Article by Robert O'Shea and Sarah Jayne Hanna1
Ireland is one of the most popular and profitable locations for multinational corporations to invest in Europe. Globally recognised as a hub for financial services and the life sciences and information technology sectors, it is one of the leading 'gateways' to access the European market. The level of foreign investment into Ireland has been increasing recently, and the trend of redomestications continues with US companies in the fast-growing technology and social media sectors looking to establish EMEA headquarter operations to access the EU market (e.g., Linkedin, Dropbox, Facebook and Twitter have all established or relocated their operations in recent years). Recently, the large US power management company, Eaton Corporation, redomesticated to Ireland by virtue of its US$11.8 billion acquisition of the electrical equipment supplier, Cooper Industries plc (a US-listed plc), while Actavis Inc announced the acquisition of Warner Chilcott plc for US$5.1 billion.
Ireland's attraction as an investment location can be attributed to the positive approach of successive governments to the promotion of inward investment, its membership of the EU, a very favourable corporate tax regime, and a skilled and flexible labour pool, as evidenced by an Economist Intelligence Unit report examining the main factors that bring foreign investors to Ireland.2
In the mid-1990s, the government embarked on a series of reforms to ensure that the level and structure of taxation, cost and quality of infrastructure, and the effectiveness of training and education were given greater emphasis.3
The government has used Ireland's tax infrastructure to facilitate the establishment and expansion of overseas companies, and has continually enhanced and refined the tax system to ensure that the country remains attractive to foreign investors.4 Ireland has maintained a corporate tax rate of 12.5 per cent for active business, and offers a number of additional tax incentives such as recourse to an extensive double taxation treaty network.
The government aims to maintain an open and free market for investors. There are no general restrictions governing foreign direct investment (FDI) in Ireland,5 no limits on the percentage of foreign ownership permitted, no requirements that shares in Irish companies must be held by Irish citizens and no restrictions on the purchase of land for industrial purposes by foreigners. Private investment, whether domestic or foreign, is not permitted in the arms industry, but there are no other foreign investment restrictions for public order and security reasons. Indeed, Ireland scored favourably in the Organisation for Economic Co-operation and Development's (the OECD) FDI regulatory restrictive index, which measures statutory restrictions on FDI in 56 countries.6
The Irish legal system is based on the English common law tradition, which is also similar to that in operation in the United States. It is modified by Irish legislation and case law, and is further influenced by Ireland's membership of the EU. In the area of company law, the government has stated that its 'overall aim is to establish a legal framework that is among the world's best - an efficient and effective framework that ensures that Ireland is a less bureaucratic place to do business, for both indigenous and foreign-owned companies.'7 Indeed, Ireland ranked 10th out of 186 countries for...