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Domestic Company Law and Free Movement of Capital:
Nothing Escapes the European Court?
Copenhagen Business School, Department of Law; University of Oxford - Faculty of Law; University of Oxford - Oxford-Man Institute of Quantitative Finance
March 20, 2010
Oxford Legal Studies Research Paper No. 42/2008
Cambridge Law Journal, Vol. 69, Forthcoming
Company law has long shared an uneasy relationship European Union law. Whereas the traditional approach of the Court of Justice of the European Union was to challenge national company law rules that were applied to foreign companies under the freedom of establishment (Centros and its progeny), recent case-law suggests that the Court might embark on a general assessment of domestic company law rules. This tendency is based on an extended interpretation of the free movement of capital, which became most prominently relevant in the recent Volkswagen case.
A systematic analysis of the latter fundamental freedom and its relationship to company law demonstrates that this tendency is not without risk and might well end up in a ‘quality control’ of national company law through the European Court. However, differentiated outcomes will be found depending on the actor in question (private party or State), and depending on the beneficiary of the measure at stake. It is argued that State measures potentially will always trigger the scope of application of the free movement of capital, irrespective of their nature or objective. Hence, even general statutory company law can be caught by this fundamental freedom. However, the decisive test will be identified as whether the measure has a ‘deterring effect’ on potential investors from other Member States. Special rights for the State are one extreme example which are surely caught by EU law, and purely private arrangements within the articles of association, are the other extreme. This test is recommended to serve the Court as guidance in future cases.
Number of Pages in PDF File: 39
Keywords: company law, free movement of capital, internal market, golden shares, public ownership, privatisation, Volkswagen law, private liability to EC law, state prerogatives, multiple voting rights, voting caps, special majority requirement, veto rights
JEL Classification: F15, G32, G38, K22, L22, L32, L33
working papers series
Date posted: November 5, 2008
; Last revised: March 23, 2010