Will There Ever Be a Delaware of Europe?

Abstract

The European Union (EU) does not yet have the U.S. equivalent of Delaware; that is, the EU does not yet have a place where it is fairly common to incorporate, regardless of where business is done. Recently, there has been much debate among European states (and legal scholars) in the corporate law field regarding the possible emergence of a "Delaware of Europe." Some European countries have overtly fought a trend towards this possibility by passing local laws that make it difficult to establish a branch or subsidiary company in a location outside the country of origin. In response, the European Court of Justice (ECJ) has heard several cases that have progressively limited the ability of individual countries to restrict the establishment of companies, agencies, branches, and subsidiaries in other European countries. On September 30, 2003, the ECJ delivered its latest blow to countries that have put in place prohibitive regulations regarding incorporation with its decision in the case Inspire Art. This judgment is consistent with the ECJ's jurisprudence on the matter of corporate headquarters and subsidiaries, beginning with Daily Mail, continuing with Centros, and peaking with Uberseering. Daily Mail pertained to a so-called "outbound" case, and Uberseering and Centros dealt with so-called "inbound" cases.

All three cases were decided in the context of "freedom of establishment" from Article 43, paragraph 1, of the European Community Treaty (hereinafter EC), which, read together with Articles 46 and 48 EC, grants great leeway to European corporations that want to move about within the Community.

In this short Case Note and Commentary, we will analyze the development of the ECJ case law as it led to the development of the 2003 ECJ decision Inspire Art. In so doing, we shall review the underlying theories and principles that govern the different legal treatments of European companies when they choose to establish subsidiaries or branches in other European countries.

Keywords: Inspire Art, Uberseering, Grundungstheorie, sitztheorie, centros, delaware of europe, european union, article 43, freedom of establishment

JEL Classification: K10