If the Italian company has claims against a failing Community foreign company, it is in a position to determine which court has jurisdiction to deal with the foreign insolvency proceedings and the applicable national law, thanks to the new EU Reg. 2015/848 on insolvency proceedings, published in the Official Journal EU No. L. 141 of 5 June 2015 and entered into force on 25 June 2015 for all member countries except Denmark.
Until now, in the event of international insolvency, due to the lack of legislation on the identification of jurisdiction and applicable national law, Italian doctrine applied to the discipline of international bankruptcy article 9 of the Italian bankruptcy law (R. D. 16 March 1942, n. 267 and ss.mm.), according to which the bankruptcy is declared by the court of the place where the entrepreneur has the main seat of the company.
A principle of international insolvency law has existed since the entry into force in the European Union of Reg. CE 1346/2000 on cross-border insolvency proceedings, which uniformly settled the main questions of jurisdiction and law applicable to the insolvency of a debtor by reference to the principal centre of interest of that debtor (so-called COMI, from the English “Center Of Main interest”) located in a Member State.
The new Reg. UE 2015/848, which definitively repealed and replaced Reg. CE 1346/2000 from 26 June 2017, introduced important innovations and clarifications regarding the determination of the court competent to manage the insolvency proceedings and applicable national law.
The competent court and the applicable law
As mentioned above, the concept of the principal centre of the debtor’s interests is the primary criterion for determining the jurisdiction of the court which will have the power to open and administer a main insolvency across borders.
According to art. 3.1 of Reg. EC 1346/2000 “for companies and legal persons, the centre of main interests shall be presumed to be the place where the registered office is located until there is evidence to the contrary“. This provision had to be read in conjunction with the next n. 13 according to which “centre of main interest should be understood as the place where the debtor habitually exercises, and therefore recognizable by third parties, the management of his interests“.
The same criteria for international jurisdiction also apply to the national law applicable to the insolvency proceedings as under art. Article 4 of Reg. EC 1346/2000 is the law of the Member State in whose territory the procedure is open (so-called lex concursus).
In practice, however, it was the case that courts of more than one State could be considered competent to open cross-border insolvency proceedings, thus creating a conflict of jurisdiction and a conflict of applicable laws that was resolved by considering as the main procedure the one that was first opened.
This regulatory framework, however, has created distortions in the system, favouring the country that was able to open insolvency proceedings more quickly, generating the well-known phenomenon of the so-called forum shopping” (search of the bankruptcy court considered more favourable by the applicant).
The innovations introduced from the new Reg. UE 848/2015 in matter of competence and applicable law
The adoption of the Regulation was preceded by Commission Recommendation No. 135 of 12 March 2014, where it has been claimed that the liquidation of the debtor’s assets should no longer be regarded as the primary purpose of the insolvency proceedings but as a residual solution, each country having mainly to adopt procedures for the recovery and restructuring of firms in difficulty in order to continue their economic activity.
The aim of the Commission recommendation was to encourage a gradual approximation of the national laws of the Member States in the field of procedures available to debtors in difficulty to restructure their business.
Today, Reg. UE 848/2015, transposing the notions of jurisprudence of the Court of Justice, clarifies that the COMI is the place where the debtor exercises the management of his interests in a manner habitual and recognizable by third parties. The new art. 3.1 states that: “The courts of the Member State in whose territory the centre of the debtor’s main interests is situated are competent to open insolvency proceedings (main insolvency proceedings). The centre of main interest is the place where the debtor exercises the management of his interests in a manner customary and recognisable by third parties“.
For companies and legal persons, the presumption (already in force in the previous wording of the rule) that COMI coincides with the place where the company’s registered office is located, with the further clarification that, where the head office has been moved to another Member State within the three months preceding the application for the opening of insolvency proceedings, the original presumption will not operate and the verification will be carried out on a case-by-case basis (Art. 3.1).
In addition, at the request of the person administering the main proceedings, the Judge empowered to open the secondary proceedings refuse or postpone the opening of the secondary procedure in another country in order to allow better coordination between the main procedure and any secondary procedure.
With regard to the recognition of the decision to open insolvency proceedings within the countries of the European Union, it is necessary to consider the principle set out in art. Article 19, where it is provided that “the decision to open insolvency proceedings by a court of a Member State having jurisdiction pursuant to art. It shall be recognized in all Member States from the time when it takes effect in the State of opening. The provision referred to in the first subparagraph shall also apply where a debtor, by virtue of his capacity, cannot be subject to insolvency proceedings in the other Member States“.
The effects of the recognition are set out below in art. 20, in which it is specified that the decision to initiate the main insolvency proceedings shall have the effects provided for in the law of the State of opening in any other Member State without any other formalities.
The principle invoked is valid not only from the point of view of the elimination of the exequatur, as a prerequisite for the recognition of an enforceable title in the individual Member States if it is issued in another Member State, but also in view of the ultimate purpose of the regulation, namely the granting to the debtor of the possibility to remain active in the market (internal and Community) despite the insolvency declared or even only potential.
As far as creditors are concerned, they may lodge an application under paragraph 5 of art. Article 55 of the Regulation, in any official language of the institutions of the Union and, in the case of foreign creditors, within a period of not less than 30 days from the publication of the opening of insolvency proceedings in the bankruptcy register of the State of initiation.
Further innovations include the establishment, under Reg. UE 848/2015, of an electronic system of interconnected insolvency registers accessible free of charge by operators in the Member States, in order to promote the transparency and openness of insolvency proceedings and to improve the information of creditors and judges.
The new Reg. 848/2015 extends the scope of the Community rule also to all insolvency proceedings; in Italy, for example, in addition to bankruptcy, the prior arrangement, compulsory administrative liquidation is also included, D Special administration (such as large firms in crisis), restructuring agreements, crisis resolution procedures from over-indebtedness, liquidation of assets.