Court of Appeal guidance on the meaning of 'establishment'

Court of Appeal guidance on the meaning of 'establishment'

Has the Court of Appeal clarified the meaning of ‘establishment’ under the EC Regulation on Insolvency? Kathy Stones looks at the case of Re Olympic Airlines SA [2013] All ER (D) 39 (Jun) which raises the bar for the ‘establishment’ test.

Re Olympic Airlines SA (Olympic) went into liquidation in Greece. Subsequently, the trustees of Olympic’s pension scheme presented a petition to wind-up the company in England. Olympic appealed the judge's finding that it had an 'establishment' in England for the purposes of the EC Regulation on Insolvency, art 2(h). The Court of Appeal allowed the appeal as there was no possible alternative to the conclusion that the definition of 'establishment' had not been fulfilled.

What does ‘establishment’ mean?

The EC Regulation on Insolvency (EC) 1346/2000, art 2(h) defines establishment as ‘any place of operations where the debtor carries out a non-transitory economic activity with human means and goods’.

The Court of Appeal decided that an establishment did not exist in this case and overturned the first instance decision – only two former employees remaining on short term ad hoc contracts for the desultory running down of the business did not constitute the requisite ‘economic activity’.

What is essential is a location where there is still, at the critical date, a business operation (‘a place of operations’ performing ‘economic activity’) such as will justify secondary proceedings in a state outside the state of the centre of main interests.

What is the relevant time f

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.