Author: Alexander Wildschütz
On 12 September 2013 the High Court dismissed the petition of a German national who had incurred substantial debts, almost exclusively in Germany, to be declared bankrupt (Re Wilfried Löffler).
Alexander Wildschütz and Lisa Serrant of Fladgate’s Banking Litigation team acted for the opposing German bank.
For some time debtors from across the EU have often successfully petitioned for bankruptcy in the English courts to take advantage of a bankruptcy regime, which can see them automatically discharged from their liabilities after just one year. This is in stark contrast to other regimes such as in Germany and Ireland, where the bankruptcy process can take seven years or more.
Commenting on the case Alexander Wildschütz explains, “In the eyes of European lawyers and financial institutions the English courts had in the past too readily accepted jurisdiction in such cases, which has led to a form of bankruptcy tourism that was clearly not intended by the Brussels legislation. The decision in Löffler is an extremely positive result for any overseas creditor. It illustrates that the English courts are fully aware of the need to closely scrutinise whether the petitioning debtor has indeed established a COMI (centre of main interests) in England rather than merely created an impression in order to take advantage of English insolvency rules.”
Council Regulation (EC) No 1346/2000 establishes that insolvency proceedings should be opened in the member state where a debtor has its COMI, being the place where the debtor conducts the administration of his interests on a regular basis and which is ascertainable by third parties. In the Löffler case the High Court found that his COMI remained in Germany where he continued to have considerable interests, a home and family and where he also had incurred all relevant debts.
The judgment provides very helpful guidance on the criteria the court will consider:
Whilst the court recognised a debtor does of course have a right to effect a change of COMI such change must have occurred genuinely by the time he presents a petition.
In summary, Alexander Wildschütz explained, “The key point for creditors to note is that if they suspect forum shopping by their debtors they should consider early intervention by bringing a jurisdictional challenge.”
If you would like more information on the above, or any related matter, please contact a member of Fladgate’s Banking Litigation team.
Alexander Wildschütz, Partner, Fladgate LLP (email@example.com)