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Centre of Main Interests (“COMI”) Abroad

 The Background

The cases of Office Metro Limited [2012] EWGC 1191 (“OM”) and Olympic Airlines SA [2012] EWHC 1413 (Ch) (“OA”) decided in May 2012 led to the High Court deciding whether a winding-up order should be made in England in circumstances where the COMI of the debtor company was in another country. The Facts OM was a company incorporated in and having its registered office in England. In 2008 OM had transferred its main headquarters to Luxembourg. OM became the subject of English insolvency proceedings when it failed to make payment of rent for a property situated in England, performance of which it had guaranteed to the petitioner. The petitioner pleaded that the English proceedings were main proceedings in terms of the EC Regulation on Insolvency Proceedings. However, OM had already been the subject of insolvency proceedings in Luxembourg and maintained those were the main proceedings and that the English proceedings could only be secondary proceedings. The issue then became whether OM had an “establishment”, as defined in the EC Regulation, in England at a relevant time. OA was a Greek incorporated and state owned airline which had branch offices and employees in England. The employees were members of the OA Pension Scheme (“the Pension Scheme”). In 2009 OA was placed into special liquidation in Greece. In 2010, the Greek liquidator took steps to terminate the employment of the 27 English based employees and to cease contributions to the Pension Scheme on their behalf. A petition was subsequently presented to the High Court by the Trustees of the Pension Scheme to wind up OA on the basis that it was unable to pay the pension debt. The Greek liquidator contended that, at the date of the petition, OA had no “establishment” in England and so the court had no jurisdiction to make a winding up order.

The Decision

In OM it was held that the relevant time for determining the existence of an “establishment” was the date the petition was presented and not the date which the guarantee was entered into. It was also determined that OM did not possess an “establishment” in England as the company was not carrying on economic activity, within the meaning of the EC Regulation, in a non-transitory nature from its registered office. The petition was dismissed. In OA the court reasoned that to determine whether an “establishment” existed, the facts as at the date of presentation of the petition had to be evaluated in light of what came immediately before and after. As OA had 27 employees immediately prior to the presentation of the petition and a fully equipped office with a skeleton staff immediately after, it was carrying on economic activity in a non- transitory nature with human means and assets. Accordingly, it satisfied the test for determining the existence of an “establishment” and the court granted the winding order.

Advice

At first glance it appears that there is some inconsistency between these two decisions as to what is required to fulfil the definition of “establishment”. However, it is clear that in OA there was significantly more activity at their English address then there was in OM. Nonetheless, both decisions show the discretionary nature of the High Court. In OM the Judge held there would be little purpose in making a winding up order even if was established that there was an establishment in England. In OA the Trustees would have been prejudiced had secondary proceedings not been entered into.

BBM Solicitors specialise in advising IP's in both contentious and non-contentious matters (including transactional work). Contact: Eric Baijal () or Alasdair Baijal (). This briefing note is current 19 July 2012 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).

 

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