ON THE LEGITIMACY OF EUROPEANISING PRIVATE LAW Considerations on a Justice-making Law for the eu multi-level System Christian Joerges Introduction The Europeanisation of private law is very much a topical theme. And although this theme no longer very new, it has, in the last three years, developed a new dynamic. Anyone taking it up with the intention or hope of keeping up with the pace of legal policy development and remaining on top of the current stage of the academic debate is letting himself in for a race which he will inevitably feel like the unfortunate hare which, despite all its efforts, kept on arriving too late: something else will have changed or articles whose relevance has to be assessed first will have appeared. Anyone seeking to dodge such a race by specialising in the general is not necessarily better off. Has not everything already been said? Is it enough to add as Karl valentin did in a ceremonial address, " Quite so, but not by everyone? Surveys of the development of the law, legal policy and the academic debate remain meaningful if and because every new systematisation of the material takes some constructive steps. Admittedly, the more immense the material appears, the more time consuming it becomes to sift through it. In the present context, I have to have recourse to a form of reconstruction of the factual position that allows me to refer to previous work, 2 which I now sharpen so as to relate the debates on the Europeanisation of private law to the basic problem of the legitimation of law production in the EU (I). I distinguish between three strategies of legitimation and, in the next section(Il), go on to test and to query their viability on the basis of three sets of examples. These theses and antitheses are intended to pave the way for a synthesis in the closing section (ID) I Three competing patterns of legitimation Europe expects much of the law, exposing it to changes from top to bottom -and it has to justify these challenges itself. This is a requirement that may sound like a matter of course I Translated by lain F. Fraser, EUl Florence. A preliminary German version of this essay was presented ata workshop on pty Institute in April 2002. That text was rewritten for the lus Com m ference i e private law theory organised in co-operation with Gunther Teubner( Frankfurt a M )att European Uni Amsterdam on 28-29 November 2002, and subsequently revised again. I would like to thank many participants of the Amsterdam conference and the contributors to the workshop in Florence fortheir comments and suggestions. I am in particular indebted to Christoph Schmid(Florence/Munich), much more than the references to his work in my footnotes can indicate The artificially created term in the subtitle is a translation of the German construct Recht-Fertigungs-Recht, a notion used by Rudolf Wietholter in a recent essay: " Recht-Fertigungen eines Gesellschafts-Rechts (forthcoming in Christian Joerges and Gunther Teubner(eds ) Rechtsverfassungsrecht Recht-Fertiging zwischen Privatrechtsdogmatik und Gesellschaftstheorie, Baden-Baden: Nomos). lain F. Fraser suggests the translationjust-ifications of a law of society, adding that the German Recht-Fertigung can be etymologised as making/manufacturinglaw/right. Justi(ce)-fication'or justice-making law' may reta in a touch more of the German term's message But it needed a connoisseurof Roman law, namely Wolfgang Ernst(Bonn), to remind me that justumfacere is the common root of Recht-Fertigung and justification Esp Ch Joerges and G. Bruggemeier, Europa isierung des Vertrags und Haftungsrechts, in: P -Ch Muller-Graff (ed. ) Gemeinsames Privatrecht in der Europaischen Gemeinschaft, 2nd edn., Baden-Baden Nomos 1999, 301 ff, Ch Joerges, The Impact of European Integration on Private Law: Reductionist Perceptions, True Conflicts and a New Constitutionalist Perspective, European Law Journal3(1997),378
ON THE LEGITIMACY OF EUROPEANISING PRIVATE LAW: Considerations on a Justice-making Law for the EU Multi-level System1 Christian Joerges Introduction The Europeanisation of private law is very much a topical theme. And although this theme is no longer very new, it has, in the last three years, developed a new dynamic. Anyone taking it up with the intention or hope of keeping up with the pace of legal policy development and remaining on top of the current stage of the academic debate is letting himself in for a race in which he will inevitably feel like the unfortunate hare which, despite all its efforts, kept on arriving too late: something else will have changed or articles whose relevance has to be assessed first will have appeared. Anyone seeking to dodge such a race by specialising in the general is not necessarily better off. Has not everything already been said? Is it enough to add, as Karl Valentin did in a ceremonial address, ‘Quite so, but not by everyone’? Surveys of the development of the law, legal policy and the academic debate remain meaningful if and because every new systematisation of the material takes some constructive steps. Admittedly, the more immense the material appears, the more time consuming it becomes to sift through it. In the present context, I have to have recourse to a form of reconstruction of the factual position that allows me to refer to previous work,2 which I now sharpen so as to relate the debates on the Europeanisation of private law to the basic problem of the legitimation of law production in the EU (I). I distinguish between three strategies of legitimation and, in the next section (II), go on to test and to query their viability on the basis of three sets of examples. These theses and antitheses are intended to pave the way for a synthesis in the closing section (III). I Three competing patterns of legitimation Europe expects much of the law, exposing it to changes from top to bottom - and it has to justify these challenges itself. This is a requirement that may sound like a matter of course, 1 Translated by Iain F. Fraser, EUI Florence. A preliminary German version of this essay was presented at a workshop on private law theory organised in co-operation with Gunther Teubner (Frankfurt a.M.) at the European University Institute in April 2002. That text was rewritten for the Ius Commune Conference in Amsterdam on 28-29 November 2002, and subsequently revised again. I would like to thank many participants of the Amsterdam conference and the contributors to the workshop in Florence for their comments and suggestions. I am in particular indebted to Christoph Schmid (Florence/Munich), much more than the referenc es to his work in my footnotes can indicate. The artificially created term in the subtitle is a translation of the German construct Recht-Fertigungs-Recht, a notion used by Rudolf Wiethölter in a recent essay: ‘Recht-Fertigungen eines Gesellschafts-Rechts’ (forthcoming in Christian Joerges and Gunther Teubner (eds.), Rechtsverfassungsrecht. Recht-Fertiging zwischen Privatrechtsdogmatik und Gesellschaftstheorie, Baden-Baden: Nomos). Iain F. Fraser suggests the translation ‘just-ifications of a law of society’, adding that the German Recht-Fertigung can be etymologised as making/manufacturing law/right. ‘Justi(ce)-fication’ or ‘justice-making law’ may retain a touch more of the German term’s message. But it needed a connoisseur of Roman law, namely Wolfgang Ernst (Bonn), to remind me that justum facere is the common root of Recht-Fertigung and justification. 2 Esp. Ch. Joerges and G. Brüggemeier, Europäisierung des Vertrags und Haftungsrechts, in: P.-Ch. Müller-Graff (ed.), Gemeinsames Privatrecht in der Europäischen Gemeinschaft, 2nd edn., Baden-Baden: Nomos 1999, 301 ff.; Ch. Joerges, The Impact of European Integration on Private Law: Reductionist Perceptions, True Conflicts and a New Constitutionalist Perspective, European Law Journal 3 (1997), 378 ff
which, indeed, is really a claim raised in the treaties and treaty amendments, but is, in reality in need of clarification and hard to meet. Why? The process of European integration has been seen as forming and formatting a sovereignty association of a special nature (Herrschafisverband eigener Pragung)as M. Rainer Lepsius puts it-a happy formulatio since, by simply using the Weberian category of Herrschaft(domination/sovereignty ),it designates a continuing key problem in the European project. This Herrschafisverband is dependent on recognition by its subjects-and this de facto dependency has continued to become visible and perceptible. 4 Social scientists ought not, and we lawyers may not, satisfy ourselves with an empirical concept of legitimacy: Are Europes sovereignty claims justifiable as to deserve our recognition, too? This is a question which we have to ask ourselves, irrespective of whether we bring in Jurgen Habermas for the purpose or not law"from the outset, namely, in the very stage of the establishment of the EEC. It is y o And, in fact, legal science did ask the question of the basis of the valid ity of Europe impression that this happened more fundamentally in Germany than elsewhere-not necessarily for good reasons, but certainly for compelling ones: the Federal Repu still a very young democracy at that time and could not be expected to call this achievement into question. At the same time, it was dependent on being included in Europe. The Basic Law of 1949, however, had anticipated such dilemmas and provided a siby llic and prudent response it had constitutionalised both principles, the inviolability of democracy(in Article 79 III)and its openness to integration(in Article 24). Is this a paradox documenting the intrinsic contradictoriness of all law? It is, at any rate, a challenge around which all European law to date must turn and which keeps its interpreters so restless. I wish to distinguish between three sets of attempts to find fixed points here and give the European process a firm normative I 1 Market rational ity as a principle of (constitutional) law? The first, ordo-liberalism'(a German version of neo- liberalism), was ready even before the EEC existed. It had been developed in the turmoil of the Weimar Republic, and posited that a the opportunistic, discretionary encroachments of politics o uted,)so as to be protected from This trad ition survived the Third 3 For this German term, see M. Rainer Lepsius, Die Europaische Union als Herrschaftsverband eigener Pragung(The European Union as a Sovereignty Association of a Special Nature), in: Ch. Joerges, Y. Meny and J HH. Weiler(eds ) What Kind of Constitution for What Kind of polity? Responses to Joschka Fischer Florence: The robert Schuman Centre for Advanced Studies at the European University Institute/Cambridge, Ma:HarvardLawSchool2000,203ff.(213ff.); This has now been given thorough treatment by the explanatory disciplines, most recently in KJ. Alter, Establishing the Supremacy of European Law: The Making of an International Rule ofLaw in Europe Oxford/New York: Oxford University Press 2001; A. Wiener, They Just Dont Understand! Finality and Compliance: Opposing Rationales in the European Constitutional Debate, MS Belfast 2002 For a very pointed recent restatement, see J. Habermas, Remarks on Legitimation through Human Rights, in: id, The Postnational Constellation, Cambridge: Polity 2001, 113 ff, 113. The whole issue is systematically discussed in Ch. Jetzlsperger, Legitimacy through Jurisprudence? The Impact of the European Court of Justice on the Legit macy of the European Union, EUl Working Paper Law 12/2003 Cf. on this tradition D.J. Gerber, Constitutionalising the Economy: German Neo-Liberalism Competition Law and the New Europe, American Journalof Comparative Law 42( 1994), 25 ff, w. Sauter, Competition Law and Industrial Policyin the EU, Oxford: Clarendon Press 1997, 26 ff.; oddly(and significantly ) this tradition hardly appears in political science and sociology. A remarkable exception is Ph Manow, Modell Deutschland asan Interdenom inational Comprom ise: Program for the Study of Germany and
which, indeed, is really a claim raised in the treaties and treaty amendments, but is, in reality, in need of clarification and hard to meet. Why? The process of European integration has been seen as forming and formatting a ‘sovereignty association of a special nature’ (Herrschaftsverband eigener Prägung) as M. Rainer Lepsius3 puts it - a happy formulation, since, by simply using the Weberian category of Herrschaft (domination/sovereignty), it designates a continuing key problem in the European project. This Herrschaftsverband is dependent on recognition by its subjects - and this de facto dependency has continued to become visible and perceptible.4 Social scientists ought not, and we lawyers may not, satisfy ourselves with an empirical concept of legitimacy: Are Europe’s sovereignty claims so justifiable as to deserve our recognition, too? This is a question which we have to ask ourselves, irrespective of whether we bring in Jürgen Habermas5 for the purpose or not. And, in fact, legal science did ask the question of the basis of the validity of European law ‘from the outset’, namely, in the very stage of the establishment of the EEC. It is my impression that this happened more fundamentally in Germany than elsewhere - not necessarily for good reasons, but certainly for compelling ones: the Federal Republic was still a very young democracy at that time and could not be expected to call this achievement into question. At the same time, it was dependent on being included in Europe. The Basic Law of 1949, however, had anticipated such dilemmas and provided a sibyllic and prudent response: it had constitutionalised both principles, the inviolability of democracy (in Article 79 III) and its openness to integration (in Article 24). Is this a paradox documenting the intrinsic contradictoriness of all law? It is, at any rate, a challenge around which all European law to date must turn and which keeps its interpreters so restless. I wish to distinguish between three sets of attempts to find fixed points here and give the European process a firm normative basis. I.1 Market rationality as a principle of (constitutional) law? The first, ‘ordo-liberalism’ (a German version of neo-liberalism), was ready even before the EEC existed. It had been developed in the turmoil of the Weimar Republic, and posited that a free order for economic life must be legally shaped (‘constituted’) so as to be protected from the opportunistic, discretionary encroachments of politics.6 This tradition survived the Third 3 For this German term, see M. Rainer Lepsius, Die Europäische Union als Herrschaftsverband eigener Prägung (The European Union as a Sovereignty Association of a Special Nature), in: Ch. Joerges, Y. Mény and J.H.H. Weiler (eds.), What Kind of Constitution for What Kind of Polity? Responses to Joschka Fischer, Florence: The Robert Schuman Centre for Advanced Studies at the European University Institute/Cambridge, MA: Harvard Law School 2000, 203 ff. (213 ff.); . 4 This has now been given thorough treatment by the explanatory disciplines, most recently in K.J. Alter, Establishing the Supremacy of European Law: The Making of an International Rule o f Law in Europe, Oxford/New York: Oxford University Press 2001; A. Wiener, They Just Don’t Understand! Finality and Compliance: Opposing Rationales in the European Constitutional Debate, MS Belfast 2002. 5 For a very pointed recent restatement, see J. Habermas, Remarks on Legitimation through Human Rights, in: id., The Postnational Constellation, Cambridge: Polity 2001, 113 ff., 113. The whole issue is systematically discussed in Ch. Jetzlsperger, Legitimacy through Jurisprudence? The Impact of the European Court of Justice on the Legitimacy of the European Union, EUI Working Paper Law 12/2003. 6 Cf. on this tradition D.J. Gerber, Constitutionalising the Economy: German Neo-Liberalism, Competition Law and the ‘New’ Europe, American Journal of Comparative Law 42 (1994), 25 ff.; W. Sauter, Competition Law and Industrial Policy in the EU, Oxford: Clarendon Press 1997, 26 ff.; oddly (and significantly), this tradition hardly appears in political science and sociology. A remarkable exception is Ph. Manow, Modell Deutschland as an Interdenominational Compromise: Program for the Study of Germany and
Reich, and marked the Federal Republic's sensibility in relation to economic policy as Ordnungspolitik. In the course of European integration, ordo-liberalism became the German dominant theory, with a peculiar double meaning for both components of the term: it dominated among professors of economic law and in many unofficial and officious policy statements; but the practice of law and of politics looked different. 8 The same holds true for the Community and its law: The 'four freedoms guaranteed in the eEC treaty, the opening up of the national economies, the bans on discrimination and the competition rules, were understood as a'decision' in favour of an economic constitution which met the conceptions of the ordo-liberal school with regard to the framework cond itions for a competitive market system. And the very fact that Europe was set in motion as a mere economic community conferred plausibility on the ordo-liberal argument: through the interpretation of the economic law provisions in the EEC Treaty as a legally established order committed to guaranteeing economic freedoms, the Community gained a legitimacy of its own, which was independent of the institutions of the democratic constitutional state, and from which legally bind ing policy commitments of this Community followed. 0 This was a framework which left room for alternatives. For many years, in fact, until the intenal market programmes of 1985 and the Single European Act of 1987, private law was left to itself. In the course of these initiatives, the legal principle of mutual recognition was discovered for private law, thus establishing the hope that the mechanisms of regulatory competition would promote an feconomic'rationalisation of private law in Europe. 2 At any rate, a European code of private law was also envisaged in the early 1990s. 3 The newest version of this idea is now, however Europe, Working Paper No. 00.3, Center for European Studies, Harvard University, Cambridge, MA, 2000 7 Again(see note 1 supra)a notion which tends to lose its meaning in translation. Economi govemancethetermusedinpertinentdocumentsoftheEuropeancOnventionwebsite()may be as close as one can get Cf, for example, Ch Joerges, The Market without a State? States without Markets? Two Essays on the Law of the European Economy, EUI Working Paper Law 1/96, San Domenico di Fiesole 1996 (http:/leiop.orat/eiop/texte/1997-019a.htm>,shttp:/leiop.orat/eiop/texte/1997-020.htm>);goodGovernance in the European Internal Market: Two Competing Legal Conceptualisation of European Integration and their Synthesis, in: A. v, Bogdandy, P C. Mavroides and Y, Meny(eds ) European Integration and International Co ordination: Studies in Transnational Economic Law in Honour of Claus-Dieter Ehlermann, Den Haag/London/New York: Kluwer Law Intermational2002219 ff. were then to be understood as mere exceptions from the governing ordo E Admittedly, the many im portant policy fields exempted from Ord nungspolitik in the EEC Treaties Particularly significant, here, is A. Muller-Armack, Die Wirtschaftsordnung des Gemeinsamen Marktes, in: id, Wirtschaftsordnung und Wirtschaftspolitik, Freiburg i Br: Rombach 1966, 401 ff. Or more or less decisively preserved itself against relevant early special statutory private law (sonderprivatrechtliche)projects, which existed from the mid-1970s onward(and fit in with the picture sketched out here; cf. Ch Joerges, Zielsetzungen und Instrumentarien der Europaischen Verbraucherrechtspolitik. Eine Analyse von Entwicklungen im Bereich des Zivilrechts, Zeitschriftfuir Verbraucherpolitik3(1979),213 ff, cf. B Bomer, Die Produkthaftung oder das vergessene Gemeinschaftsrecht in: W.G. Grewe(ed ) Europaische Gerichtsbarkeit und nationale Verfassungsgerichtsbarkeit. Festschrift zum 70. Geburtstag von Hans Kutscher, Baden-Baden: Nomos 1981, 43 ff. For an official position, see Wissenschaftlicher Beirat beim Bundesm inisterium fur Wirtschaft Stellungnahme zum WeiBbuch der EG-Kommission uiber den Binnenmarkt( Schriften-Reihe 51), Bonn 198 Cf, in particular, E.-. Mestmacker, Die Wiederkehr der burgerlichen Gesellschaft und ihres Rechts Rechtshistorisches ournal10(1991), 177., 190 ff.; w. Tilmann, Eine Privatrechtskodifikation fur die Europaische Gemeinschaft, in: P.-Ch. Muller-Graff(ed. ) Gemeinsames Privatrecht in der europaischer
Reich, and marked the Federal Republic’s sensibility in relation to economic policy as Ordnungspolitik. 7 In the course of European integration, ordo-liberalism became the German ‘dominant theory’, with a peculiar double meaning for both components of the term: it ‘dominated’ among professors of economic law and in many unofficial and officious policy statements; but the practice of law and of politics looked different.8 The same holds true for the Community and its law: The ‘four freedoms’ guaranteed in the EEC Treaty, the opening up of the national economies, the bans on discrimination and the competition rules, were understood as a ‘decision’ in favour of an economic constitution which met the conceptions of the ordo-liberal school with regard to the framework conditions for a competitive market system.9 And the very fact that Europe was set in motion as a mere economic community conferred plausibility on the ordo-liberal argument: through the interpretation of the economic law provisions in the EEC Treaty as a legally established order committed to guaranteeing economic freedoms, the Community gained a legitimacy of its own, which was independent of the institutions of the democratic constitutional state, and from which legally binding policy commitments of this Community followed.10 This was a framework which left room for alternatives. For many years, in fact, until the internal market programmes of 1985 and the Single European Act of 1987, private law was left to itself.11 In the course of these initiatives, the legal principle of mutual recognition was discovered for private law, thus establishing the hope that the mechanisms of regulatory competition would promote an ‘economic’ rationalisation of private law in Europe.12 At any rate, a European code of private law was also envisaged in the early 1990s.13 The newest version of this idea is now, however, Europe, Working Paper No. 00.3, Center for European Studies, Harvard University, Cambridge, MA, 2000. 7 Again (see note 1 supra) a notion which tends to lose its meaning in translation. ‘Economic governance’, the term used in pertinent documents of the European Convention website () may be as close as one can get. 8 Cf., for example, Ch. Joerges, The Market without a State? States without Markets? Two Essays on the Law of the European Economy, EUI Working Paper Law 1/96, San Domenico di Fiesole 1996 (; ); ‘Good Governance’ in the European Internal Market: Two Competing Legal Conceptualisation of European Integration and their Synthesis, in: A. v. Bogdandy, P.C. Mavroides and Y. Mény (eds.), European Integration and International Coordination: Studies in Transnational Economic Law in Honour of Claus-Dieter Ehlermann, Den Haag/London/New York: Kluwer Law International 2002, 219 ff. 9 Admittedly, the many important policy fields exempted from Ordnungspolitik in the EEC Treaties were then to be understood as mere exceptions from the governing ordo. 10 Particularly significant, here, is A. Müller-Armack, Die Wirtschaftsordnung des Gemeinsamen Marktes, in: id., Wirtschaftsordnung und Wirtschaftspolitik, Freiburg i.Br.: Rombach 1966, 401 ff. 11 Or more or less decisively preserved itself against relevant early ‘special statutory private law’ (sonderprivatrechtliche) projects, which existed from the mid-1970s onward (and fit in with the picture sketched out here; cf. Ch. Joerges, Zielsetzungen und Instrumentarien der Europäischen Verbraucherrechtspolitik. Eine Analyse von Entwicklungen im Bereich des Zivilrechts, Zeitschrift für Verbraucherpolitik 3 (1979), 213 ff.; cf. B. Börner, Die Produkthaftung oder das vergessene Gemeinschaftsrecht, in: W.G. Grewe (ed.), Europäische Gerichtsbarkeit und nationale Verfassungsgerichtsbarkeit. Festschrift zum 70. Geburtstag von Hans Kutscher, Baden-Baden: Nomos 1981, 43 ff. 12 For an official position, see Wissenschaftlicher Beirat beim Bundesministerium für Wirtschaft, Stellungnahme zum Weißbuch der EG-Kommission über den Binnenmarkt (Schriften-Reihe 51), Bonn 1986. 13 Cf., in particular, E.-J. Mestmäcker, Die Wiederkehr der bürgerlichen Gesellschaft und ihres Rechts, Rechtshistorisches Journal 10 (1991), 177 ff., 190 ff.; W. Tilmann, Eine Privatrechtskodifikation für die Europäische Gemeinschaft, in: P.-Ch. Müller-Graff (ed.), Gemeinsames Privatrecht in der Europäischen
called the privatisation of private law. 4 I 2 Integration functionalism The ordo-liberal assignment of constitutional valid ity to the system of undistorted competition' was never dominating, certainly not beyond German borders. On the one hand the normative yardstick it provided seemed simply to narrow to provide guidance for the broad range of activities in which the European Economic Community was involved. Equally in the legal disciplines which started to explore the nature of that new phenomenon. That is certainly true for international law. 5 But even in German constitutional law (law of the state, Staatsrecht), the economic policy was widely held to be the responsibility of the democratically elected -government. This exactly was the challenge for the new discipline since this type of legitimacy, i.e., one based on a parliamentary majority, was not available for supranational political governance, it became imperative to find an alternative basis for gitimising supranational governance. Hans Peter Ipsen succeeded in developing a particularly interesting response. He characterised the(then) three European Communities special purpose associations for functional integration'(Zweckverbande funktioneller Integration). 6 The term special purpose associations' denoted areas not foreseen in the ordo-liberal concepts-without, however, exposing Community law to democratic requirements. As a special purpose association, Europe was supposed to deal with questions of technical realisation, i.e., administrative tasks that could -and had to- be conveyed to a supranational bureaucracy. 7 That all this has to do with private law may seem a far-fetched assertion, but it is raps, easier to understand if one bears in mind that Ipsen's functionalism was a continuation at the European level of the second trad ition in German economic law, which K W. Norr has called the concept of organised economy 8 This trad ition is agnostic as to Gemeinschaft, Baden-Baden: Nomos 1993, 485 ff. ee the programmatic title of the September 2002 Heidelberg conference of the German Association of Junger Zivilrechtswissenschafiler 2002 (Die Privatsierung des privatrechts-rechtliche Gestaltung ohp uch youngteachersofcivillawshttp:/www.iunge.zivilrechtswissenschaftler.de>,recentlypublishedasJAht staatlichen Zwang), Stuttgart [etc ] Boorberg 2003. Another school of thought, represented first and foremost by Reinhard Zimmermann, conceptualises private law as an autonomous body of la w freeing itself from national ties(and finding the way back to the ius commune europaeum); cf R Zimmermann, Das Romisch-Kanonische lus commune als Grundlage europaischer Rechtseinheit, Juristen Zeitung 1992, 8 ff.; Der Europaische Charakter des englischen Rechts. Historische Verbindungen zwischen civil law und common law, Zeitschriftfir Europaisches Privatrecht 1993, 4 ff.(reprinted in P -Ch. Muller-Graff(ed. ) Gemeinsames Privatrecht in der Europaischen Gemeinschaft, 2nd edn., Baden-Baden: Nomos 1999, 103 ff. ) see, also, id, Roman Lawand European Legal Unity, in: A.S. Hartkamp, M.W. Hesselink, E. Hondius, C Joustra and E du Perron(eds ) Towards a European Civil Code, 2nd edn., Nijmegen/Den Haag. Kluwer 1998, 21 ff, and id, Savignys Vermachtnis, in: P. Caropni andG Dilcher (eds ) Norm und Tradition. Welche Geschichtlichkeitfuirdie Rechtsgeschichte?, Koln/Weimarwien: Bohlau 1998, 281 ff. 15 For an instructive account of the legal history, see Ch. Tietje, Internationalisiertes venwaltung shandeln Berlin: Duncker Hum blot 2001. 50 ff. 86 ff.155 ff. 16 H.P. Ipsen, Der deutsche Jurist und das Europa ische Gemeinschaftsrecht, Verhandlungen des 43 Deutschen uristentages, Munchen: C H. Beck 1964, Vol. 2 L 14 ff. H P. Ipsen, Europaisches Gemeinschaftsrecht, Tubingen: Mohr/Siebeck 1972, 176 ff. K.W. Norr, Die Republikder Wirtschaft, Teil: Von der Besatzungszeit bis =ur GroBen Koalition
called the ‘privatisation of private law’.14 I.2 Integration functionalism The ordo-liberal assignment of constitutional validity to the ‘system of undistorted competition’ was never dominating, certainly not beyond German borders. On the one hand, the normative yardstick it provided seemed simply to narrow to provide guidance for the broad range of activities in which the European Economic Community was involved. Equally important, the idea of an ‘economic constitution’ was not accepted, or was simply unheard of, in the legal disciplines which started to explore the ‘nature’ of that new phenomenon. That is certainly true for international law.15 But even in German constitutional law (law of the state, Staatsrecht), the economic policy was widely held to be the responsibility of the - democratically elected - government. This exactly was the challenge for the new discipline: since this type of legitimacy, i.e., one based on a parliamentary majority, was not available for supranational political governance, it became imperative to find an alternative basis for legitimising supranational governance. Hans Peter Ipsen succeeded in developing a particularly interesting response. He characterised the (then) three European Communities as ‘special purpose associations for functional integration’ (Zweckverbände funktioneller Integration).16 The term ‘special purpose associations’ denoted areas not foreseen in the ordo-liberal concepts - without, however, exposing Community law to democratic requirements. As a special purpose association, Europe was supposed to deal with questions of ‘technical realisation’, i.e., administrative tasks that could - and had to - be conveyed to a supranational bureaucracy.17 That all this has to do with private law may seem a far-fetched assertion, but it is, perhaps, easier to understand if one bears in mind that Ipsen’s functionalism was a continuation at the European level of the second tradition in German economic law, which K.W. Nörr has called the concept of ‘organised economy’.18 This tradition is agnostic as to Gemeinschaft, Baden-Baden: Nomos 1993, 485 ff. 14 See the programmatic title of the September 2002 Heidelberg conference of the German Association of young teachers of civil law, , recently published as Jahrbuch Junger Zivilrechtswissenschaftler 2002 (Die Privatsierung des Privatrechts - rechtliche Gestaltung ohne staatlichen Zwang), Stuttgart [etc.]: Boorberg 2003. Another school of thought, represented first and foremost by Reinhard Zimmermann, conceptualises private law as an autonomous body of law freeing itself from national ties (and finding the way back to the ius commune europaeum); cf. R. Zimmermann, Das Römisch-Kanonische Ius commune als Grundlage europäischer Rechtseinheit, Juristen Zeitung 1992, 8 ff.; Der Europäische Charakter des englischen Rechts. Historische Verbindungen zwischen civil law und common law, Zeitschrift für Europäisches Privatrecht 1993, 4 ff. (reprinted in P.-Ch. Müller-Graff (ed.), Gemeinsames Privatrecht in der Europäischen Gemeinschaft, 2nd edn., Baden-Baden: Nomos 1999, 103 ff.); see, also, id., Roman Law and European Legal Unity, in: A.S. Hartkamp, M.W. Hesselink, E. Hondius, C. Joustra and E. du Perron (eds.), Towards a European Civil Code, 2nd edn., Nijmegen/Den Haag: Kluwer 1998, 21 ff., and id., Savignys Vermächtnis, in: P. Caropni and G. Dilcher (eds.), Norm und Tradition. Welche Geschichtlichkeit für die Rechtsgeschichte?, Köln/Weimar/Wien: Böhlau 1998, 281 ff. 15 For an instructive account of the legal history, see Ch. Tietje, Internationalisiertes Verwaltungshandeln, Berlin: Duncker & Humblot 2001, 50 ff., 86 ff., 155 ff. 16 H.P. Ipsen, Der deutsche Jurist und das Europäische Gemeinschaftsrecht, Verhandlungen des 43. Deutschen Juristentages, München: C.H. Beck 1964, Vol. 2 L 14 ff. 17 H.P. Ipsen, Europäisches Gemeinschaftsrecht, Tübingen: Mohr/Siebeck 1972, 176 ff. 18 K.W. Nörr, Die Republik der Wirtschaft, Teil I: Von der Besatzungszeit bis zur Großen Koalition
the ordo in its economic policy. To put this in a constitutionally positive way: it leaves the ordering of the economy to the democratically certified legislator. But, once again, the question arose how politics is to be legitimised if it outgrows this framework without being able to find a basis in international law? Ipsen's ingenious answer: Europe should be understood as institutionalising technocratic, functionalist rationality as the basis of and time, to be an adequate cause for what integration policy was actually doing. However, this ceased to be the case when the by now legendary programme to completethe internal market by 1992 was implemented. Europe then witnessed its own re-regulation'. 9 It started to complement its market build ing efforts with new regulatory strategies that, accord ing to Giandomenico Majone, would lead to the transformation of the European Community into a regulatory state”2 From such perspectives, private law proper'continues to be marginal. Both Europe lawyers and private lawyers shared this view the former were participating in renewing the whole regulatory framework for Europe's economy, the latter- most insistently the German academic community -complained about distortions of private law by European statutes but also emphasised that the core areas of private law continued to be in national hands the logic of integration policy and the logic of the development of private law were, seemingly operating autonomously. 21 1.3 Europe as a Sozialstaat(welfare state)and codifier of private law? Hard Code Now! This title sounded a bit like a battle cry and was meant to. Ugo Mattei who inscribed it on his banners, is more conciliatory and circumspect in reality than the slogan he chose is. A European civil code ought to lay down binding provisions, but be content with a minimal programme and be process orientated. Only in this way could it fit the social fabric of European capitalism. Would this, then, mean a code with deep enough foundations and high enough vaulting to include these social matters in its conceptual Germany, but his critique of the formalism of the German code still seems to be allve o edifice' to a sort of otto von Gierke redivivus? 23 Otto von gierke may be forgotten outsid topical 24 Tubingen: Mohr/Siebeck 1999, 5 ff.; cf earlier id, Zwischen den Muhlsteinen Eine Privatrechtsgeschichte der Weimarer Republik, Tubingen: Mohr/Siebeck 1988 See his regulating Europe: Problems and Prospects, Jahrbuchzur Staats-und Venwaltungswissenschaft3(1989),159 ff.; id(ed ) Deregulation or Re-Regulation? Regulatory Reform in urope and the United States, London: Routledge 1990, where he developed the corresponding legitim ising formula For an interim balance, see G. Majone, Regulating Europe, London: Routledge 1996.Since then, the conceptualedifice has been steadily refined, for example, in id, Non-majoritarian Institutions and the Limits of Democratic Govemance: A Political Transaction-Cost Approach, ournal of Institutional and Theoretical Economics 157(2001), 57 ff. For more details, see Ch Joerges and G. Bruggemeier, Europa isierung des vertrags und Haftungsrechts(note 2 supra); Ch Joerges, The Impact of European Integration on Private Law(note 2 supra) U Mattei, Hard Code Nowl, Global Jurist Frontiers 2(1)(2002), Article 1 O. v. Gierke, Die soziale aufgabe des Privatrechts, Berlin 1889, 17 Cf Ch. Schmid, On the Legitimacy of a European Civil Code, Maastricht ournalofEuropean and Comparative La 8(2001), 277
the ordo in its economic policy. To put this in a constitutionally positive way: it leaves the ordering of the economy to the democratically certified legislator. But, once again, the question arose how politics is to be legitimised if it outgrows this framework without being able to find a basis in international law? Ipsen’s ingenious answer: Europe should be understood as institutionalising technocratic, functionalist rationality as the basis of and contents of its law. And this type of output legitimacy seemed, for a considerable period of time, to be an adequate cause for what integration policy was actually doing. However, this ceased to be the case when the by now legendary programme to ‘complete’ the internal market by 1992 was implemented. Europe then witnessed its own ‘re-regulation’.19 It started to complement its market building efforts with new regulatory strategies that, according to Giandomenico Majone, would lead to the transformation of the European Community into a ‘regulatory state’.20 From such perspectives, ‘private law proper’ continues to be marginal. Both European lawyers and private lawyers shared this view: the former were participating in renewing the whole regulatory framework for Europe’s economy; the latter - most insistently the German academic community - complained about distortions of private law by European statutes but also emphasised that the core areas of private law continued to be in national hands: the logic of integration policy and the logic of the development of private law were, seemingly, operating autonomously.21 I.3 Europe as a Sozialstaat (welfare state) and codifier of private law? ‘Hard Code Now!’ This title sounded a bit like a battle cry and was meant to. Ugo Mattei, who inscribed it on his banners,22 is more conciliatory and circumspect in reality than the slogan he chose is. A European civil code ought to lay down binding provisions, but be content with a minimal programme and be process orientated. Only in this way could it fit the ‘social fabric of European capitalism’. Would this, then, mean a code ‘with deep enough foundations and high enough vaulting’ to include these social matters ‘in its conceptual edifice’ to a sort of Otto von Gierke redivivus? 23 Otto von Gierke may be forgotten outside Germany, but his critique of the formalism of the German code still seems to be alive and topical.24 Tübingen: Mohr/Siebeck 1999, 5 ff.; cf. earlier id., Zwischen den Mühlsteinen. Eine Privatrechtsgeschichte der Weimarer Republik, Tübingen: Mohr/Siebeck 1988. 19 See his Regulating Europe: Problems and Prospects, Jahrbuch zur Staats- und Verwaltungswissenschaft 3 (1989), 159 ff.; id. (ed.), Deregulation or Re-Regulation? Regulatory Reform in Europe and the United States, London: Routledge 1990, where he developed the corresponding legitimising formula. 20 For an interim balance, see G. Majone, Regulating Europe, London: Routledge 1996. Since then, the conceptual edifice has been steadily refined, for example, in id., Non-majoritarian Institutions and the Limits of Democratic Governance: A Political Transaction-Cost Approach, Journal of Institutional and Theoretical Economics 157 (2001), 57 ff. 21 For more details, see Ch. Joerges and G. Brüggemeier, Europäisierung des Vertrags und Haftungsrechts (note 2 supra); Ch. Joerges, The Impact of European Integration on Private Law (note 2 supra). 22 U. Mattei, Hard Code Now!, Global Jurist Frontiers 2(1) (2002), Article 1. 23 O. v. Gierke, Die soziale Aufgabe des Privatrechts, Berlin 1889, 17. 24 Cf. Ch. Schmid, On the Legitimacy of a European Civil Code, Maastricht Journal of European and Comparative Law 8 (2001), 277 ff
Would the social dimensions of private law be in a safe harbour in a European civil code? This is a question that does not concern private law alone, but is connected with the fate of the welfare state as a whole. We shall come back to this 25 The difficulties that such a vision faces are, however, so massive that there is no sense in putting them off. To anticipat the argument that we are developing: the normative quality of the constitutional social private law'is dependent on the interplay of parliamentary legislation and the non parliamentary production of law, on regulatory policy, special statutory law and codification, on expert communities and on the general public.26 These circumstances are not present in the European context, and will not emerge in any near future That this is the case follows simply from state of the(European) Union: this polity is not unitary, but plural27 (heterarchical, as some call it; 28 or" mixed', as others do29) In it, there are - relatively autonomous political units, none of which are empowered with the Kompetenz-Kompetenz which would be needed for an authoritative resolution of jurisd ictional conflicts. The result is a very specific disjunction of society'and'state', of economic freed oms and political rights, market citizenship and political citizenship Let us distance ourselves from the two approaches initially dealt with: Europe has never become a market without a state in which a supranational economic constitution can structure the systems of private law, and it is even less the European transformation into a statal entity with comprehensive political powers nstead it is a tertium which finds itself in a constitutional moment that will continue to last for some time yet. 3 Sections 11.3 and Ill infra Cf. Ch Joerges, Formale Freiheitsethik, materiale Verantwortungsethik und Diskursethik im modernen Privatrecht, in: F U. Pappi(ed ) Wirtschaftsethik Gesellschaftswissenschaftliche Perspektiven ( Sonderheft der Christiana Albertina Universitat ), Kiel: s.n. 1989, 127 ff.; The Science of Private Law and the Nation-State, in F. Snyder(ed ) The Europeanisation ofLaw: The Legal Effects of European Integration, Oxford/Portland: Hart 2000, 47 ff, 70 ff.):O. Gerstenberg, Public Intervention, Private Ordering and Social Pluralism, in: Ch Joerges andO Gerstenberg(eds ) Private Governance, Democratic Constitutionalism and Supranationalism, Luxembourg: European Commission(Directorate-General Science, Research and Development; EUR 18340 EN,1998,205ff. As well argued by N. Walker, The Idea of Constitutional Plura lism, Modern Law Review 65(2002), 317ff K-H. Ladeur, The Theory of Autopoiesis: An Approach to a Better Understanding of Post-modern Law. From the Hierarchy of Norms to the Heterarchy of Changing Patterns of Legal Inter-relationships, EUI Working Paper Law 99/3 G Majone, Delegation of Regulatory Powers in a Mixed Polity, European Law Journal(2002), 319 This scepticism does not, as P. Legrand's(European Legal Systems Are not Converging, Internat and Comparative Law Quarterly, 45 (1996), 52 ff. ) result from presumed unbridgeable communication difficulties between common law and civil law, nor is it meant, as, for instance, in H. Collins, European Private Law and the Cultural Identity of States, European Review ofPrivate Law 3(1995), 353 ff, a rigid defence of the 'cultural ties of private law. Instead, it assumes two kinds of social integration-cultural and political. The former denotes the kind of integration that is needed for individuals and groups that seek to find out who they are or would like to be. . the latter does not rest upon a particular set of values but on trans-culturalnorms and universal principles; E.O. Eriksen and J.E. Fossum, The EU and Post-national Legitimacy, Oslo: Arena Working Paper 26/2000, text accompany ingnotes 40 ff. It is in this sense that I understand M.w. Hesselink, The New European Legal Culture, Deventer: Kluwer 2001, 72 ff
Would the ‘social’ dimensions of private law be in a safe harbour in a European civil code? This is a question that does not concern private law alone, but is connected with the fate of the welfare state as a whole. We shall come back to this.25 The difficulties that such a vision faces are, however, so massive that there is no sense in putting them off. To anticipate the argument that we are developing: the normative quality of the constitutional ‘social private law’ is dependent on the interplay of parliamentary legislation and the nonparliamentary production of law, on regulatory policy, special statutory law and codification, on expert communities and on the general public.26 These circumstances are not present in the European context, and will not emerge in any near future. That this is the case follows simply from ‘state of the (European) Union’: this polity is not unitary, but plural27 (‘heterarchical’, as some call it;28 or ‘mixed’, as others do29). In it, there are - relatively - autonomous political units, none of which are empowered with the Kompetenz-Kompetenz which would be needed for an authoritative resolution of jurisdictional conflicts. The result is a very specific disjunction of ‘society’ and ‘state’, of economic freedoms and political rights, market citizenship and political citizenship. Let us distance ourselves from the two approaches initially dealt with: Europe has never become a ‘market without a state’ in which a supranational economic constitution can structure the systems of private law; and it is even less the European transformation into a statal entity with comprehensive political powers. Instead, it is a tertium which finds itself in a ‘constitutional moment’ that will continue to last for some time yet.30 25 Sections II.3 and III infra. 26 Cf. Ch. Joerges, Formale Freiheitsethik, materiale Verantwortungsethik und Diskursethik im modernen Privatrecht, in: F.U. Pappi (ed.), Wirtschaftsethik. Gesellschaftswissenschaftliche Perspektiven (Sonderheft der Christiana Albertina Universität), Kiel: s.n. 1989, 127 ff.; The Science of Private Law and the Nation-State, in: F. Snyder (ed.), The Europeanisation of Law: The Legal Effects of European Integration , Oxford/Portland: Hart 2000, 47 ff., 70 ff. ); O. Gerstenberg, Public Intervention, Private Ordering and Social Pluralism, in: Ch. Joerges and O. Gerstenberg (eds.), Private Governance, Democratic Constitutionalism and Supranationalism, Luxembourg: European Commission (Directorate-General Science, Research and Development; EUR 18340 EN), 1998, 205 ff. 27 As well argued by N. Walker, The Idea of Constitutional Pluralism, Modern Law Review 65 (2002), 317 ff. 28 K.-H. Ladeur, The Theory of Autopoiesis: An Approach to a Better Understanding of Post-modern Law. From the Hierarchy of Norms to the Heterarchy of Changing Patterns of Legal Inter-relationships, EUI Working Paper Law 99/3. 29 G. Majone, Delegation of Regulatory Powers in a Mixed Polity, European Law Journal 8 (2002), 319 ff. 30 This scepticism does not, as P. Legrand’s (European Legal Systems Are not Converging, International and Comparative Law Quarterly, 45 (1996), 52 ff.), result from presumed unbridgeable communication difficulties between common law and civil law, nor is it meant, as, for instance, in H. Collins, European Private Law and the Cultural Identity of States, European Review of Private Law 3 (1995), 353 ff., a rigid defence of the ‘cultural’ ties of private law. Instead, it assumes ‘two kinds of social integration - cultural and political. The former denotes the kind of integration that is needed for individuals and groups that seek to find out who they are or would like to be . . ., the latter does not rest upon a particular set of values but on trans-cultural norms and universal principles’; E.O. Eriksen and J.E. Fossum, The EU and Post-national Legitimacy, Oslo: Arena - Working Paper 26/2000, text accompanying notes 40 ff. It is in this sense that I understand M.W. Hesselink, The New European Legal Culture, Deventer: Kluwer 2001, 72 ff
Il Three sets of examples Verba docent, exempla trahunt. But it is by no means the case that the sets of examples from the case law of the eCJ discussed below could" confute' the paradigms sketched out in the first section, or represent some higher law. This is because these paradigms merely refer to sets of ideas in which legal concepts and arguments can find a theoretical basis. To that extent, they compete with each other. But it is not to be expected, say, that one of them will totally dominate practice, or that one tradition of thought will disappear without trace Nevertheless, the analyses below pursues systematic and theoretical claims: they are intended to illustrate problems graphically with all three of the paradigms set forth in the previous section, thus preparing the transition to the synthesising perspectives in the concluding section II. 1 Centros and Uberseering The transformation of the freedoms of market citizens into political rights, and the obsolescence of trad itional private international law CentrosI may be regarded as the ECJ's most interesting judgment on European market building since the legendary Cassis de Dijon decision of 1979: 32 it is, at any rate, the most intensively debated one. 33 Expectations about the subsequent Uberseering litigation were correspondingly tense. 34 So much has been written that it would seem appropriate to start with the three theses that are to be established below: (1)This case law transforms economic freedoms into political rights. (2) It strives towards a jurid ification(proceduralisation) of regulatory competition. (3)It has the potential of constitutionalising' the Europeanisation process through a law of just(ce ) -fication that reaches beyond both orthodox supranationalism and trad itional private international law IL. .I Centros The judgment in Centros concems the core of the European legal acquis, namely the freedoms of market citizens which apply directly and ought therefore to take primacy over national law. Moreover, the decision is widely perceived as a step towards a long expected new type of negative integration, because it seems to expose the national company laws to regulatory competition. But Centros is more sophisticated than such interpretations suggest. 35 As so often occurs, the facts of this seminal case were triv ial a Danish married couple Case 212/97, Judgment of9 March 1999, ECR(1999-1)1459, Centros Ltd v. Ervervsog Selskabsstrylsen Rs. 120/78, SIg. 1979, 649-Cassis de dijon A Celex search on 25 March 2002 indicated 1 12 commentaries. That figure was too modest, for it did not take into account, for instance, H. Halbhuber's monograph Limited Company statt GmbH? Europarechtlicher Rahmen und deutscher Widerstand- Ein Beitrag =ur Auslegung von Art. 48 EG und =um Europaischen Gesellschaftsrecht, Baden-Baden: Nomos 2001 Rs 208/00, U.v. 5 November 2002, Uberseering Bl v Nordic Construction Company The following owes much to B. Trefil, Die Niederlassungsfreiheit fur Gesellschaften in der Rechtsprechung des EuGH und ihre Auswirkungen auf nationales Recht, EUl Working Paper Law 200319. nttp:/www.iue.it/pub/law03-9pdf.IamalsoindebtedtoKaraPreedyformanydiscussionsonthenormative contents of the freedoms, see K Preedy, Fundamental Rights and Private Acts: Horizontal Direct or Indirect Effect, European Review of private Law 8(2000), 125 ff
II Three sets of examples Verba docent, exempla trahunt. But it is by no means the case that the sets of examples from the case law of the ECJ discussed below could ‘confute’ the paradigms sketched out in the first section, or represent some ‘higher law’. This is because these paradigms merely refer to sets of ideas in which legal concepts and arguments can find a theoretical basis. To that extent, they compete with each other. But it is not to be expected, say, that one of them will totally dominate ‘practice’, or that one tradition of thought will disappear without trace. Nevertheless, the analyses below pursues systematic and theoretical claims: they are intended to illustrate problems graphically with all three of the paradigms set forth in the previous section, thus preparing the transition to the synthesising perspectives in the concluding section. II.1 Centros and Überseering: The transformation of the freedoms of market citizens into political rights, and the obsolescence of traditional private international law Centros31 may be regarded as the ECJ’s most interesting judgment on European market building since the legendary Cassis de Dijon decision of 1979;32 it is, at any rate, the most intensively debated one.33 Expectations about the subsequent Überseering litigation were correspondingly tense.34 So much has been written that it would seem appropriate to start with the three theses that are to be established below: (1) This case law transforms economic freedoms into political rights. (2) It strives towards a juridification (proceduralisation) of regulatory competition. (3) It has the potential of ‘constitutionalising’ the Europeanisation process through a law of just(ce)-fication that reaches beyond both orthodox supranationalism and traditional private international law. II.1.1 Centros The judgment in Centros concerns the core of the European legal acquis, namely the freedoms of market citizens which apply directly and ought therefore to take primacy over national law. Moreover, the decision is widely perceived as a step towards a long expected new type of ‘negative integration’, because it seems to expose the national company laws to regulatory competition. But Centros is more sophisticated than such interpretations suggest.35 As so often occurs, the facts of this seminal case were trivial: a Danish married couple, 31 Case 212/97, judgment of 9 March 1999, ECR (1999-I) 1459, Centros Ltd. v. Ervervsog Selskabsstrylsen. 32 Rs. 120/78, Slg. 1979, 649 - Cassis de Dijon. 33 A Celex search on 25 March 2002 indicated 112 commentaries. That figure was too modest, for it did not take into account, for instance, H. Halbhuber’s monograph Limited Company statt GmbH? Europarechtlicher Rahmen und deutscher Widerstand - Ein Beitrag zur Auslegung von Art. 48 EG und zum Europäischen Gesellschaftsrecht, Baden-Baden: Nomos 2001. 34 Rs. 208/00, U. v. 5 November 2002, Überseering BV v. Nordic Construction Company Baumanagement GmbH (NCC). 35 The following owes much to B. Trefil, Die Niederlassungsfreiheit für Gesellschaften in der Rechtsprechung des EuGH und ihre Auswirkungen auf nationales Recht, EUI Working Paper Law 2003 /9, . I am also indebted to Kara Preedy for many discussions on the normative contents of the freedoms; see K. Preedy, Fundamental Rights and Private Acts: Horizontal Direct or Indirect Effect, European Review of Private Law 8 (2000), 125 ff
Marianne and Tony Bryde, wished to import wine into Denmark but not pay the fee of the DK 200,000(28,000 Euro) that Denmark requires for the registration of companies. The two then hit on the idea of cocking a snoot'at their Danish Law. 36 They founded, and this was in May 1992, a private limited company in England, the now legendary Centros Ltd, and set up a subsidiary in Copenhagen- for none of these steps did they require more than the minimum capital investment However, the Danish authorities refused registration; the Brydes went to court. After all the courts had been gone through, the Hojesteret brought the questionwhether the refusal of registration was compatible with the guaranteed freedom of establishment(Article (ex 52)taken together with Articles 52 and 58 EC Treaty) before the ECJ in early June 97. The ECs answer(given on 9 March 1999)read It is contrary to Articles 52 and 58 of the Treaty for a Member State to refuse to register a branch of a company formed in a ccordance with the law of another Member State in which it las its registered office but in which it conducts no business where the branch is intended to enable the company in question to carry on its entire business in the state im which that branch is to be created, while avoiding the need to form a company there, thus evading application of the rules goveming the formation of companies which, in that state, are more restrictive as regards the paying up of a m inimum share capital. 38 11.1.2 Interpretation The ECJ is seen by some39 as cautiously continuing its earlier case law on freedom of establishment or radicalising it in a questionable fashion. 4 The incorporation theory (Gruindungstheorie) is seen as having won through against the sitztheorie(company seat principle)with the help of the ECJ. 42 None of this is true, it is argued by others: in Denmark, the incorporation theory applied anyway, and recognition of the seat of the company principle through the Daily Mail decision does not come into it: hence, it is business as usual for 36 This is how the maitre penseur of private international law, G. Kegel, interpreted what the Brydes were doing in his Editorial in Europaisches Wirtschafts und Steuerrecht(9)1999(Es ist was faul im Staate Danemark und anderswo.. - There is something rotten in the State of Denmark) Para. 13 Sentence l of the tenor of the judgment ECJ(1999)1-1947 Completeness can scarcely be achieved in portray ing the range of opinions. Specifically on the response in Germany, see H. Halbhuber, National Doctrinal Structures and European Company Law, Common Market Law Review 38(2001); a very comprehensive survey "from outside on the overall development of company law is offered by J Wouters, European Company Law. Quo Vadis?, Common Market Law Review 37 (2000), 257 ff. more topically, B. Trefil(note 35 supra) Judgment of 10 July 1986, Case C-79785, (1986)ECR 2375-Segers 41 An opinion to be found in E Steindorff, Centros und das Recht auf die gunstigste Rechtsordnung Juristen Zeitung 1999, 1140 ff. 42 Cf, for example, P. Behrens, Das Internationale Gesellscha ftsrecht nach dem Centros-Urteil des EuGH Praxis des Internationalen Privat und Verfahrensrechts 19(1999), 323 ff. this was the question the Federal High Court subm itted to the EJC on 25 May 2000; cf the Uberseering decision, Il. 1. 4 infra 43 Case C-81/87, judgment of 27 September 1988, (1988)ECR 5483, The Queen v. Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust PLC
Marianne and Tony Bryde, wished to import wine into Denmark but not pay the fee of the DK 200,000 (28,000 Euro) that Denmark requires for the registration of companies. The two then hit on the idea of ‘cocking a snoot’ at their Danish Law.36 They founded, and this was in May 1992, a private limited company in England, the now legendary Centros Ltd., and set up a subsidiary in Copenhagen - for none of these steps did they require more than the minimum capital investment. However, the Danish authorities refused registration; the Brydes went to court. After all the courts had been gone through, the Højesteret brought the question37 whether the refusal of registration was compatible with the guaranteed freedom of establishment (Article 43 (ex 52) taken together with Articles 52 and 58 EC Treaty) before the ECJ in early June 1997. The ECJ’s answer (given on 9 March 1999) read: It is contrary to Articles 52 and 58 of the Treaty for a Member State to refuse to register a branch of a company formed in a ccordance with the law of another Member State in which it has its registered office but in which it conducts no business where the branch is intended to enable the company in question to carry on its entire business in the state in which that branch is to be created, while avoiding the need to form a company there, thus evading application of the rules governing the formation of companies which, in that state, are more restrictive as regards the paying up of a minimum share capital.38 II.1.2 Interpretation The ECJ is seen by some39 as cautiously continuing its earlier case law on freedom of establishment40 or radicalising it in a questionable fashion.41 The incorporation theory (Gründungstheorie) is seen as having won through against the Sitztheorie (company seat principle) with the help of the ECJ.42 None of this is true, it is argued by others: in Denmark, the incorporation theory applied anyway, and recognition of the seat of the company principle through the Daily Mail decision43 does not come into it: hence, it is business as usual for 36 This is how the maître penseur of private international law, G. Kegel, interpreted what the Brydes were doing in his Editorial in Europäisches Wirtschafts und Steuerrecht (9) 1999 (‘Es ist was faul im Staate Dänemark und anderswo …’ - ‘There is something rotten in the State of Denmark’). 37 Para. 13. 38 Sentence 1 of the tenor of the judgment ECJ (1999) I-1947. 39 Completeness can scarcely be achieved in portraying the range of opinions. Specifically on the response in Germany, see H. Halbhuber, National Doctrinal Structures and European Company Law, Common Market Law Review 38 (2001); a very comprehensive survey ‘from outside’ on the overall development of company law is offered by J. Wouters, European Company Law: Quo Vadis?, Common Market Law Review 37 (2000), 257 ff.; more topically, B. Trefil (note 35 supra). 40 Judgment of 10 July 1986, Case C-79/85, (1986) ECR 2375 - Segers. 41 An opinion to be found in E. Steindorff, Centros und das Recht auf die günstigste Rechtsordnung, Juristen Zeitung 1999, 1140 ff. 42 Cf., for example, P. Behrens, Das Internationale Gesellschaftsrecht nach dem Centros-Urteil des EuGH, Praxis des Internationalen Privat und Verfahrensrechts 19 (1999), 323 ff.; this was the question the Federal High Court submitted to the EJC on 25 May 2000; cf. the Uberseering decision, II.1.4 infra. 43 Case C-81/87, judgment of 27 September 1988, (1988) ECR 5483, The Queen v. Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust PLC
private international law(PIL). 4 Again, the ECJ is seen as opening the road to regulatory competition, so one would now have to expect Delaware effects in Europe. 45 My first thesis 46 seeks to demarcate itself from the doctrinal dichotomy between European law and PIL, between thinking in terms of primacy and linkage and the associated policy dualism of negative and positive integration. The way the ECJ treated the conduct of the Brydes seems to me to make this sort of interpretation plausible. European law, says the criticism of the ECJ, has no business interfering with a purely internal Danish matter. The Brydes, who were pursuing no business interests in England, ought to have bowed to their home sovereign. But are the Brydes only Danes? May they have the right to the most citizens of the EU? This is the way thal/ fact. read the ECJ: there is nothing n lse o favourable legal system', 4/just because they are not merely citizens of Denmark, but al abusive in a citizen of a member State found ing a company in accordance with another Members State's provisions which are more favourable for him. That is simply his right Certainly, Centros concerned the incorporation of a company in England; the Brydes never intended to do business in England but merely wished to start their activities to Denmark. But can one call the freedom to exploit the provision of English law an abuse? No the ecj insists TTHe fact that a national of a Member State who wishes to set up a com pany chooses to form it in the Member State whose rules of company lawseem to him the least restrictive and to set up branches in other Mem ber States cannot, in itself, constitute an abuse of the right of establishment. The right to form a company in accordance with the law of a Member State and to set up branches in other Mem ber States is inherent in the exercise, in a single market, of the freedom of establishment guaranteed by the Treaty. Is this, then, negative integration, interference with Denmark's constitutional autonomy, and a new confirmation of the deregulatory effect of the freedoms? 50 Is the ECJ sending Europe's constitutional law off on the road to Delaware? Not really. For Denmark remains entitled to impose regulatory requirements on both its own -and on foreign -citizens, but has to adduce compelling grounds of public interest. European law does not push Danish law aside, but places it under pressure of justification. It was this pressure that Denmark could not stand up to it was completely unable to achieve the protection of creditors which, accord ing to the Danish governments presentation, was the object of the Danish regulation-that was Thus, for example, w. Ebke, Das Schicksal der Sitztheorie nach dem Centros-Urteil des euGH, Juristen Zeitung 1999, 656ff, P. Kindler, Niederlassungsfreiheit fur Scheinauslandsgesellschaften? Die Centros-Entscheidung des EuGH und das internationale Privatrecht, Neue Juristische Wochenschrift 1999, 1993 ff, W-H. Roth, Case Note, Common Market Law Review 37(2000), 147 ff It was especially paragraph 20 in Advocate General La Pergolas Opinion that inspired this sort of 46 Above text before section I. E. Steindorff, Centros und das Recht auf die gunstigste Rechtsordnung, note 4 1 supra Para. 27; cf. para. 29 Para 35 M. Baudisch discusses and contests this point in a very comprehensive study: From Status to Contract An American Perspective on Recent Developments in European Company Law, MS New York(Columbia Law School) 2002(on file with the author)
private international law (PIL).44 Again, the ECJ is seen as opening the road to regulatory competition, so one would now have to expect Delaware effects in Europe.45 My first thesis46 seeks to demarcate itself from the doctrinal dichotomy between European law and PIL, between thinking in terms of primacy and linkage and the associated policy dualism of ‘negative’ and ‘positive’ integration. The way the ECJ treated the conduct of the Brydes seems to me to make this sort of interpretation plausible. European law, says the criticism of the ECJ, has no business interfering with a purely internal Danish matter. The Brydes, who were pursuing no business interests in England, ought to have bowed to their home sovereign. But are the Brydes only Danes? May they have the ‘right to the most favourable legal system’,47 just because they are not merely citizens of Denmark, but also citizens of the EU? This is the way that I, in fact, read the ECJ: there is nothing in itself abusive in a citizen of a Member State founding a company in accordance with another Members State’s provisions which are more favourable for him. That is simply his right.48 Certainly, Centros concerned the incorporation of a company in England; the Brydes never intended to do business in England, but merely wished to start their activities to Denmark. But can one call the freedom to exploit the provision of English law an abuse? No, the ECJ insists: [T]he fact that a national of a Member State who wishes to set up a company chooses to form it in the Member State whose rules of company law seem to him the least restrictive and to set up branches in other Member States cannot, in itself, constitute an abuse of the right of establishment. The right to form a company in accordance with the law of a Member State and to 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.49 Is this, then, ‘negative integration’, interference with Denmark’s constitutional autonomy, and a new confirmation of the deregulatory effect of the freedoms?50 Is the ECJ sending Europe’s constitutional law off on the road to Delaware? Not really. For Denmark remains entitled to impose regulatory requirements on both its own - and on foreign - citizens, but has to adduce ‘compelling grounds of public interest’. European law does not push Danish law aside, but places it under pressure of justification. It was this pressure that Denmark could not stand up to: it was completely unable to achieve the protection of creditors which, according to the Danish government’s presentation, was the object of the Danish regulation - that was 44 Thus, for example, W. Ebke, Das Schicksal der Sitztheorie nach dem Centros-Urteil des EuGH, Juristen Zeitung 1999, 656 ff.; P. Kindler, Niederlassungsfreiheit für Scheinauslandsgesellschaften? Die Centros-Entscheidung des EuGH und das internationale Privatrecht, Neue Juristische Wochenschrift 1999, 1993 ff.; W.-H. Roth, Case Note, Common Market Law Review 37 (2000), 147 ff. 45 It was especially paragraph 20 in Advocate General La Pergola’s Opinion that inspired this sort of interpretation. 46 Above text before section II.1. 47 E. Steindorff, Centros und das Recht auf die günstigste Rechtsordnung, note 41 supra. 48 Para. 27; cf. para. 29. 49 Para. 35. 50 M. Baudisch discusses and contests this point in a very comprehensive study: From Status to Contract: An American Perspective on Recent Developments in European Company Law, MS New York (Columbia Law School) 2002 (on file with the author)
the ECj's find ing. I The ECJ acted as a constitutional court It assumed the right to test Danish law according to whether it respects rights guaranteed at the European level. However, the limits imposed on Denmark are limited. Denmark remains entitled to protect cred itors and act against fraud but in accordance with the provisos familiar to the readers of the case law on Article 28(ex 30). Denmark very soon, in May 2000, adopted a new regulation accord ing to which companies wishing to do business in Denmark and having their main centre there, must either deposit a caution amounting to DK 110,000 with the Danish bank authorities in the form of cash, government bonds or bank guarantees (which in the event of insolvency serve exclusively to meet tax demands), or else it must be clear that minimum assets of at least DK 125.000 are available. 53 Merely putting new gloss on the old provisions? At least some Danish commentators think so. 54 In its judgment of 3 February 2002, the Danish Supreme Court was silent on th issue of Centros's tax liability; it simply reprimanded the company that the forms had not been completed correctly. 55 What, then, is so rotten'-in the State of Denmark -or elsewhere?56 Denmark has to justify itself before its own citizens in the forum of the ECJ.It is entitled to pursue its regulatory interests, but it also has to show that the means it chooses serve the ends it pursues. What sort of law, then, are we dealing with here? With provisions that subject the case to the geographically'best-suited jurisdiction? A legal innovation supported by comparative studies? What is at stake -rather a European conflict of laws'to the extent that it involves dealing with legal differences or a conflict of laws that seeks to reconcile Denmark's political autonomy with the granting of European citizenship rights to Danish citizens? In reshaping economic freedoms as rights to political participation, I see the constitutional core of the decision: private autonomy and political rights in democracies, as Jurgen Habermas has continually argued since Between Facts and norms, 7 have to be conceived as both having an equivalent original dignity 8 What does this mean in the Paras 34-36 nach dem Centros-Urteil des EuGH: Eine Bilanz, Europarecht 2000, 167 ff, 192 ff for a very thoughtful recent comprehensive analysis of the Article 28 jursiprudence, cf S. Feiden, Die Bedeutung der ' Keck Rechtsprechung im system der Grundfreiheiten. Ein Beitrag =ur Konvergenzder Freheiten, Berlin: Duncker Humblot 2003, passim 53cf.B.Trefil(note35supra),at31ff.,withreferencestowww.retsinfo.dkandasurveyofthedebate on the questiona bility in European law of the new regulations. F Hansen, From C 12 to L 212: Centros Revisited, European Business Organization Law Review 2 (2001), 141 ff, 156: a flagrant violation of Article 43 EU Ugeskrift for Retsvaen 2002.1079H; Laurits Christensen(Copenhagen)and Hanne G. Kegel, note 36 J. Habermas, Faktizitiat und Geltung, Frankfurt a M. Suhrkamp 1992, 109 ff, Between Facts Norms, Cambridge, MA: MIT Press 1998, 82 ff, 133 ff. Cf. his recent restatement in Constitutional Democracy: A Paradoxical Union of Contradictory iples?, Political Theory 29(2002), 766-781, as well as Why Europe Needs a Constitution,, in: EO en,JE. Fossum and J. Menendez(eds ) Developing a Constitution for Europe, London: Routledge
the ECJ’s finding.51 The ECJ acted as a constitutional court. It assumed the right to test Danish law according to whether it respects rights guaranteed at the European level. However, the limits imposed on Denmark are limited. Denmark remains entitled to protect creditors and act against fraud - but in accordance with the provisos familiar to the readers of the case law on Article 28 (ex 30).52 Denmark very soon, in May 2000, adopted a new regulation according to which companies wishing to do business in Denmark and having their main centre there, must either deposit a caution amounting to DK 110,000 with the Danish bank authorities in the form of cash, government bonds or bank guarantees (which in the event of insolvency serve exclusively to meet tax demands), or else it must be clear that minimum assets of at least DK 125,000 are available.53 Merely putting new gloss on the old provisions? At least some Danish commentators think so.54 In its judgment of 3 February 2002, the Danish Supreme Court was silent on the issue of Centros’s tax liability; it simply reprimanded the company that the forms had not been completed correctly.55 What, then, is so ‘rotten’ - in the State of Denmark - or elsewhere?56 Denmark has to justify itself before its own citizens in the forum of the ECJ. It is entitled to pursue its regulatory interests, but it also has to show that the means it chooses serve the ends it pursues. What sort of law, then, are we dealing with here? With provisions that subject the case to the ‘geographically’ best-suited jurisdiction? A legal innovation supported by comparative studies? What is at stake - rather a European ‘conflict of laws’ to the extent that it involves dealing with legal differences or a conflict of laws that seeks to reconcile Denmark’s political autonomy with the granting of European citizenship rights to Danish citizens? In reshaping economic freedoms as rights to political participation, I see the constitutional core of the decision: private autonomy and political rights in democracies, as Jürgen Habermas has continually argued since Between Facts and Norms, 57 have to be conceived as both having an equivalent original dignity.58 What does this mean in the 51 Paras. 34-36. 52 Paras. 37-39; for a particularly lucid analysis, cf. U. Forsthoff, Niederlassungsrecht für Gesellschaften nach dem Centros-Urteil des EuGH: Eine Bilanz, Europarecht 2000, 167 ff., 192 ff.; for a very thoughtful recent comprehensive analysis of the Article 28 jursiprudence, cf. S. Feiden, Die Bedeutung der ‘Keck’- Rechtsprechung im system der Grundfreiheiten. Ein Beitrag zur Konvergenz der Freheiten, Berlin: Duncker & Humblot 2003, passim. 53 Cf. B. Trefil (note 35 supra), at 31 ff., with references to www.retsinfo.dk and a survey of the debate on the questionability in European law of the new regulations. 54 F. Hansen, From C 212 to L 212: CentrosRevisited, European Business Organization Law Review 2 (2001), 141 ff., 156: ‘a flagrant violation of Article 43 EU’. 55 Ugeskrift for Retsvæn 2002.1079H; Laurits Christensen (Copenhagen) and Hanne B. Jensen (Florence) kindly pointed me to the judgment. 56 G. Kegel, note 36 supra. 57 J. Habermas, Faktizitiät und Geltung, Frankfurt a.M.: Suhrkamp 1992, 109 ff.; Between Facts and Norms, Cambridge, MA: MIT Press 1998, 82 ff., 133 ff. 58 Cf. his recent restatement in Constitutional Democracy: A Paradoxical Union of Contradictory Principles?, Political Theory 29 (2002), 766-781, as well as ‘Why Europe Needs a Constitution’, in: E.O. Eriksen, J.E. Fossum and J. Menéndez (eds.), Developing a Constitution for Europe, London: Routledge (forthcoming)
