European Private Law: (1) Private law,
the Internal Market and European
Constitutionalism; (2) Company law and
financial markets
Professor Mads Andenas, Oslo
Visiting Professor, Sapienza, Roma
(1) Private law, the Internal Market
and European Constitutionalism
– Private law in the Internal Market and in an EU
constitutional order
– The legal base for EU legislation in private law
– The resistance at national level
(2) European Private Law: Company
law and financial markets
– EU law: Company law and financial markets. The
role of free movement.
– The right of establishment and the free movement
of capital. The Centros and Golden Shares lines of
cases.
– The harmonisation of company law and financial
market regulation and reactions in national
private law.
– The impact of the financial crisis.
(1) Private law, the Internal Market
and European Constitutionalism:
Three parts:
1) private law in the Internal Market and in an
EU constitutional order
2) the legal base for EU legislation in private
law
3) the resistance at national level
1. Private law in the Internal Market
and an EU constitutional order
Role of private law in the Internal Market and in
an EU constitutional order: incidental but the
total impact considerable.
Remains fragmented and not consistent
1.1 Internal market and private law
• Individual rights and effectiveness through the
constitutional doctrines of direct effect and
supremacy.
• Impact on private law obligations.
• Free movement rights and private parties.
Wider EU rights and remedies:
• Breach of EU obligations and remedies in tort
and contract against public authorities and
private parties.
• Developed by ECJ and national courts under
Article 267 TFEU (ex Article 234 EC)
• Directly effective treaty rights, (Case 2/74)
Defrenne and Sabena [1974] ECR 631,
competition law, state aid, public procurement
Remedies in EU legislation:
• Remedies directives: public procurement, Public
procurement Directive 2007/66/EC revising
Remedies Directive for the utilities sector
(Directive 92/13/EEC) and Remedies Directive for
the public sector (Directive 89/665/EEC)
• State aid
• IP rights, Enforcement of intellectual property
rights (Directive 2004/48/EC), current reform
process on the challenges posed by the digital
environment.
Making competition remedies
effective
• 2008 Commission White Paper on Damages
Actions for Breach of the EC antitrust rules.
• 2011 Draft Guidance Paper on quantifying
harm in actions for damages based on
breaches of the EU antitrust rules.
Tort law:
• Breach of EU law and tort remedies: all aspects of
liability
• Public authority liability for breach of EU law.
• Summing up the ‘incidental’ instruments and policy
initiatives mentioned.
• Then adding ‘the first private law directive’: Directive
on Product Liability (85/374/EEC). Sharing common
feature with many of the other instruments:
responding to moves to regulate at national level with
consequences for internal market. Head of liability not
causation and quantum.
Contract law
Contract law consequences of breach of EU law
Consumer law directives, proposed and withdrawn
directive on consumer rights (2008)
Financial markets, consequences for professional actors
in the financial markets
National contract law including different models for the
basic contracting mechanism with offer and acceptance
(consideration) remain
Unclear impact on general contract law: emphasis on
mandatory rules and non-derogable rights, against the
paradigm of contractual freedom for general contract law.
1.2 Human rights and private law
• ECHR and private law, family and inheritance
law, property law, the reach of protection
against discrimination. Pla and Puncernau v.
Andorra.
• One of the autonomies, EU law and human
rights. Solange and the end of the EU as an
autonomous treaty regime.
• The Charter and the Lisbon treaty.
Relationship to ‘purely’ domestic
rights discourses
Domestic discussion of constitutional rights in
private law, breaking through in different
jurisdictions
1.3 Private law in an EU constitutional
order
• Private law in any constitutional order
• ‘Incidental’ role in EU law: what does it add up
• Harmonisation paradigm: also applies when
the EU recognises its general constitutional
dimension
1.4 “National” private law
Is there anything such as purely “national”
private law? Was there ever?
2. The legal base for EU legislation in
private law
Article 114 TFEU: “the European Parliament and the
Council shall, acting in accordance with the ordinary
legislative procedure … adopt the measures for the
approximation of the provisions laid down by law,
regulation or administrative action in Member
States which have as their object the establishment
and functioning of the internal market”
or
Article 352: absence of any other legal basis in the
Treaty unanimity in the Council.
Previous discussion
Very German.
And Stephen Weatherill, but after strong
criticism of ‘competence creep’ and calls to
private lawyers to resist, he concluded
eventually, after the Commission Green Paper
that the Commission had taken the ‘heat out of
the competence question’.
Current discussion
Jürgen Basedow and MPI study: Outside Article
114 TFEU and has to rely on Article 352.
Hans Micklitz: Article 114 TFEU cover the
measures but need to pare down the CESL
• National” private law
The history of competence challenges
The history of company law, the early directives,
directives in other fields: banking (deposit
guarantee schemes), SE/SCE (more below)
W.H. Roth: doorstep selling directive no cross
border element and no treaty base, not succeeded
before courts
Parallels on fundamental freedoms in the ECJ:
against the application of free movement post
Centros . Private international law not free
movement. IP rights, labour rights
Limits to the competence under Article
114 TFEU
Case C-376/98, Germany against the European
Parliament and Council , citing ‘health’
C-380/03 Germany v European Parliament and
Council
C-436/03 EP v Council [2006] ECR I-3733 (SE and
SCE)
Subsidiarity and proportionality
• Art 5 TEU
• Impact asessment
Impact on current CESL proposal
• The competence discussion, a natural challenge and
generally good process? But little likelihood of carving
out an exception for general contract law.
• Relationship with political consensus moving
• Impact on current CESL proposal: clear. Problematic:
Christiane C. Wendehorst building on Hans Micklitz:
‘the purely instrumentalist approach to private law,
which is suggested by Article 114 TFEU, can negatively
affect both the legislative process and the rules
themselves. In the long run, good European private law
may be possible only if it gets a clear and firm legal
basis in the Treaty.’
3.The resistance at national level
National traditions as an obstacle. Defending the
national system as a reflex. The variety of
national law as a value and the inherent tension
with rights at a European level and the internal
market. Many complex relationships where the
conflicts between disciplines and different parts
of the legal community plays a role.
3.1. ‘The end of comparative and
private international law’
Jürgen Basedow and MPI Study: balanced and good
argument, but also emphasis on the perspective of
the comparativist and private international lawyer.
Comparativist discourse often not engaging with EU
law: the end of comparative law. Similar tendencies
among some private international lawyers. Focus
on international instruments in their scholarship,
and a long time before the effect not only of EU or
EU initiated private international law instruments
was accounted for, not to speak of the effects of
free movement and ECHR.
3.2. The autonomy and autonomies of
national law
• Public/private
• Constitutional rights and the rest of the legal
system
• Constitutional, administrative and public law.
Regulatory law.
Within civil law
• Traditional divisions of disciplines.
• Civil and commercial law: should there be
general rules or specialised regimes.
Consequences for contract interpretation, less
protections, role of custom.
• Consumer law. Mandatory or default rules:
freedom of contract. Professor Alpa’s article in
reading.
• Impact of constitutional and ‘other public law’
Proportionality in private law
• German example:
– Grundrechte im Privatrecht
– Strahlungswirkung and not fully fledged
proportionality
– Exception: labour law.
– New scholarship
• French and Italian law
Role of EU and ECHR in domestic
reform
3.3 The interference of EU law in the
national law autonomies
The variety of national law as a value and rights
in the internal market.
Role of consumer law protection with
mandatory rules and non-derogable rights,
against the paradigm of contractual freedom for
general contract law. What is ‘general contract
law’: compare commercial and civil law conflicts,
inclusion of consumer rights in general contract
legislation
4. Conclusions
The outside-in perspective, Eric A Posner, in a recent paper completely
rejects the CESL proposal:
1. the introduction of an optional instrument should increase rather
than reduce transaction costs.
2. It can produce benefits (reduction of “uniformity costs”), but it is
unlikely that these benefits exceed the transaction-cost harms.
3. The potential dynamic effect of CESL for jurisdiction competition:
benefits slight
4. The CESL might not be desirable as a means for helping to
establish a common European identity, and reject it.
Posner, Eric A., The Questionable Basis of the Common European Sales
Law: The Role of an Optional Instrument in Jurisdictional Competition
(May 1, 2012). University of Chicago Institute for Law & Economics Olin
Research Paper No. 597. Available at SSRN:
http://ssrn.com/abstract=2049594 or
http://dx.doi.org/10.2139/ssrn.2049594
(2) European Private Law: Company
law and financial markets
1. EU law: Company law and financial markets. The
role of free movement.
2. The right of establishment and the free
movement of capital. The Centros and Golden
Shares lines of cases.
3. The harmonisation of company law and financial
market regulation and reactions in national
private law.
4. The impact of the financial crisis.
2.1 EU law: Company law and financial
markets. The role of free movement.
2.2. The right of establishment and the free
movement of capital. The Centros and Golden
Shares lines of cases up to Vale.
Free movement of companies?
• There is still no free movement of companies in EU law.
Natural persons and goods can move, practically without
restriction, from one member state to another.
• Article 48 EC Treaty provides that companies shall be treated
in the same way as natural persons. But national company
laws still discriminate in different ways against companies
from other Member States.
• Many discriminatory restrictions remain against foreign
companies, and there are also restrictions on the movement
of home companies out of the jurisdiction.
• National company laws do not provide ways in which a
company can reincorporate in another Member State.
Impact of fundamental freedoms
• In a number of recent decisions, the European Court of Justice
has applied the principles of its free movement case law on
the company law and tax law of the Member States.
• Furthermore, in cases brought by the Commission a number
of Member States, the Court of Justice has reviewed the
different ways in which Member States attempted to extend
control in privatised companies.
• The fundamental freedoms, in particular the right of
establishment and the free movement of capital, are
beginning to dismantle the obstacles to the movement of
companies in national law.
German company law doctrine
And free movement: a cautionary tale
• Concern over free movement, Commission v France
• Sigh of relief over Daily Mail Case 81/87 Ex parte
Daily Mail [1988] ECR 5483
• Concern before and after Centros
• See Harald Halbhuber ’National Doctrinal Structures
and European Company Law’
(2001) 38 Common Market Law Review 1385–1420
Company law, capital and
establishment in the Internal Market
Company law and the fundamental
freedoms
Freedom of establishment is a fundamental freedom in EC law
(Article 43 EC)
– Case C-205/84 Commission v Germany (Re-insurance)
– Case C-442/02 Caixa Bank France (ban on interest for current
accounts) [2004] ECR I-89615
Free movement of capital is a fundamental freedom in EC law
(Article 43 EC)
Company law directives I
First Company Law Directive 68/151/EEC, on co-ordination of safeguards (...)
for the protection of the interests of members and others, repealed by
2009/101/EC
Second Company Law Directive 77/91/EEC, on formation of public companies
and the maintenance and alteration of capital, updated by 2006/68/EC and
2009/109/EC, repealed by 2012/30/EU
Third Company Law Directive 78/855/EEC, on mergers of public limited
liability companies, repealed by 2011/35/EU
Fourth Company Law Directive 78/660/EEC, on accounting standards
Sixth Company Law Directive 82/891/EEC, on division of public companies,
amended by 2007/63/EC
Seventh Company Law Directive 83/349/EEC, on group accounts
Eighth Company Law Directive 84/253/EEC, on the approval of persons
responsible for carrying out the statutory audits of accounting document,
repealed by 2006/43/EC, on statutory audits of annual accounts and
consolidated accounts
Company law directives II
Tenth Company Law Directive 2005/56/EC, on cross-border mergers of limited
liability companies
Eleventh Company Law Directive 89/666/EEC, on disclosure requirements in
respect of branches opened in a Member State by certain types of company
governed by the law of another State
Twelfth Company Law Directive 89/667/EEC, on single-member private
limited-liability companies, repealed by 2009/102/EC
Thirteenth Company Law Directive 2004/25/EC, on takeover bids
Market Abuse Directive 2003/6/EC
Transparency of Listed Companies Directive 2004/109/EC
Shareholder Rights Directive 2007/36/EC, on the exercise of certain rights of
shareholders in listed companies
Merger Tax Directive 90/434/EEC, on the common system of taxation
applicable to mergers, divisions, transfers of assets and exchanges of shares
concerning companies of different Member States, repealed by 2009/133/EC
Proposals
Draft Fifth Company Law Directive, on structure
of public companies, shareholder right to
determine director pay and codetermination
Draft Ninth Company Law Directive, on
corporate groups
Draft Fourteenth Company Law Directive, on
cross-border transfer of the registered offices of
limited liability companies
Proposed 14th Company Law Directive on the
cross-border transfer of company seats
• To provide a simple mechanism for the cross-border
transfer of company seats.
• Commission staff working document on impact
assessments for the 14th company law directive, December
2007.
• EP resolution on the 14th Directive, 10 March 2009. Owninitiative report adopted by JURI on 9 January 2012.
• EP adopted report at plenary session on 2 February 2012.
• Commission Action Plan on company law and corporate
governance envisages further consultations in 2013 to
update its impact assessments, 12 December 2012.
• Commission publishes consultation on cross-border
transfer of company seats, 14 January 2013.
Merger of existing company law
Directives
Commission Action Plan for company law and
corporate governance contains Commission's
plans to adopt a proposal codifying and merging
major company law Directives in 2013, 12
December 2012.
Commission Action Plan for company
law and corporate governance
outlines the initiatives which the Commission
intends to take in this area in the coming years in
order to modernise and enhance the current
framework.
The initiatives, which will be both legislative and
non-legislative, follow three main lines:
• Enhancing transparency between companies and
investors
• Encouraging long-term shareholder engagement
• Improving the framework for cross-border
operation of companies
Free movement of companies: five cases
First setting the scene: the ECJ case law
1. C-212/97 Centros Ltd v. Erhvervs- og
Selskabsstyrelsen [1999] E.C.R. I-1459.
2. C-208/00 Überseering [2002] ECR I-9919.
3. Kamer van Koophandel en Fabrieken voor
Amsterdam v Inspire Art [2005] ECR I. 1095
4. C-411/03 Sevic Systems AG [2005] ECR I-10805
5. C-210/06 Cartesio
The right of investment and the free
movement of capital
• Golden Shares Cases, Case C-174/04
Commission v Italian Republic suspension of
the voting rights attached to shareholdings
exceeding 2% of the capital of companies in
the electricity and gas sectors.
• Volkswagen Case C-112/05 Commission of the
European Communities v Federal Republic of
Germany
Case C-212/97 Centros v Erhvervs-og
Selskabsstyrelsen [1999] ECR I-1459
Contrary to Articles 52 and 58 EC for a Member State to refuse to
register a branch of a company formed in accordance with the
law of another Member State in which it has its registered
office but in which it conducts no business where the branch
is intended to enable the company in question to carry on its
entire business in the State in which that branch is to be
created, while avoiding the need to form a company there,
thus evading application of the rules governing the formation
of companies which, in that State, are more restrictive as
regards the paying up of a minimum share capital.
C-208/00 Überseering [2002] ECR I-9919
The real seat doctrine, or, in the official English
translation of the judgment in Überseering, the
"company seat principle", is one of two alternative
models in the private international law of
companies. Under the real seat doctrine, the law
applicable to a company is the law of the country
where the company has its actual centre of
administration. In the U.K. an incorporation doctrine
is followed. The law of the country of incorporation
applies irrespective of where a company carries out
its business.
Since the company is not incorporated under
German law, it does not exist, even if it is still
recognised under the law of the country of
incorporation (the U.K.). In a number of cases,
German courts refused standing to companies
incorporated abroad. There is also the threat
of loss of the protection by limited liability for
directors and shareholders.
C-411/03 Sevic Systems AG [2005] ECR I10805
Sevic decided a few weeks after the enactment
of the Tenth Directive on Cross-Border Mergers,
that a Luxembourg company had the right to
merge with a German company, despite
contrary rules of German law. Refusal to permit
a merger would be a restriction in the meaning
of Articles 43 and 48 EC and could only be
justified if it pursued a legitimate objective
under the Treaty and justified by imperative
grounds in the public interest. The ECJ regarded
the treatment of the Luxembourg company as
an instance of discrimination.
C-411/03 Sevic Systems AG [2005] ECR I10805 [para 22]:
In so far as, under national rules, recourse to
such a means of company transformation is not
possible where one of the companies is
established in a Member State other than the
Federal Republic of Germany, German law
establishes a difference in treatment between
companies according to the internal or crossborder nature of the merger, which is likely to
deter the exercise of the freedom of
establishment laid down by the Treaty.
Cartesio (C-210/06)
The question in Cartesio
May a Hungarian company request transfer
of its registered office to another Member
State of the European Union relying
directly on community law (Articles 43
and 48 of the Treaty of Rome)? If the
answer is affirmative,may the transfer of
the registered office be made subject to
any kind of condition or authorisation by
the Member State of origin or the host
Member State?
AG Maduro’s opinion and the judgment in
Cartesio
• Overturns Daily Mail in so far it allows
restrictions on exit
• More measured from the ECJ but to same
effect
National Grid Indus (C-371/10)
VALE Építési kft (C-378/10)
Hungarian company law conversion rules were
incompatible with the freedom of establishment
because they provided for conversion
opportunities when the companies involved in
the operation were Hungarian but not when a
company involved in the conversion operation
was established in another member state, such
as Italy.
The general reach of the Fundamental
Freedoms
• Freedom of establishment is a fundamental freedom in EC law
(Article 43 EC)
– Case C-205/84 Commission v Germany (Re-insurance)
– Case C-442/02 Caixa Bank France (ban on interest for current
accounts) [2004] ECR I-89615
• Free movement of capital is a fundamental freedom in EC law
(Article 43 EC)
– Golden shares cases
•
The core test: restriction, market access, making less
attractive
• Horizontal direct effect
• Indirect direct effect
– with particular application to company law: Case C-106/89 Marleasing
[1990] ECR I-4135)
Issues for our discussion
National doctrine and EU law
– Autonomy of national law and resistance to EU
law
• Horizontal direct effect?
• The impact of the ECJ case law on national
company law on
– transfer of shares
– exit of companies
Exit of European companies, SEs
• Here Italian law is not so far out from the European
mainstream.
• But again, a question of ’restriction’ under freedom
of establishment or free movement of capital.
• What is the consequence of EU secondary legislation.
• Consequences of free movement on interpretation
and application of EU legislation.
2.3 The harmonisation of company law and
financial market regulation and reactions in
national private law.
Briefly about the harmonisation of financial
market regulation: impact of free movement.
• Institutional, and marked structures: moving
from national to EU level. Diamond/Dybvig,
Modigliani/Miller and Prescott/Kydland.
• Investor protection.
Monetary policy, costs of financial system
• Internal marked dilemmas
2.3 The harmonisation of company law and
financial market regulation and reactions in
national private law.
Briefly about the harmonisation of company law:
Company law directives on harmonisation of
national company laws
EU companies
Briefly about the harmonisation of financial
market regulation: impact of free movement.
• Institutional, and marked structures: moving
from national to EU level. Diamond/Dybvig,
Modigliani/Miller and Prescott/Kydland.
• Investor protection.
Monetary policy, costs of financial system to the
economy
• Internal marked dilemmas
Financial market regulation and free
movement: impact on private law
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Contracts with investors
Limitations on contracts between professionals
Increased intensity of competition regulation
Payments
Insolvency
Security
Settlements and clearing
Proposed Euro mortgage
2.4 The impact of the financial
crisis.
• Monetary policy, costs of financial system to
the economy. Macro and micro level reforms
• Restrictions on contractual freedom of
financial institutions