CYIL vol. 12 (2021)

CYIL 12 (2021) IMPACTS OF THE CJEU CASE LAW ON REGULATORY COMPETITION … therefore clear that the CJEU respects certain reasons for which limitation of freedom of establishment is justifiable, nevertheless they cannot be applied in a discriminatory way. In consequence of the above-analysed CJEU decisions which largely supported cross- border mobility of companies in the EU, some Member States started to prepare reforms of their national legal regulations in the field of foundation of capital companies of the “s.r.o.” (limited liability company) type. The common main point of all proposed changes was reduction of the required minimum registered capital which must be invested before incorporation of the company. By using this way, the states attempted to maintain competitiveness of their national legal regulations and prevent their own nationals from founding companies in other Member States of the European Union. 38 There is, however, still an open issue whether this horizontal competition of legal orders will have a long-term positive benefit for the functioning of the single market, or whether the matter concerns a “race to the bottom”. 39 Since it has been possible to register, in recent years (on the one hand in the field of the CJEU case law), some attempts of applying freedom of establishment also to non-business (non-profit-making) legal entities, and at the same time also the area of legislation was characterised by creation of certain proposals of legal acts which should serve for foundation of multinational non-business legal entities, it is appropriate to mention, at least briefly, the development in this field as well. Although freedom of establishment originally did not apply to non-business entities at all with regard to the specific exception from the material scope determined by Article 49 of the TFEU, even this certainty has been somehow challenged on In this case, the CJEU had to assess compatibility of German tax legislation with prohibition of discrimination on the basis of nationality, as the main principle of the single internal market. German law admitted, in fact, tax advantages to public service entities, but only entities with both the registered office and actual seat in the territory of the Federal Republic of Germany could qualify for such advantages according to German law. Mr. Stauffer’s foundation was established under Italian law, it had its seat in Italy, nevertheless it had taxable incomes in Germany due to the lease of real property situated there. Since it did not have its actual seat or registered office in Germany, tax advantages for public service entities were not recognised for this foundation by German authorities. The question whether the above-mentioned German legislation is discriminatory or not was assessed within the framework of the subsequent preliminary ruling procedure. The CJEU 38 Examples of such a change in corporate law is not only the Czech Republic, but also France, Spain, Germany, etc. 39 The term “race to the bottom” was used for the first time by U.S. lawyer W. Carry in the context of corporate law as a description of competition of legal orders of individual states of the U.S.A. during the increasing of attractiveness for founders of new business corporations. See CARRY, W. Federalism and corporate law: reflexions upon Delaware (1974) 83 Yale Law Journal 663. 40 Judgement of the Court of Justice of 14 September 2006. Centro di Musicologia Walter Stauffer v. Finanzamt München für Körperschaften . Case C-386/04. 3. Freedom of establishment of non-business legal entities in the EU and influence of the CJEU case law the part of the CJEU as well. Case C-386/04: Stauffer 40

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