The field of comparative corporate governance is currently undergoing what may amount to a paradigm shift. Since the seminal analysis of the modern corporation by Berle and Means in 1932, the large publicly held corporation with dispersed shareholders as owners unable to effectively control management has dominated the field not only in the United States, the origin country of the Berle & Means corporation, but also elsewhere. Recent empirical analyses, however, document that the corporation with dispersed owners is much less common than typically assumed. As a result, many of the assumptions that have driven the analysis of the corporate sector in the past are currently undergoing review. To a large extent, the fresh look at the corporation, its ownership structure and performance, and the legal framework in which it operates can be attributed to the recent experience of the transition economies. Reform strategies that were implemented in these countries over the past decade included the reorganization of state owned enterprises into marketable share companies and their subsequent privatization. Corporatization and privatization were expected to lead to enterprise restructuring and improved performance. In fact, these expectations materialized only slowly, if at all, and, as will be further discussed below, the emerging enterprise structures in these countries looks quite different from earlier predictions. Cynics may say that these countries became the testing ground for empirically unfounded corporate finance theories. In fact, many privatization programs in transition economies were designed and advised by US trained financial economists who have now taken the lead in challenging the very same assumptions on which their advice had been based. While they earlier predicted that institutions will follow the market, they now argue that institutions, in particular legal institutions, are determinants of the ownership structure of firms and the development of capital markets. In any event, the process of transforming centrally planned economies into market economies has revealed how little is understood about markets and firms or the role of law and legal institutions for their functioning.

Due to its connection with competition, the formation, the conduct, and the steering of groups of undertakings have been a subject of modern competition law since its emergence in the USA of the late 19th century. This is because market players might, by making use of their economic freedom to form and to act as groups, destroy this freedom. The question is, therefore, whether and to what extent legislation is required in order to get rid of this threat to the freedom of competition of the individual and competition itself as an institution. With the transition to a system based on freedom of contracts and freedom of competition, this question has also become topical in the countries of Central and Eastern Europe (CEECs).

I am honored to participate in this celebration of my friend and colleague Professor Ernst-JoachimMestmäcker. Although the topic of my contribution may jar this Law Review by being purely American, and what's more by having nothing to do with business organizations, the American part, at least, may be justified by Professor Mestmäcker's expertise in American law and by all he has done to promote legal and academic cross-fertilization between the European and American gardens. I myself have benefited enormously from the welcome and encouragement that Professor Mestmäcker has provided to me, as to so many other American scholars, at the Max Planck Institute in Hamburg. I salute him, and I trust that he will continue his own scholarly contributions for many years to come.

During socialist times the socialist enterprises were the basic entities of the socialist economic system. Admittedly, there were also commercial companies in Central and Eastern Europe in this period, but examples tended to be rare. In the form of limited liability companies (owned by the state or by a state entity) they typically served the purpose of facilitating economic exchange with third countries (companies or banks for foreign trade, insurance companies, etc.). In Romania, Hungary, Poland and the GDR, for example, their legal foundations dated from the period in between the World Wars, and partly even from the 19th century. Regulation largely ceased to develop after that time. Bulgaria, to mention another example, abolished – without substitution – its Commercial Code and Act on Private Limited Companies in 1951, dissolved all trading companies and vested in the Ministerial Council the authority to set up companies by the mere approval of their articles of association. In this way, the insurance company Bustrad and the Bulgarian Bank of Foreign Trade were set up in 1961 and 1964 respectively, both of them as public limited companies. Following a number of intermediate steps, of which the State Council's resolution 56/1989 on economic activity deserves special mention, Bulgarian company law was finally recodified in the second part of the commercial code in 1991.

This paper analyses the monitoring under competition law of the formation and operation of company groups in Poland. Groups of undertakings, which existed in the centrally planned economy, have been eliminated, or have radically, changed the range of their operations. Reasons for the formation of company groups include: risk management on the emerging market, the creation of common investment funds under the restrictive monetary policy, reduced transaction costs, and the delegation of powers to subsidiaries. The groups operating currently were incorporated through agreements between companies, buy-outs of state enterprises by private investors, acquisitions and outsourcing. The distribution networks form the majority of the agreement-based groups. Sectoral diversification is a characteristic feature of the capital groups and in most cases they are vertically integrated. Polish competition law enables the supervision of agreements between undertakings, acquisitions and buy-outs by private investors. The application of the competition law resulted in the formation of multi-sectoral company groups. The market power of companies and their groups depends not only on their size but also on the size of their relevant markets. Liberalisation of international economic relations results in the elimination of barriers to entry on product and geographic markets, weakening the market power of the domestic market players and developing competition.

This paper analyzes the emergence and practice of company groups as well as other legal institutions aimed at protecting creditors and minority shareholders of controlled companies in Polish law. To avoid misunderstandings, the concept of groups of companies is defined as an association of two or more companies dominated by a single entity (dominant firm). In principle, it is assumed that such groups of companies consist of companies possessing independent legal personality. However, participation of other legal entities in the group should also be considered. In particular, the classical narrow definition of a group of companies, if adopted by a given statute for the purpose of protecting creditors or minority shareholders, makes the task of circumventing the law rather easy. Thus, it should be sufficient if a group is dominated by a partnership or a cooperative organization. For similar reasons, a requirement that a “group” shall consist of at least three companies seems to be too formalistic and imperfect. Hence, the definition of a “group” or “dominance” may be given different meanings for various purposes. In this paper the notion of “dominance” is patterned after the seventh EU Directive, unless defined otherwise.

German corporate group law (or rather, to be more precise, the German Recht der verbundenen Unternehmen, i.e., the law of affiliated companies, §§ 15 ff., 291 ff. Marketable Share Company Act [Aktiengesetz, abbreviated AktG]) owes its existence to special concerns of the German legislature at the end of the 1950s and the beginning of the 1960s regarding the ability to protect the interests of outsiders in group-dependent marketable share companies (Aktiengesellschaften). The interests of shareholders and creditors were considered to be so intensive, so inscrutable and so continuously endangered, that the legislature believed that the existing company law was incapable of satisfactorily providing the requisite protection.

When the European Commission published its “White Paper on modernisation of the rules implementing Articles 85 and 86 of the EC Treaty” in spring 1999 it triggered a broad discussion on the future legal framework of the enforcement of competition law in the European Union. The most important change, which the Commission suggested, consists in the decentralisation of the application of Article 81 section 3 EC. While anti-competitive agreements and concerted practices, which are prohibited by Article 81 section 1 can only be exempted, for the time being, by a Commission decision taken under Article 81 section 3 and Regulation 17/62 the Commission wants to give up that monopoly. According to the White Paper both national competition authorities and national courts of law will be in a position to directly apply Article 81 section 3. Among the first reactions to that proposal was that of ErnstJoachimMestmäcker to whom this paper is dedicated in longstanding respect and gratitude to celebrate his 75th Anniversary. He published an extensive, severe and outspoken critique as early as September 1999. His analysis has had a strong impact on academic discussions and public opinion in Germany, although it has not persuaded the European Commission which drafted a proposal for a regulation along the lines of the White Paper in late 2000. Again, Ernst-JoachimMestmäcker has reacted by a striking and even more elaborate critique which resumes and extends the discussion.

The subject of this article is the development of group law in Hungary, which can already be traced back to the time before the fall of the iron curtain in 1989-1990. In particular, the Law on Commercial Companies (LCC) had already since 1988 contained several basic rules on group law. The evolution of Hungarian group law may be described as gradual and reactive. Whilst already in 1988 it had become conceivable that in the foreseeable future groups of companies and the legal problems inherent to them would gain significance, this situation had not then become sufficiently concrete to require a comprehensive legal solution.

The idea that the State is, in a very general sense, responsible for the welfare of the people in terms of availability of goods and services, is probably as old as the State itself. How the State should organise the production and distribution of goods and services, however, is subject to time and ideological approach. Adam Smith has shown that the “welfare of the nations” does not presuppose a State that would itself produce and distribute all goods and services. Such a State would reduce rather than enhance the welfare of the people. The balance between economic activities of the State, on the one hand, and of private actors in the market, on the other, has been a matter of theoretical as well as political debate for centuries. The central question concerns the appropriate “economic constitution”. This question is the Leitmotiv of Ernst-JoachimMestmäcker in whose honour I am pleased to submit the following contribution.

Financial groups may be defined as groups in which one or more components, legally independent companies, engage in offering financial services to the public, acting as a bank, a broker, an insurance company, an investment adviser or in any other capacity, offering their services to individuals, professional investment managers or other business firms. Firms that exclusively offer financial services to other group entities – the so-called “in-house banks” would be excluded, as these normally do not receive “deposits or other repayable funds” from the public.

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.

The present contribution looks at the private international law regimes of EU Member States with regard to companies and their relationship with the provisions of the EC Treaty (“the Treaty”) concerning freedom of establishment. After the Centros judgment of the European Court of Justice (hereinafter usually referred to as “the Court of Justice”) and the avalanche of comments on this case, this issue is more topical than ever. But it would be wrong to say that it is new: the controversy about the meaning of Articles 43 and 48 EC [ex Articles 52 and 58 ECT] for national conflict-of-law rules regarding companies has been dragging on for at least fifteen years and, if anything, the equally illustrious Daily Mail judgment of the Court of Justice only quietened it down for a very brief period.

It is moving on towards half a century now since Mestmäcker's Verwaltung, Konzerngewalt und Rechte der Aktionäre appeared. It was among the first significant postwar studies of modern corporation law in a comparative context and one that productively used his comparative mastery of American law in ways that in turn were influential in shaping the terms of reference for the 1965 reform of the Aktiengesetz. Two topics dominated his study: the treatment of conflict-of-interests transactions by managers and controlling shareholders, and the application of appropriate principles of corporation law to the affiliatedenterprise system, the Konzern. On both counts the book repays reading today; at the same time, because of the clarity of its conception and organization, it encourages the reader to reflect on what a Habilitand of today might bring back from a similar intellectual voyage.

This article proposes a model of the transformation process of statutory monopolies in European Community (EC) Law, on the basis of the liberalisation of the markets which has taken place in the past ten years. Despite discrepancies between the paths chosen for the various public utilities' sectors, EC institutions, including the Court of Justice of the European Communities, have pursued a policy, which they have constantly refined, regarding the transformation of statutory monopolies, regardless of its legal basis in the EC Treaty. After first defending a very far-reaching approach in favour of total liberalisation, EC institutions have adopted a more balanced attitude towards statutory monopolies. This is reflected in a four-tier transformation programme, which comprises both a functional and a structural transformation.

The Centros decision ranks as one of the most controversial decisions of the ECJ to date. The decision has raised a number of important issues, which have been vigorously debated in several countries of the EU. The most controversial question raised by the Centros judgement is whether the so-called siége réel Theory, or Sitztheorie, which until now has been applied by the majority of the EU Member States for determining the nationality of companies, can still be applied to companies which originate from other Member States. If the siège réel theory can no longer be applied by a Member State to deny the recognition of certain foreign companies as separate legal entities, this fact would mean an important change of perspective for the European Company Law.

Personal and proprietary security are the two basic types of instruments for securing credit. In the more frequent and better known case of proprietary security, usually the debtor of the credit offers an asset owned by him to serve as security for the creditor by transferring a limited proprietary right to the creditor. By contrast, in the case of personal security a third person assumes a security obligation vis-à-vis the creditor; potentially he is liable for that obligation – up to its agreed limit – with all his property.

The freedom of establishment entails not only a general prohibition of discrimination and restrictions, but also incorporates, as regards the setting-up of secondary establishments, the right to choose between the legal forms of a dependent branch establishment and an independent subsidiary. This right to choose serves the purpose of giving the economic operators in the internal market the opportunity of a gradual integration into foreign markets.