Planning and flexibility: keys to Europe

Flexibility and sound planning are vital to doing business in Europe, according to participants at the American Corporate Counsel Association (ACCA) European Chapter conference held in Brussels earlier this month.

Despite the depiction by Europhiles of the EC as a unified single entity, the conference highlighted significant barriers to cross-border business, such as lack of harmonised company and fiscal laws, the stalling (over employee integration) of a proposed directive to bring the European company into existence, and lack of development on the public company takeovers directive.

"Local laws and taxes need serious consideration," advised Elizabeth Wall, group director of legal services at Cable & Wireless. Accountants as well as lawyers should be involved at the earliest stages of structuring Euro-wide operations, she said, and commercial objectives should be appreciated when planning. "Only if you understand the intended scale of operations will the lawyer be able to do the job properly, get the tax structure right and select the right legal vehicle."

Trevor Lucas, at CPC Europe Consumer Foods, agreed, but urged that selection of organisational bases should not be hastily planned. He pointed out that regional incentives in particular member states should not be overlooked, and that gross tax rates were only part of the picture.

"In Germany, corporate tax rates, for example, are 44 per cent," he said, "but the German tax system is flexible, so the effective tax rate can be much less." Nor are dividends the only way to repatriate profits, he added; other methods such as royalties should not be ignored. And, contrary to the forebodings of some Tory MPs, he paid tribute to the possible and practical trading advantages of a single currency.

Tax structures for multinationals have traditionally favoured use of local currency subsidiaries, said Fran Horner, of Washington firm Covington & Burling, but other forms of establishment have advantages including flexibility, and the OECD Transfer Pricing Guidelines have resulted in decreases in the rates of double tax.

Scott Squillace, chief European counsel of Levi Strauss Europe, said corporate governance systems, which differed considerably throughout the EU, also influenced Euro-wide business operations, with two-tier board structures favoured in Germany and unitary structures in the UK. He added that advertising standards also varied greatly across borders.

International legal networks came in for scrutiny. Thilo von Bogungen, of German law firm Droste, said his firm had rejected being part of an international network on the grounds of additional costs, possibilities of diverse development of members, conflicts of interest and liability risk. Others paid tribute to the benefits of marketing and pooling resources and most, including the large number of ACCA in-house counsel members, believed today's competitive environment favoured fully integrated firms.

Technology and the law was also high on the agenda. In-house and external lawyers vary widely in their technical skills, said David Teichman of Sybase Europe BV, an ACCA Europe board member, stating that the pressure of in-house costs and the need for efficient, reasonably priced external services demanded that all lawyers quickly come up to speed in the use of technology.