CYIL vol. 12 (2021)

CYIL 12 (2021) IMPACTS OF THE CJEU CASE LAW ON REGULATORY COMPETITION … 1. Freedom of establishment of natural persons and legal entities in the EU Free movement of persons is regulated, within the framework of primary law of the EU, in particular by article 49 et seq. of the Treaty on the Functioning of the European Union (“TFEU”). These concepts include both prohibition of limitation of freedom of establishment of nationals of one EU Member State in another Member State (the so- called primary freedom of establishment) and the prohibition of limitation of creation of representations, branch offices, or subsidiaries in the territory of another Member State of the EU (the so-called secondary freedoms and establishment). From the CJEU case law it clearly implies that provisions of article 49 of the TFEU have both vertical and horizontal direct effects, i.e. individuals (natural persons or legal entities) have the right to proactively claim these freedoms even before national bodies of a Member State of the EU in a dispute with the Member State as well as with another individual 1 . At the same time, it applies, with regard to the valid principle of application priority 2 of EU law over national law, that if national legal regulations concerning freedom of establishment are in contradiction with EU law, the standard of EU law will be applied on a preferential basis. The TFEU specifically determines, for the area of freedom of establishment, that it applies to natural persons, as well as (to a considerable extent) to legal entities. Although basic provisions of article 49 of the TFEU admits freedom of establishment to nationals of a Member State (i.e. to natural persons) only, a fact is that special arrangements contained in article 54 of the TFEU state that it is necessary to treat in the same way also the companies founded according to legal regulations of any of the Member States, which term includes all companies founded pursuant to both civil law and commercial law, including cooperatives and other legal entities (whether private-law or public-law entities). This broad definition is a consequence of the effort of including all possible types of legal entities which exist in national legal orders of individual EU Member States and which mutually differ from each other to a large extent. The notion “company” is generally perceived by the doctrine of private international law as a private-law association of persons, who have decided, through their own legal acts, to associate for a joint purpose 3 . Unlike these concepts, the notion “legal entity” concerns only the entities to which the legal personality is admitted by applicable legal order, i.e. this notion is narrower than the notion “company”, which includes also various entities with partial (limited) legal personality or without legal personality which currently exist in the 27 EU Member States. Surprisingly, the legal definition of companies presented by article 54 of the TFEU considers also public-law legal entities as companies, which is rather untypical in comparison to usual understanding. If specified conditions are met, this notion includes virtually all types of both private-law and public-law entities except for non-profit-making organisations. The only exception from the range of application of article 54 of the TFEU consists of non-profit-making organisations to which the above-mentioned article does not expressly apply, nevertheless the CJEU case law significantly challenges this limit with the 1 Judgement of the Court of Justice of 21 June 1974. Jean Reyners v. Belgian State . Case 2/74. Paragraph 30. 2 The principle of application priority of EU law was defined for the first time by the Judgement of the Court of Justice of 15 July 1964. Flaminio Costa v. E.N.E.L . Case 6/64. 3 Nevertheless, it is a disputable term with different interpretations. See e.g. PAUKNEROVÁ, M. Companies in private international law. 1 st edition. Prague: Karolinum, 1998, p. 23. ELIÁŠ, K. Miniature on an unsolvable topic, Právník . Volume 132, 11/12, 1993, p. 1058 et seq.


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