Finding The Centre: COMI In A Multi-Jurisdictional World

The facts behind Mr. Justice Lewison's recent judgment in Stanford (STANFORD INTERNATIONAL BANK LIMITED [2009] EWHC 1441 (Ch)) have no direct connection with either the British Virgin or Cayman Islands but lawyers there do have particular reason to note the more general principles around the seemingly vexed but important issue of COMI in the context of multi-jurisdictional insolvency.

While many take advice on the detailed nuances of Cayman and BVI insolvency laws they can often be accused of ignoring the elephant in the room. The elephant is this, what role will international conflicts rules allow the insolvency law of these centres to take? Despite their small physical size the importance of these islands cannot be overestimated. Asset values move (occasionally even up) and those who quote them all have agendas but it does not seem unreasonable to accept that over $1.75 trillion of assets and over 40% of the world's offshore companies are present in those two jurisdictions so the question is far from academic. It also has a relevance to what some would see as the bigger issue raging around the use of offshore centres. Despite admission to the OECD White List of both Cayman and BVI earlier this year general background noise about their harmful impact continues and anyone pointing to the beneficial effects of their legal systems is likely to be drowned out. That is especially true if those beneficial effects come from an area such as insolvency law which will never catch the attention of the media and disappointingly rarely the attention of international regulatory bodies. This is regrettable as the insolvency regimes of each jurisdiction are both sophisticated and predictable and as such have a positive role to play in international trade and finance.

The decision itself concerns the insolvency of Stanford International Bank and competition for recognition under the UK Cross Border Insolvency Regulations of 2006. Given that those regulations are derived from the UNITRAL model law on cross border insolvency its importance is not necessarily restricted to the UK and the Stanford decision marks a pretty abrupt halt to any tendency to treat the place of a registered office of a company as a technical nuisance in determining the "center of main interest" ("COMI") of an insolvent company and where followed has the capacity to take the registered office back to the central role that was arguably intended by legislators and, importantly, assumed...