1.2.1. Effect Must Re Sufficiently Certain and Direct

It is well established that the freedoms, unlike the rules on competition, do not contain

a de minimis with regard to the effect on intra-Community trade. For there to be a

breach of o n e of t he freedoms it is not necessary that national measures have an appreciable

effect on intra-Community trade. At the same time, the Court has occasionally

denied scrutiny of national measures within the framework of the freedoms on the

ground that the relevant measure's effect on trade was ' t o o uncertain and indirect'."

The Court's judgment in Krantz is of particular interest in the present context.' A

German supplier, Krantz GmbH, sold machines to a Dutch buyer. In order to secure

payment of the purchase price the contract of sale included a reservation of title. After

the machines had been delivered insolvency proceedings (faillissetnent) were opened

over the Dutch company in the Netherlands. The Dutch Collector of taxes seized all

movable property on the company's premises, including the machines sold by Krantz.

Under Dutch law the Collector of taxes may seize certain movable property on the

The measure of Dutch law at issue in Krautz was not as such a measure oi insolvi ncy

law but of tax law. Furthermore, the measure was limited in scope. It only allowed the

seizure of a narrowly defined category of assets: movable assets for the furnishing of

the debtor's premises.1 ' 1 Effects on security fights provided for by insolvency law are

not normally so limited. Advocate General Darmon himselt indicated that a wider

range of assets affected could lead to a different outcome. 1 Moreover, it is to be

doubted whether Krautz should (still) be considered good law at all. Not only is the

judgment questionable on its facts but it also appears irreconcilable with the Court's

later judgment in Trumnwr and Mayer.-' The case itself had nothing to do with insolvency

but concerned the requirements for the creation of a security interest in the

context of the free movement of capital. It nevertheless strongly supports the proposition

that the effects of insolvency law on security rights is 'sufficiently direct and

certain' for the purposes of the economic freedoms.

In Trunimer and Mayer the Austrian Uberster Gericlitshof referred a question to the

Court of Justice for a preliminary ruling. The question concerned the compatibility

with the free movement of capital of a prohibition by Austrian law to register a mortgage

in a foreign currency covering a debt in that currency. Austrian law required

parties to denominate the debt either in Austrian currency or by reference to the price

of fine gold. C lonsequently, when Trummer and Mayer wanted to register a mortgage,

securing the payment of the purchase price denominated in German marks tor a share

in the ownership of property located in Austria, the registration was refused.

According to the Court the creation of a mortgage securing a debt payable in another

currency came within the ambit o f the free movement o f capital. A mortgage i s the

'classic method of securing a loan linked to a sale of real property', which is a transaction

covered by the free movement of capital.'- The Court went on to observe that

the Austrian prohibition lead to a restriction on the free movement of capital. First,

such a rule is liable to weaken the link between the debt payable and the amount covered

by the security right as the hitter's value becomes subject to currency fluctuations.

This can 'only reduce the effectiveness, and thus its attractiveness' of the security

r i g h t . 5 This, in turn, may dissuade parties to exercise a right which forms part of the

free movement of capital. Secondly, the Court observed that

effects. If the requirement may not be a de minimis, it must, it is submitted, be construed

as a test of causality or 'remoteness'.1 1 But the degree of causality required would

necessarily be very small. It is submitted that the Court was mistaken in holding this

requirement of causality not fulfilled in Krautz.' If the Court intended to preserve

the possibility for Member States to take the measure at issue, the proper place for

allowing these measures should have been the application of the rule of reason.

A national measure must (potentially) result in a 'hesitation' or 'reluctance' for traders

to exercise one of the freedoms.' In the context of cross-border insolvency regulation

this would mean that the possible effects of insolvency or the risk of insolvency must

be relevant to (one of) the parties at the time of their decision to conclude a particular

transaction. Only when the risk of insolvency is of relevance to the transaction may

the universal application of t he lex fori concursus result in a burden adversely affecting

interstate trade, and thus, be in need of justification. Whether or not the insolvency

risk is relevant depends to a large extent on the circumstances of the case. It is,

however, possible to make some general observations. In this respect a convenient

distinction can be made between secured transactions on the one hand, and unsecured

transactions on the other.