Brac Rent-A-Car International Inc, Re

The court has jurisdiction under Council Regulation 1346/2000 to open insolvency proceedings against a corporate debtor incorporated outside the Community where the debtor’s centre of main interests is in a Member State. Incorporation within a Member State is not an additional requirement. The relevant test is based on the location of the debtor’s centre of main interests, subject to the Regulation’s rules concerning establishments and secondary proceedings. In construing Community legislation, the substantive provisions prevail over inconsistent recitals. A restrictive interpretation based solely on incorporation would undermine the Regulation’s purposes by encouraging artificial corporate arrangements and forum-shopping.

BRAC Rent-A-Car International Inc was incorporated in Delaware and was in Chapter 11 proceedings in the United States. Its business, employees, contracts and operations were substantially based in England. The company petitioned for an administration order under the Insolvency Act 1986 to obtain protection against creditors in England.

The judgment creditors argued that the court lacked jurisdiction because the company was incorporated outside the Community. The central issue was whether Council Regulation 1346/2000 permitted insolvency proceedings in a Member State against a corporate debtor incorporated in a non-Member State, where its centre of main interests was in that Member State.

1. The administration order was made. The reserved issue was whether the court had jurisdiction to make an administration order in respect of a company incorporated outside the Community.

2. Section 8 of the Insolvency Act 1986, read with the definition of “company” applied through section 251 and as originally enacted, did not ordinarily extend administration orders to foreign companies. The Act expressly extended winding-up jurisdiction to unregistered companies, including foreign companies, under section 221. Section 8(7), introduced from 31 May 2002, provided that “company” included a company in relation to which an administration order could be made by virtue of article 3 of the Regulation.

3. Article 3 of Council Regulation 1346/2000 conferred jurisdiction on the courts of the Member State where the debtor’s centre of main interests was situated. For a company or legal person, the registered office was presumed to be that centre, subject to proof to the contrary. The Regulation did not state that the debtor had to be incorporated in a Member State.

4. The wording and structure of the Regulation supported that conclusion. It expressly referred to creditors’ residence, domicile or registered office being within the Community, but imposed no equivalent incorporation requirement on debtors. The substantive text of the articles prevailed over inconsistent recitals, applying the approach in Société d’Importation Édouard Leclerc-Siplec v TF1 Publicité SA and M6 Publicité SA Case C-412/93 [1995] ECR I-179.

5. A restrictive interpretation would frustrate the Regulation’s objectives by enabling businesses with their assets and operations in a Member State to avoid its application through incorporation elsewhere. The company’s centre of main interests was in England. The court therefore had jurisdiction to open insolvency proceedings against it.