Eurofoods IFC Limited – Clash of jurisdictions over EC Insolvency Regulation

A preliminary opinion, by an Advocate General attached to the European Court of Justice, on the jurisdiction for a winding-up under the EC Insolvency Regulation1 (the Regulation) was published on 27 September. The Advocate General considered that the appointment of a provisional liquidator by the Irish Court was sufficient to commence proceedings under the Regulation.

The opinion backs the arguments put forward by Bank of America and the Irish Supreme Court in their battle with the administrators of Parmalat for jurisdiction to oversee the winding up of one of Parmalat's Irish subsidiaries, Eurofoods IFSC Limited.

The referral to the European Court of Justice was made by the Irish Supreme Court, following a decision of the Irish High Court to reject the decision of an Italian Court to commence main insolvency proceedings pursuant to the Regulation in Italy, on the basis that the Company's "centre of main interests" was in Ireland and that main proceedings (within the meaning of the Regulation) had already been commenced in Ireland.

While the opinion of the Advocate General is not binding on the European Court of Justice which has yet to deliver its decision on this case, opinions of the Advocate General are extremely persuasive and often followed by the Court in their rulings.

Advocate General Jacobs considered the 5 questions which were referred to the Court by the Irish Supreme Court in July 2004. The full questions formulated by the Irish Supreme Court are set out in our previous Law Now article that was issued on 5.8.2004. To view the previous article please click here.

The Advocate General was persuaded that the appointment of a provisional liquidator by the Irish Court was of itself sufficient to be regarded as a "judgment" opening "insolvency proceedings" pursuant to the Regulation. While provisional liquidation is not a collective proceeding for the purposes of Annex A of the Regulation for Ireland, the Advocate General took the view that the decision of the Irish Court to appoint a provisional liquidator (listed in annex C), in the context of a compulsory winding up by the Court (which is a measure listed in annex A) must be a judgment opening insolvency proceedings. This could pose interesting questions for the English Court should any similar case be brought to its attention since the Regulation was amended (on 12 April 2005)2 to include a provisional liquidator within Annex C of the Regulation for the UK.

The Advocate General also considered that the Regulation applied to individual companies, not groups of companies. The Advocate General was not persuaded by arguments raised by the Italian Administrator, Signor Bondi, that the control exercised by a parent company over its subsidiary would rebut the presumption in the Regulation that a company's centre of main interests was situated in the member state where its registered office is to be found.

However, the Advocate General did not take the opportunity to clarify the centre of main interests test, pursuant to which main insolvency proceedings can be opened. We are still therefore left with the decisions of national courts for guidance as to what factors should be taken into account in determining a company's centre of main interests.

1 EC Regulation on Insolvency Proceedings (1346/2000)

2 the amendments were made pursuant to the adoption of Council Regulation (EC) 603/2005