The Unavoidable Persistence of Forum Shopping in European Insolvency Law

Abstract

One of the goals of the EU Insolvency Regulation, confirmed by recent reform proposals of the European Parliament and the Commission, is to limit forum shopping. The real world, however, looks quite different, as forum shopping is becoming increasingly common in the EU. The reason for the increase in forum shopping cases is hidden in the mechanisms of the Insolvency Regulation. It is well known that the Member State of a debtor’s centre of main interests (COMI) is competent to govern its main insolvency proceeding with universal effects. Additionally, companies’ COMI is presumed to coincide with their registered office, unless the contrary is proven. Nowadays, however, companies can often transfer their registered office throughout the European Union. Additionally, pursuant to ECJ case law, the reference date to assess the insolvency competence is the date of filing, with the consequence that, if a company relocates its registered office abroad before the filing, the new jurisdiction becomes competent to govern its insolvency, unless creditors prove that the COMI is still in the original State. However, the presumption that the COMI coincides with the registered office cannot be rebutted if a company actually relocates its headquarters alongside its registered office in a way by third parties. Creditors’ protection against opportunistic forum shopping, therefore, depends exclusively on the ascertainability criterion. This criterion, however, as applied by Member States’ case law and the ECJ, does not take into account the viewpoint of pre-existing creditors: If a company relocates its headquarters alongside its registered office and makes this transfer public and ascertainable for future potential creditors, no evidence whatsoever can be provided that its COMI is still in the State of origin. Forum shopping, therefore, has become an unavoidable component of EU insolvency law.