Europe's highest court ruled yesterday that the liquidation of the Irish subsidiary of the Italian food group Parmalat should take place in Ireland rather than Italy.
The ruling by the European Court of Justice (ECJ) represents a victory for the creditors of Eurofood, the IFSC-based subsidiary of Parmalat that was put into administration following the collapse of its Italian parent company in 2003.
The creditors, which include a number of US banks and insurance firms, should now be able to share tens of millions of euro from the liquidation of Eurofood rather than have the Irish subsidiary's assets shared out from the administration of the wider Italian group.
Parmalat collapsed owing €14 billion to creditors in one of the world's biggest accountancy scandals, but has now been refinanced and restructured by administrators.
The decision yesterday by the ECJ could benefit one of Parmalat's creditors, Bank of America, which faces allegations of fraud from the Italian administrator of Parmalat.
Parmalat has said that the IFSC-based Eurofood is of fundamental importance to a fraud case that it is pursuing against Bank of America, Citigroup and its former auditors, Deloitte and Grant Thornton.
The Italian group's former administrator, Enrico Bondi, is seeking access to documents from Eurofood to help bolster the ongoing €10 billion legal suit for damages. Eurofood was structured to provide financing facilities for the Parmalat Group, whose collapse involved complex offshore financing deals in one of the world's largest accounting scandals.
It is believed that Italian authorities are particularly interested in Eurofood's role in issuing bonds sold in the US.
The ECJ case ruled on which jurisdiction a subsidiary should be liquidated in when its parent firm collapses. The dispute became a test case for the EU insolvency regulation, which was meant to simplify cross-border insolvencies.
The Italian courts had ruled that Eurofood should be liquidated under Parmalat's former administrator, Enrico Bondi. However, the Irish courts had ruled that the liquidation should go ahead in the Republic under liquidator Pearse Farrell of Farrell Grant Sparks.
But the ECJ said yesterday that the court with jurisdiction to open "main" insolvency proceedings is, save where good reason is shown to the contrary, the court of the member state where the debtor's registered office is situated.
Mr Farrell said that he welcomed the judgment yesterday and would advance the liquidation in a speedy manner in coming weeks.
The Supreme Court, which referred the case to Europe, should give effect to the ruling by the ECJ shortly.
The director of corporate enforcement, Paul Appleby welcomed the judgment.
"Ireland's creditor-friendly insolvency regime is one of the many factors that make investing in Irish companies attractive.
"It is clear from today's judgment that Irish insolvency law will remain the applicable framework for the liquidation of the majority of Irish-registered companies trading in the EU," he said.
He said that he was particularly pleased that the ECJ has today confirmed that "the mere fact that a company's economic choices are or can be controlled by a parent company in another member state is not enough to rebut the presumption" that its "centre of main interests" is located in the member state in which it is incorporated.
