Uberseering BV v. Nordic Construction Company Baumanagement GmbH (NCC)

(Case C-208/00)

Before the Court of Justice of the European Communities

ECJ

Presiding, RodrÍguez Iglesias P.; Puissochet, Wathelet ( Rapporteur) and

Schintgen PP.C.; Gulmann, Edward, La Pergola, Jann, Skouris, Macken, Colneric,

von Bahr and Cunha Rodrigues, JJ.; Dámaso Ruiz-Jarabo Colomer, Advocate

General

November 5, 2002

Companies; Freedom of establishment; Legal personality

H1 Establishment--companies--legal capacity--Community law and national law-- company incorporated under law of a Member State with registered office there-- exercising its freedom of establishment in another Member State--deemed to have

transferred its actual centre of administration to host Member State under the law of that State--non-recognition by host Member State of company's legal capacity to bring legal

proceedings--requirement of reincorporation in that State--continued existence of company at all times recognised by home Member State--inapplicability of Art.293 EC--inexistence of convention on mutual recognition of companies irrelevant--scope of Arts 43 EC and 48 EC--case distinguished from Daily Mail and General Trust--freedom of

establishment distinguished from free movement of capital-- requirement of reincorporation for company to be party to legal proceedings in host Member State

restriction on freedom of establishment--absence of justification.

H2 Reference from Germany by the Bundesgerichtshof (Federal Supreme Court) under Art.234 EC.

H3 Ü, a company incorporated in the Netherlands and with its registered office there, acquired land in Germany. It engaged NCC, a German company, to refurbish a garage and a motel on the site. The contractual obligations were performed but Ü claimed that the paint work was defective. Meanwhile, two German nationals residing in Düsseldorf acquired all the shares in Ü. Ü brought an action for compensation before the Regional

Court, Düsseldorf, which dismissed it as inadmissible. The Higher Regional Court dismissed the appeal on the basis that Ü lacked legal capacity to be a party to

proceedings. Ü had transferred its actual centre of administration to Düsseldorf once its shares had been acquired by two German nationals. Under German conflict of law rules, a company's legal capacity *2 was determined by reference to the law applicable in the place where its actual centre of administration was established. Since Ü's legal capacity was determined by reference to German law following the transfer of the shares, it could not enjoy rights or be the subject of obligations or be a party to legal proceedings unless it had been reincorporated in Germany in such a way as to acquire legal capacity under German law. Ü appealed to the Federal Supreme Court, which stayed its proceedings to

seek a ruling from the Court of Justice as to whether, where a company formed in accordance with the legislation of a Member State (A) in which it had its registered office was deemed, under the law of another Member State (B), to have moved its actual centre of administration to Member State B, Arts 43 EC and 48 EC precluded Member State B

from denying the company legal capacity, and therefore the capacity to bring legal proceedings before its national courts in order to enforce rights under a contract with a

company established in Member State B. Held:

Scope of Community provisions on freedom of establishment H4 (a) Where a company which was validly incorporated in Member State A, in which it had its registered office, was deemed, under the law of a Member State B, to have moved

its actual centre of administration to Member State B following the transfer of all its shares to nationals of that State residing there, the rules which Member State B applied to

that company fell within the scope of the Community provisions on freedom of establishment. Article 293 EC did not constitute a reserve of legislative competence

vested in the Member States. Although Art.293 gave Member States the opportunity to enter into negotiations with a view, inter alia, to facilitating the resolution of problems

arising from the discrepancies between the various laws relating to the mutual recognition of companies and the retention of legal personality in the event of the transfer of their

seat from one country to another, it did so solely "so far as ... necessary", namely, if the provisions of the Treaty did not enable its objectives to be attained. The exercise of the

freedom of establishment could not be dependent upon the adoption of conventions under Art.293. [52]-[55]

H5 (b) According to Art.48 EC, companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal

place of business within the Community should have the same right of establishment as natural persons who were nationals of Member States. Such companies or firms were therefore entitled to carry on their business in another Member State. The location of

their registered office, central administration or principal place of business constituted the connecting factor with the legal system of a particular Member State in the same way as nationality did in the case of a natural person. A necessary precondition for the exercise of the freedom of establishment was the recognition of those companies by any Member State in which they wished to establish themselves, however, it was not necessary for the Member States to adopt a convention on the mutual recognition of companies in order for

companies meeting the conditions set out in Art.48 EC to exercise the *3 freedom of establishment conferred on them by Arts 43 EC and 48 EC, which were directly

applicable. [56]-[60] Centros (C-212/97): [1999] E.C.R. I-1459; [1999] 2 C.M.L.R. 551, followed.

Case at issue distinguished from Daily Mail and General Trust H6 The case at issue concerned the recognition by the host Member State of a company incorporated under the law of its home Member State--in circumstances where its legal existence was never called in question under the law of the home Member State--as a

result of all its shares being transferred to persons resident in the host Member State. The company was denied all legal capacity in the host Member State which took the view that the company had moved its actual centre of administration to its territory, irrespective of whether in that regard the company actually intended to transfer its seat. That set of facts was quite different from those at issue in Daily Mail and General Trust, which concerned

the treatment by a Member State of a company incorporated and having its central administration in that same Member State. Daily Mail and General Trust did not

recognise a Member State as having the power, vis-à-vis companies validly incorporated in other Member States and found by the first Member State to have transferred their seat

to its territory, to subject those companies' effective exercise in its territory of the freedom of establishment to compliance with its domestic company law. It did not

therefore support the argument that the case at issue fell outside the Community law provisions on freedom of establishment. [62]-[73]

Daily Mail and General Trust (81/87): [1988] E.C.R. 5483; [1988] 3 C.M.L.R. 713, distinguished.

"Beneficiaries" under Title I of the General Programme for the abolition of restrictions on the freedom of establishment

H7 The General Programme required a real and continuous link with the economy of a Member State solely in a case in which the company had nothing but its registered office within the Community. That was unquestionably not the position in the case of Ü whose registered office and actual centre of administration were within the Community. Ü was therefore entitled to rely on the principle of freedom of establishment in order to contest the refusal of German law to regard it as a legal person with the capacity to be a party to

legal proceedings. [75]-[76] Centros ( C-212/97: [1999] E.C.R. I-1459; [1999] 2 C.M.L.R. 551, followed.

Distinction between free movement of capital and freedom of establishment H8 As a general rule the acquisition by one or more natural persons residing in a Member State of shares in a company incorporated and established in another Member State was

covered by the Treaty provisions on the free movement of capital, provided that the shareholding did not confer on those natural persons definite influence over the

company's decisions and did not allow them to determine its activities. By contrast, where--as in the case at issue--the acquisition involved all the shares in a company having

its registered office in another Member State and the shareholding conferred a definite influence over the company's decisions and allowed the shareholders to determine its

activities, it was the Treaty provisions on freedom of establishment which applied. [77] *4 Baars (C-251/98): [2000] E.C.R. I-2787; [2002] 1 C.M.L.R. 49, followed.

Restriction on freedom of establishment H9 In circumstances such as those at issue, a company validly incorporated under the law

of, and having its registered office in, a Member State other than Germany had, under German law, no alternative to reincorporation in Germany if it wished to enforce before a

German court its rights under a contract entered into with a company incorporated under German law. Ü, which was validly incorporated in the Netherlands and had its registered

office there, was entitled under Arts 43 EC and 48 EC to exercise its freedom of establishment in Germany as a company incorporated under Netherlands law. It was of little significance that, after the company was formed, all its shares were acquired by

German nationals residing in Germany, since that had not caused Ü to cease to be a legal person under Netherlands law. Its existence was inseparable from its status as a company

incorporated under Netherlands law since a company existed only by virtue of the national legislation which determined its incorporation and functioning. The requirement of reincorporation of the same company in Germany was therefore tantamount to outright

negation of freedom of establishment and was, in principle, incompatible with Arts 43 and 48 EC. [79]-[82]

Daily Mail and General Trust (81/87): [1988] E.C.R. 5483; [1988] 3 C.M.L.R. 713, followed.

Absence of justification H10 Overriding requirements relating to the general interest, such as the protection of the interests of creditors, minority shareholders, employees and even the taxation authorities,

might, in certain circumstances and subject to certain conditions, justify restrictions on freedom of establishment. Such objectives could not, however, justify denying the legal capacity and, consequently, the capacity to be a party to legal proceedings of a company properly incorporated in another Member State in which it had its registered office. [92]-

[93]

Cases referred to in the judgment: 1. Baars v Inspecteur der Belastingdienst Particulieren/Ondernemingen Gorinchem (C-

251/98), April 13, 2000: [2000] E.C.R. I-2787; [2002] 1 C.M.L.R. 49. 2. Centros Limited v Erhvervs-og Selskabsstyrelsen (C-212/97), March 9, 1999: [1999]

E.C.R. I-1459; [1999] 2 C.M.L.R. 551 3. R. v H.M. Treasury and Commissioners of Inland Revenue, Ex parte Daily Mail and General Trust plc (81/87), September 27, 1988: [1988] E.C.R. 5483; [1988] 3 C.M.L.R.

713

Further cases referred to by the Advocate General: 4. Commission v Belgium (Re Golden Shares) (C-503/99), June 4, 2002: [2002] E.C.R. I-

4809; [2002] 2 C.M.L.R. 50 5. Commission v France (Re Golden Shares) (C-483/99), June 4, 2002: [2002] E.C.R. I-

4781; [2002] 2 C.M.L.R. 49 6. Commission v Portugal (Re Golden Shares) (C-367/98), June 4, 2002: [2002] E.C.R. I-

4731; [2002] 2 C.M.L.R. 48 *5 7. Gebhard v Consiglio dell'Ordine degli Avvocati e Procuratori di Milano (C-55/94),

November 30, 1995: [1995] E.C.R. I-4165; [1996] 1 C.M.L.R. 603 8. HSB-Wohnbau GmbH, Re (C-86/00), July 10, 2001: [2001] E.C.R. I-5353

9. Johnston v Chief Constable of the Royal Ulster Constabulary (222/84), May 15, 1986: [1986] E.C.R. 1651; [1986] 3 C.M.L.R. 240

10. Kraus v Land Baden-Wurttemberg (C-19/92), March 31, 1993: [1993] E.C.R. I-1663

11. R. (On the application of Broadcasting, Entertainment, Cinematographic and Theatre Union (BECTU)) v Secretary of State for Trade and Industry (C-173/99), June 26, 2001:

[2001] E.C.R. I-4881; [2001] 3 C.M.L.R. 7 12. Segers v Bestuur van de Bedrijfsvereniging voor Bank-en Verzekeringswezen,

Groothandel en Vrije Beroepen ( 79/85), July 10, 1986: [1986] E.C.R. 2375; [1987] 2 C.M.L.R. 247

13. Trummer and Mayer ( C-222/97), March 16, 1999: [1999] E.C.R. I-1661; [2000] 3 C.M.L.R. 1143

14. Union Nationale des Entraineurs et Cadres Techniques Professionnels du Football (UNECTEF) v Heylens (222/86), October 15, 1987: [1987] E.C.R. 4097; [1989] 1

C.M.L.R. 901 15. Van Binsbergen v Bestuur van de Bedrijfsvereniging voor de Metaalnijverheid

(33/74), December 3, 1974: [1974] E.C.R. 1299; [1975] 1 C.M.L.R. 298 16. Webb (279/80), December 17, 1981: [1981] E.C.R. 3305; [1982] 1 C.M.L.R. 719

Cases before the European Court of Human Rights 17. Ashingdane v United Kingdom (A/93), May 28, 1985: [1985] 7 E.H.R.R. 528

18. Campbell and Fell v United Kingdom (A/80), June 28, 1984: [1985] 7 E.H.R.R. 165 19. Golder v United Kingdom ( A/18), February 21, 1975: [1979-80] 1 E.H.R.R. 524

20. Tolstoy Miloslavsky v United Kingdom ( A/323), July 13, 1995: [1995] E.H.R.R. 442

Cases before the European Commission of Human Rights 21. H. v United Kingdom, December 2, 1985, No 11559/85, DR 45

22. M. v United Kingdom, May 4, 1987, No 12040/86, DR 52 23. X. v Sweden, October 6, 1982, No 9707/82, DR 31

Representation

W H Wagenführ, Rechtsanwalt, for Überseering BV. F Kösters, Rechtsanwalt, for Nordic Construction Company Baumanagement GmbH

(NCC). A Dittrich and B Muttelsee-Schön, acting as Agents, for the German Government. M López-MonÍs Gallego and N DÍaz Abad (in the oral proceedings only), acting as

Agents, for the Spanish Government. U Leanza, acting as Agent, assisted by F Quadri, avvocato dello Stato, for the Italian

Government. R Magrill, acting as Agent, and by J Stratford, barrister, for the United Kingdom

Government. *6 M Patakia and C Schmidt, acting as Agents, for the Commission of the European

Communities. P Dyrberg and J F Jónsson and E Wright, acting as Agents, for the EFTA Surveillance

Authority. H G Sevenster, acting as Agent (in the oral proceedings only) for the Dutch Government.

OPINION

Introduction AG1 [FN1]This reference for a preliminary ruling gives the Court of Justice the opportunity to clarify the meaning of the Centros judgment, [FN2] and to specify, in general terms, the extent to which Community law influences determination of the legal status of bodies corporate. FN1 Opinion of AG Ruiz-Jarabo Colomer, delivered on December 4, 2001. FN2 Case C-212/97: [1999] E.C.R. I-1459; [1999] 2 C.M.L.R. 551 (hereinafter "the Centros judgment"). That controversy has occasioned lively debate in European, and in particular German, academic circles. [FN3] FN3 See, amongst others, Behrens, P., "Das internationale Gesellschaftsrecht nach dem Centros-Urteil des EuGH", Praxis des internationalen Privat- und Verfahrensrecht, 1999, Vol. 5, p.323; Ebke, F., "Das Schicksal der Sitztheorie nach dem Centros-Urteil des EuGH", Juristenzeitung, 1999, Vol. 13, p.656; Roth, W.-H., "Gründungstheorie, ist der Damm gebrochen?", Zeitschrift für Wirtschaftsrecht, 1999, Vol. 21, p.861; Sandrock, O., "Centros: ein Etappensieg für die Überlagerungstheorie", Betriebsberater, 1999, Vol. 26, p.1337; Steindorff, E.O., "Centros und das Recht auf die günstigste Rechtsordnung", Juristenzeitung, 1999, Vol. 23, p.1140; Wouters, J., "Private International Law and Companies' Freedom of Establishment", European Business Organisation Law Review, 2001, Vol. 2, p.101; Zimmer, D., "Mysterium 'Centros': von der schwierigen Suche nach der Bedeutung eines Urteils des Europäischen Gerichtshofes", Zeitschrift für das gesamte Handelsrecht und Wirschaftsrecht, 2000, Vol. 1, p.23. AG2 The main proceedings raise the issue of a legal order which precludes a company validly incorporated in a Member State and having its head office and pursuing its activity in Community territory, and which can expect, in consequence, to enjoy the freedom of establishment under the EC Treaty, from asserting its rights in another Member State in which it has established its actual head office. [FN4] FN4 I shall henceforth use expressions such as "actual head office", "actual centre of administration" or "centre of management" synonymously. I am referring, by each of these, to the place where the running of the company takes place and where it concludes a substantial proportion of its dealings with third parties (see Kegel, G., Internationales Privatrecht, Beck, Munich, 1995, p.416). AG3 The issue is essentially to determine whether, and to what extent, Community law directly impacts on the organisation of national private international law rules on the international personality of companies.

Facts and procedure of the main action

AG4 The following is a summary of the facts and procedural stages of the main action as set out in the order for reference. AG5 The plaintiff, Überseering BV (hereinafter "Überseering"), has since 1990 been registered in the Amsterdam and Haarlem business register as a "Besloten Vennootschap met beperkte aansprakslijkheid" (BV). [FN5] It appears in the German land register as the proprietor of a parcel of land in Düsseldorf on which a large motel and carparking complex have been built. FN5 The conventional form of limited liability companies under Netherlands law. AG6 *7 Under a project managership agreement of November 27, 1992, the defendant company, Nordic Construction Company Baumanagement GmbH (hereinafter "NCC"), whose registered office is in Germany, contracted with the plaintiff to refurbish those two buildings. It carried out that work, but the plaintiff considered there to be defects in the paintwork. In 1995, it required the defendant, without success, to remedy those defects. AG7 On January 1, 1995, two individuals acquired the entirety of the shares in the plaintiff. According to the finding of the Düsseldorf Oberlandesgericht (Higher Regional Court), the appeal court, the company's actual centre of administration was, from the time of that acquisition, in Düsseldorf. AG8 In 1996, Überseering filed a claim against NCC for DEM 1,163,657.77 plus interest, as the cost of remedying the defects and resulting loss and damage. The Landgericht (Regional Court) dismissed the action as inadmissible. The Oberlandesgericht dismissed the appeal brought against the judgment at first instance, upholding the argument that the plaintiff, as a Netherlands company, lacked capacity to bring legal proceedings in Germany. Under Para.50 of the German Zivilprozeβordnung ( Code of Civil Procedure, hereinafter "the ZPO"), capacity to bring legal proceedings attaches to persons with legal capacity, which, in relation to companies, is determined according to the law applicable to them, governed by the law of the State in which they have their principal centre of administration. The same applies to a company validly incorporated in the Netherlands which moves its head office to the Federal Republic of Germany. AG9 The plaintiff lodged an appeal on a point of law (Revision) against that judgment, in which it reiterated its claim for damages.

Relevant national law AG10 Under the German law of civil procedure, a court must dismiss as inadmissible any action brought by a person that, on account of lack of capacity, cannot be a main party (plaintiff or defendant) or a secondary party (intervener) to legal proceedings. Under Para.50(1) of the ZPO, persons who have legal capacity have capacity to bring legal proceedings. That provision also applies to companies. Capacity to bring legal proceedings which is the ability to enjoy rights and to be subject to obligations. AG11 According to the settled case law of the Bundesgerichtshof, whether or not a company has legal capacity is determined by the law applicable in the place where it has its actual centre of administration (the "Sitztheorie" or company seat principle). The same is true where a company is validly incorporated in a different State and has subsequently

transferred its actual centre of administration to the Federal Republic. The legal capacity acquired by virtue of its creation does not automatically persist in Germany, but depends on whether the company continues to exist under the law of the State where it was incorporated and whether, in addition, it has legal capacity under German law. The prevailing view of academic commentators shares that approach by the case law. AG12 Taking the actual head office as the connecting factor has the effect that a company validly incorporated abroad, which on an initial analysis has legal capacity in Germany, loses that capacity when it moves its permanent head office *8 to the Federal Republic. In so far as it is subject to the German legal order, it cannot be entitled to rights or subject to obligations, nor party to legal proceedings. In order to have legal dealings, it would have to dissolve itself and reincorporate in a way enabling it to acquire legal capacity under German law. [FN6] FN6 There is doubt as to whether, instead of reincorporating, the company in question could merely alter its status. AG13 As the Bundesgerichtshof (Federal Court of Justice) itself admits, however, its case law is the subject of controversy amongst German commentators. One can discern two main lines of thinking: In the first, determination of a company's legal relations and also, therefore, its capacity, should be according to the law of the State in which the company was incorporated (the place of incorporation principle). That connecting factor has the advantage of being more precise and predicable, thus favouring legal certainty. It also fosters the cross-border mobility of undertakings. For other commentators, a company's legal status should not be assessed according to a single legal order, but in different ways depending on a number of factors. It is therefore the law of the State where it was incorporated which should determine a company's existence and legal capacity and the legal relations between shareholders ("internal relations"), whilst it should be the law of the State where it has its head office which governs the activities of the company and protection of its creditors ("external relations").

Applicable Community law AG14 The main proceedings have given rise to questions as to the interpretation, essentially, of Arts 43 EC and 48 EC, in conjunction with the third indent of Art.293 EC.

"Article 43 EC Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State. Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Art.48, under the conditions laid

down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital."

"Article 48 EC Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community shall, for the purposes of this Chapter, be treated in the same way as natural persons who are nationals of Member States. *9 'Companies or firms' means companies or firms constituted under civil or commercial law, including co-operative societies, and other legal persons governed by public or private law, save for those which are non-profit-making."

"Article 293 EC Member States shall, so far as is necessary, enter into negotiations with each other with a view to securing for the benefit of their nationals: ... --the mutual recognition of companies or firms within the meaning of the second paragraph of Art.48, the retention of legal personality in the event of transfer of their seat from one country to another, and the possibility of mergers between companies or firms governed by the laws of different countries; ...."

The questions referred AG15 The Bundesgerichtshof, the highest civil court, finds it unclear from the case law of the Court of Justice whether, in the event of an undertaking transferring its head office abroad, the freedom of establishment enshrined in Arts 43 EC and 48 EC precludes the actual centre of administration from being taken as the connecting factor for the purpose of determining the law applicable to the undertaking. Under those circumstances, the national court stayed the proceedings and referred the following questions to the Court for a preliminary ruling: "(1) Are Articles 43 EC and 48 EC to be interpreted as meaning that there is an infringement of the right to freedom of establishment of companies where the legal capacity and capacity to bring legal proceedings of a company validly incorporated under the law of one Member State are determined according to the law of another State to which the company has moved its actual centre of administration and the law of that second State does not, as a result, allow the company to bring legal proceedings in respect of claims in that second State? (2) If the Court answers the first question in the affirmative, does the right to freedom of establishment of companies (Articles 43 EC and 48 EC) mean that a company's legal capacity and capacity to bring legal proceedings must be determined according to the law of the State where the company is incorporated?"

Proceedings before the Court of Justice

AG16 The application for a preliminary ruling was received at the Registry of the Court of Justice on May 25, 2000. AG17 In addition to both parties to the main proceedings, the German, Spanish and United Kingdom Governments, the Commission and the European Free Trade Association (EFTA) Surveillance Authority submitted written and oral observations. *10 The Italian Government filed only written submissions, whilst the Netherlands Government confined itself to attending the hearing, which took place on the morning of October 16, 2001. AG18 The plaintiff, together with the United Kingdom and Netherlands Governments and the Commission, advocated an affirmative answer to both questions, whilst the EFTA Surveillance Authority called for such a reply as regards the first. The other parties appearing argued for the opposite response.

Analysis of the questions referred AG19 It is desirable, at this initial stage, to define the case law background to the questions raised by the Bundesgerichtshof. Having determined the relevant principles of general application, it is necessary to examine how to apply them to the present case.

Definition of the applicable case law principles AG20 The assertions of the parties concentrate, rightly in my view, on the judgments in Daily Mail and General Trust [FN7] and that referred to above in Centros. FN7 Case 81/87: [1988] E.C.R. 5483; [1988] 3 C.M.L.R. 713 (hereinafter "the Daily Mail judgment"). AG21 The Daily Mail case had a rather peculiar legal background. English commercial law in force at the time the case was brought provided that a company incorporated in accordance with the legislation of England and Wales and having its registered office in the United Kingdom could move its central management and control and central administration to another country without losing its nationality. Undertakings resident in the United Kingdom were liable to corporation tax. Tax legislation therefore prevented companies and firms resident, for tax purposes, in the United Kingdom from transferring abroad their central management and control without the prior consent of the Treasury. AG22 Daily Mail, with a view to a major restructuring operation, sought to move its central management and control to the Netherlands in order to obtain significant tax advantages and applied, unsuccessfully, for the requisite authorisation. The question referred for a preliminary ruling arose in the context of the procedure challenging that refusal. The Court of Justice found that the current Arts 43 EC and 48 EC, in the then current state of Community law, conferred no right on a company incorporated in accordance with the legislation of a Member State where it had its registered office to move its central management and control to another Member State. AG23 In reaching that finding, the Court took account of the fact that the freedom of establishment precludes the State of origin from hindering the establishment in another

Member State of one of its nationals or of a company incorporated under its legislation. [FN8] It also held that, unlike natural persons, companies are creatures of the law and exist only by virtue of the varying national legislation which governs their incorporation and functioning. *11 [FN9] FN8 ibid., at [16]. FN9 ibid., at [19]. AG24 After observing that, despite the express invitation contained in the current Art.293 EC, the Community had not adopted any measures in that regard, the Court held that the EC Treaty regarded the disparity in the national legislation of States relating to the connecting factor required for companies belonging to those States (registered office, central administration or principal place of business) and as to whether and, if so, how the registered office or real head office of a company incorporated under national law could be transferred from one Member State to another, as problems not resolved by the rules concerning the freedom of establishment, but ones which had to be addressed by future legislation or treaty. [FN10] FN10 ibid., at [23]. AG25 The wording of that latter statement is particularly clear and unconditional. Were that on its own to reflect the current state of case law, the answer to the first question raised for a preliminary ruling would probably have to be in the negative. [FN11] FN11 On that point, see Behrens, P., op. cit., p.323. AG26 However, several of the parties appearing, notably the Commission, have taken pains to minimise the relevance of the arguments in the Daily Mail judgment to these proceedings. Basing their agreement on the facts of the main proceedings in that case and on a principle that the host Member State should provide enhanced protection of the freedom of establishment, they seek to confine the significance of that judgment to a mere recognition that it is exclusively the Member State of origin which has power to determine the rules for the incorporation and legal existence of companies in accordance with any provision on the conflict of laws which may prove applicable. That interpretation is based on wishful, but mistaken, thinking. The judgment suggests no differentiation in the degree of protection, depending on whether it is to be afforded by the State of origin or the host State, nor is limiting its effect to recognising any one exclusive legislative competence in keeping with the statement at para.[23] of that judgment. On the contrary, again according to what is stated in that paragraph, Community rules on the freedom of establishment do not (or did not at that time) affect the power of Member States to define the criteria for determining the status of legal persons or issues relating to the transfer of the registered office or real head office from one Member State to another. AG27 One must bear in mind, however, that what was established in the Daily Mail judgment held good only "in the [then current] state of Community law". That reservation

shows the concern of the Court at the disparity of provisions, reflected by the legislature in what is now Art.293 EC, which invites Member States to reduce that disparity "so far as is necessary". AG28 It must therefore be examined whether, since that time, there have been any material changes in the legal position which allow a new approach. AG29 I agree with all the parties expressing a view on that point that the progress seen in the harmonisation of companies legislation has not affected the issues relating to cross-border transfers of the registered office or real head office of bodies corporate. There has not, therefore, been any significant development in the legislation. AG30 *12 The same does not pertain as regards developments in case law. In that regard, the parties are again in agreement, although they do not all draw the same conclusions as to the consequences of the changes they refer to. AG31 The Centros judgment referred to above emerges as easily the most important precedent. At issue in that case was whether the refusal to register in the companies register of a Member State a branch of a foreign Community company, incorporated under the law of another Member State and created with the aim of carrying on its entire activity in the country where the branch was established, was compatible with the rules on the freedom of establishment. The referring Danish court found, furthermore, that the method used sought to circumvent the, more onerous, obligations for the incorporation of companies in force in Denmark. AG32 The Court's reasoning was in three stages, distinguishing from the outset between (a) the issue of the application of provisions on the freedom of establishment and (b) the measures a Member State can take to prevent persons, using the remedies offered by the EC Treaty, improperly to evade certain national rules (prevention of abuse of right), and adding (c) a number of observations on fulfilment of the grounds put forward by the Danish authorities (imperative requirements in the general interest). AG33 It therefore began by determining whether there was an obstacle to that fundamental freedom. It established that there was merely by pointing out that the right to freedom of establishment covers companies incorporated in accordance with the legislation of a Member State and having their registered office, central administration or principal place of business (primary establishment) within the Community, leading to the conclusion that such companies are entitled to conduct their activity in another Member State through an agency, branch or subsidiary (secondary establishment), and that the location of a company's registered office, central administration or principal place of business serves as the connecting factor with the legal system of a Member State in the same way as does nationality for natural persons. [FN12] FN12 ibid., at [19] & [20]. In relation to that same case, AG La Pergola drew the conclusion that the current Arts 43 EC & 48 EC give a right to incorporate companies in accordance with the legislation of a Member State to operate in that State or, equally, in any other Member State. The company thus formed must be entitled to set up its principal and, as the case may be, any secondary establishment, wherever it wishes within the Community (Opinion in Centros E.C.R. I-1459, point 20). It is of no surprise that the Advocate General himself was in favour of the Court applying the " Cassis de

Dijon" doctrine on mutual recognition to corporate mobility ( ibid., point 20). It then dismissed the argument that the refusal to register the branch may have been a measure intended to prevent abuse of the right of establishment, as referred to in the Van Binsbergen case law. [FN13] It held, on the contrary, that the right to incorporate a company in accordance with the legislation of a Member State, in particular of one whose company law regulations were less strict, and to set up branches in other States, is inherent to the exercise, in a single market, of the freedom of establishment guaranteed by the EC Treaty. [FN14] FN13 Case 33/74: [1974] E.C.R. 1299; [1975] 1 C.M.L.R. 298, at [13]. FN14 Centros judgment, cited above, at [27]. Lastly, the Court considered whether the national practice at issue could be justified on the grounds of imperative requirements in the general interest. The *13 Danish authorities had advanced two grounds--the protection of non-contractual public creditors (such as the tax authorities or the Department of Social Security) and the protection of creditors in general by requiring a minimum initial share capital. The Court referred to the conditions attaching to that type of restrictive measure, defined in Gebhard, [FN15] and held that they were not fulfilled in the case before it. [FN16] FN15 Case C-55/94: [1995] E.C.R. I-4165; [1996] 1 C.M.L.R. 603, at [37], (hereinafter "the Gebhard judgment"), according to which national measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the EC Treaty must fulfil four conditions: they must be applied in a non-discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain that objective. FN16 In general terms, there was no justification for the national practice on the grounds that it was intended to protect creditors, since had Centros conducted business in the United Kingdom, its branch would have been registered in Denmark, without putting Danish creditors in any better position. Further, Centros held itself out to operators as a company governed by the law of England and Wales and not as a Danish company. As regards public creditors, a less restrictive measure than refusing registration would have been to allow them to obtain the necessary guarantees. Lastly, nothing prevented the Danish authorities from taking any appropriate measure to prevent or penalise fraud (at [34]-[38] of the Centros judgment, cited above). AG34 There is a pleasing simplicity to the argument in the Centros judgment. It applies, in their terms, the provisions of Arts 43 EC and 48 EC. That approach is in line with the traditional interpretation of the fundamental freedoms under the EC Treaty which, on expiry of the transitional period, become directly or immediately effective. I would like to single out the following two aspects of the Centros judgment--one an omission and one an inclusion.

AG35 The significant omission is that of any reference to Art.293 EC, or to the Daily Mail judgment, which used that article as a guideline. The Advocate General does not address that issue in his Opinion, nor do the parties to those proceedings seem to have done so in their submissions. AG36 There is one obvious explanation--that in the Centros case the issue under examination was the opening of a branch and not the transfer of a company head office. That theory would, however, be excessively formalist, would fail to take into account that head office (sede) can refer not only to the registered office but to the place where the actual administration takes place, and would be distinguishing, on no apparent grounds, between a--very qualified--right of primary establishment and a practically unlimited right of secondary establishment. [FN17] Further, the Court cannot have been unaware that by upholding such a wide-ranging freedom to set up branches (which, strictly, have little of a true branch about them, in the normal sense of the word, since they can comprise the entire assets of a company) [FN18] it was providing a loophole in the legislation on cross-border transfers of company registered offices or actual head offices which, in the absence of harmonisation, is the province of Member States. [FN19] The invitation by the Danish authorities to exclude from the benefit of the right of establishment those circumstances in which a company's sole aim is to circumvent a particular legislation should have led the *14 Court to examine that possible form of evasion, in that instance of its own case law, namely the Daily Mail judgment. The Court based its reasoning, nevertheless, on the hypothesis that, for the purposes of Community law, Centros was seeking to exercise the secondary form of freedom of establishment. [FN20] FN17 Although it is indeed true that primary freedom of establishment is liable to affect Member States more than secondary freedom of establishment, since the registered or actual head office is the connecting factor for application of tax or surveillance regulations. In that regard, see Zimmer, D., op. cit., p.33. See also, although more critical, Steindorff, E., op. cit., p.1141. These considerations are not, however, referred to in the texts of the judgments, nor do they find any foundation in the EC Treaty. FN18 That is the view of Freitag, R., "Der Wettbewerb der Rechtsordnungen im internationalen Gesellschaftsrecht", Europäische Zeitschrift für Wirtschaftsrecht, 1999, Vol. 9, p.267, in particular p.268. FN19 Daily Mail judgment, cited above, at [23]. FN20 That omission may reflect the fact that the Community court is implying that there are no differences in the provisions governing the primary and secondary expressions of the freedom of establishment. On that point, see Behrens, P., op. cit., p.327. AG37 A second explanation would consist of stressing the differences between the factual circumstances of the main proceedings in each case. On that view, the conditions contained in the Daily Mail judgment pertain only in relation to the ability of the State of origin to restrict the freedom of establishment of companies incorporated in accordance with its law, whilst the Centros judgment addresses the obstacles which the host State

could impose. Alternatively, one could argue that the background to the first is an issue of tax law, whereas the subject-matter of the second is one of company law. Those appear to me to be artificial distinctions intended to justify divergent judicial results. They have no foundation, clearly, in any express statement in the judgments. AG38 A third possible explanation would see the Centros judgment as superseding the Daily Mail precedent, if only as regards its practical legal consequences: a company wishing to establish its actual centre of administration in a different Member State would only need to apply for registration of a branch. The precepts of the Daily Mail judgment would then serve solely to prevent the State of origin, under whose law the company was incorporated, from being able to retain a degree of control over the body corporate, which remains a fiction created by that legal system. Control would encompass, for example, determining the connecting factor for liability to a tax obligation, as in the Daily Mail case, or, generally, for the exercise of administrative surveillance. That interpretation admittedly compels one to discount a number of statements made in the broadest terms in the judgment in question, in particular those at para.[23]. [FN21] FN21 See point 24 above. AG39 It is, to my mind, rather a matter of supplementing the former decision; issues regarding definition of the connecting factor determining the law applicable to a company and questions concerning cross-border transfers of companies' head offices were and are governed, in the absence of harmonising measures, by the legal systems of Member States which must, none the less, comply with substantive Community law. [FN22] FN22 On that point, see Wouters, J., op. cit., pp.122 et seq. AG40 From that point of view, European law still does not directly affect the ability of Member States each to organise its rules on the conflict of laws as it wishes, beyond the requirement that they respect the principles of that law. AG41 The significant inclusion in the Centros judgment is that it introduces, in relation to companies' freedom of establishment, the general criteria for assessing whether restrictions on a fundamental freedom are compatible with EC Treaty provisions, which the Court described in the judgment in Kraus [FN23] and set definitively in the Gebhard judgment cited above. FN23 Case C-19/92: [1993] E.C.R. I-1663, at [34]. AG42 Inclusion of that type of analysis impliedly acknowledges that the provisions on the freedom of establishment are immediately effective in relation to the *15 movement of companies which presupposes, in turn, the abandonment or, in any event, a qualification, of the reservation contained in Art.293 EC. [FN24] FN24 A view already voiced, albeit obliquely, in Segers (79/85): [1986] E.C.R. 2375; [1987] 2 C.M.L.R. 247, at [16]. That stance is desirable from a point of view of dynamic European integration and finds

support in the wording of the provision. Unlike Art.295 EC ("[t]he Treaty shall not prejudice in any way ...") which, without the slightest doubt, excludes from application of the EC Treaty the rules governing the system of property ownership, [FN25] Article 293 EC contains only an invitation to Member States to enter into negotiations and, what is more, only "so far as is necessary". Article 293 EC is not therefore comparable to a true exclusion from the legislation and is rather an admonition to Member States to overcome the inevitable problems which will arise from the disparity of legislation on the mutual recognition of companies, on the retention of their legal capacity in the event of cross-border transfers of their head office and on mergers. Being thus an admonition it cannot, as such, hinder the effectiveness of one of the fundamental freedoms. FN25 See, in that regard, my Joined Opinion delivered in Commission v Portugal (C-367/98), Commission v France (C-483/99), and Commission v Belgium (C-503/99): [2002] E.C.R. I-4731; [2002] 2 C.M.L.R. 48; [2002] 2 C.M.L.R. 49; [2002] 2 C.M.L.R. 50, points 39 et seq. AG43 I submit, therefore, that existing authorities do permit an analysis of whether restrictions intended to limit or having the effect of limiting the exercise of the freedom of establishment by bodies corporate protected by Art.48 EC are compatible with the EC Treaty, according to the general guidelines defined by the Court of Justice, that is, that they are in themselves non-discriminatory, that they are justified by imperative requirements in the general interest and that they are suitable and proportionate for attaining the objective which they pursue. As with other legal disciplines, that type of analysis--which is strictly Community in nature--cannot aspire to shape the national law in question, particularly private international law. Having said which, the resulting national rules must be subject to interpretation in accordance with Community law or must, otherwise, meet the criteria for restrictions imposed on the grounds of imperative requirements in the general interest.

Analysis of the first question AG44 By the first question referred for a preliminary ruling, more restricted in scope than the second, the Bundesgerichtshof seeks essentially to ascertain whether Community law precludes a national provision which prevents a company validly incorporated in accordance with the legislation of a Member State from relying on contractual rights in the courts of another Member State on the ground that it has its actual centre of administration in that second State. AG45 That deprivation of the capacity to sue arises, according to the Bundesgerichtshof, because the company's legal capacity and capacity to bring legal proceedings are assessed according to the law of the Member State in which it had established its actual centre of administration, which law, not being acquainted with the foreign corporate vehicle, is, it asserts, bound to refuse to recognise the company as having such capacity. The only option available to the company affected would be to dissolve itself and to reincorporate in accordance with the law of the host State. AG46 *16 However, it is preferable, in my view, to adhere to the most objective expression of the problem raised, so as not to rule on a subject which it is for national law to interpret; the German legal system does not confer capacity to sue on foreign

companies whose real head office is located, under German law, in its territory. I believe that, on the one hand, the German provisions fit uneasily with any autonomous Community interpretation of the concepts of legal capacity and capacity to bring proceedings since, whilst denying capacity to sue to companies whose real head office is not in the State of incorporation, they do accept, as Überseering has described to this Court, that they have capacity to be sued under the same circumstances. [FN26] Further, the referring court itself, which in its order for reference defines legal capacity as the capacity to enjoy rights and bear obligations, admits that Überseering is the owner of real property. [FN27] That gives rise, in my view, to an artificial separation of concepts foreign to the traditional definition of legal capacity, one which seems to correspond rather to a deterrent or penalising mechanism. FN26 In other proceedings, according to the submission of Überseering, which was not contested, the Landgericht Düsseldorf ordered Überseering to pay the fees of the architects who worked on the refurbishment, and registered a preventive attachment against the real property in Germany owned by the plaintiff in the main proceedings. FN27 See point 5 above. So, the question admits of different interpretations in terms of the precise legal order applicable to the triggering circumstance, that is, the transfer of the company head office, [FN28] or of the criteria for assessing whether that transfer has taken place. FN28 At the hearing, the Netherlands and United Kingdom Governments agreed that a situation such as that in the present proceedings would under their laws be classified as the creation of a branch. On the other hand, nor is it inconceivable that application of the company seat principle might not inevitably lead to the dramatic consequences which German law attributes to it. [FN29] FN29 To that effect, see Wouters, J., op. cit., p.132. One could think, for example, of the application to the company of certain compulsory provisions laid down in relation to the corresponding company vehicle under domestic law. For those reasons, it seems more sensible to avoid any legal assessment of the internal law and to consider the national rule in question as an instance of a restriction on a company's capacity to bring legal proceedings, which seeks to prevent a particular primary corporate activity in a State other than that in which the company was incorporated. AG47 That restriction is, on a first analysis, incompatible with the freedom of establishment laid down by the EC Treaty, and Art.293 EC cannot, as I have stated previously, lead to the opposite conclusion. AG48 It is necessary, therefore, to ascertain whether the restriction fulfils the other conditions laid down by the case law. AG49 Contrary to the assertions of various parties, the measure is not of itself

discriminatory. A company incorporated under German law which had transferred its administrative centre to another Member State would have received similar treatment. That transfer would, in any event, have affected its legal capacity, in the meaning given to it in German law. [FN30] FN30 See, in that regard, the reference for a preliminary ruling in HSB-Wohnbau ( C-86/00): [2001] E.C.R. I-5353 *17 , disposed of by an order of inadmissibility of July 10, 2001 (on the grounds that the referring body lacked jurisdiction), at [7] whereof the order states that, under German law, "a company has legal existence only if it has its establishment in the country under whose law it has been incorporated. From that viewpoint, the transfer abroad of a company's registered office necessarily entails its dissolution and liquidation, that is to say, in particular, the loss of its legal personality in Germany, and the formation of a new company abroad". AG50 It emerges from the order for reference that the company seat principle, as applied in Germany, serves to protect the rights of creditors (through the requirement of a minimum paid-up share capital, with rules on how it can be disposed of), of dependent companies and minority shareholders (by enhancing the weight given to their interests by requiring qualified majorities, or providing for indemnification or compensation in particular circumstances) and of workers (by requiring co-determination on the terms laid down by law). The German Government adds protection of the interests of the tax authorities (by means of reducing the incidence of double liability to tax). Those reasons must be deemed to be imperative requirements in the general interest for the purposes of the case law of the Court of Justice. [FN31] FN31 See, on the protection of the creditors of a company, Trummer and Mayer (C-222/97): [1999] E.C.R. I-1661; [2000] 3 C.M.L.R. 1143, at [30], and, by implication, the Centros judgment, at [35], cited above, and also, on the protection of the rights of workers, notably, Webb (279/80): [1981] E.C.R. 3305; [1982] 1 C.M.L.R. 719, at [19]. AG51 It remains to be ascertained whether the measure should be considered to be suitable for and proportionate to the objectives it pursues. AG52 The answer here must be in the negative. The expedient consisting of denying capacity to sue to a company validly incorporated in another Member State is not a suitable measure to attain the legitimate objectives it claims to pursue and, therefore, goes beyond what attainment of those objectives requires. AG53 The Court of Justice has already had occasion to qualify the protection which the minimum paid-up share capital requirement can afford the creditors of a company. [FN32] In other respects, there has been no examination of whether Überseering actually did offer lesser guarantees to creditors. In any event, it is clear that to deny capacity to sue, which prevents a party from relying before a court on rights against third parties, rather than enhancing the position of creditors of the company, would seem to operate to the benefit of its debtors. FN32 At [35] of the Centros judgment, cited above, and, especially, point 21 of the Advocate General's Opinion.

AG54 None of the other three interests supposedly protected by the measure in question has been articulated sufficiently to warrant consideration. There is no indication of the rights of minority shareholders allegedly protected, nor is it on record even whether Überseering has any such holdings or that the law governing the company does not give them an equivalent level of protection. Nor, as in relation to creditors, can denying the company capacity to sue be of benefit to minority shareholders. It has emerged from the discussions ensuing before this Court that co-determination applies to undertakings with more than 2,000 workers and there is nothing to suggest that the transfer of the centre of management and control of the plaintiff in the main proceedings has affected such a high number of employees, rather the reverse. The German Government has not made it clear what tax provisions would be circumvented if Überseering exercised its rights before the German courts. [FN33] FN33 As counsel for the EFTA Surveillance Authority has observed, the fact that Überseering is located in Germany could, on the contrary, be advantageous to the German tax authorities, in that it could be liable to local taxes. AG55 However unsuitable the measure may be deemed to be for attaining the stated objectives, its incompatibility with the EC Treaty is particularly apparent when one examines whether the denial of capacity to sue is proportionate. *18 At the hearing, the German Government stressed one point to which it had referred in passing in its written observations--the fact that a company in Überseering's position can continue to rely on its rights before a court by appearing as an unincorporated association. Its submission, in itself less than clear, was refuted by counsel for the parties in the main proceedings, who each proffered a different account of the mechanism referred to and its legal consequences. Under those circumstances, the Court has insufficient evidence to determine whether Überseering, or any other company in the same position, can prosecute a claim before the courts and on what terms. What does indeed appear to be common ground is that a company in the situation under consideration could not appear in proceedings whilst retaining its separate legal personality. One must be guided, therefore, by the terms of the question referred, as raised by Germany's highest civil court, from which it emerges that the sanction laid down by that country's legal regime is that the company concerned "cannot rely on contractual rights before the courts". [FN34] FN34 In other respects, it is apparent from the documents in the proceedings that the lack of capacity to sue extends to claims arising from causes other than those in contract. AG56 A measure of that nature presents, in practice, an enormous obstacle to companies' freedom of establishment. AG57 The measure truly undermines the legal remedies available to a company validly incorporated in accordance with the legislation of a Member State. It is, in any event, a serious interference with the fundamental right to a fair hearing enshrined in Art.6(1) of

the European Convention for the Protection of Human Rights and Fundamental Freedoms (hereinafter "the Convention"). Interpreting the first of those precepts, as early as Golder v United Kingdom, [FN35] the European Court of Human Rights had held that access to the courts in civil matters was a corollary of the rule of law, a principle which, in its turn, is part of the common spiritual heritage of European countries. [FN36] It is true that, given its particular nature and as pertains with so many other fundamental rights, that of access to the courts is not an absolute right. [FN37] In Ashingdane v United Kingdom, [FN38] the Strasbourg court found, however, that limitations on the right may not impair its very essence, must be justified in terms of pursuing a legitimate aim and must be reasonably proportionate to that aim. [FN39] FN35 European Court of Human Rights, judgment of February 21, 1975, Series A No 18: [1979-80] 1 E.H.R.R. 524. FN36 ibid., § 34. FN37 ibid., § 38. FN38 European Court of Human Rights, judgment of May 28, 1985, Series A No 93: [1985] 7 E.H.R.R. 528. FN39 ibid., § 57. The Strasbourg institutions have therefore accepted that measures which rendered legal actions subject to a specified time-limit for the bringing of the action [FN40] or to a summary examination of their prospects of success [FN41] or which required provision of security for costs [FN42] were compatible with the Convention. None of those conditions impairs the essence of the principle, but they accommodate its exercise to the requirements of reasonableness. Those institutions have also accepted that national legislation can apply restrictive measures *19 on the basis of the personality of the litigant. These are long-established situations where the legal order tolerates diminished exercise of legal or procedural capacity, as occurs with minors, [FN43] abusive litigants, [FN44] convicted persons [FN45] or persons declared bankrupt. [FN46] None of those categories bears any resemblance to the present case. One should also observe that, even in those situations, the right to seek judicial relief was merely limited, never removed, and that limitation was made subject, as a general rule, to obtaining prior leave from a representative of the public interest. FN40 European Commission of Human Rights, X. v Sweden, decision of October 6, 1982, No 9707/82, Decisions and Reports, (DR) 31, p.2. FN41 Ashingdane v United Kingdom, cited above, § 59. FN42 European Court of Human Rights, Tolstoy Miloslavsky v United Kingdom, judgment of July 13, 1995, Series A No 316-B: [1995] E.H.R.R. 442.

FN43 See the judgment in Golder v United Kingdom, cited above. FN44 European Commission of Human Rights, H. v United Kingdom, decision on admissibility of December 2, 1985, No 11559/85, DR 45, p.281. FN45 European Court of Human Rights, Campbell and Fell v United Kingdom, judgment of June 28, 1984, Series A No 80: [1985] 7 E.H.R.R. 165. FN46 European Commission of Human Rights, M. v United Kingdom, decision on admissibility of May 4, 1987, No 12040/86, DR 52, p.269. AG58 In relation to commercial undertakings, whose main assets comprise claims against third parties, depriving the undertaking of the right to bring legal proceedings may also amount to a serious restriction on the right to enjoy property, protected by Art.1 of Protocol No 1 to the Convention, and denial of an effective remedy, contrary to the provisions of Art.13 of the Convention. AG59 The same idea prevails in the light of Art.47 (right to an effective legal remedy and to a fair trial) and Art.17 (right to property) of the Charter of Fundamental Rights of the European Union, proclaimed in Nice on December 7, 2000, which, whilst not having genuine legislative scope in the strict sense, as "it is not in itself binding", [FN47] is an invaluable reflection of the common denominator of the legal values paramount in Member States, from which emanate, in their turn, the general principles of Community law. FN47 Opinion of AG Tizzano in BECTU (C-173/99): [2001] E.C.R. I-4881; [2001] 3 C.M.L.R. 7, at [27]. AG60 Finally, the Court has acknowledged that the right to judicial control is paramount in the context of Community matters. [FN48] FN48 See, amongst others, Johnston (222/84): [1986] E.C.R. 1651; [1986] 3 C.M.L.R. 240, at [18], and Heylens and Others ( 222/86): [1987] E.C.R. 4097; [1989] 1 C.M.L.R. 901, at [14]. AG61 Accordingly, it is true to say that to deny the right to bring legal proceedings to a body corporate validly incorporated in accordance with one of the legal systems of the Member States is a serious restriction on a fundamental right. If it is to pass the proportionality test, it must be balanced on the other side of the scales by an imperative requirement in the public interest. Suffice it to say that no evidence has been submitted capable of demonstrating a social need of that order. As I found when examining the question of suitability, the German legal order does not, given such a serious sanction, require any specific assessment of the risk. The legal rights which the measure seeks to protect or, rather, the risks to which those interests may be subject by reason of a company not having its centre of administration in the State in which it was founded do not stand up when measured against the magnitude of the sanction imposed. AG62 It must be held, under those circumstances, that Arts 43 EC and 48 EC do preclude

a national measure which denies a company the right to bring proceedings on the grounds that it has its actual centre of administration in a Member State other than that in which it was incorporated.

*20 Analysis of the second question AG63 The second question, raised by the Bundesgerichtshof in case the first warrants an affirmative answer, as I propose it does, is broader in scope by virtue of being more abstract. It seeks to ascertain whether the principles which govern the freedom of establishment require that a company's legal capacity and capacity to bring legal proceedings must always be determined in accordance with the law of the State where it is incorporated. AG64 It is not immediately obvious how any answer to that second question raised could be of additional assistance in resolving the issue of the interpretation of Community law which has arisen for the referring court. If, as I suggest, the Court finds that the sanction of depriving a company of the right to bring proceedings is neither suitable for nor proportionate to the aims sought and, consequently, is not justified on imperative grounds of national interest, it is immaterial what was the precise course which the national court took, when it applied the various rules governing the conflict of laws under German law to find, in compliance with its internal law, that the sanction was lawful. AG65 It is not for the Community judicature to enter into discussions which are the province of national law. I reiterate that the issue properly under consideration, from the point of view of Community law, is that of whether a measure which restricts a fundamental freedom is justified in the light of supposedly imperative requirements in the general interest. AG66 In view of the premisses of the answer to the first question, it is not necessary, in my submission, to reply to the second. What that means is that the outcome would be the same if denial of the right to bring proceedings were the result not of failure to recognise legal capacity but of application of an imperative rule. AG67 That approach seems to me all the more desirable in that it avoids the need to make bold pronouncements, without detracting in any way from the co-operation which the Community court can be expected to give in resolving the issue raised. AG68 In the first place, to answer the second question would involve integrating features specific to German law into an autonomous Community theory, in so far as it would mean accepting--which admission is, at the very least, questionable--that the denial of the right to bring proceedings derived entirely from the failure to recognise legal capacity and the capacity to bring legal proceedings. I believe it is possible, on the contrary, to consider that denial as merely one of the powers available to the legal system to penalise companies seeking to circumvent national law, in the interests of protecting particular legal rights. AG69 Secondly, where the Member State where the company is incorporated is also that in which it has its registered office, one would be forcing the Court to opt for one of the connecting factors which, in the absence of any change in legislation, are of equal weight under Art.48 EC, namely, the factor consisting of the registered office of the entity in question, of its centre of administration or of its principal place of business. If the EC Treaty has not given preference to any one factor, it is not the place of the court to do so.

[FN49] In the absence of harmonisation, Member *21 States remain at liberty to organise their rules of private international law in that area, and the national courts to interpret those rules, which must nevertheless comply, in terms of their practical effects, with the requirements of Community law. FN49 The principle of the neutrality of the EC Treaty in relation to the power of Member States to define the connecting factor determining the law which applies to the company is also reflected in Council Regulation 2157/2001 of October 8, 2001 on the Statute for a European Company (SE): [2001] O.J. L294/1. See, in particular, recital 27 in the preamble thereto. AG70 In the alternative, in the event that the Court considers it desirable to reply to the second question raised, either because it believes to do so would assist the referring court to make a decision, or because it sees fit to reiterate a principle, I propose that, for the reasons set out in the preceding point, the Court should give a negative response to that question.

Conclusion AG71 By reason of the foregoing, I suggest that the Court should reply to the question referred by the Bundesgerichtshof as follows: Arts 43 EC and 48 EC preclude a national provision which leads to denial of the right to bring proceedings to a company validly incorporated according to the law of a Member State which has transferred its actual centre of administration to another Member State. Judgment 1 By order of March 30, 2000, received at the Court Registry on May 25, 2000, the Bundesgerichtshof (Federal Court of Justice) referred to the Court for a preliminary ruling under Art.234 EC two questions on the interpretation of Arts 43 EC and 48 EC. 2 Those questions were raised in proceedings between (i) Überseering BV ("Überseering"), a company incorporated under Netherlands law and registered on August 22, 1990 in the register of companies of Amsterdam and Haarlem, and (ii) Nordic Construction Company Baumanagement GmbH ("NCC"), a company established in the Federal Republic of Germany, concerning damages for defective work carried out in Germany by NCC on behalf of Überseering. National law 3 The Zivilprozessordnung ( German Code of Civil Procedure) provides that an action brought by a party which does not have the capacity to bring legal proceedings must be dismissed as inadmissible. Under para.50(1) of the Zivilprozessordnung any person, including a company, having legal capacity has the capacity to be a party to legal proceedings: legal capacity is defined as the capacity to enjoy rights and to be the subject of obligations. 4 According to the settled case law of the Bundesgerichtshof, which is approved by most German legal commentators, a company's legal capacity is determined by reference to the

law applicable in the place where its actual centre of administration is established ("Sitztheorie" or company seat principle), as opposed to the "Gründungstheorie" or incorporation principle, by virtue of which legal capacity is determined in accordance with the law of the State in which the company was *22 incorporated. That rule also applies where a company has been validly incorporated in another State and has subsequently transferred its actual centre of administration to Germany. 5 Since a company's legal capacity is determined by reference to German law, it cannot enjoy rights or be the subject of obligations or be a party to legal proceedings unless it has been reincorporated in Germany in such a way as to acquire legal capacity under German law. The main proceedings 6 In October 1990, Überseering acquired a piece of land in Düsseldorf (Germany), which it used for business purposes. By a project-management contract dated November 27, 1992, Überseering engaged NCC to refurbish a garage and a motel on the site. The contractual obligations were performed but Überseering claimed that the paint work was defective. 7 In December 1994 two German nationals residing in Düsseldorf acquired all the shares in Überseering. 8 Überseering unsuccessfully sought compensation from NCC for the defective work and in 1996 it brought an action before the Landgericht (Regional Court), Düsseldorf, on the basis of its project-management contract with NCC. It claimed the sum of DM 1,163,657.77, plus interest, in respect of the costs incurred in remedying the alleged defects and consequential damage. 9 The Landgericht dismissed the action. The Oberlandesgericht (Higher Regional Court), Düsseldorf, upheld the decision to dismiss the action. It found that Überseering had transferred its actual centre of administration to Düsseldorf once its shares had been acquired by two German nationals. The Oberlandesgericht found that, as a company incorporated under Netherlands law, Überseering did not have legal capacity in Germany and, consequently, could not bring legal proceedings there. 10 Therefore, the Oberlandesgericht held that Überseering's action was inadmissible. 11 Überseering appealed to the Bundesgerichtshof against the judgment of the Oberlandesgericht. 12 It also appears from Überseering's observations that, in parallel with the proceedings currently pending before the Bundesgerichtshof, an action was brought against Überseering before another German court based on certain unspecified provisions of German law. As a result, it was ordered by the Landgericht Düsseldorf to pay architects' fees, apparently because it was entered on September 11, 1991 in the Düsseldorf land registry as owner of the land on which the garage and the motel refurbished by NCC were built. The questions referred for a preliminary ruling 13 Although it notes that the case law referred to at [4] and [5] of this judgment is disputed in various respects by certain German legal commentators, the

Bundesgerichtshof *23 considers it preferable, in view of the current state of Community law and of company law within the European Union, to continue to follow that case law for a number of reasons. 14 First, it is appropriate to discount any solution which entails (through taking account of different connecting factors) assessing a company's legal situation by reference to several legal systems. According to the Bundesgerichtshof, such a solution leads to legal uncertainty, since it is impossible to segregate clearly the areas of law to be governed by the various legal orders. 15 Secondly, where the connecting factor is taken to be the place of incorporation, the company's founding members are placed at an advantage, since they are able, when choosing the place of incorporation, to choose the legal system which suits them best. Therein lies the fundamental weakness of the incorporation principle, which fails to take account of the fact that a company's incorporation and activities also affect the interests of third parties and of the State in which the company has its actual centre of administration, where that is located in a State other than the one in which the company was incorporated. 16 Thirdly, and by contrast, where the connecting factor is taken to be the actual centre of administration, that prevents the provisions of company law in the State in which the actual centre of administration is situated, which are intended to protect certain vital interests, from being circumvented by incorporating the company abroad. In the present case, the interests which German law is seeking to safeguard are notably those of the company's creditors: the legislation relating to " Gesellschaften mit beschränkter Haftung (GmbH)" (limited liability companies under German law) provides such protection by detailed rules on the initial contribution and maintenance of share capital. In the case of related companies, dependent companies and their minority shareholders also need protection. In Germany such protection is provided by rules governing groups of companies or rules providing for financial compensation and indemnification of shareholders who have been put at a disadvantage by agreements whereby one company agrees to manage another or agrees to pay its profits to another company. Finally, the rules on joint management protect the company's employees. The Bundesgerichtshof points out that not all the Member States have comparable rules. 17 The Bundesgerichtshof nevertheless wonders whether, on the basis that the company's actual centre of administration has been transferred to another country, the freedom of establishment guaranteed by Arts 43 EC and 48 EC does not preclude connecting the company's legal position with the law of the Member State in which its actual centre of administration is located. The answer to that question cannot, according to the Bundesgerichtshof, be clearly deduced from the case law of the Court of Justice. 18 It points out, in that regard, that in The Queen v Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust [FN50] the Court, having stated that companies could exercise their right of establishment by setting up agencies, branches and subsidiaries, or by transferring all their shares to a new company in another Member State, held that, unlike natural persons, companies exist only by virtue of the national legal system which governs their incorporation and *24 operation. It is also apparent from that judgment that the EC Treaty has taken account of the differences in national rules on the conflict of laws and has reserved resolution of the problems associated therewith to future legislation.

FN50 Case 81/87: [1988] E.C.R. 5483; [1988] 3 C.M.L.R. 713. 19 In Centros, [FN51] the Court took exception to a Danish authority's refusal to register a branch of a company validly incorporated in the United Kingdom. However, the Bundesgerichtshof points out that the company had not transferred its seat, since, from its incorporation, its registered office had been in the United Kingdom, whilst its actual centre of administration had been in Denmark. FN51 Case C-212/97: [1999] ECR I-1459; [1999] 2 C.M.L.R. 551. 20 The Bundesgerichtshof wonders whether, in view of Centros, the Treaty provisions on freedom of establishment preclude, in a situation such as that in point in the main proceedings, application of the rules on conflict of laws in force in the Member State in which the actual centre of administration of a company validly incorporated in another Member State is situated when the consequence of those rules is the refusal to recognise the company's legal capacity and, therefore, its capacity to bring legal proceedings in the first Member State to enforce rights under a contract. 21 In those circumstances, the Bundesgerichtshof decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling: "1. Are Articles 43 EC and 48 EC to be interpreted as meaning that the freedom of establishment of companies precludes the legal capacity, and capacity to be a party to legal proceedings, of a company validly incorporated under the law of one Member State from being determined according to the law of another State to which the company has moved its actual centre of administration, where, under the law of that second State, the company may no longer bring legal proceedings there in respect of claims under a contract? 2. If the Court's answer to that question is affirmative: Does the freedom of establishment of companies (Articles 43 EC and 48 EC) require that a company's legal capacity and capacity to be a party to legal proceedings is to be determined according to the law of the State where the company is incorporated?" The first question 22 By its first question, the national court is, essentially, asking whether, where a company formed in accordance with the legislation of a Member State ("A") in which it has its registered office is deemed, under the law of another Member State ("B"), to have moved its actual centre of administration to Member State B, Arts 43 EC and 48 EC preclude Member State B from denying the company legal capacity, and therefore the capacity to bring legal proceedings before its national courts in order to enforce rights under a contract with a company established in Member State B. Observations submitted to the Court 23 For NCC and the German, Spanish and Italian Governments, the Treaty provisions on freedom of establishment do not preclude the legal capacity, *25 and the capacity to be a party to legal proceedings, of a company validly incorporated under the law of one

Member State from being determined under the rules of law of another Member State, to which that company is found to have moved its centre of administration: nor, depending on the circumstances, do they preclude the company from being prevented from enforcing before the courts of the second Member State rights under a contract entered into with a company established in the second State. 24 They base their view, first, on the provisions of the third indent of Art.293 EC, which provides: "Member States shall, so far as is necessary, enter into negotiations with each other with a view to securing for the benefit of their nationals: ... --the mutual recognition of companies or firms within the meaning of the second paragraph of Article 48, the retention of legal personality in the event of transfer of their seat from one country to another ..." 25 In NCC's submission, Art.293 EC is founded on the recognition by all the Member States of the fact that a company incorporated in one Member State does not automatically retain its legal personality in the event of its seat being transferred to another Member State and that it is necessary for the Member States to enter into a specific convention to that effect--a convention which has not as yet been adopted. NCC concludes that the fact that a company may lose its legal personality in the event of its transferring its actual centre of administration to another Member State is compatible with the Community rules on freedom of establishment. The refusal by one Member State to recognise the foreign legal personality of a company incorporated in another Member State, where the company has moved its actual centre of administration to the first State, does not amount to a restriction on freedom of establishment since the company is able to reincorporate itself under the law of the host State. The only rights safeguarded by the freedom of establishment are the right to reincorporation in that State and the right to establish a presence there. 26 According to the German Government, the framers of the Treaty included Arts 43 EC and 48 EC with full knowledge of the significant differences in company law between the Member States and with the intention of leaving intact national competence and the authority of national law as long as there has been no approximation of laws. Even though there are many harmonising directives in the sphere of company law adopted under Art.44 EC, there are currently no directives of that kind regarding the transfer of a company's seat and no multilateral convention has been adopted in that regard pursuant to Art.293 EC. Consequently, as Community law now stands, the application in Germany of the actual or real centre of administration principle and the implications thereof as regards recognition of a company's legal capacity and its capacity to be a party to legal proceedings are compatible with Community law. 27 Likewise, for the Italian Government, the fact that Art.293 EC contemplates the conclusion of conventions by the Member States with a view, in particular, to *26 ensuring that a company retains its legal personality if its seat is transferred from one Member State to another, shows that the question of the retention of legal personality following the transfer of a company's seat is not conclusively dealt with by the provisions of Community law relating to freedom of establishment. 28 The Spanish Government, for its part, points out that the Convention on the Mutual Recognition of Companies and Legal Persons, signed in Brussels on February 29, 1968,

has never entered into force. Therefore, in the absence of a convention concluded between the Member States on the basis of Art.293 EC, there is no harmonisation at Community level such as to settle the question whether a company retains its legal personality in the event of a transfer of its seat. Articles 43 EC and 48 EC are silent in that regard. 29 NCC and the German, Spanish and Italian Governments also submit that their view is endorsed by Daily Mail and General Trust, [FN52] in particular [23] and [24] thereof, which read as follows: "... the Treaty regards the differences in national legislation concerning the required connecting factor and the question whether -- and if so how -- the registered office or real head office of a company incorporated under national law may be transferred from one Member State to another as problems which are not resolved by the rules concerning the right of establishment but must be dealt with by future legislation or conventions. FN52 Cited above. Under those circumstances, Article 52 [of the EEC Treaty (now, after amendment, Article 43 EC)] and Article 58 of the Treaty [(now Article 48 EC)] cannot be interpreted as conferring on companies incorporated under the law of a Member State a right to transfer their central management and control and their central administration to another Member State while retaining their status as companies incorporated under the legislation of the first Member State." 30 The German Government submits that, although it is not disputed that Daily Mail and General Trust concerned relations between a company and the Member State under whose legislation it was incorporated in a case in which the company was moving its actual centre of administration to another Member State, the Court's reasoning in that judgment may be applied to the issue of the relations between a company validly incorporated in one Member State and another Member State (the host State as opposed to the State in which the company was incorporated) to which the company has moved its actual centre of administration. On that basis, it submits that, where a company validly incorporated in one Member State has availed itself of its right of establishment in another Member State by virtue of transferring all its shares to nationals residing in the host State, the question whether, in the host Member State, the law applicable under the rules on conflict of laws allows the company to continue to exist does not fall within the scope of the provisions on freedom of establishment. 31 The Italian Government also claims that it is apparent from Daily Mail and General Trust that the criteria by reference to which companies' identities are determined do not pertain to the exercise of the right of establishment, regulated by *27 Arts 43 EC and 48 EC, but fall to be dealt with under national law. Consequently, the rules relating to freedom of establishment cannot be relied on for the purpose of harmonising the connecting factors, which, as Community law now stands, are determined solely by the national law of the Member States. Since there may be factors connecting a company with several States, it is important that each national legal system determines the circumstances in which companies are to be subject to its particular rules. 32 In the Spanish Government's submission, there is no conflict with Art.48 EC where a company incorporated in accordance with the law of a Member State is required to have

its actual centre of administration there in order to be capable of being considered in another Member State as a company entitled to freedom of establishment. 33 The Spanish Government observes, in that regard, that the first paragraph of Art.48 EC sets out two conditions which must be met if the companies defined in the second paragraph of that article are to enjoy the right of establishment in the same way as nationals of other Member States. First, they must be formed in accordance with the law of a Member State and, second, they must have their registered office, central administration or principal place of business within the Community. It submits that the second condition has been modified by the General Programme for the abolition of restrictions on the freedom of establishment, adopted in Brussels on December 18, 1961. [FN53] FN53 [1962] O.J. Spec. Ed., Second Series (IX), p.7, "the General Programme". 34 Title I, 'Beneficiaries', of the General Programme provides: "... the persons entitled to benefit from the abolition of restrictions on freedom of establishment ... are: ... -- companies and firms formed under the law of a Member State ... and having either the seat prescribed by their statutes, or their centre of administration, or their main establishment situated within the Community or in an overseas country or territory, who wish to establish themselves in order to pursue activities as self-employed persons in a Member State; ... -- companies and firms as above, provided that, where only the seat prescribed by their statutes is situated within the Community or in an overseas country or territory, their activity shows a real and continuous link with the economy of a Member State or of an overseas country or territory; such link shall not be one of nationality ... who wish to set up agencies, branches or subsidiaries in a Member State." 35 The Spanish Government submits that, although the General Programme imposes the requirement for a real and continuous link only for the purpose of the exercise of the freedom to set up a secondary establishment, such a requirement *28 should also apply in the case of the principal establishment, in order to ensure uniformity as regards the connecting factors required for the right of establishment to be enjoyed. 36 In the submission of Überseering, the Netherlands and United Kingdom Governments, the Commission and the EFTA Surveillance Authority, where a company validly incorporated under the law of one Member State ("A") is found, under the law of another Member State ("B"), to have moved its actual centre of administration to Member State B, Arts 43 EC and 48 EC, read together, preclude the conflict rules applying in Member State B from providing that the company's legal capacity, and its capacity to be a party to legal proceedings, are to be determined by reference to the law of Member State B. That would be so where, under the law of Member State B, the company is denied all possibility of enforcing before the national courts rights under a contract with a company established in Member State B. Their arguments in that regard are as follows. 37 First, the Commission argues that under Art.293 EC entry into negotiations with a view to reducing the discrepancies between national laws regarding the recognition of

foreign companies is provided for by that article only "so far as is necessary". If in 1968 there had been a relevant body of case law, it would have not been necessary to have recourse to Art.293 EC. That explains the decisive importance of the Court's case law today in establishing the substance and scope of the freedom of establishment conferred on companies by Arts 43 EC and 48 EC. 38 Secondly, Überseering, the United Kingdom Government, the Commission and the EFTA Surveillance Authority submit that Daily Mail and General Trust [FN54] is irrelevant in the present case. FN54 Cited above. 39 They argue that, as is apparent from the facts at issue in that judgment, the Court was considering the legal consequences, in the Member State in which a company was incorporated, of transferring the company's actual centre of administration to another Member State: accordingly, the judgment cannot form a basis for examining the legal consequences, in the host Member State, of such a transfer. 40 Daily Mail and General Trust applies only to the relationship between the Member State of incorporation and the company which wishes to leave that State whilst retaining the legal personality conferred on it by the legislation thereof. Since companies are creatures of national law, they must continue to observe the requirements laid down by the legislation of their State of incorporation. Daily Mail and General Trust therefore formally acknowledges the right of the Member State of incorporation to set rules on the incorporation and legal existence of companies in accordance with its rules of private international law. It does not, in contrast, decide the question whether a company formed under the law of one Member State must be recognised by another Member State. 41 Thirdly, in the submission of Überseering, the United Kingdom Government, the Commission and the EFTA Surveillance Authority, to answer the question raised in this case, it is appropriate to refer not to Daily Mail and General Trust but rather to Centros, [FN55] since the dispute in Centros concerned, as in the Überseering case, the treatment in the host Member State of a company incorporated under the law of another Member State, which was exercising its right of establishment. FN55 Both cited above. 42 *29 They observe that Centros concerned a secondary establishment in Denmark, the host Member State, of a company, Centros Ltd, which was validly incorporated in the United Kingdom where it had its registered office but did not carry on business. Centros Ltd wished to set up a branch in Denmark in order to carry on its main business activities there. The Danish authorities did not question the company's existence under English law but denied it the right to exercise its freedom of establishment in Denmark by setting up a branch there, since it was not disputed that that form of secondary establishment was intended to avoid Danish rules on company formation, in particular the rules relating to the paying-up of a minimum share capital. 43 In Centros the Court held that a Member State (the host State) must allow a company validly incorporated in another Member State where it has its registered office to register another establishment (in that case, a branch) in the host State, from which it may

develop its entire business. On that basis, the host Member State cannot impose on a company which has been properly formed in another Member State its own substantive company law, in particular the rules on share capital. The Commission submits that the position must be the same where the host Member State invokes its private international law governing companies. 44 For the Netherlands Government, the Treaty provisions on freedom of establishment do not preclude application of the company seat principle as such. However, the consequences which German law attaches to What it regardS as a transfer to Germany of the seat of a company which has, moreover, legal personality by virtue of its incorporation in another Member State constitute a restriction on the freedom of establishment where they lead to a refusal to recognise that company's legal personality. 45 The Netherlands Government observes that in the Treaty the three connecting factors, namely the registered office, the actual centre of administration (central administration) and the principal place of business, are on an equal footing. There is no indication in the Treaty that, to be able to invoke the principle of freedom of establishment, the registered office and the central administration must be located in one and the same Member State. The Netherlands Government consequently contends that a company whose actual centre of administration is no longer in the State in which the company was incorporated is also entitled to the right of establishment. It is therefore contrary to the Treaty provisions on freedom of establishment for a Member State to refuse to recognise the legal capacity of a company validly incorporated in another Member State, which is exercising its freedom to set up a secondary establishment in the host Member State. 46 The United Kingdom Government submits that the provisions of German law at issue in the main proceedings are contrary to Arts 43 EC and 48 EC since their effect is to prevent a company in Überseering's position from carrying on its business through an agency or branch in Germany, if that agency or branch is regarded, under German law, as the actual centre of administration of the company, since those provisions entail the loss of legal capacity, without which a company cannot operate. 47 The EFTA Surveillance Authority adds that freedom of establishment includes not only the right to set up a secondary establishment in another Member State, but also the right, where a company moves its actual centre of administration to *30 another Member State, to retain its original establishment in the Member State of incorporation. The effect of the provisions of German law being applied in the main proceedings is to turn freedom of establishment into an obligation of establishment if the company's legal capacity, and consequently its capacity to be a party to legal proceedings, are to be preserved. They thus constitute a restriction on the freedom of establishment enshrined in the Treaty. That conclusion does not imply that the Member States do not have the power to establish the connecting factors between a company and their territory but that they must exercise that power consistently with the Treaty. 48 Furthermore, the Netherlands and United Kingdom Governments and the EFTA Surveillance Authority stress the fact that Überseering did not intend to transfer to Germany its actual centre of administration in the sense contemplated in German law. Überseering maintains that it did not intend to wind up its activities in the Netherlands in order to reincorporate itself in Germany and that it wishes to remain a Netherlands-law limited-liability company (BV). Furthermore, it is paradoxical that German law should regard it as such for the purpose of legal proceedings brought against it for payment of

architects' fees. 49 The Netherlands Government argued at the hearing that Netherlands law regards a case such as that in the main proceedings as involving the formation of a branch, hence of a secondary establishment. It is wrong to consider the present case on the premise that Überseering's actual centre of administration has moved to Germany merely because there has been a transfer of shares to German nationals residing in Germany. Such a view is peculiar to German private law. There is nothing to suggest that Überseering intended to move its actual centre of administration to Germany. Furthermore, to argue on the basis that the case concerns a primary establishment is to seek to negate the relevance of Centros, in which secondary establishments were at issue as the result of the setting-up of a branch, and to attempt to align this case with Daily Mail and General Trust. 50 The United Kingdom Government points out that Überseering was validly incorporated in the Netherlands, has always been registered in the Amsterdam and Haarlem register of companies as a company incorporated under Netherlands law and has not attempted to move its actual centre of administration to Germany. Since 1994, following a transfer of ownership, it has simply carried on the greater part of its business in Germany and has held certain meetings there. It must therefore be regarded in practice as having acted in Germany through an agency or branch. That situation is quite different from the situation in Daily Mail and General Trust. That case concerned a deliberate attempt to transfer the registered office and management of a company incorporated under English law from the United Kingdom to another Member State, whilst preserving the company's status as a company validly incorporated in the United Kingdom but avoiding the tax-law requirements associated in the United Kingdom with the transfer to another country of a company's management and control. 51 For the EFTA Surveillance Authority, the refusal to recognise Überseering's right to be a party to legal proceedings in Germany by reason of the apparently unsolicited transfer of its actual centre of administration to Germany is indicative of the lack of certainty which may be caused in cross-border transactions when the different private international law rules of the Member States are applied. Since *31 characterisation as a company's actual centre of administration turns, to a large extent, on the facts, it is always possible that different national legal systems and, within them, different courts may have divergent views on what is an actual centre of adminisTration. Moreover, it is increasingly difficult to identify a company's actual centre of administration in an international, computerised economy, in which the physical presence of decision-makers becomes increasingly unnecessary. Findings of the Court As to whether the Treaty provisions on freedom of establishment apply 52 In limine and contrary to the submissions of both NCC and the German, Spanish and Italian Governments, the Court must make clear that where a company which is validly incorporated in one Member State ("A") in which it has its registered office is deemed, under the law of a second Member State ("B"), to have moved its actual centre of administration to Member State B following the transfer of all its shares to nationals of that State residing there, the rules which Member State B applies to that company do not,

as Community law now stands, fall outside the scope of the Community provisions on freedom of establishment. 53 In that regard, it is appropriate to begin by rejecting the arguments based on Art.293 EC, which were put forward by NCC and the German, Spanish and Italian Governments. 54 As the Advocate General maintained at point 42 of his Opinion, Art.293 EC does not constitute a reserve of legislative competence vested in the Member States. Although Art.293 EC gives Member States the opportunity to enter into negotiations with a view, inter alia, to facilitating the resolution of problems arising from the discrepancies between the various laws relating to the mutual recognition of companies and the retention of legal personality in the event of the transfer of their seat from one country to another, it does so solely "so far as is necessary", that is to say if the provisions of the Treaty do not enable its objectives to be attained. 55 More specifically, it is important to point out that, although the conventions which may be entered into pursuant to Art.293 EC may, like the harmonising directives provided for in Art.44 EC, facilitate the attainment of freedom of establishment, the exercise of that freedom can none the less not be dependent upon the adoption of such conventions. 56 In that regard, it must be borne in mind that, as the Court has already had occasion to point out, the freedom of establishment, conferred by Art.43 EC on Community nationals, includes the right for them to take up and pursue activities as self-employed persons and to set up and manage undertakings under the same conditions as are laid down by the law of the Member State of establishment for its own nationals. Furthermore, according to the actual wording of Art.48 EC, "companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community shall, for the purposes of [the provisions of the Treaty concerning the right of establishment], be treated in the same way as natural persons who are nationals of Member States". 57 *32 The immediate consequence of this is that those companies or firms are entitled to carry on their business in another Member State. The location of their registered office, central administration or principal place of business constitutes the connecting factor with the legal system of a particular Member State in the same way as does nationality in the case of a natural person. 58 The Court's reasoning in Centros was founded on those premises. [FN56] FN56 paras [19] & [20]. 59 A necessary precondition for the exercise of the freedom of establishment is the recognition of those companies by any Member State in which they wish to establish themselves. 60 Accordingly, it is not necessary for the Member States to adopt a convention on the mutual recognition of companies in order for companies meeting the conditions set out in Art.48 EC to exercise the freedom of establishment conferred on them by Arts 43 EC and 48 EC, which have been directly applicable since the transitional period came to an end. It follows that no argument that might justify limiting the full effect of those articles can be derived from the fact that no convention on the mutual recognition of companies has as yet been adopted on the basis of Art.293 EC.

61 Secondly, it is important to consider the argument based on the decision in Daily Mail and General Trust, which was central to the arguments put to the Court. It was cited in order, in some way, to assimilate the situation in Daily Mail and General Trust to the situation which under German law entails the loss of legal capacity and of the capacity to be a party to legal proceedings by a company incorporated under the law of another Member State. 62 It must be stressed that, unlike Daily Mail and General Trust, which concerned relations between a company and the Member State under whose laws it had been incorporated in a situation where the company wished to transfer its actual centre of administration to another Member State whilst retaining its legal personality in the State of incorporation, the present case concerns the recognition by one Member State of a company incorporated under the law of another Member State, such a company being denied all legal capacity in the host Member State where it takes the view that the company has moved its actual centre of administration to its territory, irrespective of whether in that regard the company actually intended to transfer its seat. 63 As the Netherlands and United Kingdom Governments and the Commission and the EFTA Surveillance Authority have pointed out, Überseering never gave any indication that it intended to transfer its seat to Germany. Its legal existence was never called in question under the law of the State where it was incorporated as a result of all its shares being transferred to persons resident in Germany. In particular, the company was not subject to any winding-up measures under Netherlands law. Under Netherlands law, it did not cease to be validly incorporated. 64 Moreover, even if the dispute before the national court is seen as concerning a transfer of the actual centre of administration from one country to another, the interpretation of Daily Mail and General Trust put forward by NCC and the German, Spanish and Italian Governments is incorrect. 65 *33 In that case, Daily Mail and General Trust Plc, a company formed in accordance with the law of the United Kingdom and having both its registered office and actual centre of administration there, wished to transfer its centre of administration to another Member State without losing its legal personality or ceasing to be a company incorporated under English law. This required the consent of the competent United Kingdom authorities, which they refused to give. The company initiated proceedings against the authorities before the High Court of Justice, Queen's Bench Division, seeking an order that Arts 52 and 58 of the EEC Treaty gave it the right to transfer its actual centre of administration to another Member State without prior consent and without loss of its legal personality. 66 Thus, unlike the case before the national court in this instance, Daily Mail and General Trust did not concern the way in which one Member State treats a company which is validly incorporated in another Member State and which is exercising its freedom of establishment in the first Member State. 67 Asked by the High Court of Justice whether the Treaty provisions on freedom of establishment conferred on a company the right to transfer its centre of management to another Member State, the Court observed, at [19] of Daily Mail and General Trust, that a company, which is a creature of national law, exists only by virtue of the national legislation which determines its incorporation and functioning. 68 At [20] of that judgment, the Court pointed out that the legislation of the Member

States varies widely in regard both to the factor providing a connection to the national territory required for the incorporation of a company and to the question whether a company incorporated under the legislation of a Member State may subsequently modify that connecting factor. 69 The Court concluded, at [23] of the judgment, that the Treaty regarded those differences as problems which were not resolved by the Treaty rules concerning freedom of establishment but would have to be dealt with by legislation or conventions, which the Court found had not yet been done. 70 In so doing, the Court confined itself to holding that the question whether a company formed in accordance with the legislation of one Member State could transfer its registered office or its actual centre of administration to another Member State without losing its legal personality under the law of the Member State of incorporation and, in certain circumstances, the rules relating to that transfer were determined by the national law in accordance with which the company had been incorporated. It concluded that a Member State was able, in the case of a company incorporated under its law, to make the company's right to retain its legal personality under the law of that State subject to restrictions on the transfer of the company's actual centre of administration to a foreign country. 71 By contrast, the Court did not rule on the question whether where, as here, a company incorporated under the law of a Member State ("A") is found, under the law of another Member State ("B"), to have moved its actual centre of administration to Member State B, that State is entitled to refuse to recognise the legal personality which the company enjoys under the law of its State of incorporation ("A"). 72 Thus, despite the general terms in which [23] of Daily Mail and General Trust is cast, the Court did not intend to recognise a Member State as having the power, *34 vis-à-vis companies validly incorporated in other Member States and found by it to have transferred their seat to its territory, to subject those companies' effective exercise in its territory of the freedom of establishment to compliance with its domestic company law. 73 There are, therefore, no grounds for concluding from Daily Mail and General Trust that, where a company formed in accordance with the law of one Member State and with legal personality in that State exercises its freedom of establishment in another Member State, the question of recognition of its legal capacity and its capacity to be a party to legal proceedings in the Member State of establishment falls outside the scope of the Treaty provisions on freedom of establishment, even when the company is found, under the law of the Member State of establishment, to have moved its actual centre of administration to that State. 74 Thirdly, the Court rejects the Spanish Government's argument that, in a situation such as that in point before the national court, Title I of the General Programme subordinates the benefit of the freedom of establishment guaranteed by the Treaty to the requirement that there be a real and continuous link with the economy of a Member State. 75 It is apparent from the wording of the General Programme that it requires a real and continuous link solely in a case in which the company has nothing but its registered office within the Community. That is unquestionably not the position in the case of Überseering whose registered office and actual centre of administration are within the Community. As regards the situation just described, the Court found, at [19] of Centros, that under Art.58 of the Treaty companies formed in accordance with the law of a

Member State and having their registered office, central administration or principal place of business within the Community are to be treated in the same way as natural persons who are nationals of Member States. 76 It follows from the foregoing considerations that Überseering is entitled to rely on the principle of freedom of establishment in order to contest the refusal of German law to regard it as a legal person with the capacity to be a party to legal proceedings. 77 Furthermore, it must be borne in mind that as a general rule the acquisition by one or more natural persons residing in a Member State of shares in a company incorporated and established in another Member State is covered by the Treaty provisions on the free movement of capital, provided that the shareholding does not confer on those natural persons definite influence over the company's decisions and does not allow them to determine its activities. By contrast, where the acquisition involves all the shares in a company having its registered office in another Member State and the shareholding confers a definite influence over the company's decisions and allows the shareholders to determine its activities, it is the Treaty provisions on freedom of establishment which apply. [FN57] FN57 See, to that effect, Baars (C-251/98): [2000] E.C.R. I-2787; [2002] 1 C.M.L.R. 49, at [21] & [22]. As to whether there is a restriction on freedom of establishment 78 The Court must next consider whether the refusal by the German courts to recognise the legal capacity and capacity to be a party to legal proceedings of a *35 company validly incorporated under the law of another Member State constitutes a restriction on freedom of establishment. 79 In that regard, in a situation such as that in point in the main proceedings, a company validly incorporated under the law of, and having its registered office in, a Member State other than Germany has under German law no alternative to reincorporation in Germany if it wishes to enforce before a German court its rights under a contract entered into with a company incorporated under German law. 80 Überseering, which is validly incorporated in the Netherlands and has its registered office there, is entitled under Arts 43 EC and 48 EC to exercise its freedom of establishment in Germany as a company incorporated under Netherlands law. It is of little significance in that regard that, after the company was formed, all its shares were acquired by German nationals residing in Germany, since that has not caused Überseering to cease to be a legal person under Netherlands law. 81 Indeed, its very existence is inseparable from its status as a company incorporated under Netherlands law since, as the Court has observed, a company exists only by virtue of the national legislation which determines its incorporation and functioning. [FN58] The requirement of reincorporation of the same company in Germany is therefore tantamount to outright negation of freedom of establishment. FN58 See, to that effect, Daily Mail and General Trust, cited above, at [19]. 82 In those circumstances, the refusal by a host Member State ("B") to recognise the legal

capacity of a company formed in accordance with the law of another Member State ("A") in which it has its registered office on the ground, in particular, that the company moved its actual centre of administration to Member State B following the acquisition of all its shares by nationals of that State residing there, with the result that the company cannot, in Member State B, bring legal proceedings to defend rights under a contract unless it is reincorporated under the law of Member State B, constitutes a restriction on freedom of establishment which is, in principle, incompatible with Arts 43 EC and 48 EC. As to whether the restriction on freedom of establishment is justified 83 Finally, it is appropriate to determine whether such a restriction on freedom of establishment can be justified on the grounds advanced by the national court and by the German Government. 84 The German Government has argued in the alternative, should the Court find that application of the company seat principle entails a restriction on freedom of establishment, that the restriction applies without discrimination, is justified by overriding requirements relating to the general interest and is proportionate to the objectives pursued. 85 In the German Government's submission, the lack of discrimination arises from the fact that the rules of law proceeding from the company seat principle apply not only to any foreign company which establishes itself in Germany by moving its actual centre of administration there but also to companies incorporated under German law which transfer their actual centre of administration out of Germany. 86 As regards the overriding requirements relating to the general interest put forward in order to justify the alleged restriction, the German Government *36 maintains, first, that in other spheres, secondary Community law assumes that the administrative head office and the registered office are identical. Community law has thus recognised the merits, in principle, of a single registered and administrative office. 87 In the German Government's submission, the German rules of private international company law enhance legal certainty and creditor protection. There is no harmonisation at Community level of the rules for protecting the share capital of limited liability companies and such companies are subject in Member States other than the Federal Republic of Germany to requirements which are in some respects much less strict. The company seat principle as applied by German law ensures that a company whose principal place of business is in Germany has a fixed minimum share capital, something which is instrumental in protecting parties with whom it enters into contracts and its creditors. That also prevents distortions of competition since all companies whose principal place of business is in Germany are subject to the same legal requirements. 88 The German Government submits that further justification is provided by the protection of minority shareholders. In the absence of a Community standard for the protection of minority-shareholders, a Member State must be able to apply to any company whose principal place of business is within its territory the same legal requirements for the protection of minority shareholders. 89 Application of the company seat principle is also justified by employee protection through the joint management of undertakings on conditions determined by law. The German Government argues that the transfer to Germany of the actual centre of

administration of a company incorporated under the law of another Member State could, if the company continued to be a company incorporated under that law, involve a risk of circumvention of the German provisions on joint management, which allow the employees, in certain circumstances, to be represented on the company's supervisory board. Companies in other Member States do not always have such a body. 90 Finally, any restriction resulting from the application of the company seat principle can be justified on fiscal grounds. The incorporation principle, to a greater extent than the company seat principle, enables companies to be created which have two places of residence and which are, as a result, subject to taxation without limits in at least two Member States. There is a risk that such companies might claim and be granted tax advantages simultaneously in several Member States. By way of example, the German Government mentions the cross-border offsetting of losses against profits between undertakings within the same group. 91 The Netherlands and United Kingdom Governments, the Commission and the EFTA Surveillance Authority submit that the restriction in question is not justified. They point out in particular that the aim of protecting creditors was also invoked by the Danish authorities in Centros to justify the refusal to register in Denmark a branch of a company which had been validly incorporated in the United Kingdom and all of whose business was to be carried on in Denmark but which did not meet the requirements of Danish law regarding the provision and paying-up of a minimum amount of share capital. They add that it is not certain that requirements associated with a minimum amount of share capital are an effective way of protecting creditors. 92 *37 It is not inconceivable that overriding requirements relating to the general interest, such as the protection of the interests of creditors, minority shareholders, employees and even the taxation authorities, may, in certain circumstances and subject to certain conditions, justify restrictions on freedom of establishment. 93 Such objectives cannot, however, justify denying the legal capacity and, consequently, the capacity to be a party to legal proceedings of a company properly incorporated in another Member State in which it has its registered office. Such a measure is tantamount to an outright negation of the freedom of establishment conferred on companies by Arts 43 EC and 48 EC. 94 Accordingly, the answer to the first question must be that, where a company formed in accordance with the law of a Member State ("A") in which it has its registered officeis deemed, under the law of another Member State ("B"), to have moved its actual centre of administration to Member State B, Arts 43 EC and 48 EC preclude Member State B from denying the company legal capacity and, consequently, the capacity to bring legal proceedings before its national courts for the purpose of enforcing rights under a contract with a company established in Member State B. The second question referred to the Court 95 It follows from the answer to the first question referred to the Court for a preliminary ruling that, where a company formed in accordance with the law of a Member State ("A") in which it has its registered office exercises its freedom of establishment in another Member State ("B"), Arts 43 EC and 48 EC require Member State B to recognise the legal capacity and, consequently, the capacity to be a party to legal proceedings which the

company enjoys under the law of its State of incorporation ("A"). Costs 96 The costs incurred by the German, Spanish, Italian, Netherlands and United Kingdom Governments and by the Commission and by the EFTA Surveillance Authority, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. R1 Order On those grounds, THE COURT, in answer to the questions referred to it by the Bundesgerichtshof by order of March 30, 2000, Hereby Rules: 1. Where a company formed in accordance with the law of a Member State ("A") in which it has its registered office is deemed, under the law of another Member State ("B"), to have moved its actual centre of *38 administration to Member State B, Arts 43 EC and 48 EC preclude Member State B from denying the company legal capacity and, consequently, the capacity to bring legal proceedings before its national courts for the purpose of enforcing rights under a contract with a company established in Member State B. 2. Where a company formed in accordance with the law of a Member State ("A") in which it has its registered office exercises its freedom of establishment in another Member State ("B"), Arts 43 EC and 48 EC require Member State B to recognise the legal capacity and, consequently, the capacity to be a party to legal proceedings which the company enjoys under the law of its State of incorporation ("A").

(c) Sweet & Maxwell Limited [2005] 1 C.M.L.R. 1