The European Court of Justice (Judgment of 4 September 2014, C-327/13), held that in accordance to the EC Regulation No. 1346/2000, a secondary insolvency proceeding in the Member State where the debtor has its registered office – which does not coincide with the centre of its main interest (COMI) – may be opened at the request of creditors entitled under the law of that State.
An Italian company, creditor of a company subject to a main insolvency proceeding in France, where its centre of main interest (COMI) was located, applied for the opening of a secondary proceeding before the Brussels Commercial Court, since that company was having two establishments in Belgium, owning a building, buying and selling goods and employing staff.
The Brussels Commercial Court dismissed the petition, holding that Regulation No. 1346/2000 allows the opening of secondary proceeding against the debtor only if, in the territory of the Member State in which it is filed the secondary proceeding, such debtor has an ‘establishment’.
The Court of Second Instance of Brussels – on appeal – decided to stay the proceedings and to refer the following questions to the European Court of Justice (ECJ).
Among other issues, the Court of Second Instance of Brussels referred the following to the ECJ:
- can a secondary insolvency procedure be opened in the Member State where the company has an ‘establishment’, being that the registered office of the company?
- according to Article 29(b) of the Regulation, the person or authority empowered to request the opening of a secondary insolvency proceeding must be resident in the territory of the Member State where the opening of a secondary proceeding is being sought, or should any person or authority (whose claim arose from the activity performed by company through the establishment in the Member State of the secondary proceeding) be entitled to file such a request ?
- As to the first question, the ECJ held that Article 3(2) of Regulation No. 1346/2000 must be interpreted as allowing that a company, subject to a main insolvency proceeding, may be also subject to a secondary proceeding in the Member State where it has its registered office.
The ECJ held that ‘establishment’ is defined in Article 2(h) of Regulation No. 1346/2000 as “any place of operations where the debtor carries out a non-transitory economic activity with human means and goods”, underlying the fact that such a definition – by referring to the pursuit of an economic activity through the presence of human resources – shows that a minimum level of organisation and a degree of stability are required. It follows that, on the contrary, the location of goods or bank accounts as such does not, in principle, satisfy the requirements for an ‘establishment’.
- As to the second question, the ECJ held that, according to Article 29(b) of Regulation No. 1346/2000, the issue as to which person or authority is empowered to seek the opening of secondary insolvency proceeding must be resolved on the basis of the law of the Member State where the opening of such proceeding is sought. The right to seek the opening of secondary proceedings cannot, however, be restricted by Member States to creditors who have their domicile or registered office within the Member State where the relevant establishment is located, or to creditors whose claims arise from the operation of that establishment.
- As to the first question, the ECJ’s decision is to be approved. Indeed, if the notion of ‘establishment’ should be interpreted in a narrower sense, the ‘local interests’ (and in particular the interests of creditors who are established in that Member State) would not be protected under the Regulation, by way of the opening, in that Member State, of secondary insolvency proceedings. In this regard, it should be noted, first, that while the protection afforded to local creditors is, admittedly, not the only objective underlying the power to request the opening of secondary proceedings, the fact remains that a different interpretation may give rise to discrimination against creditors established in the Member State where the registered office of the company is located, by comparison with, inter alia, creditors established in other Member States in which the debtor may have other establishments.
- As to the second question, as pointed out by the ECJ, it is apparent from recitals 17 and 18 in the preamble to the Regulation, and from Article 3(2) and (4) thereof, that a clear distinction is drawn between secondary proceedings opened prior to the opening of the main proceeding and secondary proceedings opened after the main proceeding. It is only in relation to secondary proceedings sought to be opened before the main proceeding that the right to apply for the opening of secondary proceedings is limited to creditors having their domicile, residence or registered office within the Member State where the relevant establishment is located, or whose claims arise from the operation of that establishment. It follows, a contrario, that those limitations do not apply to secondary proceedings sought to be opened after the main insolvency proceeding. On the other hand, limiting the right to request the opening of secondary proceedings to local creditors would constitute an indirect discrimination on grounds of nationality, which, in accordance with settled case-law, is, in principle, prohibited.