Niki’s COMI up in the air

Insolvency Bitesize - April 2018

A showdown between German and Austrian administrators on where the COMI of Air Berlin subsidiary Niki was located came to a pragmatic end in January. When it became clear a deal for the sale of Niki’s assets out of the Austrian process had the support of creditors, the German official dropped his challenge to the competing proceedings in Vienna. The debate around the location of COMI is as relevant now as it has ever been.

Niki was an Austrian subsidiary of Air Berlin with registered office in Vienna and additional offices in Berlin. Following its German parent’s collapse, it filed for insolvency at the local insolvency court of Berlin in December arguing that its COMI was in Germany and not in Austria. The local Berlin insolvency court agreed and opened preliminary insolvency proceedings, rejecting an immediate appeal by a passenger rights group.

Subsequently, the group successfully challenged the decision in front of the Regional Court of Berlin. It found that Germany did not have international jurisdiction under the EU Insolvency Regulation because Niki’s COMI was in Austria. Shortly after, the Austrian regional court of Korneuburg opened main insolvency proceedings in Austria. The German administrator eventually decided to drop its challenge to these proceedings and instead opened secondary proceedings in Germany.

The recast EU Insolvency Regulation gave creditors an express right to challenge COMI, but a debtor can only have one COMI. Before the German administrator dropped its challenge, there were seemingly two purported main insolvency proceedings pending. The German Regional Court had held that because its decision could be appealed to and overruled by the German Federal Court, the initial decision of the local Berlin court opening main proceedings would remain in place. Yet, following the appeal, the Vienna court opened main proceedings. COMI can’t be in two places at one time. The decisions leave the proper identification of Niki’s COMI somewhat up in the air.

The events serve as a reminder that:

  • even after more than 15 years in existence, how to apply the concept of COMI still causes difficulty;
  • there needs to be a clear body of factors in favour of rebutting the registered office presumption. Significantly, as between COMI in Germany or Austria, the German Regional Court’s decision found that there were no factors pointing strongly in either direction and so the registered office presumption should prevail. It held that legal certainty and predictability for creditors meant high demands had to be placed on rebutting the presumption; and
  • if a debtor wants to rely on its COMI being other than in its place of registered office, for example if looking to effect a COMI shift as part of a broader restructuring, then informing creditors of the new location is likely to be key. Niki had never taken steps to do this which was significant in the eyes of the Regional Court in Berlin.