The Decisions of the European Court of Justice on the Right of Establishment of Companies
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Abstract
The freedom of establishment similarly to other freedoms provides broad prohibition of restrictions. This Article analyses the decisions of the European Court of Justice (ECJ) on the freedom of establishment for companies, detailing definition of restriction, the conditions for justification of restriction. The special attention is drawn to the forms of establishment – primary and secondary as well as the stages of establishment.
The Article analyses the unwillingness of the Court at least for certain period of time to grant the right of primary establishment to legal persons. In it‘s two decisions Daily Mail and Überseering the ECJ analysed the right of primary establishment, however, even in these decisions the Court does not confirm the definition of primary establishment that is widely accepted by the legal scholars and that is said to be derived from EC art. 43 par 2 and covers the transfer of central administration. It is claimed that after decisions in Überseering and Inspire Art the ECJ has lifted the veil as regards the interpretation of the right of primary establishment under the Treaty establishing European Community (EC Treaty).
The Article concludes that the European Court of Justice clearly distinguishes several phases of establishment. As relates primary establishment, the ECJ distinguishes relations between a company and the Member state under the laws of which it had been incorporated (leaving the country of origin or „emigration phase“) as opposed to relations between the company and the state to which the company transfers its central administration („immigration phase“) applying different ambit of prohibition of restrictions.
Following the analysis of the jurisprudence of the ECJ, the author concludes that the investors are allowed to choose the jurisdiction that fits them best, i.e. seems to them the least restrictive. The investor may establish the company in an jurisdiction and further „re–establish” in another jurisdiction by setting–up agencies or branches. Such establishment may not be interpreted as abusive or fraudulent as the right of secondary establishment is inherent in European Community freedom of establishment. In other words, ECJ allows for so–called „forum shopping” and enables company law competition between the Member states.
The European Court of Justice views as incompatible with the EC Treaty the attempts of the Member states to introduce formally foreign company law regulation, i.e. to apply additional company law requirements for the companies and branches that are established in other Member states but operates exclusively or almost exclusively in the former Member state. The ECJ declares incompatible with the EC Treaty non–recognition of companies, if the company is validly incorporated and operates under the legal system that created it.
The Article analyses the unwillingness of the Court at least for certain period of time to grant the right of primary establishment to legal persons. In it‘s two decisions Daily Mail and Überseering the ECJ analysed the right of primary establishment, however, even in these decisions the Court does not confirm the definition of primary establishment that is widely accepted by the legal scholars and that is said to be derived from EC art. 43 par 2 and covers the transfer of central administration. It is claimed that after decisions in Überseering and Inspire Art the ECJ has lifted the veil as regards the interpretation of the right of primary establishment under the Treaty establishing European Community (EC Treaty).
The Article concludes that the European Court of Justice clearly distinguishes several phases of establishment. As relates primary establishment, the ECJ distinguishes relations between a company and the Member state under the laws of which it had been incorporated (leaving the country of origin or „emigration phase“) as opposed to relations between the company and the state to which the company transfers its central administration („immigration phase“) applying different ambit of prohibition of restrictions.
Following the analysis of the jurisprudence of the ECJ, the author concludes that the investors are allowed to choose the jurisdiction that fits them best, i.e. seems to them the least restrictive. The investor may establish the company in an jurisdiction and further „re–establish” in another jurisdiction by setting–up agencies or branches. Such establishment may not be interpreted as abusive or fraudulent as the right of secondary establishment is inherent in European Community freedom of establishment. In other words, ECJ allows for so–called „forum shopping” and enables company law competition between the Member states.
The European Court of Justice views as incompatible with the EC Treaty the attempts of the Member states to introduce formally foreign company law regulation, i.e. to apply additional company law requirements for the companies and branches that are established in other Member states but operates exclusively or almost exclusively in the former Member state. The ECJ declares incompatible with the EC Treaty non–recognition of companies, if the company is validly incorporated and operates under the legal system that created it.
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Authors retain copyright of their work, with first publication rights granted to the Association for Learning Technology.
Please see Copyright and Licence Agreement for further details.
