Despite recent developments in ECJ case law, the ability of EU firms to choose among different Member State corporate law regimes is quite limited. At the same time, however, Member States have started to show an interest in providing competitive business forms, and firms seem keen to use them. Against this background, the ongoing review of EU company law and takeover law can be seen as an attempt to complete the set of minimum requirements that establish a limit for the ‘race to the bottom’. This paper suggests that, unfortunately, many of the proposed harmonization measures in the Commission's Action Plan are unlikely to benefit firms and investors and will promote costly bureaucratic uniformity. Indeed, as currently structured, the proposals regarding disclosure, board structure and director liability have limited merits. Moreover, reforms aimed at the establishment of a permanent structure providing advice on future EU regulatory initiatives and requiring Member States to adopt director disqualification mechanisms are likely to result in excessive regulatory intervention. Similarly, many provisions of the proposed Takeover Bids Directive can be expected to hamper rather than enhance the development of a competitive, cross-border market for corporate control. By contrast, the authors recommend regulatory changes that facilitate private litigation, as this may limit regulatory biases and contribute to disciplining managers and gatekeepers. Finally, the authors endorse a default arrangement for takeovers that would allow firms to choose to be governed either by the proposed Takeover Bids Directive or by existing Member State law. The move towards more choice should challenge regulators to provide more cost-effective rules.

Privatised public services have become a fact of daily life, in these times of budget constraints and concerns about government efficiency. There is much debate, however, as to what government activities should be entrusted to the private sector. Politicians are unsure whether public goods can be provided at quality and price levels acceptable to the general public. Moreover, there is a need to study the governance structures and legal framework of privatised government activities that range from public-private partnerships to private companies supplying services under a private-law contract. It is against this background that we present a series of articles, marking a starting point in an as yet open debate where aspects of public, competition and contract laws overlap.

Europe has historically lagged behind the United States in viewing the primary role of company law as being to facilitate the operation of businesses in corporate form. In this respect, the report of the High Level Group of Company Law Experts (HLG) to the European Commission of November 2002 marks a distinct break with the past. In facilitative corporate law systems, disclosure is a key mechanism for the regulation of corporate governance agency problems. This paper questions the merits of singling out directors' disqualification as a pan-European sanction for the enforcement of corporate governance disclosure requirements. It argues that a more effective strategy for promoting consistency in enforcement could be to pay closer attention to the institutional allocation of regulatory responsibilities for corporate governance disclosure. It suggests a model in which responsibility for the monitoring and enforcement of corporate governance disclosure is located with securities regulators. Making securities regulators the primary regulators of corporate governance disclosure would promote pan-European consistency in monitoring and enforcement. Looking beyond disclosure to the actual exercise of internal control by shareholders, this paper also casts a sceptical eye over the HLG's views on the need for urgent EC intervention to address the problem of investor disenfranchisement. British market participants have made ingenious use of proxy mechanisms to ensure that underlying investors retain control over the exercise of voting rights attached to shares held on their behalf by nominees. This evidence suggests that the case for EC company law intervention to address problems that the market has proved unable to solve is weak. While the situation may be different in other Member States, the existence of such differences militates against top-down EC intervention.

Despite the fact that ours are market societies, the common good – bonum commune – plays a surprisingly important role, not only in the Member States of the European Union but also in Community law. As stated in the Communication from the Commission of 20 September 2000, services of public interest are a key element in the European model of society. The new Article 16 in the EC treaty now confirms their place among the shared values of the Union and their role in promoting social and territorial cohesion. It stipulates that the Community and the Member States ... shall take care that such services operate on the basis of principles and conditions which enable them [the services] to fulfil their missions. On the other hand, as the Community is committed to the principle of free and fair competition (Art. 3g/4 EC), there is bound to be at least a certain tension between this principle and the concepts of common good or public subsistence. Economists point out that the “enemies of an open society” follow “their own interests under the cover of the common good”. Bonum commune – this “sounds like something that has been given a-priori precedence, something that calls for republican civic virtue and that would seem to place obligations above individual rights”. But the European Commission sees no contradictions here. An earlier Communication stated that “far from being incompatible, services of general economic interest, internal market and Community competition policy were complementary in the pursuit of the fundamental objectives of the Treaty. Their interplay must benefit individual citizens and society as a whole.” It is therefore consistent for Article 16 EC to state that Articles 73, 86 and 87 EC (transport / application of competition rules to public undertakings / regulations governing state aid) continue to apply fully and without prejudice.

This article examines the euro area corporate bond market, in particular its development since the introduction of the euro. This market, that is to say, debt securities issued by non-financial corporations, non-monetary financial corporations and monetary financial institutions, is economically important, as it contributes to the allocation of funds to their most profitable uses. The euro area corporate bond market has grown rapidly since the introduction of the euro. Empirical analysis using regression techniques suggests that this growth can be explained by developments in economic activity, the costs of issuance and M&A-related activity. The latter reflects financing needs related to corporate restructuring, which in turn appears to be triggered partly by the introduction of the euro. The results also suggest that the introduction of the single currency had a direct and permanent effect on debt securities issued by non-monetary financial corporations. However, the use of corporate bonds at the euro area level is not uniform across countries. Country-specific factors continue to matter, despite the fact that financial markets are gradually becoming more integrated. To reap the full benefits of integration, public authorities and market practitioners are implementing a number of EU initiatives.

There is historical evidence which suggests that mergers can be a potent agent for change in a transition towards a US-style corporate governance system where widely-held companies play a pivotal role. Moreover, past events suggest that competition law can influence whether ‘transformative’ acquisition activity will occur. Despite this, little has been said in the contemporary discourse on comparative corporate governance about how competition law and mergers might be catalysts for change. This paper seeks to familiarise a European audience with the relevant dynamics. For expository purposes, the analysis will focus on historical events occurring in the United States and the United Kingdom, the country with corporate governance arrangements which resemble America's more closely than any other nation. Nevertheless, there will also be discussion of questions which merit attention from a Continental European perspective, accompanied for illustrative purposes by references to circumstances in Germany.

After Enron, WorldCom, and other US business scandals, politicians in Washington faced enormous pressure to take swift action to address seemingly widespread malfeasance at US corporations. So only twenty-nine days from the disclosure of the accounting irregularities at WorldCom, Congress passed with near unanimity the Sarbanes-Oxley Act of 2002. When President Bush signed the law, he claimed it was one of ‘the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt.’ The President significantly understated the case, however, because the Act does much more than reform the laws applicable to US-based issuers – a substantial number of the Act's provisions reach overseas to affect foreign private issuers whose securities trade in the United States.

The Spanish university system has witnessed many changes during the last thirty years. Initial conditions for competition were established in 1983, especially through the legal recognition of private universities. However, a shortage of students since 1998 and a drop in demand for higher education, which has been aggravated by an extraordinary increase in supply, has prompted further reform in the past few years. A new regulation was adopted in 2001 in order to impose market-like behaviour and privatise some of the operating conditions of State universities, such as the freedom of students to choose their university, hiring policies, quality assessment and public accountability, the allocation of research funds and rankings. Although it is probably too early to assess the impact of these changes, it is clear that public funding remains largely unchanged. This is a key issue that needs to be addressed in order to create the appropriate conditions for competition in the higher education industry. Although the market has been introduced into the provision of higher education in Spain, the continued public funding of State universities creates a powerful distortion that prevents the development of a truly fair and competitive market.

This paper evaluates the current attempt to develop local ‘compacts’ between local government and the voluntary and community sector, as an example of a relational contracting approach to structuring the evolving relationships between these sectors. It is structured in four parts. The first part charts briefly local government – voluntary sector (LG – VS) relationships in England over the period 1979-2000. It draws examples in particular from experience in the field of area regeneration. The second part introduces the concept of the Voluntary Sector Compact (VSC), and argues that it is central to the approach of the current Labour government to these relationships. It differentiates this approach from that of the previous government, denoted here as the service agency model, and situates it within the meta-paradigm of community governance. The third part explores the implementation of the Compact in England at both the national and local level. The final part draws out key lessons from this for the future of LG – VS relationships in England, situating these within an emerging model of LG – VS relationships.

Most of the countries that are candidates for EU membership are from Central and Eastern Europe. Although their company laws are generally rooted in the Western (and Central) European legal tradition, the influence of Communism has also left a mark on their corporate law regimes. These regimes have recently undergone major changes, and the European Commission has declared that they are now largely in conformity with EU standards. As to rules concerning corporate governance in stock companies, European company law still leaves ample scope for national particularities. Central and Eastern European laws concerning stock companies allow for a great variety of different organisational structures, including pure two-tier systems, mixed systems and systems that provide a choice between one-tier and two-tier systems.

Since the mid-1990s, there has been much talk of the convergence of corporate governance systems to Anglo-American standards, and several trends have pointed in this direction. In this paper, however, Steen Thomsen argues that US/UK corporate governance is also converging to European standards through the concentration of ownership, increasing levels of insider ownership, the separation of management and control in more independent boards, the deregulation of the banking system and the increasing importance of stakeholder concerns. Support for the mutual convergence hypothesis is found in a statistical study on the evolution of ownership concentration in 2,238 companies during the 1989-1998 period. Ownership concentration, which is substantially higher in Continental Europe than in the United States and the United Kingdom, has been increasing in the United States and the United Kingdom and decreasing in Europe. However, the process is slow, and even if the observed trends were to persist, differences in corporate governance between Europe and the United States would persist for decades. Moreover, a regime change away from market governance may be under way following the collapse of the recent stock market bubble and the wave of financial scandals in the United States

Corporate governance codes have recently been adopted by most of the European markets. Stock markets in Eastern Central Europe, with their weak governance mechanisms and practices, are trying to follow suit. However, drafting such codes may be a much more challenging task in this part of Europe than elsewhere, due to the existence of powerful interest groups and an underdeveloped corporate environment (immature institutional investors, ineffective shareholder activism and a lack of government interest in corporate governance). This paper provides some insights into various governance problems related to the drafting of a ‘private’ corporate governance code for Polish listed corporations. In particular, it focuses on supervisory boards and explains how they should be structured to gain credibility without clashing with blockholder interests. This paper argues that the soft proposition (i.e. independent members should account for less than half the members of supervisory boards) can bring about more far-reaching result, as it takes account of real market conditions. Regrettably, the strong proposition, which is employed in the official code of the Warsaw Stock Exchange, may produce fewer benefits or even fail under the criticism of blockholders. Polish corporate governance dilemmas are common to most of Eastern Central Europe. The solutions presented in this paper may therefore also be useful to code drafters in other countries. This paper strongly advocates that there should be the establishment of an open market for codes that allows companies to choose the best and most suitable governance arrangements. NGOs could play an important role in such a market by stimulating competition, establishing benchmarks and enforcing mechanisms like ratings.

This article examines the English law governing the legal effect of a contract made by the agent of a company who lacks the necessary authority to act on the company's behalf under its internal rules that confer power to make contracts on its behalf. The article focuses on what could be called an ‘overriding rule of attribution’, which ensures that such contracts can still be binding on the company in certain circumstances. It also considers the economic context of this rule, which can be viewed as allocating risk between companies and third parties contracting with those companies. In effect, the law strikes a balance between two conflicting sets of costs and benefits, and this can be analysed in terms of economic efficiency. This article shows that the English courts have taken two differing approaches in establishing the ambit of the overriding rule of attribution and evaluates each of these approaches in terms of their capacity for promoting an economically efficient allocation of risk. It argues that the special circumstances of corporate agency (as opposed to agency for a natural principal) demand a special approach and that the more flexible approach embodied in the so-called ‘indoor management rule’ is more satisfactory in this context and more likely to promote efficiency in the organisation of a company's management body. However, there need to be some modifications to this approach and a greater acknowledgement of its overall economic context.

Economists are showing an increasing interest in alternative organizational arrangements for delivering public interest services. More specifically, the involvement of private operators has been called into question in light of market failures. Following the UK privatization program in the 1980s, one might look there for a model for transferring ownership of infrastructure utilities from the public to the private sector. Such transfer of ownership is based on the idea that market forces and private ownership can lead to better performance, for instance by insulating management from political interference (see Boyco-Shleifer 1995 for a specific model and Vickers-Yarrow 1991 and Vining-Boardman 1992 for a more general discussion on this issue). This increased control is believed to favour reduction of costs (and prices if competition exists), and improvement in quality and innovation. Solutions other than full privatization are also proposed, such as delegation contracts.

Privatisation has been one of the defining economic developments of the last two decades in several manufacturing and service industries in both industrialised and developing countries. This paper reviews a number of theoretical and empirical studies linking privatisation processes to innovation activities at the firm level. First, it refers to the literature on corporate governance structures and innovation in order to analyse the theoretical relationship between changes in the principal-agent structure of firms following privatisation, incentives to invest in R&D and R&D performance. It then reviews a number of empirical studies that have analysed this issue in the context of Western Europe.

Starting from the latest decision of the European Court of Justice on the freedom of establishment for companies that are active in the European single market, this article develops an economic and comparative framework to answer the question which level (federal or national) should have competence to decide conflict of law rules for companies operating in the entire single market.

The corporate landscape of a country comprises the total number and size, overall activity, economic performance, legal form, corporate governance and importance of the companies that operate there. It is dependent, inter alia, on the country's size, population, economic strength, historical development, traditions, stability, stage of development of the legal system and geographic position, as well as a series of other factors. This paper presents the author's views on the current level of development of Croatia's corporate landscape. In order to understand the changes that have taken place in this landscape, it is also necessary to describe the state of the Croatian corporate landscape in 1989, before the transition. It is also important to explain how private companies were established, how foreign direct investment was carried out, the course of privatisation, how bankruptcies were handled and how Croatia's capital markets developed. Taken together, these factors paint a comprehensive picture of the corporate and social landscape in Croatia. After these factors have been analysed, this paper presents on Croatian companies and an overview of corporate governance in Croatia.

Since the introduction of the EU merger control mechanism in 1990, the European Commission has always denied merging parties the option of using a defence based on efficiency considerations to show why an otherwise anticompetitive merger should be cleared. At the end of 2002, however, the Commission made an apparent U-turn in this regard. In fact, the reform package it is currently proposing includes a draft of the horizontal merger guidelines in which a whole section is dedicated to the treatment of efficiencies. Williamson's ‘efficiency defence’ model, despite being considered naïve by its own creator, provides a simple but powerful analytical framework through which enforcement agencies can analyse the social desirability of a concentration. With some adjustments, which are necessary to take account of many ‘real world’ factors, the trade-off suggested by Williamson's compelling model appears to be robust in theory and feasible in practice. Examples of this may be found in the two most advanced antitrust jurisdictions in which such a defence has been contemplated: the United States and Canada. Although there are doubts concerning the practical feasibility of introducing efficiency considerations into the EU merger control process, the Commission has in the past consistently demonstrated that it is able to assess, estimate and set off the same trade-off terms suggested by Williamson's refined model in neighbouring areas of antitrust law, including the full-function cooperative joint ventures that fall under Article 81(3) EC.

As in other European Union countries, Spanish local governments, by law and according to their population size, provide a number of basic services, which include the local police service, fire-fighting, refuse collection, street cleaning, land use control, urban transportation, social services, leisure and cultural activities, public works and town planning, slaughterhouses, central markets, housing, etc. Only the larger Spanish municipalities participate in the delivery of services such as education or health, which are under regional government responsibility. The vast majority of Spanish municipalities are very small. Recently, some Autonomous Communities have been establishing supra-municipal or district authorities (Comarcas), grouping several municipalities in order to manage the delivery of common local services. Public-private partnership initiatives were introduced into Spain by the Municipal Services Act of 1955, which allows the provision of local services by private operators. This act was updated by the Public Contracting Act of 1995, which was recently amended to bring it into line with EU legislation. Spanish local governments have traditionally provided services using almost all PPP methods, such as local government corporations, concessions or franchises, lease of assets with or without additional investment, public-private ventures, associations with other local governments, public entities and non-profit organisations. The results of our work on local service provision, set out in this paper, show a higher degree of PPP initiatives in medium-sized Spanish cities than in the rest. We find no statistical differences in the levels of efficiency observed in public and private urban transport operators. Finally, we observe both a need to update car park concessions in Spanish local administrations, incorporating mechanisms to increase efficiency, and an absence of homogeneity in these concessions because there is no unit that advises public authorities.