Podcast
Questions and Answers
Which legal theory argues that a company is governed by the law of the state where it is formally incorporated?
Which legal theory argues that a company is governed by the law of the state where it is formally incorporated?
- Corporate Dualism theory
- Operational Headquarters theory
- Incorporation theory (correct)
- Real Seat theory
The CJEU recognizes an unrestricted right to transfer management and control from one member state to another without limitations.
The CJEU recognizes an unrestricted right to transfer management and control from one member state to another without limitations.
False (B)
What does the concept of 'reincorporation' refer to in the context of company movement?
What does the concept of 'reincorporation' refer to in the context of company movement?
A change in the law governing the company.
The _____ theory stipulates that a company should be established under the law of the state where its operational headquarters is located.
The _____ theory stipulates that a company should be established under the law of the state where its operational headquarters is located.
Match the following cases with their significance regarding freedom of establishment:
Match the following cases with their significance regarding freedom of establishment:
What is a key focus of the EU's market access-based approach?
What is a key focus of the EU's market access-based approach?
The national restrictions are always in breach of EU law regardless of circumstances.
The national restrictions are always in breach of EU law regardless of circumstances.
What test has been suggested to evaluate the impact of national restrictions on free movement?
What test has been suggested to evaluate the impact of national restrictions on free movement?
The establishment of a new branch or company falls under the freedom of __________.
The establishment of a new branch or company falls under the freedom of __________.
Match the following terms with their definitions:
Match the following terms with their definitions:
Which case began a shift towards a market access-based approach?
Which case began a shift towards a market access-based approach?
Company incorporation regulations in national law do not impact the freedom of establishment.
Company incorporation regulations in national law do not impact the freedom of establishment.
What is a significant concern regarding higher taxes in relation to EU law?
What is a significant concern regarding higher taxes in relation to EU law?
The EU has the power to harmonize tax rates among member states.
The EU has the power to harmonize tax rates among member states.
What kind of approach is indicated by the ACT Group Litigation and FII (No 1) in relation to EU law?
What kind of approach is indicated by the ACT Group Litigation and FII (No 1) in relation to EU law?
The Viking and Laval cases highlight the tension between posted workers, internal market freedoms, and ________ action.
The Viking and Laval cases highlight the tension between posted workers, internal market freedoms, and ________ action.
What are most judgments regarding national restrictions primarily concerned with?
What are most judgments regarding national restrictions primarily concerned with?
Companies are likely to challenge lower taxes rather than higher taxes.
Companies are likely to challenge lower taxes rather than higher taxes.
What do the terms 'horizontal effect' and 'vertical effect' refer to in the context of EU law?
What do the terms 'horizontal effect' and 'vertical effect' refer to in the context of EU law?
In the context of EU law, moving towards internationally-agreed norms is a reaction to ________ restrictions.
In the context of EU law, moving towards internationally-agreed norms is a reaction to ________ restrictions.
Match the case to the relevant issue it highlights.
Match the case to the relevant issue it highlights.
What potential effect does strike action have in relation to freedoms within the internal market?
What potential effect does strike action have in relation to freedoms within the internal market?
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Study Notes
Market Access
- The EU approaches market access from a broad perspective.
- Legal cases have shifted to prioritize market access, beginning with Säger and continuing in subsequent cases.
- The language regarding market access has simplified over time.
- Viking case defines market access as prohibiting "obstacles" or "restrictions" to free movement.
- This broad test is applied differently in areas such as taxes and company incorporation.
Restrictions and Regulation
- The broad test can have regulatory implications.
- Much legitimate public decision-making falls under this test.
- The court has limited the test's impact by excluding instances where the effect on free movement is too uncertain or indirect (Volksbank Romania).
- A de minimis test has been suggested, though not consistently applied.
Incorporation
- The establishment of new branches or companies falls under the freedom of establishment.
- EU company law includes extensive secondary legislation governing company incorporation.
- This legislation may limit freedom of establishment by imposing regulations on company formation.
- Finding the balance between regulation and freedom is crucial.
Taxation
- Taxes are a significant potential barrier to free movement.
- Higher taxes can deter companies from moving to a particular country.
- The EU lacks power to harmonize taxes.
- Companies are most likely to challenge higher taxes, creating a situation of cherry-picking.
- EU law has aimed to follow internationally-agreed norms on taxation.
- ACT Group Litigation and FII (No 1) indicate a move towards a discrimination-based approach in this area.
Horizontal Effect
- The majority of legal rulings involve vertical effects, concerning actions by states or government organs.
- The legal framework acknowledges actions of private actors, with potentially problematic implications.
Horizontal Effect - Viking and Laval Cases
- Viking and Laval focus on the use of posted workers or internal market freedoms.
- Both cases involve strike action in response to the use of internal market freedoms for lower wages and working conditions.
- The strike action, as an attempt to limit the use of internal freedoms, could be considered a restriction of those freedoms.
Incorporation: Legal Theories
- Two main legal theories of incorporation are used across member states.
- Real Seat Theory: A company is established under the law of its operational headquarters, regardless of formal incorporation.
- Incorporation Theory: A company is governed by the law of the state where it is formally incorporated.
Incorporation: Daily Mail
- Daily Mail case demonstrates that, despite freedom of establishment, the CJEU has refused to recognize an unrestricted right to legally relocate operational headquarters while maintaining the original state's corporate status.
- States can continue to impose limitations on company movement, provided they are proportional and legitimate.
Incorporation: Cartesio
- Cartesio expands on Daily Mail by establishing that its principles apply only in situations where the company's governing law remains the same.
- Relocating and changing the governing law, known as reincorporation, can potentially be a restriction on freedom of establishment.
- Centros ruling highlights the potential restriction on freedom of establishment when a state refuses to recognize a new branch.
- This area of law is subject to extensive legal analysis.
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