The UK Supreme Court’s strict interpretation of the requirement for an Establishment within the Insolvency Regulation

Typology: Case Law

A few weeks ago (29th April 2015), the UK Supreme Court delivered its judgment in The Trustees of the Olympic Airlines SA Pension and Life Assurance Scheme v Olympic Airlines SA ([2015] UKSC 27). The UK Supreme Court delivers far less judgments than several other European Supreme Courts so its decisions always raise high expectations. The issue was what connection a foreign company must have with the United Kingdom to entitle an English court to wind it up, if its centre of main interests is in another member state of the European Union and whether that connection existed in the case at the date of the 20 July 2010.

The centre of main interests is generally known as “COMI” and is the key concept of the Insolvency Regulation (Regulation 1346/2000) when it comes to international jurisdiction. However, Article 3. 2 of the Regulation states that “Where the centre of a debtor’s main interests is situated within the territory of a Member State, the courts of another Member State shall have jurisdiction to open insolvency proceedings against that debtor only if he possesses an establishment within the territory of that other Member State. The effects of those proceedings shall be restricted to the assets of the debtor situated in the territory of the latter Member State”. Article 2 (h) defines an “establishment” as “any place of operations where the debtor carries out a non-transitory economic activity with human means and goods.” Therefore, the answer to the above question depends on the meaning of the words “economic activity”.

The facts were the following. In September 2009, shortly before the commencement of the liquidation proceedings in Greece, the area manager for Olympic Airlines in London was instructed that the company would cease all commercial operations as from 00.01 on the following day. From that time all flight operations were undertaken by an unrelated company. In June 2010, the Greek liquidator informed the trustees of the pension fund that the employment of the 27 remaining UK staff would be terminated with effect from 14 July 2010. Three persons, Mr Savva the General Manager, Mr Platanias the Finance and Purchasing Manager, and an accounts clerk, were retained thereafter on short term ad hoc contracts. At the time of the English winding-up petition, they were the only persons still working there. Mr Savva attended the office at Conduit Street as required. In practice this was about three or four times a week. His function was to deal generally with anything requiring attention, principally instructions and requests from the liquidator and staff in Athens retained by him. Mr Platanias arranged the payment of bills for his own salary and Mr Savva’s, council tax, electricity and cleaning, and for minor repairs following a break-in. He reconciled bank statements, copied and sent relevant documents to the liquidator and his staff in Athens and dealt generally with post and telephone calls. He supervised the disposal of the company’s assets in England, a process which had begun before the winding-up petition and continued for some time afterwards. These comprised a current and deposit account, computers and office furniture, fixtures and fittings and computerised accounting records. They had no substantial realisable value. Are these elements sufficient to identify an establishment within the meaning of the Insolvency Regulation?

The Court does not believe so. It holds that “Olympic was not carrying on any business activity at 11 Conduit Street on the relevant date. The last of the company’s business activities had ceased some time before. All that Mr Savva and Mr Platanias were doing was handling matters of internal administration associated with the final stages of the company’s disposal of the means of carrying on business. The company cannot therefore be said to have had an “establishment” in the United Kingdom”.

(Altalex, 2 November 2015. Article by Emmanuel Guinchard)

UK Supreme Court

Judgment 29 April 2015

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