The Supreme Court judgment in the case of Trustees of the Olympic Airlines SA Pension and Life Assurance Scheme v Olympic Airlines looked at what connection a foreign employer must have with the UK to entitle an English court to wind it up, if its centre of main interests is in another EU member state.
While very fact specific, the case shows the complexities and uncertainties surrounding pan-European and global insolvencies for defined benefit pension schemes and their sponsoring UK employers. This is not a new theme because many of the largest and most recent pension cases deal with these issues.
It also shows that if an organisation has an ‘establishment’ in the UK, there can still be a successful secondary insolvency application. However, the circumstances in which there can be an ’establishment’ are limited to avoid the risk of a multiplicity of different insolvency actions through Europe, and indeed the world, when a large conglomerate or smaller pan-European company might fail.
Under EU legislation, the centre of main interest (essentially the place where the registered office is located and the business is operated from) dictates the jurisdiction of the insolvency law that applies to the global insolvency.
Secondary proceedings can be started in other EU states if there is a debt owed to a resident of that state and if the debtor (in Olympic’s case the pension trustees) can demonstrate the insolvent company had an ‘establishment’ in that state on the date of the petition for the secondary insolvency.
‘Establishment’ means any place of operations where the debtor carries out a non-transitory economic activity with human means and goods. This test should be taken as a whole, with all parts of it satisfied.
The Supreme Court agreed with the Court of Appeal that there was no ‘establishment’ in the UK when the trustees petitioned for insolvency, because, at that date, the sole remaining UK office was only carrying out tasks to wind up the business following the start of the Greek insolvency and this was seen as internal administration rather than external business activities.
Penny Cogher is head of pensions at law firm Charles Russell Speechlys