The Freedom of Establishment and Recapture of PE Losses under the Merger Directive

Recent ECJ case law addresses situations in which PE losses are recaptured at the head office level following a cross-border reorganization pursuant to which a PE is wound up or transferred to a different company. This article examines whether the recapture rule, under article 10(1) of the Merger Directive (2009/133), restricts the freedom of establishment and, if so, whether a justification applies. Does a recapture go beyond what is necessary to attain the objectives pursued?