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Free Movement of Legal Persons - Coggle Diagram
Free Movement of Legal Persons
No (incomplete) harmonization of company law
The rules covering ‘primary establishment’ (the incorporation of a new corporate entity) are a matter for national law (Daily Mail; confirmed in Cartesio)
But for ‘secondary establishment’ (setting up of subsidiaries or branches) the deliberate choice of a Member State for such secondary establishment is an inherent aspect of the Treaty rules on freedom of establishment (Centros; confirmed in Uberseering, Inspire Art …)
Unless the national rules are justified by an objective public interest (such as effective fiscal supervision (Cadbury Schweppes), protection of creditors or investors), which is proportionate to their aim
Or the rules in effect fall outside the scope of EU law (Kornhaas)
Defining a ‘legal person’
Art 54 TFEU: “Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Union (Not necessarily within that MS) shall, for the purposes of this Chapter, be treated in the same way as natural persons who are nationals of Member States.
"Companies or firms" means companies or firms constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profit-making.”
Article 49 TFEU
Secondary Establishment – refers to the right of legal persons to set up agencies, subsidiaries and other branches in another MS
No discrimination on grounds of nationality; no restrictions on taking up or pursuit of economic activity
Primary Establishment – right for legal persons to set up and manage undertakings, companies and firms especially in other MS
Direct effect (Case 2/74 Reyners; Case 340/89 Vlassopoulou)
Case C-438/05 Viking – Article 49 TFEU is ‘horizontally’ directly effective (at least in some circumstances)
In the Viking case (Case C-438/05), Article 43 of the Treaty of the European Union (now Article 49 TFEU) is interpreted as capable of conferring rights on a private undertaking that may be relied on against a trade union or an association of trade unions.
Where company is lawfully formed in one MS, even if it does no business there but uses subsidiary, branch or agency (Case 79/85 Segers [1986] ECR 2375)
A company has a right of secondary establishment only if it has its principal place of business or registered office within the EU. – important point
Approaches to ‘establishment’ under national law
“Real seat” (France, Germany)
Head office or central administration in the jurisdiction? – must incorporate under that law
“Incorporation” (UK)
No need for company to have head office in territory in which it is incorporated or to operate in the state at all
Rules of the MS of origin which that restrict establishment are in principle a violation of freedom of establishment.
However court has held that these rules can only be justified if they are non-discriminatory, justified by imperative requirements in the public interest, suitable for the objective and not going beyond what is necessary - Centros para 19