Legal issue: The right of the body corporate to transfer its seat to another Member State without changing the applicable law.
Background of the case: Hungarian partnership ‘Cartesio’ wished to transfer its registered seat abroad (to Italy), while continuing to operate under Hungarian company law, i.e. without changing the applicable law. Since the Hungarian law followed the rule whereby a change of company’s registered seat to a foreign country required liquidation procedure in order to be re-incorporated in another member state, it was not possible that after the seat transfer ‘Cartesio’ could be still governed by the law of its original incorporation. Therefore, the national court sought the ECJ’s interpretation on Articles 43 EC and 48 EC in the light of the national provisions which prevented a Hungarian company from transferring its seat to another Member State by requiring its prior winding-up. It should be emphasised that the Cartesio case is to a considerable extent similar to the ECJ’s Daily Mail decision, since it also raises the question of the transfer abroad of the de facto head office.
The decision: The European Court of Justice ruled that Articles 43 EC and 48 EC do not preclude national legislation that prevents a company from transferring its seat to another Member State while remaining under the governance of the law of the Member State of incorporation. The Court did not overrule its ‘Daily Mail’ decision, which allows Member States to restrict the transfer of the central administration of a company abroad. On the contrary, it appears that the ECJ reaffirmed its ‘Daily Mail doctrine’. The Court stated:
‘As Community law now stands, Articles 43 EC and 48 EC are to be interpreted as not precluding legislation of a Member State under which a company incorporated under the law of that Member State may not transfer its seat to another Member State whilst retaining its status as a company governed by the law of the Member State of incorporation.’ (…) ‘The EEC Treaty regarded… the question whether – and, if so, how – the registered office (siège statutaire) or real seat (siège réel) 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 which must be dealt with by future legislation or conventions’ (para 108).
On the other hand, slightly puzzling was the obiter dictum statement that freedom of establishment covers the possibility of a company converting itself into a company governed by the law of another Member State – which is de facto the transfer of the registered office (paras 111–113).
Significance and implications: The consequences of this obiter dictum have not been finally clarified. However, there are reasons to believe that the obiter dictum applies only if national law completely forbids any kind of transfer of seat to another Member State. As long as one form of transfer is allowed under national law, Arts 43 and 48 EC do not apply. In general, it seems that Cartesio is an amendment to ‘Daily Mail doctrine’. In Daily Mail a company could not transfer without losing its legal personality under the law of incorporation and was denied the right to transfer at all. In Cartesio the company was denied the possibility to transfer while remaining under governance of home law but it was awarded a possibility to rely on the freedom of establishment, retain legal personality and transfer with a change of the applicable law.