Basing its relevant provisions on the German law model, Croatia is one of the very few countries which comprehensively regulates company groups. However, some important remarks have to be made in this respect.

This paper aims to give an analysis of corporate groups, with an emphasis on current ‘trends’ and ‘realities’. Despite the huge effort made by the doctrine and case law, traditional company law no longer covers today's challenges in the field of corporate integration. In fact, the implementation of special statutory and procedural laws on corporate groups is still inadequate in most European countries.

This relevant model of corporate integration and control requires a properly designed ‘philosophy’, which is being provided successfully by some relevant and welcome initiatives, such as the Winter Report, the Forum Europaeum and the trends that have recently emerged in some European countries.

Opening up markets has been one of key endeavors of Ernst-JoachimMestmäcker's endeavors. But what to do if markets have yet to emerge? Biotechnology is one of the key emerging technologies and exemplifies the major problems of innovative industrial activity in Europe. Broadly defined, biotechnology includes “ …any technique that uses living organisms (or parts of organisms) to make or modify products, to improve plants or animals, or to develop microorganisms for specific uses”. In light of its approach on a genetic and molecular level biotechnology is research-intensive and driven by innovation. The Commission's Green Paper on Innovation identified the biotechnology sector as one of dynamic growth and importance for Europe. However, a study by Ernst & Young shows that as of 1997 the United States outperforms all other countries in the biotech sector in terms of its number of companies and employees as well as in terms of sales and research and development expenditures. In addition, all top ten products were developed in the US, and most of them sold by US companies. Thus, Europe lags behind the US in most indicators of economic performance in biotechnology and therefore biotechnology has been identified as an area of prime importance to the future economic development and competitiveness in Europe. For example, in Germany quite successful basic research has been conducted over the years at universities and research institutes. However, these innovative advances in research could not be translated into success on the German pharmaceutical market. What then are the ingredients of the American success in biotechnology?

European company law, i.e., all European Community statutes dealing with company law, has in the past been discussed from three different angles.

It has firstly been regarded as falling within the auspices of the fundamental freedoms guaranteed by the EC Treaty, especially the freedom of establishment, by examining whether the national company law system is compatible with the provisions laid down in primary law. An example of this perspective is the passionate discussion on the questions whether and by what means the EC Treaty directly enables companies to transfer their seat within the European Union to another Member State and to what extent the involved Member States' international company law must take this European right of establishment into consideration. In his 1990 Ernst Rabel Memorial Lecture Wulf-Henning Roth related to his audience the pros and cons. Another example of the submission of national private law under the provisions of the EC Treaty is the question raised by Steindorff whether the national law-making authorities may set standards for shareholder and creditor protection that exceed the standards set by the EC harmonization directives. This field of academic examination of European company law aims primarily at the interpretation and effectiveness of the fundamental freedoms guaranteed by the EC Treaty.

Hedge funds and private equity increasingly play an important role in the financial services industry and corporate governance in Europe and the United States. Activist hedge funds and private equity firms have developed similar investment strategies that are designed to influence the corporate governance and organisational structure of publicly listed companies. A large number of hedge funds, for example, have adopted an investment strategy to accumulate large positions in publicly listed companies, using their ownership positions to engage in monitoring of management. Activist hedge funds often make direct interventions in the corporate governance of target firms, confronting management teams by demanding specific actions, such as changes in management, company capital structure, dividend policy and company strategy, in order to increase shareholder value. The investment strategy of private equity buyout funds is to target publicly listed companies which they can take private for a period of restructuring and governance changes. Eventually, the firm will either be returned as a publicly listed company or be sold to a strategic buyer or another investor. Activist hedge funds and private equity firms have recently come under scrutiny by regulators who are concerned about the effect of the strategies used by these funds on the companies in which they invest and the capital markets in which they operate. Existing accounts focus on the mechanisms in corporate law, taxation and labour law to address current practices of hedge fund and private equity firm managers. We examine the circumstances where direct government regulation could be supplemented with a mix of self-regulatory and co-regulatory strategies. We conclude by analysing the various regulatory responses to the propensity of activist hedge funds and private equity firms to act in concert and assess whether the reforms will have practical significance.

The Union legislator and the ECJ are trying to prevent forum shopping in cross-border insolvency cases through recourse to the following legal instruments: (1) guiding the process of interpreting the notion of COMI and determining that COMI in practice so as to avoid forum shopping; (2) determining the moment relevant for establishing the debtor's COMI, which should be relatively early; (3) introducing the perpetuatio fori principle that can frustrate debtors' attempts to transfer their COMI to another Member State; and (4) making it impossible to change international jurisdiction in cross-border insolvency matters after insolvency proceedings have been opened. However, there is no need to exclude the possibility of a transfer of the debtor's COMI that leads to the effective change of international jurisdiction before the request for the opening of insolvency proceedings is lodged, as it would be contrary to the freedom of establishment. It is thus submitted that in order to facilitate the exercise of fundamental freedoms, international jurisdiction in cross-border insolvency cases should be (de lege ferenda) determined not so much by the COMI as by the location of the registered office (statutory seat) of the debtor.

Despite the fact that ours are market societies, the common good – bonum commune – plays a surprisingly important role, not only in the Member States of the European Union but also in Community law. As stated in the Communication from the Commission of 20 September 2000, services of public interest are a key element in the European model of society. The new Article 16 in the EC treaty now confirms their place among the shared values of the Union and their role in promoting social and territorial cohesion. It stipulates that the Community and the Member States ... shall take care that such services operate on the basis of principles and conditions which enable them [the services] to fulfil their missions. On the other hand, as the Community is committed to the principle of free and fair competition (Art. 3g/4 EC), there is bound to be at least a certain tension between this principle and the concepts of common good or public subsistence. Economists point out that the “enemies of an open society” follow “their own interests under the cover of the common good”. Bonum commune – this “sounds like something that has been given a-priori precedence, something that calls for republican civic virtue and that would seem to place obligations above individual rights”. But the European Commission sees no contradictions here. An earlier Communication stated that “far from being incompatible, services of general economic interest, internal market and Community competition policy were complementary in the pursuit of the fundamental objectives of the Treaty. Their interplay must benefit individual citizens and society as a whole.” It is therefore consistent for Article 16 EC to state that Articles 73, 86 and 87 EC (transport / application of competition rules to public undertakings / regulations governing state aid) continue to apply fully and without prejudice.

Usually, reflections on corporate governance take an inside perspective, i.e., a shareholder's or a director's point of view. Two perspectives are underrepresented in the discussion: firstly, an analysis from a regulatory perspective, i.e., from the government's point of view; secondly, an analysis that draws on the recent literature on behavioral economics, experimental economics, and psychology. This paper tries to compensate for this gap in the literature.

The claim of this paper is that there is some potential for regulatory intervention to change corporate conduct by modifying the institutional design. However, this potential is limited. The paper addresses the task of institutional design by applying behavioral analysis and provides an analysis of concrete, real-world legal corporate governance institutions. It explores potentials for changing corporate conduct by accordingly shaping institutions on the basis of the foregoing behavioral analysis

This article examines the euro area corporate bond market, in particular its development since the introduction of the euro. This market, that is to say, debt securities issued by non-financial corporations, non-monetary financial corporations and monetary financial institutions, is economically important, as it contributes to the allocation of funds to their most profitable uses. The euro area corporate bond market has grown rapidly since the introduction of the euro. Empirical analysis using regression techniques suggests that this growth can be explained by developments in economic activity, the costs of issuance and M&A-related activity. The latter reflects financing needs related to corporate restructuring, which in turn appears to be triggered partly by the introduction of the euro. The results also suggest that the introduction of the single currency had a direct and permanent effect on debt securities issued by non-monetary financial corporations. However, the use of corporate bonds at the euro area level is not uniform across countries. Country-specific factors continue to matter, despite the fact that financial markets are gradually becoming more integrated. To reap the full benefits of integration, public authorities and market practitioners are implementing a number of EU initiatives.

Niklas Luhmann's sociological systems theory sees in an organisation neither a group of acting individuals nor a single corporative actor, but instead a social system. For Luhmann, a social system is a closed network of communication processes that recursively engender each other. This article introduces the reader to this particular way of understanding organisations. For this purpose, we will have to look at certain individual issues within Luhmann's theory. We will start with a few explanatory notes on Luhmann's theory of communication. Subsequently, key terms from the field of systems theory such as ‘system’, ‘medium/form’, ‘autopoiesis’ and ‘structure’ will be introduced. With the help of these notions, we will be able to clarify what Luhmann understands by a social system in general. For Luhmann, organisations are social systems of a particular type. In the last two sections, the specific characteristics of organisations as subsystems of the society will be outlined.

Electronic communications operators can be exposed to two types of ex ante measures – merger remedies and regulatory measures. Although in a merger control procedure competition authorities prefer structural remedies, these seem to be less adapted to the electronic communications sector, since communications operators naturally tend to concentrate. Given that the electronic communications sector is characterised by economies of scale and a network effect, behavioural remedies seem more appropriate. In EU sector-specific legislation, regulatory measures that can be imposed on operators with significant market power can be defined as behavioural as well. This can make the difference between the two types of measures even vaguer. However, the difference should be found in the very purpose of state intervention. Competition law should not be used to make an existing market more competitive, unless some element of the market is illegal. Conversely, regulation only requires that some form of conduct is considered undesirable for some reason (it need not necessarily be illegal). Unfortunately, on several occasions, the European Commission (mis)used competition law powers to regulate the market. Should this approach be applied extensively, it would result in the creation of what could be defined as hybrid competition law.

This paper seeks to analyse the ruling (hereinafter: the Essent ruling) handed down by the Grand Chamber of the Court of Justice of the European Union (hereinafter: CJEU) on 22 October 2013 on the compatibility with EU law of Dutch legislation concerning ownership unbundling in the electricity and natural gas sectors. The ruling concerns the interpretation of Article 63 TFEU (free movement of capital) and Article 345 TFEU.

The paper starts by briefly outlining the developments in the EU energy market since the 1990s and the contents of the Dutch legislation at issue. This is followed by a short description of the factual background to the cases and the preliminary questions. The analysis then shifts to three important legal issues. The first is the interaction between Article 345 TFEU and the free movement rules. The second is the dividing line between purely economic interests and overriding reasons in the general interest. A final issue to be touched upon is that of so-called ‘gold plating’, i.e., the situation in which the requirements laid down in the implementing legislation of a Member State go further than those set out in relevant EU directives.

Corporate governance in China has gone through enormous changes since China embraced the idea of market economy in 1978. Most of these changes were initially inspired by the German and Japanese but more recently by the Anglo-American systems. There have been varying degrees of success and failure in this process. What are the reasons behind its success and failure? What is the way forward? In this article, we focus on the evolution of internal monitoring mechanisms in listed companies to explain that the process of borrowing foreign law in China is not a simple process of convergence or persistence, as is believed by the convergence and persistence schools. It is a process of what we call sinonisation and this is the reason behind its success and failure. As we attempt to explain, the sinonisation process is the right approach for China given its current state of economic, social and political development. Thus, it is not helpful to critique the Chinese system from the convergence or persistence perspective. China needs to develop its own model and the sinonisation process allows this to happen. However, Chinese law-makers and reformers need to recognise the weaknesses in the sinonisation process and take steps to remove these impediments in order for a workable model to be developed.

This paper describes the current state of implementation of the European Commission's 2003 Action Plan on Modernising Company Law and Enhancing Corporate Governance, as well as how the new Commission revisited and adjusted the Action Plan after it entered office in November 2004. In addition, the paper sketches the outlook for the future development of European company law and corporate governance. It presents the methods and goals of the Commission and, to the extent possible, describes the contours of the concrete measures that are in the works.

The European Private Company (EPC) is best understood as part of the effort of providing a uniform statute for a wide group of companies that can operate in and move to any part of Europe under a single set of regulations. Starting from the suggestion that the EPC might increase the level of trade overall, the author goes on to point out that this vehicle may produce distinct advantages for a wide group of companies. The author points to the key role the EPC could play in the development of inward investment in the European Union, particularly in stimulating cooperative joint ventures. Importantly, the EPC may be useful to countries that have recently entered or are planning to join the European Union. The article explores the two types of companies that are likely to adopt the EPC and examines the set of model articles of association for the draft statute, which include a wide range of company law elements, including fiduciary duties, a business judgment rule, pre-emption rights, voting rules and valuation rules on share transfer.

Iceland was hit hard by the financial crisis in 2008, especially by the spill-over effects of its banking failure when all of its three major banks collapsed. This article examines the Icelandic regulatory response to the crisis. The Icelandic case is special as the banks were not only too big to fail but also too big to rescue. Thus, legislation dealt with the failure of the banks and the aftermath of the crisis. First, the most important legislation was the Emergency Act that provided the Financial Supervisory Authority (FME) with emergency authority over banks in danger of becoming insolvent. The role of banks is integral to any economy. In order to ensure normal banking services and the safety of deposits in Iceland, three new banks fully owned by the Icelandic government were established on the basis of the Emergency Act. The most controversial provision of the Emergency Act granted depositors' claims priority over other unsecured claims in the winding up of the collapsed banks. Now the EFTA Surveillance Authority has concluded that this did not constitute a breach of the EEA Agreement. The Emergency Act made necessary amendments to the Act on Financial Undertakings concerning the reorganisation and winding up of financial undertakings. Second, a Special Investigation Commission was established by law. To enable a search for the truth, the legislation was far-reaching. The primary role of the Commission was to seek the truth. The report of the Commission discloses information that otherwise would not have been disclosed because of bank secrecy laws and sheds a unique light on the practices of the banks. Third, it was considered important that the law would be enforced by all necessary means. Thus, the temporary position of Special Prosecutor was established by law. Fourth, cross-border banking in the EU/EEA is examined in the light of the so-called Icesave dispute between Iceland on the one hand and the UK and the Netherlands on the other. It sheds a light on some of the major flaws of cross-border banking in the EU/EEA already known and criticised long before the crisis. When the Icelandic banks collapsed, the government of Iceland declared that all deposits in domestic banks and branches were guaranteed but not those in foreign branches. This gave rise to the question of whether Iceland could be held liable on the basis of the EU Deposit Guarantee Directive or because of discrimination of depositors based on nationality. In any case, the financial crisis has shown that there is a gap between law and reality. The conclusion of this article is that it is questionable whether the potential economic benefits of full integration in the field of cross-border banking outweigh the dangers and risks that come with it. If not, the price of full integration may be too high.

Following recent developments in some European jurisdictions, the Committee of European Securities Regulators (CESR) proposed, on 9 February 2010, ‘to extend major shareholding notifications to instruments of similar economic effect to holding shares and entitlements to acquire shares’. This initiative pushes for mandatory Economic-only Disclosure of Major Shareholdings in Europe (EOD). By providing twenty arguments against the CESR proposal, this paper seeks to spur a lively discussion as to whether mandatory EOD is desirable. It puts forward that European institutions are well advised to refrain from implementing the CESR proposal in its current form. If at all, implementing a requirement to report to regulators (Economic- only Reporting – EOR) and limiting EOD to very large positions serves social welfare better than EOD and avoids major differences between European securities law and US securities regulation.

This article explores how issuer liability re-allocates fraud risk and how risk allocation may reduce the incidence of fraud. In the US, the apparent absence of individual liability of officeholders and insufficient monitoring by insurers undermine the potential deterrent effect of securities litigation. The underlying reasons why both mechanisms remain ineffective are collective action problems under the prevailing dispersed ownership structure, which eliminates the incentives to monitor set by issuer liability. This article suggests that issuer liability could potentially have a stronger deterrent effect when it shifts risk to individuals or entities holding a larger financial stake. Thus, it would enlist large shareholders in monitoring in much of Europe. The same risk-shifting effect also has implications for the debate about the relationship between securities litigation and creditor interests. Creditors' claims should not be given precedence over claims of defrauded investors (e.g., because of the capital maintenance principle), since bearing some of the fraud risk will more strongly incentivise large creditors, such as banks, to monitor the firm in jurisdictions where corporate debt is relatively concentrated.

Corporation tax rates significantly influence the location of foreign direct investment (FDI) as well as company decisions on corporate borrowing, transfer pricing, dividend and royalty payments, and research and development. While direct taxation remains within the competence of individual EU Member States, the European Court of Justice (ECJ) has faced an increasing number of corporation tax-related cases over recent years and its judgments have significantly redrawn the European tax landscape. The present paper reviews and synthesises these ECJ decisions and analyses their implications for the FDI decisions of multinational corporations.