Page 43 - Albanian law on entrepreuners and companies - text with with commentary

Indeed the two concepts lead to a clash between two regulatory strategies. On the one
hand stand the two principles of freedom of establishment and non-discrimination on national
71
grounds which are also two main pillars of the EU Internal Market. On the other hand stands
the right of the state where the company actually operates to regulate and control those
activities and, above all, to subject it to national taxation. No reconciliation of these views
72
has ever been brokered. The ECJ has, in four important decisions, established a pragmatic
approach. The ECJ recognizes, on the one hand, the reasons behind the ‘real seat’ doctrine,
i.e. the right of the state to protect interests of creditors, minority shareholders, employees or
taxation as ‘compulsory reasons of the common good’ which may legitimate a restriction of
the freedom of establishment without being considered discriminatory. On the other hand,
however, the refusal to recognize the legal personality of a company as such is a restriction of
the freedom of establishment which cannot be legitimated by ‘compulsory reasons of the
common good’ as it de facto results in a complete negation of the right of establishment.
That means that the ‘real seat’ doctrine, which is the law in force in Albania, is basically
accepted by the ECJ. However, no state is able freely to apply its entire company law without
restrictions deriving from the freedom of establishment. The application of protective
mechanisms may never preclude the freedom of establishment as such. Albania may,
therefore, apply the ‘real seat’ doctrine while understanding the restrictions on that doctrine
by the ‘spirit’ of Article 54 TFEU (ex-Article 48 TEC). That means that foreign companies
are to be recognized in Albania if they were legally founded abroad and if the real connection
with the founding state continues. In this respect, the ECJ envisages registration of the foreign
73
company in the host state as a branch while it continues to remain registered in its country
of origin. After its registration as a branch, such a foreign company may, then, conclude
contracts in Albania, file court cases, and create subsidiaries and branches.
One of the effects of this ECJ jurisprudence is that a Member State must allow
companies with a more flexible design founded in another Member State to operate freely
within its territory regardless of how restrictive its own company model is. This may lead to a
situation where companies founded in accordance with the more rigid rules of one Member
State may be outnumbered by companies founded in accordance with the more flexible rules
of another Member State. For example, there are now more than 40,000 English Limited
Companies in Germany. In other words, the option to choose the different company models of
other Member States, creates competitive legislative pressure among Member States. This
situation was one of the reasons to notably reduce the formal legal requirements for LLCs in
the Company Law and to create a significant attraction for foreign investment. We will come
back to this aspect when commenting on LLC provisions. The pressure in the two systems
might be eased if companies use the new EU Cross Border Mergers Directive now
implemented in Albania but this will not be a complete answer to the dilemma.

71 See Article 49 TFEU (ex-Article 43 TEC).
72 Case 212/97, Centros; Case 208/00, Überseering; Case 167/01, Inspire Act; Case 411/03, Sevic.
73 See Case 212/97, Centros.
42