Centros, the Freedom of Establishment for Companies, and the Court's Accidental Vision for Corporate Law

in: Fernanda Nicola & Bill Davies, EU Law Stories (Cambridge University Press 2017)

Fordham Law Legal Studies Research Paper No. 2564765

ECGI - Law Working Paper No. 287/2015

43 Pages Posted: 16 Feb 2015 Last revised: 1 Oct 2017

See all articles by Martin Gelter

Martin Gelter

Fordham University School of Law; European Corporate Governance Institute (ECGI)

Date Written: February 13, 2015

Abstract

In consequence of the three ECJ cases in Centros (1999), Überseering (2002), and Inspire Art (2003), EU member states can no longer effectively apply the real seat theory to companies from other Member States or take other measures to avoid the circumvention of their own laws by foreign incorporation. Founders of companies can – in principle – “pick and choose” the best legal form from all Member States, a result that many policymakers and legal scholars had sought to avoid for decades. This chapter attempts to tell a short intellectual history of the debate. In the early years of the EEC, it was thought that company law would be harmonized to such a strong degree that the free movement of corporations would no longer raise any concern. When the harmonization program stalled, Member States felt justified in maintaining protectionist measures impeding free choice of corporate law. Many saw dicta in the Daily Mail case of 1988 as providing a justification for the real seat theory, whereas few observers paid attention to the Segers case of 1986, which seemed to be saying the opposite. The triad of Centros, Überseering and Inspire Art thus was a particularly disruptive surprise. The ECJ, was seen as opening the door to regulatory competition in European corporate law, and in particular to English Private Limited Companies flooding the continent. In the end, there was little “offensive” regulatory competition, since no Member State had the incentive to capture a large part of the market for incorporation. Member States did, however, engage in “defensive” regulatory competition by eliminating requirements in their laws that seemed to drive founders to the UK (even if it does not appear to be the reason why the popularity of the English Private Limited Company on the Continent ended after a few years). In consequence, the ECJ thus unwittingly nudged Member States toward a certain vision of corporate law that had never been intended by policymakers.

Keywords: freedom of establishment, European Company Law, European corporate law, regulatory competition, Daily Mail, Segers, Centros, Überseering, Inspire Art, Cartesio, European Court of Justice, company law directives

JEL Classification: K22

Suggested Citation

Gelter, Martin, Centros, the Freedom of Establishment for Companies, and the Court's Accidental Vision for Corporate Law (February 13, 2015). in: Fernanda Nicola & Bill Davies, EU Law Stories (Cambridge University Press 2017); Fordham Law Legal Studies Research Paper No. 2564765; ECGI - Law Working Paper No. 287/2015. Available at SSRN: https://ssrn.com/abstract=2564765 or http://dx.doi.org/10.2139/ssrn.2564765

Martin Gelter (Contact Author)

Fordham University School of Law ( email )

150 West 62nd Street
New York, NY 10023
United States
646-312-8752 (Phone)

HOME PAGE: http://www.fordham.edu/info/23135/martin_gelter

European Corporate Governance Institute (ECGI)

HOME PAGE: http://ecgi.global/users/martin-gelter

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