English High Court Weighs In on Requirements for an "Establishment" under the EC Insolvency Regulation

On May 9, 2012, the English High Court, in Trillium (Nelson) Properties Ltd v Office Metro Ltd [2012] EWHC 1191 (Ch) (09 May 2012), for the first time ruled on the requirements governing the existence of an "establishment" under the EC Insolvency Regulation (Council Regulation (EC) No 1346/2000) (the "Regulation"). Under the Regulation, "main" insolvency proceedings may be commenced on behalf of a debtor only in the single jurisdiction in which the debtor's "centre of main interests" (commonly referred to as "COMI") is located. Where a main proceeding has been instituted in one EC Member State, the Regulation provides that "secondary" proceedings may be commenced in another Member State if the debtor "possesses an establishment within the territory of that other Member State." "Establishment" is defined by the Regulation as "any place of operations where the debtor carries out non-transitory economic activity with human means and goods." 

The key issue in Trillium was whether the English court had jurisdiction to open secondary proceedings for Office Metro Ltd ("Office Metro"), whose main insolvency proceedings had been opened in Luxembourg. The court acknowledged that Office Metro had a "place of operations" in England (even though it neither owned nor leased property there) and that it carried out some functions via agents in England, so as to satisfy the "human means" requirement of the "establishment" definition in the Regulation. However, the court ruled that the continued functions of the company in the U.K. were "transitory" and did not amount to "economic activity" necessary to create an "establishment." Therefore, the English court dismissed Office Metro's winding-up petition.