Case C-341/04, Eurofood IFSC Ltd

Another interesting case of last Tuesday, which concerned Eurofood, a subsidiary of Parmalat registered in Ireland.

On 24 December 2003, Parmalat was placed under extraordinary administration in Italy. At the request of the Bank of America NA seeking the liquidation of Eurofood, the Irish High Court of 27 January 2004 appointed Mr Farrell as the provisional liquidator of Eurofood. On 9 February 2004, Eurofood was placed under the extraordinary administration in Italy of Enrico Bondi.

On 23 March 2004 the High Court found Finding Eurofood insolvent and ordered its liquidation, appointing Mr Farrell as liquidator. It held that the proceedings opened in Ireland were the “main” proceedings, since the centre of main interests of Eurofood was in Ireland.

Mr. Bondi appealed that judgment. The Supreme Court of Ireland referred several questions to the European Court of Justice

Article 3 of Council Regulation (EC) No 1346/2000 on insolvency proceedings states that the court with jurisdiction to open the "main" insolvency proceedings is the court of the Member State where the centre of the debtor's main interests is situated. In the case of a company, the place of the registered office shall be presumed to be the centre of its main interests.

The Court of Justice now held that that presumption can be “rebutted only if factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which locating it at that registered office is deemed to reflect.” (para. 34), for instance in the case of a
‘letterbox’ company.

Article 16 of the regulation provides: “Any judgment opening insolvency proceedings handed down by a court of a Member State which has jurisdiction pursuant to Article 3 shall be recognised in all the other Member States from the time that it becomes effective in the State of the opening of proceedings.” (the so-called rule of priority).

The Court held that this rule is based on the principle of mutual trust. Therefore insolvency proceedings opened by a court of a Member State must be recognised by the courts of the other Member States.

According to Article 26, such recognition may be refused by a Member State where the effects of such recognition would be manifestly contrary to its public policy, in particular its fundamental principles or the constitutional rights and liberties of the individual.

The Court reiterated that is a general principle of Community law that everyone is entitled to a fair legal process (see case law mentioned below).

It held that “that principle is inspired by the fundamental rights which form an integral part of the general principles of Community law which the Court of Justice enforces, drawing inspiration from the constitutional traditions common to the Member States and from the guidelines supplied, in particular, by the European Convention for the Protection of Human Rights and Fundamental Freedoms” (para. 65).

The Court held that the right to be notified of procedural documents and the right to be heard “occupy an eminent position in the organisation and conduct of a fair legal process”. (para. 65). It argued that in the context of insolvency proceedings, the right of creditors or their representatives to participate in accordance with the equality of arms principle is of particular importance, and hence constitutes a ground to refuse recognition in the sense of Article 26.

Text of Judgment

Relevant case law: