The Battle over Jurisdiction in European Insolvency Law – ECJ 2.5.2006, C-341/04 (Eurofood) –

The judgment of the European Court of Justice in Eurofood IFSC Ltd., C-341/04, explores several key provisions of the European Insolvency Regulation (Council Regulation (EC) No. 1346/2000 of 29 May 2000 on insolvency proceedings), notably Articles 3(1), 16(1) and 26. The Court interpreted Article 3(1) on the basis of Recital 13 and held that the presumption whereby the centre of main interests (COMI) of a company is situated in the Member State where its registered office is situated can be rebutted only if factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which locating at that registered office is deemed to reflect. By contrast, where a company carries on its business in the territory of the Member State where its registered office is situated, the mere fact that its economic choices are or can be controlled by a parent company in another Member State is not enough to rebut the presumption. In this context the Court reminded the national courts that it is inherent in the principle of mutual trust that the court of a Member State hearing an application for the opening of main insolvency proceedings checks that it has jurisdiction having regard to Article 3(1), i.e. examines whether the COMI is situated in that Member State. On Article 16(1) the Court held the main insolvency proceedings opened by a court of a Member State must be recognised by the courts of the other Member States, without the latter being able to review the jurisdiction of the court of the opening State. The Court gave an autonomous interpretation to the words “judgment opening insolvency proceedings” in Article 16(1) as meaning every decision handed down by a court of a Member State, based on the debtor's insolvency and seeking the opening of proceedings referred to in Annex A to the Regulation, where that decision involves the divestment of the debtor and the appointment of a liquidator referred to in Annex C to the Regulation, irrespective of whether that decision was regarded as “opening” the insolvency proceedings under the national law. Finally, the Court held that under Article 26 a Member State may refuse to recognise insolvency proceedings opened in another Member State where the decision to open the proceedings was taken in flagrant breach of the fundamental right to be heard, which a person concerned by such proceedings enjoys. The article gives a critical assessment of the decision, noting in particular the dangers of allowing Member States to open insolvency proceedings on the basis of ex parte applications for provisional measures.