CYIL vol. 12 (2021)

CYIL 12 (2021)

IMPACTS OF THE CJEU CASE LAW ON REGULATORY COMPETITION …

Case C-210/06 – Cartesio 34 In this case, the CJEU had an opportunity, after almost 20 years from its decision in the Daily Mail case, of providing its opinion on the issue of limitation of cross-border transfers of the actual seat of a company by the original state of incorporation again. The Cartesio limited partnership incorporated pursuant to Hungarian law filed an application for the transfer of its actual seat to Italy at a Hungarian court. The Court, however, rejected this proposal, stating that Hungarian legislation does not make such a cross-border transfer of the registered office with the maintaining of the company’s continuity possible, clarifying that it requires the registered office and the actual seat to be in the same place, otherwise in accordance with the seat principle it requires cessation of the existing company and subsequent foundation of a new entity in another jurisdiction. Unlike this, within the territory of Hungary it was possible to make a seat transfer, which means that there was a different treatment of purely national situations and cross-border cases. Cartesio, however, wanted to retain its Hungarian legal statute even after the transfer of the actual seat, and therefore it challenged this treatment before the court which subsequently referred the case to the CJEU for a preliminary ruling procedure. The matter therefore concerned a typical outgoing situation, when assessment was made for compatibility of rules of the legal order of the state from which the company wanted to move its seat to another place. Many experts considered the Cartesio case as an opportunity for definite refusal of the seat theory and for an unambiguous support of the incorporation principle as the main concepts of the personal statute within the framework of the entire EU, which seemed to be a prevailing trend of the decision-making practice of the CJEU on the basis of previous case law. Likewise, Advocate General Maduro proposed in his opinion on the case that states cannot have absolute freedom in determining the conditions on which national companies could exercise freedom of establishment. Mr. Maduro stated in his opinion, among other things, that requirements of the states adhering to the seat principle mean de facto a “death sentence” for a company which intends to make a cross- border transfer of its actual seat, because it is forced by such a legal order to its cancellation in its domestics state 35 . This means that Mr. Maduro proposed abandonment of the Court’s conclusion from the Daily Mail decision in favour of broader freedom of establishment. Nevertheless, in spite of previous conclusions in the decisions in such cases as Centros, Inspire Art or Überseering and in spite of the Opinion of the Advocate General in the Cartesio case, the CJEU confirmed its original opinion from the Daily Mail decision from 1988 and stated that the possibility of the transfer of the seat to another EU Member State with the maintaining of the personal statute depends on applicable legislation of the domestic state where the company is incorporated. If this national legal order does not make a similar transfer of the seat with the maintaining of the legal continuity possible, it is not in contradiction with the principle of freedom of establishment. The CJEU moreover referred to the fact that without a more in-depth harmonisation of national law in this area it is not possible to eliminate, on a case-law basis, the differences existing among the Member States in the field of the personal status of companies. This conclusion, however, leads in fact to a double standard when the companies founded according to a legal order enabling a cross- border transfer of the seat with the maintaining of legal personality can make use of the 34 Judgement of the Court of Justice of 16 December 2008. Cartesio Oktató és Szolgáltató bt. Case C-210/06. 35 Opinion of the Advocate General of 22 May 2008. Cartesio Oktató és Szolgáltató bt . Case C-210/06. Available online from: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62006CC0210 [cit. 30.06.2020].

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