Vol 10 (2013) - Issue 6

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American Isolationism: A Commentary on COMI under the Model Law as it is Applied in the United States

I. Introduction
This article critically analyses the application in the US of the centre of main interest ('COMI') requirement with respect to incorporated bodies. The analysis will seek to demonstrate that in this regard the Model Law, as legislated into the domestic law of the US ('Chapter 15'), and its use in the US, as observed from an analysis of the relevant case law, contains shortcomings and constitutes unwelcome developments that frustrate Chapter 15’s own stated objectives and interpretation requirements.

After this introductory section, the next two sections of this article will briefly recount the enactment of the Model Law by Congress in the form of Chapter 15 and establish the basic premise; that US courts interpret COMI differently to how it is interpreted by other countries that have adopted the Model Law and by European Union member states which are subject to the European Insolvency Regulation ('EIR'). The following section of the article will identify where the language of Chapter 15 relevantly departs from that used in the Model Law, explaining the change was intended to be cosmetic not substantive and that it should still be viewed that way notwithstanding attempts by non-US courts to attribute the US’ approach to its difference in terminology. Section five of the article will analyse the prominent US decisions on COMI and by comparing them with non-US court decisions, as well as with Chapter 15 interpretative aids that have been endorsed by Congress, demonstrate the error in the approach of the US courts. Section six will continue the analysis by reference to the most recent United States Court of Appeals decision on COMI, In re Fairfield Sentry, concluding, lamentably, that US isolationism on COMI continues. Finally, section seven will offer concluding remarks on the incorrectness and undesirability of the US approach.

II. Chapter 15, an overview
Chapter 15 became law in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act. Generally, the text of Chapter 15 is in keeping with the text of the Model Law with only such modifications as were necessary to conform with the broader concepts and language of Title 11 to the United States Code. That is, save for a number of exceptions which, in so far as they are relevant to this paper, are commented upon later, it was intended that the Model Law’s adoption in the US would be in a form consistent with its original text. Notwithstanding this, in the area of concern to this paper, it will be demonstrated that by reason of one or both of, first, the different language employed, where that does arise, or, secondly, the interpretation given by US courts to the Model Law’s language, a noticeable difference exists between the Model Law’s use in the US and its use in other jurisdictions as it relates to COMI.

III. COMI
Since Chapter 15’s introduction, US courts have tended to interpret COMI differently in important respects when compared with other jurisdictions which have adopted the Model Law and differently to the interpretation given to COMI by countries bound by the EIR. This is best exemplified by a greater readiness to rebut the registered office presumption. The different interpretation which has been adopted in the US is important.