The Illusion of Motion: Corporate (Im-)mobility and the Failed Promise of Centros

45 Pages Posted: 24 Jun 2019 Last revised: 5 Jul 2019

See all articles by Carsten Gerner-Beuerle

Carsten Gerner-Beuerle

University College London - Faculty of Laws

Federico M. Mucciarelli

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Dipartimento di Economia Marco Biagi, Modena; University of London, SOAS, Department of Financial and Management Studies

Edmund-Philipp Schuster

London School of Economics - Law Department

Mathias Siems

European University Institute (EUI); Durham University

Date Written: March 1, 2019

Abstract

The European Court of Justice’s landmark decision in Centros was heralded as creating the preconditions for a vibrant market for incorporations in the EU. In practice, however, today’s corporate landscape in Europe differs little from that of the late 1990s. Very few large companies have made use of their ability to subject themselves to the company law of a Member State in which they are not also headquartered, and there are few signs suggesting that a ‘European Delaware’ will emerge in the near future. To the extent that Member States have engaged in competitive law-making, this has largely been confined to minimum capital requirements and rules affecting the ease of the incorporation process – areas concerning primarily micro-companies. We argue that the modest effect of Centros is not only a function of limited economic incentives to engage in regulatory competition and regulatory arbitrage, but also of the fact that the applicability of large sections of relevant laws governing corporate behaviour is determined by real-seat like connecting factors which render regulatory arbitrage more difficult. We analyse the boundaries between the lex societatis and neighbouring legal areas, notably insolvency and tort law, and find that the body of rules regulating a company’s outward-facing activities, as opposed to its internal affairs, is largely removed from regulatory arbitrage. It seems therefore likely that the potential benefits of selecting the applicable company law, while remaining subject to a cocktail of other, equally relevant rules, are sufficiently small to be regularly outweighed by the costs of a complex and non-standard corporate structure necessary to exercise free movement rights.

Keywords: right of establishment, Centros, corporate mobility, regulatory competition, lex societatis, lex concursus

JEL Classification: K22

Suggested Citation

Gerner-Beuerle, Carsten and Mucciarelli, Federico M. and Schuster, Edmund-Philipp and Siems, Mathias, The Illusion of Motion: Corporate (Im-)mobility and the Failed Promise of Centros (March 1, 2019). European Corporate Governance Institute - Law Working Paper No. 458/2019. Available at SSRN: https://ssrn.com/abstract=3407896

Carsten Gerner-Beuerle (Contact Author)

University College London - Faculty of Laws ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

Federico M. Mucciarelli

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Dipartimento di Economia Marco Biagi, Modena

Viale Berengario 51
Modena, Modena 41121
Italy

University of London, SOAS, Department of Financial and Management Studies ( email )

Thornhaugh Street
London, WC1H 0XG
United Kingdom

Edmund-Philipp Schuster

London School of Economics - Law Department ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Mathias Siems

European University Institute (EUI) ( email )

Via Bolognese 156 (Villa Salviati)
Firenze, 50139
Italy

HOME PAGE: http://www.eui.eu/siems

Durham University ( email )

Stockton Road
Durham, County Durham DH1 3LE
United Kingdom

HOME PAGE: http://www.dur.ac.uk/mathias.siems

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