Unification, Harmonisation and Competition in European Company Forms

The main tools for the convergence of company law are full legal unification, mere harmonisation, and regulatory competition. The article uses this framework to study both the existing and the proposed European company forms (ECFs): the European Company, the European Cooperative Company, the European Private Company and the Single Member Company. All ECFs aim at legal unification, but none of them have been endowed with comprehensively unified legal regimes; their regulation is patchy and stratified and suffers from heavy referencing to national law in crucial areas such as corporate governance and corporate groups. It is therefore no surprise that ECFs have failed to win the favour of European entrepreneurs, and the data on the diffusion of ECFs are not encouraging: a large proportion of the few registered ECFs are in fact only shell companies, and most of the operating ECFs are found only in selected parts of central Europe. This failure is the result of high setup, legal and reputational costs, not offset by sufficiently important benefits. The roots of the fiasco go deeper, however, as regulatory protectionism impedes the adoption of attractive supranational company forms. While acknowledging that forcing further cooperative convergence could be not only costly but also ineffective, it must be noted that to some extent non-cooperative convergence is already occurring, at least with reference to national company forms suitable for small companies. Here, in contrast with the cooperative/supranational level, the non-cooperative mechanism of regulatory competition needs not inevitably turn into regulatory protectionism but can instead be a positive source of emulation, causing the diffusion of effective national company forms and leading ultimately to spontaneous legal convergence without supranational intervention. Until there is a true political Union, EU company law makers should realise that in the field of ECFs no law is better than bad law, avoiding the path of cooperative adaptation and trusting the uniforming force of regulatory competition instead.