Vol 12 (2015) - Issue 2

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C-327/13 Burgo Group SpA v Illochroma SA (in liquidation)

Introduction
Readers familiar with the operation of Council Regulation (EC) No. 1346/2000 (the 'Insolvency Regulation') will know that main insolvency proceedings may be opened only in the member state where a company has its centre of main interests (COMI). A company's COMI will often be where it has its registered office, but need not be. It will occasionally be necessary to open proceedings in another member state. These proceedings cannot be main proceedings, and are known either as territorial proceedings (if there are no main proceedings elsewhere) or secondary proceedings (if main proceedings have already been commenced in another state).
It is often thought that the right to seek the opening of secondary proceedings is given to 'local creditors … in order to protect local interests': Moss, Fletcher & Isaacs, The EC Regulation on Insolvency Proceedings (2nd edn, OUP, Oxford, 2009) para.8.352. However, the recent decision of the First Chamber of the European Court of Justice (the 'ECJ') in the case of Burgo Group SpA v Illochroma SA (Case C-327/13) handed down on 4 September 2014, shows that it is not just 'local creditors' who seek to take advantage of secondary proceedings.

Background
Illochroma SA had its registered office in Brussels in Belgium. It owned a building in Belgium, employed staff in Belgium, and bought and sold goods there. Its centre of main interests, however, was in France, where it was put into redressement judiciaire (broadly equivalent to an English administration) in April 2008. On 4 November 2008, Burgo Group (an Italian company) presented the administrator with a claim for EUR 359,778.48, which was rejected for being out of time.
Presumably considering that it could circumvent any time bar by opening fresh insolvency proceedings, on 15 January 2009, Burgo Group applied to the Tribunal de commerce de Bruxelles (Brussels Commercial Court) to open secondary proceedings. The French liquidator of Illochroma SA argued that it would not make sense to open secondary proceedings in the jurisdiction where the debtor has its registered office. Secondary proceedings can only be opened where there is an 'establishment'. An 'establishment', it was argued, could not have legal personality. Furthermore, it was alleged that under Belgian domestic law, secondary proceedings could only be opened by a creditor residing or having its registered office in Belgium. It was argued that secondary proceedings exist for the benefit of local creditors, and an Italian creditor therefore ought not to be allowed to commence secondary proceedings in Belgium.