Harmonisation of the harmonised rules, like maintaining existing

Harmonisation is “the act of making systems or laws the same or similar in different companies, countries, etc. so that they can work together more easily” 1. One of the reasons why businesses may be motivated to merge is in order to reduce the transaction costs of negotiating bilateral contracts or take advantage of increased economies of scale. Nevertheless, increased market share and size may also increase market power and in such a way strengthening the negotiating position of the business. This is good for the firm but can be bad for competitors and downstream entities (such as distributors or consumers). A monopoly is the most extreme case, where prices might be raised to the monopoly price instead of the lower equilibrium price and an oligopoly is another potentially undesirable situation in which limited competition may allow higher prices than a market with more participants 2.HARMONISATION                                                                                                                                            There are different types of harmonisation: they can be classified according to the degree of freedom left to the EU Member States to adopt measures different from the ones of the harmonised rules, like maintaining existing lower standards or by setting higher standards. The main forms of harmonisation usually found in EC law are:• Total harmonisation: it leaves the Member States with no freedom to take independent action in the field covered by the harmonising measure. Member States must ensure that their home system abides exactly to what is required by that directive that covers that area by a total harmonisation directive.  In Commission of the European Communities vs United Kingdom of Great Britain and Northern Ireland – Dim-dip lighting devices for motor vehicles – Case 60/86, the judgment of the Court of 12 July 1988 was against the UK because the directive specified exhaustively the types of lights which could be fitted to cars: Directive 76/756/EEC on the approximation of the laws of the Member States relating to the installation of lighting and light-signalling devices on motor vehicles, as amended by Directive 83/276, is exhaustive and motor vehicles complying with the technical requirements laid down therein must be able to move freely within the common market . A Member State cannot therefore unilaterally require manufacturers who have complied with those requirements to comply with a requirement not provided for by this directive. 3 The ECJ, in its earlier decision in the Prantl case 16/83, stated that: ONCE RULES ON THE COMMON ORGANIZATION OF THE MARKET MAY BE REGARDED AS FORMING A COMPLETE SYSTEM, THE MEMBER STATES NO LONGER HAVE COMPETENCE IN THAT FIELD UNLESS COMMUNITY LAW EXPRESSLY PROVIDES OTHERWISE. 4 If the measure is a total harmonisation measure, then Member States aren’t free to adopt additional provisions covering the same sector. These principles aren’t limited to just technical rules relating to goods, but they apply to all aspects of EC Law and the Inspire Art (case C-167/01) judgement is a good example: It is contrary to Article 2 of the Eleventh Directive 89/666 concerning disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State, which contains a list of the information which must be disclosed in the Member State in which the branch is established and a list of optional measures imposing disclosure requirements, for national legislation 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, such as recording in the commercial register the fact that the company is formally foreign, 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, 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 or mention of the company’s status of a formally foreign company on all documents it produces. 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 exhausted. 5• Derogation from a total harmonisation measure: the general rule is that once, for a particular product, a common measure has been adopted, the Member States are no longer free or have the power to maintain in force provisions or adopt different practices which are conflicting with the scheme of common organisation or which can jeopardise its aims or functioning. In each case it’s important to inspect the harmonising measure to make sure that the field isn’t occupied, if that’s the case then any national measure conflicting with the common measure it’s going to be illegal. If not, national measures are admissible supposing they don’t undermine the function of the common organisation or go against Article 28 EC. 6. If that is the case, then derogations may still be possible under Article 30 (ex 36) EC. After the ruling of the Court in the case of Tedeschi vs Denkavit Commerciale Srl (case 5/77), the thought that, once a Community Directive had legislated in a particular field, States are no longer free to control the legislation in that field or resort to Article 30 EC, derived more support and recourse to Article 30 was no longer justified. 7 But after the van Bennekom case 227/82 the Court made it possible for States to take emergency action on what is now Article 30, but only if there was a genuine justification and it could be demonstrated. The Court judgement was: IT IS ONLY WHEN COMMUNITY DIRECTIVES, IN PURSUANCE OF ARTICLE 100 OF THE TREATY, MAKE PROVISION FOR THE FULL HARMONIZATION OF ALL THE MEASURES NEEDED TO ENSURE THE PROTECTION OF HUMAN AND ANIMAL LIFE AND INSTITUTE COMMUNITY PROCEDURES TO MONITOR COMPLIANCE THEREWITH THAT RECOURSE TO ARTICLE 36 CEASES TO BE JUSTIFIED. 8• The Community’s power to re-legislate: once a total harmonisation measure has been introduced, the States have no power to change it or overrule it but the Community itself is able to re-legislate existing harmonisation measures in an area where it has already adopted harmonising directives. In The Queen vs Secretary of State for Health, ex parte British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd Case C-491/01 the Court judgement held: It follows that, even where a provision of Community law guarantees the removal of all obstacles to trade in the area it harmonises, that fact cannot make it impossible for the Community legislature to adapt that provision in step with other considerations. 9• Minimum harmonisation: in recent times maximum harmonisation it seems to be preferred to minimum harmonisation. In minimum harmonisation the Community sets down a minimum standard and all Members need to comply to it. Besides this minimum standard, Members are free to set up their own domestic standards. The main role of a minimum harmonisation measure is to reduce the differences between Member States by narrowing the freedom given to them to regulate particular areas within their territory.• Other types of harmonisation: reverse discrimination, technical harmonisation and other harmonisation measures are limited to the cross-border context.SOCIETAS EUROPEACross-border mergers could be seen as the core instrument for promoting growth and facilitating corporate mobility in the EU. When it was just adopted there where some legislative developments which facilitated international mergers like Societas Europea.The Societas Europea, also known as the European Company or SE, is a type of public company regulated by the corporate law of the EU, introduced in 2004 by the Council Regulation on the Statute for a European Company. 10The formation of a Societas Europea by merger is only available to public limited companies from different Member States.The Societas Europea Statute grants:• An easier way to run the business if a company operates in more than one Member State (it is possible to rearrange all activities under one single European label).• Better mobility in the unified EU market: it is possible to transfer a registered office to another EU country free from having to dissolve the company.• An outline for how to involve the staff that is employed in more than one country in the running of a business. Since it has been introduced in 2004, the Societas Europea statute has been adopted by more than 2827, as of the 14th of August 2017, businesses that run their activities in more than one EU country. 11The number of registered societates Europaeae since 2004CJEU’S JUDGEMENT IN THE SEVIC CASEAnother legislative development that facilitated international mergers was the CJEU’s judgement in the SEVIC case C-411/03. A German company was prevented from merging with another company from Luxembourg because the German legislation provided only for the inscription in the company register of mergers between German firms.                                                                                              Based on articles 43 and 48, the Court held that ” Cross-border merger operations, like other company transformation operations, respond to the needs for cooperation and consolidation between companies established in different Member States. They constitute particular methods of exercise of the freedom of establishment, important for the proper functioning of the internal market, and are therefore amongst those economic activities in respect of which Member States are required to comply with the freedom of establishment laid down by Article 43 EC.” 12In the SEVIC case, the CJEU held that the refusal of a national commercial court to register a cross-border merger may enact a violation of the freedom of establishment in the Member States. In the future, this decision will be outmoded by the new (10th) Cross-Border Merger Directive. Nonetheless, SEVIC case will still be important because of its larger effect. Even though this decision has not found an influence on transfers of the statutory seat, the SEVIC case does have legal implications for cross-border divisions and takeovers. Like cross-border mergers, cross-border divisions have to be possible in the European Union. 1310TH DIRECTIVEEven if at the time of the adoption of cross-border mergers there were other legislative measures which facilitated those international mergers, like Societas Europea or the CJEU’s judgement in the SEVIC case, the enforcement of the 10th Directive on Cross-Border Mergers is still more important because it has clarified, simplified and developed a legal framework for the enforcement of the freedom of establishment within the EU and effectively made the cross-border merger procedure more certain and less time and cost-consuming. Making Europe more competitive and enabling businesses to better reap the benefits of the Single Market. “This Directive facilitates the cross-border merger of limited liability companies as defined herein. The laws of the Member States are to allow the cross-border merger of a national limited liability company with a limited liability company from another Member State if the national law of the relevant Member States permits mergers between such types of company”. 14                                                                                                                                The Directive had to be transposed into national law by 15 December 2007.According to the 10th directive, a merger is an operation whereby:(a) one or more companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to another existing company, the acquiring company, in exchange for the issue to their members of securities or shares representing the capital of that other company and, if applicable, a cash payment not exceeding 10 % of the nominal value, or, in the absence of a nominal value, of the accounting par value of those securities or shares; or(b) two or more companies, on being dissolved without going into liquidation, transfer all their assets and liabilities to a company that they form, the new company, in exchange for the issue to their members of securities or shares representing the capital of that new company and, if applicable, a cash payment not exceeding 10 % of the nominal value, or in the absence of a nominal value, of the accounting par value of those securities or shares; or (c) a company, on being dissolved without going into liquidation, transfers all its assets and liabilities   to the company holding all the securities or shares representing its capital. 14The Directive applies to all cross-border mergers of limited liability companies, but only if at least two of the companies are ruled by the law of two different Member States and have their head office or seat within the European Union market.CONCLUSION:The EU Directive on Cross Border Mergers of Limited Liability Companies (2005/56/EC) (the 10th Directive) provides a tool with the help of which qualifying companies (societates) can impact mergers by operation of law.  The Directive relates to the mergers where there are at least two companies from different EU Member States. It is applicable to public and private companies with limited liability, including Societas Europaea (the SE), the EU public limited company created following to the EU Regulation 2157/2001 on the Statute for a European Company. In the UK the Directive has been enforced by The Companies Cross Border Mergers Regulations 2007 (SI 2007/2974) (as amended) (CCBMR) and there is a similar empowering legislation across the EU Member States.  At first the 10th Directive creates a harmonised EU wide system for issuing a “statutory” merger by operation of law. In spite of this, there remains a number of inconsistencies across the EU Member States in terms of the precise adaption of the Directive into national legislation.