Making the Case for a Rome V Regulation on the Law Applicable to Companies

Abstract

There is significant legal variation and uncertainty in the conflict of laws rules applicable to companies in the EU. While the case law of the Court of Justice on the freedom of establishment has clarified some questions, it is evident that case law cannot provide for an adequate level of legal certainty. The main recommendation of this article is that private international company law in the EU should be harmonized. The article discusses the main challenges that a future regulation to this effect—called here ‘Rome V Regulation on the Law Applicable to Companies’—would have to overcome. Some of those are of a political nature: for instance, countries may fear that it may become easier for companies to evade domestic company law (eg, rules of employee co-determination), and there are specific considerations that concern companies established in third countries. Another challenge is that a future regulation on the law applicable to companies has to be consistent with existing EU conflict of laws rules as regards, for example, insolvency and tort law, while also complying with the freedom of establishment of the Treaty. It is the aim of this article to discuss these questions in detail, notably the general considerations for harmonisation in this field, a potential harmonization based on the ‘incorporation theory’, how it may be possible to overcome some contentious issues such as the definition of the lex societatis or the relationship between the lex societatis and other areas of law, and the prospects for future international harmonization.

The Concept of a Virtual Registered Office in EU Law: Challenges and Opportunities

“…110 We also acknowledge the clear advantages of incorporation theory, namely its certainty and formality, and support the suggestion of Lina Mikalonienė. 111 Although in some sources Lithuania is posited as an incorporation theory jurisdiction, 112 the Lithuanian Civil Code defines the legal entity's registered office as the seat of its principal managing body, which is a sign of the real seat theory. 113 For foreign entities, the situation is different because according to the Lithuanian Civil Code they are governed by the laws of the state where they are founded.…”