CORPORATE LAW

CORPORATE LAW

INTRODUCTION

Over the past decade, there has been an intriguing dual movement in the development of the forms of regulation of business in the global economy. Since the 1980s the dominant trend has been liberalization, i.e., the relaxation or removal of national controls on international capital movements. It seemed to many that business firms and investors were close to attaining the goal of a world market, in which they could be free to manage their assets and activities globally without hindrance from state legal requirements. This neo-liberal form of economic globalization was hailed by its advocates and excoriated by its critics.

However, by at least the mid-1990s, it was becoming apparent that the processes at work were more complex. Although liberalization has generally entailed the removal of barriers to market access and the ending of direct forms of state intervention, it has frequently been accompanied or succeeded by the development of new forms of regulation or regulatory reform. The result has been the creation of a complex and multi-layered regulatory framework for the governance of global economic activity. There has been a transition to denser and more fragmented regulatory networks with new types of linkages, including combinations of formal and semi-formal legal arrangements (“hard” and “soft” law). Yet, far from constituting a smooth transition to a neo-liberal order, these forms are contested and conflict-ridden processes. The institutional and legal frameworks for managing and legitimating economic activities are an important focus of this contestation.

BACKGROUND

This Essay analyzes the interaction between the development of international legal provisions for investment protection and liberalization and the emergence of codes of conduct for international business. The recent proliferation of corporate social responsibility (“CSR”) codes and standards has been matched only by the boom in writings on the subject. This Essay will focus mainly on the interaction between these codes and formal legal requirements, at national and international levels. It starts from the perspective that the recent spate of voluntary corporate codes for transnational corporations (“TNCs”) must be understood in the context of the changing environment for foreign direct investment (“FDI”), including shifting patterns of national and international regulation. Hence, although corporate codes have a legitimate place in helping to ensure compliance with standards through corporate networks, this Essay suggests that they should be more firmly anchored within a broader regulatory framework that establishes obligations as well as rights for business. Such a framework could be based on new approaches to combining binding hard law with non-binding soft law standards through a framework convention.

International business has a long history, and even the currently dominant form of the TNC goes back to the end of the nineteenth century. However, it is only since the 1960s that there has been an increasing tension between the global reach and visibility of TNCs and the dualist hierarchy of national and international law established in the classical liberal period. This dualism regards corporations as formally private legal persons, and hence subjects of national law, but not international law, which directly binds only ...