Vol 9 (2012) - Issue 6

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The Rule in Interedil and the Concept of an Establishment

Introduction
The basic jurisdictional rule in the European Insolvency Regulation ('EIR') is that insolvency proceedings may be opened in the member state where the debtor has the centre of his main interests ('COMI'). Insolvency proceedings opened in this 'main' jurisdiction are deemed to have universal scope and encompass all the debtor's assets. They may also be of either the rescue or liquidation type. In order to control the proliferation of proceedings, 'secondary' jurisdiction to hear cases is qualified by limiting occasions when independent territorial proceedings may be opened. Although the EIR, predicated as it is on the principle of 'modified universality', allows secondary proceedings to be maintained in parallel with main proceedings, potentially creating a 'constellation' of procedures, the text limits the availability of secondary proceedings to those states where an establishment is to be found, their impact to assets within the jurisdiction and the type of procedures applicable to only winding up procedures. There have been many cases seeking to elucidate what COMI means, a term that is undefined anywhere in the EIR, chief amongst these the decision in Re Eurofood. The concept of establishment central to the definition of entitlement to open secondary proceedings is, however, defined in Article 2(h) of the EIR. Until recently, it had been the subject of very few cases, although the European Court of Justice ('ECJ') has had occasion to pronounce in 2011 in the case of Interedil on how the definition is to be amplified.
In Interedil, the company concerned was constituted under Italian law with its registered office in that jurisdiction. In July 2001, it transferred its registered office to London, simultaneously being removed from the Italian companies register. It was subsequently registered as a foreign company in the United Kingdom. At the time of the transfer, the company was engaged in a transaction that would see its business being acquired by the Canopus Group and, following the transfer, title to properties it owned in Sicily were transferred to Windowmist Ltd in the United Kingdom pursuant to the agreement. On the acquisition of its business, the company was removed from the United Kingdom register in July 2002. In October 2003, a creditor filed a bankruptcy petition in Bari against the company, which the latter challenged on grounds that the transfer of its registered office to the United Kingdom conferred jurisdiction on the English courts in respect of any such proceedings. Without waiting for a preliminary ruling on the issue of jurisdiction from the Italian Supreme Court applied for by the company in December 2003, the Bari court opened insolvency proceedings in May 2004, which it qualified as main proceedings. The Supreme Court subsequently held that the Italian courts had jurisdiction, taking the view that various connecting factors, such as property owned by the company situated in Italy, contracts over property and with a creditor as well as the fact that the Bari companies register had not been notified of the change of registered office, all contributed to rebutting the presumption of COMI in favour of the United Kingdom.