European Regulation 1346/2000: French Tribunal recognises decision of English Court in declaring a French company insolvent

30 August 2005

Mathilde Parent

This interesting decision has arisen from the car manufacturer and distributor Rover going into administration.

On 8 April 2005, the Birmingham High Court initiated a group administration with regard to the English company, MG Rover Group Limited. On 18 April 2005, the court decided to extend the insolvency proceedings to its French subsidiary SAS Rover France stating that “the centre of SAS Rover France’s principal interests was located in England”.

However, as the French prosecutor opposed recognition of the English court’s decision, the Nanterre Commercial Tribunal had to decide on the conditions for recognition of an English decision which initiates a group administration in respect of a French company.

The prosecutor criticised the English judge for not having taken into account the fact that the registered office was located in France and was also concerned that the employees would not be as well protected under English insolvency law as they would be under French law.

The Tribunal strictly applied the “mutual confidence” principle which appears in the preamble to European Regulation 1346/2000 (29 May 2000), deciding that under Article 16 of the Regulation, the decision did not impact on internal public order.

‘Confidence’ requires that insolvency proceedings taken by a court of one Member State are recognised by all the other Member States, as the other States are not empowered to control the competencies of the Member State that initiated the procedure.

Thiswas reflected in the way in which the Nanterre Commercial Tribunal reached its decision. The Tribunal did not assess or vary the criteria employed by the English court in determining the location of the actual registered office of the company, stating that “the English judge, in order to negate the presumption that the centre of principal interests of SAS Rover France was located in France rather than its statutory registered office, identified in respect of Rover France all the significant actions that it carried out in Longbridge, England, and was thereby convinced that the centre of principal interests of Rover France was located in Longbridge”.

Further, the Commercial Tribunal noted that the consequences of the decision were not “manifestly contrary to public order”, after having considered in a simple and pragmatic fashion the situation of the employees (notably that they would receive the same sum as that which they would have received under a French insolvency proceedings, which in fact the English administrators had undertaken to respect) and that of the concession holders (noting mainly that agreements had been reached allowing them to continue any commercial activity and guaranteeing that they could retain any stock).

This decision was only made possible by the fact that the English administrators had understood and respected the requirements of the French public order.

One can only congratulate the approach of the Nanterre Commercial Tribunal, along with that of the English administrators, for respecting and giving priority to the mutual confidence principle. This decision bodes well for the development of European insolvency law and one hopes that this is only the first decision in a line of developing jurisprudence.