4 - Harmonisation

Summary

Introduction

This chapter begins with an outline of the EC Treaty provisions relating to freedom of establishment and the various Treaty bases which permit the introduction of harmonising regulation. It then examines a number of explanations which have been offered for the harmonisation programme and the inclusion of a company law harmonisation power in the Treaty. After a brief examination of the Fifth Company Law Directive, it concludes by canvassing a number of possible explanations for the failure of the programme to harmonise national corporate governance systems.

Freedom of establishment as a route to market integration

The European Community regulates corporate governance not as an end in itself, but because some national regulations prevent or distort resource allocation within the internal market. Article 2 of the EC Treaty provides that the establishment of a common market is one means by which the Community is to achieve its goals, which include economic development, employment and social protection. Article 3 then includes among the activities of the Community the creation of ‘an internal market characterised by the abolition, as between Member States, of obstacles to the free movement of goods, persons, services and capital’. The EC Treaty provides a legal framework for the internal market, guaranteeing free movement of goods, services, capital and workers, and, most importantly for our purposes, granting freedom of establishment to entrepreneurs and companies.