Leiden Law Blog

Nortel Networks Judgment a milestone in development of European insolvency law

Posted on by Bob Wessels in Private Law
Nortel Networks Judgment a milestone in development of European insolvency law

The Court of Justice of the EU on 11 June 2015, Case C-649/13 (Comité d'entreprise de Nortel Networks SA and Others v Cosme Rogeau and Cosme Rogeau v Alan Robert Bloom and Others) delivered a significant judgment, both for the EU Insolvency Regulation’s rules on international jurisdiction as well as those on the law applicable and the way courts in cross-border insolvency cases jointly have to come to decisions. Although this Nortel case (with main proceedings in England and a secondary proceeding in France) deserves much more study, I take five conclusions from the CJEU’s judgment:

(1) It confirms the determination of the matter of international jurisdiction, more specifically the relationship between the EU Insolvency Regulation and Brussels I (specifically referring to Nickel & Goeldner Spedition, C 157/13);

(2) The disputes before the referring French ‘secondary’ court fall within the context of the application of a large number of agreements concluded by or between the parties before it, including, in particular an Interim Funding and Settlement Agreement (between the Canadian Nortel Networks Limited and a number of subsidiaries in the Nortel group), an intra-group Master R&D Agreement’, a ‘coordinating protocol’ and a ‘memorandum settling the action’ between the insolvency practitioners involved. The CJEU concludes that it is apparent that the rights or obligations on which the actions before the referring French secondary court are founded derive directly from insolvency proceedings, are closely connected with them and have their source in rules specific to insolvency proceedings, and therefore it concludes that the EIR is applicable;

(3) Where for main insolvency proceedings Article 3(1) EIR also confers international jurisdiction to hear and determine related actions on the Member State within the territory of which the insolvency proceedings have been opened (the CJEU refers in particular to the judgment in F-Tex, C 213/10), it now decides that for secondary proceedings Article 3(2) EIR must be regarded (also) as conferring international jurisdiction to hear and determine related actions on the courts of the Member State within the territory of which secondary insolvency proceedings have been opened, in so far as those actions relate to the debtor’s assets that are situated within the territory of that State;

(4) Both the main as well as the secondary courts have jurisdiction, concurrently or ‘jointly’ to rule on the determination of the debtor’s assets falling within the scope of the effects of the  secondary proceedings;

(5) Finally, the CJEU sets out a marching order for the French court to decide on the location of the assets. This court has the task of establishing (i) whether the assets at issue are property or rights ownership of or entitlement to which must be entered in a public register, or (ii) whether they must be regarded as being claims. Next (iii), that court will have the task of determining, respectively, whether the Member State under the authority of which the register is kept is the Member State in which the secondary insolvency proceedings have been opened, namely the French Republic, or (iv) whether, as the case may be, the Member State within the territory of which the third party required to meet the claims has the centre of his main interests is the French Republic. It is only if one of those checks has a positive outcome that the assets at issue will fall within the secondary insolvency proceedings opened in France.

A remark accompanying my fourth conclusion.

Where the courts of the Member State in which the main proceedings have been opened also have jurisdiction to rule on related actions and therefore to determine the scope of the effects of the latter proceedings, the CJEU holds (paragraph 42), that: ‘Accordingly, exclusive jurisdiction of the courts of the Member State in which secondary insolvency proceedings have been opened to rule on the determination of the debtor’s assets falling within the scope of the effects of those proceedings would deprive Article 3(1) of Regulation No 1346/2000 of its practical effect in so far as that provision confers international jurisdiction to rule on related actions and, therefore, cannot be upheld’. If I read this correctly, the CJEU has created a ‘broad’ jurisdiction for the secondary court, but that cannot be upheld, because of the strong jurisdiction of the main proceeding. Or does it say that by its new ‘broad’ jurisdiction decision, the result is that the jurisdiction of the main proceedings will be eroded? It should be noticed that several parties have submitted that the recognition, in this context, of concurrent jurisdiction entails the risk of concurrent and, potentially, irreconcilable judgments. On the other hand the Advocate General has observed (point 60 of his Opinion, to which the CJEU refers), that Article 25(1) EIR will enable the risk of concurrent judgments to be avoided by requiring any court before which a related action, such as those before the referring French court, has been brought to recognise an earlier judgment delivered by another court with jurisdiction under Article 3(1) EIR or, as the case may be, Article 3(2) EIR. The CJEU decides (paragraph 46): ‘In the light of all the foregoing considerations, … Articles 3(2) and 27 of Regulation No 1346/2000 must be interpreted as meaning that the courts of the Member State in which secondary insolvency proceedings have been opened have jurisdiction, concurrently with the courts of the Member State in which the main proceedings have been opened, to rule on the determination of the debtor’s assets falling within the scope of the effects of those secondary proceedings.’ Evidently this will create huge challenges for judges, acquainted as they are to independency. On how to act and how to set up such a cross-border decision framework, assistance can be found in recent Leiden research, the results of which were published last month.

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