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     Siena Conference 30-31 March 2000                   Christiaan TIMMERMANS


1.      Twelve years ago I had the pleasure to be invited to a Conference in Lugano
        organised by Professors Alain Hirsch and Gérard Hertig to discuss in a small
        group of specialists the results of the research project of Professors Richard
        Buxbaum and Klaus Hopt on Legal Harmonization and the Business Enterprise.
        It became one of the most stimulating colloquia I have ever attended. On that
        occasion I presented a paper on the possible consequences for EC-harmonization
        in the field of company law of a then recent judgment of the European Court of
        Justice in a case related to a pseudo-foreign company (Segers, case 79/85,
        judgment of 10 July 1986). One of the reasons to accept Eddy Wymeersch
        invitation for the Siena Conference has been that recently the Court of Justice has
        decided a new case on that issue but this time more fully reasoned and therefore
        with a possibly larger impact than the Segers case (Centros, case C-212/97,
        judgment of 9 March 1999).

        Before discussing the Centros case, I shall first briefly comment on where we
        stand with the EC activities in the field of company law.

The European Community and Company Law

2.      The subject has been extensively analysed in academic writing, including by some
        eminent experts attending this Conference (Klaus Hopt, Marcus Lutter, Eddy
        Wymeersch). Let me just recall some of the basic aspects and discuss recent

3.      The legal base for harmonization of company law is still the former Article 54(3)
        (g), now Article 44 par. 2 (g) of the EC Treaty. Its wording has been left
        unchanged by the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1997.
     Only the decision-making procedure has been amended, to become the so-called
     co-decision procedure. According to this Article of the Treaty the Community
     legislator is under a duty to coordinate « to the necessary extent the safeguards
     which, for the protection of the interests of members and others, are required by
     Member States of companies or firms (…..) with a view to making such
     safeguards equivalent throughout the Community ».

     The Hallstein Commission during the mid-sixties read this article as a clear
     instruction to harmonize basic rules of national company law systems, that is rules
     on public and private companies. It launched an ambitious programme for that
     purpose. The First harmonization directive of 9 March 1968 covered accordingly
     all limited liability companies (disclosure, nullity, validity of obligations).
     Immediately afterwards aspirations were downgraded.        Priority was given to
     harmonization for the public company, the firm intention being, once
     harmonization for the public was completed, to continue harmonization for the
     private companies. An exception was made for accounting rules and rules on
     annual and consolidated accounts, where the global approach of covering all
     limited liability companies was maintained.

4.   What followed is well known. Two specific directives were enacted on public
     companies during the second half of the seventies (capital protection, internal
     mergers) followed by a directive on splitting (scission) in the early eighties. The
     accounting directives were finalised, later on amended and completed by the
     Eleventh Directive. On private companies very little was achieved. Apart from
     the FirstDirective just mentioned and of course the important accounting rules,
     only the Twelfth Directive regarding the one member company can be mentioned.
     Harmonization regarding the private company has never been seriously pursued.
     There are no formal Commission proposals (albeit that the European
     Commission’s White Paper of 1985 on the completion of the internal market
     announced proposals for that purpose). These intentions have not materialized.
     Apparently, the aspirations of the Commission, in comparison with its original
     program from the sixties, have drastically changed and become much more

     Of course, as far as public companies are concerned, the proposed 5th Directive is
     still on the table of the Council (but discussions are suspended), priority having
     been given to the modified (and seriously trimmed) proposals for a European
     Company from 1991.

     The respective Commission services have started preparatory work on various
     subjects, particularly the transfer of a company’s seat. Questionnaires as to the
     future fate of the harmonization of company law have been sent to Member
     States ; a general debate with Member States experts was organized in 1998 and
     reports of outside consultants have been requested.         However, the overall
     impression remains that Brussels has become fairly reticent about taking new
     harmonization initiatives in the company law field.       The only new initiative
     announced by the Commission’s Communication of November 1999 on the
     Strategy for Europe’s Internal Market is in essence an initiative for deregulation :
     proposals are being prepared within the framework of the so-called SLIM exercise
     to improve and simplify the First and Second Company law Directives in order to
     reduce the regulatory burden on business, particularly for small and medium-sized

5.   How to explain this striking change in aspirations ?

     A number of reasons can be given.

     A.     The intrinsic difficulties of a harmonization process of this kind.
            Difficulties of substance (how to agree on workers participation for
            instance) and difficulties of decision-making. The First Directive was
            decided by six Member States, the Second by nine, the Seventh by ten, the
            Eleventh by twelve Member States ; for the time being fifteen Member
            States are participating in decision-making (although, a qualified majority
            is sufficient). This reason alone however is not sufficient to explain the
            obvious change of attitude of the Commission inparticular. There are
            other sectors, where objective difficulties for harmonization were no less
            considerable and the decision-making process is sometimes even more
            difficult (unanimity required for a Council decision).         Nevertheless

     progress has appeared possible (VAT harmonization for the completion of
     the internal market, harmonization regarding intellectual property rights :
     we may not have a European Company, but we do have a European Trade
     Mark and a European plant breeders right and a proposal for a Community
     Patent is being prepared).

     To give a more complete explanation of the apparent change of attitude in
     Brussels regarding the harmonization of company law, I think – this is a
     personal judgment – at least two more reasons should be added.

     -   first of all, the completion of the internal market,

     -   secondly, the quest for subsidiarity.

     A few comments now on both.

B.   Completion of the internal market

     The internal market has been completed, without completion of the
     harmonization of company law. That could give the impression that the
     one does not need the other. Indeed, most of the legislative program of the
     White Paper of 1985 has been realised. Market integration as far as trade
     in goods and services is concerned is largely a reality (more and more also
     for the free movement of persons). So, it seems, the internal market can
     function without further harmonization of company law.        The merger
     boom of the end of the eighties, beginning of the nineties which brought
     about a substantial increase of crossborder investment and cooperation
     between companies, was apparently not hampered by the incomplete stage
     of company law harmonization. The more recent, massive increase of
     intracommunity crossborder direct investment (its total value almost
     doubled between 1997 and 1998) and of intracommunity merger and take-
     over operations (total value in the first nine months of 1998 amounts to
     more than double the value for 1995) would seem to confirm this
     conclusion. There are no clear signals to the contrary from European
     business or practising business lawyers (that is not entirely true for the
     European company). So, in this respect, there seems to be no direct
     impetus for a completion of the harmonization program.
It should be added that the general attitude in Brussels towards
harmonization has changed. Nowadays there exists a profound scepticism
with regard to detailed harmonization. Inspired by the so-called new
approach to harmonization in the field of technical standards to trade, and
sustained by the case law of the Court in the field of free movement of
goods and services, there exists a clear preference for home country
control, that is to accept the law of the country of origin (of the product or
the service), whereever possible, as equivalent to the rules of the country
of import.    This change of approach makes a case for a detailed,
substantive harmonization much more difficult to plead than in the sixties.

Now, to come back to the relationship between the harmonization of
company law and the internal market : it follows from the legal base for
this harmonizatio Article 44 para. 2 (g) referred to above, that
harmonization is only required « to the necessary extent ». The internal
market having being completed, is no further company law harmonization
required any more ?

That brings me to the old debate on the objectives of this harmonization.
It is a lengthy debate, at least in academic writing ; there never was a
thorough debate between the EC institutions and amongst Member States.
However, until now this debate has not been really conclusive.             To
summarize, three objectives are to be distinguished

First objective : this is the one which the founding fathers seem to have
had particularly in view ; it was also the objective most actively supported
by France.    Establishing an internal market and granting a right of
establishment will open the national markets for foreign companies. That
liberalization is unacceptable, if the guarantees given by foreign
companies under their company law statute are substantially lower than
those of the law of the country where they trade and set up establishments.
Dutch company law in the fifties was fairly lenient, more lenient than that
of the other five Member States.        France feared that the lax Dutch
company law would attract massive incorporation by foreign business in
the Netherlands, in order to penetrate the common market.            For that

      reason, granting the right of establishment to companies should go
      together with a harmonization of national company law systems to bring
      the protection for members and other (creditors) to an equivalent level (see
      the wording of Article 44 para. 2 (g)).      According to this objective,
      harmonization of company law is not intended to facilitate the completion
      of the internal market, it is an entrance fee Member States accepted to pay
      for market integration. I add, to prevent misunderstandings or dispel false
      hopes, that since the fifties Dutch company law has incomparably changed
      and become much more stringent. An objective indication for that has
      been the flight of Dutch businesses into foreign company forms, to escape
      disclosure and capital protection requirements applying to Dutch private
      companies.     This has become sufficiently serious for the Dutch
      government to initiate legislation in order to impose specific requirements
      on these pseudo foreign companies (contrary to the classic incorporation
      approach followed by the Netherlands with regard to recognition of
      foreign companies and acceptance of their statute).

      The two other objectives, normally ascribed to company law
      harmonization are closely related to the completion and functioning of the
      internal market.

      second objective : no Delaware effect in its Community variant (Delaware
      effect in US form is not possible, a majority of Member States applying
      the « siège réel » system) : the decision in which Member State to locate
      investment should not be « perverted » by considerations of company law.

      third objective : harmonization should facilitate the functioning and
      restructuring of international groups of companies based in the EC as well
      as crossborder mergers, take-overs and transfers of a company’s seat. This
      objective is of course most closely linked to the completion of the internal

My conclusion on this point is that in the process of completing the internal
market the Council (Member States) and the Commission (the European
Parliament is rather absent from the debate) have apparently become less
convinced about the need to harmonize company law to accomplish the first two
     objectives just mentioned. The confrontation with foreign company law systems
     in the daily practice of market integration has apparently not been really painful or
     caused real problems because of differences in the level of protection. As far as
     the so-called Delaware effect is concerned, Member States apparently have not
     been sufficiently afraid of competition between their company law systems in
     attracting foreign investments to prefer harmonization by law to harmonization
     through the market.

     The reason for this is also certainly that Member States, so willing, were able to
     continue to apply various devices to protect themselves against the import of
     laxist company statutes either by applying the real seat approach, or by adopting
     special rules with regard to pseudo-foreign companies. Now it is precisely in this
     respect that the Centros judgment of 9 March 1999 might change this feeling of
     relative comfort of Member States with regard to the present situation of
     piecemeal harmonization only (public company) or no harmonization (private
     company) (infra 7 seq.).

C.   Subsidiarity

     As to a further reason for the slackening pace of company law harmonization
     subsidiarity need to be mentioned. Not only has the subsidiarity principle been
     written into the EC Treaty (Article 5), the subsidiarity test is now fully integrated
     in the decision-making process. Legally, it could be argued that where the Treaty
     already imposes a company law harmonization with a view to achieving the
     internal market, a subsidiarity test is superfluous.      But that is theory.     Ivo
     Schwartz, some time director of the EC Commission responsible over many years
     for private law harmonization, including company law refers to « die Verbannung
     der Rechtsangleichung in die Subsidiarität ». And, indeed, subsidiarity has now
     become part and parcel of the EC decision-making culture. The message is, to
     say it in plain terms : it is necessary not to do what it is not necessary to do. That
     is to say that the case for harmonization must be really convincing for the
     Commission to take an initiative and the Council to decide (the European
     Parliament is by nature less subsidiarity minded).

The Centros judgment of 9 March 1999

6.    One hesitates to produce another comment on this case. « Half of the experts
      have already written on Centros, the other half are preparing a contribution », one
      of them said to me recently. But for our subject an analysis of the judgment is

7.    The Centros case presented the perfect context to test the consequences of the
      right of establishment of companies under Articles 43 and 48 of the EC Treaty for
      the pseudo-foreign company. Mr. and Mrs. Bryde, Danish citizens living and
      working in Denmark had acquired an empty private company, incorporated under
      English law, which had never traded in the United Kingdom, in order to carry on
      business in Denmark, and there only. The reason for this operation, as frankly
      admitted by Mr. and Mrs. Bryde in the main proceedings for the Danish Courts,
      had been to avoid the capital protection rules under Danish company law for
      companies of this type, and particularly the requirement as to a minimum capital.
      For the English private company such a requirement does not exist. Under
      Danish law foreign companies of this type may do business in Denmark through a
      branch after they have been registered. However, the Danish authorities refused
      to register a branch of Centros because Centros was in fact seeking to establish in
      Denmark, not a branch, but its principal establishment ; moreover it intended by
      doing so to escape the application of the Danish rules on minimum capital.
      Centros argued that the refusal of registration was incompatible with the EC
      Treaty : as a company formed in accordance with the law of the United Kingdom
      and having its registered office in that Member State it satisfied the conditions of
      Article 48 of the EC Treaty to be able to invoke the right of establishing a branch
      in another Member State in conformity with Article 43 of that Treaty. During the
      subsequent proceedings in the Danish Courts and a preliminary ruling having
      been requested from the European Court of Justice, also in that Court, the various
      arguments were produced which, also in view of the case-law of the European
      Court itself, might allow the denial to the pseudo-foreign company of the benefit
      of the right of establishment, or at least the restriction of the benefit of that right.

8.   The Danish Government argued in the first place that the EC Treaty did not apply
     at all to the case in hand in the absence of any cross border element. That
     argument is not without merit : there is no question of a cross border movement of
     economic activity. Also after the business had been brought into Centros, it
     would have continued to be carried out in Denmark only. However, it already
     followed from the judgment in the Segers case that the European Court would
     reject this interpretation. The company being lawfully incorporated under English
     law, it can invoke the right of establishment under Article 43 EC in order to set up
     a branch in Denmark.       The Court had no difficulty at all in qualifying the
     establishment as a branch, following its earlier judgment in the Segers case, albeit
     that the establishment of Centros in Denmark would be its single, and
     consequently its principal establishment.       For that reason also the Danish
     authorities had refused to register the establishment as a branch.

9.   The distinction between principal (primary) and secondary establishment is
     legally relevant in so far as each company falling within the scope of Article 48
     EC can always claim the right of primary establishment, even if it has no activity
     whatsoever in the Community. However, according to orthodox views, it can
     only invoke the right of secondary establishment if it has an economic link with
     the Community ; just as natural persons, which are nationals of a Member State
     can only do so if they are established within the Community. Following this
     interpretation, Centros would therefore not have been able to invoke Article 43
     EC to establish a branch in Denmark because being an « empty » company, it did
     not satisfy the conditions of having an economic link with the Community.
     However, if the establishment of Centros in Denmark were to be considered as its
     primary establishment, that difficulty would not arise, just as a national of a
     Member State can always establish itself into another Member State, once this
     concerns the exercise of its main economic activities. However that may be, the
     Court confirmed its ruling in the Segers case and refused to contest the
     qualification of a branch in this context. That might not be in conformity with
     established doctrine, but remains without practical consequences because the
     condition of an economic link has been implicitly satisfied, the establishment of
     Centros in Denmark being the main establishment. By the way, I would expect
     the Court to return to the orthodox distinction between primary and secondary
     establishment with regard to mailbox companies, having only their registered seat
      but no business activity in the Community, which would like to invoke Article 43
      EC in order to set-up a secondary establishment within a Member State.

10.   The Danish government argued secondly that the operation envisaged by Centros
      had to be considered as an abuse of the right of establishment and that the refusal
      of registration could therefore be justified under the EC Treaty. The concept of
      abuse of a fundamental freedom is indeed firmly established in the Court’s case
      law. There would be such abuse in this case because of the admitted purpose to
      circumvent the Danish rules on minimum capital.             The Court rejected this
      argument in unqualified and principled terms. That is why the Centros ruling is
      so important. The Danish rules in question being rules of company law and not
      rules concerning the carrying on of certain trades, professions or business, the
      choice of a less severe, more attractive foreign company statute is in itself
      perfectly legitimate. « The right to form a company in accordance with the law of
      a Member State and to set up branches in other Member States is inherent in the
      exercise, in a single market, of the freedom of establishment guaranteed by the
      Treaty. » (para. 27)      Also the pseudo-foreign company must therefore be
      considered as a perfectly normal phenomenon within the single market. At least,
      the fictitious nature of its foreign quality could not be raised to deny the company
      the benefit of the right of establishment under the EC Treaty. Measures may be
      taken against abuse or fraudulent conduct but only case by case and on the basis
      of objective evidence. To prefer a more laxist foreign company statute can not in
      itself be qualified as such.

11.   That brings us to the third and final argument brought forward by the Danish
      Government. Even if the refusal to register a branch of Centros were to be
      considered as a restriction of the right of establishment, it could be justified on the
      basis of the exception clause of Article 46 of the Treaty or in view of imperative
      requirements in the general interest as accepted under the Court’s case-law. The
      Danish Government referred in that respect to the need to protect creditors, also
      against the risk of fraudulent bankruptcy due to the insolvency of companies
      whose initial capitalisation was inadequate. The creditors protection does not
      figure in the list of general interests referred to in Article 46, so that argument

12.   However, the Court has indeed accepted within the scope of Article 43 itself the
      possibility to justify restrictions on the right of establishment under a rule of
      reason but subject to strict conditions. First of all, the measure in question must
      be applied in a non-discriminatory manner, secondly the general interest pursued
      must be of an imperative nature, thirdly the measure must be suitable for securing
      the attainment of the objective pursued, and fourthly it must be proportionate.
      The Danish measure fails this test. Fortunately, the reasons why have been fairly
      extensively explained by the Court.

13.   First of all, the condition as to the suitability of the measure has not been met.
      Had Centros traded in the United Kingdom the lack of a minimum capital would
      have been accepted without any difficulty by the Danish authorities. (The Court
      could also have said that in this respect Danish practice discriminates between
      foreign and pseudo-foreign companies). It is important to note that the Court held
      the third condition was also not met for another reason : creditors contracting with
      a foreign company like Centros know that they are dealing with a company
      governed by foreign law. Moreover they are protected by the harmonized rules on
      accounting (Fourth Company law Directive) and the specific rules of the Eleventh
      Directive on disclosure in respect of branches established by foreign companies.
      Apparently, the Court considers the existence of this harmonized corpus of
      disclosure rules an important safeguard for the protection of creditors with regard
      to foreign companies. Could one infer from this this that a general, indiscriminate
      application of a minimum capital requirement with regard to foreign companies
      like the English private company would also fail the test under the rule of reason ?
      That seems at least arguable. The Court adds that less restrictive measures could
      have been taken to protect the creditors. On the other hand, measures to protect
      creditors from fraudulous actions by foreign companies always remain possible in
      individual cases if concrete indications for an animus fraudendi exist. However, a
      practice of generally refusing to register a branch of a company having its
      registered office in another Member State can never be justified for that purpose.

14.   The Court has not answered the important question whether in a case like this the
      EC Treaty would have allowed the registration of a branch of the pseudo-foreign
      company to be refused by invoking the real seat doctrine, as a conflict rule. And
      indeed the Centros case did not raise that question. Denmark belongs (quite
      probably, there seem to be some doubts on this) to the minority of Member States
      applying the incorporation system. Would it be possible for Member States
      applying the real seat of a company, however defined (central administration,
      principal establishment, directors’ seat) as the connecting factor for determining
      the company’s statute to thwart the exercise of the right of establishment of the
      pseudo-foreign company by invoking that criterion as a conflict rule ? In its Daily
      Mail judgment of 27 September 1988 the Court ruled that companies as defined
      by Article 48 of the EC Treaty cannot invoke the right of establishment in order to
      enforce the transfer of their seat to another Member State if the national law by
      which they are governed does not allow such a transfer. The Court has arrived at
      this conclusion by referring to the text of Article 48, which clearly demonstrates
      that the Treaty accepts the continuing existence of very divergent conflict rules of
      Member States on company law and that an harmonization in this respect, which
      might be possible in itself, has not (yet) been achieved. This seems indeed to
      imply that the application of national conflict rules for determing a company’s
      statute cannot be opposed by invoking the Treaty rules on the right of

15.   In an annotation of this judgment I have argued for limiting the consequences of
      the rule in Daily Mail to situations like the one in the Daily Mail case itself : a
      restriction to the right of establishment with regard to the departure from the
      Member State of origin because of the application of a conflict rule by that
      Member State. In my view this reading of the Daily Mail case does full justice to
      the equal treatment by Article 48 of the variety of conflict rules. In the absence of
      harmonization Member States are fully entitled to require as a constitutive
      requirement for the formation of a company that the real seat of the company shall
      be established within their territory ; also that this seat should remain there, were
      the legal existence of the company not to be endangered. It appears acceptable
      that the EC right of establishment cannot be invoked to cure a deficiency as to one
      of the constitutive elements for the existence of a company. However, it would be
      quite a different matter to allow a Member State to which the real seat would be
      transferred, to frustrate such exercise of the right of establishment, if the law of
      incorporation of that company would allow that transfer.

16.   The Centros judgment might not have solved this controversy. However, by
      qualifying the phenomenon of the pseudo-foreign company so explicitly as a
      legitimate exercise of the right of establishment , it provides in my view new
      arguments in favour of a restrictive reading of the ruling in Daily-Mail. A further
      argument for this could be derived from the willingness of the Court to consider
      the principal establishment in the case of a pseudo-foreign company as a branch
      and to define such an exercise of the right of establishment so emphatically as
      intended by the Treaty provisions on the right of establishment (para. 26). A strict
      distinction between principal and secondary establishment would make it easier to
      condition the right of establishment in case of a transfer of the principal
      establishment in sofar as this would be frustrated by a conflict rule of the Member
      State of establishment. I agree with Wulf-Henning Roth that Daily Mail has not
      been overruled by Centros. Centros assists me however in the restrictive
      interpretation of Daily Mail mentioned above. Indeed, the rationale for the real
      seat doctrine is very much linked to the objective of preventing abuse.
      Companies having their center of gravity in a state should be organized according
      to the laws of that state. Now, if within the European single market the pseudo-
      foreign company cannot be seen as a special case for treatment, different from the
      real foreign company, much of the basic justification for applying the real seat
      doctrine seems to fall.

17.   If one were to accept a more generous interpretation of Daily Mail as implying a
      general declaration of immunity of international company law of the Member
      States from any interference through the Treaty rules on the right of
      establishment, Denmark, if it had applied the real seat doctrine, could then have
      refused the registration of Centros by invoking that doctrine. I fail to see why
      national conflict rules should benefit from a higher degree of protection in relation
      to the right of establishment than rules of substantive company law. At any rate,
      new preliminary references on these questions might be expected in the near
      future, particularly from Germany.

18.   What conclusion may be drawn from this analysis of the Centros judgment ?

      1.     The pseudo-foreign company constitutes a fully legitimate exercise of the
             right of establishment. Special measures taken by Member States with
             regard to pseudo-foreign companies which limit their scope to that
             category of companies, will normally be incompatible with the EC Treaty
             if they were to restrict (« liable to hinder or make less attractive ») the
             exercise of the right of establishment under the EC Treaty.           Their
             justification under the Treaty is not entirely excluded, at any rate the
             pseudo-foreign quality of a company can never be invoked as a sufficient
             ground for justification.

      2.     Whether Member States will be allowed to apply part of their own rules of
             company law to branches of foreign companies falling within the scope of
             Article 48 of the EC Treaty, in order to maintain a higher level of
             protection of shareholders, workers’, creditors’ or other third party
             interests than that provided by the law of incorporation of the foreign
             company, is uncertain in cases where the application of such rules of the
             Member State of the branch could be said to cause a restriction to the
             exercise of the right of establishment.

      3.     The application of conflict rules of the Member State of the branch,
             obliging the foreign company in application of the real seat doctrine, to
             respect the local company law or to be set-up under the form of a local
             company, is probably incompatible with the EC Treaty.

      In other words, the consequences of the Centros judgment for the treatment of
      foreign companies within the framework of the company law system of the host
      country of a branch, are unclear but potentially far reaching. One might expect
      further clarifications of this case-law by the European Court in the years to come.
      If the Court were to follow the lines of thinking just explored, what would then be
      the consequences for the harmonization activity of the Community ?

The EC harmonization of company law in the future

19.   These consequences are highly unpredictable. The aftermath of Centros might
      foster more statute shopping in the EC, more « Delawarization » because it will be
      easier to set-up or to move – I leave aside the very important tax aspects –
      principal establishments to Member States applying the real seat doctrine. Those
      Member States, seeing their defence against the pseudo-foreign company
      seriously undermined might become more interested in harmonization initiatives
      on Community level. However, it would be highly unlikely to achieve agreement
      between Member States on a harmonized Community regime as to rules of
      conflict, making a fundamental choice in favour of either the incorporation or the
      real seat approach. The contents and fate of the 1968 Convention on the mutual
      recognition of companies have established an ominous precedent in this respect.

      A specific Community regime with regard to pseudo-foreign companies, allowing
      Member States to impose part of their company law rules on pseudo-foreign
      companies, would seem to be excluded in the light of the Centros judgment. A
      similar regime, but applying indiscriminately to branches of foreign companies,
      might be difficult to reconcile with Community law if the Court were to be as
      strict as Centros seems to suggest with regard to the acceptance of the foreign
      company’s statute.

      There remains the possibility of a further substantive harmonization for the
      private company, limited perhaps to some topical issues when levels of protection
      are substantially different between Member States.        Those Member States
      applying the incorporation system might not be very much interested in such a
      harmonization. For the other Member States much will depend on the nature of
      the rules involved, the objectives pursued and the differences of the level of
      protection between the national company law systems as they exist or are
      perceived to exist. Answers to these questions will of course vary between
      Member States. That being so, it would not seem at all sure or even probable that
      sufficient momentum could be built up for such a harmonization.

20.   As to the free movement of companies in a stricter sense, good cases for
      harmonization continue to be measures facilitating international mergers, and a
      transfer of a company’s seat maintaining its legal personality.        They are
      objectively required in a single market. What could be the consequences of
      Centros for such measures ?       Again, free movement as to the possibility to
      transfer principal establishments to other Member States, that is from Member
      States applying the incorporation method, might be facilitated (but again not
      taking into account the tax aspects). That is not necessarily so for companies
      incorporated in Member States applying the real seat method. Such inbalance
      might give an impetus to complete – with regard to the transfer of seat to start
      with– a harmonization for that purpose (provided the moratorium of the persistent
      conflict on workers’ participation rules was first lifted).

21.   All in all, the future of company law harmonization remains highly uncertain. It
      can not however be excluded that the evolution of the case-law of the European
      Court of Justice might bring new surprises able to change the present outlook and
      perspectives for this harmonization. Change could also result from incidents or
      scandals in Member States putting into question the adequacy of company law
      rules and with an obvious impact on the single market.        (Harmonization is
      sometimes also a conjunctural affair).

      (Footnotes to be added)


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