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European Restructuring: Migration or Forum Shopping

Debtors migrate but creditors forum shop. Robert Hickmott and Alex Ballman write in Legal Week about how the trio of German cases:

  • Deutsche Nickel
  • Hans Brochier
  • Schefenacker

illustrate the post-Eurofood attitude to COMI (centre of main interests) under the European Insolvency Regulation. It has been established through cases like Staubitz-Schreiber that debtors can move their COMI, and this facility was used in the Collins & Aikman restructuring and insolvencies. But forum shopping, where creditors race to their court of choice, is what the European Insolvency Regulation sought to avoid. With COMI now established as elsewhere than the place of a company's registered office only as a result of factors that are both objective and ascertainable by third parties, such cynical or opportunistic forum shopping by creditors is rightly deprecated. There are many reasons why a debtor might choose to make use of an alternative insolvency regime by moving its COMI, such as:

  • to give UK and US stakeholders comfort that a flexible and familiar (UK) restructuring environment will be available;
  • to make use of Insolvenzgeld funding (Germany & Austria);
  • to avoid Acquired Rights Directive/TUPE problems with employees (Netherlands);
  • to enhance employee protection (France); or
  • to use DIP financing (Sweden).

But it will be critical, as the Hans Brochier directors discovered, to get the details of the COMI move right. The Deutsche Nickel mechanism - conversion to a limited partnership and transfer of the assets and liabilities to the new general partner (in that case an English company) by universal succession - is a specific form of migration that nevertheless requires a COMI to be established in another jurisdiction. Migration is the acceptable face of forum shopping, and we will see more of it!

 

 

Date: 26th February, 2007
Author: Chris Laughton

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