European Constitution of Corporations: Legal Personhood, Legal Powers & Legal Governance of Corporate Entities in the European Union

The financial and economic crisis of 2008−2014 raised many questions about the role of corporations in European society. This research studies the European Union’s response to the crisis and its impact on the legal powers and legal relations of corporate entities. It seeks to increase our understanding of the nature of corporations as legal entities and the development of their societal role during the crisis period.

A model of corporate legal personhood recognising the extent and limits of corporate legal power has been lacking from the current EU legal debate. The research aims to elucidate the role and powers of corporations as legal entities and provide preliminary models for further discussion and development. The research formulates a hybrid model of corporate legal personhood. The hybrid model combines artificial, aggregate and real entity models. For the study of corporate legal relations, the research introduces a reviewed Hohfeldian typology of legal powers and legal relations. The typology reviewed recognises the trilateral nature of all formal relations recognised by the State, providing a more accurate description of also contractual relations between private law entities.

The research systematises EU primary legislation and general principles. It systematises the legal powers of private law entities in general and corporate entities in particular in the framework of the European Union’s primary legislation. It then analyses the legal powers applying the reviewed Hohfeldian typology. The systematisation produces yields seven categories of legal rights and liberties and three sources of legal duties recognised by the EU. It is argued that statutory legislation recognising the corporate entity as an autonomous entity adds a surplus of legal personhood. The liberties and rights of CEs are limited to those necessary for their economic function in society. The research then recognised key principles of legal governance of private law entities generally and corporate entities in particular. Together with the systematisation of corporate legal powers, these principles constitute the four principles of legal governance of CEs. The liberties and rights of CEs can be intervened to any efficient measures to achieve Union objectives or to protect general interests recognised by the Union or promote fundamental non-market liberties and rights of natural persons.

To recognise the key variables that determine the legal status of corporate entities, the research studies the impact of crisis measures on the legal powers and legal relations of corporate entities. It covers relevant regulatory measures adopted between 2008 and 2014 and early 2015. The analysis of these measures demonstrates that ensuring the proper functioning of the financial and banking sector required entailed establishing a robust regulatory framework. At the same time, responses to the social challenges posed and perpetuated by the crisis were pursued primarily through markets or market-like mechanisms. To enhance the proper functioning of these mechanisms, the EU adopted regulation enhancing corporate transparency, protecting weaker contractual parties, and aiming at more efficient enforcement of competition.

According to the research, the key objectives of the measures adopted were to ensure economic recovery and growth in the prevailing conditions while also ensuring efficient use of pubic resources and financial sustainability. The majority of changes in corporate legal power are traceable to changes in extrajudicial variables, such as changed economic conditions and their impact on the costs and benefits created by business activities. In contrast to judicial factors, extrajudicial variables have been carefully assessed and balanced, highlighting their significance in determining the legal powers and legal relations of corporate entities.

The discussion recognises the dynamic nature of EU law. It connects this regulatory pendulum with the nature and function of the European Union as an intergovernmental organisation, aiming to create added value for Europeans. The discussion also recognises differences in approaches when comparing the EU legislator and the Court of Justice of the European Union. While the research at hand cannot solve policy issues, it provides a common terminology for future discussion.