INSPIRE ART
JUDGMENT OF THE COURT
30 September 2003 *
In Case C-167/01,
REFERENCE to the Court under Article 234 EC by the Kantongerecht te
Amsterdam (Netherlands) for a preliminary ruling in the proceedings pending
before that court between
Kamer van Koophandel en Fabrieken voor Amsterdam
and
Inspire Art Ltd,
on the interpretation of Articles 43 EC, 46 EC and 48 EC,
THE COURT,
composed of: G.C. Rodríguez Iglesias, President, J.-P. Puissochet, M. Wathelet
(Rapporteur), R. Schintgen and C.W.A. Timmermans (Presidents of Chambers),
* Language of the case: Dutch.
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C. Gulmann, D.A.O. Edward, A. La Pergola, P. Jann, V. Skouris, F. Macken,
N. Colneric, S. von Bahr, J.N. Cunha Rodrigues and A. Rosas, Judges,
Advocate General: S. Alber,
Registrar: M.-F. Contet, Principal Administrator,
after considering the written observations submitted on behalf of:
— the Kamer van Koophandel en Fabrieken voor Amsterdam, by C.J.J.C. van
Nispen, advocaat,
— Inspire Art Ltd, by M.E. van Wissen and G. van der Wal, advocaten,
— the Netherlands Government, by H.G. Sevenster, acting as Agent,
— the German Government, by B. Muttelsee-Schön and A. Dittrich, acting as
Agents,
— the Italian Government, by I.M. Braguglia, acting as Agent, and by
M. Fiorilli, Avvocato dello Stato,
— the Austrian Government, by H. Dossi, acting as Agent,
— the United Kingdom Government, by R. Magrill, acting as Agent, and
J. Stratford, Barrister,
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— the Commission of the European Communities, by C. Schmidt and C. van der
Hauwaert, acting as Agents,
having regard to the Report for the Hearing,
after hearing the oral observations of the Kamer van Koophandel en Fabrieken
voor Amsterdam, represented by R. Hermans and E. Pijnacker Hordijk,
advocaten, of Inspire Art Ltd, represented by G. van der Wal, of the Netherlands
Government, represented by J.G.M. van Bakel, acting as Agent, of the German
Government, represented by A. Dittrich, of the United Kingdom Government,
represented by J. Stratford, and of the Commission, represented by C. Schmidt
and H. van Lier, acting as Agent, at the hearing on 26 November 2002,
after hearing the Opinion of the Advocate General at the sitting on 30 January
2003,
gives the following
Judgment
1 By order of 5 February 2001, received at the Court on 19 April 2001, the
Kantongerecht te Amsterdam (Amsterdam Cantonal Court) referred to the Court
for a preliminary ruling under Article 234 EC two questions on the interpretation
of Articles 43 EC, 46 EC and 48 EC.
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2 Those questions were raised in proceedings between the Kamer van Koophandel
en Fabrieken voor Amsterdam (Amsterdam Chamber of Commerce and
Industry), Netherlands ('the Chamber of Commerce') and Inspire Art Ltd, a
company governed by the law of England and Wales ('Inspire Art'), concerning
the obligation imposed on Inspire Art's branch in the Netherlands to record, with
its registration in the Dutch commercial register, its description as a 'formeel
buitenlandse vennootschap' (formally foreign company) and to use that
description in its business dealings, such obligations being imposed by the Wet
op de Formeel Buitenlandse Vennootschappen (Law on Formally Foreign
Companies) of 17 December 1997 (Staatsblad 1997 No 697, 'the WFBV).
I — The legal framework
The relevant provisions of Community law
3 The first paragraph of Article 43 EC provides:
'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.'
4 Article 48 EC extends entitlement to freedom of establishment, subject to the
same conditions as those laid down for individuals who are nationals of the
Member States, to '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'.
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5 Article 46 EC permits the Member States to restrict the freedom of establishment
of foreign nationals by adopting 'provisions laid down by law, regulation or
administrative action', in so far as such provisions are justified 'on grounds of
public policy, public security or public health'.
6 Article 44(2)(g) EC empowers the Council of the European Union, for the
purpose of giving effect to freedom of establishment, to coordinate 'to the
necessary extent the safeguards which, for the protection of the interests of
members and others, are required by Member States of companies or firms within
the meaning of the second paragraph of Article 48 of the EC Treaty with a view
to making such safeguards equivalent throughout the Community.'
7 Various directives have in that manner been adopted by the Council on that basis
('company-law directives') and, in particular, the following directives referred to
in the dispute in the main proceedings.
8 The First Council Directive 68/151/EEC of 9 March 1968 on coordination of
safeguards which, for the protection of the interests of members and others, are
required by Member States of companies within the meaning of the second
paragraph of Article 58 of the Treaty, with a view to making such safeguards
equivalent throughout the Community (OJ, English Special Edition 1968 (I),
p. 41, 'the First Directive'), applies to companies with share capital. It provides
for three measures calculated to protect the interests of other persons dealing with
those companies: the opening of a file containing certain obligatory information
for each company registered in the relevant commercial register, harmonisation
of the national rules on the validity and enforceability of obligations entered into
in the name of the company (including companies being formed) and the drawing
up of a list exhaustively setting out the cases entailing the nullity of a company.
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9 The Second Council Directive 77/91/EEC of 13 December 1976 on coordination
of safeguards which, for the protection of the interests of members and others, are
required by Member States of companies within the meaning of the second
paragraph of Article 58 of the Treaty, with regard to the formation of public
limited liability companies and the maintenance and alteration of their capital,
with a view to making such safeguards equivalent (OJ 1977 L 26, p. 1, 'the
Second Directive'), specifies the information which must mandatorily be given in
the statutes or the instrument of incorporation of public limited companies and
the minimum amount of share capital required for such companies and it
provides for harmonised rules concerning contributions to assets, paying up of
shares, the nominal value of shares and the distribution of dividends to
shareholders.
10 The Fourth Council Directive 78/660/EEC of 25 July 1978 based on
Article 54(3)(g) of the Treaty on the annual accounts of certain types of
companies (OJ 1978 L 222, p. 11, 'the Fourth Directive') applies to companies
limited by shares. It harmonises national provisions relating to the drawing up of
the annual accounts of undertakings, their content, structure and publication.
1 1 The Seventh Council Directive 83/349/EEC of 13 June 1983 based on
Article 54(3)(g) of the Treaty on consolidated accounts (OJ 1983 L 193, p. 1,
'the Seventh Directive') pursues the same objective as the Fourth Directive with
regard to the drawing up of consolidated accounts.
1 2 The Eleventh Council Directive 89/666/EEC of 21 December 1989 concerning
disclosure requirements in respect of branches opened in a Member State by
certain types of company governed by the law of another State (OJ 1989 L 395,
p. 36, 'the Eleventh Directive') concerns the branches of partnerships and
companies with share capital.
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13 According to the third recital in the preamble to the Eleventh Directive, that act
was adopted in consideration of the fact that 'the opening of a branch, like the
creation of a subsidiary, is one of the possibilities currently open to companies in
the exercise of their right of establishment in another Member State'.
1 4 The fourth recital in the preamble to that directive recognises that 'in respect of
branches the lack of coordination, in particular concerning disclosure, gives rise
to some disparities, in the protection of shareholders and third parties, between
companies which operate in other Member States by opening branches and those
which operate there by creating subsidiaries'.
15 According to the fifth recital in the preamble to that directive 'in this field the
differences in the laws of the Member States may interfere with the exercise of the
right of establishment... [and] it is therefore necessary to eliminate such
differences in order to safeguard, inter alia, the exercise of that right'.
16 The 12th recital in the preamble states that the Eleventh Directive in no way
affects the disclosure requirements for branches under other provisions of, for
example, employment law on the workers' right to information and tax law, or
for statistical purposes.
17 Article 2(1) of the Eleventh Directive provides a list of the information which
must be disclosed in the Member State in which the branch is established, namely:
'(a) the address of the branch;
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(b) the activities of the branch;
(c) the register in which the company file mentioned in Article 3 of Council
Directive 68/151/EEC is kept, together with the registration number in that
register;
(d) the name and legal form of the company and the name of the branch if that is
different from the name of the company;
(e) the appointment, termination of office and particulars of the persons who are
authorised to represent the company in dealings with third parties and in
legal proceedings:
— as a company organ constituted pursuant to law or as members of any
such organ, in accordance with the disclosure by the company as provided
for in Article 2(1)(d) of Directive 68/151/EEC,
— as permanent representatives of the company for the activities of the
branch, with an indication of the extent of their powers;
(f) the winding-up of the company, the appointment of liquidators, particulars
concerning them and their powers and the termination of the liquidation in
accordance with disclosure by the company as provided for in Article 2(1)(h),
(j) and (k) of Directive 68/151/EEC,
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— insolvency proceedings, arrangements, compositions, or any analogous
proceedings to which the company is subject;
(g) the accounting documents in accordance with Article 3;
(h) the closure of the branch.'
18 Furthermore, Article 2(2) of the Eleventh Directive permits the Member State in
which the branch has been opened to provide for additional disclosure
requirements concerning the following:
'(a) the signature of the persons referred to in paragraph 1(e) and (f) of this
Article;
(b) the instruments of constitution and the memorandum and articles of
association if they are contained in a separate instrument in accordance
with Article 2(1)(a), (b) and (c) of Directive 68/151/EEC, together with
amendments to those documents;
(c) an attestation from the register referred to in paragraph 1(c) of this Article
relating to the existence of the company;
(d) an indication of the securities on the company's property situated in that
Member State, provided such disclosure relates to the validity of those
securities.'
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19 Article 4 of the Eleventh Directive provides that the Member State in which the
branch has been opened may stipulate that another official language of the
Community must be used and that the translation of the documents published
must be certified, in particular in respect of the publication referred to in
Article 2(2)(b) of that directive.
20 Article 6 of the Eleventh Directive provides that the Member States are to
prescribe that letters and order forms used by a branch are to state, in addition to
the information prescribed by Article 4 of the First Directive, the register in which
the file in respect of the branch is kept together with the number of the branch in
that register.
21 Finally, Article 12 of the Eleventh Directive requires the Member States to
provide for appropriate penalties for failure to comply with the disclosure
requirements laid down by that directive in respect of branches in the host State.
The relevant provisions of national law
22 Article 1 of the WFBV defines a 'formally foreign company' as 'a capital company
formed under laws other than those of the Netherlands and having legal
personality, which carries on its activities entirely or almost entirely in the
Netherlands and also does not have any real connection with the State within
which the law under which the company was formed applies...'.
23 Articles 2 to 5 of the WFBV impose on formally foreign companies various
obligations concerning the company's registration in the commercial register, an
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indication of that status in all the documents produced by it, the minimum share
capital and the drawing-up, production and publication of the annual documents.
The WFBV also provides for penalties in case of non-compliance with those
provisions.
24 In particular, Article 2 of the WFBV requires a company falling within the
definition of a formally foreign company to be registered as such in the
commercial register of the host State. An authentic copy in Dutch, French,
German or English, or a copy certified by a director, of the instrument
constituting the company must also be filed in the commercial register of the host
State, and a copy of the memorandum and articles of association if they are
contained in a separate instrument. The date of the first registration of that
company, the national register in which and the number under which it is
registered must also appear in the commercial register and, in the case of
companies with a single member, certain information concerning that sole
shareholder.
25 Article 4(4) provides for directors to be jointly and severally liable with the
company for legal acts carried out in the name of the company during their
directorship until the requirement of registration in the commercial register has
been fulfilled.
26 Pursuant to Article 3 of the WFBV, all documents and notices in which a formally
foreign company appears or which it produces, except telegrams and advertisements,
must state the company's full name, legal form, registered office and chief
place of business, and the registration number, the date of first registration and
the register in which it is required to be registered under the legislation applicable
to it. That article also requires it to be indicated that the company is formally
foreign and prohibits the making of statements in documents or publications
which give the false impression that the undertaking belongs to a Netherlands
legal person.
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27 Pursuant to Article 4( 1 ) of the WFBV, the subscribed capital of a formally foreign
company must be at least equal to the minimum amount required of Netherlands
limited companies by Article 2:178 of the Burgerlijke Wetboek (Netherlands Civil
Code, 'the BW), which was EUR 18 000 on 1 September 2000 (Staatsblad 2000,
N 322). The paid-up share capital must be at least equal to the minimum capital
(Article 4(2) of the WFBV, referring back to Article 2:178 of the BW). In order to
ensure that formally foreign companies fulfil those conditions, an auditor's
certificate must be filed in the commercial register (Article 4(3) of the WFBV).
28 Until the conditions relating to capital and paid-up share capital have been
satisfied, the directors are jointly and severally liable with the company for all
legal acts carried out during their directorship which are binding on the company.
The directors of a formally foreign company are likewise jointly and severally
responsible for the company's acts if the capital subscribed and paid up falls
below the minimum required, having originally satisfied the minimum capital
requirement. The directors' joint and several liability lasts only so long as the
company's status is that of a formally foreign company (Article 4(4) of the
WFBV).
29 Nevertheless, Article 4(5) of the WFBV states that the minimum capital
provisions do not apply to a company governed by the law of a Member State
or of a Member State of the European Economic Area ('the E.E.A.') to which the
Second Directive is applicable.
30 Article 5(1) and (2) of the WFBV requires the directors of formally foreign
companies to keep accounts and hold them for seven years. Directors must
produce annual accounts and an annual report. Those documents must be
published by being lodged in the commercial register and must satisfy the
conditions laid down in Title 9 of Book 2 of the BW, which makes it possible to
be sure that they are consistent with the annual documents produced by
Netherlands companies.
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31 Directors are additionally bound to lodge in the commercial register before
1 April each year proof of registration in the register determined by the law
applicable to the company (Article 5(4) of the WFBV). For the application of the
WFBV persons responsible for the day-to-day management of the company are
treated in the same way as directors, in accordance with Article 7 of that law.
32 Articles 2:249 and 2:260 of the BW are applicable by analogy to formally foreign
companies. Those articles provide for the joint and several liability of directors
and auditors for damage caused to others by the publication of misleading annual
documents or interim figures.
33 Article 5(3) of the WFBV provides, however, that the obligations under
Article 5(1) and (2) of the WFBV relating to accounts and annual documents
are not to apply to companies governed by the law of a Member State or by the
law of a Member State of the E.E.A. and falling within the ambit of the Fourth
and/or the Seventh Directive.
I I — The dispute in the main proceedings and the questions referred for a
preliminary ruling
34 Inspire Art was formed on 28 July 2000 in the legal form of a private company
limited by shares under the law of England and Wales and it has its registered
office at Folkestone (United Kingdom). Its sole director, whose domicile is in The
Hague (Netherlands), is authorised to act alone and independently in the name of
the company. The company, which carries on activity under the business name
'Inspire Art Ltd' in the sphere of dealing in objets d'art, began trading on
17 August 2000 and has a branch in Amsterdam.
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35 Inspire Art is registered in the commercial register of the Chamber of Commerce
without any indication of the fact that it is a formally foreign company within the
meaning of Article 1 of the WFBV.
36 Taking the view that that indication was mandatory on the ground that Inspire
Art traded exclusively in the Netherlands, the Chamber of Commerce applied to
the Kantongerecht te Amsterdam on 30 October 2000 for an order that there
should be added to that company's registration in the commercial register the
statement that it is a formally foreign company, in accordance with Article 1 of
the WFBV, which would entail other obligations laid down by law, set out in
paragraphs 22 to 33 above.
37 Inspire Art denies that its registration is incomplete, primarily because the
company does not meet the conditions set out in Article 1 of the WFBV. As a
secondary point, if the Kantongerecht were to decide that it met those conditions,
it maintained that the WFBV was contrary to Community law, and to Articles 43
EC and 48 EC in particular.
38 In its order of 5 February 2001 the Kantongerecht held that Inspire Art was a
formally foreign company within the meaning of Article 1 of the WFBV.
39 As regards the compatibility of the WFBV with Community law, it decided to
stay proceedings and refer the following questions to the Court of Justice for a
preliminary ruling:
'1. Are Articles 43 EC and 48 EC to be interpreted as precluding the
Netherlands, pursuant to the Wet op de formeel buitenlandse vennootschappen
of 17 December 1997, from attaching additional conditions, such as
those laid down in Articles 2 to 5 of that law, to the establishment in the
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Netherlands of a branch of a company which has been set up in the United
Kingdom with the sole aim of securing the advantages which that offers
compared to incorporation under Netherlands law, given that Netherlands
law imposes stricter rules than those applying in the United Kingdom with
regard to the setting-up of companies and payment for shares, and given that
the Netherlands law infers that aim from the fact that the company carries on
its activities entirely or almost entirely in the Netherlands and, furthermore,
does not have any real connection with the State in which the law under
which it was formed applies?
2. If, on a proper construction of those articles, it is held that the provisions of
the Wet op de formeel buitenlandse vennootschappen are incompatible with
them, must Article 46 EC be interpreted as meaning that the said Articles 43
EC and 48 EC do not affect the applicability of the Netherlands rules laid
down in that law, on the ground that the provisions in question are justified
for the reasons stated by the Netherlands legislature?'
III— Preliminary observations
40 The Chamber of Commerce, the Netherlands Government and the Commission
of the European Communities are of the view that the questions were too broadly
framed by the national court. Since the dispute in the main proceedings concerned
only the registration of a company in the commercial register, the Court must
confine its analysis exclusively to the provisions of national law relating to that
point.
41 Consequently they suggest that the Court should exclude from consideration
Articles 3 and 6 of the WFBV entirely, and also various parts of Articles 2, 4 and
5 of that law (more specifically the end of Article 2(1), Article 2(2), Article 4(1),
(2), (4) and (5), and Article 5(1) and (2) of that law).
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42 In this connection, settled case-law makes it clear that the procedure provided for
by Article 234 EC is an instrument for cooperation between the Court of Justice
and the national courts (see, inter alia, Case C-343/90 Lourenço Dias [1992]
ECR I-4673, paragraph 14).
43 In the context of that cooperation, the national court before which the dispute
has been brought, which alone has direct knowledge of the facts of the case in the
main proceedings and must assume responsibility for the subsequent judicial
decision, is in the best position to determine, in the light of the particular
circumstances of the case, both the need for a preliminary ruling in order to
enable it to deliver judgment and the relevance of the questions which it submits
to the Court (Lourenço Dias, cited above, paragraph 15, and Case C-390/99
Canal Satélite Digital [2002] ECR I-607, paragraph 18).
44 Consequently, where the question submitted by the national court concerns the
interpretation of Community law, the Court of Justice is, in principle, bound to
give a ruling (Lourenço Dias, paragraph 16; Case C-415/93 Bosman [1995] ECR
I-4921, paragraph 59; Case C-379/98 PreussenElektra [2001] ECR I-2099,
paragraph 38, and Canal Satélite Digital, cited above, paragraph 18).
45 It is nevertheless equally settled case-law that the Court considers that it may, if
need be, examine the circumstances in which the case was referred to it by the
national court, in order to assess whether it has jurisdiction (Case 244/80 Foglia
[1981] ECR 3045, paragraph 21, and Canal Satélite Digital, paragraph 19). The
spirit of cooperation which must prevail in preliminary ruling proceedings
requires the national court for its part to have regard to the function entrusted to
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the Court of Justice, which is to contribute to the administration of justice in the
Member States and not to give opinions on general or hypothetical questions (see,
inter alia, Foglia, cited above, paragraphs 18 and 20; Lourenço Dias, paragraph
17; Bosman, cited above, paragraph 60, and Case C-451/99 Cura Anlagen [2002]
ECR I-3193, paragraph 26).
46 Moreover, in order to enable the Court to give a useful interpretation of
Community law, it is essential for the national court to explain why it considers
that an answer to its questions is necessary for resolving the dispute (see, inter
alia, Foglia, paragraph 17).
47 With that information in its possession, the Court will then be in a position to
ascertain whether the interpretation of Community law which is sought is related
to the actual nature and subject-matter of the main proceedings. If it should
appear that the question raised is manifestly irrelevant for the purposes of
deciding the case, the Court must declare that there is no need to proceed to
judgment (Lourenço Dias, paragraph 20).
48 Having regard to the foregoing, the Court must consider whether the questions
referred by the national court in this case are relevant to resolution of the dispute.
49 Although the issue at the heart of the dispute in the main proceedings is whether
or not Inspire Art must be registered as a formally foreign company in the
business register, the fact remains that that registration automatically and
inextricably entails a number of legal consequences provided for by Articles 2 to 5
of the WFBV.
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50 The national court has thus considered that the question of compatibility with
Articles 43 EC, 46 EC and 48 EC arose more particularly in respect of certain of
the obligations provided for by Articles 2 to 5 of the WFBV, namely, those
relating to registration as a formally foreign company, the indication of that
status in all documents produced by the company, the minimum capital required
and the personal liability of the directors as joint and several debtors when the
company's share capital has never reached or has fallen below the minimum
amount of capital required by law.
51 In order to provide the national court with a helpful answer, within the meaning
of the case-law referred to above, it is in consequence necessary to examine all
those provisions, having regard to freedom of establishment as guaranteed by the
EC Treaty, and also to the company-law directives.
Consideration of the questions referred
52 By those questions, which may appropriately be considered together, the national
court seeks in substance to ascertain:
— whether Articles 43 EC and 48 EC must be interpreted as precluding
legislation of a Member State, such as the WFBV, which attaches additional
conditions, such as those laid down in Articles 2 to 5 of that law, to the
establishment in that Member State of a company formed under the law of
another Member State with the sole aim of securing certain advantages
compared with companies formed under the law of the Member State of
establishment which imposes stricter rules than those imposed by the law of
the Member State of formation with regard to the setting-up of companies
and paying-up of shares;
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— whether the fact that the law of the Member State of establishment infers that
aim from the circumstance of that company's carrying on its activities
entirely or almost entirely in that latter Member State and of its having no
genuine connection with the State in accordance with the law of which it was
formed makes any difference to the Court's analysis of that question;
— and whether, if an affirmative answer is given to one or other of those
questions, a national law such as the WFBV may be justified under Article 46
EC or by overriding reasons relating to the public interest.
53 In the first place, Article 5(1) and (2) of the WFBV, mentioned in the questions
referred for a preliminary ruling, concerns the keeping and filing of the annual
accounts of formally foreign companies. Article 5(3) of the WFBV provides,
however, that the obligations laid down in those subparagraphs are not to apply
to companies governed by the law of another Member State and to which the
Fourth Directive, inter alia, applies. Inspire Art is covered by that exception, since
it is governed by the law of England and Wales and since it falls within the scope
ratione personce of the Fourth Directive.
54 There is therefore no longer any need for the Court to consider whether a
provision such as Article 5 of the WFBV is compatible with Community law.
55 Secondly, several of the provisions of the WFBV fall within the scope of the
Eleventh Directive, since that concerns disclosure requirements in respect of
branches opened in a Member State by companies covered by the First Directive
and governed by the law of another Member State.
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56 In that connection, first, as the Commission observes, some of the obligations
imposed by the WFBV concern the implementation in domestic law of the
disclosure requirements laid down by the Eleventh Directive.
57 Those are, more specifically, the provisions requiring: an entry in the business
register of the host Member State showing registration in a foreign business
register, and the number under which the company is registered in that register
(Article 2(1) of the WFBV and Article 2(1)(c) of the Eleventh Directive), filing in
the Netherlands business register of a certified copy of the document creating the
company and of its memorandum and articles of association in Dutch, French,
English or German (Article 2(1) of the WFBV and Articles 2(2)(b) and 4 of the
Eleventh Directive), and the filing every year in that business register of a
certificate of registration in the foreign business register (Article 5(4) of the
WFBV and Article 2(2)(c) of the Eleventh Directive).
58 Those provisions, the compatibility of which with the Eleventh Directive has not
been called into question, cannot be regarded as constituting any impediment to
freedom of establishment.
59 Nevertheless, even if the various disclosure measures referred to at paragraph 57
above are compatible with Community law, that does not automatically mean
that the sanctions attached by the WFBV to non-compliance with those disclosure
measures must also be compatible with Community law.
60 Article 4(4) of the WFBV provides for directors to be jointly and severally liable
with the company for legal acts adopted in the name of the company during their
directorship for so long as the requirements concerning disclosure in the business
register have not been met.
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61 It is true that Article 12 of the Eleventh Directive requires the Member States to
provide for appropriate penalties where branches of companies fail to make the
required disclosures in the host Member State.
62 The Court has consistently held that where a Community regulation does not
specifically provide any penalty for an infringement or refers for that purpose to
national laws, regulations and administrative provisions, Article 10 EC requires
the Member States to take all measures necessary to guarantee the application
and effectiveness of Community law. For that purpose, while the choice of
penalties remains within their discretion, they must ensure in particular that
infringements of Community law are penalised in conditions, both procedural
and substantive, which are analogous to those applicable to infringements of
national law of a similar nature and importance and which, in any event, make
the penalty effective, proportionate and dissuasive (Case 68/88 Commission v
Greece [1989] ECR 2965, paragraphs 23 and 24; Case C-326/88 Hansen [1990]
ECR I-2911, paragraph 17; Case C-36/94 Siesse [1995] ECR I-3573, paragraph
20, and Case C-177/95 Ebony Maritime and Loten Navigation [1997] ECR
I-1111, paragraph 35).
63 It is for the national court, which alone has jurisdiction to interpret domestic law,
to establish whether the penalty provided for by Article 4(4) of the WFBV
satisfies those conditions and, in particular, whether it does not put formally
foreign companies at a disadvantage in comparison with Netherlands companies
where there is an infringement of the disclosure requirements referred to in
paragraph 56 above.
64 If the national court reaches the conclusion that Article 4(4) of the WFBV treats
formally foreign companies differently from national companies, it must be
concluded that that provision is contrary to Community law.
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65 On the other hand, the list set out in Article 2 of the Eleventh Directive does not
include the other disclosure obligations provided for by the WFBV, namely,
recording in the commercial register the fact that the company is formally foreign
(Articles 1 and 2(1) of the WFBV), recording in the business register of the host
Member State the date of first registration in the foreign business register and
information relating to sole members (Article 2(1) of the WFBV), and the
compulsory filing of an auditor's certificate to the effect that the company
satisfies the conditions as to minimum capital, subscribed capital and paid-up
share capital (Article 4(3) of the WFBV). Similarly, mention of the company's
status of a formally foreign company on all documents it produces (Article 3 of
the WFBV) is not included in Article 6 of the Eleventh Directive.
66 It is therefore necessary to consider, with regard to those obligations, whether the
harmonisation brought about by the Eleventh Directive, and more particularly
Articles 2 and 6 thereof, is exhaustive.
67 The Eleventh Directive was adopted on the basis of Article 54(3)(g) of the
EC Treaty (now, after amendment, Article 44(2)(g) EC) which provides that the
Council and Commission are to carry out the duties devolving on them under that
article 'by coordinating to the necessary extent the safeguards which, for the
protection of the interests of members and others, are required by Member States
of companies or firms within the meaning of the second paragraph of Article 58
with a view to making such safeguards equivalent throughout the Community'.
68 Furthermore, it follows from the fourth and fifth recitals in the preamble to the
Directive that the differences in respect of branches between the laws of the
Member States, especially as regards disclosure, may interfere with the exercise of
the right of establishment and must therefore be eliminated.
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INSPIRE ART
69 It follows that, without affecting the information obligations imposed on
branches under social or tax law, or in the field of statistics, harmonisation of the
disclosure to be made by branches, as brought about by the Eleventh Directive, is
exhaustive, for only in that case can it attain the objective it pursues.
7 0 It must likewise be pointed out that Article 2(1) of the Eleventh Directive is
exhaustive in formulation. Moreover, Article 2(2) contains a list of optional
measures imposing disclosure requirements on branches, a measure which can
have no raison d'être unless the Member States are unable to provide for
disclosure measures for branches other than those laid down in the text of that
directive.
7 1 In consequence, the various disclosure measures provided for by the WFBV and
referred to in paragraph 65 above are contrary to the Eleventh Directive.
72 It must therefore be concluded on this point that it is contrary to Article 2 of the
Eleventh Directive for national legislation such as the WFBV to impose on the
branch of a company formed in accordance with the laws of another Member
State disclosure obligations not provided for by that directive.
73 Thirdly, several of the provisions of the WFBV do not fall within the scope of the
Eleventh Directive. Those are the rules relating to the minimum capital required,
both at the time of registration and for so long as a formally foreign company
exists, and those relating to the penalty attaching to non-compliance with the
obligations laid down by the WFBV, namely, the joint and several liability of the
directors with the company (Article 4(1) and (2) of the WFBV). Those provisions
must therefore be considered in the light of Articles 43 EC and 48 EC.
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The existence of an impediment to freedom of establishment
Observations submitted to the Court
74 The Chamber of Commerce and the Netherlands, German, Italian and Austrian
Governments are of the view that application of provisions such as those of the
WFBV is not contrary to Articles 43 EC and 48 EC.
75 In the first place, the rules laid down by the WFBV concern neither the formation
of companies under the law of another Member State nor their registration (and
consequently their recognition). The validity of those companies is in fact
recognised and they are not refused registration, with the result that freedom of
establishment is not compromised.
76 They submit that the considerations of the Court in Case C-212/97 Centros
[1999] ECR I-1459 are therefore irrelevant to the present case, because the latter
is concerned solely with the rule governing registration of foreign companies
without affecting the Member States' freedom to lay down conditions for the
carrying on of certain trades, professions or businesses.
77 The Netherlands Government maintains that for companies formed under the
law of another Member State and intending to carry on their activities in the
Netherlands, the system of incorporation applied in the Netherlands is extremely
liberal. In accordance with that principle, as formulated in Article 2 of the Wet
conflictenrecht corporaties (the Law concerning the rules on conflict of laws
applicable to legal persons) of 17 December 1997 ('the rules-of-conflict Law'), 'a
company which, by virtue of its contract or instrument of incorporation, has, at
the time of its formation, its registered office or, failing that, the centre of its
external operations in the State under the law of which it was formed, shall be
governed by the law of that State'.
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INSPIRE ART
78 The Netherlands Government submits that the existence of companies validly
formed under the law of another Member State is recognised without further
formality in the Netherlands. Those companies are subject to the law of the State
of formation; it is as a rule important that those companies should carry on some
activity in that State.
79 It has however become apparent that that very accommodating system has in
practice led to increased use of foreign companies for ends which the Netherlands
legislature had not covered or even foreseen. More and more frequently
companies that carry on their activity principally or even exclusively on the
Netherlands market are formed abroad with the aim of evading the overriding
requirements of Netherlands company law.
80 In order to tackle that development, Article 6 of the rules-of-conflict Law has
established a limited exception to that liberal regime, by providing that 'this law
is without prejudice to the provisions of the [WFBV]'.
83 Next, the Chamber of Commerce and the Netherlands, German, Italian and
Austrian Governments observe that the provisions of the WFBV do not concern
freedom of establishment but are confined to imposing on companies with share
capital formed under a law other than that of the Netherlands a limited number
of additional obligations relating to the exercise of their business activities and
the running of the company, with a view to ensuring that others are clearly
informed that companies such as Inspire Art are formally foreign companies and
that they are in addition given the same guarantees — by means of the filing of
certain documents and certificates — when concluding contracts with those
companies as they have when concluding contracts with Netherlands companies.
82 In their opinion, those conditions are non-discriminatory since they correspond to
the mandatory rules of Netherlands company law applicable to limited-liability
companies formed in the Netherlands. Moreover, the purpose of those conditions,
which must be satisfied by Netherlands companies as well as by formally
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foreign companies, is to safeguard non-economic interests — recognised at
Community level — concerning the protection of consumers and creditors.
83 Maintaining that the WFBV is applicable under private international law, the
Chamber of Commerce and the Netherlands, German and Austrian Governments
refer to the judgment in Case 81/87 Daily Mail and General Trust [1988] ECR
5483 and the relevant case-law. In their submission, in that case the Court held
that Articles 43 EC and 48 EC did not constitute a restriction on the powers of
the Member States to determine the relevant factor connecting a company to their
national legal order. They infer from that judgment that those articles do not
preclude the adoption under private international law of rules applying to
companies falling in part within the scope of Netherlands law. In that context,
the WFBV does no more than attach significance to the place in which the
company carries on its activities, in addition to the connecting factor of the 'place
of incorporation and registration'.
84 In addition, the German and Austrian Governments have asserted that as a
matter of principle the purpose of Articles 43 EC and 48 EC, as regards freedom
to set up branches, is to enable undertakings carrying on activities in one Member
State to achieve growth in another Member State, which is not so in the case of
'brass-plate companies'.
85 The German and Austrian Governments question whether, with regard to
formally foreign companies, branches ought not actually to be regarded as
principal establishments and whether there ought not to be applied to them the
principles of freedom of primary establishment. Following the same reasoning,
the Italian Government maintains that the fact that a company established in one
Member State has never carried on any activity in that State means that it cannot
be considered to be a branch when it carries on activity in another Member State.
By placing the sole centre of its activities in a State other than that to which it
formally belongs, such a company must be considered to be primarily established
in that first State.
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INSPIRE ART
86 Finally, the Netherlands, German and Italian Governments observe that in its
case-law the Court has recognised that a Member State is entitled to take
measures designed to prevent certain of its nationals from attempting, under
cover of the rights created by the Treaty, improperly to circumvent their national
legislation or to prevent individuals from improperly or fraudulently taking
advantage of provisions of Community law (Centros, paragraph 24, and the
case-law cited therein). Whether or not there is any improper use must be
determined taking into account, in particular, the objectives pursued by the
provisions of Community law in question (Case C-206/94 Paletta [1996] ECR
I-2357, paragraph 25).
87 Those Governments argue that, according to the judgments in Case 79/85 Segers
[1986] ECR 2375, paragraph 16, and Centros, paragraph 29, the fact that a
company has been formed in one Member State but carries on all its activities
through its branch established in another Member State does not constitute a
sufficient reason for denying the persons concerned the right to freedom of
establishment by pleading abuse, deceit and/or the unacceptable evasion of
national laws.
88 Nevertheless, in this case those Governments submit that, without refusing to
recognise a company formed under the law of another Member State or
preventing the registration of a branch, the WFBV does no more than provide for
a few limited preventive measures and penalties where a company evades the
overriding rules of company law applicable in the Member State in which all the
activities are carried on.
89 In consequence, where, as in the main proceedings, a company goes beyond
merely exercising its right to freedom of establishment and where it was formed
in another Member State for the purpose of circumventing the body of rules
applying to the formation and running of companies in the Member State in
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which it carries on all its activities, those Governments maintain that the result of
allowing that company to rely on freedom of establishment would be an
unacceptable evasion of national law. Adoption of measures such as those set out
in the WFBV is therefore justified as Community law now stands.
90 By contrast, in the view of Inspire Art, the United Kingdom Government and the
Commission the provisions of the WFBV constitute interference with the freedom
of establishment guaranteed by Articles 43 EC and 48 EC, in that they impose on
formally foreign companies obligations which render the right of establishment
markedly less attractive for those companies. That indeed is the stated purpose of
those provisions.
91 Inspire Art, the United Kingdom Government and the Commission submit that
the rules on freedom of establishment are applicable to a situation such as that
concerned in the main proceedings. Referring to Segers and to Centros, they
argue that a company may also rely on freedom of establishment where it was
formed in one Member State for the sole purpose of being able to establish itself
in another Member State where it carries on the essential part, or even all, of its
activities. It is immaterial that the company was formed in the first Member State
solely in order to avoid the statutory provisions of the second Member State.
According to that case-law, there is no abuse, merely the exercise of the freedom
of establishment guaranteed by the Treaty.
92 The United Kingdom Government and the Commission maintain that Article 1 of
the WFBV takes account of the place where the company's activity is carried on
in order to attach to it a number of provisions mandatory in the host Member
State. Use of actual activity as a connecting factor, which does not correspond to
any yardstick provided for in Article 48 EC, interferes with freedom of
establishment inasmuch as it makes the exercise of that freedom less attractive
to companies formed abroad which intend subsequently to carry on activity in the
Netherlands, on the ground that other rules have been held to be applicable, in
addition to those of the State of formation.
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INSPIRE ART
93 Inspire Art argues for a similar interpretation of the WFBV. It states that although
under the national legislation companies are as a rule governed by the law of the
State in which they were formed, the Netherlands legislature sought to counter
the formation, which it regarded as improper, of companies under foreign laws
with the aim of carrying on activity exclusively or principally in the Netherlands
by declaring that the provisions of Netherlands company law were applicable to
those companies. The legislature justified that regime by invoking the protection
of creditors. It follows that the WFBV cannot be seen as an application of the real
head office theory according to which a company is governed by the law of the
Member State in which it has its actual head office.
94 Lastly, the United Kingdom Government notes that it is of fundamental
importance to the operation of the common market that it should be possible
to set up secondary establishments in other Member States. It submits that in the
circumstances of the case Centros is fully applicable.
The Court's answer
95 The Court has held that it is immaterial, having regard to the application of the
rules on freedom of establishment, that the company was formed in one Member
State only for the purpose of establishing itself in a second Member State, where
its main, or indeed entire, business is to be conducted (Segers, paragraph 16, and
Centros, paragraph 17). The reasons for which a company chooses to be formed
in a particular Member State are, save in the case of fraud, irrelevant with regard
to application of the rules on freedom of establishment (Centros, paragraph 18).
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96 The Court has also held that the fact that the company was formed in a particular
Member State for the sole purpose of enjoying the benefit of more favourable
legislation does not constitute abuse even if that company conducts its activities
entirely or mainly in that second State (Segers, paragraph 16, and Centros,
paragraph 18).
97 It follows that those companies are entitled to carry on their business in another
Member State through a branch, and that the location of their registered office,
central administration or principal place of business serves as 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 (Case 270/83 Commission v France
[1986] ECR 273, paragraph 18; Segers, paragraph 13, and Centros, paragraph
20.
98 Thus, in the main proceedings, the fact that Inspire Art was formed in the United
Kingdom for the purpose of circumventing Netherlands company law which lays
down stricter rules with regard in particular to minimum capital and the
paying-up of shares does not mean that that company's establishment of a branch
in the Netherlands is not covered by freedom of establishment as provided for by
Articles 43 EC and 48 EC. As the Court held in Centros (paragraph 18), the
question of the application of those articles is different from the question whether
or not a Member State may adopt measures in order to prevent attempts by
certain of its nationals improperly to evade domestic legislation by having
recourse to the possibilities offered by the Treaty.
99 The argument that freedom of establishment is not in any way infringed by the
WFBV inasmuch as foreign companies are fully recognised in the Netherlands
and are not refused registration in that Member State's business register, that law
having the effect simply of laying down a number of additional obligations
classified as 'administrative', cannot be accepted.
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INSPIRE ART
100 The effect of the WFBV is, in fact, that the Netherlands company-law rules on
minimum capital and directors' liability are applied mandatorily to foreign
companies such as Inspire Art when they carry on their activities exclusively, or
almost exclusively, in the Netherlands.
101 Creation of a branch in the Netherlands by companies of that kind is therefore
subject to certain rules provided for by that State in respect of the formation of a
limited-liability company. The legislation at issue in the case in the main
proceedings, which requires the branch of such a company formed in accordance
with the legislation of a Member State to comply with the rules of the State of
establishment on share capital and directors' liability, has the effect of impeding
the exercise by those companies of the freedom of establishment conferred by the
Treaty.
102 The last issue for consideration concerns the arguments based on the judgment in
Daily Mail and General Trust, namely, that the Member States remain free to
determine the law applicable to a company since the rules relating to freedom of
establishment have not led to harmonisation of the provisions of the private
international law of the Member States. In this respect it is argued that the
Member States retain the right to take action against 'brass-plate companies', that
classification being in the circumstances of the case inferred from the lack of any
real connection with the State of formation.
103 It must be stressed that, unlike the case at issue in the main proceedings, Daily
Mail and General Trust concerned relations between a company and the Member
State under the laws of which 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.
In the main proceedings the national court has asked the Court of Justice whether
the legislation of the State where a company actually carries on its activities
applies to that company when it was formed under the law of another Member
State (Case C-208/00 Überseering [2002] ECR I-9919, paragraph 62).
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JUDGMENT OF 30. 9. 2003 — CASE C-167/01
104 It follows from the foregoing that the provisions of the WFBV relating to
minimum capital (both at the time of formation and during the life of the
company) and to directors' liability constitute restrictions on freedom of
establishment as guaranteed by Articles 43 EC and 48 EC.
105 It must therefore be concluded that Articles 43 EC and 48 EC preclude national
legislation such as the WFBV which imposes on the exercise of freedom of
secondary establishment in that State by a company formed in accordance with
the law of another Member State certain conditions provided for in domestic law
in respect of company formation relating to minimum capital and directors'
liability. The reasons for which the company was formed in that other Member
State, and the fact that it carries on its activities exclusively or almost exclusively
in the Member State of establishment, do not deprive it of the right to invoke the
freedom of establishment guaranteed by the Treaty, save where abuse is
established on a case-by-case basis.
Whether there is any justification
106 As a preliminary point, there can be no justification for the disclosure provisions
of the WFBV, which have been found to be contrary to the Eleventh Directive (see
paragraphs 71 and 72 above). As a result, only the arguments concerning the
provisions of the WFBV relating to minimum capital and directors' liability will
be considered below.
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INSPIRE ART
107 Given that those rules constitute an impediment to freedom of establishment, it
must be considered whether they can be justified on one of the grounds set out in
Article 46 EC or, failing that, by an overriding reason relating to the public
interest.
Observations submitted to the Court
108 According to the Chamber of Commerce and the Netherlands, German and
Austrian Governments, the provisions of the WFBV are justified both by
Article 46 EC and by overriding reasons relating to the public interest.
109 They maintain that the purpose of the WFBV is to counter fraud, protect
creditors and ensure that tax inspections are effective and that business dealings
are fair. Those aims have been recognised in the Court's decisions to be legitimate
sources of justification.
110According to the Chamber of Commerce and the Netherlands, German and
Austrian Governments, the rule in Article 4 of the WFBV concerning minimum
capital, its paying-up and its maintenance serves to protect creditors and others.
Thus, the importance of minimum capital is expressly recognised in Article 6 of
the Second Directive. The purpose of the rules on minimum capital is above all to
strengthen the financial capacity of companies and thus to provide greater
protection of private and public creditors. In a general way they help to protect
all creditors against the risk of fraudulent insolvency connected to the formation
of companies which have insufficient capital from the outset.
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111 The Netherlands Government submits that directors' liability constitutes an
appropriate sanction for non-compliance with the provisions of the WFBV. In the
absence of Community harmonisation measures, the Member States enjoy a wide
margin of discretion in determining the penalties to be applied in the case of
non-compliance with their national rules (Case C-265/95 Commission v France
[1997] ECR I-6959, paragraph 33). The choice of that penalty is on the one hand
motivated by the wish to apply the same rule as that laid down for directors of a
Netherlands company. Nor is it unknown to Community law, as may be seen
from Article 51 of Council Regulation (EC) No 2157/2001 of 8 October 2001 on
the Statute for a European company (SE) (OJ 2001 L 294, p. 1).
112On the other hand, the Netherlands Government maintains that, since directors
are responsible for the proper conduct of company matters, it is to be expected
that they should incur liability if the company does not comply with the
provisions of the WFBV.
1 1 3Finally, Article 4(1) of the Second Directive permits the Member States to adopt
suitable liability rules in respect of obligations entered into by the company or in
its name, where the company cannot be wound up.
114The Chamber of Commerce adds that the provisions of the WFBV are not
discriminatory. In its view, they lead instead to the application to foreign
companies of the rules applicable to companies governed by Netherlands law.
115The Netherlands Government submits that the provisions of the WFBV
concerning minimum capital and directors' liability are appropriate for the
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INSPIRE ART
purpose of attaining the sought-after objective. In this regard it emphasises the
point that that assessment cannot be made without taking into account the
fundamental and central objective of the WFBV, namely, to combat improper use
of foreign companies and abuse of freedom of establishment.
116 In addition, the Austrian Government observes that the rules on minimum capital
are an appropriate and proportionate means, as is recognised by Community law.
As regards joint-stock companies, the Second Directive itself established the
importance of minimum capital. There is however no such rule for limitedliability
companies. Nevertheless, all the Member States, except Ireland and the
United Kingdom of Great Britain and Northern Ireland, have rules on the
minimum capital to be guaranteed by those companies. Unlike members'
personal liability, which would frequently be of no use in the event of compulsory
liquidation, company capital offers greater security.
117The Chamber of Commerce submits that those measures do not go beyond what
is necessary if the objective pursued is to be attained. Non-compliance with the
obligations imposed by the WFBV does not result in refusal to recognise the
foreign company but only in the joint and several liability of its directors. In that
regard the Chamber of Commerce maintains that the fact that a company does
not satisfy, or no longer satisfies, the rules on minimum capital is clear evidence
that there is a risk of abuse or fraud, where moreover that company has no real
connection to its State of formation.
118Inspire Art, the United Kingdom Government and the Commission put forward
the opposite argument and are of the view that the provisions of the WFBV are
not justified.
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119 In the first place, there is no justification for the WFBV to be found in Article 46
EC.
120 As regards abuse of the law, it follows from Centros that the mere fact that a
company does not carry on any activity in the State of formation cannot
constitute such abuse. It is instead for the national authorities and courts to
establish in every case whether the conditions on which such a restriction might
be justified have been satisfied. Legislation as general as the WFBV does not meet
that condition.
121 In their submission, Centros recognised that it was possible for a Member State to
restrict freedom of establishment where it pleaded non-compliance with
provisions concerning the carrying on of certain trades, professions or businesses.
That is not so in the circumstances of this case. So far as Inspire Art is concerned,
the issue is not regulation of the conduct of its activities in the Netherlands but
whether or not the rules of Netherlands company law, such as those on minimum
capital, must be observed on setting up a secondary establishment in the
Netherlands. The Court held in that judgment that taking advantage of the more
favourable rules of another Member State cannot, in itself, constitute an abuse of
the right of establishment but is a right inherent in the exercise of freedom of
establishment.
122 Inspire Art, the United Kingdom Government and the Commission also note that
the Court held in Centros that the protection of creditors does not in theory fall
within the ambit of the system of derogations under Article 46 EC.
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INSPIRE ART
123 Nor, in their submission, can the provisions of the WFBV concerning minimum
capital and directors' liability be justified by the imperative public-interest
requirement of protection of creditors, because those provisions are not such as to
guarantee that protection.
124 In that context, Inspire Art and the Commission observe that the company holds
itself out as a company governed by the law of England and Wales and that
creditors cannot therefore be deceived on that subject.
125 Furthermore, creditors must take some measure of responsibility for their own
actions. If the assurances given them by the law of England and Wales do not
satisfy them, they can either insist on additional security or refuse to conclude
contracts with a company governed by foreign law.
126 The United Kingdom Government and the Commission maintain that the WFBV
would not have been applicable if Inspire Art had carried out even minor activity
in another Member State. In that case the risk run by creditors would, however,
have been as great as it would have been if the activities were carried out in the
Netherlands exclusively, or indeed greater.
127 According to Inspire Art, the minimum capital requirements do not guarantee
any protection for creditors. Thus, the minimum capital might, for example, be
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converted into a loan immediately once it had been contributed and the company
registered, even if the company was governed by Netherlands law. It would not
therefore satisfy the creditors. Consequently, the provisions of the WFBV
concerning minimum capital are not such as to achieve the intended purpose of
protecting creditors.
128Inspire Art and the Commission maintain that the rules on the joint and several
liability of directors are discriminatory. Article 4(4) of the WFBV makes them
jointly and severally liable where, after the company has been registered in the
business register, minimum capital falls below the limit set. By contrast, the
directors of a limited liability company governed by Netherlands law are not
subject to that strict liability. Moreover, as opposed to companies governed by
Netherlands law, the circle of potentially liable persons is extended to those who
actually conduct the company's activities.
129 Inspire Art, the United Kingdom Government and the Commission submit that
the provisions of Article 4(1), (2) and (4) of the WFBV are disproportionate
because Inspire Art holds itself out as a company governed by the law of England
and Wales.
130Furthermore, less radical measures could in their view be envisaged. For example,
as the Court has acknowledged in Centros, it could be made possible in law for
public creditors to obtain the necessary guarantees from those foreign establishments,
in so far as they feel that they are insufficiently protected by the company
law of the State of formation.
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INSPIRE ART
The Court's answer
131It must first of all be stated that none of the arguments put forward by the
Netherlands Government with a view to justifying the legislation at issue in the
main proceedings falls within the ambit of Article 46 EC.
132 The justifications put forward by the Netherlands Government, namely, the aims
of protecting creditors, combating improper recourse to freedom of establishment,
and protecting both effective tax inspections and fairness in business
dealings, fall therefore to be evaluated by reference to overriding reasons related
to the public interest.
133 It must be borne in mind that, according to the Court's case-law, national
measures liable to hinder or make less attractive the exercise of fundamental
freedoms guaranteed by the Treaty must, if they are to be justified, fulfil four
conditions: they must be applied in a non-discriminatory manner; they must be
justified by imperative requirements in the public 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 it (see, in particular, Case C-19/92
Kraus [1993] ECR I-1663, paragraph 32; Case C-55/94 Gebhard [1995] ECR
I-4165, paragraph 37, and Centros, paragraph 34).
134 In consequence, it is necessary to consider whether those conditions are fulfilled
by provisions relating to minimum capital such as those at issue in the main
proceedings.
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135 First, with regard to protection of creditors, and there being no need for the Court
to consider whether the rules on minimum share capital constitute in themselves
an appropriate protection measure, it is clear that Inspire Art holds itself out as a
company governed by the law of England and Wales and not as a Netherlands
company. Its potential creditors are put on sufficient notice that it is covered by
legislation other than that regulating the formation in the Netherlands of limited
liability companies and, in particular, laying down rules in respect of minimum
capital and directors' liability. They can also refer, as the Court pointed out in
Centros, paragraph 36, to certain rules of Community law which protect them,
such as the Fourth and Eleventh Directives.
136 Second, with regard to combating improper recourse to freedom of establishment,
it must be borne in mind that a Member State is entitled to take measures
designed to prevent certain of its nationals from attempting, under cover of the
rights created by the Treaty, improperly to circumvent their national legislation
or to prevent individuals from improperly or fraudulently taking advantage of
provisions of Community law (Centros, paragraph 24, and the decisions cited
therein).
137 However, while in this case Inspire Art was formed under the company law of a
Member State, in the case in point the United Kingdom, for the purpose in
particular of evading the application of Netherlands company law, which was
considered to be more severe, the fact remains that the provisions of the Treaty on
freedom of establishment are intended specifically to enable 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 to
pursue activities in other Member States through an agency, branch or subsidiary
(Centros, paragraph 26).
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INSPIRE ART
138 That being so, as the Court confirmed in paragraph 27 of Centros, the fact that a
national of a Member State who wishes to set up a company can choose to do so
in the Member State the company-law rules of which seem to him the leastrestrictive
and then set up branches in other Member States is inherent in the
exercise, in a single market, of the freedom of establishment guaranteed by the
Treaty.
139 In addition, it is clear from settled case-law (Segers, paragraph 16, and Centros,
paragraph 29) that the fact that a company does not conduct any business in the
Member State in which it has its registered office and pursues its activities only or
principally in the Member State where its branch is established is not sufficient to
prove the existence of abuse or fraudulent conduct which would entitle the latter
Member State to deny that company the benefit of the provisions of Community
law relating to the right of establishment.
1 4 0 Last, as regards possible justification of the WFBV on grounds of protection of
fairness in business dealings and the efficiency of tax inspections, it is clear that
neither the Chamber of Commerce nor the Netherlands Government has adduced
any evidence to prove that the measure in question satisfies the criteria of
efficacy, proportionality and non-discrimination mentioned in paragraph 132
above.
1 4 1To the extent that the provisions concerning minium capital are incompatible
with freedom of establishment, as guaranteed by the Treaty, the same must
necessarily be true of the penalties attached to non-compliance with those
obligations, that is to say, the personal joint and several liability of directors
where the amount of capital does not reach the minimum provided for by the
national legislation or where during the company's activities it falls below that
amount.
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142 The answer to be given to the second question referred by the national court must
therefore be that the impediment to the freedom of establishment guaranteed by
the Treaty constituted by provisions of national law, such as those at issue,
relating to minimum capital and the personal joint and several liability of
directors cannot be justified under Article 46 EC, or on grounds of protecting
creditors, or combating improper recourse to freedom of establishment or
safeguarding fairness in business dealings or the efficiency of tax inspections.
143 In light of all the foregoing considerations, the answers to be given to the
questions referred for a preliminary ruling must be:
— It is contrary to Article 2 of the Eleventh Directive for national legislation
such as the WFBV to impose on the branch of a company formed in
accordance with the laws of another Member State disclosure obligations not
provided for by that directive.
— It is contrary to Articles 43 EC and 48 EC for national legislation such as the
WFBV to impose on the exercise of freedom of secondary establishment in
that State by a company formed in accordance with the law of another
Member State certain conditions provided for in domestic company law in
respect of company formation relating to minimum capital and directors'
liability. The reasons for which the company was formed in that other
Member State, and the fact that it carries on its activities exclusively or
almost exclusively in the Member State of establishment, do not deprive it of
the right to invoke the freedom of establishment guaranteed by the EC
Treaty, save where the existence of an abuse is established on a case-by-case
basis.
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INSPIRE ART
Costs
144 The costs incurred by the Netherlands, German, Italian, Austrian and United
Kingdom Governments and by the Commission, 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.
On those grounds,
THE COURT,
in answer to the questions referred to it by the Kantongerecht te Amsterdam by
order of 5 February 2001, hereby rules:
1. It is contrary to Article 2 of the Eleventh Council Directive 89/666/EEC of
21 December 1989 concerning disclosure requirements in respect of branches
opened in a Member State by certain types of company governed by the law
of another State for national legislation such as the Wet op de Formeel
Buitenlandse Vennootschappen (Law on Formally Foreign Companies) of
17 December 1997 to impose on the branch of a company formed in
accordance with the laws of another Member State disclosure obligations not
provided for by that directive.
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2. It is contrary to Articles 43 EC and 48 EC for national legislation such as the
Wet op de Formeel Buitenlandse Vennootschappen to impose on the exercise
of freedom of secondary establishment in that State by a company formed in
accordance with the law of another Member State certain conditions
provided for in domestic company law in respect of company formation
relating to minimum capital and directors' liability. The reasons for which
the company was formed in that other Member State, and the fact that it
carries on its activities exclusively or almost exclusively in the Member State
of establishment, do not deprive it of the right to invoke the freedom of
establishment guaranteed by the EC Treaty, save where the existence of an
abuse is established on a case-by-case basis.
Rodriguez Iglesias Puissochet Wathelet
Schintgen Timmermans Gulmann
Edward La Pergola Jann
Skouris Macken Colneric
von Bahr Cunha Rodrigues Rosas
Delivered in open court in Luxembourg on 30 September 2003.
R. Grass
Registrar
G.C. Rodriguez Iglesias
President
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