Court holds passive foreign investment company regime to be incompatible with freedom of establishment and free movement of capital

On 22 August 2008, the Court of Appeals of Nantes held that the French anti-abuse provision regarding foreign personal holding companies located in a low-tax jurisdiction was incompatible with the freedom of establishment and the free movement of capital. This note describes the French provision, the case and the Court's decision, and presents a brief analysis regarding the European Court of Justice judgments in respect of abuse and comparable anti-abuse provisions.