Factors in the Determination of COM

One of the most significant issues for consideration in an international legal framework for cross-border banks is the problem of defining the home country, the centre of the debtor’s main interests. The COMI is intended to be the location of the company’s head office functions.197 Wessels, however, noted that there are two conceptual approaches that the courts use in the determination of COMI in the EU. The first is a ‘contact with creditors’ or business activity approach where a debtor’s COMI is determined through the eyes of creditors.198 A second concept is the ‘mind of management’ or ‘head office functions’ approach where, in order to rebut the presumption that the COMI is the place of incorporation, it will be necessary to show that the head office functions are carried out in a Member State other than the state in which the registered office is situated.199 As indicated, under the Model Law, the debtor’s registered office is presumed to be its COMI and the determination of a debtor’s COMI is central to its legal framework as this decides the main proceeding.200 In the determination of COMI, many factors have been considered by the courts, indicating its complexity, including the:

i. location of the debtor’s headquarters201 or head office functions202 or ‘nerve centre’203;

ii. location of a debtor’s management or those who actually managed the debtor204 or of the operational management of the debtor205;

196_{Cunard Steamship CovSalen Reefer Services AB 773 F2d 452 at 458 (2d Cir NY, 1985).}

197 _{Miguel Virgos & Etienne Schmidt, ‘Report on the Convention on Insolvency Proceedings’, Virgos Schmidt}

Report, paragraph 76 viewed at <http://aei.pitt.edu/952/>> on May 22, 2011.

198 _{Wessels, above n180, 79.} 199 _{Ibid, 80.}

200 _{United Nations Commission on International Trade Law, UNCITRAL Model Law on Cross-Border}

Insolvency with Guide to Enactment, (30 May 1997), Article 20.

201 _{In re Tradex Swiss AG, 384 BR 34 (Bankr. D. Mass. 2008); Re Stanford International Bank, [2009] EWHC}

1441 (Ch); Re MPOTEC GmbH [2006] BCC 681.

202 _{ENERGOTECH SARL [2007] BCC123; In re MPOTEC GmbH [2006] BCC 681 (Trib. de Grande Instance}

(Nanterre); In Re Hellas Telecommunications (Luxmebourg) II SCA [2009] EWHC 3199 (CH).

203 _{Hertz Corp. v Friend (US Supreme Court, No. 08-1107); In the case of the Bankruptcy of Stanford}

International Bank. Superior Court, District of Montreal. Quebec, decision on the application of the SEC receiver, Fairfield Sentry.

204

In re Tradex Swiss AG, 384 BR 34 (Bankr. D. Mass. 2008);, Re Stanford International Bank, [2009] EWHC 1441 (Ch).

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iii. location of the debtor’s main assets and/or creditors206 or the location of the majority of creditors who would be affected by the case207;

iv. jurisdiction whose law would apply to most disputes208;

v. location from which the administration of the debtor was organized209; vi. location from which reorganisation of the debtor was being conducted210; vii. location in which the debtor was subject to supervision or regulation211; and

viii. location which creditors recognised as being the centre of the company’s operations.212

The concept of COMI is flexible as it can be applied to any class of debtor and to any type of organisational structure of a debtor. However, it involves the examination and the evaluation of the debtor’s circumstances and the resulting flexibility is considered a weakness by many.213 It increases the risks of different conclusions being reached by courts in different jurisdictions214in spite of claims made about the laws in which it is used that it is an autonomous concept whose meaning is uniform and independent of any national laws.215 The Virgos-Schmit report states that COMI normally corresponds to the head office, or to the place where the debtor conducts the business' administration and has centralized the management of its affairs (i.e., the location from which it contracts with third parties), and does not correspond to the place where the assets of the debtor, whatever the value, are located, nor to the place where goods are manufactured. According to the report, assessing where COMI is located is a matter of fact. A debtor's COMI can move but it can only have

205 _{Eurotunnel Fin. Ltd, Tribunal de Commerce [TDC] Commercial Court Paris, Aug 2, 2006(Fr.); In re British}

American Insurance 425 BR 884 (Bankr. SD Fla 2010).

206

In re Tradex Swiss AG, 384 BR 34 (Bankr. D. Mass. 2008); ‘Ernst & Young, Eurotunnel Fin. Ltd, Tribunal de Commerce [TDC] Commercial Court Paris, Aug 2, 2006(Fr.); In re British American Insurance 425 BR 884 (Bankr. SD Fla 2010).

207 _{Re Stanford International Bank, [2009] EWHC 1441 (Ch).} 208

Re Stanford International Bank, [2009] EWHC 1441 (Ch). Ernst & Young; British American Insurance

209 _{Re Eurofood, IFSC Ltd [2005] BCC 1021; Daisytek.}

210 _{Eurotunnel Fin. Ltd, Tribunal de Commerce [TDC] Commercial Court Paris, Aug 2, 2006(Fr.); In re Ernst &}

Young Inc383 BR 773(Bankr D Colo 2008); In Re Hellas Telecommunications (Luxembourg) II SCA [2009] EWHC 3199 (CH).

211 _{In re Ernst & Young Inc 383 BR 773(Bankr D Colo2008).}

212 _{Re Eurofood, IFSC Ltd [2005] BCC 1021. See also United Nations Commission of International Trade Law,}

Working Group V (Insolvency Law), Thirty-ninth session, Vienna, 6-10 December 2010, UN Doc. No. A/CN.9/WG.V/WP.95/Add.1, 6-7.

213 _{Miguel Virgos Soriano, Francisco Garcimartin & Francisco J. Garcimartin Alferez, The European Insolvency}

Regulation: Law and Practice, (Kluwer Law International, 2004), 38.

214 _Ibid. 215

Look Chan Ho, ‘Cross-border Fraud and Cross-border Insolvency: Proving COMI and Seeking Recognition under the Model Law’, (2009) Butterworths Journal of International Banking and Financial Law 538.

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one COMI at any given time.216 In practice, it is often the debtor that makes the first filing, and therefore has the opportunity to present an argument to the court arguing why its COMI is located in a particular jurisdiction.217