Free movement of companies and Polbud. The CJEU is not for turning.

When I reviewed Kokott AG’s Opinion in C-106/16 Polbud, I flagged that Ms Kokott concluded that the freedom of establishment provided for in Articles 49 and 54 TFEU only applies to an operation whereby a company incorporated under the law of one Member State transfers its statutory seat to another Member State with the aim of converting itself into a company governed by the law of the latter Member State, in so far as that company actually establishes itself in the other Member State, or intends to do so, for the purpose of pursuing genuine economic activity there. In other words she proposed a test along the lines suggested by Darmon AG in Daily Mail, but rejected by La Pergola AG in Centros.

The CJEU today held along La Pergola lines. It thus indeed facilitates forum /applicable (lex societatis) shopping (argument made also by Gillis Lindemans) for companies. The writing was very clearly on the wall when the Court (in Grand Chamber nota bene) started citing the old chestnuts of Daily Mail, Centros and Inspire Art. That no business is actually being conducted by Polbud in the host Member State is viewed by the court as irrelevant (at 37 ff). In the absence of harmonisation of EU law, the definition of the connecting factor that determines the national law applicable to a company or firm falls, in accordance with Article 54 TFEU, within the powers of each Member State (at 34).

Freedom of establishment is applicable (third question);  that freedom has been restricted (first question); and that restriction (transfer of the registered office of a company incorporated under the law of one Member State to the territory of another Member State, for the purposes of its conversion into a company incorporated under the law of the latter Member State, in accordance with the conditions imposed by the legislation of that Member State, is subject to the liquidation of the first company) is not justifiable (second question).


(Handbook of) EU Private international law, 2nd ed. 2016, Chapter 7.

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