Cross-Border Insolvency in the U.S. and U.K.: Conflicting Approaches to Defining the Locus of a Debtor's 'Center of Main Interests'

• Author: Bryan Rochelle
• Position: J.D. Candidate 2017, Southern Methodist University Dedman School of Law. This article is dedicated to the memory of my late grandfather, William J. Rochelle, Jr. I thank Jennifer Little and Trevor Spears for their efforts in shepherding this article toward publication.
• Pages: 391-399

Cross-Border Insolvency in the U.S. and U.K.:

Conflicting Approaches to Defining the Locus

of a Debtor’s “Center of Main Interests”

B

RYAN

R

OCHELLE

*

I. Introduction

In order to take up a “foreign”

1

corporate insolvency case in the United

States (U.S.) or the United Kingdom (U.K.), courts have to determine that a

“foreign main proceeding” is pending in a country where the debtor has its

“center of main interests” (“COMI”). Unfortunately, neither the U.S.

Bankruptcy Code

2

nor the U.K. Cross-Border Insolvency Regulation,

3

the

prevailing laws in each jurisdiction, defines COMI. This lack of clarity has

left courts on both sides of the proverbial “pond” with the task of

formulating definitions of their own.

4

U.K. courts, at least, have been

remarkably consistent in this endeavor, reaching the near consensus that

COMI should be evaluated by asking where a third party, assessing certain

objective factors, would perceive the corporate debtor to conduct the bulk of

its business operations.

5

Some U.S. courts, for their part, have reached the

same conclusion.

6

However, other U.S. courts have tied COMI to the

* J.D. Candidate 2017, Southern Methodist University Dedman School of Law. This

article is dedicated to the memory of my late grandfather, William J. Rochelle, Jr. I thank

Jennifer Little and Trevor Spears for their efforts in shepherding this article toward publication.

1. Note that the word “foreign,” for purposes of discussing U.K.-based cross-border

insolvency proceedings in this paper, means actions brought in the U.K. by parties residing

outside of the European Union (EU). “Foreign” retains a more natural meaning in examining

U.S.-based cross-border bankruptcy cases here, describing cases involving parties and

jurisdictions located outside of the U.S.

2. 11 U.S.C. § 101 et seq.

3. The Cross-Border Insolvency Regulations 2006, SI 2006/1030 (Gr. Brit.).

4. Instead of moving towards a consensus on a definition of COMI in recent years, courts

have exerted considerable effort attempting to ascertain the time at which COMI should be

measured. Courts have tended to resolve this question in one of two ways. First, as in In re

Betcorp, 400 B.R. 266, 290-91 (Bankr. D. Nev. 2009), courts have held that a debtor’s COMI

should be measured as of the date of the petition for recognition instead of the date of the

opening of the foreign insolvency proceeding. Second, and by contrast, in In re Millenium

Global Emerging Credit Master Fund Ltd., 458 B.R. 63, 74 (Bankr. S.D.N.Y. 2011), aff’d, 2012

U.S. Dist. LEXIS 88782 (S.D.N.Y. June 25, 2012), the court held that the proper date to

measure COMI is the time the foreign insolvency proceeding commenced. While a consensus

on the temporal nature of COMI has yet to be resolved, courts appear to be even further behind

in terms of arriving at a definition of the term itself.

5. See, e.g., In re Stanford Int’l Bank Ltd. [2010] EWCA 137 (Civ) 184.

6. See, e.g., In re SPhinx, Ltd., 351 B.R. 103, 117-18, 351 B.R. 103, 56 (S.D.N.Y. 2006).

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