How to establish jurisdiction in Scottish insolvency cases (Bank Leumi (UK) plc, petitioner)

How to establish jurisdiction in Scottish insolvency cases (Bank Leumi (UK) plc, petitioner)

Ben Zielinski, senior associate at Shoosmiths, considers the decision in Bank Leumi (UK) plc, petitioner. He says the decision provides a helpful clarification that a company’s centre of main interests (COMI) is irrelevant to determine territorial jurisdiction in Scotland.

Original news

Bank Leumi (UK) plc, petitioner [2017] CSOH 129, 2017 Scot (D) 6/10

What is the background to the case and issues within it that are pertinent to insolvency professionals?

The case concerned a petition which was presented in the Court of Session in Scotland by a secured creditor, seeking the making of an administration order against an English registered company. The petitioner averred that the Court of Session had jurisdiction to hear the petition because the company’s COMI, as defined in Regulation (EU) 2015/848 (the Recast Regulation on Insolvency), was in Scotland. An order for intimation and service of the petition and certain interim orders was granted. However, when the petition returned to court, senior counsel for the petitioner candidly drew the court’s attention to the issue of whether the court had jurisdiction to make the administration order as it was uncertain whether the Recast Regulation on Insolvency and the concept of COMI were relevant to determining jurisdiction between the courts of the constituent parts of the UK.

What were the main legal arguments raised?

The Insolvency Act 1986 (IA 1986) says that the court that may make an administration order in respect of a company is a court that has jurisdiction to wind that company up. IA 1986, s 120 provides that the Court of Session has jurisdiction to wind up any company registered in Scotland. IA 1986, s 117 makes similar provision in respect of the High Court and companies registered in England and Wales. Both sections are qualified with a sub-section stating:

‘This section is subject to Article 3 of the EU Regulation’.

Article 3 of the Recast Regulation on Insolvency provides the courts of the EU Member State where a company has its COMI with jurisdiction to open main insolvency proceedings. The petitioner argued that the qualification meant that Article 3 had been adopted in national law for the purpose of determining jurisdiction between the parts of the UK.

What did the judge decide, and why?

Lord Doherty found that the Court of Session did not have jurisdiction and dismissed the petition. He noted that there was no case law on the point, but that academic writers universally disagreed with the petitioner’s argument.

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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.