Have the Dikes Collapsed? Inspire Art a Further Break-through in the Freedom of Establishment of Companies?

Abstract

On 30 September 2003, the European Court of Justice (hereinafter: the ECJ), in full court, handed down a judgment in the Inspire Art case in which it found certain provisions of the Dutch Law on Formally Foreign Companies of 17 December 1997 (Wet op de Formeel Buitenlandse Vennootschappen. Hereinafter: the WFBV) to be contrary to Article 2 of the Eleventh Company Law Directive and others to form a restriction to the exercise of the right of secondary establishment incapable of justification under Article 46 of the EC Treaty or the case law on overriding reasons relating to the public interest, also referred to as the ‘:rule of reason’ case law. Ten days later, a leading Dutch legal periodical stated that this judgment would lead to the Netherlands being inundated by private limited liability companies incorporated in England under English company law. Does the ruling in Inspire Art mean that the dikes erected in the Netherlands to prevent an influx of so-called formally foreign or pseudo-foreign companies have collapsed? In this paper I will deal with the following issues. Firstly in order to answer the question whether the judgment in Inspire Art can indeed be regarded as a break-through with regard to the freedom of establishment of companies, I will place this ruling against the background of two other judgments in this field, namely the judgments in the Centros and Überseering cases. I will then discuss the importance of the Inspire Art ruling for both the exercise of the right of primary and that of secondary establishment by companies. This will be followed by a discussion of the so-called abuse or improper use of the right of establishment. I will then briefly touch on the issues of the concept of legal capital and forum shopping before drawing some conclusions.