Getting to the core of EU Insolvency Regulation and centre of main interests

The EU Insolvency Regulation EC1346/2000 purports to establish a uniform framework for insolvency proceedings in the EU. The regulation becomes operative in insolvency proceedings having a cross-border element. It is designed to prevent debtors experiencing financial distress from forum shopping, namely seeking recourse to jurisdictions that facilitate an insolvency regime that is less punitive and more favourable to their particular circumstances. It has direct effect in all EU member states (excluding Denmark), and applies to all types of insolvency proceedings and to most legal entities and natural persons.

The cornerstone concept of the centre of main interests (COMI) of the debtor lies in the core of the regulation, the vexed determination of which is crucial in pinpointing to the EU jurisdiction where the main insolvency proceedings may be opened, and accordingly the insolvency law that will be applied. A debtor whose COMI is in the EU will be subject to the regulation in so far as the applicable insolvency procedures are concerned.

The reasons for shifting COMI, and accordingly for a debtor choosing the jurisdiction in which to become insolvent, vary. The period of exiting bankruptcy in one EU member state may be considerably shorter when compared to another and accordingly attractive to an individual debtor.