At Long Last: Freedom of Establishment for Legal Persons in Europe Accomplished ECJ Case C-167/01 Kamer van Koophandel en Fabrieken Voor Amsterdam v Inspire Art Ltd. [2003] ECR Not Yet Reported
| DOI | 10.1177/1023263X0401100403 |
| Published date | 01 December 2004 |
| Date | 01 December 2004 |
| Author | Stephan Rammeloo |
| Subject Matter | Article |
Stephan
Rammeloo∗
11 MJ 4 (2004) 379
At Long Last: Freedom of Establishment for Legal Persons
in Europe Accomplished
ECJ Case C-167/01 Kamer van Koophandel en Fabrieken
voor Amsterdam v Inspire Art Ltd. [2003] ECR not yet
reported
Summary
Cross-border company migration in Europe. It is contrary to the Eleventh
Council Company Law Directive to impose on the branch of a company formed
in accordance with the laws of another Member State disclosure obligations not
provided for by that directive. It is furthermore contrary to Articles 43 EC and
48 EC to impose on the exercise of freedom of secondary establishment of such a
company certain conditions provided for in domestic company law in respect of
company formation relating to minimum capital and directors' liability. Even if a
company carries on its activities exclusively or almost exclusively in another
Member State than where it has been duly set up, it may not be deprived of the
right to invoke the freedom of establishment guaranteed by the EC Treaty save
where the existence of an abuse is established on a case-by-case basis.
§ 1. Introduction
Barely a year ago, it was still possible to characterize the subject matter of freedom of
establishment for legal persons in Europe as a ‘long and winding road’.1 The nature of
∗ Stephan Rammeloo is Senior Lecturer in European Company Law, Private International Law and
Comparative law at the University of Maastricht and Member of the MJ Board.
1. S. Rammeloo, ‘The long and winding road towards freedom of establishment for legal persons in
Europe. ECJ Case C-208/00 Überseering BV v Nordic Construction Company Baumanagement GmbH
Æ
Freedom of Establishment for Legal Persons in Europe Accomplished
380 11 MJ 4 (2004)
the journey’s end, however, was set at the dawn of the EC era, half a century ago: legal
persons should be allowed to migrate throughout Europe without running the risk of
being dissolved. Nor should the managers of companies crossing national borders be
exposed to the threat of joint and severe liability for the migrating company’s debts. Of
all business types available to business entrepreneurs, legal persons are generally
considered to be highly attractive vehicles for conducting business activities. To a large
extent this is explained by the fact that both investors and company managers
concluding risk-carrying transactions in the name of the company enjoy the privilege of
limited liability. In awareness of the fact that in a Single European Market companies
increasingly operate on a cross-border scale, one may well ask which substantive law
rules of which legal order such companies should be bound by. Should the conflict of
laws of the legal orders involved (i.e. the laws of the country where the company
departs from and, subsequently, the laws of the country of re-establishment) decide
autonomously on this matter? Or must answers be taken directly from EC Law
concerning freedom of establishment for legal persons? However well-established the
principle of limited liability under the substantive company laws of most EC Member
States, it cannot conceal that several other issues (e.g. minimum capital protection,
protection of company creditors and minority shareholders, company structures,
employee co-determination regimes, etc.) appeared to be highly controversial. These
matters have hampered the process of company law harmonization in Europe.
Although Art. 65 EC paves the way to (further) judicial cooperation in civil matters,
culminating inter alia in EC Regulations bringing about the unification of various
conflict of law topics by the EC Treaty,2 ‘mutual recognition of companies and firms’
explicitly remained submitted to the regime of Art. 293.3 Moreover, as international
treaties on this subject do not exist,4 treatment of foreign companies fundamentally
remained the domain of national conflict of law rules of all EC Member States. Two
prevailing conflict of law theories, the ‘Incorporation’ theory and the ‘Real Seat’ theory
strongly divided states. According to the ‘Incorporation’ theory, matters of company
formation, capital requirements, functioning of company members and officers, as well
as employees, board structure of the company, liability regime, dissolution and winding
Æ (NCC), ECR 2002, p. I-9919’, 10 Maastricht Journal of European and Comparative Law 2 (2003),
169.
2. Cf. some unification achievements of conflict of laws in an EC context so far, particularly based on EC
Council Regulations: pursuant to (ex) Articles 61 (c) and 67 (1) of the Treaty, EC Council Reg. no.
1346/2000 on Insolvency Procedures, Council Reg. EC no. 1347/2000 on Jurisdiction and the
Recognition and Enforcement of Judgments in Matrimonial Matters and in Matters of Parental
Responsibility for Children of Both Spouses, Council Reg. EC no. 1348/2000 on the Service of
Member States of Judicial and Extra-Judicial Documents in Civil or Commercial Matters, EC Council
Reg. no. 44/2001 on Jurisdiction and Recognition and Enforcement of Foreign Judgments in Civil and
Commercial Matters (‘Brussels I’), Council Reg. on (‘Brussels II’).
3. Cf. further § 3, below.
4. The Hague Conference on Private International Law elaborated a draft Treaty on the Mutual
Recognition of the Legal Personality of Companies. This Treaty has never entered enter into force and
never will.
Stephan Rammeloo
11 MJ 4 (2004) 381
up, etc., are all governed by the law according to which the company is (duly)
established. The ‘Real Seat’ theory prescribes, that the law of the country where the
company has its ‘real’ seat (i.e. where the management and control centre is located)
applies to these company relationship matters. Thus, the ‘Incorporation’ theory stands
for party autonomy. The ‘Real Seat’ theory, on the contrary, stands for an objective
proper law test.
On 30 September 2003, the legal landscape with a view to freedom of establishment for
legal persons in Europe underwent drastic changes. In its judgment Inspire Art Ltd., the
ECJ prohibited Member States from applying additional ‘front loaded control’
measures, such as minimum capital requirements, and penalties for non-compliance
with these measures under their own laws to companies moving in from another EC
Member State where they had been duly established. This contribution is an attempt to
clarify ramifications for EC law, the conflict of laws, as well as substantive company
laws of EC Member States. First, the prevailing observations of the Court are rendered.
Subsequently, various matters deserve consideration: the right to primary and secondary
establishment for legal persons under the Treaty; the (non-) compliance with the Treaty
of measures and penalties under national laws of the Member States, notably the Dutch
Wet Formeel Buitenlandse Vennootschappen (WFBV); justifications to restrict the
freedom of establishment in both the member state of departure and the member state of
reestablishment. Furthermore, a glimpse of what is perhaps to come is rendered:
planned reforms of substantive company laws of EC Member States with a view to
private limited company types. Once again, a plea is made to speed up works on
existing plans concerning the Draft for a Fourteenth EC Company Law Directive on the
Transfer of the Registered Office or De Facto Head Office from One Member State to
Another. Finally, some conclusions are drawn.
§ 2. The Inspire Art Case
A. FACTS; PRELIMINARY QUESTIONS
Inspire Art Ltd. was formed on 28 July 2000 as a private company limited by shares
under the law of England and Wales and it has its registered office at Folkestone
(United Kingdom). Its sole director, whose domicile is in The Hague (Netherlands), is
authorized to act alone and independently in the name of the company. The company
has a branch in Amsterdam and is registered in the commercial register of the local
Chamber of Commerce without any indication of the fact that it is a formally foreign
company within the meaning of Article 1 of the WFBV.5 Taking the view that a note to
5. This Act, commonly referred to as WFBV (transl. Pro Forma Foreign Companies Act), entered into
force on 1 January 1998. For historical and methodological treatment with references to other
literature, M. Groenleer, ‘De communautaire aspecten van de Wet op de Formeel Buitenlandse
Vennootschappen’, 19 Nederlands Internationaal Privaatrecht 3 (2001) 306, S. Rammeloo,
Æ
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