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A HARMONIZED EUROPEAN COMPANY LAW: ARE WE THERE ALREADY?

Published online by Cambridge University Press:  25 May 2017

Luca Enriques
Luca Enriques*
Affiliation:
Allen & Overy Professor of Corporate Law, University of Oxford, and ECGI Research Fellow, [email protected].
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Abstract

To what extent is EU company law harmonized? This article first makes the point that little progress has been made in the direction of company law uniformity within the EU. It then argues that, even leaving aside the question of whether it would be desirable to have a uniform EU company law, that outcome is simply impossible to achieve, due to interest group resistance and the variety in national meta-rules. Yet it concludes that, in a narrow meaning, European company laws have indeed been harmonized: European Member States company laws fit together, which may well be what harmonization, not only etymologically, is all about.

Keywords

Centroscompany lawharmonizationmeta-rulesregulatory arbitrageuniformity of laws
Type
Shorter Articles and Notes
Information
International & Comparative Law Quarterly , Volume 66 , Issue 3 , July 2017 , pp. 763 - 777
Copyright
Copyright © British Institute of International and Comparative Law 2017 

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References

1 Actually, the possible meanings are six, because ‘harmonization’ can equally refer to a process and to the outcome of the same process. See eg Lohse, EJ, ‘The Meaning of Harmonization in the Context of European Union Law: A Process in Need of Definition’ in Andenas, M and Baasch Andersen, C (eds), Theory and Practice of Harmonisation (Elgar 2011) 313Google Scholar. In the following, unless otherwise made clear, the term harmonization will be used to refer to the outcome. For an account of the various phases of the company law harmonization process in the second half of the twentieth century see Villiers, C, European Company Law: Towards Democracy? (Ashgate 1998) 224–6Google Scholar.

2 The Greek word ἁρμονία comes from the verb ἁρμόζειν, which means ‘to fit together’. See eg Dictionary of Derivations of the English Language (Collins 1931) 173Google Scholar.

3 One could add a spatial meaning of the term harmonization as expressed in art 114 TFEU, ie the idea of ‘approximation’, where more similarity would appear to be a goal in itself. Note, however, that in art 114 approximation is functional to the internal market. So, this should draw us either to the etymological meaning of the word or to the extensive one (if one takes the view that market integration requires uniformity of laws).

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15 Case C-212/97 Centros Ltd. v Erhvervs- og Selskabsstyrelsen [1999] ECR I-1459; Case C-208/00 Überseering BV v Nordic Construction Company Baumanagement GmbH [2002] ECR I-9919.

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18 See European Commission, ‘Consultation and Hearing on Future Priorities for the Action Plan on Modernizing Company Law and Enhancing Corporate Governance in the European Union—Summary Report’ (2006) <http://ec.europa.eu/internal_market/company/docs/consultation/final_report_en.pdf>; Shearman and Sterling, ISS and ECGI, ‘Report on the Proportionality Principle in the European Union’ (2006) <http://ec.europa.eu/internal_market/company/docs/shareholders/study/final_report_en.pdf>; European Commission, ‘Study on Administrative Costs of the EU Company Law Acquis—Final Report’ (2007) <http://ec.europa.eu/internal_market/company/docs/simplification/final_report_company_law_administrative_costs_en.pdf>; European Business Test Panel (EBTP), ‘European Survey on European Private Company’ (2007) <http://ec.europa.eu/yourvoice/ebtp/docs/epc_report_en.pdf>; European Commission, ‘Communication from the Commission on a Simplified Business Environment for Companies in the Areas of Company Law, Accounting and Auditing’ COM(2007) 394 final (2007) <http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52007DC0394&from=EN>; RiskMetrics Group, ‘Study on Monitoring and Enforcement Practices in Corporate Governance in the Member States’ (2009) <http://ec.europa.eu/internal_market/company/docs/ecgforum/studies/comply-or-explain-090923_en.pdf>; Mazars, ‘Transparency Directive Assessment Report— Prepared for the European Commission Internal Market and Services DG Final Report’ (2009) <http://ec.europa.eu/finance/securities/docs/transparency/report-application_en.pdf>; European Commission, ‘Green Paper—The EU Corporate Governance Framework’ COM(2011) 164 final (2011) <http://ec.europa.eu/internal_market/company/docs/modern/com2011-164_en.pdf>; Directorate General for the Internal Market and Services, ‘Consultation on the Future of European Company Law’ (2012) <http://europa.eu/rapid/press-release_MEMO-12-119_en.htm?locale=en>; Marccus Partners, ‘The Takeover Bids Directive Assessment Report’ (2012) <http://ec.europa.eu/internal_market/company/docs/takeoverbids/study/study_en.pdf>; European Commission, ‘Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Application of Directive 2004/25/EC on Takeover Bids’ COM(2012) 347 final (2012) <http://ec.europa.eu/internal_market/company/docs/takeoverbids/COM2012_347_en.pdf>; European Commission, ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Action Plan: European Company Law and Corporate Governance—A Modern Legal Framework for More Engaged Shareholders and Sustainable Companies’ COM/2012/0740 final (2012) <http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52012DC0740&from=en>; C Gerner-Beuerle, P Paech and EP Schuster, ‘Study on Directors’ Duties and Liability’ (2013) <http://ec.europa.eu/internal_market/company/docs/board/2013-study-analysis_en.pdf>.

19 See Armour, J and Ringe, W-G, ‘European Company Law 1999–2010: Renaissance and Crisis’ (2011) 48 CMLRev 151–2Google Scholar.

20 Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies [2007] OJ L 184/17.

21 For Belgium, see Van der Elst, C, ‘Shareholders as Stewards: Evidence of Belgian General Meetings’ (2013) Financial Law Institute Working Paper 2013–05Google Scholar <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2270938>. For Italy, see M Gargantini, ‘Oltre la record date. Gli ostacoli al voto transfrontaliero dopo il recepimento della direttiva sui diritti degli azionisti’ in L Schiuma (ed), Governo societario ed esercizio del diritto di voto (Cedam 2014) 71.

22 See Winter, J, ‘ Ius Audacibus; The Future of EU Company Law’ in Tison, M et al. . (eds), Perspectives in Company Law and Financial Regulation (Cambridge University Press 2009) 50Google Scholar (stating that ‘the directive is precisely not doing that’). See also Schouten, MC, ‘The Political Economy of Cross-Border Voting in Europe’ (2009) 16 ColumJEurL 1Google Scholar.

23 Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies [2005] OJ L 310/11.

24 See (nn 54–57).

25 See eg Ventoruzzo, M, ‘The Disappearing Taboo of Multiple Voting Shares: Regulatory Responses to the Migration of Chrysler-Fiat’ (2015) Bocconi Legal Studies Research Paper Google Scholar.

26 Art 19a and 29a, Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC [2013] OJ L 182/19, as amended by Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups [2014] OJ L 330/1.

27 Art 4, Directive 2014/95/EU.

28 See Szabó, DG and Sørensen, KE ‘New EU Directive on the Disclosure of Non-Financial Information (CSR)’ (2015) Nordic & European Company Law Working Paper 15-01Google Scholar <http://ssrn.com/abstract=2606557>.

29 In the area of directors’ duties and liability, divergence among Member States’ laws is perhaps not as big as it was in the past, but still the rules and their enforcement can hardly be said to be uniform. See eg Gerner-Beuerle, K and Schuster, EP, ‘The Evolving Structure of Directors’ Duties in Europe’ (2014) 15 EBOR 191Google Scholar.

30 Ventoruzzo, M, ‘Cost-Based and Rules-Based Regulatory Competition: Markets for Corporate Charters in the US and in the EU’ (2006) 3 New York University Journal of Law & Business 91Google Scholar.

31 M Gelter, ‘Centros, the Freedom of Establishment for Companies, and the Court's Accidental Vision for Corporate Law’ in F Nicola and B Davies (eds), EU Law Stories (Cambridge University Press forthcoming). To be sure, not in all countries was the repeal of minimum capital provisions and other measures of the same kind a response to regulatory arbitrage. For instance, in Italy, where UK-formed pseudo-foreign companies never gained any traction ( Becht, M, Enriques, L and Korom, V, ‘ Centros and the Cost of Branching’ (2009) 9 JCLS 174Google Scholar), they were rather attempts at obtaining a better ranking in the highly influential Doing Business Report. See E Brodi, ‘Svolgere attività d'impresa senza capitale di rischio: brevi note sulla nuova fisionomia della società a responsabilità limitata’ (2014) Analisi giuridica dell'economia 206.

32 See Ringe, W-G, ‘Corporate Mobility in the European Union—a Flash in the Pan? An Empirical Study on the Success of Lawmaking and Regulatory Competition’ (2013) 10 ECFR 230Google Scholar.

33 See eg Armour and Ringe (n 19) 129, for an additional explanation based upon the varieties of capitalism literature's view of the role of corporate law within the set of complementary institutions that shape a country's corporate governance framework. See also Villiers (n 1) 171–5, where further cultural, political, and economic explanations for continuing differences in national company laws are provided.

34 See Enriques, L, ‘Related Party Transactions: Policy Options and Real-World Challenges (with a Critique of the European Commission Proposal)’ (2015) 16 EBOR 1Google Scholar (criticizing a number of features in the Commission proposal that made it little effective in terms of minority shareholder protection).

35 See European Commission, ‘Proposal for a Directive of the European Parliament and of the Council amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement and Directive 2013/34/EU as regards certain elements of the corporate governance statement’ COM(2014) 213 final, art 9c <www.eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM:2014:213:FIN>.

36 See Council of the European Union, ‘Proposal for a Directive of the European Parliament and of the Council amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement and Directive 2013/34/EU as regards certain elements of the corporate governance statement’ <http://data.consilium.europa.eu/doc/document/ST-7315-2015-INIT/en/pdf>. The European Parliament's own text closely tracks the Council's. See European Parliament, ‘Amendments adopted by the European Parliament on 8 July 2015 on the proposal for a directive of the European Parliament and of the Council amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement and Directive 2013/34/EU as regards certain elements of the corporate governance statement’ COM(2014)0213 – C7-0147/2014 – 2014/0121(COD) <http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P8-TA-2015-0257+0+DOC+XML+V0//EN>.

37 Council of the European Union (n 36) 46 (emphasis added).

38 Enriques (n 34) 31.

39 Davies, PL, Schuster, EP and Walle de Ghelcke, E, ‘The Takeover Directive as a Protectionist Tool?’ in Bernitz, U and Ringe, W-F (eds), Company Law and Economic Protectionism: New Challenges to European Integration (Oxford University Press 2010) 139Google Scholar.

40 See Enriques (n 16) 61–2.

41 Legrand, P, ‘European Legal Systems Are Not Converging’ (1996) 45 ICLQ 57Google Scholar.

42 cf also Pistor, K, ‘Legal Ground Rules in Coordinated and Liberal Market Economies’ in Hopt, K et al. . (eds), Corporate Governance in Context: Corporations, States, and Markets in Europe, Japan, and the US (Oxford University Press 2005) 254Google Scholar (using the somewhat similar concept of ‘legal ground rules’, defined as those allocating ‘substantive and procedural powers to either individuals or the collective/state’).

43 See Legrand (n 41) 74–8 (with specific regard to the ‘irreducible differences’ between common and civil law meta-rules). Needless to say the UK, which will soon leave the EU, is not the only Member State from the common law tradition. See also text following (n 45).

44 See eg Gelter, M, ‘Why Do Shareholder Derivative Suits Remain Rare in Continental Europe?’ (2012) 37 BrooklynJIntlL 881–7Google Scholar.

45 See Case C-14/83 Sabine von Colson and Elisabeth Kamann v Land Nordrhein-Westfal [1984] ECR 1891; Case C-106/89 Marleasing SA v La Comercial Internacional de Alimentacion SA [1990] ECR I-4135.

46 Case C-106/89 Marleasing (n 45) para 8 (in the official English translation, the wording is even weaker: ‘the national court called upon to interpret it is required to do so, as far as possible, …’).

47 See M Andenas, C Baasch Andersen and R Ashcroft, ‘Towards a Theory of Harmonisation’ in Theory and Practice of Harmonisation (n 1) 577.

48 According to art 26 TFEU, ‘[t]he 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’. Art 49 spells out the freedom of establishment.

49 See art 6, Directive 2012/30/EU of the European Parliament and of the Council of 25 October 2012 on coordination of safeguards which, for the protection of the interests of Members and others, are required by Member States of companies within the meaning of the second paragraph of art 54 of the Treaty, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent [2012] OJ L 315/74.

50 One important exception may be found in the European case law extending insolvency courts’ jurisdiction, now pursuant to art 6(1) Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings [2015 ] OJ L 141/19, to liability suits against directors of insolvent corporations (see C-295/13, H v H.K. [2015] OJ C 46/9): behaviour by directors of foreign entities before they entered insolvency proceedings in their host (‘centre of main interest’) Member State will in fact be subject to the host State's directors’ liability rules, which are otherwise an integral part of company law functionally defined. See also Kornhass (Case C-594/14 Simona Kornhaas v Thomas Dithmar als Insolvenzverwalter über das Vermögen der Kornhaas Montage und Dienstleistung Ltd [2016] OJ C 48/5), which is in line with the cases cited above, but frames its holding in terms that appear to cast doubt on the implications of Centros and its progeny. While some commentators have been quick to see Kornhass as a first sign that the CJEU is ready to put Centros behind it, others have warned that it would be a mistake to read too much into that opinion. See W-G Ringe, ‘Kornhaas and the Limits of Corporate Establishment’ (Oxford Business Law Blog, 25 May 2016) <https:// www.law.ox.ac.uk/business-law-blog/blog/2016/05/kornhaas-and-limits-corporate-establishment>.

51 In the light of Cartesio (Case C-210/06 Cartesio Oktató és Szolgáltató bt [2008] ECR I-9641, para 110), a company may not reincorporate in a real-seat-doctrine Member State without also moving its ‘real seat’ there (whatever real seat means according to that Member State's law), which may obviously discourage the choice of reincorporating in that Member State.

52 Note, incidentally, that Cartesio (ibid) falls short of negatively harmonizing cross-border conversions, because, in para 112, it grants the Member State of destination a mere option to grant entry and change of applicable law to companies engaging in cross-border conversions. Yet, as later clarified by Vale (Case C-378/10 Vale Építési kft EU:C:2012:440), no such option exists if the Member State of destination allows domestic companies to engage in ‘intra-border’ conversions. See also Wiśniewski, AW and Opalski, A, ‘Companies’ Freedom of Establishment after the ECJ Cartesio Judgment’ (2009) 10 EBOR 652Google Scholar.

53 Individual Member States may provide for additional tools. See eg Ferran, E, ‘Corporate Mobility and Company Law’ (2016) 79 MLR 814–15Google Scholar.

54 If the SE statute is used, the resulting European Company will have to have its administrative seat in the country of incorporation. The same is true, in the case of cross-border mergers, when the State of destination follows the real seat doctrine, which therefore acts as a curb on reincorporations to certain destinations (but cannot be used to prevent migrations from real seat doctrine Member States to registered seat doctrine Member States).

55 See European Company Law Experts Group, ‘Response to the European Commission's Consultation on the Future of European Company Law’ (2012) Columbia Law and Economics Research Paper 420, 8–9 <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2075034>; Enriques, L ‘A New EU Business Combination Form to Facilitate Cross-Border M&A: The Compulsory Share Exchange’ (2014) 35 UPaJIntlL 541Google Scholar.

56 See contra Vossestein, GJ, ‘Transfer of the Registered Office: The European Commission's Decision Not to Submit a Proposal for a Directive’ (2008) 4 UtrechtLRev 60Google Scholar.

57 See text preceding (n 25).

58 See eg Macey, JR and Miller, G, ‘Toward an Interest Group Theory of Delaware Corporate Law’ (1987) 65 TexasLRev 481–2Google Scholar.

59 See C-371/10 National Grid Indus BV v Inspecteur van de Belastingdienst Rijnmond/kantoor Rotterdam, EU:C:2011:785. See also Council Directive 2009/133/EC of 19 October 2009 on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different Member States and to the transfer of the registered office of an SE or SCE between Member States [2009] OJ L 310/34.

60 See art 10–13 Directive 2009/101/EC of the European Parliament and of the Council of 16 September 2009 on coordination of safeguards which, for the protection of the interests of Members and third parties, are required by Member States of companies within the meaning of the second paragraph of Article 48 of the Treaty, with a view to making such safeguards equivalent [2009] OJ L 258/11.

61 Enriques (n 16) 30.