European hubs must look beyond strategic location

Legal issues play key role ALAN PEAT THE IDEA of centralised European distribution centres (EDCs) has caught fire on the continent, with member states of the European Union (EU) now vying to be chosen as the site for such a centre. The logic behind these EDCs stems from the development of the warehousing sector into value-added logistics service providers - and the pure economies of scale of centralising such a distribution function. According to Cape Town-based Antwerplaw - whose parent company has done a major legal study of the EDC issue - new technological and economic trends have made the role of the distribution sector in the global economy a very important one. “The sector developed from warehouses that were simply storing and keeping goods to distribution centres that are realising various ‘value added logistics’ (quality controls, packaging, labelling, and the like) and thereby occupying a primary position in the supply chain. “As such, the economic importance of an EDC - in the creation of jobs and added value, and as a first step towards other international activities - is ever growing.” And, Antwerplaw added, while legal aspects may not be the most decisive factor, they are playing an ever growing role in the competition between different European member states to attract EDCs. “Despite the decisive character of the economic and geographic factors,” FTW was told, “there is growing competition between the EU member states on the level of the legal issues.” According to the company’s study, Belgium (Flanders) was considered the most attractive place to create an EDC, before France and the Netherlands. Tax regime Several EU members have adopted a specific, favourable tax regime for distribution centres - although adopting such favourable tax regimes is limited by the European Commission (EC). “The EC,” said Antwerplaw, “is quite vigilant to avoid harmful tax competition between the member states.” Other factors influencing the choice of an investment place for EDCs include the level of social security charges imposed on companies and the financial incentives that might be available. “Even though some member states are trying to take (ad hoc) measures to alleviate the social security problem,” said Antwerplaw, “it may still be advisable to use an offshore construction for the personnel of the EDC.” Other areas of law, such as labour law in general, corporate law, environmental law, and the like, can also influence the choice of a location for the EDC, said the report. “It is strongly advised that an in-depth comparative study of the countries that are considered should be conducted,” it concluded.