The Illusion of Motion: Corporate (Im-)mobility and the Failed Promise of Centros

45 Pages Posted: 24 Jun 2019 Last revised: 5 Jul 2019

See all articles by Carsten Gerner-Beuerle

Carsten Gerner-Beuerle

University College London - Faculty of Laws; University of Notre Dame - Notre Dame Law School; European Corporate Governance Institute (ECGI)

Federico M. Mucciarelli

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Dipartimento di Economia Marco Biagi, Modena; European Corporate Governance Institute (ECGI)

Edmund Schuster

London School of Economics - Law School

Mathias Siems

European University Institute (EUI); University of Cambridge - Centre for Business Research; European Corporate Governance Institute (ECGI)

Date Written: March 1, 2019

Abstract

The European Court of Justice’s landmark decision in Centros was heralded as creating the preconditions for a vibrant market for incorporations in the EU. In practice, however, today’s corporate landscape in Europe differs little from that of the late 1990s. Very few large companies have made use of their ability to subject themselves to the company law of a Member State in which they are not also headquartered, and there are few signs suggesting that a ‘European Delaware’ will emerge in the near future. To the extent that Member States have engaged in competitive law-making, this has largely been confined to minimum capital requirements and rules affecting the ease of the incorporation process – areas concerning primarily micro-companies. We argue that the modest effect of Centros is not only a function of limited economic incentives to engage in regulatory competition and regulatory arbitrage, but also of the fact that the applicability of large sections of relevant laws governing corporate behaviour is determined by real-seat like connecting factors which render regulatory arbitrage more difficult. We analyse the boundaries between the lex societatis and neighbouring legal areas, notably insolvency and tort law, and find that the body of rules regulating a company’s outward-facing activities, as opposed to its internal affairs, is largely removed from regulatory arbitrage. It seems therefore likely that the potential benefits of selecting the applicable company law, while remaining subject to a cocktail of other, equally relevant rules, are sufficiently small to be regularly outweighed by the costs of a complex and non-standard corporate structure necessary to exercise free movement rights.

Keywords: right of establishment, Centros, corporate mobility, regulatory competition, lex societatis, lex concursus

JEL Classification: K22

Suggested Citation

Gerner-Beuerle, Carsten and Mucciarelli, Federico M. and Schuster, Edmund-Philipp and Siems, Mathias, The Illusion of Motion: Corporate (Im-)mobility and the Failed Promise of Centros (March 1, 2019). European Corporate Governance Institute - Law Working Paper No. 458/2019, Available at SSRN: https://ssrn.com/abstract=3407896

Carsten Gerner-Beuerle (Contact Author)

University College London - Faculty of Laws ( email )

Bentham House
4-8 Endsleigh Gardens
London, WC1E OEG
United Kingdom

HOME PAGE: http://https://www.ucl.ac.uk/laws/people/carsten-gerner-beuerle

University of Notre Dame - Notre Dame Law School ( email )

Eck Hall of Law
Notre Dame, IN 46556
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/carsten-gerner-beuerle

Federico M. Mucciarelli

Università degli studi di Modena e Reggio Emilia (UNIMORE) - Dipartimento di Economia Marco Biagi, Modena

Viale Berengario 51
Modena, Modena 41121
Italy

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/federico-mucciarelli

Edmund-Philipp Schuster

London School of Economics - Law School ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Mathias Siems

European University Institute (EUI) ( email )

Via Bolognese 156 (Villa Salviati)
Firenze, 50139
Italy

HOME PAGE: http://www.eui.eu/siems

University of Cambridge - Centre for Business Research ( email )

Top Floor, Judge Business School Building
Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.cbr.cam.ac.uk/people/research-associates/mathias-m-siems/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://ecgi.global/users/mathias-siems

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