The Political Economy of "Integration-through-Law": How the European Court of Justice Liberalizes Corporate Control

Benjamin Werner

 
Political efforts to unify European systems of corporate governance have so far failed because of the diverging interests of member states. Regulatory competence in this political area should therefore have remained at national levels. However, the European Court of Justice (ECJ), in a series of judgments on the free movement of capital within the European Union, has imposed restrictions on the autonomy of member states to regulate corporate governance. Accordingly, any national directive that makes the buying of shares less attractive - e.g., by limiting shareholder rights - constitutes a restriction on capital movement and thus can be permitted only under rare and exceptional circumstances. Legal experts have pointed out that the ECJ has therefore seriously diminished the rights of member states to limit or correct market mechanisms concerning corporate governance. This project investigates a number of ECJ’s judgments - particularly those on "Golden Shares" and the German "Volkswagen Law" - as well as their associated political circumstances and reactions, and aims to reveal the political conditions that have enabled this judge-made and market-enhancing limitation to member-state competencies. Project duration: May 2012 to September 2013.