A. Introduction*

In its most recent judicature the European Court of Justice (ECJ) continued its tendency of deciding in favor of the freedom of establishment by holding that rules submitting pseudo-foreign companies to the company law of the host state were inadmissible. It clarified that a foreign company is not only to be respected as a legal entity having the right to be a party to legal proceedings, but rather has to be respected as such, i.e. as a foreign company that is subject to the company law of its state of incorporation. Any adjustment to the company law of the host state is, hence, not compatible with European law. In addition to commenting on the decision and its effects, this article points out potential for corporate restructuring in the field of codetermination.

Questions concerning the freedom of establishment of companies have always been both a central and controversial area of Community law. After the previous landmark decisions Daily Mail, Centros and Überseering, the ECJ decided in the case Inspire Art once again in favor of the freedom of establishment resulting in a now discernable consistent judicature. The place of incorporation theory, which determines the applicable law according to the statutory seat of a company, seems to be gradually replaced by the real seat theory, which regards the law of that state to be applicable where the actual center of administration, i.e. headquarters, of the company is located.

B. Inspire Art

I. Facts of the Case

Opponent in the Dutch proceedings was Inspire Art Ltd., a private company limited by shares established in Great Britain and having its statutory seat in Folkestone. Immediately after its formation, the company, which was dealing in objets d'art, started doing business in the Netherlands, where its sole shareholder and director was domiciled. No business was ever...