CHAPTER FOUR COMMUNITY LAW AND PRIVATE INTERNATIONAL LAW I N T R O D U C T I ON

One of the principal means by which the Community is to attain its overall objectives

is the creation ot an internal market in which the free movement of goods, persons,

services and capital is guaranteed.' Ultimately, this process of integrating national

markets into a single European market, common to all the Member States, may be

said to be successlul only to the extent that private parties (may) become active on that

market and exercise their economic freedoms under Community law. They must do

so by entering into transactions, which by their nature will more often than not have

contacts with more than one Member State. As the comprehensive unification of t he

substantive laws of the Member States i s not in any way contemplated, the a c c o m m o dation

and regulation of such cross-border transactions falls to private international

law. Consequently, private international law has both a legitimate and crucial function

in support of the process of market-integration. At the same time, however, this means

that private international law can no longer be a matter tor the Member States only.

In formulating and applying their rules of private international law Member States

must take account of t he requirements of Community law and the internal market/

This may be particularly true for a field such as cross-border insolvency law. 1-letcher

writes, at a time when there were still only nine Member States to take into account:

Since the cornerstones ot policy in the k l 'C include the tacilitation ot tree movement

of goods, persons, services and capital, and freedom of establishment, it must

be expected that the subjects of Community law, both natural and legal persons,

will to an increasing extent have assets and liabilities and 'legal and economic

contacts' dispersed among several Member States. In such cases, the disparities

between the laws of the nine Member States, including their rules on private

international law, in relation to bankruptcy pose ominous difficulties, and there

is the over-present threat ot 'distortion in economic relationships' - that arch-villain

of C'ommunity law demonology.

This was written before the Court of lust ice gave its milestone ruling in (.'<!>•>•/>" tie Dijon,

though alter the one in DassonviUc.' Nevertheless, the question may be asked whether,

during the twenty years since then, Fletcher's observation should not have been taken

to its logical c o n c l u s i o n . ' T h e 'ominous difficulties' do not make themselves felt only

after insolvency proceedings have been opened. Rather, the expectation that 'ominous

difficulties' might arise in the event of insolvency may already be relevant to parties

prior to the opening of proceedings. A prospect ot unpredictable, wasteful and unfair

proceedings makes it less attractive to extend credit in whatever form or, conversely,

makes it harder for a potential debtor to obtain goods, services, labour and capital

across borders. If i t is correct that 'the disparities between the laws of the . . . Member

States, including their rules on private international law, in relation to bankruptcy'

are at the source of these difficulties, then those rules could possibly be regarded as

being contrary to Community law. As Community law takes precedence over national

law, Member States would be bound to take away these burdens to interstate trade

and reshape their rules on cross-border insolvency accordingly.

It is this Community law context to cross-border insolvency regulation which will be

explored in this second section. T h e present chapter commences by elaborating further

the relationship between national private international law and Community law. At

a general level this relationship is best described as being governed by what may be

called a comitas Eutvpaca. Within the scope of Community law the basis of private

international law is not only to be found in national law and the sovereignty of the

Member States but also in the Community and its autonomous legal order. Furthermore,

the (non-)applicability of a legal n o rm or the allocation of a legal question to

a particular legal system no longer depends exclusively on the national preferences

of Member States but also on the needs of the internal market. The following analysis

of how this comitas informs the private international law of the Member States is

structured along two main lines. The f i r s t line of inquiry concerns the impact of the

four freedoms of Community law on national private international law. Through these

freedoms Community law controls the regulatory interests and intensity of national

measures of private international law as well as the regulatory jurisdiction for the

Member States to take these measures. The second line of inquiry does not so much

deal with the manner in which Community law affects the taking of measures by a

Member State, but rather whether and how Community law instructs a Member State

in its response to such measures taken by sister Member States. Taken together, these

two elements of the comitas Europnen will provide an appropriate framework to

examine the (universal) application of insolvency law under the principle of universality,

as well as the non-recognition and non-application of foreign insolvency

law under the principle of territoriality in the subsequent chapters of this section.