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The Modus Operandi of Multinational Enterprise Groups in the European Context: A Critical Account of the Corporate and Insolvency Law Issues

The existence of multinational enterprise Groups (‘MEGs’) is not a new phenomenon. MEGs are comprised of several independent entities that are integrated under the unitary control of a dominant enterprise, and over time they have become quite prominent in global commerce. In fact, UNCTAD, in its 2011 report, highlighted that MEGs’ production worldwide generated value of approximately $16 trillion in 2010; about a quarter of global GDP. These findings come as no surprise since an MEG’s organization is usually based on endeavors for securing power, optimizing capital management, accessing privileged markets and ultimately, ascertaining fiscal advantages. Nevertheless, despite these laudable advances, whether MEGs are equity or contractually-based, in corporate or insolvency law and in Europe or globally, their operation is not without difficulties. This paper accordingly takes a two-pronged approach toward addressing the various problems associated with the operation of MEGs. Firstly, it tackles the regulation of MEGs in the context of corporate law, critically analyzing important company law notions such as transparency and disclosure, and the implications of corporate mobility, as well as issues relating to group management and creditor protection. Secondly, the paper addresses the concerns of MEGs in the context of insolvency law by critically examining the Universalist versus Territorialist approach to MEGs facing insolvency, the difficulties raised by applying either an entity or enterprise law approach in the vicinity of insolvency, as well as the notion of centre of main interest (‘COMI’) as applied to MEGs. The latter has become the subject of intense criticism. Importantly, the paper highlights the difficulties associated with the approach taken by the “High Level Group of Company Law Experts” in its 2002 report with regard to its rejection of a harmonized approach to corporate law. The paper postulates that a harmonized approach will better serve to achieve the goal of providing a stable and uniform legal framework for MEGs’ cross-border activities in Europe. The paper also assesses whether existing provisions and supranational corporate forms, such as the European Economic Interest Grouping (‘EEIG’) and the European Company (‘SE’), sufficiently mitigate against the difficulties faced by MEGs, and argues that the European Private Company (‘EPC’) albeit indirectly, could serve as a pervasive weapon in the armoury of the European Union in addressing some of these difficulties, despite its much publicized limitations.