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EU regulations don't apply for insolvency proceedings based on COMI in UK says Court of Session

The Court of Session has found that the EU Regulations to found jurisdiction for Insolvency proceedings based on COMI do not apply in a purely UK matter.

Bank Leumi (UK) plc (The bank) lodged a petition to make an Administration Order in respect of Screw Conveyor Limited (the company). While the company's registered office was in Birmingham, the bank stated in its petition that the company's centre of main interest (COMI) was in Scotland.

The question arose as to whether or not the Court of Session had jurisdiction to make the administration order in terms of Regulation (EU) 2015/848 (the EU Regulation).

The EU Regulation provides that;

"The Courts of the Member State within the territory of which the centre of the debtor's main interests is situated shall have jurisdiction to open Insolvency proceedings ("main insolvency proceedings").

The centre of main interests shall be the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties.

In the case of a Company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary".

The difficulty for the bank was in avoiding the terms of Section 120 of the Insolvency Act 1986. Section 120(1) provides that the Court of Session has jurisdiction to wind up any Company registered in Scotland. This is qualified by Section 120(6) which states that provision is subject to the EU Regulation.

In a well-reasoned Judgment, Lord Doherty found that the EU Regulation only applies to establish International jurisdiction. Territorial jurisdiction within a Member State is established by that member state's national law. The component parts of the United Kingdom are treated as one jurisdiction for the purposes of the EU Regulation. He considered the terms of the European Communities Act 1972 which, in his opinion, did not authorise the Government to alter national law governing territorial jurisdiction as between the component parts of the United Kingdom.

Accordingly, as the company's registered office was in England the EU Regulation was not applicable and the Court of Session did not have jurisdiction to wind up the company. The petition was dismissed.

The case is a useful reminder that for EU Regulations the UK is treated as one jurisdiction. Great care should be taken when considering EU Regulations for domestic disputes, particularly where jurisdiction is concerned.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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