On 3rd December 2019 leading Latvian legal journal Jurista Vards has published an article “Determination of the centre of main interests (COMI) in cross-border insolvency proceedings”, authored by Aleksandrs Lacens, an attorney-at-law and insolvency practitioner. The article addresses issues of application of the law in situations where a citizen of another European Union country permanently resides or has established business in Latvia and applies for insolvency proceedings in Latvia when all or most of the creditors of the person are in another EU Member State.
The provisions of Regulation 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (hereinafter “the regulation”) shall apply to the examination of such insolvency application. By analyzing various sources of law, Aleksandrs Lacens explains the correct application of the legal provisions of the regulation and the considerations on the basis of which it is possible to conclude whether a person has moved his or her centre main interests (COMI) and is subject to insolvency proceedings in Latvia.
The article draws the following conclusions concerning the determination of the centre of main interests (COMI) in the insolvency proceedings of natural persons under the provisions of the regulation:
• when assessing an application for insolvency of private individual, the court must assess, in accordance with the provisions of the Latvian Civil Procedure Law, whether the body of evidence submitted by the applicant provides sufficient grounds for considering that the applicant is habitually resident in Latvia or his principal place of business is in Latvia (unless there is a legal basis to disregard the presumption); in the event of a positive answer, the applicant’s insolvency proceedings are to be declared in Latvia;
• the fact that the applicant has his habitual residence in Latvia obviously cannot be proved solely by the fact that he has declared his place of residence or registered as a taxpayer, which is a formal act that can be easily carried out without being permanently resident in Latvia;
• the court does not apply the presumptions contained in the Regulation to the designation of a centre of main interests (COMI) only if it has a legal basis under the Regulation – the centre of main interests (COMI) has been relocated within three or six months before the application (depending on the applicant category), which overturns the presumption of having a centre of main interests (COMI) in Latvia;
• in the event of an application being filed in the “suspect period”, the court does not apply the presumptions set out in the regulation; still, in this case the applicant’s insolvency proceedings shall be declared in Latvia if the applicant can prove that Latvia is a place where the debtor regularly manages his interests and can be ascertained by third parties; namely, in the case of non-application of the presumption, the debtor has to prove the existence of the centre of main interests (COMI) in Latvia, and the standard of proof in this case is higher (the range of circumstances to be proved is broader and more complex);
• the assumption that the debtor has a centre of main interests (COMI) in Latvia (whether by assumption or by proving that the debtor has established COMI in Latvia without the presumption) cannot be rebutted on the basis of abstract interests of the creditors or the fact that debtor’s obligations are established in another EU Member State; such an interpretation shall be considered contra legem – contrary to the provisions of both the old regulation and the regulation in force;
• moreover, the interests of the creditors or the place of establishment of the creditor per se do not form part of the concept of the centre of main interests (COMI) and are not decisive in determining the location of the centre of main interests (COMI); at the same time, the place where the debtor’s obligations are established may play a role in determining, in conjunction with other circumstances of the case, the place where the debtor regularly manages his interests (determining COMI in case there are grounds for not applying any of the presumptions);
• if the body of evidence gives grounds for conclusion that Latvia is the habitual residence of the debtor, the principal place of business (in the case of presumptions) or a place where the debtor regularly manages his interests and can be ascertained by third parties is located in Latvia, insolvency proceedings are to be declared in Latvia, irrespective of court assumptions about the debtor’s motives for relocating the centre of main interests (COMI) or the “fraudulent” nature of the relocation.