University of applied sciences Schmalkalden Faculty of Business Law

European and International Insolvency Law SS 2011

Topic:
Where is the COMI of Siemens AG?

Author: Viktor Sdobin Matr.-Nr.: 270903

Deadline: 30.09.2011

Contents
Contents ...................................................................................................................................... 2 Assessment ................................................................................................................................. 3 Essay........................................................................................................................................... 3 1. Siemens in Germany........................................................................................................... 3 2. Siemens in United Kingdom............................................................................................... 4 3. Where is the COMI? ........................................................................................................... 4 4. Summary ............................................................................................................................ 7 Bibliography ............................................................................................................................... 8

Assessment
Choose any quoted (listed) company that operates in BOTH Germany and the United Kingdom. Determine, with reasons, where its Centre of Main Interest (the COMI) is. You may assume that it has become Insolvent.

Essay
The company that I have chosen is Siemens AG. Siemens AG is a German engineering conglomerate, the largest of its kind in Europe. This company operates, amongst others, in Germany and in the UK. Siemens has international headquarters located in Berlin, Munich and Erlangen. The company has three main business sectors: Industry, Energy, and Healthcare, and is further refining its profile as a leading provider of climate protection technologies. Worldwide, Siemens and its subsidiaries employ approximately 420,800 people in nearly 190 countries and reported global revenue of 76.651 billion euros for the year of 2009/2010. Siemens AG is listed on the Frankfurt Stock Exchange, and has been listed on the New York Stock Exchange since March 12, 2001.1

Siemens in Germany Germany remains a stable domestic market for Siemens. With around 128,400 employees and about 10,000 trainees the company is still one of the largest private employers in Germany. There are 125 places in Germany where Siemens AG operates. Siemens in Germany had revenue of almost EUR 11.432 billion during fiscal 2010 (October 1, 2009 September 30, 2010). New orders totaled more than EUR 11.985 billion. This is about 15 % of the revenue around the world.2

1 2

http://www.siemens.com/investor/pool/en/investor_relations/e09_00_gb2009.pdf. www.siemens.com/about/en/worldwide.htm.

Siemens in United Kingdom For more than 165 years, Siemens has been present in the UK, where its Industry, Energy and Healthcare Sectors hold leading positions, while Siemens IT Solutions and Services and Siemens Financial Services function across all three Sectors. In fiscal 2010 (October 1, 2009 September 30, 2010), sales to customers in the UK amounted to more than EUR 3.9 billion. New orders totaled EUR 4.6 billion. Siemens currently has about 16,000 employees in the UK.3

Where is the COMI? Under Article 3 of the Regulation, the courts of the Member State in which the companys COMI is situated have exclusive jurisdiction to open main insolvency proceedings only secondary proceedings can then be opened in other Member States.4 COMI is not a defined term in the Regulations, the Model Law or the relevant provisions of the EU Insolvency Regulation or US Bankruptcy Code. As a result of there being no statutory definition, COMI has been manipulated by companies.5 One of the performances of cross-border insolvency is that debtors may seek to open proceedings in a state having insolvency legislation more favourable to their particular circumstances. This is labelled as forum shopping. The Regulation attempts to stop forum shopping by requiring that the main proceeding be opened in the member state where the debtors centre of main interests (COMI) is situated. Article 3 of the Regulation states that the location of a companys registered office is presumed to be its COMI in the absence of proof to the contrary. Furthermore, Recital 13 states that a companys COMI should correspond to the place where the company conducts the administration of its interests on a regular basis, and therefore can be ascertained by third parties.6 In broad terms this will be the country in which the debtor mainly carries out their trade, profession or self employment. Where the debtor does not trade or carry on a profession, the state in which he/she habitually resides is considered to be the COMI. Where the debtor

3 4

http://www.siemens.com/about/en/worldwide.htm. Art. 3 EU Insolvency Regulation. 5 http://www.bakermckenzie.com/RRGoverningDeterminingCOMIJul09/. 6 http://webarchive.nationalarchives.gov.uk/+/http:/www.insolvency.gov.uk/freedomofinformation/technical/ TechnicalManual/Ch37-48/chapter41/part5/part%205.htm.

resides in one country but trades in another, it is the country in which the trade is carried out that is considered to be the COMI.7 The COMI is determined at the date the petition is presented and not where, historically, the relevant activity was carried out. Therefore, the location of creditors and the country in which debts were incurred are not material issues in determining a COMI. In the case of Siemens AG it is said that the company is a German engineering conglomerate. That means that its registered office is in Germany. There are two head offices located in Berlin and Munich. According to Art. 3 EU Insolvency Regulation the COMI of Siemens AG is presumed to be in German jurisdiction. That presumption can be rebutted, but in order to rebut the presumption there must be clear objective and ascertainable facts which indicate that a different situation exists. This could be the case particularly where a company does not carry out any business in the territory of the member state in which its registered office is situated. In our case Siemens AG carries out its business in Germany and its registered office is also in Germany. By contrast, where a company carries on its business in the territory of the member state where its registered office is situated, the mere fact that its economic choices are or can be controlled by a parent company in another member state is not enough to rebut the presumption laid down by the regulation. This could concern a subsidiary of Siemens AG.8 In the present case it is said that 15 % of the turnover are generated in Germany and the rest of the turnover, 75 % are distributed to several countries of the complete globe: 27 % in Americas, 41.5 % in Europe without Germany, 16.5 % in Asia and Australia.9 But if we compare Germany with each individual country, its turnover is larger than that from each single country. For example, turnover of United Kingdom is 3.9 billion Euro, only 5 % in comparison to Germany. That means Germany is the country in which Siemens AG mainly carries out its trade. Next important point which is mentioned above is that the company is one of the largest private employers in Germany. Siemens in Germany has around 32 % employees of the complete globe. It remains stable domestic market for Siemens. There are 125 places in Germany where Siemens operates. This is also significant factor by determination of COMI. Furthermore, Siemens AG is historically German company and it`s company culture is demonstrated in nearly 190 other associated companies abroad.

http://www.insolvency.gov.uk/freedomofinformation/technical/TechnicalManual/Ch3748/chapter41/part5/part%205.htm. 8 Eurofood- the ECJ decision, http://www.freshfields.com/publications/pdfs/2006/15065.pdf. 9 http://www.siemens.com/press/pool/de/homepage/the_company_2010.pdf.

As a result of the arguments above we can say that the COMI is in Germany if Siemens AG becomes insolvent because its registered office and administration of its interests is in Germany. Germany is a location where the company mainly carries out its business and organise their business and trade affairs. There are no clear objective and ascertainable facts which rebut this presumtion. But if we assume that a subsidiary of Siemens AG (legal independent company) which has its head office in Frimley (UK) becomes insolvent then it could have possibly another result. We could say that the COMI is presumed to be in the UK in this case because the COMI is presumed to be on the place where its registered office is. This presumption can be rebutted if there are objective and ascertainable facts which indicate that a different situation exists. Such a factor could be that in Germany is control management of the wholly owned subsidiary. But as already mentioned, the fact that economic choices are or can be controlled by parent company is not enough to rebut the presumption. Other factors like location of bank facilities and of majority of its creditors in the UK and determination of English Law in the contract with its bank could add to the presumption. As a result of this case we could say that the COMI is in the UK, because administration of its interests seems to be in the UK. But everyone should know that Siemens AG is originally a German company. This is the fact which could rebut the presumption because it is ascertainable by third parties that Siemens AG is German company.

Summary Regarding to the above mentioned arguments, there could be different results where COMI of Siemens AG is. But there are more arguments indicating the fact that COMI is in Germany. The first step to determine COMI is to look where registered office of insolvent company is. This could be Frimley in U.K. The second step is to apply principles of business activity theory (Recital 13 EU Insolvency Regulation). That means we need to find objective and ascertainable facts which indicate that COMI is not the location of a companys registered office (Frimley). This facts are in our case: 1) Siemens AG mainly carries out its business and organise their business and trade affairs in Germany; 2) the company is one of the largest private employers in Germany; 3) there are 125 places in Germany where Siemens operates (more than in other countries); 4) Siemens AG is historically German company and it`s company culture is demonstrated in nearly 190 other associated companies abroad, everyone should know that. That means that the administration of its interests is in Germany. On the other hand not everybody knows maybe that Siemens German company is. Factors like location of the registered office in the UK, location of bank facilities and of majority of its creditors in the UK and determination of English Law in the contract with its bank could rebut the presumption that COMI is in Germany.

Words: 1600

Bibliography
Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings. Links
Eurofood- the ECJ decision, http://www.freshfields.com/publications/pdfs/2006/15065.pdf.

http://www.siemens.com/investor/pool/en/investor_relations/e09_00_gb2009.pdf. http://www.siemens.com/about/en/worldwide.htm. http://www.bakermckenzie.com/RRGoverningDeterminingCOMIJul09/. http://webarchive.nationalarchives.gov.uk/+/http:/www.insolvency.gov.uk/freedomofinformat ion/technical/ TechnicalManual/Ch37-48/chapter41/part5/part%205.htm. http://www.siemens.com/press/pool/de/homepage/the_company_2010.pdf.