Regulation (EU) 2015/848 of 20 May 2015 relating to insolvency proceedings uses the center of the debtor’s main interests criterion (center of main interests – COMI) in order to identify the legal order deemed to manage the debtor insolvency. Via the COMI criterion, the Regulation aims to entrust the administration of the insolvency procedure to the authorities closest to the debtor’s assets, while ensuring creditors the easy identification of the legal order and the competent authorities in this regard.
The COMI criterion in sources of law on international insolvency
The choice to use the COMI as a key concept in the handling of insolvency proceedings dates back to the Convention on insolvency proceedings, adopted within the (at the time) European Community on 23 November 1995 and never entered into force as it was never ratified by the United Kingdom. Subsequently, the criterion was adopted by the UNCITRAL model law on cross border insolvency of 1997, adopted with the Resolution No 52/58 of the United Nations General Assembly of 15 December 1997, in the harmonized legal framework proposed to the UN Member States on cross-border insolvency. The Regulation (EC) No 1346/2000 on insolvency proceedings, which reproduced many of the rules the Convention of 23 November 1995 made use of, which never entered into force. Regulation (EC) No 1346/2000 is today replaced by Regulation (EU) 2015/848, applicable from 26 June 2017 to insolvency proceedings.
In the wake of these choices in the international legislative policy, even the Italian legal order has included the COMI among the jurisdiction criteria under the Code of business crisis and insolvency: see Art. 11 on the allocation of jurisdiction, which in the first paragraph provides that the Italian courts have jurisdiction on the application for opening a procedure for the crisis settlement or insolvency when the debtor has the center of main interests or an establishment in Italy, without prejudice to international conventions and European Union legislation (Italian Legislative Decree No 14 of 12 January 2019, which entered into force – as regards the rule at stake – on 1 September 2021).
The COMI role in Regulation (EU) 2015/848
In Regulation (EU) 2015/848, the COMI has been assigned to a plurality of functions. Indeed:
- It determines the subjective scope of application of the Regulation: as indicated in the 25th Recital of the Regulation, it applies only to proceedings in respect of a debtor whose centre of main interests is located in a Member States of the European Union (excluding Denmark), even if the registered office is located in a third country. Pursuant to Art. 1, para. 2, the Regulation shall not apply to proceedings that concern, among others, insurance undertakings, credit institutions, investment firms and collective investment undertakings;
- It provides for the court having jurisdiction: the courts of the Member State in which the COMI is situated shall have jurisdiction to open the main insolvency proceedings with universal effects (Art. 3, para. 1). The courts of Member States other than the one in which the COMI is situated may – under Art. 3, para. 2 – open so-called secondary insolvency proceedings, or territorial if an establishment is located in their territory, as defined under Art. 2, No 10 of the Regulation, with effects limited to the territory in which this procedure is opened;
- It identifies the law applicable to the main insolvency proceedings: pursuant to Art. 7, the law of the Member State in whose territory the COMI is situated determines ” conditions for the opening of those proceedings, their conduct and their closure ” (para, 1), as well as numerous issues related to the proceeding (para. 2).
How to identify the COMI?
The COMI is defined under Art. 3 of Regulation (EU) 2015/848 as the ” place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties”. Therefore, the COMI shall be traced via objective elements that localize the debtor economic life. It is a mobile notion, in that it follows the debtor movements. The objective criteria useful for locating the COMI are only those verifiable by third parties (and in particular by creditors), to allow them to recognize in advance the legal order that will discipline and manage the debtor insolvency. For this reason, in order to ensure certainty in the COMI identification, some rebuttable presumptions arise. Until proven otherwise, indeed, the COMI is:
- for companies or legal persons, the place where the registered office is located (Art. 3, para. 1, II);
- for natural persons exercising an independent business or professional activity: the place where the principal place of business is located (Art. 3, para. 1, III);
- for naturals persons who do not exercise independent business or professional activity: the place of habitual residence (art. 3, para. 1, IV). For the Court of Justice of the EU, the fact that the debtor, a natural person who is not an entrepreneur or a professional, is the owner of only one real estate located in a country other than that of habitual residence is not relevant to prevail over this presumption (judgment of 16 July 2020, C-253/19, MH and NI v. OJ and Novo Banco SA, EU:C:2020:585, para. 31).
COMI in the context of group insolvency
As a rule, in groups of companies, the COMI is identified independently for each individual company belonging to the group, where it has legal and commercial autonomy. Therefore, as many main proceedings can be opened as there are companies in the group with an autonomous COMI.
However, it is possible that the COMI is common to all the group companies, if – as now set out by the Recital 53 Recital of the Regulation – its management is, indeed, – so centralized that the parent company controls the subsidiaries in an absorbent and widespread manner, thus leaving them without any managerial autonomy. In this case, the COMI will coincide with the headquarters of the parent company. The Court of Justice of the EU, however, in the Eurofood case (judgment of 2 May 2006, C-341/04, Eurofood IFSC Ltd., EU:C:2006:281, para. 37) ruled that the situation the management choices of the subsidiary company are under the control (even if only abstractly) of the parent company does not determine – for this only – the location of the subsidiary COMI at the parent company headquarters. When multiple insolvency proceedings are opened in relation to different companies belonging to the same group, Art. 57 of the Regulation provides for cooperation between the authorities of the various Member States having the various proceedings pending, in order to coordinate, among others, the exchange of information, the appointment of insolvency practitioners and the orderly administration and supervision of the assets and affairs of the members of the group. Pursuant to Art. 61, para. 1, any court having jurisdiction over the insolvency proceedings of a member of the group may request for group coordination proceedings. Art. 66, para. 1, however, specifies that where at least two-thirds of all insolvency practitioners appointed in insolvency proceedings of the members of the group have agreed that a court of another Member State having jurisdiction is the most appropriate court for the opening of group coordination proceedings, that court shall have exclusive jurisdiction to coordinate the various insolvency proceedings.
Safeguards on potential behavior in defiance of the Regulation
The debtor could have an interest in the COMI transfer from one Member State to another, in order to benefit from more favourable rules that better protect the interested assets, to the detriment of creditors. To discourage the practice of fraudulent “forum shopping”, Art. 3 of the Regulation establishes a temporal presumption, which operates from the moment of the application to open the insolvency proceeding: for the purposes of the presumptions that establish the COMI, the movements of the registered office, the principle place of business or the habitual residence when they occurred in the previous period are irrelevant to the application to open the insolvency proceeding (recently, also, Italian Court of Cassation, Civil Joint Divisions, judgement of 17 December 2020 No 28981). This period is three months, in the case of transfer of registered office or of principle place of business, while it is six months in the case of habitual residence. In the event of fraudulent transfers of the registered office, therefore, the jurisdiction is to be determined on the basis of the registered office prior to the transfer, if the COMI coincided with it (order of 24 May 2016, C-353/15, Leonmobili Srl, EU:C:2016:374, para. 41).
Silvia Marino, Lisa Stivanello, Omar Vanin
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