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Welcome / Blog Archive / English / 2022-08-doc2 On presumptions in int’l insolvency law

2022-08-doc2 On presumptions in int’l insolvency law

Article 16 of the UNCITRAL Model Law on Cross-Border Insolvency (MLCBI) provides for important presumptions which assist the domestic court of the State, enacting the MLCBI, to reach a conclusion on the nature, status and effect of the respective foreign proceeding. Article 16 (‘Presumptions concerning recognition’) provides:

  1. If the decision or certificate referred to in paragraph 2 of article 15 indicates that the foreign proceeding is a proceeding within the meaning of subparagraph (a) of article 2 and that the foreign representative is a person or body within the meaning of subparagraph (d) of article 2, the court is entitled to so presume.
  2. The court is entitled to presume that documents submitted in support of the application for recognition are authentic, whether or not they have been legalized.
  3. In the absence of proof to the contrary, the debtor’s registered office, or habitual residence in the case of an individual, is presumed to be the centre of the debtor’s main interests.

Flexible article. The heading of Article 16 could be considered somewhat odd as the presumptions in the article do not concern recognition itself, but actually concern documents that accompany an application for recognition. Article 16 establishes presumptions that allow the court to expedite the evidentiary process. The article is rather flexible in that it does not prevent, in accordance with the applicable procedural law, the calling for or assessment of other evidence in the event that the solution to which the presumption gives rise, is called into question by the court or by an interested party, see the explanation in the Guide to Enactment and Interpretation (2013), nr. 137. The basis for such questioning by an interested party should be found in the applicable national legislation itself.

Article 16(2). The wording of Article 16(2) leaves no doubt (the court ‘is entitled to presume’ the authenticity of documents) that the court retains discretion to decline to rely on the presumption of authenticity or to conclude that evidence to the contrary prevails. Presumably a court will not exercise its discretion when the court may be able to assure itself that a particular document originates from a particular court even without it being legalized. On the other hand, it seems realistic to presuppose that a court may be unwilling to act on the basis of a foreign document when it originates from a jurisdiction with which it is not familiar. A specific issue is the situation that a State may be a party to bilateral or multilateral treaties on mutual recognition and legalization of documents. One of these treaties is the Convention Abolishing the Requirement of Legalization for Foreign Documents (UN Treaty, vol. 527, No. 7625; 1961), adopted under the auspices of the Hague Conference on Private International Law. The Convention provides for specific simplified procedures for the legalization of documents originating from signatory States. The Guide to Enactment and Interpretation to the MLCBI submits that in many instances, however, the treaties on legalization of documents, like letters rogatory and similar formalities, leave in effect laws and regulations that have abolished or simplified legalization procedures, for this reason a conflict is unlikely to arise. However, if there is a conflict, Article 3 of the MLCBI dictates that the specific treaty shall prevail, see Guide to Enactment and Interpretation (2013), nr. 130.

Examination by the court. It also seems clear from the wording that the court ‘is entitled to presume’ the authenticity of documents etc, that the court also retains the discretion to examine these documents anew. There is nothing in the article preventing the court from cooperating with the relevant foreign court in the country in which the initial application was made. The duty to cooperate with another court (Article 25), particularly in cases to which Article 16(3) is applicable, will increase efficiency.

Registered office presumption. Article 16(3) contains a rebuttable presumption. The text of section 1516 US Bankruptcy Code has replaced the term ‘proof’ by ‘evidence’. ‘Registered office’ is the term used in the Model Law to refer to the place of incorporation or the equivalent for an entity that is not a natural person. The presumption that the location of the registered office is also the COMI of the debtor (the centre of the debtor’s main interest) is included for speed and convenience of proof where there is no serious controversy. Article 16(3) Model Law also applies to individuals.

EIR 2015 v MLCBI. The European Insolvency Regulation (recast; EIR 2015) also contains presumptions. They are of a different nature. In recital 29 EIR it is said that the Regulation should contain ‘… a number of safeguards aimed at preventing fraudulent or abusive forum shopping’. The next two recitals set the scene for three presumptions. It does so after revealing in recital 30, first line, that accordingly (with the aim preventing fraud and abuse) the presumptions that the registered office, the principal place of business and the habitual residence are the centre of main interests should be rebuttable, and the relevant court of a Member State ‘… should carefully assess whether the centre of the debtor’s main interests is genuinely located in that Member State.’ In the case of a company, it should be possible to rebut this presumption where the company’s central administration is located in a Member State other than that of its registered office, and where a comprehensive assessment of all the relevant factors establishes, in a manner that is ascertainable by third parties, that the company’s actual centre of management and supervision and of the management of its interests is located in that other Member State (recital 30, second line). The application of the COMI doctrine under the Model Law (and its incorporation under chapter 15) and the recast of the EU Insolvency Regulation (EIR 2015) has been considered in a case, concerning Brazil, Netherlands and the USA. See my comments Both the Netherlands Supreme Court and the US Bankruptcy Court S.D.N.Y. were involved. The approach to COMI is different, although both build upon ‘registered office’ and the treatment of the registered office presumption. Although both the EIR 2000 (and now EIR 2015) and section 1516(c) US B.C. contain similarly worded presumptions, the value assigned to them seems to vary significantly. Whereas under the EIR 2015, a registered office gives a strong indication for determining COMI, for Chapter 15 purposes it applies just ‘[f]or speed and convenience in instances in which the COMI is obvious and undisputed’.

I sum, what looks the same, may differ substantially.