Vol 10 (2013) - Issue 5

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Olympic Airlines SA Pension and Life Assurance Scheme v Olympic Airlines SA [2013] EWCA Civ 643

Introduction
The Court of Appeal’s recent decision in Olympic Airlines SA Pension and Life Assurance Scheme v Olympic Airlines SA [2013] EWCA Civ 643 concerns the jurisdiction under EU law to commence secondary insolvency proceedings. Under the EU Regulation on Insolvency Proceedings (1346/2000) ('the Regulation'), secondary proceedings can only be opened in a Member State where the debtor has an 'establishment' and the case provides guidance as to what constitutes an 'establishment' for the purposes of the Regulation. The case is, however, also notable for exposing a hole in the protection afforded by English pensions legislation where main proceedings are opened in another Member State in respect of a company with UK employees and pension scheme members.

The Regulation
Under the Regulation, 'main proceedings' can be opened in the Member State where the insolvent company has its centre of main interests ('COMI'). 'Secondary proceedings' (the effects of which are restricted to the assets of the insolvent company in the secondary Member State) can be opened in another Member State, if the insolvent company has an 'establishment' there (see article 3(2) of the EC Regulation).
As to what constitutes an ‘establishment’, article 2(h) of the EC Regulation provides that an 'establishment' is 'any place of operations where the debtor carries out a non-transitory economic activity with human means and goods'. Guidance as to what this means has been given by the Court of Appeal in the Olympic Airlines case.
As to the rationale for allowing the opening of secondary proceedings, it is worth noting that recital 19 to the EC Regulation provides that:
'Secondary insolvency proceedings may serve different purposes, besides the protection of local interests. Cases may arise where the estate of the debtor is too complex to administer as a unit or where differences in the legal systems concerned are so great that difficulties may arise from the extension of effects deriving from the law of the State of the opening to other States where the assets are located. For this reason the liquidator in the main proceedings may request the opening of secondary proceedings when the efficient administration of the estate so requires.'

Background
Olympic Airlines SA ('Olympic') was a Greek airline. Olympic’s COMI was Greece, but it also carried on business in England, with a head office in London, as well as offices in Heathrow and Manchester, and around 27 employees in the jurisdiction.
Following a decision of the European Commission in September 2008 to the effect that the company had received illegal state aid, Olympic went into insolvent liquidation in Greece in October 2009. Olympic’s COMI being in Greece, the Greek proceedings were main proceedings.
Olympic’s liquidation left the pension scheme of which its UK employees were members with a deficit of over GBP 15 million. The pension did not, however, fall within the scope of the Pension Protection Fund ('the PPF') because the Greek liquidation of the company did not constitute a qualifying insolvency event for the purposes of English pensions legislation. Only if insolvency proceedings were commenced in England could the PPF assume responsibility for the scheme.
That being the case, the trustees of the pension scheme presented a petition to wind up Olympic in England (opening secondary proceedings) on the basis that the company was unable to pay its debts. In order for the petition to succeed the trustees needed to show that the company had an establishment in England at the relevant time (an establishment being necessary for opening of secondary proceedings in a Member State as explained above). The relevant time was the date on which the petition to open the secondary proceedings was presented (see Re Office Metro [2012] EWHC 1191 (Ch)), 20 July 2010.