The saga of the Isa-Daisytek and Rover cases appears to be drawing to a close.
In less than two months, the debates surrounding Regulation 1346/2000 on Insolvency proceedings have become considerably clearer thanks to the European Court of Justice’s (ECJ) decision of 2 May 2006 (Eurofood IFSC Ltd) and the case before the Cour de cassation (France’s Supreme Court) on 27 June 2006 (Isa-Daisytek).
The Regulation’s main issue related to the centre of a debtor’s main interests and the possibility of a receiver starting insolvency proceedings in a jurisdiction that is not necessarily that of the company’s head office, but rather in its “centre of main interests” (to use the wording of the Regulation).
In the Isa-Daisytek and Rover cases, Hammonds Hausmann acted for the English administrative receivers who had begun insolvency proceedings against French companies in Leeds and Birmingham respectively, claiming that the centre of main interests for these companies was in England. In the Isa Daisytek case, the Commercial Court of Pontoise refused the interpretation given by the English administrative receivers. Furthermore, in 2003 and 2004 most legal practitioners were critical of the application of the Regulation in the context of a group of companies.
In two seminal judgments dated 4 September 2003 and 15 December 2005, the Court of Appeal of Versailles held that the Commercial Court had made an error and approved of the insolvency proceedings commenced in Leeds and Birmingham.
The Cour de cassation has delivered its verdict in Isa-Daisytek and it puts the issue, so to speak beyond debate. The appeal (“pourvoi en cassation”) lodged by the Versailles Avocat Général (deputy Director of Public Prosecution at the Court) was rejected and the French Supreme Court confirmed the position defended by Hammonds Hausmann for more than three years.
The main arguments before the Cour de cassation centred largely on the reasoning of the ECJ decision in Eurofood handed down a few weeks previously (the Cour de cassation had indicated that it wished to wait for the verdict of the ECJ’s decision before overruling any decisions).
The ECJ confirmed in the Eurofood matter that the centre of a debtor’s main interests is presumed to be the place where it has its head office or where the debtor regularly carries out its business. However, this presumption can be set aside if a third party can establish objective and verifiable elements showing that the true situation is different from that reflected by the location of the head office.
The ECJ also held that the Regulation provides that main insolvency proceedings opened in one Member State should be recognised in the courts of all Member States (principle of mutual trust).
Most importantly, the principle of mutual trust requires that the courts of other Member States recognise the decision initiating the insolvency proceedings, without it controlling the jurisdiction of the court of the initiating State.
The Cour de cassation’s decision of 27 June, rejecting the Public Prosecutor’s appeal, only reiterates the Regulation’s actual wording.
Interestingly, the Cour de cassation’s judgment also refers to the public policy exception (article 26 of the Regulation). Only where there has been a manifest breach of a rule regarded as essential in the legal order of the Member State in which the main proceedings are to be enforced does the Cour de cassation consider that the public policy exception to the duty to recognise may be involved.
We are proud to have been involved in this long, hard fought legal battle and one can only welcome these long awaited and perfectly sound judgments.