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Cross-border insolvency

Recognition of foreign proceedings

Under what circumstances will the courts in your jurisdiction recognise the validity of foreign insolvency proceedings?

Foreign insolvency proceedings will in principle be recognised in Luxembourg, provided that the criteria pertaining to the centre of main interests (COMI) (as defined in the EU Insolvency Regulation (1346/2000) were taken into account upon the opening of the proceedings. According to Luxembourg case law, foreign proceedings against a Luxembourg debtor shall be recognised provided that the debtor's centre of main interests is within the jurisdiction of the foreign court. The foreign judgment must comply with the requirements of due process and must not violate Luxembourg public policy.

The regulation provides for automatic recognition in Luxembourg of any judgment opening insolvency proceedings handed down by a court of an EU member state (with the exception of Denmark) which has jurisdiction pursuant to Article 3 of the regulation (ie, the centre of the debtor’s main interests is located in the foreign court’s jurisdiction).

Winding up foreign companies

What is the extent of the courts’ powers to order the winding up of foreign companies doing business in your jurisdiction?

Foreign companies whose place of central administration, place of effective management and COMI is considered to be in Luxembourg may be subject to Luxembourg bankruptcy proceedings.

Centre of main interests

How is the centre of main interests determined in your jurisdiction?

The Luxembourg case law in this area is based on the case law of the European Court of Justice. Pursuant to the EU Insolvency Regulation, there is a rebuttable presumption that the debtor’s COMI is situated where its registered office is located.

In a 2008 judgment, the Luxembourg Court of Appeal found that the COMI of a company governed by Luxembourg law was located in France, focusing primarily on the place where the company exercised its business and managed its client relationships, rather than the place where it conducted administrative activities, such as the place where board meetings were held.

Cross-border cooperation

What is the general approach of the courts in your jurisdiction to cooperating with foreign courts in managing cross-border insolvencies?

With the exception of the duty to cooperate in the context of European insolvency proceedings, there is no specific duty to cooperate with foreign courts. The Luxembourg courts are traditionally favourable to cooperation in cross-border insolvency matters, as confirmed by the high-profile cross-border insolvencies which took place during and after the last financial crisis involving Luxembourg members of international financial groups (ie, those involving Lehman Brothers, Bernie Madoff, Kaupthing Bank, Landsbanki and Espirito Santo).

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