Societas Europaea: between Harmonization and Regulatory Competition
Authors: Sasso Lorenzo 
Published: March 2022

During the past years in Europe, the possibility of a market for corporate incorporations, namely the freedom of European companies to choose their country for incorporation, has been blocked, in part, by the difficult economic conditions and in part by the operation of national level rules on the conflicts of laws which limit the degree to which a company can choose its applicable law. National level laws also widely differ in their attitude towards the movement of companies from one jurisdiction to another and this factor does not help a resumption of the companies and of the investments in the private equity sector.

This situation has been changed by some judgments of the European Court of Justice that underscored, in the cases of Überseering, Centros, Inspire Art and Sevic, the EU Treaty’s principles of Free Establishment and Movement of Firms. In these cases legal entities and human beings were considered in the same way. This confirmed the ECJ’s approach that originates from Articles 43 and 48 of the EC Treaty which together with some efforts of the EU Legislator have tried to facilitate a mechanism of corporate entry and exit that possibly will encourage a direct competition of the different corporate law systems provided by the European Member States. Along this line, the proposed Directive on Cross-border Transfer of the Registered Offices of Limited Liability Companies and the Directive on Cross-border Mergers (2005/56/EC) try to provide a common solution to the issue of re-incorporation.

In the European market for corporate control, where one size does not fit all, decentralized solutions can permit Member States to continue patterns of diversity, while regulatory arbitrage allows individual firms for which the national model is inappropriate to opt out. Moreover, in an area such as company law, where the configuration of the optimal rules is hotly debated, regulatory competition, if driven by the market from the bottom together with a harmonization of the law implemented by the top through Directives, can lead to a conversion of the European corporate law and build up, at the same time, a ‘market-for-rules’ that is essential for economic growth.

In this paper, I will discuss the role of the legal instrument available for companies since 8 October 2004, namely the Statute for a European Company (SE), underlying some of its applications and implications in the process of harmonization of the law. In particular, I will try to explain why this regulation, even if it is obsolete in some parts and incomplete in some others, being a motivation for regulatory competition, can represent a step forward towards the development of appropriate legal rules.

In the next sections, I will describe the experience of the European legislator trying to create a common model of European Company (part 2) and to what extent nowadays EU law permits companies to migrate from a member country to another one (part 3). Then, analysing the European market for corporate control, I will show how an efficient regulatory competition, in which arbitrage will be motivated by a desire to increase total value rather than the private interests of one group, can be feasible and attractive (parts 4 and 5). Eventually I will summarize adding some conclusions (part 6).