BGH Decision of February 16, 2021 - II ZB 25/17

In the BGH decision dated 02/16/2021, the Federal Court of Justice dealt for the first time with the question of the legal capacity of the Limited company after Brexit. The ruling states as follows: 

"Following the United Kingdom's withdrawal from the European Union, the party involved can fundamentally no longer rely on the freedom of establishment as governed by Articles 49 and 54 TFEU. 

According to Article 50(3) in conjunction with Article 1(3) TEU, the TEU no longer applies to a member state that has withdrawn from the European Union from the day the withdrawal agreement comes into force or, failing that, two years after the notification of withdrawal. Thus, the EU legislator has made a general explicit regulation concerning the temporal validity of the TEU. In the withdrawal agreement, the United Kingdom and the European Union agreed that the United Kingdom would be treated as a member state until December 31, 2020. No provisions were agreed for the continued validity of primary or secondary law for companies established in the United Kingdom beyond this date.

The freedom of establishment guaranteed in Articles 49, 54 TFEU presupposes that the state under whose law the company was founded is a member state of the European Union at the time the company claims the freedom of establishment. This is not the case here."

Our note on the decision: The opinion in the BGH decision of February 16, 2021 (II ZB 25/17), which states that Article 54 TFEU is no longer applicable to the UK because the TEU no longer applies to the UK, overlooks (for Ltds founded before 2021) in our legal view, that the focus should not be primarily on the UK, but on Germany as a member state. Article 54 TFEU indeed unfolds its protection here at the place of establishment (and thus within the EU) through its extraterritorial effect. The company's dispositions were made, not least, in reliance on the protective effect of Article 54 TFEU here in Germany. It remains to be seen, in our view, whether the BGH's perspective will prove to be compatible with EU law.