Bankruptcy Law

The court's territorial jurisdiction is primarily determined by the location of the debtor's headquarters (1) or, in the absence of headquarters in France, by the location of the debtor's main center of interests in France (2). However, certain circumstances sometimes call for deviating from these rules and relocating the procedure (3), or, for larger companies, having them heard by a specialized court (4).

In accordance with Article R. 600-1 of the Commercial Code, the court with territorial jurisdiction over insolvency proceedings is the one in whose jurisdiction the debtor, a natural person, has declared the address of his business or activity. Where the debtor is a legal entity, the competent court is the one in whose jurisdiction the debtor has its headquarters. To avoid delaying tactics, paragraph 2 of the text provides that in the event of a change in the legal entity's headquarters in the six months prior to referral to the court, the court in whose jurisdiction the original headquarters were located retains sole jurisdiction. The time-limit runs from the date of the amending entry in the company and trade register (RCS) of the original headquarters. Thus, the headquarters to be taken into account are those of the company on the day proceedings are instituted, and not those of the jurisdiction to which the debtor has subsequently transferred his company . Similarly, where a company has been struck off the RCS register after transferring its headquarters to another court and bringing proceedings before a court in the jurisdiction of its original headquarters, the latter remains competent to open the insolvency procedure if less than six months have elapsed between the amending registration and the referral . The Court of Cassation also considers that a company which hastily transfers its headquarters before the imminent opening of an insolvency procedure commits a fraud on creditors' rights, which reflects the fictitious nature of the new headquarters and deprives the commercial court in whose jurisdiction they are located of its jurisdiction . In the absence of a transfer of the headquarters, the latter may also be declared fictitious where no activity is carried out there  or where the debtor does not own any property, office or infrastructure that would justify the exercise of a real activity in the place where it is registered . Nevertheless, the fictitious nature of a company's headquarters cannot be deduced from the mere fact that they have remained unoccupied and that no personnel have been assigned to them, when the debtor's activity is reduced to that of a lessor of business assets .

2) Location of the main center of interest in France

Article R. 600-1 of the Commercial Code stipulates that in the absence of headquarters on French territory, the competent court is the one within whose jurisdiction the debtor has the main center of his interests in France. The main center of a company's interests is located within the jurisdiction of the court that has jurisdiction over its principal place of business in terms of its registration with the RCS  or corresponds to the place where the debtor usually manages its interests . Indeed, the conclusion of important legal acts, such as the taking out of a loan and the creation of securities subject to publicity in France, which can be verified by third parties, demonstrates that the center of main interests of a company with its headquarters abroad is actually located in France, where its main interests are managed, and brings it under the jurisdiction of the French courts . On the other hand, a company's tax status is not a criterion for determining the center of its main interests . Where a company has several secondary establishments in France, the commercial court with jurisdiction over the principal of these establishments, i.e. the court with the largest offices, has territorial jurisdiction to initiate an insolvency procedure against the company, as long as the judgment subjecting it to a foreign procedure has not been declared enforceable in France .

Under the terms of Article L. 662-2 of the Commercial Code, “[w]here justified by the interests at stake, the court of appeal may decide to transfer the case to another court” of the same nature as the court initially having jurisdiction. In application of this text, it is possible to derogate from the territorial jurisdiction rules governing the opening of an insolvency procedure, and to transfer the case to a court other than the one in whose jurisdiction the debtor, as a legal entity, has its headquarters, or the debtor, as an individual, has declared the address of its business or activity, when this is justified by the need to preserve the impartiality of justice . This is particularly the case where there is a suspicion of friendship, or even a conflict of interest, between the court and one of the parties . Article R. 662-7 of the Commercial Code specifies that “[t]hese decisions are binding on the parties and on the designated referring court”. These provisions are particularly useful for putting an end to the conflict of solutions that can arise when courts in different jurisdictions initiate proceedings of a different nature against the same company. In such cases, the referral decision automatically renders null and void any decisions to initiate proceedings handed down by any court other than the one designated . In addition, Article 47 of the Code of Civil Procedure grants lawyers a privilege of jurisdiction, enabling them to ask the court in which they practise to transfer the case to another court located in a neighboring jurisdiction . The Court of Cassation has ruled that this privilege of jurisdiction applies to the bankruptcy judge . Article R. 662-7 of the Commercial Code sets out the procedures for obtaining a referral. It specifies that the referral decision is an administrative measure not subject to appeal.

Article L. 721-8 of the Commercial Code lists the jurisdiction of “specially designated commercial courts”. These courts have jurisdiction over receivership proceedings when the debtor is a company with 250 or more employees and net sales of at least EUR 20 million, or a company with net sales of at least EUR 40 million. They are also competent to hear receivership procedure initiated against a company which owns or controls another company, within the meaning of Articles L. 233-1 and L. 233-3 of the same code, as soon as the company is a subsidiary of another company. The text also confers jurisdiction over international insolvency proceedings on specialized commercial courts. The seat and jurisdiction of the specialized courts are set out in Appendix 7-1 of Book 7 of the Commercial Code. The specific territorial jurisdiction of specialized commercial courts is determined by the company's actual economic situation on the date of its application to open insolvency proceedings, and not necessarily on the closing date of its last financial year, which may be several months earlier . A challenge by the public prosecutor to the jurisdiction of a non-specialized commercial court is not an objection to dismissal, but rather a plea of lack of jurisdiction, so that if the public prosecutor has raised the merits of the case at first instance, it is no longer entitled to raise it for the first time on appeal .

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322. Jurisdiction ratione loci