Academic journal article The George Washington International Law Review

Internalizing Externalities in E.U. Law: Why Neither Corporate Governance nor Corporate Social Responsibility Provides the Answers

Academic journal article The George Washington International Law Review

Internalizing Externalities in E.U. Law: Why Neither Corporate Governance nor Corporate Social Responsibility Provides the Answers

Article excerpt

I. E.U. LAW, SUSTAINABLE DEVELOPMENT, AND THE ROLE OF CORPORATIONS

A. Taking the General Objectives of the E. U. Treaties Seriously

E.U. law1 purports to take sustainable development,2 and notably its environmental dimension, seriously.3 At the Treaty level, the European Union has progressed from a situation where it did not even mention environmental protection to one where it included environmental protection as one of the general objectives of E.U. law in Article 2 EC of the European Community Treaty (Treaty)4 in 1992 and where it codified the sustainable development principle in the environmental integration rule of Article 6 EC5 in 1997.6 Interesting issues are raised if the E.U. law's focus on sustainable development, and especially the environmental dimension thereof, is taken seriously. What is the significance of the overarching objective of sustainable development for the various sectors of E.U. law? More specifically, does E.U. law require the integration of the environmental dimension of sustainable development in European corporate law?

The position of this Article is that it does. Part I will go on to show why and on what level it is necessary to integrate sustainable development into corporate law. Part II indicates the direction to go to determine how to integrate. Thereafter, Part III summarizes and further analyzes E.U. law concerning the legal consequences of the general objectives which establish the tasks of the Community.7 The Article will focus particularly on the general objective of sustainable development and its enhancement through the environmental integration rule contained in Article 6 EC. Part III will also demonstrate the chain of legal reasoning that establishes the legal basis in E.U. law for environmental integration as well as the argument for a legal obligation to carry out such integration.

B. Corporate Law as an E. U. Law Matter

In the European Union, corporate law is not solely a matter for the national legislators.8 Community regulation of European corporations has existed since the late 1960s.9 Traditionally, the E.U. legislature has been reluctant to deal with the core issues of corporate law, but that has now changed with the adoption of legislation such as the Takeover Directive.10 The Takeover Directive attempts to facilitate a "market for corporate control" in Europe through regulating takeover bids.11 In its controversial rule on how the board of the target corporation should deal with a takeover attempt (that is, do nothing to prevent the bid), the Takeover Directive goes into the very core of corporate law.12 The "board neutrality" rule goes straight to the heart of one of the biggest and oldest controversies in E.U. corporate law, which concerns diverging views regarding the purpose of the corporation and the role of the board.13 Accordingly, the question is no longer whether E.U. corporate law should go into the core issues of corporate law. The question is whether it should do so under the influence of the dominant corporate governance debate and its shareholder primacy drive, and on the basis of an uncritical belief in the market for corporate control, or based upon a considered reflection of what the overarching goals and guiding principles of E.U. law are and should be.14

C. Getting Corporations to Contribute: The External and the Internal Perspective

Corporations are the basic actors in our economies.15 If the European Union wishes to achieve sustainable development, European corporations must contribute to that goal. Corporations need to contribute in a substantive way that goes beyond the mere use of corporate social responsibility as a marketing tool, or "greenwashing."16 This Article focuses on the contributions of European corporations to sustainable development, whether the corporations operate within the European Union or outside it. Specifically, this Article concentrates on the environmental dimension of sustainable development. …

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