Consideration of whether the Recast EIR applied

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This case considered the effect of the transitional provisions as contained in Article 67(3) of the Withdrawal Agreement governing the continued effect post-31 December 2000 of the Recast European Insolvency Regulation (EU 2015/848) (Recast EIR). Article 67(3)(c) is to the effect that the Recast EIR continues to apply provided that “main” proceedings were opened before 31 December 2020.

An application to commence “main” insolvency proceedings was made to the English court by a debtor company, but before an insolvency order was made by the English court a secured creditor (the Secured Creditor) exercised security rights to replace the debtor company’s directors and the substitute director obtained a “main” insolvency order in relation to the debtor company in Germany. The German order was made before 31 December 2020.

The German court referred a question to the Court of Justice of the European Union (CJEU) as to whether in effect a debtor’s centre of main interests (comicile) could be shifted after the date of an application to open “main” insolvency proceedings in one Member State such that a court in another Member State could open “main” insolvency proceedings against a debtor, notwithstanding a pending application in the former Member State. The CJEU held, applying its earlier decision in Staubitz-Schreiber, that comicile could not be so shifted. The English application was subsequently revived and, at a contested hearing, it was submitted by the Secured Creditor that the English court still had no jurisdiction to make the insolvency order on the ground, inter alia, that prior to the German court giving effect to the CJEU’s ruling those proceedings remained “main” proceedings under the Recast EIR and Article 67(3)(c) such that the English court had to refrain from opening English proceedings.

The English court held that, applying the CJEU’s judgments in Staubitz-Schreiber and in the instant case, (i) the English court retained exclusive jurisdiction to open main proceedings when the German court purported to do so; (ii) the German proceedings could not therefore be characterised as “main” proceedings under Article 67(3)(c) and the Recast EIR; and (iii) as the 31 December 2020 had now passed, the Recast EIR no longer governed the question of the jurisdiction of the English court. The court went on to hold that it had jurisdiction to make a winding up order against the debtor company on the basis of the applicable post-31 December 2020 jurisdictional criteria.

 In re Galapagos SA, 30 June 2022

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