Applying EU Insolvency Law to Non-EU Organisations

Does a non-EU Company, operating outwith the EU but with its head office located within an EU member state, have to comply with EU insolvency law?  Yes, declared the European Court of Justice (ECJ) in the case of Elliniko Dimosio v Stroumpoulis and others.  

The defendants were Greek seamen, living in Greece but working on board a Maltese cruise ship flying the Maltese flag (at the time, Malta was not a member of the EU). The company engaging the seamen had been declared insolvent under Greek Law and the vessel the seamen worked aboard was subsequently detained.  The seamen ultimately applied under Greek law for a payment out of state funds in respect of their unpaid wages, expenses and compensation in respect of the termination of their employment, in accordance with the Greek Insolvency Protection Directive. 

Their application was rejected on the basis that it fell outwith the protection of Greek Law given that they were seamen and were “therefore covered by other forms of guarantee”. Additionally, the Greek Courts determined that the seamen’s contracts contained a clause electing to apply Maltese law, and noted also that the United Nations Convention on the Law of the Sea states that a ship’s nationality is determined by the flag under which it sails and that it is subject to the exclusive jurisdiction of its “flag state”. 

However, in deciding the issue in favour of the seamen, the ECJ concluded that the Insolvency Protection Directive has the social objective of guaranteeing employees a minimum protection at EU level in the event of their employer’s insolvency, commenting in particular that claims for salary are of great importance.  Accordingly, the ECJ confirmed that the protection of the Directive applied to individuals deemed to be employees at national law, against companies found to be insolvent under national law. As both conditions were met, the guarantee had to be provided, irrespective of the maritime waters upon which the vessel sailed. 

This case reminds employers of the at times far reaching extent of EU protections, highlighting here that the Insolvency Directive is capable of applying to employees working outwith the EU, even if their employer is a non-EU company. 

For more information please contact Martin Sinclair or Nicola Gray or call 01224 632464.