Freedom of Establishment or Free Movement of Capital: Is There an Order of Priority? Conflicting Visions of National Courts and the ECJ
EC Tax Review, Vol. 1, pp. 19-31, 2010
17 Pages Posted: 15 Nov 2011
Date Written: October 2, 2009
Where a parent company owns a controlling interest in a subsidiary resident in another Member State the question arises whether article 43 EC Treaty (the freedom of establishment), article 56 EC Treaty (the free movement of capital), or both articles may be relied upon by the taxpayer to challenge domestic law for breach of the EC Treaty. That is, is there a mandatory order of priority between these freedoms in such cases? This question has wide relevance since the freedom of establishment cannot be relied upon in third country situations whereas the free movement of capital can. The ECJ and several national courts have ruled on this question. However, the ECJ case law does not give clear guidance and national courts have come to opposite conclusions. This article gives an overview of the ECJ case law against the background of which the decisions of the national courts are analysed. We come to the conclusion that the question of which freedom takes priority is not an acte clair/acte éclairé. Given the current status of the question of the dominance of the freedoms, with opposite conclusions from national courts and the ECJ having adopted inconsistent approaches in its decisions, national courts should, in our view, no longer decide such questions without seeking a preliminary ruling from the ECJ. We urge the ECJ to deliver clear and consistent rules regarding this question.
Keywords: Tax law, European Union, freedom of establishment, free movement of capital
JEL Classification: H25, H87, K34
Suggested Citation: Suggested Citation