Companies' Freedom of Establishment after the ECJ Cartesio Judgment

Abstract

The ECJ's Cartesio judgment should be understood as overriding the Daily Mail judgment of 1988. Under Daily Mail, Community rules governing freedom of establishment were waved away as not applicable, while in Cartesio they are merely not precluding national legislation controlling emigration. According to Cartesio, restrictions on transferring the centre of administration generally pass the test of compatibility. Nonetheless, in the authors' view, there should be no justification for sanctions of annulment or immediate dissolution of a company which has attempted to move its centre of administration to another Member State. In Cartesio, the ECJ proclaimed the right of companies to emigrate for the purpose of conversion into a company form of the host state. By analogy with SEVIC Systems, it seems that the host state may not refuse to give the immigré company permission to convert if similar conversion is open for local legal forms, unless justified by overriding requirements in the public interest. To sum up, the ECJ provides a complex method to determine and protect the freedom of companies to emigrate. Still, this method seems preferable to the other option: forcing Member States to tolerate emigration without regard to their legal tradition and the ensuing difficulties.