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A Battle against Regulatory Arbitrage in the Delusive Fringes of Article 49? – The Current State of Law in Terms of Abuse of Right to Establishment for Legal Persons

Zsiga, Gabriel LU (2011) JURM01 20111
Department of Law
Abstract (Swedish)
Genom sitt beslut i målet Centros, öppnade EU-domstolen för en bred användning av etableringsfriheten för juridiska personer. I huvudsak konstaterar domen att det finns situationer där etableringsfriheten kan åberopas för att kringgå nationell lagstiftning.

Sådana kringgående transaktioner kan betecknas som regelarbitrage Det ska förstås som åtgärder varigenom ekonomiska aktörer försöker dra nytta av olikheter i regleringar mellan jurisdiktioner för att minska kostnader eller för att vinna fördelar. Det genom en konstgjord överensstämmelse med lagens bokstavliga villkor. Traditionellt har medlemsstaterna bekämpat sådant missbruk på olika sätt - vissa genom generiska doktriner mot missbruk av rättigheter, andra genom specifika... (More)
Genom sitt beslut i målet Centros, öppnade EU-domstolen för en bred användning av etableringsfriheten för juridiska personer. I huvudsak konstaterar domen att det finns situationer där etableringsfriheten kan åberopas för att kringgå nationell lagstiftning.

Sådana kringgående transaktioner kan betecknas som regelarbitrage Det ska förstås som åtgärder varigenom ekonomiska aktörer försöker dra nytta av olikheter i regleringar mellan jurisdiktioner för att minska kostnader eller för att vinna fördelar. Det genom en konstgjord överensstämmelse med lagens bokstavliga villkor. Traditionellt har medlemsstaterna bekämpat sådant missbruk på olika sätt - vissa genom generiska doktriner mot missbruk av rättigheter, andra genom specifika bestämmelser med sikte på särskilt beteende varigenom rättigheter missbrukas. Genom rättspraxis har EU-domstolen inrättat en doktrin mot missbruk av rättigheter missbruk av rätten doktrin.

Begreppen regelarbitrage och missbruk av rättigheter står i motsats till varandra. Genom att etablera en preferens för regelarbitrage i Centros, ignorerade EU-domstolen till synes sin utvecklade doktrin mot missbruk av rättigheter i samband med situationer där etableringsfriheten behandlades.

I Cadbury tillämpades doktrinen mot missbruk av rättigheter för första gången uttryckligen i ett fall gällande etableringsfrihet. Detta införde i praktiken en avgränsning för möjlig användning av regelarbitrage, då denna bestod av "rent konstlade upplägg".

För att bedöma om transaktionen utgjorde ett rent konstlat upplägg, användes ett tvådelat test som tidigare utarbetats av EU-domstolen. Det består av ett objektivt och ett subjektivt element. Det objektiva elementet består av en teleologisk tolkning av syftet bakom själva regleringen - i syfte att bedöma om transaktionen, trots formell överensstämmelse, uppfyller ändamålet. Den subjektiva element består av en bedömning av avsikten med transaktionen. I slutändan hamnar denna metodik i bedömningen av om transaktionen är ett resultat av verklig ekonomisk verksamhet.

I jämförelse med Centros så kan Cadbury betraktas som en avgränsning av etableringsfriheten – däreigenom överraskar domen samtidigt som den är tillsynes konsekvent. Det uttryckliga införandet av subjektiva rekvisit är tvivelaktigt och, i kombination med den teleologiska bedömningen, riskerar bedömningen att bli godtyckligt.

Denna avhandling avslutas med slutsatsen att Cadbury - och senare rättspraxis – kanske skall förstås så att vad EU-domstolen i själva verket gör är att man anger sin preferens för en generisk doktrin mot missbruk av rättigheter. (Less)
Abstract
Through its decision in Centros, ECJ opened up for a wide use of the freedom of establishment for legal persons. In substance the ruling concluded that there are situations were the freedom of establishment can be relied upon in order to circumvent national legislation.

Such circimventional transactions can be denominated as regulatory arbitrage. It is to be understood as the actions by which economic actors seek to take advantage of regulatory differences between jurisdictions in order to reduce costs or to gain advantages. It involves artificial conformity to the letter of the law. Traditionally the Member States have combated such abuse in different ways – some through generic anti-avoidance legislations, other through specific... (More)
Through its decision in Centros, ECJ opened up for a wide use of the freedom of establishment for legal persons. In substance the ruling concluded that there are situations were the freedom of establishment can be relied upon in order to circumvent national legislation.

Such circimventional transactions can be denominated as regulatory arbitrage. It is to be understood as the actions by which economic actors seek to take advantage of regulatory differences between jurisdictions in order to reduce costs or to gain advantages. It involves artificial conformity to the letter of the law. Traditionally the Member States have combated such abuse in different ways – some through generic anti-avoidance legislations, other through specific provisions aiming at certain conducts. Through case law, ECJ have also established an abuse of right doctrine, aiming at the improper use of rights.

The concepts of regulatory arbitrage and abuse of law is situated on oposing ends. By establishing a preference for regulatory arbitrage in Centros, ECJ seemingly ignored involvment of its evolved abuse of law doctrine to situations involving the right to establishment.

In Cadbury the abuse of rights doctrine were for the first time explicitly applied on a case regarding freedom of establishment. This effectively introduced a delimitation on the possible use of regulatory arbitrage, when it consisted of ’wholly artificial arrangement’.

To assess whether the transaction comprised ’wholly artificial arrangement’, ECJ elaborated on a two-pronged test previously introduced in case law. It comprise a objective element and a subjective element. The objective element consists of a teleological interpretation of the purpose behind the regulation – in order to assess if the transaction, despite formal adherence, complies with the purpose. The subjective element consists of an assessment of the intention behind the transaction. Eventually, this methodology ends in assessment of whether the transaction is the result of genuine economic activity.

Despite a surprisingly and seeming coherence Cadbury might, when contrasted with Centros, be considered as delimiting the relience on freedom of establishment. The explicit introduction of the subjective element is dubious and, in combination with the teleological assessment, risks to be arbitrary.

This thesis concludes that perhaps Cadbury – and subsequent case law - is to be read so that ECJ indicates as preference for a generic anti-abuse regime. (Less)
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author
Zsiga, Gabriel LU
supervisor
organization
course
JURM01 20111
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
EU law
language
English
id
1983697
date added to LUP
2011-09-26 09:30:37
date last changed
2011-09-26 09:30:37
@misc{1983697,
  abstract     = {Through its decision in Centros, ECJ opened up for a wide use of the freedom of establishment for legal persons. In substance the ruling concluded that there are situations were the freedom of establishment can be relied upon in order to circumvent national legislation.

Such circimventional transactions can be denominated as regulatory arbitrage. It is to be understood as the actions by which economic actors seek to take advantage of regulatory differences between jurisdictions in order to reduce costs or to gain advantages. It involves artificial conformity to the letter of the law. Traditionally the Member States have combated such abuse in different ways – some through generic anti-avoidance legislations, other through specific provisions aiming at certain conducts. Through case law, ECJ have also established an abuse of right doctrine, aiming at the improper use of rights. 

The concepts of regulatory arbitrage and abuse of law is situated on oposing ends. By establishing a preference for regulatory arbitrage in Centros, ECJ seemingly ignored involvment of its evolved abuse of law doctrine to situations involving the right to establishment. 

In Cadbury the abuse of rights doctrine were for the first time explicitly applied on a case regarding freedom of establishment. This effectively introduced a delimitation on the possible use of regulatory arbitrage, when it consisted of ’wholly artificial arrangement’.

To assess whether the transaction comprised ’wholly artificial arrangement’, ECJ elaborated on a two-pronged test previously introduced in case law. It comprise a objective element and a subjective element. The objective element consists of a teleological interpretation of the purpose behind the regulation – in order to assess if the transaction, despite formal adherence, complies with the purpose. The subjective element consists of an assessment of the intention behind the transaction. Eventually, this methodology ends in assessment  of whether the transaction is the result of genuine economic activity.

Despite a surprisingly and seeming coherence Cadbury might, when contrasted with Centros, be considered as delimiting the relience on freedom of establishment. The explicit introduction of the subjective element is dubious and, in combination with the teleological assessment, risks to be arbitrary.

This thesis concludes that perhaps Cadbury – and subsequent case law - is to be read so that ECJ indicates as preference for a generic anti-abuse regime.},
  author       = {Zsiga, Gabriel},
  keyword      = {EU law},
  language     = {eng},
  note         = {Student Paper},
  title        = {A Battle against Regulatory Arbitrage in the Delusive Fringes of Article 49? – The Current State of Law in Terms of Abuse of Right to Establishment for Legal Persons},
  year         = {2011},
}