The COMI (Center Of Main Interest) in insolvency law in Austria

Generally, the possibility of a debtor changing his domicile or registered seat is accepted under Austrian doctrine as this is in line with European regulations and Economic Freedom. The (accepted) reasons can be either private or economic motives such as the cost of living or operating a business or the cost of proceedings may be cheaper in the other state or a higher income may be generated there. Further, the other State may provide an insolvency law which favours restructurings of companies /  individuals. However where forum shopping is purposefully chosen to disadvantage creditors, the Austrian courts have power to prevent it. In order to be able to distinguish between acceptable and non-acceptable forum shopping, a comprehensive weighing up of interests is undertaken. If the result of such balancing of interests is that the interests of the departure state deserve more protection than the interests of the arrival state, the old COMI shall continue to have effect. Further, attempts to manufacture an unjustified COMI may be met with allegations of abuse of law or evasion of the law (fraud legis). However, attempting to perpetuate the idea of an ‘old’ COMI conflicts with the fundamental freedoms of the European Union so that the position of the Austrian courts regarding the changes of COMI cannot be too restrictive. 

General comment: The Austrian Supreme Court (“Oberster Gerichtshof”) has only dealt twice with legal questions regarding “COMI”. 

The debtor was an individual and owner of real estate in Austria on which four apartments were located and which were rented out and generated regular income [Austrian Supreme Court (“Oberster Gerichtshof”), 30 November 2006, 8 Ob 12 / 06g]. He further rented out real estate in Germany. On 27 October 2004 he gave the Austrian police notice of leaving Austria and rented a small apartment in London (one bedroom with use of kitchen and bathroom) in a huge complex where a lot of limited companies were “registered”. The debtor also (at least from time to time) lived in Austria in one of his apartments, where he pursued his activities in connection with the renting out of his apartments. As a matter of fact the debtor was continuously on the move around Europe. Furthermore, the debtor had an office in the Austrian town of Innsbruck. Before the court, he declared that he was an employee of an English “Ltd” company, although he could only provide a forged registration for such company. Following this, insolvency proceedings were initiated against him in Austria. 

The EIR states the fundamental principle that only one COMI of a debtor exists and therefore only one Member State shall be competent to open the main insolvency proceedings. COMI shall be the location where the debtor generally administers his interests and which is therefore ascertainable by third parties. Therefore the crucial concern is the impression of third parties. Of importance are therefore, inter alia, the following criteria: corporate management, organisational structure, the most important management activities, and – with regard to individuals – the habitual residence or the domicile and place of work. If – as in the case at hand – the “enterprise” of an individual only encompasses the renting out of several apartments in Austria, the debtor however also uses a domicile in Austria and performs activities in Austria and, on the other hand, only has a rented flat in the UK, it is to be assumed that, according to the facts, which are ascertainable by third parties, the actual COMI of the debtor is in Austria. 

The decision puts paid to attempts to conceal the real residence in order to attain a more favourable forum for insolvency proceedings (forum shopping). 

The debtor was an individual person who had lived and worked in Spain since 1999 and was married to a Spanish citizen [Austrian Supreme Court (“Oberster Gerichtshof”), 16 January 2008, 8 Ob 134 / 07z].

To open insolvency proceedings a court is competent in the jurisdiction where the debtor has its COMI according to Art 3 para 1 of the EIR. According to the wording of the provision it is unclear whether the COMI of individuals is his place of residence (in accordance with the prevailing ECJ opinion regarding the EIR) or his habitual abode (as according to the Austrian Insolvency Code). However, with regard to individuals who pursue a business activity, the location where such activity is pursued is generally the COMI of such person. In the present case, the competency of the Austrian courts for insolvency proceedings was therefore negated given the debtor worked in Spain.