ECL Week 3.pdf

Company Law… alone? Not just hard law Statutory law Increasing importance of soft law Voluntarily applicable codes, best practices… E.g.: corporate governance codes And relevance of companies’ internal rules Internal regulations, bylaws, articles… E.g.: internal...

Company Law… alone? Not just hard law Statutory law Increasing importance of soft law Voluntarily applicable codes, best practices… E.g.: corporate governance codes And relevance of companies’ internal rules Internal regulations, bylaws, articles… E.g.: internal privacy or ethical codes That’s corporate governance, overall considered A basic compass for orienteering in European Company Law European Company Law So what does “European” mean? At least two meanings: Geographic Institutional This makes it clear that we have two different (and sometimes overlaying) dimensions: Institutional ECL Comparative CL, where the different domestic solutions in MSs are compared A basic compass for orienteering in European Company Law «Institutional» European CL Refers to the direct intervention of European institution in the Member States (MS) Company Law Different means of action; foundations in the TFEU (and principles in TEU) «Incomplete» system: ECL has not provisions regarding every profile of a «national» company law. For this reason… A basic compass for orienteering in European Company Law «Geographic» European CL Each country, its own CL Comparative company law is king Some profiles are different, even very different; some are similar, since the very concept of company Let’s think about the difference company/partnerships, and the recent Lithuanian simplified partnerships Similarity comes from three reasons: 1. Common background 2. Diffusion and/or transplant of legal models 3. Harmonisation A basic compass for orienteering in European Company Law Finally: ECL! CL is not an exclusive competence of EU; it is just a competence shared with the MS, usually in the macro-area of Internal Market Any initiative of the EU in the field is subject to two basic principles (besides conferral from Member States to the Union): 1. Proportionality 2. Subsidiarity A basic compass for orienteering in European Company Law Art. 5.3 &.4 TEU 3. Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the Union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level. […] 4. Under the principle of proportionality, the content and form of Union action shall not exceed what is necessary to achieve the objectives of the Treaties. […] A basic compass for orienteering in European Company Law Basic principles in EU Law (1) Art. 26.1 &.2 TFEU 1. The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Treaties. 2. The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties. A basic compass for orienteering in European Company Law Basic principles in EU Law (2) Freedom to provide services Art. 56 TFEU Within the framework of the provisions set out below, restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may extend the provisions of the Chapter to nationals of a third country who provide services and who are established within the Union. A basic compass for orienteering in European Company Law Basic principles in EU Law (3) Freedom of establishment Art. 49 TFEU Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State. Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 54, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital. A basic compass for orienteering in European Company Law 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 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. A basic compass for orienteering in European Company Law Key issues of Art. 54.2 Not only companies, also firms, and even cooperatives Under civil or commercial law Governed by either public or private law Save for no-profits. So, just profit companies & firms are considered, because they are supposed to pursue business, and thus economic, activities Caution 1: no-profit entities could pursue economic activity as well Therefore: exclusion is a political decision Caution 2: what about hybrid/low-profit companies? A basic compass for orienteering in European Company Law Corollary principle regarding capital Art. 55 TFEU Member States shall accord nationals of the other Member States the same treatment as their own nationals as regards participation in the capital of companies or firms within the meaning of Article 54, without prejudice to the application of the other provisions of the Treaties. Art. 63.1 TFEU Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited. A basic compass for orienteering in European Company Law Critical issues of Art. 54 When is a company an Italian company? Or French? Or German? It must be «…formed in accordance...» AND «having their registered office, central administration or principal place of business…» Cumulative? Alternative? The point is the… A basic compass for orienteering in European Company Law Connecting factor (1) MS rules as for constitution: «formed in accordance» MS rules as for granting citizenship to a company, according its own rules of Private International Law of companies The two mainstream theories are: 1. Incorporation theory 2. Real seat theory A basic compass for orienteering in European Company Law Connecting factor (2) Incorporation theory: the company belongs to (i.e.: is governed by the law of) the MS where it has been incorporated or has lawfully transferred its registered office ([UK,] Ireland, Netherland, Italy; preferred by ECJ – see Überseering case) Real seat theory: the company is governed by the law of the place where the central management and control is located (France, Germany, Hungary) Combinations are possible. A basic compass for orienteering in European Company Law What is in concrete ECL’s goal? Art. 50 TFEU 1. In order to attain freedom of establishment as regards a particular activity, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, shall act by means of directives. A basic compass for orienteering in European Company Law Art 50.2 TFEU (1) 2. The European Parliament, the Council and the Commission shall carry out the duties devolving upon them under the preceding provisions, in particular: […] (c) by abolishing those administrative procedures and practices, whether resulting from national legislation or from agreements previously concluded between Member States, the maintenance of which would form an obstacle to freedom of establishment; A basic compass for orienteering in European Company Law Art 50.2 TFEU (2) […] (f) by effecting the progressive abolition of restrictions on freedom of establishment in every branch of activity under consideration, both as regards the conditions for setting up agencies, branches or subsidiaries in the territory of a Member State and as regards the subsidiaries in the territory of a Member State and as regards the conditions governing the entry of personnel belonging to the main establishment into managerial or supervisory posts in such agencies, branches or subsidiaries; (g) by coordinating to the necessary extent the safeguards which, for the protection of the interests of members and others, are required by Member States of companies or firms within the meaning of the second paragraph of Article 54 with a view to making such safeguards equivalent throughout the Union; […] A basic compass for orienteering in European Company Law In addition: Art. 115 TFEU Without prejudice to Article 114, the Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, issue directives for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market. A basic compass for orienteering in European Company Law So… Art. 50 is ordinary for progressive abolition of restrictions, and Parliament and Council work together, while… …Art. 115 is for extraordinary removal, by the Council alone, of MS’ provisions which directly affect the freedom of establishment (principle) or the functioning (concrete) of the internal market. A basic compass for orienteering in European Company Law Is that all, folks? NO! By means of Arts. 114 and 352 TFEU, EU Institutions are also entitled to adopt Regulations, in order to enact the objectives of art. 26 (Parliament and Council, art. 114), or any objective set out in the Treaties, «and the Treaties have not provided the necessary powers» (Just the Council, art. 352) A basic compass for orienteering in European Company Law In addition to that… …the European Court of Justice is entitled to judge over the alleged failure, by a MS «to fulfil an obligation under the Treaties» (art. 258 TFEU), called by the EU Commission, or by any MS’ court or tribunal (art. 267 TFEU) The issue is the scope of application of ECJ Decisions, and the possibility to its extension to similar cases outside the judgment A basic compass for orienteering in European Company Law Three pillars, three (joint?) actions 1. Directives: Harmonisation 2. Regulations: Standardisation 3. Decisions: Interpretation A basic compass for orienteering in European Company Law The pillars and the ages ECL’s formation has not been uniform in its development. There has been a «golden age» between 1965 and 1990… …then a «quasi stalemate» in the 1990s… …and an «apparent recovery» in the 2000s A basic compass for orienteering in European Company Law An incomplete system Again, ECL does not draw – and even cannot draw, due to the principle of subsidiarity – a complete CL system European institutional interventions are «spot-by-spot», according to an original project, with many changes of mind, political oppositions, abandoned tasks, eventual amendments to original texts and so on… A basic compass for orienteering in European Company Law It sounds like a crime series There are murders… Fifth and Ninth draft Directives; SPE draft Regulation There are hidden motivations… SUP draft Directive There is a continuous fight for the power… All the Regulations, with EU competences clashing with MS’ ones A basic compass for orienteering in European Company Law