European Private Law: (1) Private law, the Internal Market and European Constitutionalism ; (2) Company law and f

1. European Private Law: (1) Private law, the Internal Market and European Constitutionalism; (2) Company law and financial markets Professor Mads Andenas, Oslo Visiting Professor, Sapienza, Roma

2. (1) Private law, the Internal Market and European Constitutionalism • Private law in the Internal Market and in an EU constitutional order • The legal base for EU legislation in private law • The resistance at national level

3. (2) European Private Law: Company law and financial markets • EU law: Company law and financial markets. The role of free movement. • The right of establishment and the free movement of capital. The Centros and Golden Shares lines of cases. • The harmonisation of company law and financial market regulation and reactions in national private law. • The impact of the financial crisis.

4. (1) Private law, the Internal Market and European Constitutionalism: Three parts: 1) private law in the Internal Market and in an EU constitutional order 2) the legal base for EU legislation in private law 3) the resistance at national level

5. 1. Private law in the Internal Market and an EU constitutional order Role of private law in the Internal Market and in an EU constitutional order: incidental but the total impact considerable. Remains fragmented and not consistent

6. 1.1 Internal market and private law • Individual rights and effectiveness through the constitutional doctrines of direct effect and supremacy. • Impact on private law obligations. • Free movement rights and private parties.

7. Wider EU rights and remedies: • Breach of EU obligations and remedies in tort and contract against public authorities and private parties. • Developed by ECJ and national courts under Article 267 TFEU (ex Article 234 EC) • Directly effective treaty rights, (Case 2/74) Defrenne and Sabena [1974] ECR 631, competition law, state aid, public procurement

8. Remedies in EU legislation: • Remedies directives: publicprocurement, Public procurement Directive 2007/66/EC revising Remedies Directive for theutilitiessector (Directive 92/13/EEC) and Remedies Directive for thepublicsector (Directive 89/665/EEC) • State aid • IP rights, Enforcement of intellectual property rights (Directive 2004/48/EC), current reform process on the challenges posed by the digital environment.

9. Making competition remedies effective • 2008 Commission White Paper on Damages Actions for Breach of the EC antitrust rules. • 2011 Draft Guidance Paper on quantifying harm in actions for damages based on breaches of the EU antitrust rules.

10. Tort law: • Breach of EU law and tort remedies: all aspects of liability • Public authority liability for breach of EU law. • Summing up the ‘incidental’ instruments and policy initiatives mentioned. • Then adding ‘the first private law directive’: Directive on Product Liability (85/374/EEC). Sharing common feature with many of the other instruments: responding to moves to regulate at national level with consequences for internal market. Head of liability not causation and quantum.

11. Contract law Contract law consequences of breach of EU law Consumer law directives, proposed and withdrawn directive on consumer rights (2008) Financial markets, consequences for professional actors in the financial markets National contract law including different models for the basic contracting mechanism with offerand acceptance (consideration) remain Unclear impact on general contract law: emphasis on mandatory rules and non-derogable rights, against the paradigm of contractual freedom for general contract law.

12. 1.2 Human rights and private law • ECHR and private law, family and inheritance law, property law, the reach of protection against discrimination. Pla and Puncernau v. Andorra. • One of the autonomies, EU law and human rights. Solange and the end of the EU as an autonomous treaty regime. • The Charter and the Lisbon treaty.

13. Relationship to ‘purely’ domestic rights discourses Domestic discussion of constitutional rights in private law, breaking through in different jurisdictions

14. 1.3 Private law in an EU constitutional order • Private law in any constitutional order • ‘Incidental’ role in EU law: what does it add up • Harmonisation paradigm: also applies when the EU recognises its general constitutional dimension

15. 1.4 “National” private law Is there anything such as purely “national” private law? Was there ever?

16. 2. The legal base for EU legislation in private law Article 114 TFEU: “the European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure … adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market” or Article 352: absence of any other legal basis in the Treaty unanimity in the Council.

17. Previous discussion Very German. And Stephen Weatherill, but after strong criticism of ‘competence creep’ and calls to private lawyers to resist, he concluded eventually, after the Commission Green Paper that the Commission had taken the ‘heat out of the competence question’.

18. Current discussion Jürgen Basedow and MPI study: Outside Article 114 TFEU and has to rely onArticle 352. Hans Micklitz: Article 114 TFEU cover the measures but need to pare down the CESL

19. National” private law

20. The history of competence challenges The history of company law, the early directives, directives in other fields: banking (deposit guarantee schemes), SE/SCE (more below) W.H. Roth: doorstep selling directive no cross border element and no treaty base, not succeeded before courts Parallels on fundamental freedoms in the ECJ: against the application of free movement post Centros . Private international law not free movement. IP rights, labour rights 

21. Limits to the competence under Article 114 TFEU Case C-376/98, Germany against the European Parliament and Council, citing ‘health’ C-380/03 Germany v European Parliament and Council C-436/03 EP v Council [2006] ECR I-3733 (SE and SCE)

22. Subsidiarity and proportionality • Art 5 TEU • Impact asessment

23. Impact on current CESL proposal • The competence discussion, a natural challenge and generally good process? But little likelihood of carving out an exception for general contract law. • Relationship with political consensus moving • Impact on current CESL proposal: clear. Problematic: Christiane C. Wendehorst building on Hans Micklitz: ‘the purely instrumentalist approach to private law, which is suggested by Article 114 TFEU, can negatively affect both the legislative process and the rules themselves. In the long run, good European private law may be possible only if it gets a clear and firm legal basis in the Treaty.’

24. 3. The resistance at national level National traditions as an obstacle. Defending the national system as a reflex. The variety of national law as a value and the inherent tension with rights at a European level and the internal market. Many complex relationships where the conflicts between disciplines and different parts of the legal community plays a role.

25. 3.1. ‘The end of comparative and private international law’ Jürgen Basedowand MPI Study: balanced and good argument, but also emphasis on the perspective of the comparativist and private international lawyer. Comparativist discourse often not engaging with EU law: the end of comparative law. Similar tendencies among some private international lawyers. Focus on international instruments in their scholarship, and a long time before the effect not only of EU or EU initiated private international law instruments was accounted for, not to speak of the effects of free movement and ECHR.

26. 3.2. The autonomy and autonomies of national law • Public/private • Constitutional rights and the rest of the legal system • Constitutional, administrative and public law. Regulatory law.

27. Within civil law • Traditional divisions of disciplines. • Civil and commercial law: should there be general rules or specialised regimes. Consequences for contract interpretation, less protections, role of custom. • Consumer law. Mandatory or default rules: freedom of contract. Professor Alpa’s article in reading. • Impact of constitutional and ‘other public law’

28. Proportionality in private law • German example: • GrundrechteimPrivatrecht • Strahlungswirkung and not fully fledged proportionality • Exception: labour law. • New scholarship • French and Italian law

29. Role of EU and ECHR in domestic reform

30. 3.3 The interference of EU law in the national law autonomies The variety of national law as a value and rights in the internal market. Role of consumer law protection with mandatory rules and non-derogable rights, against the paradigm of contractual freedom for general contract law. What is ‘general contract law’: compare commercial and civil law conflicts, inclusion of consumer rights in general contract legislation

31. 4. Conclusions The outside-in perspective, Eric A Posner, in a recent paper completely rejects the CESL proposal: • the introduction of an optional instrument should increase rather than reduce transaction costs. • It can produce benefits (reduction of “uniformity costs”), but it is unlikely that these benefits exceed the transaction-cost harms. • The potential dynamic effect of CESL for jurisdiction competition: benefits slight • The CESL might not be desirable as a means for helping to establish a common European identity, and reject it. Posner, Eric A., The Questionable Basis of the Common European Sales Law: The Role of an Optional Instrument in Jurisdictional Competition (May 1, 2012). University of Chicago Institute for Law & Economics Olin Research Paper No. 597. Available at SSRN: http://ssrn.com/abstract=2049594 or http://dx.doi.org/10.2139/ssrn.2049594

32. (2) European Private Law: Company law and financial markets • EU law: Company law and financial markets. The role of free movement. • The right of establishment and the free movement of capital. The Centros and Golden Shares lines of cases. • The harmonisation of company law and financial market regulation and reactions in national private law. • The impact of the financial crisis.

33. 2.1 EU law: Company law and financial markets. The role of free movement.

34. 2.2. The right of establishment and the free movement of capital. The Centros and Golden Shares lines of cases up to Vale.

35. Free movement of companies? • There is still no free movement of companies in EU law. Natural persons and goods can move, practically without restriction, from one member state to another. • Article 48 EC Treaty provides that companies shall be treated in the same way as natural persons. But national company laws still discriminate in different ways against companies from other Member States. • Many discriminatory restrictions remain against foreign companies, and there are also restrictions on the movement of home companies out of the jurisdiction. • National company laws do not provide ways in which a company can reincorporate in another Member State.

36. Impact of fundamental freedoms • In a number of recent decisions, the European Court of Justice has applied the principles of its free movement case law on the company law and tax law of the Member States. • Furthermore, in cases brought by the Commission a number of Member States, the Court of Justice has reviewed the different ways in which Member States attempted to extend control in privatised companies. • The fundamental freedoms, in particular the right of establishment and the free movement of capital, are beginning to dismantle the obstacles to the movement of companies in national law.

37. German company law doctrine And freemovement: a cautionary tale • Concern over freemovement, Commission v France • Sighofrelief over Daily Mail Case 81/87 Ex parte Daily Mail [1988] ECR 5483 • Concernbefore and afterCentros • See Harald Halbhuber ’National DoctrinalStructures and European Company Law’ (2001) 38 Common Market Law Review1385–1420

38. Company law, capital and establishment in the Internal Market

39. Company law and the fundamental freedoms Freedom of establishment is a fundamental freedom in EC law (Article 43 EC) • Case C-205/84 Commission v Germany (Re-insurance) • Case C-442/02 Caixa Bank France (ban on interest for current accounts) [2004] ECR I-89615 Free movement of capital is a fundamental freedom in EC law (Article 43 EC)

40. Company law directives I First Company Law Directive 68/151/EEC, on co-ordination of safeguards (...) for the protection of the interests of members and others, repealed by 2009/101/EC Second Company Law Directive 77/91/EEC, on formation of public companies and the maintenance and alteration of capital, updated by 2006/68/EC and 2009/109/EC, repealed by 2012/30/EU Third Company Law Directive 78/855/EEC, on mergers of public limited liability companies, repealed by 2011/35/EU Fourth Company Law Directive 78/660/EEC, on accounting standards Sixth Company Law Directive 82/891/EEC, on division of public companies, amended by 2007/63/EC Seventh Company Law Directive 83/349/EEC, on group accounts Eighth Company Law Directive 84/253/EEC, on the approval of persons responsible for carrying out the statutory audits of accounting document, repealed by 2006/43/EC, on statutory audits of annual accounts and consolidated accounts

41. Company law directives II Tenth Company Law Directive 2005/56/EC, on cross-border mergers of limited liability companies Eleventh Company Law Directive 89/666/EEC, on disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State Twelfth Company Law Directive 89/667/EEC, on single-member private limited-liability companies, repealed by 2009/102/EC Thirteenth Company Law Directive 2004/25/EC, on takeover bids Market Abuse Directive 2003/6/EC Transparency of Listed Companies Directive 2004/109/EC Shareholder Rights Directive 2007/36/EC, on the exercise of certain rights of shareholders in listed companies Merger Tax Directive 90/434/EEC, on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States, repealed by 2009/133/EC

42. Proposals Draft Fifth Company Law Directive, on structure of public companies, shareholder right to determine director pay and codetermination Draft Ninth Company Law Directive, on corporate groups Draft Fourteenth Company Law Directive, on cross-border transfer of the registered offices of limited liability companies

43. Proposed 14th Company Law Directive on the cross-border transfer of company seats • To provide a simple mechanism for the cross-border transfer of company seats. • Commission staff working document on impact assessments for the 14th company law directive, December 2007. • EP resolution on the 14th Directive, 10 March 2009. Own-initiative report adopted by JURI on 9 January 2012. • EP adopted report at plenary session on 2 February 2012. • Commission Action Plan on company law and corporate governance envisages further consultations in 2013 to update its impact assessments, 12 December 2012. • Commission publishes consultation on cross-border transfer of company seats, 14 January 2013.

44. Merger of existing company law Directives Commission Action Plan for company law and corporate governance contains Commission's plans to adopt a proposal codifying and merging major company law Directives in 2013, 12 December 2012.

45. Commission Action Plan for company law and corporate governance outlines the initiatives which the Commission intends to take in this area in the coming years in order to modernise and enhance the current framework. The initiatives, which will be both legislative and non-legislative, follow three main lines: • Enhancing transparency between companies and investors • Encouraging long-term shareholder engagement • Improving the framework for cross-border operation of companies

46. Free movement of companies: five cases Firstsetting the scene: the ECJ caselaw • C-212/97 Centros Ltd v. Erhvervs- ogSelskabsstyrelsen [1999] E.C.R. I-1459. • C-208/00Überseering [2002] ECR I-9919. • Kamer van Koophandel en Fabriekenvoor Amsterdam v Inspire Art [2005] ECR I. 1095 • C-411/03 Sevic Systems AG [2005] ECR I-10805 • C-210/06 Cartesio

47. The right of investment and the free movement of capital • Golden Shares Cases, Case C-174/04 Commission v Italian Republic suspension of the voting rights attached to shareholdings exceeding 2% of the capital of companies in the electricity and gas sectors. • Volkswagen Case C-112/05 Commission of the European Communities v Federal Republic of Germany

48. Case C-212/97 Centros v Erhvervs-og Selskabsstyrelsen [1999] ECR I-1459 Contrary to Articles 52 and 58 EC for a Member State to refuse to register a branch of a company formed in accordance with the law of another Member State in which it has its registered office but in which it conducts no business where the branch is intended to enable the company in question to carry on its entire business in the State in which that branch is to be created, while avoiding the need to form a company there, thus evading application of the rules governing the formation of companies which, in that State, are more restrictive as regards the paying up of a minimum share capital.

49. C-208/00 Überseering [2002] ECR I-9919 The real seat doctrine, or, in the official English translation of the judgment in Überseering, the "company seat principle", is one of two alternative models in the private international law of companies. Under the real seat doctrine, the law applicable to a company is the law of the country where the company has its actual centre of administration. In the U.K. an incorporation doctrine is followed. The law of the country of incorporation applies irrespective of where a company carries out its business.

50. Since the company is not incorporated under German law, it does not exist, even if it is still recognised under the law of the country of incorporation (the U.K.). In a number of cases, German courts refused standing to companies incorporated abroad. There is also the threat of loss of the protection by limited liability for directors and shareholders.