Introduction to Polish PIL:Introduction to Polish PIL:Law ApplicableLaw Applicableto to MoralMoral Persons Persons

Dr. Mateusz PilichDr. Mateusz PilichUniversity of Warsaw,University of Warsaw,

Chair of International Private & Trade Chair of International Private & Trade LawLaw

Law ApplicableLaw Applicableto Moral Personsto Moral Persons

Law Governing Law Governing Moral Persons Moral Persons Key ConceptsKey Concepts

Competing ideas of the connecting factorCompeting ideas of the connecting factor The place of The place of incorporation incorporation (setting (setting

up/registering)up/registering) The place of the company’s The place of the company’s seatseat::

- ‘‘real’ seatreal’ seat

- statutory (formal) seatstatutory (formal) seat

Article 17(1) PILAArticle 17(1) PILA

A moral person is governed by the A moral person is governed by the law of the state in which it has its law of the state in which it has its seat.seat.

What is the „What is the „seat”seat”? Viewpoints among ? Viewpoints among scholarsscholars

Case #1Case #1

An inhabitant of Warsaw Stefan B. set up an off-shore company named An inhabitant of Warsaw Stefan B. set up an off-shore company named Alpha Trading Ltd. It is registered in the Cayman Islands. Alpha Trading Ltd. It is registered in the Cayman Islands. Alpha Trading Alpha Trading operates only in the Polish national market, it does not seek to establish operates only in the Polish national market, it does not seek to establish any true links to the foreign countries. It has regitered the website any true links to the foreign countries. It has regitered the website domain at .ky and the company’s director is a local lawyer but all the domain at .ky and the company’s director is a local lawyer but all the assets are located in Poland. Lodging his defense before the court, one assets are located in Poland. Lodging his defense before the court, one of the company’s debtors petitions for rejecting the lawsuit due to the of the company’s debtors petitions for rejecting the lawsuit due to the lack of the applicant’s capacity to take part in the dispute.lack of the applicant’s capacity to take part in the dispute.

Is the defendant right? Which national law applies: the Polish or the Is the defendant right? Which national law applies: the Polish or the Cayman one?Cayman one?

Real SeatReal Seat Doctrine Doctrine

Under the continental (mainly German) doctrine of the Under the continental (mainly German) doctrine of the real seatreal seat, , the place where the company is administeredthe place where the company is administered plays a role plays a role (=where the strategic decisions are transformed into day-to-day (=where the strategic decisions are transformed into day-to-day activities of a company, activities of a company, where the company operateswhere the company operates))

No party autonomy in the international company law! (?!)No party autonomy in the international company law! (?!) Even if the company is formally governed by the foreign law, it Even if the company is formally governed by the foreign law, it

may be found to be a ‘false foreign company’ (German: may be found to be a ‘false foreign company’ (German: die die ScheinauslandsgesellschaftScheinauslandsgesellschaft))

Such a company does not exist (!) in a legal sense, it is at the Such a company does not exist (!) in a legal sense, it is at the most a form of a pre-incorporation companymost a form of a pre-incorporation company

IncorporationIncorporation Doctrine Doctrine

Quite opposite to what may be Quite opposite to what may be established in the light of the established in the light of the real seat real seat conceptconcept

Supports the shareholders’ autonomySupports the shareholders’ autonomy In theory, the company may freely In theory, the company may freely

‘emigrate’ from the one country to the ‘emigrate’ from the one country to the other, it may move its centre of other, it may move its centre of administrationadministration

Approaching TechniquesApproaching Techniques

Rebuttable presumption Rebuttable presumption that the that the main centre of administration main centre of administration concides with the seat fixed by the concides with the seat fixed by the articles of incorporationarticles of incorporation

Groups of companies Groups of companies – even if the – even if the parent company effectively governs parent company effectively governs its subsidiary, their seats still are splitits subsidiary, their seats still are split

Remarks on the CRemarks on the Case #1ase #1

The defendant’s contention makes no big senseThe defendant’s contention makes no big sense The company’s director is in the Caymans, there are The company’s director is in the Caymans, there are

formal links to that countryformal links to that country Irrelevant where the company economically operatesIrrelevant where the company economically operates There is a chance only if the defense proves that it is There is a chance only if the defense proves that it is

Stefan B. himself who governs the companyStefan B. himself who governs the company Burden of proof lies with the defendant (Burden of proof lies with the defendant (excipiendo reus excipiendo reus

actor fitactor fit))

Remission or TransmissionRemission or Transmission((Renvoi Renvoi Revisited)Revisited)

Article 17(2) PILA:Article 17(2) PILA:However, if the law determined under paragraph (1) However, if the law determined under paragraph (1) refers to the law of the state according to which the legal refers to the law of the state according to which the legal person has been incorporated, that law applies.person has been incorporated, that law applies.

The provision seeks to co-ordinate the opposing theories The provision seeks to co-ordinate the opposing theories through the through the renvoirenvoi

Polish court has to make a ‘double-check’: (i) the Polish Polish court has to make a ‘double-check’: (i) the Polish conflicts law; (ii) the foreign law of conflict of lawsconflicts law; (ii) the foreign law of conflict of laws

Both kinds of Both kinds of renvoirenvoi (remission – coming back to Poland; (remission – coming back to Poland; transmission – going on abroad) are in viewtransmission – going on abroad) are in view

Case #2Case #2

A Dutch company Beta BV (A Dutch company Beta BV (besloten besloten vennootschap vennootschap = company limited) = company limited) moves its center of administration from moves its center of administration from the Netherlands to Switzerland. It the Netherlands to Switzerland. It operates mainly in the Polish market. operates mainly in the Polish market. Which law applies?Which law applies?

Remarks on the Case #2Remarks on the Case #2

Polish law designates the law of the company’s seat as Polish law designates the law of the company’s seat as applicable applicable the the Swiss Swiss law as a whole applieslaw as a whole applies

Double-check: Article 154 of the Swiss PILA (IPRG): Double-check: Article 154 of the Swiss PILA (IPRG): The The companies are governed by the law of the country companies are governed by the law of the country according to which they were organized, provided that according to which they were organized, provided that they fulfil its rules on the publication or registration…they fulfil its rules on the publication or registration…

Swiss law transmits the question of the company to the Swiss law transmits the question of the company to the law of the country where it was set up law of the country where it was set up the the Dutch Dutch lawlaw

The latter is to be understood as substantive onlyThe latter is to be understood as substantive only(we are cutting the conflicts rules off)(we are cutting the conflicts rules off)

Scope of the Law ApplicableScope of the Law Applicable

Article 17(3) PILA – non-exhaustive enumeration:Article 17(3) PILA – non-exhaustive enumeration: Formation, merger, division, transformation and dissolution Formation, merger, division, transformation and dissolution

of a legal personof a legal person Nature of a legal person (What type of a company is it?)Nature of a legal person (What type of a company is it?) Name and business nameName and business name CapacityCapacity Corporate bodies (How many of them? What functions and Corporate bodies (How many of them? What functions and

powers? Who appointed and how?)powers? Who appointed and how?) Representation (Who has to act in the name of the Representation (Who has to act in the name of the

corporation/other body)corporation/other body) Shareholders’/Members’ statusShareholders’/Members’ status Subsidiary lialibity of the shareholders (and the like)Subsidiary lialibity of the shareholders (and the like) Legal responsibility for the breach of law, articles of Legal responsibility for the breach of law, articles of

incorporation…incorporation…

Effects of the TransferEffects of the Transferof Company’s Seatof Company’s Seat

Core ProblemsCore Problems

Moving of the company’s registered office Moving of the company’s registered office from one country to the other may result in from one country to the other may result in the change of the law applicable to itthe change of the law applicable to it More probably in the model of the real seatMore probably in the model of the real seat Less frequent (and theoretically impossible) if Less frequent (and theoretically impossible) if

the incorporation theory is adoptedthe incorporation theory is adopted What to do in order to continue the moral What to do in order to continue the moral

personality untouched?personality untouched?

The European Dimension (I)The European Dimension (I)

EU law fights out the real seat doctrine step by stepEU law fights out the real seat doctrine step by step The significance of The significance of Articles 49 and 54 TFEU C-208/00 C-208/00 ÜberseeringÜberseering1. Where a company formed in accordance with the law of a Member

State (`A') in which it has its registered office is deemed, under the law of another Member State (`B'), to have moved its actual centre of administration to Member State B, Articles 43 EC and 48 EC preclude Member State B from denying the company legal capacity and, consequently, the capacity to bring legal proceedings before its national courts for the purpose of enforcing rights under a contract with a company established in Member State B.

2. Where a company formed in accordance with the law of a Member State (`A') in which it has its registered office exercises its freedom of establishment in another Member State (`B'), Articles 43 EC and 48 EC require Member State B to recognise the legal capacity and, consequently, the capacity to be a party to legal proceedings which the company enjoys under the law of its State of incorporation (`A').

The European Dimension (II)The European Dimension (II)

C-210/06 C-210/06 Carthesio, Carthesio, at 110-111at 110-1111. …a Member State has the power to define both the connecting factor

required of a company if it is to be regarded as incorporated under the law of that Member State and, as such, capable of enjoying the right of establishment, and that required if the company is to be able subsequently to maintain that status. That power includes the possibility for that Member State not to permit a company governed by its law to retain that status if the company intends to reorganise itself in another Member State by moving its seat to the territory of the latter, thereby breaking the connecting factor required under the national law of the Member State of incorporation.

2. Nevertheless, the situation where the seat of a company incorporated under the law of one Member State is transferred to another Member State with no change as regards the law which governs that company falls to be distinguished from the situation where a company governed by the law of one Member State moves to another Member State with an attendant change as regards the national law applicable, since in the latter situation the company is converted into a form of company which is governed by the law of the Member State to which it has moved.

ConclusionsConclusions

In In Überseering Überseering and and Carthesio,Carthesio, a certain a certain substantive effect was suggested but no substantive effect was suggested but no true answer to the dilemmas of the conflict true answer to the dilemmas of the conflict of lawsof laws

The EU law does not treat preferentially the The EU law does not treat preferentially the real seat doctrine but it does not definitively real seat doctrine but it does not definitively exclude itexclude it

The uniformity of application of lawsThe uniformity of application of laws is is difficult to attain without a Community difficult to attain without a Community legislative actionlegislative action

National AnswerNational Answerto the EU Requirementsto the EU Requirements

Article 19 PILAArticle 19 PILA Confirms the changeability of the law applicable Confirms the changeability of the law applicable to the to the

moral persons (1moral persons (1stst sentence) sentence) Seeks to preserve the acquired personality forbidding its Seeks to preserve the acquired personality forbidding its

non-recognition in the case of the seat transfer within the non-recognition in the case of the seat transfer within the European Economic Area (2European Economic Area (2ndnd and 3 and 3rdrd sentence) sentence)

Provisions superfluous or even pointlessProvisions superfluous or even pointless The core problem belongs to the substantive law The core problem belongs to the substantive law

of companiesof companies

International Transformation International Transformation of the Companyof the Company

Core ProblemsCore Problems

The continuation of the moral personality makes it The continuation of the moral personality makes it necessary to enable the legal transformation of a necessary to enable the legal transformation of a company (moral person) into the entity governed by the company (moral person) into the entity governed by the law of the receiving countrylaw of the receiving country

ECJ in C-378/10ECJ in C-378/10 VALEVALE Építési kftÉpítési kft, point 1. of the , point 1. of the Operating PartOperating Part:: Articles 49 TFEU and 54 TFEU must be interpreted as Articles 49 TFEU and 54 TFEU must be interpreted as

precluding national legislation whichprecluding national legislation which enables companies enables companies established under national law to convert, but established under national law to convert, but does not does not allow, in a general manner, companies governed by the law allow, in a general manner, companies governed by the law of another Member State to convertof another Member State to convert to companies governed to companies governed by national law by incorporating such a company.by national law by incorporating such a company.

Thanks for your attention!Thanks for your attention!