Cross-Border Mobility of Corporations and the European Union: Two Future Landmark Cases?
| Published date | 01 June 2001 |
| Date | 01 June 2001 |
| DOI | 10.1177/1023263X0100800201 |
| Subject Matter | Editorial |
Editorial
8 MJ 2 (2001) 117
Cross-Border Mobility of Corporations and the European
Union: Two Future Landmark Cases?
The significance of companies to business in Europe is clearly expressed by Lutter:
‘Unternehmen sind die Motoren des Europäischen Binnenmarkts’.1 From the early days
of the European Union, however, freedom of establishment for legal persons under
Articles 43 and 48 (formerly Articles 52 and 58) of the Treaty on the European Union
has been thwarted by two conflicting theories. According to the ‘Real Seat’ theory, the
law of the country where the company has its ‘real’ seat (i.e. the management and
control centre) is the law applicable to company relationships. Pursuant to the
‘Incorporation’ theory, the company is governed by the law of the country according to
which it is duly established. The latter theory is flexible and lenient, as it allows
businessmen to nominate the proper law of the company to be that of the country of
their choice. Moreover, this theory enables businessmen to move their company’s
headquarters to another country without the compulsory dissolution and winding up of
the company. Though favouring intra-community cross-border mobility, the
‘Incorporation’ theory is severely criticized for provoking a ‘rat race’ in favour of the
most flexible and lenient company law systems. The controversy between both theories
is explained by the fact that authorities of involved states take a rather ambivalent
position: each state seeks to balance the goal of stimulating economic growth by
welcoming foreign investors, against other aims such as creditor protection, worker co-
determination, fair and equal competition on domestic markets, tax revenue policies,
etc.2 This is why until recently neither cross-border mobility of companies duly
established under national laws of the involved Member States, nor the realization of a
European Public Company could be achieved.
1. M. Lutter, ‘Das Europäische Unternehmensrecht im 21. Jahrhundert’, Zeitschrift für
Unternehmungsrecht (2000), 1.
2. Cf. on this subject, Stephan Rammeloo, Corporations in Private International Law. A European
Perspective, (Oxford University Press, 2001).
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