UK: EU Bankruptcy Regulations – Centre Of Main Interests

Mr Stojevic, a Croatian businessman, had been made bankrupt on the petition of Komercni Banka AS (‘the Bank’). The petition was based on a judgment debt for approximately £60 million, which the Bank had been awarded after successful litigation against an English company, Stone Rolls Limited and Stojevic, its chief executive officer.

Article 3.1 of the EC regulation on Insolvency Proceedings (the ‘Regulation’), states that: ‘The courts of the Member States within the territory of which the centre of the debtor’s main interests is situated shall have jurisdiction to open insolvency proceedings’.

The Bank’s petition included statements indicating that Stojevic’s ‘centre of main interests’ was at an address in London, where he both lived and carried on business. A bankruptcy order was subsequently made on this basis.

Stojevic applied for annulment of the bankruptcy order made against him pursuant to S282(1)(a) Insolvency Act 1986. He argued that the order should not have been made because on the date when the bankruptcy petition was presented, his centre of main interests was in Austria, not England, and therefore the English court had lacked jurisdiction to open insolvency proceedings.

The Bank, on the other hand, submitted that a debtor’s ‘centre of main interests’ under the Regulation meant the focal point of his economic activity. They argued that the centre would be where he managed and controlled his most important economic interests, and that Stojevic’s centre of main interests at the relevant time was in the United Kingdom, suggesting that the bankruptcy order was properly made.

It was held that when considering the location of the debtor’s centre of main interests, the starting point was recital 13 of the Regulation, which states that:

It was found that Mr Stojevic had spent more time in the UK than elsewhere and that he ran Stone Rolls Limited from his UK residence through nominee directors which he controlled. His business was not run as a sole trader, and the company was not considered a sham. It would therefore be wrong to equate Stojevic’s indirect economic interests in the company with his own interests.

However, it was further held that recital 13 should be considered in its original context, as set out in paragraph 75 of the Virgos- Schmit Report which states:

Stojevic’s centre of main interests should therefore coincide with the place of his habitual residence at the date that the bankruptcy petition was presented. This was Austria. In view of this, and the fact that no evidence had been submitted to indicate that Stojevic had an establishment in the UK, it was held that the bankruptcy order should not have been made.

This case illustrates the fact that in principle, the centre of main interests of an individual, who is neither a professional nor someone carrying on business in his own right, is his place of habitual residence.

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