Corporate Mobility and the European Company (SE)

Abstract: Through a recent line of landmark judgments, the European Court of Justice has widened the scope of application of the freedom of establishment under the EC Treaty. It is now clear that the said freedom does not only convey upon undertakings the right to form subsidiaries or branches abroad&semic it also gives them the right to incorporate in one Member State only to conduct all their business and place their actual centre of administration in another one. Not only does the latter Member State have to accept the 'incoming' head office and recognise the legal personality of such a company in line with the law of its state of incorporation - it has recently been clarified that the referral to the law of the latter state shall serve to govern all questions of legal capacity, disclosure and directors' liability concerning the company at hand. In effect, the liberal case law referred to - specifically Centros, Überseering and Inspire Art - has opened up the possibility for enterprises to incorporate freely in the Member State whose company law order appears the most attractive, only to carry out all their activities elsewhere&semic i.e. to engage in jurisdiction shopping. While the Court has progressed the potential for economic integration in the EU through what could be described as a call for a competition of legal orders, the Community legislator remains on the path of harmonisation set out decades ago. Notably, this has been expressed through the recent creation of a new, Community wide business form, the European Company (in Latin the Societas Europaea, hence the abbreviation SE). Originally intended to be a supranational means of conducting business on a European level, the Regulation on the Statute for a European Company (the Statute) that was eventually adopted after more than 30 years of discrepancies between the Member States regrettably contains numerous referrals to the national company law of the state of registration of the SE. There is, however, a much more disturbing aspect to the Statute. Through its requirement that the registered office and the head office of an SE must be situated in the same Member State, the Statute denies the European Company the opportunity to engage in company law shopping that the Court has recently guaranteed national company forms. It is the view of the author that this regime is nonetheless not contrary to primary law, basically because the Court has not yet expressly overruled its Daily Mail judgment of 1988, where it was held that the freedom of establishment does not entail a right to transfer a head office out of a Member State. Nevertheless, the effects of the Statute may be detrimental to the prospects of corporate mobility within the EU, which is quite contrary to the objectives of this partially supranational company form. As a matter of uncertainty, there is an obvious need for a clarification by the ECJ whether the Statute is in breach of the Treaty, or, if not, whether the Daily Mail doctrine should be overruled once and for all, making the right of jurisdiction shopping unconditional for all limited liability companies, including the European Company.