Harmonisation of Estonian Company Law: Pre-conditions in Existing Law

AuthorAndres Vutt
Pages100-102

Andres Vutt

Harmonisation of Estonian Company Law: Pre-conditions in Existing Law

As in other areas of law, harmonisation of national law with legislation of the European Union ("EU") in the sphere of company law is currently on the agenda in Estonia. Although Estonia is not a member of the EU, the principles of European law should be considered. Article 69 of the Association Agreement between Estonia and the European Communities and Member States (the "Europe Agreement"),1 signed on 12 June 1995, prescribes the approximation of Estonian company law with EU legislation. Although the Europe Agreement does not specify the date for completion of this process, it is clear that resolution of this matter is a prerequisite for becoming a full member of the EU. Thus, the speedy approximation of company law is a priority from the perspective of state policy.

All East European countries are probably in the same situation where hardly has the national law been created when now it is necessary to bring it into line with EU requirements. As a result, the national law will cease to be original. Based on the need to harmonise national law with EU requirements, future harmonisation requirements should be considered already in the preparation of draft legislation. Since in the formation of a national legal system, experience of other countries in corresponding areas should be considered, adherence to EU requirements is possible since such requirements have developed from the national laws of the Member States and, allegedly, the best part of each national legal system has been used in the formulation of harmonisation measures2.

The principles established by the EU have a twofold role. On the one hand, they have been developed on the basis of the law of specific countries and, on the other, they affect, in turn, the laws of the Member States. However, it is a different matter as to what effect a particular country has had and to what extent a particular country must amend its laws in order to adjust them to the principles of the EU.

The principles of EU company law are expressed in EU company law directives. An analysis of the status of the directives and incorporation of the requirements contained therein into national law indicates that the Member States are free to decide how to enact the requirements of the directives3. However, it has been recommended that the formulations used in the directives be directly incorporated into national law to avoid possible conflicts between the national law and the directives4. Although practical, this recommendation can hardly be applied in Estonia at present since there are no official translations of the directives available5.

In examining the harmonisation measures, the extent of harmonisation required by the EU should be considered since it is not currently expedient to apply all requirements in Estonia. Further, different ways of harmonisation should be weighed. Although the existence of a variety of possibilities for harmonisation has been regarded as a shortcoming,6 this can also be considered an advantage to a certain extent in the preparation of new national legislation.

As noted above, the Europe Agreement contains a requirement for harmonisation of company law. However, in addition to this instrument, more specific recommendations were provided by the European Commission White Paper concerning integration of the countries of Central and Eastern Europe which was adopted in 19947. Although the White Paper is only recommendatory in nature, it contains much more precise instructions for harmonisation of national law than the Europe Agreement.

The White Paper establishes the following pre-conditions for harmonisation of legislation regulating company law:

1) establishment of a commercial register and a state gazette to publish specific information such as the structure and financial details of enterprises and third persons;

2) appointment of an administrative and judicial body to ensure the registration of commercial undertakings and supervision over the legality of certain acts;

3) appointment of independent experts to assess the financial status of enterprises at different stages (formation of capital, merger, etc.); and

4) organisation of training for contemporary managers8.

None of the pre-conditions set out above was fulfilled in Estonia before 1 September 1995. As of that date, the Commercial Code ("CC")9 regulating the fundamentals of all corresponding issues entered into force in Estonia. The laws of several European countries (Germany, The Netherlands, Denmark, Sweden, Switzerland, Austria, Czech Republic, Poland, Bulgaria, Hungary and Spain) were consulted in its preparation which ensured compliance of the CC with the best European...

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