The complications of concurrent jurisdiction—Comite d’entreprise de Nortel networks SA and others v Rogeau

The complications of concurrent jurisdiction—Comite d’entreprise de Nortel networks SA and others v Rogeau

Can several courts have concurrent jurisdiction to decide the same issue? Stefan Ramel, a barrister at Guildhall Chambers, examines a recent ruling in Europe and attempts to simplify the matter.

Original news

Comite d’entreprise de Nortel networks SA and others v Rogeau: C-649/13 [2015] All ER (D) 143 (Jun)

The Court of Justice of the European Union (CJEU) gave a preliminary ruling, deciding, among other things, that arts 3(2) and 27 of Council Regulation (EC) 1346/2000 on insolvency proceedings (the EC Reg) should be interpreted as meaning that the courts of the member state in which secondary insolvency proceedings had been opened had jurisdiction concurrently with the courts of the member state in which the main proceedings had been opened, to rule on the determination of the debtor’s assets falling within the scope of the effects of those secondary proceedings.

How did the issue arise, and what was the chronology?

The comité d’entreprise of Nortel Networks SA (NNSA) started proceedings seeking relief relating to a sum of money standing to the credit of NNSA’s account. Specifically, it sought relief in relation to whether those funds could be used to make a deferred severance payment to employees that NNSA was contractually obliged to make pursuant to a memorandum settling action entered into with those employees on 21 July 2009—post-insolvency and after the secondary proceedings were opened. The French insolvency practitioner, Mr Rogeau, had not made the payment because, under a coordinating protocol dated 1 July 2009 entered into between the English and French insolvency proceedings, certain expenses had to be paid first. Mr Rogeau sought to join the English administrators in the comité d’entreprise’s action.

Does the EC Reg apply?

The CJEU concluded that the EC Reg applies to the proceedings. It reached that conclusion on the basis that the rights and obligations on which the action before the French court was based derived directly from insolvency proceedings, and were closely connected with the case. It does not appear, however, that the CJEU supplied its reasons for reaching that particular conclusion. Plainly, it would have assisted practitioners if it had done.

Which court has jurisdiction to hear the dispute—the French courts (secondary proceedings) or English court (main proceedings)?

Both. The CJEU considered that the English courts and the French courts have concurrent jurisdiction. In reaching that view, the CJEU concluded that the EC Reg did not specifically confer exclusive jurisdiction on the court first seized. Moreover, the CJEU were sensitive to the fact that one of the purposes of secondary proceedings is to protect local creditors—this was precisely a case where local creditors were seeking the assistance of the local court in protecting their interests. The CJEU thought that it would be odd, in such circumstances, if the French courts did not have jurisdiction.

What about the risk of two irreconcilable judgments?

The CJEU adopted the analysis of the advocate general to the effect that the EC Reg, art 25(1) would require a court before which a related action is brought to recognise an earlier judgment given by a court with jurisdiction under the EC Reg, arts 3(1) or 3(2).

What is the applicable law for deciding which assets fall within secondary proceedings?

EC Reg, art 2(g) will determine which law decides which assets fall within the secondary proceedings. The CJEU’s answer to the question is interesting because it doesn’t really answer the question at all. The referring court had asked whether it was English law (main proceedings) or French law (secondary proceedings) which governed the question. By falling back on the EC Reg, art 2(g), it is one view that the CJEU hasn’t really answered the question, but has left it to the local court to resolve.

What does this mean in practice for professionals advising insolvency practitioners dealing with main and secondary proceedings? Is there still a role for protocols?

There undoubtedly is still a role for protocols. In fact the recast insolvency regulation which comes into force in 2017 contains articles which permit—possibly even encourage—office-holders to enter into protocols. The real impact this case may have is having regard to the CJEU’s conclusion that several courts have concurrent jurisdiction to decide the same issue. It is to be hoped that this decision doesn’t amount to a starter’s gun in a jurisdiction race for related actions. If it does, it may be appropriate to include in any future protocols an obligation on each office-holder to notify the other office-holders appointed in respect of the same debtor of any threatened proceedings—by way of analogy, for example, with the obligations that professionals have to notify insurers of intimated claims. That would at least enable the other office-holder to seek to actively participate in the proceedings, or open their own proceedings in their own jurisdiction.

Stefan Ramel is a highly regarded commercial advocate who litigates regularly in the High Court and who is frequently instructed to undertake drafting and advisory work in multi-million pound cases. He is on the attorney general’s regional panel for government work, and also sits in a judicial capacity for British Fencing. Practice areas include insolvency, commercial, company directors’ disqualification, banking and finance, professional negligence and sports law. Stefan is top-rated for his insolvency work by Chambers and Partners. He has been involved in several major recent insolvencies such as Alitalia, Wind Hellas, Madoff, Caterham and Kaupthing.

Interviewed by Kate Beaumont.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Further Reading

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Comity and the court's inherent jurisdiction—application and effects

Cross-border protocols

Which law applies under the EC Regulation

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First published on LexisPSL Restructuring and Insolvency

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.