Überseering BV v Nordic Construction Company Baumanagement GmbH (NCC).

• Jurisdiction: European Union
• Celex Number: 62000CJ0208
• ECLI: ECLI:EU:C:2002:632
• Docket Number: C-208/00
• Date: 05 November 2002
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling

Judgment of the Court of 5 November 2002. - Überseering BV v Nordic Construction Company Baumanagement GmbH (NCC). - Reference for a preliminary ruling: Bundesgerichtshof - Germany. - Articles 43 EC and 48 EC - Company formed in accordance with the law of a Member State and having its registered office there - Company exercising its freedom of establishment in another Member State - Company deemed to have transferred its actual centre of administration to the host Member State under the law of that State - Non-recognition by the host Member State of the company's legal capacity and its capacity to be a party to legal proceedings - Restriction on freedom of establishment - Justification. - Case C-208/00.

European Court reports 2002 Page I-09919

Parties Grounds Decision on costs Operative part

Parties

In Case C-208/00,

REFERENCE to the Court under Article 234 EC by the Bundesgerichtshof (Germany) for a preliminary ruling in the proceedings pending before that court between

berseering BV

and

Nordic Construction Company Baumanagement GmbH (NCC),

on the interpretation of Articles 43 EC and 48 EC,

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, J.-P. Puissochet, M. Wathelet (Rapporteur) and R. Schintgen (Presidents of Chambers), C. Gulmann, D.A.O. Edward, A. La Pergola, P. Jann, V. Skouris, F. Macken, N. Colneric, S. von Bahr and J.N. Cunha Rodrigues, Judges,

Advocate General: D. Ruiz-Jarabo Colomer,

Registrar: H.A. Rühl, Principal Administrator,

after considering the written observations submitted on behalf of:

- Überseering BV, by W.H. Wagenführ, Rechtsanwalt,

- Nordic Construction Company Baumanagement GmbH (NCC), by F. Kösters, Rechtsanwalt,

- the German Government, by A. Dittrich and B. Muttelsee-Schön, acting as Agents,

- the Spanish Government, by M. López-Monís Gallego, acting as Agent,

- the Italian Government, by U. Leanza, acting as Agent, assisted by F. Quadri, avvocato dello Stato,

- the United Kingdom Government, by R. Magrill, acting as Agent, and by J. Stratford, barrister,

- the Commission of the European Communities, by M. Patakia and C. Schmidt, acting as Agents,

- the EFTA Surveillance Authority, by P. Dyrberg and J.F. Jónsson and E. Wright, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Überseering BV, represented by W.H. Wagenführ, of Nordic Construction Company Baumanagement GmbH (NCC), represented by F. Kösters, of the German Government, represented by A. Dittrich, of the Spanish Government, represented by N. Díaz Abad, acting as Agent, of the Netherlands Government, represented by H.G. Sevenster, acting as Agent, of the United Kingdom Government, represented by R. Magrill, assisted by J. Stratford, of the Commission, represented by C. Schmidt, and of the EFTA Surveillance Authority, represented by P. Dyrberg, at the hearing on 16 October 2001,

after hearing the Opinion of the Advocate General at the sitting on 4 December 2001,

gives the following

Judgment

Grounds

1 By order of 30 March 2000, received at the Court Registry on 25 May 2000, the Bundesgerichtshof (Federal Court of Justice) referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Articles 43 EC and 48 EC.

2 Those questions were raised in proceedings between (i) Überseering BV (`Überseering'), a company incorporated under Netherlands law and registered on 22 August 1990 in the register of companies of Amsterdam and Haarlem, and (ii) Nordic Construction Company Baumanagement GmbH (`NCC'), a company established in the Federal Republic of Germany, concerning damages for defective work carried out in Germany by NCC on behalf of Überseering.

National law

3 The Zivilprozessordnung (German Code of Civil Procedure) provides that an action brought by a party which does not have the capacity to bring legal proceedings must be dismissed as inadmissible. Under Paragraph 50(1) of the Zivilprozessordnung any person, including a company, having legal capacity has the capacity to be a party to legal proceedings: legal capacity is defined as the capacity to enjoy rights and to be the subject of obligations.

4 According to the settled case-law of the Bundesgerichtshof, which is approved by most German legal commentators, a company's legal capacity is determined by reference to the law applicable in the place where its actual centre of administration is established (`Sitztheorie' or company seat principle), as opposed to the `Gründungstheorie' or incorporation principle, by virtue of which legal capacity is determined in accordance with the law of the State in which the company was incorporated. That rule also applies where a company has been validly incorporated in another State and has subsequently transferred its actual centre of administration to Germany.

5 Since a company's legal capacity is determined by reference to German law, it cannot enjoy rights or be the subject of obligations or be a party to legal proceedings unless it has been reincorporated in Germany in such a way as to acquire legal capacity under German law.

The main proceedings

6 In October 1990, Überseering acquired a piece of land in Düsseldorf (Germany), which it used for business purposes. By a project-management contract dated 27 November 1992, Überseering engaged NCC to refurbish a garage and a motel on the site. The contractual obligations were performed but Überseering claimed that the paint work was defective.

7 In December 1994 two German nationals residing in Düsseldorf acquired all the shares in Überseering.

8 Überseering unsuccessfully sought compensation from NCC for the defective work and in 1996 it brought an action before the Landgericht (Regional Court), Düsseldorf, on the basis of its project-management contract with NCC. It claimed the sum of DEM 1 163 657.77, plus interest, in respect of the costs incurred in remedying the alleged defects and consequential damage.

9 The Landgericht dismissed the action. The Oberlandesgericht (Higher Regional Court), Düsseldorf, upheld the decision to dismiss the action. It found that Überseering had transferred its actual centre of administration to Düsseldorf once its shares had been acquired by two German nationals. The Oberlandesgericht found that, as a company incorporated under Netherlands law, Überseering did not have legal capacity in Germany and, consequently, could not bring legal proceedings there.

10 Therefore, the Oberlandesgericht held that Überseering's action was inadmissible.

11 Überseering appealed to the Bundesgerichtshof against the judgment of the Oberlandesgericht.

12 It also appears from Überseering's observations that, in parallel with the proceedings currently pending before the Bundesgerichtshof, an action was brought against Überseering before another German court based on certain unspecified provisions of German law. As a result, it was ordered by the Landgericht Düsseldorf to pay architects' fees, apparently because it was entered on 11 September 1991 in the Düsseldorf land registry as owner of the land on which the garage and the motel refurbished by NCC were built.

The questions referred for a preliminary ruling

13 Although it notes that the case-law referred to at paragraphs 4 and 5 of this judgment is disputed in various respects by certain German legal commentators, the Bundesgerichtshof considers it preferable, in view of the current state of Community law and of company law within the European Union, to continue to follow that case-law for a number of reasons.

14 First, it is appropriate to discount any solution which entails (through taking account of different connecting factors) assessing a company's legal situation by reference to several legal systems. According to the Bundesgerichtshof, such a solution leads to legal uncertainty, since it is impossible to segregate clearly the areas of law to be governed by the various legal orders.

15 Second, where the connecting factor is taken to be the place of incorporation, the company's founding members are placed at an advantage, since they are able, when choosing the place of incorporation, to choose the legal system which suits them best. Therein lies the fundamental weakness of the incorporation principle, which fails to take account of the fact that a company's incorporation and activities also affect the interests of third parties and of the State in which the company has its actual centre of administration, where that is located in a State other than the one in which the company was incorporated.

16 Third, and by contrast, where the connecting factor is taken to be the actual centre of administration, that prevents the provisions of company law in the State in which the actual centre of administration is situated, which are intended to protect certain vital interests, from being circumvented by incorporating the company abroad. In the present case, the interests which German law is seeking to safeguard are notably those of the company's creditors: the legislation relating to `Gesellschaften mit beschränkter Haftung (GmbH)' (limited liability companies under German law) provides such protection by detailed rules on the initial contribution and maintenance of share capital. In the case of related companies, dependent companies and their minority shareholders also need protection. In Germany such protection is provided by rules governing groups of companies or rules providing for financial compensation and indemnification of shareholders who have been put at a disadvantage by agreements whereby one company agrees to manage another or agrees to pay its profits to another company. Finally, the rules on joint management protect the company's employees. The Bundesgerichtshof points out that not all the Member States have comparable rules.

17 The Bundesgerichtshof nevertheless wonders whether, on the basis that the company's actual centre of...