Definition of ‘establishment’ under EU Regulation 1346/2000 discussed

Supreme Court of United Kingdom– Deciding the present appeal which relates to the issue as to what connection a foreign company must have with the United Kingdom so as to entitle an English court to wind it up, if its centre of main interests (“COMI”) is in another member state of the European Union, the Court unanimously dismissed the appeal stating that the EU Regulation’s 1346/2000 (Regulation) definition of “establishment”, which must be read as a whole, envisages a fixed place of business and business activity carried on, also consisting in dealings with third parties, and not merely acts of internal administration like in this case. Lord Sumption further noted that where a company has no subsisting business it is clearly not the case that the mere internal administration of its winding up will qualify. Such activity would not be “exercised on the market”; moreover, if it were enough to establish jurisdiction then the requirement for “economic activities” would add little or nothing to the definition of establishment.

As per the facts Olympic Airlines SA was wound up by a court in Athens. The main liquidation proceedings are ongoing in Greece. The company pension scheme has a £16m deficit. Olympic Airlines SA is liable to make good the deficit by S. 75 of the Pensions Act, 1995 and it is unlikely to be able to do so. Members of the pension scheme are eligible for compensation under the Pensions Act, 2004 from the UK’s Pension Protection Fund in respect of the shortfall. Such compensation is payable from the date when a “qualifying insolvency event” occurred. Thus, the important question for the court is, therefore, whether Olympic Airlines SA had an “establishment” in the UK entitling the English court to make a winding-up order under the Regulation, so that it can be said that a qualifying insolvency event occurred.

Articles 2(h) and 3 of the Regulation were discussed in detail in order to understand the term ‘establishment’. Lastly the Court stated that the respondents were, on the relevant date, only handling matters of internal administration associated with the final stages of the company’s disposal of the means of carrying on business. The company cannot, therefore, be said to have had an “establishment” in the United Kingdom. The Trustees of the Olympic Airlines SA Pension and Life Assurance Scheme v. Olympic Airlines SA, 2015 UKSC 27, decided on 29.4.2015

 

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