Centros Case: what‟s New for the Freedom of Establishment of Companies in the EC?
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Abstract
Centros case is one of the most scholarly debated cases in the sphere of the establishment of companies in the European Community (hereinafter – EC). It suggested discussion on the questions whether siege reel theory is compatible with EC law and if it should be abandoned, whether the companies may employ the right of primary establishment in EC and others.
This article is divided into four parts. The first part introduces to the facts of the case, second part deals with the compatibility of the siege reel theory with the EC law, the third part analyses the problem of the right of primary and secondary establishment for companies in the EC and the last part discusses other important issues revealed by the Centros case, such as the justification of the restrictions on the freedom of establishment, the compatibility of the laws on pseudo foreign companies with the EC treaty.
The article concludes that the European Court of Justice in the Centros case did not provide for the clear guidelines as to whether the freedom of establishment of companies in the EC precludes the application of the siege reel conflicts of laws doctrine at least in the company’s formation or transfer of company’s real seat phase as well as how two different incorporation and siege reel doctrines could coexist further. It follows from the Centros decision that the company is free to set up branches in another member states and carry out there company’s main activity if setting up of the branch is made prior to company’s commencement of its business activities in the member state according to which it was established. Any restriction on the right of establishment will be justifiable only if made in accordance with art. 46 EC treaty and should meet the four requirements test set in the Centros and Gebhard. There are weighty arguments that the refusal to register a branch in the territory of the member state different than that according to which laws the company is established on the grounds of non–recognition of that company may contradict to the EC law. Similar might be said about the member states’ efforts to regulate pseudo foreign companies. Therefore, it seems that the ruling in Centros may impel some member states to be more active in unifying the Community company law, trying to allow the companies to transfer their real seat and to implement similar rules to the regulation of pseudo foreign companies either by substantial company law provisions in the EC level or by unifying conflicts of laws.
This article is divided into four parts. The first part introduces to the facts of the case, second part deals with the compatibility of the siege reel theory with the EC law, the third part analyses the problem of the right of primary and secondary establishment for companies in the EC and the last part discusses other important issues revealed by the Centros case, such as the justification of the restrictions on the freedom of establishment, the compatibility of the laws on pseudo foreign companies with the EC treaty.
The article concludes that the European Court of Justice in the Centros case did not provide for the clear guidelines as to whether the freedom of establishment of companies in the EC precludes the application of the siege reel conflicts of laws doctrine at least in the company’s formation or transfer of company’s real seat phase as well as how two different incorporation and siege reel doctrines could coexist further. It follows from the Centros decision that the company is free to set up branches in another member states and carry out there company’s main activity if setting up of the branch is made prior to company’s commencement of its business activities in the member state according to which it was established. Any restriction on the right of establishment will be justifiable only if made in accordance with art. 46 EC treaty and should meet the four requirements test set in the Centros and Gebhard. There are weighty arguments that the refusal to register a branch in the territory of the member state different than that according to which laws the company is established on the grounds of non–recognition of that company may contradict to the EC law. Similar might be said about the member states’ efforts to regulate pseudo foreign companies. Therefore, it seems that the ruling in Centros may impel some member states to be more active in unifying the Community company law, trying to allow the companies to transfer their real seat and to implement similar rules to the regulation of pseudo foreign companies either by substantial company law provisions in the EC level or by unifying conflicts of laws.
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Please see Copyright and Licence Agreement for further details.
