University of Nottingham Commercial Law Centre

How the Court of Justice of the European Union (CJEU) has defined centre of main interest in different contexts in insolvency and intellectual property law, Blog by Favour Eloka, UNCLC research assistant 

General principles in insolvency law

In insolvency law, the general principle is that the definition of centre of main interest (“COMI”) of a debtor is autonomous and should be interpreted uniformly across all Member States (“MS”): Eurofood IFSC (C-341/04). The scope of the COMI concept is highlighted by recital 13 of Regulation No 1346/2000. It states that the COMI should correspond to the place where the debtor conducts the central administration of its interests on a regular basis which is therefore ascertainable by third parties: Eurofood IFSC; Rastelli Davide (Case C-191/10).

The second paragraph of Article 3(1) of Regulation No 1346/2000 presumes the debtor’s COMI to be the place of its registered office. The CJEU has held that any rebuttal of that general presumption must be based on evidence that is objective and ascertainable by third parties: Eurofood IFSC; Burgo Group (C-327/13). Such an assessment would be fact dependent as per Rastelli Davide, and the underlying aim of the objective standard is to ensure legal certainty and foreseeability of the court with jurisdiction to open main insolvency proceedings.

When determining if the COMI is ascertainable by third parties, the Court has held that special consideration should be given to the creditors and to their perception as to where the debtor conducts the central administration of its interests. The objective criteria must make it possible to determine the jurisdiction with which the debtor has a genuine connection, thus meeting the legitimate expectations of the creditors: Novo Banco (C-253/19).

Where the debtor is an individual not exercising an independent business or professional activity, the fourth subparagraph of Article 3(1) of Regulation No 1346/2000 establishes a rebuttable presumption that the COMI of that person is his or her habitual residence, since there is a strong possibility that that place might correspond to the centre of that individuals main economic interests: Novo Banco. Therefore, the criteria to prove the COMI of such individuals are those connected with their financial and economic situation such as where the majority of their revenue is earned and spent or the place where the greater part of their assets is located: ibid.

According to Galapagos BidCo C-723/20), a debtor cannot move their COMI to another MS after a request to open main insolvency proceedings have been lodged. This intends to disincentivise parties from transferring assets between MS’s in search for more favourable legal systems (forum shopping) to the detriment of the general body of creditors. The effect of these ruling is that the COMI assessment will occur at the point when a request to open main insolvency proceedings is logged. For example, the debtor in MH and ILA (C-168/20) could not be accused of forum shopping because the relevant transfer occurred before the declaration of his bankruptcy.

Application of the general principles to specific factual contexts

In Eurofood IFSC, the CJEU held that a rebuttal of the general presumption can occur in the case of a ‘letterbox’ company not carrying out any business in the MS in which its registered office is located. However, where the company carries on its business in the same MS as its registered office, the mere fact that its economic choices are or can be controlled by a parent company in another MS is not enough to rebut that presumption. This is because each debtor constitutes a distinct legal entity subject to its own court jurisdiction.

In contrast, for individuals, the rebuttal of the presumption that their COMI is the pace where they habitually reside cannot be rebutted simply because the only immovable property of that individual is located outside the MS of their habitual residence: Novo Banco.

Further, the CJEU in Rastelli Davide held that intermixing of property by a company in one MS (MS1) with a company in another MS (MS2) was insufficient on the facts to establish that the COMI of the first company was also situated in MS2. The CJEU reasoned that intermixing of property is characterised by the existence of intermingled accounts and abnormal financial transactions which are in general difficult to ascertain by third parties. The second strand of reasoning was that intermixing of property does not necessarily imply a single centre of interests because it cannot be excluded that such intermixing may be organised from two management teams and supervision centres situated in two different MS’s. It is not clear if this ruling can be applied blanketly to all cases where property is intermixed.

The definition of COMI in intellectual property law

The leading case here is Svensk Handel (C-194/16). Although the case concerned the determination of the COMI of a company claiming its personality rights have been infringed, the CJEU took the opportunity to clarify the criterion that should be used to assess the COMI of both companies and individuals under Article 7(2) of Regulation 1215/2012. The Court held that the COMI would be the place where the ‘victims’ damage or injury occurs most significantly as courts of such MS would be best placed to assess the impact that the relevant content had on the rights of that person.

For a natural person or individual, the COMI was said to be the place of their habitual residence. In the absence of that, other factors, such as the pursuit of a professional activity, which establishes a close link with a MS, can be used. For a legal person or company pursuing an economic activity, its COMI is the place where its commercial reputation is most firmly established which is determined by reference to where it carries out the main part of its economic activities. As such, the registered office of a company is not, as with insolvency law, conclusive of the location of its COMI.

The CJEU noted that that criterion aims to satisfy similar predictability and sound administration (as opposed to individual protection) requirements pursued under the insolvency regime. The Court also noted that the criterion would apply irrespective of whether the damage allegedly suffered is material or non-material in nature.

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