12 Colum. J. Eur. L. 429 (2006)

Hon. Samuel L. Bufford, U .S. Bankruptcy Judge, Central District of California; Nomura Lecturer on Law, Harvard Law School, Winter 2005. J.D., University of Michigan, 1973; Ph.D., University of Texas, 1969; B.A., Wheaton College, 1964.

The European Union Insolvency Regulation (the EU Regulation) is a giant step forward in promoting international cooperation among EU countries for cross-border insolvency proceedings. It adopts a modified universalist solution to cross-border proceedings insofar as they are located within the EU. However, experience has shown that it needs improvements to work effectively. A venue battle now rages between courts of several European countries over which country’s courts will administer particular cross-border proceedings, and how the center of main interest is to be determined for this purpose.

This Article begins with a detailed examination of the two principal cases where conflicts have arisen, Eurofood and Daisytek. Eurofood is a subsidiary of Parmalat, which has produced the largest insolvency case in European history. The Irish and Italian courts have both opened main insolvency proceedings for the Eurofood subsidiary, and the controversy is now pending before the European Court of Justice (ECJ). For the Daisytek French subsidiary, both English and French courts have opened main insolvency cases, and an appeal is pending before the French Cour de Cassation, where the Ministry of Justice is expected to recommend submission to the ECJ.

Two very important substantive modifications would vastly improve the EU Regulation. First, the EU Regulation needs to provide for the filing in the same country (thereby permitting the filing in the same court) of members of a corporate group that are economically integrated. It is very difficult (if at all possible) to reorganize a corporate empire when its insolvency proceedings are distributed among a number of countries.

Second, the EU Regulation needs to clarify the definition of “center of main interest” (CoMI) and to specify what a court should consider in making the CoMI determination. A court should weigh the following factors: (1) the location of operations and management decisions of the corporation; (2) the location of the “nerve center” or place of principal decision-making for the corporation; and (3) the expectations of creditors, such as suppliers and financiers, as to the CoMI decision in the event that the company goes into an insolvency proceeding.

This Article also argues for three kinds of procedural improvements: (1) decoupling the decision on whether a proceeding is a main proceeding from the decision opening the proceeding itself, to give an opportunity to the parties in interest to be heard on the subject of whether a proceeding is a main proceeding; (2) defining what constitutes a “judgment opening insolvency proceedings,” to specify what steps qualify under this term in those countries where an opening order or judgment is not a typical part of the insolvency process; (3) adopting procedures to recognize the due process rights of foreign estate administrators, foreign creditors, and other parties in interest in a cross-border insolvency proceeding.