Cookies on our website

We use cookies on our website. To learn more about cookies, how we use them on our site and how to change your cookie settings please view our cookie policy.

Read more Close
Skip Ribbon Commands
Skip to main content
Sign In


Competing CoMI applications: take 2


23 July 2010

Stanford International Bank Limited & others - The Court of Appeal confirmed that the phrase "centre of main interests" (CoMI) has the same meaning under both the Cross Border Insolvency Regulations 2006 (the CBIR) and the EC Regulation on Insolvency Proceedings (1346/2000) (the Regulation).


One of the central planks of both the Regulation and the CBIR is the concept of CoMI. Under the Regulation1, the courts of the EU Member State where the debtor’s CoMI is located are able to open main insolvency proceedings. These proceedings are then automatically recognised in all other EU Member States. Under the CBIR2, the English courts are able to recognise foreign insolvency proceedings commenced in the jurisdiction where the debtor has its CoMI as “foreign main proceedings”3. If foreign proceedings are recognised as foreign main proceedings, then an automatic mandatory stay on certain types of creditor action (including the commencement of certain legal proceedings) will apply in Great Britain. CoMI is not defined in either the Regulation or the CBIR, although in both there is a presumption, in the absence of proof to the contrary, that it is the place of the company’s registered office. The Regulation contains a little further guidance on the meaning of CoMI, stating in its recitals that CoMI “should correspond to the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties”. This guidance is not replicated in the CBIR.


The application was part of the fall-out from the collapse of Sir Allen Stanford's financial services business empire following allegations of fraud against Sir Allen and his associates. In the United States, the Securities Exchange Commission filed complaints against Stanford International Bank Ltd (SIB) alleging fraud and violations of securities laws and sought and obtained a court order appointing a receiver (the Receiver) over the assets worldwide of SIB, Sir Allen himself and other Stanford companies as a means of protecting those assets4.

SIB was a company incorporated in Antigua (and had its registered office in Antigua) and, in parallel with the actions taken in the United States, the Antiguan regulatory authorities also took action against SIB. Initially, receivers were also appointed in Antigua but, ultimately, liquidators were appointed (the Liquidators) to wind up SIB.

SIB had assets in Great Britain and, as a result, both the Receiver and the Liquidators applied to the courts of England and Wales for recognition under the CBIR (effectively, rival applications), each alleging that they were "foreign representatives"5 and that the proceedings in which they had been respectively appointed were "foreign main proceedings". Both sought an order entrusting them with the distribution of SIB's assets located in Great Britain.

SIB's registered office was in Antigua. In addition, the evidence provided to the court showed that SIB's physical headquarters were in Antigua, almost all of its employees were located in Antigua, its contracts both with investors and financial advisers were governed by the laws of Antigua and its marketing material gave prominence to its presence in Antigua. Cheques from depositors were sent to Antigua and private banking facilities were provided from Antigua. SIB was regulated by Antiguan regulators and its accounts were audited in Antigua. Meetings of the board of directors were sometimes held in Antigua, although most were conducted by telephone.

However, SIB's principal operating bank account was maintained in Texas. The location of the principal movers of the fraud and most of the directors were in the USA, and none was in Antigua. The financial advisers used to conduct business were mainly located in the USA and investments by SIB were managed outside of Antigua, mainly in the USA.

Among others, two of the cross-border insolvency questions for both the court at first instance (the CFI) and on appeal were: (i) whether the appointment of the Receiver and of the Liquidators could be recognised as foreign proceedings under the CBIR; and (ii) the basis for determining CoMI under the CBIR. The CFI and the Court of Appeal reached substantially the same conclusions on each question.


Both the CFI and the Court of Appeal held that Antigua was the CoMI of SIB and, consequently, the Liquidators were entitled to recognition as foreign representatives of a foreign main proceeding. The courts were in broad agreement as to how CoMI should be assessed and, as the Court of Appeal rejected the argument that the wrong test for assessing CoMI had been applied by the CFI, some of the detailed comments by the CFI provide useful guidance on the assessment of CoMI. Accordingly, the following points of general principle can be extrapolated from the courts’ decisions.

1.    Meaning of CoMI in the CBIR and the Regulation is the same

The Court of Appeal upheld the conclusion of the CFI, holding that there was nothing in the UNCITRAL Model Law on Cross Border Insolvency (the Model Law) or the Regulation to require different meanings to be given to the phrase CoMI. As both the Model Law and the Regulation applied in England and Wales it was essential that each should be interpreted in a manner consistent with the other. Accordingly, the Court of Appeal held that the CFI had been correct to follow the European Court of Justice's (ECJ) decision in Eurofood6 when assessing the location of SIB's CoMI.

2.    Each company has its own CoMI

The Court of Appeal stressed that each company or individual has its own CoMI; it was not possible to have a CoMI of some "loose aggregation of companies and individuals". It followed that there could be no CoMI by reference to an entity comprising all those separate entities involved in the fraudulent scheme. Each company’s CoMI had to be assessed individually.

3.    Registered office presumption is a true presumption

The CFI relied on the emphasis the ECJ in Eurofood placed on the importance of the presumption in favour of CoMI coinciding with a company's registered office. It followed from this that the location of a company's registered office is a true presumption and the burden lies on the party seeking to rebut it.

4.    In rebutting the registered office presumption, CoMI must be show to be elsewhere

The CFI held that the registered office presumption cannot be rebutted by an attempt to demonstrate that the debtor's CoMI is not where it is claimed (in this instance, in Antigua) unless it can also be shown that its CoMI is in some other place. It is not possible for a company to have a generic world wide CoMI.

5.   "Rebutting factors" must be objective and ascertainable by third parties

The Court of Appeal stressed the fact that any factors used to rebut the registered office presumption must be objective and ascertainable to third parties. Accordingly, the fact that any real management of SIB was carried out by employees in the USA was something which happened behind the scenes and would not have been objectively ascertainable to third parties. In relation to what is objectively "ascertainable" by third parties, the CFI held that it is that which is in the public domain and which a typical third party would learn in the ordinary course of business as a result of dealing with the company. The Court of Appeal approved this test, holding that to extend ascertainability to factors, not already in the public domain or apparent to a typical third party doing business with a company, which might be discovered on enquiry, would introduce to this area of law a most undesirable element of uncertainty. What is of key importance is the perception of the objective observer. This is linked to one of the important purposes of CoMI – to provide certainty and foreseeability for creditors of the company at the time they enter into a transaction.

Recognition of the US receivership

As the Receiver's authority derived from the terms of the court order appointing him, whether or not the receivership was a "foreign proceeding" was a question of assessing the powers and duties that had been imposed on the Receiver by the court order. Such a question could not be answered by considering the powers and duties that might be conferred on such equitable receivers generally by the US court or whether such a receivership could generally give rise to a pari passu distribution to creditors. The fact that some receiverships may be classified for some purposes as insolvency proceedings or be treated as acceptable alternatives to bankruptcy did not mean that this receivership satisfied the definition of "foreign proceedings" in the CBIR.

The court both at first instance and on appeal held that this particular US receivership was not capable of recognition under the CBIR, as the powers and duties conferred or imposed on the Receiver (the purpose of which were to prevent dissipation, waste and detriment to investors as opposed to liquidation or prevention of detriment to creditors) did not amount to a "foreign proceeding". The receivership was not a "collective process" because it was for the protection of investors and not the wider class of creditors generally and under the terms of the court order, the Receiver had no power to distribute SIB's assets and would have needed a further court order to do so.

While the Court of Appeal accepted that a "law relating to insolvency" need not be statutory, the principles of common law and equity (which were the principles under which the Receiver was appointed) do not "relate to insolvency" unless they are activated for that purpose. The common law and equitable rules which bear on the appointment of a receiver and the conduct of a receivership had not been activated for such a purpose; they had been activated for the protection of investors.

Recognition of the Antiguan liquidation

Both the CFI and the Court of Appeal held that the Antiguan liquidation was a foreign main proceeding. The Antiguan liquidation was a collective proceeding and the Liquidators were appointed to liquidate SIB's assets – the ultimate purpose of the process was liquidation, in the sense of the dissolution of SIB. Both courts were also satisfied that at least one of the reasons that the liquidation order was made was because SIB was insolvent, even though the winding-up petition was also presented by the Antiguan regulatory authorities for failure to comply with regulatory requirements. The Liquidators had therefore been appointed pursuant to a law relating to insolvency and were therefore entitled to be recognised as foreign representatives of a foreign proceeding.


These decisions are fundamental as they are the first confirmation we have had from the courts that the expression CoMI in the Regulation is essentially identical to that under the Model Law and that the relevant case law is equally applicable in either context.

This means that, in terms of England and Wales at least, courts will be able to have regard to decisions on CoMI under the CBIR when considering the CoMI of a debtor under the Regulation and vice versa. However, in terms of the Regulation, it is only decisions of the ECJ which are binding on all Member States' courts and such decisions offer the highest authority in England and Wales. This does not mean that, under the respective legislation implementing the Model Law, courts throughout the world will apply the same process and factors to a CoMI determination, with the same emphasis on the registered office presumption. Each jurisdiction will be entitled to make its own determination of the framework for assessing CoMI.

The fact that the both the CFI and the Court of Appeal stated that the general body of law or equitable principles which bear on the appointment of a receiver and the conduct of the receiver was not a "law relating to insolvency", together with other factors relied on by the court, suggest that generally the nature of a receivership appointment will usually place it outside the definition of "foreign proceedings" for the purposes of the CBIR. Certainly, it seems very unlikely that receivers appointed to enforce security (and not on a collective basis for creditors generally) would obtain recognition.


[1] The Regulation provides a legal framework for conducting EU cross-border insolvencies. It does not seek to harmonise the substitutive insolvency laws across the EU but instead to improve the efficiency and effectiveness of insolvency and restructuring proceedings with an EU cross-border element by providing choice of jurisdiction and choice of law rules.

[2] The CBIR implemented the UNCITAL Model Law on Cross-Border Insolvency in Great Britain. The Model Law does not attempt to impose a global insolvency law or to harmonise local laws; it assists with the co-ordination and administration of cross-border insolvencies by enabling foreign officeholders and courts to obtain recognition of their insolvency proceedings in States where the Model Law has been implemented.

[3] A "foreign proceeding" is defined as a collective judicial or administrative proceeding, pursuant to a law relating to insolvency, for the purpose of reorganisation or liquidation (Art. 2(i) of the CBIR). A foreign proceeding may be a "foreign main proceeding" or a "foreign non-main proceeding". It will be a foreign main proceeding if it takes place in a State where the debtor has its CoMI (Art. 2(g) of the CBIR).

[4] The US receivers were appointed under s.21(d)(5) of the Securities Exchange Act 1934 which allows the Federal Court to grant any equitable relief that might be appropriate for the benefit of investors.

[5] A "foreign representative" is a person or body who is authorised in a foreign proceeding to administer the reorganisation or liquidation of the debtor's assets or affairs (Art. 2(j) of the CBIR).

[6] Re Eurofood ISC Ltd [2006] Ch. 508. As a decision of the ECJ (and the only ECJ decision on CoMI) this is the leading decision on the interpretation of CoMI in respect of the Regulation.


Publications search

  • Add comment (optional)