In my last column in Global Restructuring Review (GRR) I submitted that the concept of the centre of main interests (COMI) remains ambiguous and is still vague. An example could be the following case.
In August 2020, a German public inner-city locality of Berlin, Finanzamt Wilmersdorf, filed insolvency proceedings against a debtor, a natural person. He is the chairman of the supervisory board of a German company, German Landbell, a public limited company incorporated under German law. The company specialises in environmental compliance and circular economy solutions, with over 400 people working worldwide and annual revenue of some €400 million. The chairman had residences in Berlin, Monaco, Los Angeles and the island of Saint-Barthélemy. In addition, his assets consisted of a bank account in Monaco and holdings in companies incorporated under Monegasque law, as well as a securities account and capital holdings in Germany. In fact, the debtor is a billionaire heir of a well-known German family empire.
In 2021, the German court of first instance held that the application was inadmissible due to a lack of international jurisdiction. In 2022, this judgment was overturned on appeal, after which the insolvency proceedings were opened. The debtor then filed an appeal with the Bundesgerichtshof, the highest federal court in civil matters in Germany. The Bundesgerichtshof referred questions to the Court of Justice of the EU (CJEU). No data has been provided as to the amount of the tax claim against the debtor.
The question referred to the CJEU related to the legal presumption in Article 3(1), third subparagraph of the European Insolvency Regulation (recast) (EIR 2015). The presumption means that the centre of main interests (COMI) of “… an individual exercising an independent business or professional activity” is presumed to be located at that individual’s “principle place of business” in the absence of proof of the contrary. The key question in the proceedings was whether the legal presumption can be applied to the debtor, who exercises a business or professional activity as an independent person, even if he does not use people or goods (assets) for that activity.
In answering that question, the Berlin tax authority took the concept of “establishment” in Article 2(10) EIR out of the stable. It provides that an “establishment” means any place of operations where a debtor carries out or has carried out in the 3-month period prior to the request to open main insolvency proceedings a non-transitory economic activity with human means and assets. The definition of establishment includes the rule that an economic activity is carried out with the help of people and goods. Why a norm of international jurisdiction for secondary proceedings, “establishment”, was used to clear up an element of a presumption is unclear. It may be the case that in the German text of the EIR 2015 the “principal place of business” is translated as “Hauptniederlassung”, and “establishment” as “Niederlassung”. So, COMI may seem vague, if one just looks at the rather similar wording in one language of a member state, where in English different words appear.
But the CJEU considered rightly that the presence of an establishment is only decisive for the opening of secondary insolvency proceedings pursuant to Article 3(2) EIR 2015. The concept of “principal place of business” of an individual exercising an independent business or professional activity, does not correspond to the concept of “establishment” defined in Article 2(10). The CJEU did not further define “principal place of business”. It limited itself to the decision that the concept of “establishment” is not relevant in the context of Article 3(1) EIR 2015 and therefore also not for the assessment of the statutory presumption.
An interesting observation of the CJEU was that, in the context of the case, the presumption would be deprived of its useful effect if it were to be interpreted as necessarily requiring the presence of assets or human means in the principal place of business of the person concerned. The Court aligned with a note from the European Commission, that independent business or professional activity is capable of being exercised in the absence of such assets or human means, “… so that such a requirement would exclude a significant number of persons exercising such a business or activity from the scope of that presumption.”
Therefore, the CJEU held that Article 3(1), third subparagraph EIR 2015 is to be interpreted as meaning that with regard to an individual exercising an independent business or professional activity, it is to be presumed, in the absence of proof to the contrary, that that individual’s COMI is situated in the principal place of business of that individual, even where that activity does not require any human means or any asset.
With this legal baggage, in February 2025, the case came before the German Federal Court. The Federal Court determined that when examining the international jurisdiction of the courts to open insolvency proceedings, it is presumed, until proven otherwise, that COMI of a natural person engaged in self-employment as a trader or freelancer is located at the location of that person’s principal establishment, even if the activity does not require personnel or assets. For this reason, it found the German appeal court’s decision must be set aside. The Federal Court decided that further findings were required and remitted the case to the appeal court for a new decision, setting out the route that should be followed by the appeal court.
Should that appeal court affirm that the debtor is self-employed, the presumption in Article 3(1), third subparagraph EIR 2015 applies, according to which the debtor’s COMI is its principal place of business. It will then have to examine whether the presumption has been rebutted. The fact that no assets or personnel are required for the debtor’s self-employed commercial activity cannot, in itself, be sufficient to rebut the presumption (as the CJEU has held).
However, if the appeal court concludes that the debtor is not self-employed, it will have to examine its jurisdiction, considering the presumption under Article 3(1), subparagraph 4, sentence 1 EIR 2015. This provision holds that in the case of an individual not exercising an independent business or professional activity, their COMI shall be presumed to be the place of the individual’s habitual residence in the absence of proof to the contrary. The presumption shall only apply if the habitual residence has not been moved to another member state within the 6-month period prior to the request for the opening of insolvency proceedings. The appeal court had not determined the debtor’s habitual residence at the time of the application.
Finally, if the appeal court affirms the requirements of Article 3(1), subparagraph 4 EIR 2015, it will have to examine whether there is evidence to the contrary that the debtor’s centre of main interests differs from the place of habitual residence. In doing so, the appeal court will have to consider the location where the debtor habitually manages his economic interests and where most of his income is earned or spent, or the location where the majority of his assets are located, referring to the CJEU’s 2020 Novo Banco case. The presumption under Article 3(1), subparagraph 4 EIR 2015 may – after an overall assessment of all criteria – be rebutted, for example, if the majority of the assets attributable to the debtor are located outside the member state of his habitual residence.
In my June column I submitted that a clearer, uniform definition and more robust mechanisms to verify COMI declarations would reduce jurisdictional conflicts. From this case, I have learned again that working with these presumptions is not uncomplicated, and that practice presents itself much more stubbornly than can be captured in legal terms. A mechanism would be welcomed so a similar case in the future would not take so long: almost five years and counting.
References
CJEU 16 July 2020, C-253/19; ECLI:EU:C:2020:585 (MH and NI v OJ and Novo Banco SA)
CJEU 19 September 2024, ECLI:EU:C:2024:776 (DL v Land Berlin)
Federal Court of Justice (BGH) Decision of February 6, 2025 – IX ZB 35/22; ECLI:DE:BGH:2025:060225BIXZB35.22.0
Jessica Schmidt, The Finanzamt Wilmersdorf Case: Taxes, a Billionaire, and COMI lost in Translation, in: J.M.G.J. Boon et al. (eds.), In and Out of Solvency. A Tribute to Prof. Reinout Vriesendorp, Deventer: Wolters Kluwer 2025, pp. 203-212.
This is a slightly adapted version of a regular column Bob Wessels is writing for Global Restructuring Review (GRR) on the topic of cross-border restructuring and insolvency in a European context. GRR is a subscription-only publication and the column appeared in GRR of 27 June 2025. See www.globalrestructuringreview.com.