In two recent Dutch court cases, the determination of the insolvent debtor’s centre of main interests (COMI) went in two distinct ways. These cases are District Court Amsterdam 12 July 2017, ECLI:NL:RBAMS:2017:5383, and District Court North-Holland 17 October 2017, ECLI:NL: RBNHO:2017:8588. In both cases the court is confronted with the alignment of Dutch (insolvency) procedural law (in the Dutch Bankruptcy Act) and the rules regarding international jurisdiction in the European Insolvency Regulation (Recast), the EIR 2015. To understand these cases, the Dutch Bankruptcy Act provides the following: ‘Article 2. 1. The bankruptcy order is rendered by the District Court within whose district the residence (‘woonplaats’) of the debtor is located. 2. If the debtor has left the Kingdom of the Netherlands in Europe, the District Court within whose district his last residence was located, has jurisdiction.’
In the earlier case Kingsignal (Hong Kong) International Limited (‘Kingsignal’), incorporated in Hong Kong, files a petetion for bankruptcy liquidation (‘faillissement’) of Powerstorm Inc. (‘Powerstorm’), incorporated in Delaware, USA. Kingfisher provides details to be able to conclude that Powerstorm’s COMI is in the Netherlands. Powerstorm, however, denies and claims its COMI is in the USA or, at least not in the Netherlands. Its arguments: its registered office, its board of directors and its shareholder are in or from the USA. The management of the company is driven from the US and is currently working on initiating a so-called Chapter 11 procedure. The office location in Amsterdam is just an office where from time to time someone is present. It serves only for accepting orders for goods to be distributed to Europe, Russia, the Middle East, Africa and Asia. Sometimes invoices are also invoiced from there. Customers, however, are from all over the world. The website has recently been modified and, in error, only the address in Amsterdam was entered as contact address.
The Court considers that Article 2(1) of the Dutch Bankruptcy Act provides jurisdiction to the court and that for the interpretation of the Dutch term of ‘residence’ or ‘centre of main interests’ of the debtor, connection should be sought with Article 3(1) EIR 2015. It then cites the relevant texts of the latter provision. The court comes down to a balancing of the facts presented, in short:
(i) the annual accounts of Powerstorm of 2015, deposited in the Netherlands, include the sentence: ‘Powerstorm Inc. has its legal seat in Yorklyn, Delaware, USA. In the Netherlands the company has an office at Joop Geesinkweg 999 in Amsterdam …’,
(ii) according to the website, the contact address for Powerstorm in Europe is the address in Amsterdam, and in addition the website states that Powerstorm is ‘Based in Amsterdam, with offices in Los Angeles and Bucharest and repair centers around the world … Our services and operational footprint span from North and South America, to Europe, the Middle East, Asia and Africa.’ Nowhere else on the website, the court concludes, mention is made of any other address,
(iii) the invoices to Powerstorm were sent by the applicant to the address in Amsterdam. Never an objection has been made. Also, the letter of the President of Powerstorm, dated 26 June 2017, addressed to the applicant’s CEO provides the Amsterdam address.
From these pieces of evidence, the court is satisfied that, in view of all the above-mentioned public expressions, creditors were able to rely on the fact that Powerstorm’s COMI is in the Netherlands. The mere fact that the board and the shareholder are American does not conclude that Powerstorm’s COMI is in the USA. The legal presumption that the registered office is the debtor’s COMI is hereby rejected, so decides the court. In the other case mentioned, the applicant (R.L. Bezuijen Holding B.V.) has applied for the bankruptcy liquidation of X, who has no known place of residence or domicile in the Netherlands. The court considers (based on recitals 8, 26, 27, 28, 30, 33 as well as its duty to ex officio assess whether international jurisdiction exits) that the EIR 2015 is applicable. The applicant claims that the court has jurisdiction pursuant to Article 2(2) of the Dutch Bankruptcy Act. The court, however, on the basis of the foregoing, considers that it does not have the right to assess its jurisdiction on the basis of Article 2(2).
From the above mentioned recitals and Article 4(1) EIR 2015 it follows, the court states, that the court must review its jurisdiction pursuant to Article 3 EIR 2015. After citing the text of Article 3(1) the court comes to the facts. These are that the applicant has not disputed that debtor X resides in or near Paris and does no longer live in the Netherlands since the beginning of 2016. The applicant stated that X (whether or not through a company) in (or around) Paris has a number of apartments and that he lives in one of them. In this case, the court concludes that the applicant, as a creditor of the debtor, provides just an estimation that (the vicinity of) Paris is the place where X administers interests. The court further contemplates that the applicant has not provided any facts or circumstances suggesting that the usual residence (Paris) is indeed the COMI of X.
The fact that in this case in the Dutch real estate registration (Kadaster) real estate is registered in the name of a company of which X is a manager and / or a shareholder is, the court concludes, in any case insufficient. It is no property of X himself. That X regularly stays in the Netherlands is, according to his attorney, because he maintains family relations (including contact with his daughters) in the Netherlands. Consequently, this fact cannot lead to a rebuttal of the presumption that his habitual residence is his COMI. Where the COMI is not situated in the Netherlands, the court is not entitled to open insolvency proceedings pursuant to Article 3(1) EIR 2015. It therefore declares the applicant inadmissible in its application.
The latter case clearly is correct in that the court ex officio assesses its ‘international jurisdiction’. The EIR 2015 only deals with this legal element, see recital 26, which the court refers to. It does not mention recital 32: ‘In all cases, where the circumstances of the matter give rise to doubts about the court’s jurisdiction, the court should require the debtor to submit additional evidence to support its assertions and, where the law applicable to the insolvency proceedings so allows, give the debtor’s creditors the opportunity to present their views on the question of jurisdiction’. Evidently, because the facts presented by the applicant were thin, the court had no doubts. The court in the latter case also refers to recital 30, which provides a rule for the depth of the examination of the facts resulting in COMI: this examination should be done ‘carefully’, in order to confirm that the COMI is ‘genuinely’ located in a member state, see recital 30.
It is clear that a court should exercise a serious activity to assemble facts, but on the other hand it allows the court a margin of appreciation. In the first case, the court is confused regarding the relation between national procedural law and the EIR 2015. The latter binds in its entirery and directly, any by-pass through legal terms in national rules is not correct and, for the sake of clarity, should be avoided. The application of COMI is a matter of the EU law (see the Eurofood case of 2006, in which the European Court of Justice (as it then was called) in para. 31 expresses that COMI must be ‘interpreted in a uniform way, independently of national legislation’. National law deals only with deciding on the allocation of cases between local courts, i.e. which particular court will be hearing the case, provided that COMI is found pursuant to the EIR 2015.
For applications of Article 2(2) of the Dutch Bankruptcy Act, according to which jurisdiction is decided solely on the basis of national law (and based on the presumption that COMI is not in the Netherlands) see (in Dutch) blog/2017-09-doc8-rechtsmacht-rechter-in-faillissementszaken More on the EIR 2015, see my book International Insolvency Law Part II. European Insolvency Law (Wessels Insolvency Law Volume X), Deventer: Kluwer, 4th ed., 2017, ISBN 9 789013 145021. For information, see blog/2017-09-doc4-wessels-international-insolvency-law-part-ii-european-insolvency-law/. On the judgment of opening insolvency proceedings, see para. 10521b, and on international jurisdiction regarding natural persons, see para. 10588 et seq. I thank Ilja Kokorin, lecturer at the Leiden Law School, for the discussions we had on the two cases. [31 October 2017; Bob Wessels]