Ius Gentium Volume 9 Fall 2003 FederalismIUS GENTIUM · Fall 2003 PREFACE The European-American Consortium for Legal Education Mortimer Sellers University of Baltimore Volume 9 of

FederalismF A L L 2 0 0 3

V O L U M E 9

IUS GENTIUM · Fall 2003

IUS GENTIUM · Volume 9

IUS GENTIUMJournal of the University of Baltimore

Center for International and Comparative Law

Fall 2003Volume 9

Copyright 2003ISSN: 1534-6781


Editor

Mortimer N.S. SellersUniversity of Baltimore

Board of Editors

Myroslava Antonovych Nadia de AraujoKyiv-Mohyla Academy Pontifícia Universidade

Católica do Rio de Janeiro

Jasna Bak_i__-Mufti__ Loussia P. Musse FelixUniversity of Sarajevo Universidade de Brasília

Emanuel Gross Jan KlabbersUniversity of Haifa University of Helsinki

Claudia Lima Marques Eric MillardUniversdade Federal do Insitut Universitaire de FranceRio Grande do Sul

David L. Carey Miller Gabriël MoensUniversity of Aberdeen University of Notre Dame

Australia

Raul C. Pangalangan Mizanur RahmanUniversity of the Philippines University of Dhaka

Keita Sato Poonam SaxenaChuo University University of New Delhi

Gerry Simpson Eduard SomersLondon School of Economics Universiteit Gent

Xinqiang Sun Jaap W. de ZwaanShandong University Erasmus Universiteit

Rotterdam


Managing Editor

Morad EghbalUniversity of Baltimore

Student Editors

Bianca LansdownUniversity of Baltimore

Michael MorrisUniversity of Baltimore

Administrator

Joyce BauguessUniversity of Baltimore


IUS GENTIUMCONTENTS

PREFACE:

The European-American Consortium for LegalEducationby Mortimer Sellers .............................................1

ARTICLES:

Localism, History and The Articles ofConfederation: Some Observations about theBeginning of U.S. Federalism.by James Hickey, Jr. ............................................5

Products Liability Harmonizationby Rebecca Korzec .............................................25

The Subsidiarity Principle in EuropeanCommunity Law and the Irish Abortion Issueby Gabriël A Moen .............................................35

Is There a Role for Sub-Federal Governments inInternational Trade Policy Formation?by Hal S. Shapiro...............................................73


Aspects of the Reform of Higher Education inBelgium: the Case of Flandersby Eddy Somers ............................................... 115

The Enlargement of the European Union andthe IGC-2004by Hans van Meerten....................................... 137

Conflicts in the Regulation of Hostile BusinessTakeovers in the United States and the EuropeanUnionby Barbara White............................................. 161

Websites on Federalism, including European andUnited States Constitutions ............................. 196

The Vicissitudes of Federalist Visionsby Jan Klabbers ............................................... 201


PREFACE

The European-AmericanConsortium forLegal Education

Mortimer SellersUniversity of Baltimore

Volume 9 of Ius Gentium, on “Federalism”is a project of the European-AmericanConsortium for Legal Education. Most of thepapers contained in this volume were presented atthe 2002 EACLE Annual Conference, held atBaltimore in April, 2002, on the topic of“Federalism in Europe and in the United States ofAmerica”. The papers have been revised in thelight of comments made at that meeting, andduring subsequent exchanges of scholars betweenthe European and North American sisteruniversities. They illustrate the many parallels,but also some differences, between theconsolidation and division of sovereignty inEurope and North America, as both continentshave developed their federal and confederal lawsand institutions.


The European-American Consortium forLegal Education (EACLE) was established inNovember, 2000, as a partnership betweenAmerican University, the University of Baltimore,Erasmus University Rotterdam, the University ofGhent, Helsinki University, and HofstraUniversity. The purpose of the consortium is toadvance legal education, and legal scholarship inEurope and the United States of America throughthe exchange of ideas, of students, of facultymembers and of publications between sisterschools on both continents. The EACLEexchanges rest on the conviction that legal issuesin Europe and the United States are usuallysimilar and often, in fact, the same, as law andtrade increasingly transcend borders and othertraditional divisions between states.

The annual conference of the EACLE is oneof four primary programs through which themember institutions have taken the lead inovercoming the traditional insularity of legalscholarship and legal education on bothcontinents. The partnership schools: 1) exchangestudents every fall, for semester or year-long studyin their sister faculties; 2) exchange professors fora week-long visit every October, to lecture in eachother’s courses; 3) produce common publications,such as this volume; and 4) meet every May for anAnnual Conference held alternatively in Europeand in the United States of America. The 2003conference, held in Rotterdam, was on “Security”,and the 2004 conference, to be held at HofstraUniversity, will consider “Legal Personality”.


The contributions to this volume illustratethe value of distinguishing federal from nationalcompetencies, and the importance of subsidiaritynot only between, but also within states. Ingeneral, it seems that human rights and individualliberties are best protected by federal institutionsand courts, while social and cultural rightsdeserve more local attention. Peace andcommerce seem to thrive best under federalsystems of justice, while family life and land-useplanning require regional attention. The growth offederal power has also made regional and minorityidentities more sustainable, and liberated somecitizens from subjugation to local elites.

This volume appears concurrently with thenew draft treaty proposing a constitution forEurope, excerpts of which appear as an appendixto these essays. Whatever the final result of theconstitutional deliberations, it is clear that inEurope and in North America, law andconstitutional structures will play an increasinglyimportant role in maintaining peace and justicebetween the constituent states. The EACLE hasbeen and will remain at the forefront of thismovement.


ARTICLES

Localism, History and TheArticles of Confederation:

Some Observationsabout the beginning of U.S.

Federalism

James E. Hickey, Jr.Hofstra University

I. INTRODUCTION.

There is nothing new in the world except thehistory you do not know.1

Harry S. Truman 33d President of the UnitedStates.

All politics is local.2

Thomas P. A “Tip” O’NeilRepresentative of 8th District Massachusetts

Most Europeans, and all Americans are notfully aware of how much state autonomy remains

1 Robert Andrews, T HE COLUMBIA D ICTIONARY OFQUOTATIONS 410 (1993), William Hillman, Mr. President,pt. 2, Ch. 1 (1952); quoted in.2 Tip O’Neil, ALL POLITICS IS LOCAL (1994).


embedded in the Federal Constitution of theUnited States of America. The U.S. Constitutionpreserves the sovereignty of the states, and tworeasons for the preservation are localism and theArticles of Confederation.

In U.S. law schools, a course inConstitutional Law is mostly taken up withstudying cases of judicial review by the SupremeCourt of challenges to the validity of particularexercises of state or federal government powerunder the Constitution. Broadly, the issuedecided, more often than not, is whether theConstitution restrains state or federal governmentaction. The Supreme Court uses several doctrinesto decide that issue including substantive andprocedural due process, equal protection,preemption, separation of powers, and federalism.These doctrines and the judicial decisions usingthem form the core of a U.S. Constitutional lawcourse.

The roots of United States federalism inpre-constitutional history are less often discussed.The origin of United States Constitutionalismhelps to explain its persistent structure, whichrests on the sovereignty of the Union’s constituentstates. In 1819, Chief Justice Marshall in thefamous case of McCulloch v. Maryland, whichupheld federal law and limited state power,presciently observed the resiliency of debate overpowers granted to the federal government in theConstitution (and by implication also of


disagreement concerning powers residing in thestates):3

… the question respecting theextent of the powers actuallygranted, is perpetually arising, andwill probably continue to arise, aslong as our system shall exist.(emphasis added).

More recently, Justice O’Connor confirmed thatfederalism issues are alive and well in U.S.constitutional law:4

The constitutional question [in thiscase] is as old as the Constitution:It consists of discerning the properdivision of authority between theFederal Government and theStates.

II: THE BEGINNING OF U.S. FEDERALISM - LOCALISMAND THE ARTICLES OF CONFEDERATION.

3 17 U.S. 316, 405 (1819). Here, among other things, theSupreme Court interpreted the Constitution to grant tothe federal government implied power to establish theBank of the United States. 4 New York v. United States, 505 U.S. 144, 149 (1992).The Court concluded that Constitution did not confer onCongress the ability to compel the states to provide forthe disposal of the low level radioactive waste generatedwithin their borders.


Localism in pre-constitutional America wasembedded into provisions of the Articles ofConfederation and ultimately was preserved in theU.S. Constitution. Over the past 220 years, debatehas continued, as yet unsettled, about thestructure and limits of that preservation.

A. Localism in Pre-constitutional America.

The federal system of the United States hasbecome very centralized. However, thatcentralization exists in an American tradition ofpreference for local authority, local autonomy,and distrust of federal power.5 The roots of thatlocalism extend back in time to the earlyseventeenth Century well before the U.S.Constitution was ratified in the 1790s. As GordonWood aptly put it:6

“The early English migrants toAmerica brought with them strongtraditions of local and regionalautonomy that conditions in theNew World only reinforced andintensified. All the colonies in theseventeenth century experiencedan acute localization of authority.”

Colonial central government was largely aproduct of power exercised at the local level. The

5 Gordon S. Wood, The First National Constitution of theUnited States in GOVERNMENT STRUCTURES IN THE U.S.A.AND THE SOVEREIGN STATES OF THE FORMER U.S.S.R at 13(James E. Hickey, JR. and Alexy Ugrinsky eds.) 1996.6 Id. at 12.


American colonies essentially governedthemselves under royal charters from England.This was a matter of necessity because England, ofcourse, was far away in distance and time and thecolonies became accustomed to making decisionsand passing laws on their own. This established apattern of political local autonomy in town andcounty governments throughout early colonialAmerica.7 Central government authority at thecolonial level in early America was dependent onthe towns and counties and ultimately served atthe will of local communities. Local authority intowns and counties was pervasive and wasexercised in almost every sphere includingcriminal and civil law, wills and estates, taxcollection, titles to land, militia supervision, andeven orphans, taverns and welfare.8

Thus, by the time of the Declaration ofIndependence in 1776, colonial centralgovernments were politically weak and, for themost part, needed local government permission toact effectively. This localism carried over to theArticles of Confederation and later to theConstitution itself.

B. The Articles of Confederation.9

7 The same could not be said economically because thecolonies were almost entirely dependent on tradeexclusively with England and they did not tradesignificantly with one another.8 Wood supra note 7 at 13.9 The text of The Articles of Confederation may be foundat: http://www.usconstitution.net/articles.html.


The intense and comprehensive penchantfor localism evident in 17th and 18th CenturyAmerica translated rather easily into concepts ofindividual state sovereignty when the ContinentalCongress drafted and adopted the Articles ofConfederation between 1776 and 1781.10

In 1776, when union became a primeconcern, the colonies viewed themselves as 13independent sovereign nations with strongpreferences for local authority. The primarygovernment unit was considered to be the stateand not any union or continental government.The newly independent “Americans” thought oftheir state and identified with their state first andforemost. At the time it would have been odd anduncomfortable for the people of America to saythey were “Americans”. Rather, they were“Virginians”, “Marylanders”, and “New Yorkers”.Their country was their state, not the “U.S.A.”.John Adams succinctly summed up the notions ofindividual state sovereignty when he referred tothe Massachusetts delegation to the 1776 meetingof the Continental Congress as “Our Embassy”.

The Articles of Confederation was more ofa “compact” or treaty among sovereign states,governed by public international law, than it was a

10 Prior to 1776 there were two specialized attempts at“union” for specific limited purposes: first, in 1643 thecolonies in the northeast unionized to respond to threatsfrom the Dutch, the French, and native Americans;second, in 1754 the Albany Plan of Union was formed formilitary purposes. Neither attempt at Union was longlasting or significant in the U.S. constitutional history.


constitution. At the time, it was understood andaccepted that the sole source of power of theunion being formed was the states. It was throughthe states, as gatekeepers, that the will andconsent of the people was channeled to thecentral government. The peoples of the variousstates were not directly represented in theconfederation.

Under the Articles of Confederation, theterm “United States” was plural and not singularas a matter of grammar, meaning, and feeling.The U.S. Constitution that replaced the Articles ofConfederation converted the plural “peoples ofthe United States” to the singular.11 Theimplication of that semantic conversion, ofcourse, is that the people are directly representedin the Constitution.

Most analyses of the Articles ofConfederation stress the weaknesses thatcompelled adoption of the United StatesConstitution to cure. Those weaknesses were: 1)no central government authority to act directly onindividuals and the states; 2) no centralgovernment authority to enforce treaties andcentral government laws; 3) no amendment of theArticles of Confederation without the unanimousconsent of the states; 4) no proportionalrepresentation of the population in the centralgovernment; 5) no power in the central

11 The first words of the U.S. Constitution state in the Preamble“We the People of the United States, in Order to form a moreperfect union…” (emphasis added). JOHNNY H. KILLIAN ANDLELAND E. BECK, EDS. ,THE CONSTITUTION OF THE UNITED STATESOF AMERICA (GPO 1987) at 3.


government to tax; 6) no power in the centralgovernment to print money; 7) no centralgovernment authority to regulate trade among thestates; and 8) no central government courts orexecutive.

All those weaknesses in the Articles ofConfederation were addressed in theConstitution.12 What is not so often appreciated isthat the Constitution did not jettison entirely theprinciples that had animated The Articles ofConfederation.

The state sovereignty and state equalityconcerns reflected in The Articles ofConfederation were carried over in severalrespects to the Constitution: in guaranteeingsurvival of the states as discrete sovereign legalpersonalities; in the scheme of representation; inthe doctrine of enumerated powers for the centralgovernment; and in the reservation of powers inthe states.13

The Articles of Confederation preserved thestate sovereignty notion of an agreement amongstates. In addition, the Articles provided a newvehicle through which all the people of the

12 The Constitution addressed those weaknessesrespectively in Article VI, cl. 2; Article I, § 8, cl. 15;Article V; Article I, § 3, cl. 1; Article I, § 8, cl. 1; Article I,§ 8, cl. 5; Article I, § 10, cl. 2; Article I, § 8, cl. 3; ArticleIII, § 1; and Article II, § 1, cl. 1.13 See Douglas G. Smith, An Analysis of Two FederalStructures: The Articles of Confederation and theConstitution, 34 San Diego L. Rev. 249, 278-84.


country could agree to bestow certain powersdirectly on the federal government. Thus, statesovereignty (local power) was preserved in theConstitution and the states did not disappear as asource of power in the new “United States ofAmerica.”

1. Preservation of the states as discrete legalpersonalities.

The Articles of Confederation in its formaccepted that the states had discrete legalpersonalities. The Articles of Confederation, afterall, were essentially a treaty controlled by publicinternational law. A treaty by definition was anagreement among states. In the 18th Century, theonly recognized legal personalities with rights andcorrelative duties as subjects of international lawwere states.14

Any doubt about the legal personality of thestates was addressed simply and bluntly in ArticleII: “Each state retains its sovereignty, freedom,and independence.” Sovereignty, of course, is theautomatic consequence of statehood and meansthat states are essentially autonomous in thesense of having a discrete legal personality.Among several states sovereign power isnecessarily limited and implies theoreticalequality among the states.

14 Under international law a state is a subject ofinternational law and characterized by a defined territory,a permanent (i.e. stable) population, an effective andfunctioning government, and a capacity to enter intorelations with other states.


The Constitution established a muchstronger central government with specificauthority over the states and it dropped thelanguage of Article II of the Articles ofConfederation about state “sovereignty, freedomand independence.” Nonetheless, theConstitution preserved the discrete legalpersonality of the states and did not replace thestates with a “national” government.

That preservation of state legal personality isaddressed in Article IV § 4, Article V, and in theTenth Amendment to the Constitution.15 Article IV§ 4 (the Guarantee clause) provides:

The United States shall guaranteeto every State in this Union aRepublican Form of Government,and shall protect each of themagainst Invasion; and onApplication of the Legislature, or ofthe Executive (when theLegislature cannot be convened)against domestic Violence.

Article V provides in relevant part:

. . . no state, without its Consent,shall be deprived of its equalSuffrage in the Senate.

The Tenth Amendment provides:

15 A related question regarding the Tenth Amendment iswhat powers do the states have? This is discussed below.


The powers not delegated to theUnited States by the Constitution,nor prohibited by it to the States,are reserved to the Statesrespectively, or to the people.

Under the guarantee clause, of course, a“Republican Form of Government” cannot beassured unless the states have discrete legalpersonality and sufficient autonomy to make andrun their own governments in the first instance.16

Article V assured external sovereignty andsovereign equality among the states by forbiddingthe amendment of the Constitution to alter theequal state representation in the Senate. And, theTenth Amendment assures a reservoir of statesrights under the Constitution (see discussionbelow).

Finally, the overall structure adopted in theConstitution and reflected in Articles IV, V andthe Tenth Amendment presupposes independentstates with legal personality and sovereignty. TheSupreme Court acknowledged the continuing legalpersonality of states in the Constitution after theCivil War:17

16 See generally, Deborah Jones Merrit, The GuaranteeClause and State Autonomy: Federalism For a ThirdCentury; 88 Col. L. Rev. 1 (1988). 17 Texas v. White, 74 U.S. 700, 725 (1869) quoted inSmith supra note B at 283 n. 111.


[T]he people of each Statecompose a State, having its owngovernment, and endowed with allthe functions essential to separateand independent existence, …‘[W]ithout the States in union,there could be no such politicalbody as the United States.’ Notonly, therefore, can there be noloss of separate and independentautonomy to the States, throughtheir union under the Constitution,but it may be not unreasonablysaid that the preservation of theStates, and the maintenance oftheir governments, are as muchwithin the design and care of theConstitution as the preservation ofthe Union and the maintenance ofthe National government. TheConstitution, in all its provisions,looks to an indestructible Union,composed of indestructible States.

2. Equal State Representation.

Article V of The Articles of Confederationembraced sovereign equality among the states intheir votes in the central government Congress bymandating that “each State shall have one vote ...[i]n determining questions in the United States inCongress assembled.” Here, no matter the


geographic size, population or economic wealth ofeach state, the principle of one state, one vote,was adopted in recognition that otherwise statesovereignty equality would be disturbed. In theConstitution, Article I, § 3, cl. 1 carries over thatstate equality in voting in the Senate:18

The Senate of the United Statesshall be composed of two Senatorsfrom each State, chosen by theLegislature thereof, for six years;and each Senator shall have onevote.

3. The doctrine of enumerated powers.

The Articles of Confederation did notbestow on the central government any general,open-ended, legislative authority. It only gave tothe Congress certain powers and no more thanthose that were listed in The Articles.

Article II of The Articles provides that“Each state retains ... every power, jurisdiction,and right ... not ... expressly delegated to the ...Congress.”

For example, Article IX provided in part:

Congress ... shall have the sole andexclusive right and power of

18 Since the Constitution, unlike the Articles ofConfederation also conferred power directly on thepeople, it added a House of Representatives withproportional representation based on state population inArticle 1 Sections 2 and 3.


determining on war and peace ... ofsending and receiving ambassadors... entering into treaties ... ofestablishing rules for [Prize] ... ofgranting letters of marque andreprisal ... [of] appointing courtsfor the trial of piracies and feloniescommitted on the high seas ... [of]establishing courts for ... cases ofcapture ... [of deciding] all[boundary and jurisdictional]disputes between states ... ofregulating ... coin [and] ... weightsand measures ... [and] all affairswith the Indians ... [of] establishing... post offices ... of appointing[army and navy] officers ... [of]directing ... [land and naval]operations … [of] borrow[ing]money …

The Constitution adopts completely theapproach of enumerated powers for the FederalGovernment. As a result, like the centralgovernment under The Articles, the FederalGovernment under the Constitution has nogeneral legislative authority. Thus, Article I, § 8of the Constitution contains a list of enumeratedpowers that is strikingly similar to the Articles ofConfederation.

The Scope of enumerated powers wasadmittedly broader in the Constitution becauseArticle I, § 8 of the Constitution also added newenumerated powers not in The Articles like the


power to tax, to regulate interstate commerce andto establish inferior federal courts (below theSupreme Court). However, the approach, thestructure, is the same: the source of federalpower is those powers granted and enumerated bythe States (and the people) in the Constitution.

4. Reservation of State Power.

An intimately related but distinctivequestion to the federal government’s legislativepower is about the power the states have retainedafter the grant of central authority power is made.

Article II of The Articles of Confederationprovided in this regard that the states have areservoir of power vis-à-vis the Congress:

Each state retains its sovereignty,freedom, and independence, andevery power, jurisdiction, andright, which is not by thisConfederation expressly delegatedto the United States, in Congressassembled.

Article II by its words leaves no doubt thatthe States meant to keep all powers notspecifically named as conferred on the Congress.

The Constitution initially did not have thisexplicit retention of state power. It also did notaddress the power retained by the people who,under the Constitution, are now directlyrepresented in the federal government. Both


these retention considerations were addressed in1791 by the Ninth and Tenth Amendments to theConstitution19 which provide as follows:

Amendment IX.The enumeration in theConstitution, of certain rights,shall not be construed to deny ordisparage others retained by thepeople.

Amendment X.The powers not delegated to theUnited States by the Constitution,nor prohibited by it to the States,are reserved to the Statesrespectively, or to the people.

Thus, under both instruments, no generallegislative authority over the states was granted tothe central government. Additionally, under theConstitution no general legislative authority wasconferred over the people either. Thus, the states(and the people of those states) have their localsovereignty, their local autonomy, and theirindependence, reserved.20

19 Article V of the Constitution provides that theConstitution may be amended as “necessary” with theapproval of 2/3 of Congress and 3/4 of the States.20 A related concern not addressed by this essay is thescope of enumerated powers which surround the word“expressly” in Article II of The Articles which is omittedfrom the Tenth Amendment to the Constitution. Theomission raises the issue of which additional powers theFederal Government may have that may be fairly impliedfrom the enumerated powers even though not expressed.


III. CONCLUSION.

After over 200 years of federalism underthe Constitution, the United States has ahighly centralized government with enormouspower that nevertheless remains a federalgovernment and not a consolidated nationalgovernment. The daily lives of most Americansare guided by local governments, localpreferences, and local values. Even if oneviews the Constitution as something morethan a treaty, a contract, or a compact amongstates (in part because it also establishes adirect relationship between the people and thefederal government), it remains todaysomething substantially less than the solesource of law for the United States. Part of theexplanation for this is the American people’sadherence to localism, rooted in our pre-constitutional history, articulated in theArticles of Confederation, and embeddeddeeply into our Constitution.


Products LiabilityHarmonization:

A Uniform StandardRebecca Korzec

University of Baltimore

The purpose of products liability laws is tocreate safer products. In our global economy, auniform approach to products liability law is themost effective means of fulfilling this purpose.American manufacturers market their productsnationally and internationally. Worldwide,consumers buy products marketed through allmeans of interstate and international commerce,including the Internet. For this reason, any singleproduct may be regulated by a variety of differentstate or international products liability laws. Theapplication of these inconsistent rules maydiscourage essential manufacturer decision-making, may have a discriminatory impact uponsome product manufacturers and users, and maylead to externalization of accident costs.

Among industrialized nations, the UnitedStates is unique in addressing tort law at the staterather than the national level. For example,Australia and Canada, which share a common-lawheritage with the United States, have federal tortsystems. The United States approach may be


appropriate in some tort settings, such as in thepremises liability or motor vehicle accidentcontext (not involving a claim of productsliability), where the state rule’s impact remainswithin that state’s geographical boundaries. Unlikethe simple “fender-bender”, which occurs withinthe borders of one state, the typical product ismanufactured and marketed nationally orinternationally. Therefore, several factors suggestthat uniform federal treatment of product liabilitylaws may be a more desirable means of regulation.

First, conflicting state rules create anabsence of predictable standards formanufacturers. For example, while some statesmay employ the consumer expectations test fordetermining product defects, others may applythe risk utility test. To be efficient, manufacturersmust mass-produce and market their productsnationally. However, they may find itcumbersome, if not impossible, to comply withthe conflicting rules of the various states in whichthe product is made or marketed. Manufacturerscannot always redesign their products to meetcompeting, inconsistent state requirements. Thus,conflicting rules not only discourage essentialmanufacturer planning and decision-making, theyalso jeopardize product design and safety. In sum,experimentation by the states in creating theirown doctrines and regulations, one of thesupposed benefits of decentralization, actuallymay become a detriment.

Second, state lawmakers may legislate aninherent bias into products liability law, adopting


rules that advance parochial interests, which favorresident product injury victims over nationalmanufacturers.21 Conversely, a state maymanipulate its product liability rules to advanceits political or economic development goals,thereby creating a pro-manufacturer bias. Thiscan be explained, at least in part, by some basicrealities of the legislative process. Business orinsurance interests, who possess substantial fundsto underwrite intensive lobbying campaigns, mayinfluence state legislators to create a morehospitable environment for out- of- statemanufacturers. By contrast, product consumersnot only underestimate product risks22, they alsomay underestimate the potential benefits oforganized legislative advocacy. 23 As a result,product users may overlook these activities, givinglittle reward to legislators who adopt a pro-consumer stance.24 Thus, it is not surprising thatmost legislative tort reform favors insurancecompanies and sellers.25 The federal governmentcan play an important neutralizing role inpreventing such manipulation by states.

21 See, e.g. Blankenship v. Gen. Motors Corp., 406 S.E. 2d 781(W.Va. 1991), in which the Supreme Court of West Virginiastated that, where a split of authority exists about whichcrashworthiness rule to apply, the court should choose the rulemore favorable to the plaintiff. 22 See , e.g. Jon D. Hanson & Douglas A. Kysar, “TakingBehavioralism Seriously: Some Evidence of MarketManipulation,” 112 Harv. L. Rev. 1420 (1999). See also, Gary T.Schwartz, “Considering the Proper Federal Role in AmericanTort Law,” 38 Ariz. L. Rev. 917, 936 (1996).23 Id., Schwartz at 937. 24 Id. 25 Id.


Third, because most products aremanufactured and marketed nationally andinternationally, the market for many products issufficiently global to justify federal andinternational regulation. Congress already hasrecognized the advantages of uniform federaltreatment of products liability issues. Nationally,the Food and Drug Administration, the ConsumerProduct Safety Commission and the NationalHighway Traffic Safety Administration are currentexamples of this federal approach.

There may be disadvantages inherent inthe imposition of uniform federal productsliability laws. State lawmaking is viewed asadvancing autonomy, self-reliance, individualism,and independence. To the extent that states areprevented from controlling products liability laws,these goals may not be realized. Moreover,uniform national standards may ignore local voterconcerns. Similarly, innovation, economicdevelopment, political representation, and voterinterests may be burdened by national standardsthat seem difficult to implement.

Can the obstacles created by non-uniformity beremoved through the application of choice-of-lawrules? A number of proposals have beenadvanced, including: 1) applying the state lawwhere the manufacturer has the greatest numberof employees; 2) applying the state law where theproduct is first sold; 3) permitting manufacturersto designate the applicable state law.26

26 Schwartz, supra note 2 at 937.


Having seen the existence of non-uniformity and state law bias in Americanproducts liability law, it is important to considerthese in the global context. The arguments infavor of federalization of products liability apply toglobalization, as well. How might international lawrespond effectively to these concerns? First, acomprehensive code or treaty mightinternationalize all aspects of global productsliability law. One immediate problem with thisapproach is whether products liability policyconcerns would be addressed adequately, orwhether they would be subjected to parochialpolitical decisions. Unfortunately, politicizationcould jeopardize product safety if individualregimes consciously or inadvertently createdisincentives to safety and health measures byadopting rules that favor sellers.

Tobacco, as a product, offers a compellingargument for global regulation. The World HealthOrganization estimates that about 5 millionpeople a year die from tobacco-related disease,including about 400,000 a year in the UnitedStates alone. This annual global death count isprojected to be more than 8 million by 2020 and10 million by 2030.27 Seventy percent of thesedeaths will occur in developing countries.28 Asindustrialized nations combat the tobaccoindustry, these international companies focustheir marketing efforts on developing nations.

27 Framework Convention Alliance-The Framework Conventionon Tobacco Control-FAQ; available athttp://www.fctc.org/about_FCTC/index.shtml 28 Id.


Should the international tobacco problembe controlled by international treaty? In 1999,the World Health Assembly (WHA), the governingbody of the World Health Organization, agreed tohave the WHO create a tobacco control treaty.The World Health Assembly adopted theFramework Convention on Tobacco Control(FCTC) on May 23, 2003. The FCTC, a legallybinding treaty, is the first international publichealth treaty. It encourages countries to recognizeand combat the global hazards presented bytobacco-related disease.29

The WHO justifies the need for aninternational treaty in several ways. First, “[t]hetobacco epidemic is an international problem.”30

Second, “[t]he tobacco industry is a globalindustry”.31 Third, “[t]obacco industry marketingcampaigns executed across a number of differentcountries simultaneously, including throughsatellite television;….” require global solutions.32

The ultimate question is what might such atreaty accomplish? What might collective actionby the world’s nations accomplish that the nationscannot achieve by their own initiatives? Thetreaty addresses measures that requireinternational cooperation, such as regulatinginternational advertising and combatinginternational smuggling. These problems shouldreceive priority in an international treaty because

29 Id.30 Id.31 Id. 32 Id.


they require collective action and resources.Individual countries would receive benefits thatthey could not achieve on their own.

Moreover, a treaty focused on trulyinternational issues is more likely to receivesupport for two reasons. First, individualcountries may actually appreciate the benefitsthey will derive from these cooperative efforts.Second, the requirements imposed upon eachindividual country may not be burdensome.Nevertheless, countries with strong nationaltobacco control regimes may reject aninternational treaty that addresses substantivedomestic policy. These nations with existingdomestic controls may view their regimes as moreeffective than they might be under aninternational agreement. Moreover, they may fearthat limited international controls could undercutstrong domestic rules already in place.33

The framework international treaty may beviewed as a significant world health measure,encouraging nations to act collectively againstglobal tobacco companies. Ultimately, tobaccocontrol requires changing the attitudes of massesof people to make smoking unacceptable. Withoutan international approach to the global tobaccoindustry, such changes are unlikely to occur. The

33 Derek Yach and Douglas Bettcher, “Globalisation of tobaccoindustry influence and new global responses.” Tobacco Control2000; 9:206-216.


treaty is a timely and instructive example of globalproduct regulation by a uniform standard.

In sum, a uniform approach to productsliability laws is the most effective means ofcreating safer products. Uniformity diminishes theability of state lawmakers to advance merelyparochial interests, or to favor business interestsat the expense of the consumer. Finally, on aninternational level, uniformity advances globalsolutions to global problems.


The Subsidiarity Principle inEuropean Community Law

and theIrish Abortion Issue

Gabriël A MoensUniversity of Notre Dame, Australia

1. INTRODUCTION

One of the most important issues in afederal system involves the distribution of powersbetween the federal legislative authorities and themember States of the federation. In Australia,these powers have been divided between theStates and the Commonwealth in accordance withs.51 of the Commonwealth Constitution.

However, a liberal interpretation of theCommonwealth’s powers by the Australian HighCourt has significantly increased the powers ofthe federal authorities, even at the expense of theStates’ legislative powers. A comparable


development has occurred in the United Stateswhere the Constitution contains in Article I,Section 8 a catalogue of matters that come withinthe legislative competence of Congress.

In contrast, the European CommunityTreaty does not contain such a catalogue.Nevertheless, despite its absence in the Treaty,there is an irrevocable trend in favour ofincreasing the legislative powers of the federalauthorities at the expense of the legislative powersof the States. This trend will be illustrated by adiscussion of the subsidiarity principle, containedin Article 5 of the Treaty. This principle is used inthe European Community (EC) to determinewhether the federal or State authorities havelegislative power over particular subject matters.In particular, I will discuss the operation of thisprinciple in the context of the contentiouslegislative history of abortion in Ireland byconsidering possible legislative EC developmentsand by analysing relevant judgments, decided bythe European Court of Justice (ECJ) and othercourts. In particular, I argue in this paper that thesubsidiarity principle is a potentially potent butspecious concept, which is incapable of stemmingthe uncontrolled growth in the power of thefederal authorities of the EC, even if it has not yetbeen used to deprive Ireland of its legislativepower to make its own choices with regard toabortion. In this paper, I do not propose toevaluate the morality or lack of morality ofabortion. This is already adequately done in the


rich and engaging literature on the topic.1

Instead, I will focus on the distribution of powerin the EC, which is a federal State, regardingwhich level of government should make the legalchoices in the context of abortion.

2. THE SUBSIDIARITY PRINCIPLE IN EUROPEANCOMMUNITY LAW

One knowledgeable commentator, HannaErkko, in an article available on the Internet, hasreported the existence of 30 definitions of thesubsidiarity principle. Although scholarsobviously disagree on the meaning of theprinciple, they all agree that subsidiarity is vitallyimportant in the law of the European Community.The principle could be clarified by reviewing thepurposes for which it has been used.

The principle may be used to determine therelationship between individuals and stateauthorities. It is in this context that the principlebecame part of the Roman Catholic Church’s

1 See Bowman v United Kingdom (1996) 22 EHRR 13(Applicant conscientiously believes that abortion and embryoexperimentation are morally wrong and that the UnitedKingdom statute which permits abortion up to 22 weeks andembryo experimentation up to 14 days should be changed byParliament); Janaway v Salford Area Health Authority (1989)AC 537 (The secretary at the health center was asked by thedoctor to type a letter referring a pregnant patient for anappointment with a consultant with a view to the latter formingan opinion as to whether the pregnancy should be terminatedunder the Abortion Act of 1967. The secretary was a RomanCatholic who believed that abortion is morally wrong and refusedto type the letter); William Joseph Wagner, “Christianity and theCivil Law: Secularity, Privacy, and the Status of Objective MoralNorms,” (1997) 71 St. John’s Law Review 515-541.


philosophy since the Middle Ages. The natural lawof Roman Catholicism envisaged a political orderbased on timeless, unchangeable moral laws. Inpractice, the principle of subsidiarity requiredthat the state does not intervene unnecessarily inthe private sphere. Thus, the classical definitionof the subsidiarity principle by Pope Pius XIconcentrates on the relationship betweenindividuals and the state and emphasizes thefreedom of action of individuals.2 In 1931, heargued in his Encyclical Quadragesimo Anno thatthe modern state performed functions that,traditionally, had been performed by small socialgroups, especially the family unit. The encyclicalwarns against the development of absolute statepower, which, itself, may be a consequence ofelevating the interests of the state over theinterests of individuals. John Peterson describedthis encyclical in his paper Subsidiarity - ADefinition to Suit any Vision?3 as a social policythat involves a search for a middle way betweenthe centralized solutions of the left and theliberalism of the right. Some libertarians andconservatives conveniently rely on this version ofthe principle of subsidiarity to attack the welfarestate; they favour a liberal philosophy, whichstresses the importance of individual freedom andminimal state intervention.

In more recent times, proponents andopponents of the principle of subsidiarity view itmainly as a political and legal principle that is

2 Pope Pius XI, Quadragesimo Anno (On Reconstruction ofthe Social Order), 15 May 1931 (http://www.ewtn.com). 3 J. Peterson, “Subsidiarity: A Definition to Suit Any Vision,”(1994) 47 Parliamentary Affairs at 116-132.


used to determine the division of powers betweendifferent levels of government. In a federal state,such as the EC, the principle may be used toidentify the respective legislative powers of thefederal authorities and the authorities of themember States. It is this use of the principle,which is relevant for the purpose of this article.The principle of subsidiarity in the EuropeanCommunity Treaty is used to determine whichlevel of government (either state or federal) haspower to adopt laws with respect to variousmatters.4 It is enshrined in Article 5 (ex Article3b), which reads, in its relevant part, as follows:

In areas which do not fall within itsexclusive competence, theCommunity shall take action, inaccordance with the principle ofsubsidiarity, only if and insofar asthe objectives of the proposed actioncannot be sufficiently achieved bythe Member States and cantherefore, by reason of the scale oreffects of the proposed action, bebetter achieved by the Community.

The principle, by virtue of the specificlanguage of Article 5, does not apply incircumstances involving the exclusive jurisdictionof the European Community. Therefore, theprinciple presumably only applies to concurrent

4 Denis J. Edwards, “Fearing Federalism’s Failure:Subsidiarity in the European Union,” (1996), 44 AJCL 537 at542-543.


jurisdiction. The problem noted above, however,is that the Treaty, unlike the American andAustralian constitutions, does not stipulate whichpowers exclusively belong to the EC and whichbelong to the States. But a review of the relevantEuropean Community legislation andjurisprudence certainly reveals that the powers ofthe EC constantly increase whereas the powers ofthe States accordingly decrease. This increase inthe powers of the EC is, at least in part, aconsequence of the implementation by the federalauthorities of Article 308 (ex Article 235) of theTreaty, which states:

If action by the Community shouldprove necessary to attain, in thecourse of the operation of thecommon market, one of theobjectives of the Community andthis Treaty has not provided thenecessary powers, the Council shall,acting unanimously on a proposalfrom the Commission and afterconsulting the European Parliament,take the appropriate measures.

Thus, the EC is competent to act in allthose cases where EC action is required for theachievement of the objectives of the Community.However, it is obvious from the language of Article308 that this power can only be relied upon if it isnecessary for the achievement of an EC objective.The necessity principle in Article 308 helps toidentify those subject matters, which come withinthe exclusive jurisdiction of the EC because they


are necessary for the achievement by the EC ofCommunity objectives. The EC’s objectives aredefined in Article 3 of the Treaty. They includethe approximation of the laws of the MemberStates, to the extent required for the properfunctioning of the common market.

The operation of Article 308, in enlargingthe exclusive jurisdiction of the EC, results in acorresponding decrease in the effectiveness of thesubsidiarity principle, which only applies tomatters that come within the concurrentjurisdiction of the federation and the MemberStates. In addition, amendments to the Treatyhave made it possible for the EC to legislate withregard to new policy areas, includingenvironmental policy, education, vocationaltraining, youth, culture and public health policies,consumer protection, industry policies, researchand technological development cooperation andsocial policy. It is very much an issue of scholarlyinterest as to what part, if any, of these new policyareas, comes within the exclusive jurisdiction ofthe EC and what part is concurrent jurisdiction.However, it can be assumed that if the principle ofsubsidiarity is to play a role in the EC, it willpredominantly be in these policy areas which, atleast to some extent, fall within the concurrentlegislative powers of the Member States and thefederation.

It is clear that in the absence of clarificationof the respective powers of the EC and the States,the principle of subsidiarity remains an ineffective


vehicle for determining their respective legislativepowers. It could, however, be argued that in mostcases any arrogation of legislative power of the ECto itself is likely to satisfy Article 5. Suchargument is based on an understanding of one ofthe key words in Article 5: “sufficiently.” Thisword suggests that even if Member States areauthorized to undertake a proposed action or toadopt a law, the subject matter of which is part ofconcurrent jurisdiction, it should stillnevertheless be performed by the EC if it can bemore sufficiently performed by the EC than by theStates.

Subject to the validity of this argument, inareas that are not within the exclusive jurisdictionof the EC, the principle of subsidiarity becomes ameans of dividing competencies between the ECand its member States according to which entitycan perform specific proposed actions orfunctions more sufficiently. The sufficiencyprinciple of Article 5 allows action to be taken atEC level, in areas involving concurrent power,even if the Member States are able to achieve aparticular objective, albeit less sufficiently thanthe EC. Therefore, the subsidiarity principleallows EC involvement even in thosecircumstances where such involvement is notstrictly necessary.

The EC may use the necessity principle inArticle 308 to increase the number of mattersover which the Community will have exclusivejurisdiction, thereby avoiding the application ofthe subsidiarity principle. Article 308 increases


significantly the legislative power of the ECespecially because the EC authorities themselvesusually determine what is necessary in an Article308 context. In addition, in using the sufficiencyprinciple of Article 5 in cases involvingconcurrent power, the Community is capable offurther restricting the applicability of theprinciple of subsidiarity by acting incircumstances where the action can be moresufficiently performed by the EC. Similarly, ECofficials equally determine whether the EC is ableto perform functions more sufficiently than theStates, in a matter not coming within its exclusivejurisdiction. Indeed, under the subsidiarityprinciple, whether a function will be performedmore sufficiently by the EC than by the Statesusually involves the making of a value judgmentby the EC itself. There will be arbitrariness unlessthere is some mechanical procedure enabling usto test the sufficiency of actions in the publicpolicy domain. It is clear, however, that thesubsidiarity principle becomes largelymeaningless if such determination is made by theEC which itself wants to regulate a relevantmatter.

3. THE REGULATION OF ABORTION IN IRELAND:THE STATUTORY FRAMEWORK

Abortion has always been a contentiousissue, especially in Catholic countries such asIreland. Conflicts between right-to-life groups andpro-choice groups have been part of Ireland’s


history for a long time. In Ireland, abortion is notonly an unconstitutional activity, but it is also acriminal act under Section 58 of the OffencesAgainst The Person Act 1861. Although Irelandwas keen to avail itself of the new tradeopportunities when it joined the EC in 1973, itwas concerned about its ability to maintain itslongstanding prohibition of abortion.

In 1861, when Ireland was still underBritish rule, abortion was prohibited in bothBritain and Ireland through Section 58 of theOffences Against The Person Act. When Irelandbecame independent in 1922, this law wasmaintained as a part of Irish criminal law. Itreads as follows:

Every woman, being with child, who,with intent to procure her ownmiscarriage, shall unlawfullyadminister to herself any poison orother noxious thing, or shallunlawfully use any instrument orother means whatsoever with thelike intent, and whosoever, withintent to procure the miscarriage ofany woman, whether she be or benot with child, shall unlawfullyadminister to her or cause to betaken by her any poison or othernoxious thing, or shall unlawfullyuse any instrument or other meanswhatsoever with the like intent, shallbe guilty of a felony, and beingconvicted thereof shall be liable... tobe kept in penal servitude for life.


Article 40.3.2 of the Irish Constitution, enacted in1937, provides:

The State shall, in particular, by itslaws protect as best it may fromunjust attack and, in the case ofinjustice done, vindicate the life,person, good name, and propertyrights of every citizen.

The Irish Supreme Court considered Article40.3.2 in McGee v. Attorney General5 which dealtwith the right of a woman to importcontraceptives not legally available in Ireland. TheCourt ruled against the woman on this issue.However, the Court also ruled in her favour withregard to her right to marital privacy as anenumerated personal right guaranteed underArticle 40.3.2. Walsh J. opined that judges areexpected to interpret the Constitution and todetermine the rights which are superior orantecedent to positive law. He further noted thatthe terms of Article 40.3.2 clearly subordinate thelaw to justice, and that judges must interpretnatural rights according to the principles ofprudence, justice, and charity.

Although abortion still remained illegal afterMcGee, Irish anti-abortion activists feared thatthis decision would become the stepping-stone fora Roe v. Wade6 type decision in which the United

5 (1974) IR 284. 6 410 US 165 (1973).


States Supreme Court legalised abortion duringthe first trimester of a woman’s pregnancy. Thesefears led to a campaign to amend the IrishConstitution to protect specifically the right to lifeof the unborn.7 Consequently, Article 40.3.3.(Eighth Amendment of the Constitution Act) wasadded to the Constitution in 1983, whichaddresses abortion more specifically. It states:

The State acknowledges the right tolife of the unborn and, and with dueregard to the equal right to life of themother, guarantees in its laws torespect, and, as far as practicable, byits laws to defend and vindicate thatright.

The history surrounding the Eighth Amendmentof the Constitution Act, 1983 suggests that itswording was intended to correspond to theCatholic natural law framework. Thus, if aninterpretation of Section 58 of the OffencesAgainst The Person Act 1861 as it relates to therights of a pregnant woman, were to beincompatible with this Amendment, it wouldprobably be unconstitutional. For the purposes ofboth Irish criminal law and Irish constitutionallaw, life begins, and is protected, from the time ofconception. This definition of “life” prohibits theuse of certain types of birth control methods,including intra-uterine devices (IUD’s), the“Morning After” pill, and other variouscontraceptive pills such as RU 486.8 In East

7 James Casey, Constitutional Law in Ireland (3rd ed., 2000)at 442-444. 8 James Kingston & Anthony Whelan, Abortion and the Law(1997) at 54.


Donegal Co-Operative v. Attorney General,9 theCourt indicated that a post-Constitution statute ispresumed to be in conformity with theConstitution. However, as the Offences AgainstThe Person Act 1861 obviously does not enjoy thispresumption, it may be argued that the EighthAmendment does not reach abortions, whichmight be legal under Section 58. The argument isbased on the assumption that the Constitution(and its constitutional amendments) only affectspost- Constitution legislation and does not reachprior legislation, which precedes the adoption ofthe Constitution. This assumption, however,should be discounted because it is incompatiblewith the principle of the supremacy of theConstitution, which is the fundamental and basiclaw of Ireland. This principle and the intendednatural law character of the Eighth Amendment ofthe Constitution Act make it illegitimate for Irishcourts to recognize a risk of suicide as justifyingan abortion. Indeed, the language of the EighthAmendment implies that the risk to the life of themother must be imminent in order to allow anabortion. If an abortion were permitted in casesinvolving other than imminent risk, “the Statewould be giving far more than due regard to theequal right to life of the mother.”10

There have been many debates in Ireland onwhether there are any exceptions to Section 58 ofthe Offences Against The Person Act. The most

9 (1970) IR 317. 10Amy M. Buckley, “The Primacy of Democracy Over NaturalLaw in Irish Abortion Law: An Examination of the C Case,”(1998) 9 Duke J. Comp. & Int’l. L. 275 at 301.


notable and important exception to Section 58relates to the allowance of abortion where seriousinjury to health is feared and where the abortionis carried out in good faith for the purpose ofpreserving the life or health of the woman.11 In theopinion of James Kingston and Anthony Whelan,Section 58 of the Offences Against The Person Actdoes not absolutely prohibit a woman fromobtaining an abortion in these circumstances.12

However, the scope of this exception is not clear.Indeed, the question may be asked whether awoman whose mental (as opposed to physical)health is in danger may also be able to procure anabortion. The equation of mental and physicalhealth for the purposes of deciding the legality ofan abortion is discussed in the English case R. v.Bourne,13 where the court used both a subjectiveand objective test. The subjective test requires thedoctor to believe that the abortion was necessaryin order to save the mother’s life. The objectivetest is whether that belief was a reasonable one.Thus, Irish criminal law enables a woman toobtain an abortion when her health is in danger.

4. LEGISLATIVE HARMONIZATION

Legislative harmonization with regard to abortionwould require the adoption of EC laws, which arevalid throughout the Community. While legislativeharmonization is not likely to occur quickly inthis area, which traditionally, has been regulated

11Glanville Williams, The Sanctity of Life and the CriminalLaw (1958) at 154-166. 12James Kingston & Anthony Whelan, Abortion and the Law(1997) at 73. 13(1938) 3 All ER 615.


by domestic criminal statutes, the possibility ofEC intervention always concerned Ireland.However, the European Commission, which is thebureaucratic arm of the EC, has long taken theview that abortion is irrelevant to theachievement of the common market and that itsregulation falls outside the legislative competenceof the Community.14 Nevertheless, abortion couldpresumably be brought within the legislativepowers of the EC if (i) the regulation of abortionwere seen as necessary to the achievement of anEC objective under Article 308, or (ii) thesufficiency principle of Article 5 justifies ECaction in this area.

The adoption of European harmonizing legislationwith regard to abortion could be based on Article308 if the legislation is deemed necessary for theachievement of an EC objective. One of the mostimportant objectives of the EC is the developmentof the “internal market”. The internal market“comprises an area without internal frontiers inwhich the free movement of goods and services ...is ensured in accordance with the provisions ofthis Treaty.”15 By virtue of Article 95 (ex Article100a), “The Council shall, acting in accordancewith the procedure referred to in Article 251 (exArticle 189b) and after consulting the Economicand Social Committee, adopt the measures for theapproximation of the provisions laid down by law,

14 Diarmuid Rossa Phelan, “Right to Life of the Unborn vPromotion of Trade in Services: The European Court of Justiceand the Normative Shaping of the European Union,” (1992) 55MLR 670 at 672, n.10. 15Article 14 (ex Article 7a).


regulation or administrative action in MemberStates which have as their object theestablishment and functioning of the internalmarket.” In accordance with Article 251, theCouncil can adopt measures by a qualifiedmajority, in co-decision with the EuropeanParliament; these measures may in effect nullifyany incompatible law of a Member State. As thefree movement of goods and services is essentialto the development of the “internal market”, it isnot unreasonable to argue that the provision ofabortion services and the free movement ofabortion-inducing goods come within theexclusive legislative competence of theCommunity, and therefore, the subsidiarityprinciple (which otherwise might have providedfor State legislative competence) does not apply.Thus, the Council and the European Parliamentcould presumably contend that harmonization(i.e. the adoption of European legislation) in thisarea is necessary because such legislationfacilitates freedom of movement of goods andservices and the achievement of the internalmarket. Hence, any State legislation thatprohibited or restricted the free movement of theRU 486 pill would be illegal under EC law.

However, even if the prohibition of, or restrictionon, abortion is deemed to violate EC law, Irelandcould still rely on Article 95(4) (ex Article 100a)of the Treaty. This Article stipulates: “If, after theadoption by the Council ... of a harmonizationmeasure, a Member State deems it necessary tomaintain national provisions on grounds of majorneeds referred to in Article 30 [ex Article 36], or


relating to the protection of the environment orthe working environment, it shall notify theCommission of these provisions as well as thegrounds for maintaining them.” This provisionwould allow Ireland to apply their national lawwhile ignoring EC law on the ground that thenational law is based on a major need of theMember State, listed in Article 30 of the Treaty.Such major needs include public morality, publicpolicy, and the protection of the health and life ofhumans. Article 30 reads as follows:

The provisions of Articles 28 and 29shall not preclude prohibitions orrestrictions on imports, exports orgoods in transit justified on groundsof public morality, public policy orpublic security; the protection ofhealth and life of humans, animalsor plants; the protection of nationaltreasures possessing artistic, historicor archaeological value; or theprotection of industrial andcommercial property. Suchprohibitions or restrictions shall not,however, constitute a means ofarbitrary discrimination or adisguised restriction on tradebetween Member States.

Ireland could rely on a public policy argument asa means of preventing the importation ofabortion-inducing drugs. Among the public policyinterests that may be protected by non-


discriminatory national measures are “national orregional socio-cultural characteristics”, which inthe present state of EC law, are matters for theMember States.16 In Ireland, the right to life hastraditionally been regarded as being a sufficientpublic policy interest to justify its reliance onArticle 30. Mr Walter Van Gerven, the AdvocateGeneral in Society for the Protection of UnbornChildren Ireland Ltd. (S.P.U.C.) v. StephenGrogan and Others17 (which will be discussed inpart 5 of this article) acknowledged the existencein Ireland of this public interest. In particular, theAdvocate General indicated that the prevention ofabortion is a national objective inherent in theIrish Constitution’s Eighth Amendment (i.e.Article 40.3.3 of the Constitution):18

The protection of the unbornenshrined in the nationalConstitution (and the prohibition ofabortion inherent therein) andlikewise the resultant need toprevent abortions - naturally onlywithin the jurisdiction of themember-State concerned - byprohibiting the distribution ofinformation thereon in its territoryare regarded in that member-Stateas forming part of the basicprinciples of society.

16Torfaen Borough Council v B & Q (1990) 1 CMLR 337 at364. 17(1991) 3 CMLR 849. 18Id. at 873.


Section 58 of the Irish Offences Against ThePerson Act 1861 also provides evidence thatIreland sees abortion as constituting a violation ofpublic morality as understood in that country. Heconcluded that, as restrictions on abortions inIreland are not designed to achieve protectionistaims that are inconsistent with fundamentalCommunity policies, the Irish ban on abortions islegal under EC law.

Restrictive national rules may, therefore, continueto apply where they are justified under Article 30(ex Article 36) or even Article 46 (ex Article 56)of the EC Treaty. These national rules may alsosurvive if they are in accordance with what istermed “the rule of reason”. In the absence ofcommunity regulation, the rule of reason permitsthe maintenance of non-discriminatory nationalrules, despite the restrictions they may impose onintra-Community trade, if they are necessary for(and proportionate to) the achievement of alegitimate state objective (a “mandatory”requirement).19

Alternatively, the European harmonization of lawsrelating to abortion may be deemed necessary(under Article 308) in order to implement Article137 (ex Article 118) of the EC Treaty. It providesthat the Community “shall support andcomplement the activities of the Member States”with regard to improvement “in particular of the

19Gabriël Moens & David Flint, Business Law of the EuropeanCommunity (1993) at 72-79; Gabriël A. Moens, “Freedom ofMovement of Goods in the European Community” (1990) 17MULR 733-743.


working environment to protect workers’ healthand safety.” To this end, “the Council may adopt... minimum requirements for gradualimplementation, having regard to the conditionsand technical rules obtaining in each of theMember States.”20 These measures may beadopted in accordance with the co-decisionprocedure of Article 251, which involves theEuropean Parliament in the legislative process.Thus, Article 137 may provide the basis for theadoption of harmonized European abortion laws,which could very well promote women workers’health and, therefore, would override Irish anti-abortion laws. However, this view would, ineffect, constitute an arrogation by the Europeanlegislature to itself of the right to adopt laws,which only indirectly and tenuously relate towomen workers’ health. In effect, it would amountto an emasculation of the subsidiarity principlebecause concerns about employee safety in theCommunity would be used to override nationalanti-abortion laws, which only incidentallypertain to employment issues. The only obviousconnection with abortion relates to the fact thatpregnant women are part of the job market.According to one point of view, pregnant womenmay want to seek an abortion in order to be ableto continue working. This argument assumes thatabortion is likely to facilitate the employability ofwomen, and hence, this service should not bedeemed illegal under national law. The Counciladopted Directive 89/391/EEC, which provides forthe introduction of measures to encourageimprovements in the safety and health of workers

20Article 137(2).


at work. Article 15 of this Directive includespregnant women in a sensitive risk group, thusentitling them to protection against dangers,which would adversely affect them.

The ECJ has also dealt with the issue of equaltreatment of pregnant women in Dekker v.Stichting Vormingscentrum voor JongVolwassenen (VJV-Centrum) Plus.21 Mrs. Dekkerhad applied for a job with a Dutch training center.After having submitted her application, sheinformed the recruiting committee that she wasthree months pregnant. Nevertheless, thecommittee recommended her for appointment;however, the management of the employerrejected her application. Mrs. Dekker claimed thatshe had been denied equal access to a job becauseof her sex, and that such denial constituted aviolation of Article 1 of the European EqualTreatment Directive. Among other things, theemployer argued that it could not afford to hireMrs. Dekker because, under applicable Dutch law,it would be obliged to pay sickness benefits to herat a later stage and that its insurer would notreimburse that amount because she was alreadypregnant when she applied. The ECJ, in rejectingthe employer’s arguments, decided that (i) thefinancial consequences to the employer are nodefence to an apparent breach of the Directive,and that (ii) lack of any intention to discriminateis irrelevant under the Directive. The Court’sdecision is based on the rationale that anacceptance of the employer’s argument would

21(1990) ECR I-3941.


have undermined the general impact andeffectiveness of the Directive. Dekker prohibitedemployers from refusing to hire women based onthe fact that the woman was pregnant.

Dekker does not, as such, make anypronouncement about abortion. The EC]’sjudgment in Dekker probably stands for theproposition that the EC protects women fromhealth hazards and discrimination on account oftheir pregnancy. However, the Court’s decisioncould be manipulated so as to promote or allowabortion practices throughout the EC on theground that pro-choice laws and policies arenecessary to enable employed women to makesensible choices about their pregnancy.Obviously, a pregnant woman will not be able todo every single job that a non-pregnant womancould do. Nevertheless, it does not follow that,because a pregnant woman cannot perform everyprofessional function, Ireland should be compelledto change its abortion laws.

In summary: it does not appear feasible thatEuropean legislative action could be taken to forceIreland to change its domestic law in order tosecure its harmonization with the rest of theEuropean Community. With the goals of the ECbeing founded on the procurement of itseconomic interests, it has long been the view thatabortion is of no concern to the achievement of acommon market and that its regulation is outsideEC competence and that, in accordance with thesubsidiarity principle, it remains a Stateprerogative.


5. JUDICIAL HARMONIZATION

In the absence of legislative harmonization,harmonization might be achieved by judicialdecree. If the Irish constitutional prohibition ofabortion were to be deemed incompatible witheither EC judicial developments or comparabledevelopments in the European Court of HumanRights, then the Irish legislature might becompelled to relax its anti-abortion stand. If so,the principle of subsidiarity in EC law, whichreserves the right to the Irish legislature to makeits own laws on abortion, would become illusory.In this context, it is appropriate to discuss anumber of relevant cases.

The first case is Attorney General v. Open DoorCounselling and Dublin Well Woman CentreLtd.22 The plaintiffs, the Society for the Protectionof Unborn Children (S.P.U.C.), were seeking aninjunction against the two clinics in order toprevent them from counseling or assistingpregnant women within Ireland who wanted toobtain an abortion or receive relevant advice.S.P.U.C. believed that these actions were unlawfulunder the Eighth Amendment (i.e. Article 40.3.3of the Constitution) and amounted to aconspiracy to corrupt public morals. Theinjunction was granted and an appeal was taken tothe Irish Supreme Court. The Irish SupremeCourt held that assisting a pregnant woman in

22(1988) IR 593.


obtaining an abortion violates Article 40.3.3 of theConstitution because an activity, which directlyviolates the constitutionally guaranteed right tolife, is illegal.23 The Court held that the non-directive counseling offered by the clinic alsoviolated Article 40.3.3 because it assisted in thedestruction of the right to life of the unborn, aright found to be fundamental and superior to therights of privacy, association, and freedom ofexpression. The Supreme Court, concentratingon fundamental rights, held that the right to life ofthe unborn was of superior order to that offreedom of expression. Further, the Court foundthat there was no constitutional right toinformation about the availability of an abortionservice outside Ireland, which would result in thedestruction of the expressly guaranteedconstitutional right to life of the unborn.

In a subsequent case, the defendant clinics arguedin the European Court of Human Rights that thedecision of the Irish Supreme Court violated theEuropean Convention of Human Rights. In thecase of Open Door Counselling and Dublin WellWoman v. Ireland24 the European Court of HumanRights found that the injunction, preventing theclinics from counseling women on obtainingabortions outside of Ireland, breached Article 10of the Convention to the extent that it prohibitedthe applicant companies and counselors fromproviding non-directive pregnancy counselingwhich included information on how to contact

23 Id. at 625. 24(1993) 15 EHRR 244.


abortion clinics outside of Ireland. Article 10 ofthe Convention provides:

(1) Everyone has the right tofreedom of expression. Thisright shall include freedom tohold opinions and to receiveand impart information andideas without interference bypublic authority andregardless of frontiers. ThisArticle shall not preventstates from requiring thelicensing of broadcasting,television or cinemaenterprises.

(2) The exercise of thesefreedoms, since it carries withit duties and responsibilities,may be subject to suchformalities, conditions,restrictions or penalties as areprescribed by law and arenecessary in a democraticsociety, in the interests ofnational security, territorialintegrity or public safety, forthe prevention of disorder orcrime, for the protection ofhealth or morals, for theprotection of the reputationor rights of others, forpreventing the disclosure of


information received inconfidence, or for maintainingthe authority and impartialityof the judiciary.

Although this decision did not overrule Ireland’sSupreme Court ruling, it required the State tobring Irish law into line with Article 10 of theConvention. As this necessitated a constitutionalchange, the Fourteenth Amendment of theConstitution Act, 1992 amended Article 40.3.3 toallow for a limited distribution of abortioninformation. The Fourteenth Amendment statesthat:

This subsection shall not limitfreedom to obtain or make available,in the State, subject to suchconditions as may be laid down bylaw, information relating to serviceslawfully available in another state.

The second case is Society for the Protection ofUnborn Children Ireland Ltd. (S.P.U.C.) v.Stephen Grogan and Others25. This case aroseduring proceedings brought by S.P.U.C. against anumber of officers of three students’ associationsin Ireland that had distributed the names andaddresses of clinics, which offered abortions inanother Member State. The Irish national courtreferred two questions to the ECJ. The firstquestion asked whether abortion, if performed inaccordance with the procedures of the MemberState in which it is carried out, constitutes a

25(1991) 3 CMLR 849.


“service” within the meaning of ex Article 60(now Article 50). Secondly, the national courtwanted to know whether it was contrary to EC lawfor a Member State to prohibit the distribution ofthe names and addresses of clinics offeringabortions lawfully carried out in accordance withthe law of another Member State. With regard tothe first question, the ECJ held that a medicaltermination of pregnancy, performed inaccordance with the law of the State in which it iscarried out constitutes a “service” within exArticle 60 of the EC Treaty:26

services are to be considered to be‘services’ within the meaning of theTreaty where they are normallyprovided for remuneration, in so faras they are not governed by theprovisions relating to freedom ofmovement for goods, capital orpersons. Indent (d) of the secondparagraph of Article 60 expresslystates that activities of theprofessions fall within the definitionof services.

It must be held that termination ofpregnancy, as lawfully practised inseveral member States, is a medicalactivity which is normally providedfor remuneration and may be carriedout as part of a professional activity.

26 Id. at 890.


The Court reasoned that it could not “substituteits assessment for that of the legislature in thosemember-States where the activities in questionare practiced legally.”27 These remarks might beinterpreted to leave the substantive law of eachindividual Member State undisturbed. Thisenables each Member State to decide for itselfwhether to provide abortion services forremuneration.

With regard to the second question, the Courtindicated that the relevant literature was notdistributed on behalf of an economic operatorestablished in another Member State. Therefore,the link between the students’ activity and theabortion services provided by clinics in anotherMember State “is too tenuous for the prohibitionon the distribution of information to be capable ofbeing regarded as a restriction within the meaningof Article 59 [now Article 49 of the Treaty].”28 Asthis prohibition is not a restriction within themeaning of ex Article 59 of the EC Treaty, “theinformation constitutes a manifestation offreedom of expression and of the freedom toimpart and receive information which isindependent of the economic activity carried onby clinics established in another member-State.”29

The ECJ’s decision in this case reveals that, if thestudents had been distributing material on behalfof an economic operator and obtainedremuneration for doing it, Community Law would

27 Ibid. 28 Id. at 891. 29 Id. at 891.


have protected their actions. In addition, theabortion clinics themselves could not beprevented from advertising within Ireland.However, Ireland could limit that advertisingfreedom under Article 46 of the Treaty on groundsof public policy.

The third case is Attorney General v. X andOthers.30 In this case the plaintiff wanted toprevent a fourteen-year-old girl from obtaining anabortion after becoming pregnant as a result of arape. The young girl was suicidal as a result of thepregnancy and her doctors believed that shewould take her own life if she did not obtain anabortion. Costello J. of the High Court granted theinjunction and found that the “the risk that thedefendant may take her own life if an order ismade is much less and is of a different order ofmagnitude than the certainty that the life of theunborn will be terminated if the order is notmade.”31 Hence, Costello J. applied the balancingtest set forth in Article 40.3.3 of the IrishConstitution and concluded that the risk to thelife of the unborn was of a far greater magnitudethan the risk to the life of the mother. The HighCourt also held that a restriction on the EC rightto travel was permitted in this case because theEC Treaty permits the exercise of discretion bynational governments on moral issues. Costello J.pointed out that Article 40.3.3 of the IrishConstitution is a statement of public policy on theright to life of the unborn and that, accordingly, it

30 (1992) 2 CMLR 277. 31 Id. at 285.


may be argued that protecting that right engagesinterests fundamental to Irish society.

On appeal however, the Supreme Court held thatan abortion was constitutionally permissible whenthere was a substantial and real threat to the girl’slife.32 Finlay C.J. of the Supreme Court held that,under certain circumstances, suicide qualifies as arisk to the life of the mother. He stated that wherethere is substantial psychological evidence thatthe threat of suicide is real, “it is almostimpossible to prevent self-destruction in a younggirl in the situation in which this defendant is ifshe were to decide to carry out her threat ofsuicide.”33 Finlay C.J. stated the correct testunder the Eighth Amendment of the ConstitutionAct: “if it is established as a matter of probabilitythat there is a real and substantial risk to the lifeas distinct from the health of the mother, whichcan only be avoided by termination of herpregnancy ... such termination is permissible,having regard to the true interpretation of Article40.3.3 of the Constitution.”34 The Supreme Courtthereby concluded that Article 40.3.3 of the IrishConstitution permits abortions in situationswhere there was a real and substantial risk to thelife of the mother, which could be avoided only bytermination of her pregnancy. Thus, the vitaldifference in the reasoning of the Supreme Court’smajority and the High Court’s holding related tothe classification of suicide as a qualifying medical

32 Id. at 289-335. 33 Id. at 301. 34 Id. at 300.


risk to the life of the mother under Article 40.3.3of the Constitution.

As a result of the X case the Irish government, inNovember 1992, presented three differentamendments to the Constitution to the citizens ofIreland. The first amendment, which would havebeen the Twelfth to the Constitution, proposed todisallow suicidal feelings as a ground for anabortion. This amendment was rejected and thusis not part of the current Constitution. The nextproposed amendment was the ThirteenthAmendment, which added a second paragraph toArticle 40.3.3. This paragraph provides that “Thissubsection shall not limit freedom to travelbetween the State and another state.” The thirdproposed amendment to the Constitution was theFourteenth Amendment, which added a thirdparagraph to Article 40.3.3 which states that“This subsection shall not limit freedom to obtainor make available, in the State, subject to suchconditions as may be laid down by law,information relating to services lawfully availablein another state.”

Following the incorporation of these amendmentsinto the Constitution, the President of Irelandsigned the Regulation of Information (ServicesOutside the State for Termination ofPregnancies) Act, No. 5 in 1995. This actregulates the dissemination of information aboutabortion services available abroad. Section 4 ofthis Act prohibits the display of publicadvertisements, and distribution of unsolicited


publications, containing such information.Section 5 prohibits those providing informationfrom advocating or promoting the termination ofthe pregnancy, and it obliges them to advisewomen about all courses of action available tothem. Section 6 prohibits any economic linkbetween the information giver and those providingabortion services outside the State. Section 7provides that the information giver may notreceive financial benefits by reason of supplyinginformation. Finally, Section 8 prohibits theinformation giver from making an appointment orany other arrangement on the woman’s behalf.The adoption of this Act by the Irish legislaturecertainly suggests that Catholic natural lawprinciples, which presumably are embedded inArticle 40.3.3 of the Constitution, can be eroded,thereby changing the original Catholicunderstanding of the subsidiarity principle.

6. CONCLUSION

It is unlikely that the harmonization of Irishabortion laws with those of other Europeancountries will be achieved by the EC legislature.However, given the scope for further developmentof EC fundamental rights by the ECJ, and thecontinuing development of the case-law of theEuropean Court of Human Rights regarding therespective rights of women and the unborn, itcannot be excluded that Ireland will be compelledto adopt a position that is inconsistent with thedegree of protection accorded to unborn life underIrish constitutional law. Such development,


however, would be deplorable because it wouldinvolve the emasculation of the principle ofsubsidiarity in EC law. This principle hastraditionally been relied upon to enable MemberStates of the EC to pursue their own vision ofmoral excellence. In Ireland, this vision has, atleast in the past, been largely consistent with thesubsidiarity principle as developed by Pope PiusXI and with natural law principles, which aresupported by the Roman Catholic Church. Thefutility of the principle would certainly facilitatethe relentless march toward centralism in theEuropean Community.


Is There a Role forSub-Federal Governments

in International TradePolicy Formation?

Hal S. ShapiroUniversity of Baltimore

The toppling of national economic bordersin the march toward globalization has led to anassumption that sub-national borders mustnecessarily and completely crumble under thefoot of regional and even world economicintegration. Indeed, in the modern parlance ofglobalization, states, provinces, and localities arebut outdated colloquialisms. These sub-nationalgovernments must of course become altogetherirrelevant if nations are to cede their ability toprotect domestic markets from internationalcompetition, or so the assumption goes.

But is such an assumption correct? Is itnecessarily so that sub-national governments canhave no role in global village of tomorrow? Thisquestion is taking on profound importance todayas the European Union admits more and moremember-states, professes to speak on trade


matters for all of them, seeks to exercise on theirbehalf 15 votes (and soon more) in internationalorganizations, and yet struggles to police itsmembers and force them bow to its multinationalwill. The question becomes even more profoundin the context of the World Trade Organization(“WTO”), which has established a newinternational trade constitution for more than 140nations and which provides no role for sub-federalgovernments and holds federal governmentsstrictly accountable for the laws, rules, andregulations of their subordinate bodies.

In considering what role, if any, sub-national governments should play in the newinternational economic order, it is instructive toconsider the American experiment withfederalism and globalization. After all, the UnitedStates, a leading champion of the WTO and ofliberal markets, in general, has based its ownsystem of government on the premise that thefederal government should have a limitedjurisdiction, with powers derived from its statesand its people. This conceptual framework isperhaps best articulated in the Tenth Amendmentto the United States Constitution, which providesthat “[t]he powers not delegated to the UnitedStates . . . are reserved to the States respectively,or to the people.” As one drafter of the UnitedStates Constitution, Alexander Hamilton,explained,

The powers delegated by theproposed Constitution to the federal


government are few and defined.Those which are to remain in theState governments are numerousand indefinite …. [T]he ultimateauthority, wherever the derivativemay be found, resides in the peoplealone, and … will not dependmerely on the comparative ambition… of the different governmentswhether either, or which of them,will be able to enlarge its sphere ofjurisdiction at the expense of theother ….34

As Hamilton suggested, regardless of whether it isthe national government or local government thatis in the ascendancy at a given moment in time,each is but a representative organ of the peopleand the division of responsibilities among them isa bulwark of democracy against an undueencroachment against the freedom of the peopleby government in general.

Another drafter of the U.S. Constitution,James Madison, explained that this division of

34 The Federalist, Nos. 45 and 46. The Federalist Papers werea series of essays written between 1787 and 1789 by three of thedrafters of the U.S. Constitution – Alexander Hamilton, John Jay,and James Madison – arguing for its approval and adoption. Thetext of the Constitution was completed in 1787. It was ratified in1789. Under the new Constitution, Hamilton became the firstU.S. Secretary of the Treasury, Jay became the first Chief Justiceof the United States, and Madison would serve as the firstSpeaker of the U.S. House Representatives. Madison authoredthe U.S. Bill of Rights, which became the fist ten amendments tothe U.S. Constitution in 1791. He served as the fourth Presidentof the United States from 1809-16.


power among national and sub-nationalgovernments lies at the very heart of Americandemocracy. According to Madison, the framers ofthe U.S. Constitution purposefully (thoughsomewhat paradoxically) created a newgovernment that, on the one hand, dividedresponsibilities among its constituent elementsyet, on the other hand, required these elements towork together in order to take action.35 He arguedthat these separate and shared powers wereintended to act as checks and balances against thedangerous accumulation of power in one personor one part of the government. He said that:

[T]he great security against agradual concentration of the severalpowers in the same departmentconsists in giving to those whoadminister each department thenecessary constitutional means,and personal motives, to resistencroachments of the others. Theprovisions for defense must in this,as in all other cases, be madecommensurate to the danger ofattack. Ambition must be made tocounteract ambition.36

Madison and other drafters of the Constitutionbelieved that their system of limited and dividedgovernment would guard against abuses because

35 The Federalist, No. 51. 36 Id.


human nature would compel those in governmentto seek power and to confine the power of others:

It may be a reflection on humannature that such devices should benecessary to control the abuses ofgovernment. But what isgovernment itself, but the greatest ofall reflections on human nature? Ifmen were angels, no governmentwould be necessary. If angels wereto govern men, neither external norinternal controls on governmentwould be necessary. In framing agovernment, which is to beadministered by men over men, thegreat difficulty lies in this: You mustfirst enable the government tocontrol the governed; and in thenext place, oblige it to control itself.A dependence on the people is, nodoubt, the primary control on thegovernment; but experience hastaught the necessity of auxiliaryprecautions.37

Thus, the delicate U.S. federal system put inplace in 1789 would rely as much on a sharedrecognition that government officials should worktogether as a need for them to work against oneanother.

The evolution of U.S. constitutional law,however, has shown that this separation of powers

37 Id.


has been vastly diluted in the formation of U.S.foreign policy in general and U.S. internationaleconomic policy in particular. As describedbelow, the horizontal checks and balances in theU.S. governmental framework – i.e., theLegislative, Executive, and Judicial Branchesvying against each other for power – are greatlydiminished in international affairs, with thejudiciary according great deference to the politicalbranches and with the Congress delegating a vastarray of powers to the President, adding to hisalready considerable constitutional authority inthis area. Moreover, vertical power-sharing ininternational affairs – that is, the relationshipbetween the federal government, on the one hand,and state and local governments, on the other –seems to barely exist at all, as the states andlocalities have been gradually dispossessed of theability to act.

While it may make sense for the federalgovernment to have exclusive dominion overquestions of war and peace, is it equally true thatsuch authority ought to be exclusive when it isforeign commerce that is at issue? Unlike foreignaffairs in general, which since 1789 have beencommonly understood to be the province of thefederal government alone, state and localgovernments have attempted to regulate andinfluence international commerce since before theadoption of the Constitution. States and localitieshave attempted to attract foreign investment,promote their own exports, and applied their lawsgenerally and specifically to foreign citizens andcommerce.


In considering the role of state and localgovernments in U.S. international economicrelations, it is important to note that much of thestate and local action that affects internationaltrade goes unchallenged. After all, who wouldbring suit to prevent a governor or mayor fromtraveling overseas to improve relations between,for example, the State of Maryland or the City ofBaltimore, on the one hand, and Italy or Rome, onthe other? Who would doubt that state and localcourts must adjudicate the rights and property offoreign nationals or even construe U.S. treatieswhere applicable?

As a result, the removal of states andlocalities from U.S. international trade appears tobe a greater legal fiction than an economic reality.And even that legal fiction may be murkier than itmight seem at first blush. The U.S. SupremeCourt has offered precious little guidance on whatstate and local officials may or may not do inrelation to international economic affairs, and thisguidance raises as many questions as it answers.

This paper explores the leading doctrinesthat set the parameters of U.S. vertical federalismin the area of international economic affairs. Itthen compares and contrasts the U.S. positionwith how the WTO treats the issue. It concludesby raising the question of whether the states andlocalities should be precluded from regulatinginternational trade in general, whether suchpreclusion ought to be applicable only in selectiveareas, or whether no preclusion should apply at


all, but rather the matter should be left to thefederal government to decide whether and underwhat circumstances it will exercise its authority topreempt state or local laws that federal officialsconsider undesirable.

I. T H E U . S . C O N S T I T U T I O N A LFRAMEWORK

As a general rule, the U.S. federal-stateparadigm allows federal laws to supersedeinconsistent state or local laws. This basicconstruct emanates from Article VI of the U.S.Constitution, which provides that “thisConstitution, and all laws and treaties made underit shall be the supreme law of the land.” This so-called Supremacy Clause was included in theConstitution because its predecessorarrangement, the Articles of Confederation, wasconsidered by the framers of the Constitution tobe too weak, allowing states to undermine federallaws and policies. As Alexander Hamilton wrotein discussing state regulation of foreign commercein the Federalist Papers, “the interfering andunneighborly regulations of some States, contraryto the true spirit of the Union, have, in differentinstances, given just cause of umbrage andcomplaint to the others, and it is to be feared thatexamples of this nature, if not restrained by anational control, would be multiplied andextended till they became not less serious sourcesof animosity and discord than injurious


impediments to intercourse between the differentparts of the Confederacy.”38

A. Shared Powers

That the Supremacy Clause gives the upperhand to the federal government does not meanthat all matters that may be regulated by thefederal government are outside the reach of stateand local governments. In fact, most areas inwhich the federal government can act are sharedwith state and local governments, which have ageneralized “police power” to regulate in theinterests of the morality, health, and welfare of itspeople. To the extent that there are two laws, onefederal and one state or local, that conflict withone another, there is no question that theSupremacy Clause requires any court within theUnited States to invalidate the state or local law.The federal government thus may affirmativelychoose to preempt a state or local law it does notlike. If the contemplated preemptive action isamong its enumerated powers, and if it makes itsintention to preempt a state or local law explicit,the Supremacy Clause applies and the state orlocal law must give way.

However, if the federal government is silentregarding its intent to preempt a state or local law,the applicability of the Supremacy Clausebecomes hazy. Courts do not lightly infer such anintent. Rather, they will attempt to find a way toharmonize two seemingly overlapping federal and

38 The Federalist No. 42, at 192.


state or local laws, and they will avoid a directconflict wherever possible.

B. Exclusive Powers

There are, however, certain exclusivefederal powers, which entirely divest state andlocal governments of the power to act at all.These most notably include the power to declarewar, to coin money, and to determine U.S.citizenship. In addition, there are areas in whichthe federal, state, and local governments shareoverlapping powers to some extent, but thefederal government’s powers generally have somezone in which states or localities may not enter.These zones are often referred to as “dormantpowers,” i.e., powers that occupy a given fieldeven when the federal government has not acted.

The best known of these relates toCongress’s ability to regulate interstate commerceunder Article I, section 8 of the Constitution. It isin this area where Congress and the states mostoften come into conflict. The reasons for this arenot hard to understand. States typically regardthe regulation of their workers, businesses, andother aspects of their economies as among theirchief responsibilities. This regulatory activitygenerally extends to any persons or property thatcome within a state’s borders or jurisdiction.Considerable complexities arise, however, when astate regulation can be said directly or indirectlyto have effects that extend to commerce outsidethe state. Courts have relied on a balancing test


to fashion rather slippery lines as to where stateauthority ends and federal authority – even ifunexercised – begins. In recent years, these lineshave blurred considerably as the U.S. SupremeCourt has signaled a willingness to restraincongressional authority where it is used toregulate the states themselves and not just privateactors.

C. The Power to Regulate Foreign Commerce

Congress has a similar, but separate powerunder Article I, section 8 to regulate foreigncommerce. Unlike its interstate commercepower, Congress’s foreign commerce authority hasreceived less attention from the courts. Its fullshape and contours are thus even less welldefined. Nonetheless, the Supreme Court hasmade clear that state laws that touch upon foreigncommerce are to receive a greater degree ofscrutiny than state laws that affect only domesticcommerce.39 It is not altogether surprising thatthe states should have less freedom to act withrespect to foreign commerce than interstatecommerce. As the Supreme Court has explained,“there is evidence that the Founders intended thescope of the [federal government’s] foreigncommerce power to be . . . greater.”40

While the scope of the foreign commerceclause may be broader, it does not go so far as to

39 South-Central Timber Development, Inc. v. Wunicke, 467U.S. 82, 96 (1984); Reeves, 447 U.S. at 437 n. 9. 40 Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434,448 (1979).


strip states and localities of all ability to touchupon international economic affairs. TheSupreme Court has held that a state law isimpermissible only “if it either implicates foreignpolicy issues which must be left to the FederalGovernment or violates a clear federal directive.”41

II. THE DISPOSSESSION OF STATE POWERIN FOREIGN COMMERCIAL AFFAIRS: ATHEORETICAL AND REALITY DICHOTOMY

Despite the Supreme Court’s suggestion –or perhaps acknowledgement – that there remainsa role for the states and localities in the realm ofinternational economic affairs, there arecountervailing considerations suggesting that thefield is totally occupied by the federalgovernment. The section that immediatelyfollows explores these considerations. Thesection that follows thereafter explains why itsimply cannot be correct that states arecompletely dispossessed of the ability to regulateforeign commerce.

A. Considerations Suggesting the Exclusion ofStates from Regulating Foreign Commerce

In addition to granting Congress theexplicit power to regulate foreign commerce,noted above, the Constitution contains otherprovisions that seem to suggest exclusive federal

41 Container Corp., 463 U.S. 159, 194 (183).


authority in this area. Article I, section 8 of theConstitution accords to Congress the power to layand collect tariffs. Article I, section 10, clause 2of the Constitution bars state from imposingduties on imports or exports without the consentof Congress. These two provisions make clearthat Congress has full control over tariffs. Giventhe historical centrality of tariffs in internationaltrade, it could be argued that this exclusive power,coupled with a general power to regulate foreigncommerce, would be enough to remove states andlocalities from international economic affairs.

In addition, the regulation of U.S. foreigncommerce is a subset of foreign affairs and as suchmay fall under the doctrine that, where foreignpolicy is concerned, the United States speaks withone voice – i.e., the President acting alone (wherehe may do so) or the President and Congressacting in unison. In this regard, Congress’sforeign commerce power is buttressed by itspowers to raise revenue (including tariffs) andappropriate funds, as well as the President’sArticle II powers to make treaties with the adviceand consent of two thirds of senators present, hisability to receive ambassadors and consuls, andhis role as commander-in-chief of the armedforces. Based on these provisions, the SupremeCourt has long held that “power over externalaffairs is not shared by the States; it is vested inthe national government exclusively.”42

42 United States v. Pink, 315 U.S. 203, 233 (1942). See alsoHines v. Davidowitz, 312 U.S. 52, 63 (1941) (“our system ofgovernment is such that the interest of the cities, counties andstates, no less than the interest of the people of the whole nation,


The extraordinary reach of the federalgovernment in regulating international commercewas perhaps most broadly recognized in the U.S.Supreme Court’s Curtiss Wright decision,43 inwhich Justice Sutherland, speaking for themajority, said that unlike in domestic affairs, thefederal government’s powers in internationalaffairs are not limited to those granted to thefederal government by the states through theConstitution. Rather, the United StatesGovernment has all the powers of sovereigntybestowed upon a nation under international law,and these powers include not only thoseenumerated in the Constitution, but also thosetransferred to the United States from Englandafter the United States became independent. AsJustice Sutherland explained, “the broadstatement that the federal government canexercise no powers except those specificallyenumerated in the Constitution, and such impliedpowers as are necessary and proper to carry intoeffect the enumerated powers, is categorically trueonly in respect of our internal affairs.”44 Thisconceptual notion underlies Justice Holmes’decision in Missouri v. Holland, in which the

imperatively requires that the federal power in the field affectingforeign relations be left entirely free from local interference”);United States v. Belmont, 301 U.S. 324 (1937) (“In respect ourforeign relations generally, state lines disappear.”); Chae ChanPing v. United States, 130 U.S. 581, 606 (1889) (“for localinterests the several States of the Union exist, but for nationalpurposes, embracing our relations with foreign nationals, we arebut one people, one nation, one power”). 43United States v. Curtiss Wright Export Corp., 299 U.S. 304(1936). 44 Id., at 315-16.


Supreme Court held that, in exercising the foreignaffairs powers of a sovereign nation, the federalgovernment may regulate through a treaty mattersthat would be beyond its reach in domesticaffairs.45

Based on these considerations, theSupreme Court held in Zschernig v. Miller thatthere is an implied foreign affairs power – i.e., apower that does not emanate directly from anyparticular constitutional provision – that belongssolely to the federal government.46 In so ruling,the Supreme Court explained that state laws“must give way if they impair the effectiveexercise of the Nation’s foreign policy. Wherethose laws conflict with a treaty, they must bow tothe superior federal policy. Yet, even in absenceof a treaty, a State’s policy may disturb foreignrelations.”47

Although this exclusive power is an impliedone, it is not clear to what extent it is a dormantone. There is no doubt that that a state law thatruns counter to a federal policy isunconstitutional, but it also may be true that astate law will be struck down only if it can in someway be said to be inconsistent or incompatiblewith the federal policy. If state action affectsforeign affairs to a significant degree, that alonemay be enough to raise constitutional issues.

45 State of Missouri v. Holland, 252 U.S. 416 (1920). 46 Zschernig v. Miller, 389 U.S. 429, 440-41 (1968). 47 Id.


It is telling that no U.S. Supreme Courtdecision has struck down a federal action inforeign affairs because it conflicts with a state law(provided that the federal action was otherwise inconformity with the Constitution), and this isespecially true where the laws in questionconcern international affairs. To the contrary, thecourts have signaled that, absent a clear violationof a constitutional provision, they are loath tointerfere in foreign commercial affairs. Courtshave elected not to review actions taken by thepolitical branches where foreign affairs areconcerned,48 and have even been willing to supplyjustifications for actions taken by the politicalbranches that may not have been readilyapparent.49

That the exclusive federal foreign affairspower should apply with equal vigor tointernational economic affairs seems obvious. Adistinguishing characteristic of foreign commerceis the extent to which it is controlled by the use oftreaties and other international agreements.Dating back to the first days of the United Statesas an independent nation, the federal governmententered into Treaties of Friendship, Commerce,and Navigation, which extend national and most-

48 Chicago & Southern Air Lines, Inc. v. Waterman S.S.Corp., 333 U.S. 103 (1948). 49 See, e.g., Haig v. Agee, 453 U.S. 280, 290-92 (1981) (Dames& Moore v. Regan, 453 U.S. 654, 686 (1981) (findingcongressional silence in the face of President Carter’s transfer ofIranian assets and nullification of attachment orders regardingsuch assets in connection with an international agreement torelease U.S. citizens held hostage in Iran to be a form ofcongressional acquiescence justifying such action).


favored-nation treatment (i.e., non-discriminatorytreatment) to the goods or nationals of thepartners. Despite these treaties, tariff ratesremained a congressional prerogative, as Congresspainstakingly set and revised thousands of tariffline items for essentially all goods entering theUnited States. Treaties of Friendship, Commerce,and Navigation gave way in the 20th century toreciprocal tariff reduction agreements, firstbilateral and later regional and multilateral ones,in which tariffs and a broad range of U.S. lawsrelating to international trade were revised. Inshort, the federal government has over timeincreasingly and ever more expansively attemptedto occupy the field of foreign commerce.

B. The Muddled Reality

In view of the foregoing, it would seem thatthe ability to regulate foreign commerce should beas exclusive a federal power as the ability todeclare war. Indeed, the Supreme Court’spronouncements to the effect that power overforeign affairs is an exclusively federal one wouldseem to resolve the matter with a bright line. Yetthe states have always played, and continue tothis day to play, a role in international issues.

As the Restatement (Third) of the ForeignRelations Law of the United States provides,“under the United States Constitution, a State ofthe United States may make compacts oragreements with a foreign power with the consentof Congress (Article I, section 10, clause 2), butsuch agreements are limited in scope and subject


matter.” Furthermore, “[a] State may make someagreements with foreign governments without theconsent of Congress so long as they do notimpinge upon the authority or the foreignrelations of the United States.” As Professor LouisHenkin has pointed out, “in the governance oftheir affairs, states have variously and inevitablyimpinged on U.S. foreign relations.”50

Two areas of state regulation of foreigncommerce have been the subject of courtdecisions: state taxation of foreign-ownedproperty and state governments doing businesswith foreign persons or purchasing foreign goodsor services. Both have led to doctrines underwhich the states have considerable room in whichto regulate foreign commerce, albeit withrestrictions.

With regard to taxation, states have broadlatitude to tax goods within their borders. Despitethe dormant commerce clause, noted above,states may tax goods in interstate commerce,provided that the state tax “is applied to anactivity with a substantial nexus with the taxingState, is fairly apportioned [in relation to taxesimposed on the same item by other states], and isfairly related to the services provided by theState.”51 Where the goods subject to taxationinvolve foreign commerce, the same analysisapplies, with two additional considerations: the

50 L. Henkin, Foreign Affairs and the United StatesConstitution 162 (2d ed. 1996). 51 Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279(1977).


state may not subject foreign commerce “to therisk of a double tax burden to which [domestic]commerce is not exposed” and “a state tax on theinstrumentalities of foreign commerce may impairfederal uniformity in an area where federaluniformity is essential.”52

Similarly, courts have drawn fine lines inexamining state “Buy American” provisions.Some courts have struck down these laws as animpermissible interference with the federalgovernment’s exclusive authority to regulateforeign affairs.53 But others have upheld such lawswhere they are non-discriminatory (i.e., they treatall foreign countries the same and do not requirestate officials to distinguish between foreigncountries or their policies) have reasonableexceptions built into them (i.e., allowing for thepurchase of foreign goods if the cost of domesticgoods is unreasonable or it would be impracticalor not in the public interest to buy only domesticitems).54 The Supreme Court has recognized inthe context of interstate commerce that, if a stateis acting as a “market participant,” and not as aregulator, then the dormant commerce clauseplaces no restrictions on it.55

The Supreme Court recently had anopportunity to clean up this muddled picture. In

52 Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434,451 (1979). 53 See, e.g., Bethlehem Steel Corp. v. Bd. of Comm’ers, 276Cal. App. 2d 221 (1969). 54 See, e.g., K.S.B. Technical Sales Corp. v North JerseyDistrict Water Supply Comm’n, 75 N. J. 272 (1977). 55 South-Central Timber Development, Inc. v. Wunicke, 467U.S. 82 (1984).


Crosby v. Natsios, the First Circuit struck down aMassachusetts law penalizing companies biddingon Massachusetts state contracts that did businesswith the Government of Myanmar or traders inthat country.56 The First Circuit found theMassachusetts law to be infirm for three reasons.First, it violated the exclusive foreign affairs powerof the federal government. Second, it violated theforeign commerce clause. And third, it waspreempted by a federal law authorizing thePresident to impose sanctions against Myanmar,although none of the contemplated sanctionsincluded restrictions on state procurement. TheSupreme Court affirmed the First Circuit’sdecision, but did so on preemption groundsalone.57 Thus, the Court had an opportunity toclarify the scope of the exclusive foreign affairspower as well as the foreign commerce clause, butdid not.

Perhaps the most glaring omission in theSupreme Court’s Crosby decision was its refusalto consider the extent to which its prior ruling inClark v. Allen circumscribes the federal foreignaffairs power and preserves for the states theability to regulate interstate commerce. In Clarkv. Allen,58 the Court upheld the constitutionalityof a California statute which conditioned the rightof aliens to inherit property in that state on thegranting by the alien’s own country of similar

56 National Foreign Trade Council v. Natsios, F.3d 38 (1st Cir.1999). 57 Crosby v. National Foreign Trade Council, 530 U.S. 363(2000). 58 Clark v. Allen, 331 US 503.


rights to U.S. citizens to inherit property there.The Court in Clark dismissed as “farfetched” thecontention that the statute unconstitutionallyinfringed upon the federal foreign relationspower.59 The Court noted that California had notviolated any express command of the Constitutionby entering into a treaty, agreement, or compactwith foreign countries. It said that “whatCalifornia has done will have some incidental orindirect effect in foreign countries. But that istrue of many state laws which none would claimcross the forbidden line.”60 Thus, the linebetween an unconstitutional state intrusion intothe exclusive federal foreign affairs zone underZschernig and a state action that has a mere

59 See 331 U.S. at 517. 60 In Zschernig, the Supreme Court distinguished Clark on thegrounds that the Oregon statute in question contained areciprocity requirement similar to the California law involved inClark, but the Oregon law also required conditioned the right ofan alien to inherit property upon the right of United Statescitizens to receive payment here of funds from estates in theforeign country, and the right of the foreign heirs to receive theproceeds of Oregon estates “without confiscation.” The Courtalso noted that, in application, the Oregon law mandatedscrutiny by state judges of foreign government practices, actionswhich more directly and immediately carried foreign affairsimplications: At the time Clark v. Allen was decided, the case seemed toinvolve no more than a routine reading of foreign laws. It nowappears that in this reciprocity area under inheritance statutes,the probate courts of various States have launched inquiries intothe type of governments that obtain in particular foreign nations-- whether aliens under their law have enforceable rights,whether the so-called “rights” are merely dispensations turningupon the whim or caprice of government officials, whether therepresentation of consuls, ambassadors, and otherrepresentatives of foreign nations is credible or made in goodfaith, whether there is in the actual administration in theparticular foreign system of law any element of confiscation. 389U.S. 429, at 432.


“incidental or indirect effect in foreign countries”remains quite blurry.

III. THE WTO AND SUB-FEDERALGOVERNMENTS

While the U.S. Supreme Court has thus farfailed to excise entirely sub-federal governmentsfrom international economic affairs, the WTO hasbeen more aggressive in attempting to do justthat. Article XVI:4 of the WTO Agreementprovides that “[e]ach Member shall ensure theconformity of its laws, regulations andadministrative procedures with its obligations asprovided in the annexed Agreements.” Thisprovision makes clear that it is the nationalgovernment of a country alone that has standingas a member of the WTO and as such it is nationalgovernments alone that will be held accountablefor complying with the WTO’s various rules. Itsuggests quite strongly that a government may notclaim that it is unable to comply with its WTOobligations because its domestic laws do not allowit to do so. Such an argument would not only beinconsistent with Article XVI:4, it also wouldcontravene Article 27 of the Vienna Conventionon the Law of Treaties, which states that “[a]party may not invoke the provisions of its internallaw as justification for its failure to perform atreaty.”61

61 The Convention distinguishes between a country relying onits own law as a reason not to comply with a given treatyobligation, on the one hand, with an inability to honor the treatyat all due to a lack of domestic authority to have entered into thetreat in the first place, on the other hand. See Article 46 of the


In addition, during the eight-year UruguayRound negotiations leading to the establishmentof the WTO on January 1, 1995, the partiesreached an Understanding on GATT ArticleXXIV:12, which it makes clear that WTOmembers are responsible for state or local actionsin relation to the General Agreement on Tariffsand Trade (“GATT”), the central agreement of theWTO governing trade in goods. Thisunderstanding provides as follows:

13. Each Member is fullyresponsible under GATT 1994for the observance of allprovisions of GATT 1994, andshall take such reasonablemeasures as may be availableto it to ensure suchobservance by regional andlocal governments andauthorities within itsterritory.

14. The provisions of ArticlesXXII and XXIII of GATT 1994as elaborated and applied bythe Dispute Settlement

Convention (“1. A State may not invoke the fact that its consentto be bound by a treaty has been expressed in violation of aprovision of its internal law regarding competence to concludetreaties as invalidating its consent unless that violation wasmanifest and concerned a rule of its internal law of fundamentalimportance. 2. A violation is manifest if it would be objectivelyevident to any State conducting itself in the matter in accordancewith normal practice and in good faith.”).


Understanding may beinvoked in respect ofmeasures affecting itsobservance taken by regionalor local governments orauthorities within theterritory of a Member. Whenthe Dispute Settlement Bodyhas ruled that a provision ofGATT 1994 has not beenobserved, the responsibleMember shall take suchreasonable measures as maybe available to it to ensure itsobservance. The provisionsrelating to compensation andsuspension of concessions orother obligations apply incases where it has not beenpossible to secure suchobservance.

15. Each Member undertakes toaccord sympatheticconsideration to and affordadequate opportunity forconsultation regarding anyrepresentations made byanother Member concerningmeasures affecting theoperation of GATT 1994taken within the territory ofthe former.


The understanding places an explicitburden on national governments that aremembers of the WTO to ensure that their sub-national governments also comply with the GATT1994. As paragraph 14 of the understandingstates, a failure to do so could result in formaldispute-settlement proceedings being initiatedagainst the member in question and that memberbeing required to bring the sub-national measureinto compliance with WTO norms or face tradesanctions.

The understanding was deemed necessaryby Uruguay Round negotiators because priorhistory with the GATT demonstrated that ArticleXXIV:12 allowed for a number of instances inwhich national governments were not heldresponsible for actions by their sub-nationalgovernments. This result emanated from theambiguous language of Article XXIV:12 itself. Itprovides that:

Each contracting party shall takesuch reasonable measures as maybe available to it to ensureobservance of the provisions of thisAgreement by the regional and localgovernments and authorities withinits territory.62

While this language was ostensibly includedin the original GATT to make it clear that nationalgovernments have an affirmative obligation to reinin rogue states and localities, it was interpreted

62 Emphasis added.


over time to require corrective action only wheresuch action would be “reasonable” and“available.”63

This language also paved the way for theargument that the GATT is not necessarilyintended to have direct application vis-à-vis sub-national laws, but rather leaves to the nationalgovernments that are parties to the GATT thedetermination of whether and how to negate stateand local actions that are inconsistent with thatagreement. As Herman Phlegler, the StateDepartment Legal Advisor explained,

This provision . . . has always beeninterpreted as preventing theGeneral Agreement from overridinglegislation of a political subdivisionof contracting parties inconsistentwith the provisions of theAgreement; by placing uponcontracting parties the obligation totake reasonable measures to obtainobservance of the Agreement bysuch subdivisions, the partiesindicated as a matter of law theGeneral Agreement did not overridesuch laws.64

63 See John H. Jackson, “The General Agreement of Tariffs andTrade in United States Domestic Law,” 66 Mich. L. Rev. 249(1967). 64 As quoted in Jackson, “The General Agreement of Tariffsand Trade in United States Domestic Law,” 66 Mich. L. Rev. atXX.


This construction of Article XXIV:12 and itstreatment of federal/sub-federal relations isconsistent with the notion that the GATT did notautomatically trump inconsistent state or locallaws and that national governments must takeaction to bring non-conforming sub-nationalmeasures into conformity with international tradeobligations.

In this way, the WTO has placed a heavyburden on national governments to ensure theconsistency of their measures with WTO rules,regardless of whether it is a national or sub-national authority that has promulgated themeasures in question. It has been the case sincethe initial adoption of the GATT in 1947 thatprovinces, states, and localities have no seat at theGATT table, and their sphere of influence, limitedas it was, has eroded substantially with theestablishment of the WTO in 1995.

The major exception in the WTO thatcontinues to recognize a role for sub-federalgovernments is in the area of services. The tradeliberalizing commitments embodied in the WTO’sGeneral Agreement on Trade in Services(“GATS”) apply only to service sectors that agiven WTO member affirmatively identifies in itsschedule of service commitments. In other words,if a service sector is not so identified, WTOmembers may continue to protect that sectorfrom foreign competition, including through stateor local barriers. Moreover, even where a memberidentifies a service sector in its schedule ofcommitments, that member is free to condition its


concessions on various factors, including theperpetuation of trade foreclosing state or locallaws.

Thus, to preserve these localizedregulations, many WTO members either choosenot to list such sectors in their GATS schedule ofcommitments or they condition theircommitments on the preservation of stateregulation. Although the role of states andlocalities in this area is quite important,65 and hasbeen accorded a measure of deference throughthe GATS, this agreement, like all others in theWTO, looks to national governments for ensuringcompliance and will aim its enforcementmechanisms – e.g., dispute-settlement procedures,authorized trade retaliation – not against scofflawstates and localities, but the national governmentsthat are members of the WTO.

IV. AN APPROPRIATE MIDDLE GROUND: ANATIONAL GOVERNMENT VETO

In implementing the WTO agreements, theUnited States may have found not only anefficient method to meet its internationalobligations, but it also may have taken animportant step toward finding a better generalapproach to federal/sub-federal relations whereinternational economic affairs are concerned.

65 For example, a number of service sectors in the UnitedStates and other countries – i.e., banking, health care, andinsurance – are heavily regulated at the sub-federal level.


A. The Uruguay Round Agreements Act

In approving the WTO agreements, the U.S.Government reserved for itself the exclusiveauthority to nullify non-conforming U.S. state orlocal laws. It did so through the 1994 UruguayRound Agreements Act. Under that act, the WTOagreements have no direct effect in U.S. law andinconsistent sub-federal laws remain in full forceand effect unless the federal government takesaction to set them aside. Under this paradigm,the federal government has full power to upendstate or local laws inconsistent with the WTOagreements and to ensure U.S. compliance withits international obligations. At the same time,absent federal action, state or local laws touchingupon issues relevant to the WTO may be enactedand implemented.

Section 102(b)(2) of the Uruguay RoundAgreements Act states that the WTO agreementsprevail over inconsistent state laws, but noperson, except the United States Government,may challenge such laws (nor may they challengea federal law) on the basis that it is inconsistentwith a WTO rule.66 In this way, the UruguayRound Agreements Act impels states and localitiesto act consistently with the WTO agreements intwo ways. First, it imposes a moral or politicalobligation on states and localities to conform their

66 Section 102(a) of the Uruguay Round Agreements Actprovides that U.S. federal law prevails in the case of a conflictwith a WTO agreement and no party may challenge a federal lawon the basis that it does not conform to WTO rules.


laws to the WTO agreements since, as a matter ofU.S. federal law and policy, those agreementsprevail over conflicting state and local laws.67

Second, it grants the U.S. Government expressauthority to the judicial nullification of a non-conforming sub-federal law.

In this way, the United States Governmentretains complete control over whether to require astate or locality to comply with WTO obligationsor to allow an offending sub-federal action tocontinue to apply. If the United States refuses tochallenge a non-complying state or local law, itmay suffer whatever consequences such non-compliance brings in the WTO – i.e., internationalpressure, dispute-settlement proceedings, orpossibly even trade sanctions. But, that is aquestion left exclusively to the discretion of thenational government, one that will no doubt beresolved through a mixture of diplomatic,political, and policy considerations. In themeanwhile, the states and localities are left free toregulate in areas covered by WTO agreements,subject to possible corrective action by the federalgovernment.

B. Augmenting the Model

67 Court decisions make clear that U.S. internationalagreements take precedence over state laws if the agreementswere entered into in a manner consistent with the Constitutionand if a conflict with state law is unavoidable (i.e., cannot beavoided through a harmonizing construction). Moreover, thePresident may enter into international agreements under his ownconstitutional authority that cannot modify or contradict existingacts of Congress, but such sole presidential agreements trumpstate law wherever there is a conflict. See Pink and Belmont,cited in note 4 supra.


It is possible that the approach tofederal/sub-federal relations taken in the UruguayRound Agreements Act may in fact be the bestcourse for determining what role, if any, statesand localities may play not only in relation toWTO matters, but also foreign commerce ingeneral. That is, federal governments shouldretain the ability to reverse sub-federal actions asnecessary to carry out treaty obligations or toimplement foreign affairs policies; but there oughtnot to be an a fortiori presumption against stateor local action that results in the judiciary strikingdown sub-federal laws where the federalgovernment does not take the position that suchlaws are inconsistent with the foreign policy of thenation.

The Uruguay Round Agreements Actmodel, though, suffers from two deficiencies.First, it requires the federal government to suestates or localities in court in order to have aparticular non-federal measure set aside.Certainly a judicial challenge may be anappropriate avenue for achieving this end.Indeed, there may be instances in which courtsare best suited to determine whether a given stateor local law is inconsistent with a treaty, forexample.

But judicial intervention is not alwaysneeded, especially where a state or local lawundisputedly affects international economicrelations with a foreign government and the onlyissue is whether that law is consistent or


inconsistent with federal policy. Under such acircumstance, it would seem that the federalgovernment is in the best position to decide whatactions might advance or thwart its aims, tactics,or strategies. Where there is no question that thestate or local law has an effect on commerce witha foreign government, the only question should bewhether the federal government objects. If thereis a question as to germaneness – i.e., does thenon-federal action have an effect on trade with aforeign nation – then judicial intervention mightbe necessary.

Efficiency would thus seem to call forsomething short of lengthy, expensive litigation toresolve many of these questions. A simple, cleardeclaration of federal policy (whether preexistingor not) with respect to an intermeddling state orlocal law should suffice. Such a statement couldsimply come from the President, or a subordinateofficial designated to speak on the President’sbehalf. In many instances, a declaration of federalpolicy could resolve the matter without the needfor litigation at all.

Such a practice would not remove thecourts from such issues, but rather would simplifytheir role. As is the case today, courts wouldcontinue to have jurisdiction to rule on whether astate or local law is preempted by a treaty or otherinternational obligation or a federal law orregulation. Where there is no such preemption,but a state or local law nonetheless is alleged toaffect international economic relations, a court


would need only determine whether thechallenged measure does in fact affect foreigntrade with the United States (or the relevantcountry). If so, then the court could certify thequestion of whether the measure is inconsistentor otherwise harmful to federal policies to federalpolicy-makers. If the federal government answersin the affirmative, the law is struck down. If thefederal government answers in the negative (ortakes no position), the law stays in force.

Another way the Uruguay RoundAgreements Act falls short is its preclusion of achallenge to state or local action by any partyother than the federal government. There arebeneficial effects to allowing private parties tochallenge allegedly improper state or local laws.Such actions not only allow for a greater array ofvoices and a more inclusive legal system, but theyalso augment the ability of the federal governmentto monitor and address state or local laws thatmay be inconsistent with internationalagreements or federal government policies. Theremay well be a great many state or local laws thatthe federal government is unaware of that couldcause international friction at a later time. Even agovernment as large as the U.S. Governmentsimply does not have the resources to monitorevery state or local law that may be inconsistentwith all federal international trade policies.

C. The Federal Veto: Striking aBalance Between International Chaos andPlurilateralism


Perhaps the most salutary result of theforegoing approach would be that it woulddispense with the need for courts to wrestle withwhether there ought to be a dormant foreignaffairs power that applies in connection with U.S.international trade policies. As noted above, thescope of the dormant power established inZschernig is unclear, and the Supreme Court hasoffered little guidance on how to decide what stateor local actions have more than an “incidental orindirect effect in foreign countries.” This is thekind of line-drawing that necessarily leads toimprecise doctrine and muddled case law. Farbetter to limit courts either to cases of directpreemption or, failing that, determinations ofwhether state or local laws affect U.S.international economic affairs. In the formercase, if the law is preempted, it must fall. In thelatter case, if it affects areas of national policy, itshould be left to the federal government to take aposition as to whether the law is helpful (orinnocuous) and should remain on the books or isharmful (at least potentially so) and should bedispensed with. This determination likely wouldbe issued by the Executive Branch in most cases,but there may be occasions where the President,for political or policy reasons, may feel aresolution of Congress is needed. Which route tobe relied upon should be left to the Executive.68

68 It may be that Congress acts too slowly to give its views in agreat number of instances, but that too may be a politicaljudgment best left to the President or the political branches.Congress, however, could employ fast-track procedures to reacha decision, which could cut down delays considerably.


If the United States or other countries wereto head down such a path, what would come ofthe notion that in foreign affairs, a nation mustspeak with one voice, a maxim that has been anunquestioned part of U.S. constitutional law formore than a century? Wouldn’t allowing statesand localities a role in international economicrelations send mixed messages to other nationsand risk undermining the federal government, asoccurred under the Articles of Confederationprompting calls for a new constitutional order inthe United States?

The answer to these questions is two-fold.First, while the above maxim, like most maxims,is pithy and sounds good, it is not entirely true.As previously noted, states and localities do play arole, in some instances a powerful role, ininternational economic affairs. The United Statessimply does not perform alone in this arena, butrather conducts a large orchestra.

Second, it is one thing to give almostunfettered power to states and localities in thecontext of foreign affairs, commercial orotherwise, an arrangement that led to the downfallof the Articles of Confederation. It is analtogether different matter to allow states andlocalities to take actions affecting internationaltrade while giving the federal government theclear authority to negate any sub-federal laws thatare inconsistent with federal policies. This latterarrangement would fuse together the SupremacyClause and the dormant foreign affairs power, but


would not leave to courts the determination ofwhere a federal foreign policy has been undulyviolated. It would fall to those entrusted to makeand administer such policies to give a clear andunequivocal statement as to the effects of state orlocal law on U.S. international economic relations.

Finally, it could be argued that federalgovernments often lack the political will to strikedown popular state or local laws that harm tradingpartners or violate international agreements.Supporters of this argument could point out thatthe U.S. Government has yet to invoke itsauthority under Section 102(b)(2) of the UruguayRound Agreements Act to seek the judicialnullification of a state or local law that isinconsistent with the WTO agreements.

The above proposed new approach tofederal/sub-federal relations in the context offoreign commerce admittedly does rely on thefederal government to decide what is or is not theright course of action – weighing not just foreigncommercial policy but also domestic politics.

But making such decisions is what leadersare elected and paid to do. They are bestpositioned to consider all factors that bear on thequestion of whether to allow a state or local law tocontinue in effect even though it affects foreignnations and trade with those nations. Indeed, theuse of a dormant foreign affairs power could havean undue chilling effect on state or local actions inrelation to foreign commerce, just as the


President and Congress may give too much weightto the concerns of foreign governments andinternational institutions (such as the WTO) andnot enough to the concerns of states andlocalities.

V. CONCLUSION

The federalism principles that underlie theU.S. Constitution, are entirely consistent withallowing states and localities to play a role in theinternational economic order, subject to a federalveto, creating a limited counter-balance to thegreat weight of the federal government inregulating foreign commerce. It would help avoidwhat Madison referred to as “a gradualconcentration of the several powers in the samedepartment” by allowing the “ambition” of thestates and localities to “counteract” the“ambition” of the federal government. Affordingstates and localities even this modest role ininternational economic affairs would provide alimited “auxiliary precaution” against thepotential of a federal government run amok.

Because Madison was right in observingthat men are not angels and that government is“but the greatest of all reflections on humannature,” it would seem prudent to bear in mindthat the ability to speak with one voice is not thehallmark of democracy but tyranny. Theexigencies and demands of foreign affairs mayjustify a diminution in the role of the states andlocalities, but experience and case law show that a


total abolition of federalism is not warranted ordemanded. This is especially true with regard tointernational economic affairs, which in the era ofglobalization are inextricably linked to the abilityof states and localities to regulate their owneconomic affairs.


Aspects of the Reform ofHigher Education in

Belgium: the case of Flanders

Eduard SomersUniversiteit Gent

I. INTRODUCTION - CONSTITUTIONAL ASPECTS

Belgium is a federal sovereign monarchywith a parliamentary regime, the foundations ofwhich derive from the Constitution of 1831,promulgated less than one year after the revolt ofthe Belgians against the King of the Netherlands.In its own time the Belgian Constitution wasconsidered to be an exemplary piece offundamental legislation built on foundations thatreflected the principles of the French Revolution,and the Revolutions’s guiding concept of thesovereignty of the Nation. This Constitutionworked well for a very long time. Modest revisionstook place in 1893 and again in 1921, to adapt theelection system in accordance with prevailingcontemporary principles, but it was not until 1970that fundamental changes became unavoidable.The Napoleonic idea of centralisation no longer fitBelgian reality.

It was actually the Constituent Assembly of1970 that started the regionalisation process


which would lead to Belgium’s new federalinstitutions. This first wave of regionalisationacknowledged the existence of three culturalcommunities in Belgium: the Dutch, the Frenchand the German. Each community enjoyed itsown cultural and linguistic competences.69 As abasic general rule these communities comprisedthe Dutch, French and German speaking areas70.The existing cultural communities weretransformed into integral communities in the fullsense of the word in 1980 including additionalcompetences in the sphere of health, welfare andfamily policy71. Since 1989 following theConstitutional revision of 1988, the Communitiesare empowered with educational matters with theexception of the determination of the beginningand the end of compulsory education, theminimum conditions to issuing diplomas and thepension schemes (art. 127 § 1, 2 Constitution).Broadly speaking competences falling under theaegis of the Communities refer to the population.72

69 These competences were broadly defined in art. 4 of theSpecial Institutional Reform Act 1980 comprising a.o.: defenceand promotion of language, libraries, permanent education,further education, youth policy, leisure and tourism, artistictraining etc.

70 For the Dutch and French Communities exceptions were madefor certain municipalities where special facilities were created forminority linguistic groups and for the bilingual area of Brussels -Capital.

71 The so-called personalised matters which are different from theregional matters within the competence of the regions, art. 5Special Institutional Reform Act 1980.

72 The Communities are furthermore empowered as to thecooperation between themselves and as to internationalcooperation within the scope of their competences, includingtreaty - making power.


Furthermore the territory of the country isdivided into four language areas: the Dutchlanguage area73, the French language area74, theGerman language area75 and the bilingual area ofBrussels, the capital76. Every municipality in thecountry belongs to one of these language areas(art. 4 Constitution). It will not come as a surprisethat the importance of the language areas liesbasically with the application of the legislationconcerning the use of languages. Implicitly itintroduces the principle of territoriality, sincepublic authorities are only allowed to use thelanguage of the language area where they areresiding (with exception of the so-called“facilities” municipalities). In addition to theCommunities and the language areas three“Regions” were also established: the FlemishRegion, the Walloon Region and the Brussels -Capital Region. Their competences extend to therespective language areas with the exception ofthe territory of the German language area whichcomes under the competence of the WalloonRegion. The concept of region in this specificcontext refers to a territory and the competencesbestowed upon them deal with territorially linkedmatters (e.g. environment, economy, transport,public works, energy, housing, urbanisation...).

73 Comprised of the provinces of Antwerp, Limburg, East andWest Flanders and Flemish Brabant.

74 Comprised of the provinces of Hainaut, Luxembourg, Liège,Namur and Brabant Wallon.

75 Comprised of a number of municipalities from the province ofLiège (the area of Eupen and Malmédy).

76 Comprised of the so-called 19 municipalities.


1. Regional institutions

For both Communities and Regionslegislative as well as executive institutions havebeen established. In Flanders there is only onelegislative organ, i.e. the Flemish Parliament andone executive organ, i.e. the Flemish Governmentnotwithstanding the fact that the FlemishCommunity and the Flemish Region formconstitutionally separate entities.77 For theGerman Community there is a Council(legislative) and a Government (executive) of theGerman Community. The territorial (regional)competences with respect to the German languagearea come under the Walloon Regional Counciland Government. They naturally exercise similarcompetences within the Walloon Region. But inWallonia the institutions of the Region and theCommunity have not been merged. Therefore theFrench Community Council and the FrenchCommunity Government deal with personalisedmatters for the population of the French languagearea. Finally there is a Council and a Governmentfor the Region Brussels-Capital, the territory ofwhich is limited to the bilingual area of Brussels -Capital (the 19 municipalities). Personalisedmatters of the population in the bilingualBrussels-Capital area come under the competenceof either the Flemish Community or of the FrenchCommunity depending on whether they aredealing with services exclusively for the Dutch-

77 Cf. Special Institutional Reform Act 1980.


speaking or the French-speaking part of thepopulation of that Region.

2. The organisation of education

As mentioned before, competences for theorganisation of education have been transferred tothe Communities (art. 127 § 1, 2 Constitution).Therefore the Flemish education policy isdetermined by the Flemish Parliament, theFlemish Government and the Flemish minister ofeducation. The minister heads the department ofeducation of the Ministry of the FlemishCommunity and is responsible for nearly allaspects of education policy, from pre-primaryeducation to university education. Art. 24 of theConstitution guarantees freedom of education,implying the parents’ freedom of choice of theschool they want for their children (communityschools, subsidised public - authority orsubsidised private - authority schools) as well asthe freedom to organise education. This meansthat educational institutions may not be subjectedto preventive or restrictive measures in providingeducation.78 Organisation, recognition orsubsidisation of education by the Communities isregulated by statute or decree (art. 24 § 5Constitution). With respect to the quality of theeducation, the Flemish Community sets a numberof standards to be met.

Besides the Department of Education of theMinistry of the Flemish Community certain

78 The Development of Education, Ministry of the FlemishCommunity, Brussels 2001, 15.


advisory bodies can be mentioned that areinvolved in the management of the educationsystem in Flanders. The Flemish EducationCouncil (VLOR) was founded by the FlemishParliament in 1991. It has to be consulted aboutdrafts of decrees, policy documents and policystatements with respect to education.79

Concerning higher education two differentadvisory bodies have been established. TheFlemish Inter-University Council (VLIR) consistsof the rectors of the Flemish universities and isintended to advise the minister for education andto make proposals on university policy. TheFlemish Council for the polytechnics(“hogescholen”) consists of the heads of allpolytechnics. Its competences are similar to thoseof the VLIR but of course with respect toeducation in the polytechnics.

II. THE ORGANISATION OF HIGHER EDUCATION

Higher education comprises universityeducation and non-university higher education(polytechnics). Concerning non-university highereducation there are now 24 polytechnics of eitherone cycle (three years) and/or two cycles (at leasttwice two years). One-cycle polytechnics aim atproviding a vocational proficiency, based onscientific knowledge to their students so that theycan practice a profession after their studies. Two-cycle education is at an academic level and alsobased on scientific knowledge. It is not academic

79 Ibidem, 18-19.


education since it is not based on scientificresearch, only on scientific knowledge. Thedistinctions made might seem a trifle strange foroutsiders but there is a basic difference betweenthis sort of non-university higher education anduniversity education. The latter is based onscientific research and not merely on scientificknowledge. The polytechnics offer a broadspectrum of study areas such as architecture,health care, industrial sciences and technology,music and drama, product development etc.

With respect to university education inFlanders the decree of June 12, 1991 broughtabout a fundamental reform of organisationalstructures. It defined the mission of theuniversities in art. 4 Universities are, in theinterests of society, at the same time activelyengaged at the level of academic education,scientific research and the provision of scientificservices. The decree also gave universities moreautonomy and financial responsibility.80 Eighteendifferent study areas have been identified rangingfrom philosophy and moral sciences, history, law,notary, criminological sciences, applied sciences,medicine, veterinary medicine etc. Thecurriculum of these study areas is spread overfour, five (law), six (veterinary science) orseven(medicine) years. Different types of coursesexist e.g. academic courses following onsecondary education and made up of two cycles.

80 For both Ghent University and the University Centre Antwerp(originally being State institutions) the decree of June 26, 1991provides a separate legal personality. It furthermore defines theorganisation of the administration and the controlling authority.


These courses lead to a basic81 universityqualification of “licentiaat” (after four or fiveyears of study) or civil engineer, pharmacist,veterinary surgeon or medical doctor. After thesebasic qualifications postgraduate courses can befollowed. These are either supplementary studies,the purpose of which is to extend the knowledgeobtained in basic academic courses or specialisedstudies, aiming at specialisation in a given studyarea. The highest academic degree is that ofdoctor which requires the public defence of anoriginal doctoral dissertation. This degree is aprerequisite for a university career as lecturer orprofessor.

For some six million inhabitants, Flandersoffers university education in six universities.These are: the Catholic University of Brussels(KUB - courses restricted to the first cycle), theCatholic University of Leuven (KUL- with a firstcycle base in Kortrijk), the Limburg UniversityCentre(LUC), the University of Antwerp (UA),the Ghent University(RUG) and the FreeUniversity of Brussels (VUB). The University ofAntwerp has a confederated structure82; it is anassociation of the University Centre Antwerp(RUCA), the University Institution Antwerp (UIA)and the University Faculties of St. IgnatiusAntwerp (UFSIA). The governments of Flandersand the Netherlands established the Transnational

81 The first academic degree that can be obtained is that ofcandidate after two or in some faculties three years of study. It is inreality the basis for further university education.

82 Introduced by the decree of September 22, 1995.


University of Limburg together with the LimburgUniversity Centre and the (Dutch) University ofMaastricht. The two largest universities are theKUL and the RUG. They account forapproximately 70% of the Flemish universitystudent population.

III. THE BOLOGNA DECLARATION

The Sorbonne declaration of the 25th ofMay 1998 of the ministers of education of France,Germany, Italy and the UK urged for thedevelopment of a European higher educationspace that would match and support theeconomic, commercial and financial marketlaunched by the European Union over the lastforty years. It emphasised the central role ofuniversities in developing European culturaldimensions and in the creation of a European areaof higher education as a key way to promotemobility and employability and contribute to theoverall development of the European Continent.Following the Sorbonne declaration the broadergroup of European ministers of education jointlyagreed to the Bologna declaration of June 19,1999. In this document specific objectives wereput forward such as the adoption of a highereducation system essentially based on two maincycles, undergraduate and graduate where accessto the second cycle shall require successfulcompletion of first cycle studies, lasting aminimum of three years. The degree awardedafter the first cycle shall also be relevant to theEuropean labour market as an appropriate level of


qualification. The Bologna declarationfurthermore stressed upon the necessity ofdeveloping a full fledged credit system in order topromote wide spread student mobility in Europe.The main thrust of the Declaration lies inproposing the creation of a European space forhigher education (to be realised by 2010). This isnot supposed to be done within the framework ofEU institutions (even though they participate inthe elaboration process) but via an autonomouseffort of the participating countries representedby their Ministers of Education and by the Rectorsof universities. According to its wording, theBologna Declaration does not aim atharmonisation of higher education in Europe butat more transparency to increase mobility ofstudents and professors.83

IV. THE HIGHER EDUCATION REFORM

The Flemish minister of education hastaken the recommendations contained in theBologna declaration very seriously and introducedwhat are probably the most reformatory changesin higher education in Flanders since the 19th

century. On May 17, 2002 the Flemish Council ofMinisters approved a pre-draft decree on therestructuring of higher education in Flanderswhich was passed by the Flemish Parliament on 4April 2003 (Belgisch Staatsblad 14 August 2003).At the same time the Government announced that

83 In May 2001 the ministers of education released acommuniqué after their follow up meeting in Prague focussingprimarily on accreditation and quality assurance.


more initiatives will follow specifically withrespect to teachers training, a credit system,appropriate arrangements for social facilitiespertaining to students of higher education, auniform legal position of the members of staff inhigher education and a reform of study financing.The aim is to produce decrees in these matters bythe beginning of the academic year 2004-2005.Whether this time trajectory is realistic is in noway certain.

As far as the decree on the restructuring ofhigher education is concerned the text providesseveral innovations in order to implement theprinciples of the Bologna Declaration such as theintroduction of the degree of bachelor and master,a system of accreditation and the possibility ofcreating associations84 between one university andseveral polytechnics. It seems evident that theFlemish Government intends over the years toabolish the existing dual structure betweenuniversities and polytechnics in order to provideone single structure for higher education.85 Therather ambiguous binary system withpolytechnics organising courses of an academic

84 To be established as a separate legal person taking the form ofprivate law non-profit association. At present the association ofuniversities with polytechnics is effectuated primarily on thebasis of ideological foundations. The Catholic University ofLeuven for instance gathered virtually all catholic polytechnicsaround it from all over the territory of Flanders. Needless to saythat this will unavoidably create problems in the future.

85 The decree regulates the financing of polytechnics anduniversities in the second and third headings of the text. I willnot deal with this here since it is basically of internal importanceand an entire new financing system is under development to beimplemented by 2006.


level and at the same time not being academiccourses is in this decree being abandoned.

It is true that in Europe varying academicqualifications exist making it rather difficult forstudents to compare the exact situations indifferent countries. In order to avoid thisconfusing situation it will be necessary tointroduce much more transparency and equalityin the definition of these academic qualifications,to support better monitoring systems andaccreditation mechanisms. These will concentratemore on the courses provided and less on theinstitutions (polytechnics or universities)organising them.

The decree makes a difference betweenprofessional and academic courses. The formerare those that aim at the general development ofthe students and at acquiring professional (orartistic) capabilities based on the application ofscientific (or artistic) knowledge and on practicalknowledge. Therefore professional bachelorsdegrees tend to give students a certain level ofgeneral and specific knowledge necessary forindependently practising a profession. On theother hand academic bachelors degrees have theobjective of giving their students a certain level ofknowledge and capability inherent to a scientific(or artistic) functioning in a specific area ofscience (or arts), leading directly into a masterscourse or onto the labour market. Masters coursesare always academic courses and intend toupgrade students to a more advanced level of


knowledge and capabilities allowing them tofunction autonomously in a profession. The factthat masters courses are fundamentally academiccourses does not preclude them from preparingstudents for a profession, but that is not theprimary objective. A masters course has toculminate in a master test (thesis) which willcount for at least one third of the study points ofan academic year, i.e. a minimum of 20 studypoints. The minimum number of study points fora bachelors degree is 180 and for a masters degreeit is 60.

The new decree makes a valuablecontribution by identifying specific institutions aspolytechnics or as universities. This will put anend to the unfortunate practice by whichinstitutions gradually assumed the status of auniversity without in fact being one and thusdeliberately misleading potential students. Aneducational institution can only call itselfuniversity when it figures in the corresponding listin the decree and the same goes for polytechnics.The list can only be changed by the FlemishGovernment, which will prevent any undueexpansion of institutions. On the other handinstitutions which are not listed in the decree canhave themselves registered by the FlemishGovernment under certain conditions, e.g. bygiving proof of financial solvency and concluding acooperation agreement with a listed university orpolytechnic.

The decree also clarifies the actualeducational track for all institutions. Polytechnics


can offer professional bachelors courses and/oracademic bachelor and masters courses in theframework of an association with a university.Universities can organise academic bachelors andmasters courses as well as offering programsleading to the degree of doctor. Successfullyfinishing a course will lead to the correspondingdegree. The decree allows the addition of thephrase “of arts” or “of science”, to facilitateinternational transparency. The FlemishGovernment decides to which degrees thespecifications “of arts” or “of science” can beadded. Rather astonishingly, the specification “oflaws” is not mentioned at all86. Finally universitiesand polytechnics can deliver postgraduatecertificates for courses that follow the basicbachelors or masters courses but withoutnecessarily fitting into the tight bachelors andmasters structures.

Access to masters courses is limited tothose having obtained a corresponding bachelorsdegree but some masters courses will be reservedfor those having another masters degree (mastersafter bachelor and masters after master). Thepossibility remains that holders of a professionalbachelors degree may be allowed entrance into amasters course after completing a preliminary

86 At the initiative of the Ghent Law Faculty an amendment tothe decree is in preparation so that the specification “of laws”can be used in future. Due to an actual non-agreement betweenuniversities and polytechnics the Government has not yetdecided upon the use of the specifications. Since this provision ofthe decree has therefore not been enforced at the moment,faculties can decide so far more or less for themselves.


programme of at least 45 and maximum 90 studypoints (a full academic year has 60 study points).

Legal education is currently limited touniversities87 and is organised around a two-yearcandidate cycle and a three-year “licentiaat”cycle. The final degree is therefore obtained aftera minimum of five years’ study (300 study points)and it is a general law degree. Law students canspecialise in teh latter part of their studies byfollowing certain options, e.g. civil and criminallaw, social and economic law or national andinternational public law. But whatever optionsthey have chosen they will receive the samedegree of “licentiaat” in law allowing them accessto the bar or to the bench. They will also have tocomplete additional professional exams or evenentrance exams for the bench, followed by atraining period. Access to the legal profession isorganised in the Judicial Code which is comingunder the federal authority of the Minister ofJustice. This implies that any changes made to thelaw degree by the Community decree on highereducation has to be “translated” into the federallegislation whenever necessary.

At present all Flemish law schools haveagreed that the law degree within the new systemof the Flemish decree needs to be a general one.Therefore the basic law degree should not be infiscal law or social law or economic law etc. but

87 With the exception of a course of three years (one cycle) studyin polytechnics leading to a degree in law practice. The value ofthis diploma is rather limited. It does not give access to legalprofessions such as advocate, judge or bailiff. Basically thesestudents end up in the private sector as para legals.


simply in law. From the academic year 2004-2005onwards the students finishing their law studieswill be given the degree of master of laws,although the new masters structure is intended tostart from the academic year 2007-2008, whilstthe new bachelors structure will be initiated asfrom 1 October 2004.

Discussions have been going on focusing onthe total time required for law studies. Since thebachelors degree requires at least 180 studypoints and the masters at least 60, severalpossibilities arise. A bachelors law degree afterthree years (180 study points) or after four years(240 study points) and a corresponding mastersdegree after two years (120 study points) or afterone year (60 study points). A three plus two or afour plus one or even a three plus one year systembecomes possible. If there is one thing that thelaw schools must agree on, it is the duration of thelaw studies. It cannot be that one law school isusing a three plus one system and another a threeplus two system. This would not enhance the ideaof transparency embodied in the BolognaDeclaration. In practice, however, the consensusat the level of the deans of the different lawschools for a three plus two system was adopted inthe new decree. It could well be however that inthe future the legal profession might demand thatthe total length of the studies might be shorter.The law schools are not convinced that this wouldbe advisable. Indeed a more professional trainingof law students in the law school would lead todecreasing the number of academic non-law


subjects, such as philosophy, sociology,psychology, ethics that law students could take aspart of their studies. Law schools want tomaintain the basic academic qualifications of lawstudents and are not aiming at producing merelyprofessional lawyers.

Since the decree is requiring that bachelorsneed to have some access to the labour market,law schools will have to take care that lawbachelors can also use their degrees in a workingenvironment. This cannot be the legal profession,however, since federal legislation requires ahigher qualification (“licentiaat”) as a conditionfor access.88 So again it seems that law bachelorswill end up in some paralegal activities. This is notnecessarily a bad thing. It will allow privateindustries, such as the bank sector and insurancesectors, to provide on-the-job training to peoplewith sufficient - although limited - academicqualification. It might well be that after a while asubstantial number of law bachelors will leave theuniversity in order to look for jobs. After all, onlysome 25% of all law graduates currently end up ina legal profession, and for those that do not haveambitions in that direction there might definitelybe a future in just finishing the bachelors course.They can later on still resume their studies andtake on a masters course not necessarily in theuniversity they originally attended.

One of the objectives of the BolognaDeclaration is to realise a wider European space

88 For notaries an additional licentiaat in notary is obligatorytaking one academic year (60 study points).


for higher education. The bachelors-mastersstructure of higher education clearly allows forinternational student (and staff) mobility andonce the credit system is installed nothing butpractical considerations will stop students fromcontinuing their studies abroad. Although thisseems particularly feasible in most of theacademic disciplines, law finds itself rather on theedge. Indeed, a considerable amount of the effortof studying law is devoted to aspects of a nationallegal system. First and foremost, lawyers need tobe fully acquainted with their own national legalsystem. It is therefore not so self-evident that lawstudents from one country will be able to continuetheir study in another country, at least not a verysubstantial part of it. Notwithstanding certaindevelopments towards a European ius commune,a considerable part of the law studies willnecessarily deal with national law so long as theEuropean States cling to their own legal systems.Ideally of course law students would take theirbachelors degree in their home country and thengo out for a masters in another country and beallowed access to the legal profession at least inthe two countries concerned. For the momentthat is not the situation yet. And moreover thiswould require a well thought-out balance betweenthe bachelors and masters curriculum. For nowthere is no deliberate harmonisation of thedifferent law curricula between Europeanuniversities. Each and every one of theuniversities in Europe organises its curriculum byitself responding merely to legal requirementsimposed on them by their national legislation. To


a certain extent there are large parallels becausemost of the European continental states apply thesame educational philosophy aiming at theproduction of a general lawyer with broadintellectual capacities going beyond mereprofessional requirements. But of course theUnited Kingdom has a fundamentally differentapproach since law studies there are directedtowards the production of professional lawyers asrequired by the legal professional societies. So itappears that uniformity within Europe is not yetat hand.

Another aspect that needs to be taken intoconsideration in the light of student mobility isthe use of another language than the nationallanguage for teaching purposes. Particularly incountries where European minority languages arespoken, such as Dutch, Greek, Portuguese and theScandinavian or Eastern European languages. It iscommon now that in most of those countriesEnglish has become the lingua franca forteaching foreign students. A number ofuniversities make tremendous efforts to pleasetheir guest students by providing entire courses inEnglish. In other countries the use of languagescreates difficulties. Particularly in Belgium, thelanguage legislation is rather strict and based onthe territoriality principle. Accordingly,universities and other institutions of highereducation encounter problems in teaching ofsufficient number of subjects in English. Of coursethere can be no doubt whatsoever that it remainsof the highest importance that the local languagebe used for purposes of higher education. This is a


normal aspect of the cultural development of agiven society. Specifically in Flanders due tohistorical circumstances the use of Dutch inteaching cannot be put aside without betrayingthe Flemish emancipation process since the 19th

century. It goes without saying that the use oflanguages in Flanders is a politically sensitiveproblem. Therefore the decree declares that theteaching language in Flemish universities andpolytechnics will in principle be Dutch.Nevertheless, exceptions are possible e.g. forsubjects relating to the study of a foreign languageand subjects taught by foreign visiting professors.In cases where the use of a foreign language forteaching provides an added value to the course,subjects can be taught in this foreign language. Onthe bachelors level however this is limited to 20%of the subjects of a given course per academicyear. Whenever institutions of higher educationintend to organise courses specifically offered forforeign students in a foreign language, they willhave to duplicate them in Dutch, with theexception of courses offered in developmentcooperation programmes. Fortunately, for masterscourses building upon other masters courses, theinstitutions themselves are allowed to decide onthe language used for teaching purposes. So basichigher education will continue to be taught inDutch, but there will be the limited option ofdoing some teaching in a foreign language.

V. CONCLUSION


The organisation of (higher) education is afundamental aspect of the cultural identity of asociety. It reflects how this society deals with theneed to provide sufficient intellectual foundationsfor its public and cultural life. Since thefederalisation of Belgium through the successiverevisions of the Constitution starting in 1970, hasbecome a fait accompli, education is a primaryresponsibility of the Communities. From the early1990s the Flemish Community has shownremarkable initiative in reforming highereducation, both in the universities and in thepolytechnics. These institutions have been givenfar-reaching autonomy to determine their ownmissions. Under the impulse of the Europeanministers for education, the Flemish Communityagain has unreservedly sought to changefundamentally the structure of higher educationin Flanders. This was in its inception a politicaldecision, which none of the universities reallysought. University education and in particularlegal education in Flanders has already enjoyed astrong reputation for quality and efficiency. Somost faculties were in the beginning not at allenthusiastic about these potential reforms.Nevertheless, having been confronted with a newpolitical reality, the universities accepted thechallenge and undertook the process of reformingalong the lines designated by the politicians. Inany case, many universities came to value thepotential for internationalisation inherent in theproposed reforms. The creation of a widerEuropean space for higher legal education is atremendous challenge facing formidable obstaclesarising from the diverse cultural characteristics of


the European States. It is to be hoped that thereforms in Flanders will pave the way for thedevelopment of a new truly European homoacademicus who will find him-herself as much atease in Gent as in Paris, Bologna, Cologne, Pragueor anywhere else in Europe.


The Enlargement of theEuropean Union andthe IGC-2004

Hans van MeertenErasmus University Rotterdam

1. INTRODUCTION

In March 1998 the European Union(EU) formally launched a process that will leadto the largest expansion in its history. Thirteenapplicant countries stand ready to join thefederation: Bulgaria, Cyprus, the CzechRepublic, Estonia, Hungary, Latvia, Lithuania,Malta, Poland, Romania, the Slovak Republic,Slovenia and Turkey.89

The EU has had to deal withenlargements before. The Treaties of Paris(1951), establishing the European Coal andSteel Community (ECSC), and Rome (1957),establishing the European EconomicCommunity (EEC) and EURATOM, weresigned by six founding members: Belgium,France, Germany, Italy, Luxembourg and theNetherlands. But although the EU thenunderwent four successive enlargements,90 theinstitutional structure of the EU has remained

89 For more background information see the homepage of theEuropean Commission athttp://europa.eu.int/comm/enlargement . 90 Denmark, Ireland and the United Kingdom (1973), Greece(1981), Portugal and Spain (1986) and finally Austria, Finlandand Sweden (1995).


almost unchanged. For this reason it is hasbecome clear (and widely known) that thesystem is no longer working well, despite threeintergovernmental conferences (IGC’s).91

The goal of the last IGC 2000negotiations was to prepare the EU forenlargement and to make the Union moredemocratic, transparent and efficient. InDecember 2000 the Conference concluded theTreaty of Nice. However, the Treaty of Nicescarcely achieved these goals.92 Instead, theTreaty announced another IGC, to take placein 2004. Declaration No. 23, attached to theTreaty of Nice stated that:

Following a report to be drawn upfor the European Council inGöteborg in June 2001, theEuropean Council, at its meeting inLaeken/Brussels in December 2001,will agree on a declarationcontaining appropriate initiativesfor the continuation of this process.

91 Starting with the Single European Act in 1987, followed bythe Maastricht and Amsterdam negotiations in 1993 and 1996. Only through an IGC the Treaties can be amended. In an IGC arerepresented the Heads of State of the participating MemberStates. For this reason, Member States are called the “Herren derVerträge.” The amendments of the IGC shall enter into forceafter being ratified by all the Member States in accordance withtheir respective constitutional requirements. See article 48 TEU. 92 See for a commentary of the Nice Treaty. X.A. Yataganas,The Treaty of Nice. The Sharing of Power and the InstitutionalBalance in the European Union B A Continental Perspective.Cambridge: Harvard Jean Monnet Working Paper, 01/01).


The process should address, interalia, the following questions:

• how to establish andmonitor a more precisedelimitation of powersbetween the EuropeanUnion and the MemberStates, reflecting theprinciple of subsidiarity;

• the status of the Charter ofFundamental Rights of theEuropean Union,proclaimed in Nice, inaccordance with theconclusions of theEuropean Council inCologne;

• the role of nationalparliaments in theEuropean architecture;

• a simplification of theTreaties with a view tomaking them clearer andbetter understood withoutchanging their meaning.

A so called ‘Convention’ prepared the IGC.The task of the Convention was to pave the wayfor the next Intergovernmental Conference.93

Contrary to most expectations, the Conventiondesigned a true Draft-Constitution for the

93 The Convention was an innovation. It brought together awide range of governmental, parliamentary and otherrepresentatives. Available at: http://european-convention.eu.int/.


European Union94 and the IGC was, contrary tothe above mentioned declaration, held in Rome in2003. The heads of State of the Member Statescould however not reach consensus over theDraft-Constitution. The next IGC will probably beheld in the second half of 2004, under the Dutchpresidency.

This discussion will concentrate on the firsttwo issues to be faced at IGC-2004. To whatextend can these issues turn the Union into amore democratic, efficient95 and transparentorganisation?

2. THE FIRST ISSUE: A CLEARER DIVISION OF POWERSBETWEEN THE EU AND THE MEMBER STATES

Declaration 23 makes clear that the moreprecise delimitation of powers should reflect theprinciple of subsidiarity. Before turning to thedesirability of a more precise division of powersfor the European Union, some remarks should bemade about the principle of subsidiarity.

What does this principle mean? In theTreaty on European Union (TEU) the principle ismentioned in Article 2 and in the EC Treaty(TEC) in Article 5. According to this last article

94CONV 850/03. At the time of writing of this article, the

results of the Convention were not known. Therefore they willnot be discussed here. 95Efficiency means that decisions should be taken as quicklyas possible.


the Community shall only act within the limits ofthe powers conferred upon it by this Treaty, inpursuit of the objectives assigned to it therein. Inareas which do not fall within its exclusivecompetence, the Community shall take action, inaccordance with the principle of subsidiarity, onlyif and insofar as the objectives of the proposedaction cannot be sufficiently achieved by theMember States and can therefore, by reason of thescale or effects of the proposed action, be betterachieved by the Community. Any action by theCommunity shall not go beyond what is necessaryto achieve the objectives of this Treaty.

In European literature no consensus existsover the precise meaning of the principle. Inglobal terms one can only say that it means that(I) the Community shall not act when and if it isbetter for the action to be taken by the MemberStates and vice versa, and (II) if action by theCommunity is warranted the Community shallnot go beyond what is necessary to achieve theobjectives of this Treaty.96 It is clear that theopinions often differ between the Community andMember States over the question: when is it“better” for the action to be taken by the MemberStates? The European Court of Justice (ECJ) hasno competence over this question.97

96 See P. Craig, G. de Búrca, EU Law, text, cases, andmaterials. Oxford University Press, 1999. 97 This does not mean that the principle of subsidiarity is notjusticiable. The point of illegality is reached when the actinginstitution was obviously mistaken or abused its discretion whenconsidering the principle. See: A. von Bogdandy, J. Bast, TheEuropean Union’s Vertical Order of Competences: The CurrentLaw and Proposals for its Reform, CMLrev. 39, 2002, p. 227-268.


Furthermore, in European politicspractically no one seems to be willing to recognizethat theoretically the principle of subsidiarity saysnothing about the division of competencesbetween the EU and the Member States.98 Thisdivision is already laid down in the TEC. Article 7of the TEC states that “each institution shall actwithin its limits of powers conferred upon it bythis Treaty”. Determining which institution haswhich powers and how they must be exercised, isgoverned by the requirement that all Communitymeasures must be adopted on the basis of anidentifiable legal power or basis.99 In other words,if there is no legal basis, the Communityinstitutions have no legal power to adopt ameasure.

Why then does the EU want to change thecurrent division of powers? There is an officialand an unofficial motive. The unofficial motive isthat the German Länder were responsible formaking the Kompetenzabgrenzung (as theGermans call it) an official IGC agenda issue.German Länder repeatedly told the President ofthe European Commission (Prodi) that ratificationof the revised treaty will be difficult if theirpowers were not preserved.100 The official reading

98 Theoretically, because if the Commission submits aproposal to the European Parliament and the Council, thatpresupposes that the Commission thinks that action can betterbe taken by the EU. In those cases a legal basis is quickly found. 99 Opinion 2/94 (‘competances d’attribution’). 100 Agence Europe (No 7726), May 27th 2000. Thecurrent discussion concerning the introduction of a “Kompetenz-Katalog,” shows resemblance with the debate in the US in the


is that the current system is not transparent andunderstandable enough. This is deceptive, butpartly true. The current delimitation of powersdoes not excel in clarity, to put it kindly.101 Anunderstandable enumeration of Communitypowers could contribute to more acceptance andlegitimacy of the EU by the European citizen,more transparency and efficiency. The questionhowever is how to understandably write downsomething so complex?

From the perspective of efficiency thefollowing remarks can be made. To enable theUnion (with 27 or more Member States) to makedecisions as quickly as possible, it seemsunavoidable that certain competences cannotremain the domain of the EU.102 The German

days of Madison. Also there the question was: how powerfulshould the future Union be? The call from the influential GermanLänder is an effort to preserve and even extend their powers. 101 The system can be grosso modo described asfollows. The EC has so called “exclusive competences”. Thismeans that the Member States cannot take action. Thesecompetences are only fisheries and the common commercialpolicy. Furthermore, there are “concurrent” and “parallel”competences; Member States remain competent as long as theEC has not taken action in this field. For example agriculture(art. 37 EC): “In order to evolve the broad lines. Has the EC, inthe case of a ‘concurrent’ or ‘parallel’ competence (also termed‘cumulative-concurrent’ or ‘shared’ competence) not taken all the“necessary measures”, the Member States remain competent.Within the parallel powers, one can conceive non-regulatorypowers, e.g. Article 149 EC, as a particular subgroup. Under thesecompetences the Union is prevented from regulating. See: VonBogdandy, Bast, op. cit. 102 “For example, if the number of Member Statesrises from 15 to 27, the conciliation committees involved in theco-decision procedure, which currently require 40 people tomeet, would then require about 70 people. It is inevitable thatthe time taken up by each of these procedures will increase andthe time available to members of the European Parliament, theCouncil and the Deputy Permanent Representatives, who usually


Minister of Foreign Affairs, Joschka Fischer,initiated this discussion. He stated in his famousspeech at the Humboldt University in Berlin in2000 that:

“there should be a clear definition ofthe competences of the Union andthe nation-states respectively in aEuropean constituent treaty, withcore sovereignties and matterswhich absolutely have to beregulated at the European levelbeing the domain of the Federation,whereas everything else wouldremain the responsibility of thenation-states.”103

The core sovereignties of the EU can bereadily discerned. The exclusive competences ofthe EU, those are fisheries104, the external trade ingoods105 and the common commercial policies.106

represent members of the Council on the conciliationcommittees, will be reduced, while the number of procedures willproliferate. As a result, less attention will of necessity be paid tothe quality of the most important legislative acts.” This quote wastaken from: SN 3068/00, “The concept of a legislative act adoptedby the co-decision procedure within the framework of thehierarchy of Community legal acts and in the context of theforthcoming enlargement of the Union,” Brussels, 30 may 2000. 103 “From Confederacy to Federation - Thoughts onthe finality of European integration.” Speech by Joschka Fischerat the Humboldt University in Berlin, 12 May 2000. 104 According to the ECJ in C-804/79. 105 According to the ECJ in Opinion 1/75 and C-41/76. 106 However, the Treaties themselves explicitly confercompetences only in the Monetary Policy field (e.g. Art. 106 EC).The qualification of other competences as exclusive iscontroversial, in particular since the introduction of Article 3b(2)


Trying to define “matters which absolutely have tobe regulated at European level” is more difficult. Itdepends on one’s perspective.107 Where theEuropean Community under the currentarrangement shares its powers with the MemberStates, the Community will in the future beresponsible for formulating basic policies, of whichthe Member States will be the executives (inmanaging the environment, public health, socialpolicy, employment, research and technologicaldevelopment, and development co-operation).108

Member States could be fully responsible foractivities where the Community only has limitedcompetence or where the Community hassupplementary powers (e.g. education, culture,vocational training , youth and industry).Moreover, Foreign Policy and the Justice andPolice cooperation (the so-called second and thirdpillars) should belong to the core activities of theUnion. These reflections lead to the followingproposals:

[1] As provided by the Treaties upon which theUnion is founded, the Union shall have thefollowing competences: 109

(1) Exclusive competencesa) External trade in goodsb) Sea Fisheries

EC (now Art. 5(2) EC). See: Von Bogdandy, Bast, op. cit. 107 Those who support a “federal” Union will havedifferent views then adherents of a “confederal” Europe. 108 In this system, there would be no longer be adistinction between “concurrent” and “parallel” competences. 109 Von Bogdandy and Bast, op. cit, have developed asimilar model, albeit without mentioning the specificcompetences.


c) Monetary policyd) Foreign Policye) Justice and Home Affairs

(2) Concurrent competences

a) Environmentb) Public healthc) Social policyd) Employmente) Research and technological developmentf) Development co-operation

(3) Non-regulatory competences

a) educationb) culture,c) vocational trainingd) youth and industry

Could the transparency of the Union also beadvanced by a competence-catalogue?Theoretically, an enumeration of powers makesclear at a glance what the Union should or shouldnot do. In practice, however, things are muchmore complicated. Here we can learn from theGerman and American experiences. Both legalsystems have a very clear enumeration of powers.But because of the wide interpretation by theSupreme Court in the United States and theBundesverfassungsgericht in Germany,examination of Art. I, § 8 and Chapter VII of theGerman Grundgesetz tells us very little about theactual division of powers between the Union and


the States. If one wants to avoid a similarevolution in the EU, the European Court of Justiceshould be sharply restricted in the scope of itspower to interpret enumerated powers.

Another possible criticism of creating anenumerated Kompetenz-Katalog for the EU, wouldbe that it would inhibit the so-called “communitymethod” by which much European integration hastaken place.110 This method has proven to be quitesuccessful. Too strict a delimitation of powerscould endanger this method, causing furtherintegration to stagnate.111

3. THE SECOND ISSUE: THE STATUS OF THE CHARTER.

At the end of the IGC in Nice an “EUCharter of fundamental rights” was “solemnlyproclaimed”. This document contains about 50articles, containing a wider variety of fundamentalrights. Why was such an exercise needed? After

110 “The Community method guarantees both thediversity and effectiveness of the Union. It ensures the fairtreatment of all Member States from the largest to the smallest. Itprovides a means to arbitrate between different interests bypassing them through two successive filters: the general interestat the level of the Commission; and democratic representation,European and national, at the level of the Council and EuropeanParliament, together the Union’s legislature,” according to theEuropean Commission in it’s White paper on EuropeanGovernance, Brussels, 25.7.2001, COM(2001), 428, final. It alsomeans that whenever harmonisation or further integration wasneeded, new powers for the Union were created. This step-by-step approach has proven it’s value. 111 See, e.g., the view of the European Commission:“(h)owever, codifying in the Treaty a catalogue of this kind wouldhave the disadvantage of artificially straitjacketing the Union’scapacity for action, which would be particularly inappropriate ina rapidly changing global context.” A project for the EuropeanUnion, COM(2002), 427, Brussels, 22 May 2002.


all, the ECJ had already recognised in itsjurisprudence practically every fundamental rightas now laid down in the Charter. The conclusionsof the European summit in Cologne (1999) werethat: “[t]he European Council takes the view that,at the present stage of development of theEuropean Union, the fundamental rightsapplicable at Union level should be consolidatedin a Charter and thereby made more evident.”The Presidency perceived “a need, at the presentstage of the Union’s development, to establish aCharter of fundamental rights in order to maketheir overriding importance and relevance morevisible to the Union’s citizens.”

The Charter has raised several complicatedquestions and problems. Two stand out. First, thenew ability that European citizens will have toinvoke rights as laid down in the Charter before anational or European judge and second, therelationship between the Charter and theEuropean Convention on Human Rights(hereafter: the Convention).

IV. THE CHARTER AND INDIVIDUALS

Article 230 (4) EC reads as follows: “[t]heCourt of Justice shall review the legality of actsadopted jointly by the European Parliament andthe Council, of acts of the Council, of theCommission and of the ECB, other thanrecommendations and opinions, and of acts of theEuropean Parliament intended to produce legaleffects vis-à-vis third parties.” Article 230 (4)


states that: “[a]ny natural or legal person may,under the same conditions, institute proceedingsagainst a decision addressed to that person oragainst a decision which, although in the form of aregulation or a decision addressed to anotherperson, is of direct and individual concern to theformer.”

This article thus grants individuals a rightto a so-called direct appeal before the EuropeanCourt of Justice (ECJ). But only if the act of theEC112 is of a “direct and individual concern” tothem. The Court of Justice has interpreted thisdemand very strictly. In the well-knownPlaumann case 113 the court stated that: “Naturalor legal persons may claim that a contestedprovision is of individual concern to them only ifit affects them by reason of certain attributeswhich are peculiar to them or by reason ofcircumstances in which they are differentiatedfrom all other persons.” This case-law, which wasupheld until very recently, made it very difficultfor individuals to contest an act of the EC.114 Thissituation will probably come to an end. In the caseof T-177/01115, the Court of First Instance (CFI)116

made a remarkable innovation:

“ ... une personne physique oumorale doit être considérée comme

112 Acts taken within the field of the second and firstpillar are only insignificantly open for review. I shall not discussthis further. 113 C-25/62. 114 Some writers called this “an insult to democracy.” 115 3 May 2002. 116 Which is a part of the Court of Justice.


individuellement concernée parune disposition communautaire deportée générale qui la concernedirectement, si la disposition enquestion affecte, d’une manièrecertaine et actuelle, sa situationjuridique en restreignant ses droitsou en lui imposant des obligations.Le nombre ou la situation d’autrespersonnes également affectées parla disposition ou susceptibles del’être ne sont pas à cet égard desconsidérations pertinentes.”117 Ifthis judgment is being upheld bythe ECJ, the position of individualsto initiate a direct appeal wouldimprove considerably.

This raises the question whetherindividuals can invoke rights under the Charter.That was certainly not the intention of theMember States when they concluded the Treaty ofNice. According to them the Charter was only“politically” (not legally) binding.118 Here theyoverlooked the significance of Article 6 EU thatreads that the Union shall respect inter aliafundamental rights as they result from the

117 The English version of the judgement is notavailable yet. 118 See article 51 of the Charter: “The provisions ofthis Charter are addressed to the institutions and bodies of theUnion with due regard for the principle of subsidiarity and to theMember States only when they are implementing Union law.They shall therefore respect the rights, observe the principlesand promote the application thereof in accordance with theirrespective powers.”


constitutional traditions common to the MemberStates, as general principles of Community law.One could easily argue that the Charter is a partof these constitutional traditions. If that is thecase, the Union would have to respect Article 47of the Charter: “[e]veryone whose rights andfreedoms guaranteed by the law of the Union areviolated has the right to an effective remedybefore a tribunal in compliance with theconditions laid down in this Article.”

The ECJ, however, has until recentlymade no reference to the Charter.119 Thatsituation changed in case T-54/99:

“[s]uch judicial review is also oneof the general principles that areobserved in a State governed by therule of law and are common to theconstitutional traditions of theMember States, as is confirmed byArticle 47 of the Charter of Funda-mental Rights, under which anyperson whose rights guaranteed bythe law of the Union are violatedhas the right to an effective remedybefore a tribunal.”

119 Advocate-Generals of the Court, on the otherhand, did. The first was A-G Tizzano: “I think therefore that, inproceedings concerned with the nature and scope of afundamental right, the relevant statements of the Charter cannotbe ignored; in particular, we cannot ignore its clear purpose ofserving, where its provisions so allow, as a substantive point ofreference for all those involved - Member States, institutions,natural and legal persons - in the Community context.” C-173/9,BECTU, 8 February 2001.


This observation was repeated in the abovementioned case T-177/01. But here too is remainsto be seen whether the ECJ will uphold ajudgment which, if it is allowed to stand, will haveenormous consequences.

V. THE CHARTER AND THE CONVENTION

The strange situation has now arisen inwhich Europe had two different charters offundamental rights: the European Convention onHuman Rights and the Convention for theProtection of Human Rights and FundamentalFreedoms. The former, falls under the jurisdictionof the European Court of Human Rights, locatedin Strasbourg. The latter falls within thejurisdiction of the ECJ in Luxembourg. Most ofthe rights laid down in the Charter are similar tothose of the Convention. Even the way the rightsare formulated is much the same. The Conventionhowever entered into force in 1950 and hastherefore a rich store of accumulatedjurisprudence. Formally and legally the ECJ isbound by this.120 Practise however has shown thatit is not. The possibility of diverging jurisprudenceon the highest European level is far from ideal.When the ECJ offers equal121 or more122 protectionthan the ECHR, there wouldn’t be a problem. TheCharter stresses in Article 52 (3): “ ... [i]n so faras this Charter contains rights which correspond

120 Under article 6 EU. 121 An example is C-185/95. 122 An example is C-340/97.


to rights guaranteed by the Convention for theProtection of Human Rights and FundamentalFreedoms, the meaning and scope of those rightsshall be the same as those laid down by the saidConvention. This provision shall not preventUnion law providing more extensive protection.”

But what if the rights in the two cataloguesdo not correspond? In those cases Article 52(3)seems not applicable. It is therefore possible thatthe ECJ offers less protection than the ECHR.123

Since, the ECJ decides whether the rightscorrespond or not, it can easily conclude that theydo not.

The only possible solution to preventdiverging jurisprudence is accession of the Unionto the European Convention on Human Rights. Inits Opinion 2/94, however, the Court held that theEC has no competence to accede to theConvention.124 Because of the recent

123 For example, in case T-305/94 the CFI rejectedthe wide interpretation of article 8 of the Convention. In case C-17/98, the ECJ ruled that parties cannot react on the conclusionsof the Advocate-General. This is possible under the Convention. 124 “The Court stated that respect for human rightswas a condition for the lawfulness of Community acts. However,accession to the Convention would entail a substantial change inthe present Community system for the protection of humanrights in that it would involve the Community entering into adistinct international institutional system as well as integration ofall the provisions of the Convention into the Community legalorder. The Court took the view that such a modification of thesystem for the protection of human rights in the EC, with equallyfundamental institutional implications for the Community andfor the Member States, would be of constitutional significanceand would therefore go beyond the scope of the dispositivepowers provided for in Article 308 of the EC Treaty.” Available athttp://europa.eu.int/eurlex/en/about/abc/abc_10.html.


developments concerning the Charter, the issue isa pressing one. In light of the current politicaldebate in Europe it seems unlikely that the EUwill ever accede to the Convention. There areseveral reasons for this. First, the EU has no legalpersonality. Legal personality is a condition sinequa non for accession to the Convention. Second,besides the EU-Treaty, the (statute of the) ECHRrequires amendment. Under the current systemonly states can join the Convention. The EU is, ofcourse, not a state. Amending the Convention hasto be approved by all 41 members of the Councilof Europe. It is not unthinkable that some (nonEU) members will not cooperate.

VI. CONCLUSION

The IGC-2004 has to tackle some verycomplicated and politically delicate issues. Thediscussion is mostly about power. Member Stateswant to secure their influence in the enlargedUnion. The delimitation of powers is probably themost complex issue. When it comes torenegotiating the current order of competences,the EU-Member States are hardly going to followexpert legal advice or (technical) legalconsiderations.125 There is however a need forrevising the current system. It must be mademore transparent. Moreover, to keep the EUefficient in the future, the powers of the Unionmust be “few and defined”.126

125 Von Bogdandy, Bast, op. cit. 126 As Madison, Hamilton and Jay stated in T h eFederalist Papers, No. 45, “The Alleged Danger From the Powersof the Union to the State Governments Considered.”


Determining the Status of the Charter hasbecome yesterday’s question. The status isalready clear: it has legal effect and citizens caninvoke the rights as laid down in the Charter. Thedemocracy in the Union will be served by thisdevelopment. On the other hand, a solution mustbe found for the problems concerning therelationship of the Charter and the Convention onHuman Rights. Legal certainty could beendangered when there is a risk of divergingjurisprudence. Accession of the EU to theConvention is the only possible solution.


Conflicts in theRegulation of Hostile

Business Takeovers inthe United States andthe European Union

Barbara WhiteUniversity of Baltimore

I. INTRODUCTION

It is striking how the efforts of theEuropean Union to harmonize the laws of itsdifferent member nations in order to createuniform European Union laws repeat the strugglesof the United States to do the same, in the earlyyears of the American union. There were anumber of iterations of “harmonization” 200years ago127 in the course of founding the U.S. anda civil war was fought 150 years ago over whatEuropeans today would call the subsidiarity issue.The American federal power sought to dominateareas which seemed to states to be of more localconcern. Though the Civil War itself ended nearly150 years ago, the tension between Federalcontrol and States’ rights has never trulydisappeared.

127 Articles of Federation and US constitution.


Today in the United States, individualviews about subsidiarity or “states’ rights” oftenreflect attitudes towards those currently in powerat the federal level. For example, many who inthe U.S. would be characterized as politically“conservative” were, for years, the strongestadvocates of states’ rights, at a time when thefederal government was dominated by individualswith more progressive (“liberal”128) politicalorientation and agenda. When, however,conservatives achieved federal power during theReagan-Bush years, the conservatives felt norestraint in applying federal force to assert theirown political perspectives over states withdiffering opinions.

These experiences suggest that efforts todevelop a European Union might glean somelessons from the U.S. experience. It is importantto make note, however, of one dimension ofEuropean nations that makes their circumstancesdifferent and therefore might lead to differentresults. European nations have deeper separatehistories than the American states, and thereforemore profoundly different cultures.

This essay will focus on hostile businesstakeovers to illustrate the significance thatcultural differences among nations can play indeveloping a harmonized European Union law.The European Union has made several (so farunsuccessful) efforts to develop a uniform

128 “Liberal” in the United States sense, i.e., more tothe political left as opposed to Liberal in the European sense, i.e.,more to the political right.


regulation of these activities. Cultural differencesamong the several Union nations may have helpedto thwart those efforts.

Hostile takeover regulation can serve as aninteresting example of the impact of culturaldiversity, illustrating the differences andsimilarities between U.S. Federal and State laws(both statutory and judicial) and the struggles thatthe current European Community now faces indeveloping its own rules and regulations. It isgenerally believed among scholars and policy-makers that as nations increase their economicparticipation internationally, so will theireconomic laws and policies take on aninternational scope. The received view is thatthose internationalizing nations’ laws will eachevolve and in so doing, will naturally gravitatetowards one another and result in uniforminternational standards.129 The reasoning is thateconomic forces will cause each nation to developlaws along efficient lines and as a result eachnation’s laws will ultimately meet each other withthe same (efficient) standards. Furthermore, notonly will these separate efficiency processesgenerate uniform legal standards across thosenations, but the standards evolved will be also theones that are the most efficient for theinternational context. As significant attentionalready has been given academically, judiciallyand legislatively to the subject of hostile takeoversin the U.S. in the 1980’s and the results are now

129 Roberta S. Karmel, “Is it Time for a Federal Corporation Law?”, 57Brooklyn Law Review 55, 90 (1991).


viewed as essentially settled law, it seems quitenatural for current European analysts to look toU.S. conclusions when considering the EU’s andits member nations’ efforts to address the matterfor themselves.130 Indeed many European scholarsand policy-makers have done so.

In the summer of 2001, however, a HostileTakeover Directive was put before the EU’sEuropean Parliament for approval, a proposal thatwas widely regarded as the successful culminationof a 12-year collaborative effort to effectuate acommon ground on the regulatory treatment ofhostile takeovers within the EU countries, basedon principles similar to the United States. TheDirective was defeated, which was the first timesince the EU’s inception that a Directive of thismagnitude did not succeed. It was defeated in adeadlock tie, in large part because of the influenceof Germany. One of Germany’s major companieshad fallen victim to an international hostiletakeover by a British company less than two yearsearlier. The economic importance of the twocompanies was so great that the takeover itselfwas the largest in history. Some of the Germancompany’s vulnerability was due to differences inGermany’s “economic structure” and “socialcontract” and lack of takeover regulations ascompared with Britain, the home of the hostileraider. Clearly finding common ground among 15nations (which are now expanding to 25, with

130 Guido Ferrarini, “Share Ownership, Takeover Law and theContestability of Corporate Control,” Company Law Reform in OECDCountries. A Comparative Outlook of Current Trends, ConferenceProceedings (forthcoming 2001).


perhaps more to join131), even regarding a well-defined topic such as hostile takeover regulation,is difficult to achieve and even more difficult tosustain.

The purpose of this essay is to raise anumber of questions about “received theory”regarding the evolution of transnational uniformbusiness law. First, a closer look at history willchallenge the view that nations will naturallygravitate towards a uniform law. Second, reviewof the practicalities will question whether atransnational uniform law in all its aspects isindeed necessary to have efficiency. Third, a lookat actual cases suggests that the experience of theUnited States has not always yielded the most“efficient” solutions, at least with regard toeconomic matters, when applied to Europeancircumstances.

II. HOSTILE TAKEOVERS - THE UNITED STATES’EXPERIENCE

A. Evolution of Hostile Takeover Regulation

A hostile takeover occurs when anindividual or corporation - the raider - seeks toobtain ownership of enough shares to controlanother corporation - the target (Revlon v..McAndrews, 1986). What renders the activityhostile is when the target’s management (andperhaps some of the current owners) resist the

131 Frank Bruni, “A10 Countries Sign to JoinEuropean Union,” N.Y. Times, April 17th 2003


raiders’ efforts to acquire the firm. For whatpurpose the raider plans to apply his control ofthe target company will vary but it is almostalways motivated by the raider’s financial gain.132

Some goals have been to break-up a conglomeratetarget to sell its component parts at a profit, tostreamline and run a more profitable component,to replace an inefficient management or, moreprevalently recently, to incorporate the target’scomplementary assets into the raider’s own forgreater productivity and future profits. Thoughthe purpose may vary, the method is the same.The raider announces publicly an offer to buyshares from current shareholders at a pricegreater than the share’s current stock marketprice (the tender offer or bid). The method ofpayment may vary: cash, stock in the raider’scompany, bonds, etc., and the terms of the tendermay vary: for example, purchase will be exercisedonly on the condition that enough of theoutstanding shares are offered to the raider to giveit majority control in the target company. Each ofthe current shareholders then must decidewhether to tender his or her particular shares tothis bid offer.133

What makes the situation “hostile” is notthe bid for the shares, but whether themanagement (and perhaps significant minorityshareholders) of the target company is against thischange in control. In the U.S., the Board ofDirectors has sole power to run the corporation.

132 Jack B. Jacobs, “Comments on Contestability,” 54 Universityof Miami Law Review 847 (2000).

133 Ronald J. Gilson & Bernard S. Black, The Law and Finance ofCorporate Acquisitions, (2d ed. 1995).


The shareholders’ power is in their right todetermine the members of the Board throughvoting-rights based on shares owned. A typicaltarget company, however, is a stock exchange-listed firm whose owners by and large constitute adiffuse number of shareholders who are mostlyinattentive to issues of management and unlikelyto act concertedly if bothering to vote at all. As aresult, the current incumbent managementusually has default control over the Board’smembership and has had so for some time.Sometimes the management in such situations isreferred to as the “entrenched” management.Unless the articles of incorporation or bylawspreclude otherwise, if a majority shareholder (onewho owns over 50% of the voting shares) nowemerges from the takeover efforts, then thatshareholder can choose at least the majority, ifnot all, of the members of the Board and throughthem control the firm.

It is most likely that the raider, uponsuccessful acquisition of above 50% of the votingshares, will replace the incumbent Board withmembers of the raider’s choosing to pursue theraider’s plans for the company. Thus an incentivearises for the incumbent Board to use its powersto thwart the success of the raider’s tender offer.Though this is not always the reason formanagement’s resistance to external acquisitionof its firm, it is one that is often proffered, at leastby the acquiring raider. Other arguments thedefending management often gives for resistingthe takeover is that the company will be more


profitable remaining with the incumbentmanagement or that the raider is not offeringsufficient money for the shares. Though thearguments vary on both sides, the argumentsbegin when the attempt at acquisition becomeshostile rather than friendly.

With the rise in the number of takeovers inthe United States came a greater interest in thelegal question of whether it was lawful for theBoard to prevent its company’s shareholders fromaccepting a tender offer bid at a premium price.Early on, the courts concluded that despite thepossible entrenchment incentives of management,if their predominant motive was in the bestinterest of the company, the management’s actionwould be upheld.134 Of course this raised the legaland economic question of what constituted actingin the best interest of the company and what waspersuasive evidence of it.

As hostile takeover attempts increased, thequestion of permissible activity intensified. Bothraiders and incumbent managements developedtechniques and strategies to thwart each other,many of which ended up in court for review whenthe affected party complained. Some strategiesused by management were “shark repellants”(rendering the company preemptively undesirableto some potential raider, e.g., by selling offvaluable assets or putting in place some restrictivevoting requirements), “white knights” (findinganother company to outbid the raider but who

134 Cheff v. Mathes, 199 A.2d 548 (Del. 1964).


was friendly to the incumbent management) and“greenmail” (authorizing the use of companyassets to buy the raider’s stakehold of target’sshares at a significant premium on the conditionof the raider’s withdrawal.) Some techniques usedby raiders were pre-emptive announcements ofoffers (to prevent management time to react),short time frames for bid offers (to force currentshareholders to decide quickly) and two-tieredoffers (giving a high price to the first sharestendered and a sub-par price for the last shares ina subsequent forced sale after the takeover’ssuccess and merger with target).

The thrusts and parries of strategies weretested over time in the courts, forcing the courtsto define more clearly what was in the bestinterest of the corporation. The “best interests ofthe corporation” evolved into the “maximizationof (current) shareholder value” and the courts’subsequent evaluations of actions were based onthat criteria: (Did the nature of the offercoercively force the shareholder to sell or to sellprematurely against his or her best long terminterests? Was the management defenseunwarrantedly preclusive of the shareholder’sopportunity to exercise his or her own judgmentas to what was the most valuable course ofaction?) Statutes at both federal and state levelsimposed rules and regulations to affect the courseof a hostile takeover effort in order to maximizecurrent shareholder value (disclosure rules,mandatory minimum durations of offers,withdrawal of tenders by shareholders permitted


(so as to accept better offers elsewhere)) and the“best price rule” (all shareholders receive thesame best price regardless of changes in bid priceto solicit more tenders).) (Williams Act andvarious state takeover statutes.)

The denouement was the development ofrights plans (“the poison pill”) which wereamendments to corporate charters thatautomatically triggered a dilution of a company’sshares if a prelude to a hostile effort occurred.The effect was to make any hostile attemptprohibitively expensive but also gave control tomanagement to revoke “the pill” before it wastriggered. This forced any prospective raider tonegotiate directly with the target’s managementand reach a settlement before making any tenderoffer could begin. Tested in the courts, “thepoison pill” was found lawful as long as themanagement used it to maximize shareholdervalue (Moran v. Household Int’l, 1985), forexample, to secure a better bid from anothercompany. These poison pills have sometimesbeen seen as contributing to the slowdown inhostile takeovers in the early 1990’s thoughstudies have indicated otherwise (Coates IV,2000).135 Today approximately 85% of thecompanies listed on exchanges have adoptedsome form of rights plan. Though it is oftensuggested that managements have used the pill toextract some protection or compensations forthemselves once a takeover is proposed,

135 John C. Coates IV, “Empirical Evidence on StructuralTakeover Defenses: Where Do We Stand?,” 54 University ofMiami Law Review 783 (2000).


numerous studies indicate that regardless, therights plans have increased significantly thepremium the departing shareholders receive.136

B. Hostile Takeover Regulation in theUnited States Today

The issues debated in the U. S. todayrevolve around whether current regulations,statutes and court rulings adequately insuremaximization of shareholder wealth whilepermitting the market forces to discipline firmsinto maintaining economic efficiency.137

Generally, hostile takeovers are viewed as playingan important role in disciplining the participantsin the marketplace to be efficient. The underlyingthread of all the hostile takeover debates is thatgiven its expense and the offer of above-market-price premium to current shareholders, a hostiletakeover effort would not arise if there were notsignificant economic efficiency gains (andtherefore profits) to be made by the acquirerwhich are not being exploited by currentmanagement. Particular attention is paid to theimpediments of the poison pill towards that endand how the courts permit its use.138 Additionalquestions are whether the current statutoryregulations unduly burden potential acquirers,

136 Id.; R. Comment & G. Schwert, “Poison or Placebo? Evidenceon the Deterrence and Wealth Effects of Modern AntitakeoverMeasures,” 39 Journal of Financial Economics 1 (1995).137 Stephen Choi, “Regulating Investors Not Issuers: aMarket-based Proposal,” 88 California Law Review 279 (2000).138 Unitrin, Inc. v. American General Corp, 651 A.2d 1361 (Del.1995).


inhibiting their ability to move efficiently intaking over a firm when indeed it is economicallywarranted.139

C. Federal vs. State Control

In effect - legislatively and jurisprudentially- the United States has evolved a standard for theregulation and review of hostile take-over activitythat is largely uniform across the states, thoughthe impact of the variations that do exist amongthe states’ takeover statutes are still the subject ofdebate. At the federal level, the Williams Act of1968 amended the Securities Exchange Act of1934, creating federal regulation of hostiletakeover activity by both the acquiring and thetarget firms. The Act focuses on maximizing theinformation to and the ability of the currentshareholders faced with tender offers to make thebest decisions with regard to the value of theirshares. Subsequent to the passage of the WilliamsAct, a wave of state level statutes were passed togive directors of target companies powers ofresistance to hostile bids beyond the Williams Act.After those statutes were declared by variouscourts to be unconstitutional on the grounds thatthey interfered either with interstate commerceor with the federal supremacy of the WilliamsAct,140 the U.S. Supreme Court141 neverthelesspaved the way for a second wave of state statutes

139 Lucian Arye Bebchuk & Allen Ferrell, “A New Approach toTakeover Law and Regulatory Competition,” 87 Virginia LawReview 111( 2001). 140 See, e.g., Edgar v. MITE Corp., 457 U.S. 624, 646(1982). 141 CTS Corp. v. Dynamics Corp., 481 U.S. 69, 86-87(1987).


to achieve similar results, by allowing states tocouch the provisions empowering target managersin terms of the states’ powers to regulatecorporate governance. It is these variationsamong the states and their regulatory impact thatremain the subject of debate as to whether thereis a need for more circumscribing federalregulation.142

More notably, for the concerns of theEuropean Union, regardless of the extent thatthere are explicit federal rules and jurisprudenceas compared with state laws and court decisions,the issue of the impact of hostile takeovers on aparticular state’s well-being in the U.S. has playedlittle role in any legislation or court opinions.Significant court decisions at the state level, (mostnotably Delaware) have had a persuasive impacton other state courts’ decisions with regard tobusiness law matters, and the conclusions of thesecourts emphasized maximizing the currentshareholders’ wealth, whether or not theshareholders were residents of the state. Littleconcern was given to the impact that a takeovermay have on the welfare of the community inwhich the business resides. Takeovers cansometimes lead to the closure of local plants andlayoffs, thereby altering the daily life of thecommunity. Though some court decisions statedthat Boards of Directors could consider as a factorthe impact on the community in its decision to as

142 See generally, William C. Tyson, “The ProperRelationship Between Federal and State Law in the Regulation ofTender Offers,” 66 Notre Dame Law Review 241 (1990).


whether to forestall a takeover offer (sometimesreferred to as “stakeholder rights”), the effect ofsuch statements was relatively small. Ultimately,the maximization of the wealth of the currentshareholders was the standard that held primacyin the evaluation any of the players’ activities intakeover struggles.

Since maximizing current shareholders’value in the corporation disregards anycommunity impact and there is no causal oreconomic link between the shareholders’ welfareand the community’s welfare (except to theextent, in the rare event, that the shareholdersthemselves are residents), when shareholdersdecide and are able to accept (if the withdrawal ofa poison pill is required) an acquirer’s offer topurchase their shares at a premium above themarket price, the struggle is finished. The currentshareholders walk away with the proceeds fromtheir sale, the acquirer takes over the firm to itsown advantage and the consequences to theemployees and community in which the firmresides fall where they might.

During the 80’s, in the heyday of the hostiletakeovers in the U.S., news organizations andshow business media spotlighted attention on thecommunity fallouts from the waves of mergersand acquisitions. Acquirers were often portrayedas voracious greedy vultures picking on firms in amanner that destroyed a valuable company and/orvalued ways of community life and doing so solelyfor the purpose of making money. One merelyneeds to think of popular movies on the subject


produced at the time to have a sense of publicperception: Big Business (1988, Comedy, LilyTomlin, Bette Midler - a corporate struggle overwhether to close down a factory that will alsodestroy a southern town’s way of life); OtherPeople’s Money (1991, Comedy, Danny DeVito -corporate raider’s efforts to acquire a localcompany that is the lifeblood of a New Englandcommunity); and the most notorious, Wall Street(1987, Drama, Michael Douglas, Charlie Sheen,Martin Sheen - young ambitious stock brokerlearns that his idol, a major corporate raider, isreally and can only be greedy and unscrupulous inorder to be successful.) Even in Pretty Woman(1990, Julia Roberts, Richard Gere), the hero, asuccessful, albeit ethically questionable, corporateraider, is psychologically redeemed when hedecides to keep one corporate acquisition intactand build it up further instead of selling off itscomponent parts for profit. These movies andothers like them mirrored the sentiments held bythe United States public at large regarding thedisruption to corporations’ and people’s lives thatthe waves of corporate acquisitions and mergershad caused. News media gave similarly heart-rendering stories of families’ and communities’lives in upheaval as a result of shifts in corporatewinds.

Despite the popular sentiment of hostilitytowards (and fascination with) the corporateraiders and the concern for the disruption thatsuch activities were perceived to cause, courtdecisions and legislative efforts to regulate hostile


takeover activity did very little to address them.Roberta Romano, a leading U.S. scholar intakeover activity, found little or no evidence thatstate lobbyists or legislators were ever concernedfor the negative impact on their communities oremployment as a result of takeover activity.Indeed, their focus seemed to be solely onempowering the incumbent management with thecapacity to forestall the success of tender-offerbids, a move she notes has the potential to benefitthe incumbent management, who are local andoperate in concert, at the expense of shareholderswho tend to be dispersed and loosely if at allorganized.143 Ultimately, the poison pill andsimilar impediments to shareholder acceptanceforce the potential acquirer to negotiate withmanagement as to the terms of the acquisition.Management usually suggests that this secures thebest price for shareholders, but there is alsosuspicion that management uses these tools toextract benefits for itself (for example, lucrativeseverance benefits or promises to keep themanagement on). It is the extent to which thevarious state statutes regulating hostile takeoversempowers the incumbent management to thwartshareholders from accepting tender offer bids andeffectively extracting compensation for

143 Roberta Romano, “Competition for CorporateCharters and the Lesson of Takeover Statutes,” 61 Fordham L.Rev. 843, 854-56 (1993). She suggests that most state takeoverstatutes were lobbied for by the management of firms who wereeither the target or potentially a target for an acquisition bid.She also noted that the local bar (of attorneys) of each statetypically supported such legislation as well and she makes thepoint that once a takeover occurs, the acquirer continues to relyon its own legal counsel and not the ones of the target.


themselves that are the subject of scholarly andpolicy debates.144

Nevertheless, but for the issue ofmanagement compensation, it is the use of themaximization of current shareholder value as thebenchmark for review that renders regulation oftakeover activity essentially uniform across theUnited States, regardless of whether one looks atfederal or state regulation.

III. THE EUROPEAN EXPERIENCE

A. The Advent of Cross-Border HostileTakeovers

Hostile takeovers were not a focus inEurope until 1987 when the Italian entrepreneurCarlo De Benedetti sought to acquire Belgium’scrown jewel of business: Société Génerale deBelgique. Since then, the incidents of takeovershave increased dramatically145 not only in crossing

144 For example, see the articles presented at theUniversity of Chicago 2002 Symposium on ExecutiveCompensation and Takeover which continue the discussion. See,in particular: Jennifer Arlen, “Designing Mechanisms to GovernTakeover Defenses: Private Contracting, Legal Intervention, andUnforeseen Contingencies,” 69 U. Chi. L. Rev. 917; LucianBebchuk, “The Case Against Board Veto in CorporateTakeovers,” 69 U. Chi. L. Rev. 973; Marcel Kahan & Edward B.Rock, “How I Learned to Stop Worrying and Love The Pill:Adaptive Responses to Takeover Law,” 69 U. Chi. L. Rev. 871;and Martin Lipton, “Pills, Polls, and Professors Redux,” 69 U. Chi.L. Rev. 1037145 Yvette Merchiers, “De bescherming van minderheden inrechtspersonen” (Protection of the Rights of MinorityShareholders) in X., Rechtspersonenrecht, Postuniversaitairecyclus Willy Delva 1998-1999, Gent, Mys & Breesch, 1999,259-307.


national boundaries but in increasing in financialsignificance as well. The largest takeover inhistory was the acquisition by UK’s Vodafone ofGermany’s Mannesmann in 1999. Interestingly,the rise of hostile takeovers in Europe coincideswith the EU’s effort to harmonize company lawthroughout its member nations. As a result,considerable attention has focused on hostiletakeover regulation not only by scholars but bylegislators and policy-makers among the Europeannations and within the European Union itself. Asnoted earlier, despite efforts from many quarters,the EU’s Takeover Directive was voted down after12 years of what appeared to be extremelysuccessful negotiations among member nations,reflecting the divergence of opinion among thenations as to how they want to protect andfacilitate their companies’ activities. As alreadystated, it was clear that Germany’s experience ofthe takeover of Mannesman by British Vodaphonehad a major impact on the vote on the EUdirective.

What is important to appreciate is thatwhen a company is taken over by another in aninternational context, the new owners of thetarget company are usually not natives of thecountry of residence of the acquired company. Sonow Mannesmann, a German company, is nolonger German owned, it is owned by a Britishcompany. It still employs Germans, it still residesin Germany, but it is now owned by foreigners.Société Generale de Belgique was not only one ofthe most significant companies in the Belgiumeconomy but it was also a source of national


pride. Though De Benedetti’s efforts werethwarted, ultimately Société Generale through thedefensive tactic of finding a White Knight now hasFrench owners.

B. The Economic Goals of the EU andTakeover Regulation

1. The Goals in General

One of the oldest economic theories thathas driven most modernizations of economies isthat freedom of trade produces economic gains forall participants, whether they are individuals,companies, or nations; that each participant to afreely negotiated transaction comes away betteroff than before.146 Furthermore, the enhancementof the well-being of some ultimately translates intothe enhancement of well-being of many as theincreases in income increases purchases fromothers thereby increasing their income.147 Thisleads to economic growth and is considered ahallmark of the benefits of economic efficiency.

One of the underlying motives of the EUhas been to create a larger union consisting ofmember nations, so they can take advantage ofthe economic power and growth this couldgenerate and improve all member nations’

146 This goes back as far as Adam Smith’s invisiblehand theory in his “Wealth of Nations” (Modern Library Edition,1937). 147 This is the famous “multiplier effect” firstpromulgated by John Maynard Keynes in GENERAL THEORY OFEMPLOYMENT, INTEREST AND MONEY (1936).


economies and well-being. The founders of theEU recognized from the beginning that in order tobe successful in their goals, they would need afree flow of capital, goods, services and peopleamong the member nation states, and theyincluded these principles in the agreementssigned.148 The European nations have long beenthe subject of criticism for their legal andstructural impediments to the free movement ofeconomic forces that would take advantage ofthese potential economic gains.149 The Europeannations each had their own restrictions on theflow of resources, goods and services throughtariffs, import-export quotas, rules on thestructures of companies and immigration lawsamong other aspects. To overcome the effect ofthese obstacles, efforts to harmonize of lawsamong the several nations of the EU also includedthe goal of reducing the barriers to trade amongthe member nations.

2. The Takeover Friction

Along with the reduction in barriers totrade also came the reduction in impediments tohostile takeovers that crossed nationalboundaries. The effect of this on nationalpsychology may not have been adequatelyanticipated. Different nations now within the EU,as a result of feeling “invaded” by other countries’

148 Treaty Establishing the European EconomicCommunity, March 25, 1957, 298 U.N.T.S. 3 [hereinafter Treatyof Rome], Art. 3. 149 See generally, Jonathan S. Chester, The ProposedRegulation of Corporate Tender Offers in the EuropeanCommunity, 12 N.Y.L. Sch. J. Int'l & Comp. L. 481 (1991).


corporate entrepreneurs, have taken toquestioning whether indeed they want to removeall barriers to the free flow of productiveresources. Part of what enabled Société Generalede Belgique to fend off the Italian entrepreneur DeBenedetti’s efforts to acquire shareholder controlwas the willingness of French executives andofficials to join forces with Société Generalebecause of their own anger at Italian in-roads intoownership of French companies. In the end, $3billion was spent collectively by all sides in thistakeover war, resulting in De Benedetti’s defeatand French ownership of the company. SociétéGenerale itself was only worth about half thatamount according to share market prices.

Though the effect of the hostile takeoverefforts regarding Société Generale made it clearthat the European nations needed to put in placerules and regulations regarding such activities (theUK was at the time the only nation that had anyeffective regulation of takeover activity), it alsomade clear that the inherent structure ofcompanies themselves needed to be re-examined,nation by nation, because the structuresthemselves often prohibited free movements ofresources that would serve to “discipline” existingcorporations into becoming more efficient.150

Issues such as the percentage of companyownership that is closed and not publically traded,

150 The prevailing view as to why Société Generalebecame a target to a hostile take-over is that is was poorly runwith inefficient management. See Jonathan Kapstein et al., HowDi Benedetti Botched the "Battle of Belgium", Bus. Wk., Mar. 7,1988, at 44-46.


the degree of leverage (i.e., the extent thecorporation is financed through loans rather thanequity), the extent to which large institutionalbanks finance companies giving them tremendouscontrol over market forces, and regulationslimiting shareholders’ right to vote, are among themany factors of company structure that are seento limit the free flow of trade and the concomitantforces of market-induced efficiency in inducingcompanies to be more productive.

But what is also clear is that national pridehas served to introduce new factors forconsideration in addition to the goal of achievingunfettered (or at least “less fettered”) marketdynamics. Making the company structure moreliquid and more mobile also introduced it tovulnerability to hostile takeovers. ExaminingGermany’s actions prior to the EuropeanParliament’s vote on the EU Directive forregulating Hostile takeovers and Germany’sdecisions after the vote failed to adopt thedirective are instructive, particularly whencompared to United States state takeover statutesin conjunction with the United States WilliamsAct.

3. The Case of Germany and the Failure ofEU Takeover Directive

Upon the aftermath of the Vodaphonetakeover of Mannesman in 1999, Germanydecided to implement mandatory takeoverregulation which had not been in place before.Most of the proposed law had goals similar to the


Williams Act in the United States. It sought tomake information available to shareholders, togive them reasonable time to decide and othermeasures. Most of the design was to follow theprinciple of maximizing current shareholdervalue. However, one area that was in controversywas the extent to which the target boards couldadopt defensive measures in face of a hostile bid.Though the German advisory commission for theact leaned heavily towards restricting boardactions to maintaining positions of neutralityduring a takeover bid, German politicians, tradeassociations and members of industry objectedfairly strenuously and wanted the scope of theboard’s powers greatly enlarged to enable them toresist hostile bids. Ultimately a compromiseposition was adopted which enabled target boardsto adopt defensive measures under some limitedrestrictions and with the caveat that if themeasures fell within the scope of authority of theshareholders, the measures had to be approved bythe current shareholders. However, thesemeasures could be adopted in advance of anyparticular bid, allowing the board to take pre-emptive defensive actions and outside the contextof an potentially attractive tender offer.

Simultaneously, Germany also focused onwhat was transpiring regarding takeovers at thelevel of the European Union. Germany proposeda measure to be included in the discussionsforming the European Union’s own TakeoverDirective. Like Germany’s statute, the EU’sTakeover Directive was also developing along


United States lines in that the provisions wereoriented towards the maximizing of shareholdervalue. The measure Germany proposed was topermit target boards broad latitude in adoptingdefensive measures. The proposal was introducedin the latter stages of the EU ConciliationProceedings but was ultimately rejected. Eventhough the EU draft had adopted 15 amendmentsto allow for national differences, it maintained itsstrongly held position that target boards behaveneutrally in the face of a hostile bid. Hence whileGermany was developing its own takeover statutethat granted powers to target boards to takedefensive measures in the face of a hostile bid, theEU was developing a takeover directive under theprinciple of board neutrality, rejecting suggestionsof giving boards more latitude.

Ultimately when the EU Takeover Directivewas put before the European Parliament on July 42001, the Parliament came to a deadlock decision,Germany being one of the negative votes cast. Inthe meantime Germany’s own Takeover Act,which allowed for defensive tactics by targetboards, was passed in the German legislature onNovember 2001 and came into force in January,2002.

Currently, there is no EU TakeoverDirective in force and a new proposal for the EU isbeing developed. This proposal still maintains thesame basic approach of constraining the targetboard to neutrality. The one exception to the ruleof neutrality the new proposal introduces is thattarget boards can take defensive measures but


only upon shareholder approval and only after abid has been made and the shareholders are fullyapprised of its nature. This gives little teeth to thepower of the board to resist offers. It basicallyrests on whether the shareholders as a votinggroup want to reject the current offer and believethat the current board can some how do better forthem, either in securing a better offer or managingthe company to yield greater profits. Whetherthis revised proposal will succeed remains to beseen. It will probably not be put before a formalvote until the year 2005.151

IV. EU’s HARMONIZATION VS. SUBSIDIARITYCONTRA U.S. FEDERAL VS. STATES RIGHTS:TAKEOVER REGULATION

Ironically, the direction of the EU TakeoverDirective is precisely consistent with thepreferences of the American critics of the currentU. S. system. Many U.S. scholars feel the state-level takeover statutes that empower boards ofdirectors to resist offers are not only self-servingfor the board at the cost of shareholder wealth butalso economically inefficient for the economy as awhole. Such board powers interfere with themarket discipline of corporate management: thethreat of hostile takeovers induce management torun the company more efficiently or face thepossibility of being pushed out. This is at theheart of the criticism of the state takeover statutes

151 For an overview comparison of the GermanTakeover Statute with the EU Takeover Directive and theirrespective histories, see Daniela Favoccia, Recent Developmentsin German M&A Transactions, 1347 PLI/Corp 955 (2002).


among the states of the United States and it is theheart of the orientation of the EU Directives infavor of board neutrality.

However, as noted in the beginning of thisessay, when the criticism is raised with regard tothe United States and the various states’ takeoverstatutes, any concern for protection from ownersof another state does not loom very large on theradar screen of considerations. Though somebemoan the loss of a way of life, the concerns forthe lost culture or community, seem to faderather easily. In the United States, these culturesand communities do not have centuries of historybehind them. On the other hand, among theEuropean nations, the free flow of resources,services and people often means an invasion bypeoples from one culture by ownership ofenterprises in another culture. And in thisinstance the cultures are identities that go backvery far.

It is not clear what the fallout of a potentialmelting pot of such diverse and longstandingcultures will be. Based on economic efficiencyarguments, the members of the EU may have tomake a choice in the trade-off between moreeconomic well-being and the preservation ofnational and cultural identity. There is someevidence that countries are indeed willing tosacrifice some economic gains for thepreservation of a way of life. Certainly Germany’scurrent takeover regulations empowering theboards of directors to resist hostile bids reflectthat choice. But in doing so, they not only risk


some loss of economic advances but also thepotential for boards to use these powers for theirown economic gain.152

IV. HOSTILE TAKEOVER LAW IN THE FUTURE

A. Varying perspectives

Although shareholder wealth maximizationis the most widely held paradigm for promotingmaximum economic growth and efficiency, it isnot altogether clear that it is the only one that willachieve economic ends. Certainly the underlyingprinciple of unfettered markets has over timebeen modified with constraints to deal with anumber of social values such as: preventingpollution, preserving natural habitats, avoidingdestructive goods such as (now illegal) drugs,providing health care, a high level research,education, armed services, regulation ofcommunications, securities, private property,public goods, and criminal activity. Though thecriticisms of interference in the market-place tendto hold up the paradigm of unfettered markets inthe abstract, it is clear that in the reality, no onebelieves in truly unregulated market places.Which constraints one might support may vary

152 Despite Mannesmann’s strenuous fight againstVodaphone’s takeover, ultimately its CEO, Klaus Esser,recommended that the shareholders accept Vodaphone’sincreased offer. However, Esser was promised 30 million Eurosfrom the new combined entity (1 Euro is roughly $1 dependingon the exchange rates of the moment.) Charles M. Nathan &Michael R. Fischer, “An Overview of Takeover Regimes in theUnited Kingdom, France And Germany,” 1347 PLI/Corp 1163,1195 (2002).


with the political perspective of the individual, butperfect unregulated markets are not in fact held asthe ideal path to the best social and economicwelfare. This probably holds, in particular, foroptimal takeover regulation.

Certainly, there is still enough support fordeviations from the perfect shareholdermaximization model.153 Various analyses focusingon global aspects of takeover regulation span thespectrum of whether the shareholdermaximization model will naturally predominatean ultimate universal mode154 or whetherstructural and political differences will determinedifferent (sub-optimal) outcomes.155 Some assertthat Europe (and the world) will inevitablygravitate to the U.S. model,156 while others assertthat the initial differences in different economieswill perpetuate differences even as nations evolveglobally.157 A number of studies have examineddifferences in economic structure: the degree ofshareholder diffusion compared with concentrated

153 In addition to some of the articles mentioned infootnote 8, see also Mark J. Roe, “Can Culture Constrain theEconomic Model of Corporate Law?,” 69 U. Chi. L. Rev.1251(2002); Mark J. Loewenstein, “Stakeholder Protection inGermany and Japan”, 76 Tul. L. Rev. 1673 (2002); and HenryHansmann & Reinier Kraakman, “The End of History forCorporate Law”, 89 Geo. L. J. 439, 458 (2001).154 Henry Hansmann & Reinier Kraakman, “The End of Historyfor Corporate Law”, 89 Georgetown Law Journal 439 (2001).155 Mark J. Roe, “Chaos and Evolution in Law and Economics,”109 Harvard. Law Review 641 (1996).156 Roberta S. Karmel, “Is it Time for a Federal CorporationLaw?,” 57 Brooklyn Law Review 55, 90 (1991).157 Lucian Arye Bebchuk & Mark J. Roe, “A Theory of PathDependence in Corporate Ownership and Governance,” 52Stanford Law Review 127 (1999).


blocks of controlling coalitions158 or the liquidity ofa nation’s securities markets and its relationshipto concentration of ownership.159 Some examinethe differences in corporate governance: the roleshareholders play in direct decision making,160 therole financial intermediaries play161 and the roleunions play.162 Some look at political andgovernmental institutions: the impact of EUactivities,163 the reach of U.S. laws abroad164 and

158 William Bratton & Joseph McCahery, “Comparative CorporateGovernance and the Theory of the Firm: The Case Against GlobalCross Reference,” 38 Columbia Journal of Transnational Law213 (1999); European Corporate Governance Network, “TheSeparation of Ownership and Control: A Survey of SevenEuropean Countries,” (1997).159 R. La Porta, F. Lopez-de-Silanes, A. Shleifer, and R. Vishny,“Legal Determinants of External Finance,” 52 Journal ofFinance, 1131 (1997); R. La Porta, F. Lopez-de-Silanes, A.Shleifer, and R. W. Vishny, “Law and Finance,” Journal ofPolitical Economy, 106 (1998); Jonathan R. Macey, “Measuringthe Effectiveness of Different Corporate Governance Systems:Toward a More Scientific Approach,” 10 Journal of AppliedCorporate Finance 16 (1998); Bernard S. Black & John C. Coffee,Jr., “Hail Britannia?: Institutional Investor Behavior UnderLimited Regulation,” 92 Mich. L. Rev. 1997 (1994).160 Jeffrey N. Gordon, “Pathways to Corporate Convergence? TwoSteps on the Road to Shareholder Capitalism in Germany,” 5Columbia Journal of European Law 219 (1999).161Ronald J. Gilson, “Corporate Governance and EconomicEfficiency: When Do Institutions Matter?,” 74 WashingtonUniversity Law Quarterly 327 (1996).

162 Guido Ferrarini, “Share Ownership, Takeover Law and theContestability of Corporate Control,” Company Law Reform inOECD Countries. A Comparative Outlook of Current Trends,Conference Proceedings (forthcoming 2001).163 Nihat Aktas, Eric de Bodt, & Michel Levasseur, “TheInformation Impact of the European Commission InterventionsIn the Field of Merger and Acquisition Monitoring: TheEconomics Behind Information Flow Coming to the Market,”Institut d’Administration et de Gestion, Université Catholique deLouvain, (2001).164 Merritt B. Fox, “Securities Disclosure in a Globalizing Market:Who Should Regulate Whom,” 95 Michigan Law Review 2498(1997); Merritt B. Fox, “The Political Economy of Statutory


comparisons of different nations’ regulations oftakeovers165 or the impact of law itself166 inproviding protection and disruptions. Someanalyses consider the transportability of statutoryregulation across nations and whether transplantsof legal and structural features from one politicaland economic culture to another will yieldsuccess.167

Debates range over which industrialregimes are superior to others, strong financialintermediaries versus liquid stock market, highconcentration versus diffuse ownership,protection of management versus facilitation ofraiders.168 The views as to what forms andcontexts are superior have changed over time asonce flourishing countries such as Japan andGermany, whose corporate regime was far moreinstitutionally controlled than the U.S., havesubsequently fallen are harder times while the

Reach: U.S. Disclosure Rules in a Globalizing Market forSecurities,” 97 Michigan Law Review 696 (1998).165 Edward F. Greene, Andrew Curran, & David A. Christman,“Toward a Cohesive International Approach to Cross-borderTakeoverRegulation,” 51 University of Miami Law Review 823(1997).

166 John C. Coffee, Jr., “The Future as History: The Prospects forGlobal Convergence in Corporate Governance and ItsImplications,” 93 Northwestern Law Review 641 (1999).167 William Bratton & Joseph McCahery, “Comparative CorporateGovernance and the Theory of the Firm: The Case Against GlobalCross Reference,” 38 Columbia Journal of Transnational Law213 (1999); Roberta Romano, “A Cautionary Note on DrawingLessons from Comparative Corporate Law,” 102 Yale LawJournal 2021 (1993).

168 Geoffrey Miller, “Political Structure and CorporateGovernance: Some Points of Contrast between the United Statesand England,” 1998 Columbia Business Law Review 52.


U.S.’s economy began to bloom again.169 With theeconomic rise and fall and rise again of differentcountries’ economies, each under a differentregulatory and structural environment, it is nowclear that it is not unambiguous that one model ofcorporate governance and economic structuralenvironment is superior to another. Furthermore,this conclusive non-conclusion arises especially inthe context of evaluating success in purelyeconomic wealth-maximizing terms.

B. The questions that need to be asked

It is important to recognize the possibilitythat a multiplicity of economic contexts can co-exist internationally170 without interfering withoverall global efficiency. Furthermore it is quiteplausible that this co-existing multiplicity ofeconomic regimes may also possess the flexibilityto incorporate other social values in conjunctionwith economic measures of the nation’s welfareand to do so without compromising its economy’sefficiency to compete internationally. Certainlythe suggestions of a number of authors at the veryleast do not preclude that possibility.171 On a

169 John C. Coffee, Jr., “The Future as History: The Prospects forGlobal Convergence in Corporate Governance and ItsImplications,” 93 Northwestern Law Review 641 (1999).

170 Edward F. Greene, Andrew Curran, & David A. Christman,“Toward a Cohesive International Approach to Cross-borderTakeoverRegulation,” 51 University of Miami Law Review 823(1997).171 Roberta Romano, “Empowering Investors: a Market Approachto Securities Regulation,” 107 Yale Law Journal 2359 (1998);Frank J. Garcia, “Protecting Nonshareholder Interest in theMarket for Corporate Control: A Role for State Takeover


practical level, it is evident that these other socialvalues play a significant role in determiningpolicy, not only among the several nations of theEU but within the EU itself. Global economicpolicy considering hostile takeovers will have totake European sensibilities into account.

Statutes,” 23 University of Michigan Journal of Law Reform 507(1990).


FEDERALISM SITES:

Center for State Constitutional Studiesavailable atwww.camlaw.rutgers.edu/statecon

The Federalist Papersavailable athttp://thomas.loc.gov/home/histdox/fedpapers.htm

International Association of Centers for FederalStudies available at www.iacfs.org

Institut de Ciències Polítiques i Socialsavailable atwww.diba.es/icps/uk/presentacio/presentacio.htm

Institute of Intergovernmental RelationsQueen’s University, Kingston, Ontarioavailable at http://130.15.161.15/iir

Publius - The Journal of Federalism, The RobertB. & Helen S. Meyner, Center for the Study ofState and Local Government, Lafayette Collegeavailable at www.lafayette.edu/publius

The University of Fribourg, Institute of Federalismavailable at www.federalism.ch/

CONSTITUTIONS:


Articles of Confederationavailable at www.archives.gov

European Constitutions, Member States andCandidate Countriesavailable atwww.ecln.net/elements/euro_constitutions.html

The European ConventionDraft Treaty Establishing a Constitution forEuropeavailable athttp://european-convention.eu.int/docs/Treaty/cv00850.en03.pdf

International Constitutional Law, Universitat Bernavailable at http://www.oefre.unibe.ch/law/icl/

The United States Constitutionavailable at www.archives.gov

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IUS GENTIUMJournal of the University of Baltimore

Center for International and Comparative Law

Fall 2003Volume 9

Copyright 2003ISSN: 1534-6781

IUS GENTIUM • Fall 2003

The Vicissitudes of FederalistVisions

Jan Klabbers

University of Helsinki

There is no doubt that when it comes to Europeanintegration, Europe may well benefit from theexperiences of others. By the same token, there isno doubt that when it comes to Europeanintegration, Europe can learn much from theexperiences of the United States. But twopreliminary questions might (and perhaps must)be asked: What exactly is it that we want to learn?And why precisely these lessons and not otherpossible lessons?

In the fifty-odd years of conscious and voluntaryEuropean integration, the main way in whichCommunity lawyers have tried to make use of theUS experience has been through the importationor transplantation of legal concepts. Yet, the main


lesson we have learned (if we have learned it tobegin with, Which is perhaps not altogether clear)is that whenever we borrow notions from the US,those concepts or doctrines somehow seem eithernot to work in Europe, or turn out to work quitedifferently. Our European doctrine of impliedpowers, e.g., somehow bears little resemblancewith its US counterpart. The European version ofthe doctrine does not insist on implying thingsfrom express power grants172; nor does it satisfyitself with the already broader international lawconcept of implying a power from its general

172As James Madison famously put it: "No axiom ismore clearly established in law, or in reason, than thatwherever the end is required, the means are authorised;wherever a general power to do a thing is given, everyparticular power necessary for doing it, is included."See James Madison, `The Federalist No. 44', inAlexander Hamilton, James Madison and John Jay, TheFederalist Papers (New York 1982, first published1787-1788). International lawyers may recognize thesame construction in the dissenting opinion of JudgeHackworth in Reparation for Injuries Suffered in theService of the United Nations [1949] ICJ Reports 174,at 198.


necessity in light of the purposes of an entity;173 farmore ambitiously, the European version of theimplied powers doctrine calls everything impliedthat might somehow benefit the integrationprocess. The classic illustration is the ERTA case,where the Court derived an implied power fromthe mere possibility that without it, other powersmight possibly at some point in the future becircumvented.174 While it has, on occasion, settledfor a more limited Àmerican' version (in thosecases where a broader concept was notrequired175), nonetheless the upshot is that the 173This was the version endorsed by the InternationalCourt of Justice in Reparation for Injuries, supra note2. A slightly more limited version (or so it seems)prevails in US constitutional law: implied powers canbe derived from ends and means, but "within thecompass of constitutionally enumerated nationalpowers." See Laurence H. Tribe, AmericanConstitutional Law (Mineola NY 1988, 2d ed.), at 303.

174Case 22/70, Commission v. Council, [1971] ECR 273,paras. 17, 22.

175See, e.g., the classic decision in Case 8/55, FédérationCharbonnière de Belgique v. High Authority, [1954-56]ECR 292; see also joined cases 281, 283-285 and287/85, Germany and others v. Commission, [1987]ECR 3203.


version as internalized by the ECJ is, in essence,different from that developed in the US, so muchso that various observers have doubted whetherthe label "implied powers doctrine" can stillmeaningfully be applied.176

The implied powers doctrine then is a doctrinewhich is given radically different contents inEurope. An example of a doctrine which does notseem to work at all when transplanted is that ofpre-emption, perhaps, as has been suggested, dueto the Community's heterogeneity.177 When the

176So, e.g., Christine Denys, Impliciete bevoegdheden inde Europese Economische Gemeenschap: een onderzoeknaar de betekenis van ìmplied powers' (Antwerp 1990),esp. at 131; Alan Dashwood & Joni Heliskoski, `TheClassic Authorities Revisited', in Alan Dashwood &Christophe Hillion (eds.), The General Law of ECExternal Relations (London 2000), 3-19; also JanKlabbers, Òver het leerstuk van de implicietebevoegdheden in het recht der internationaleorganisaties', in Hanneke Steenbergen (ed.), Ongebogenrecht: opstellen aangeboden aan prof. dr. H. Meijers(The Hague 1998), 1-11.

177See Stephen Weatherill, `Beyond Pre-emption?Shared Competence and Constitutional Change in theEuropean Community', in David O'Keeffe & Patrick


doctrine burst on the academic scene in the1980s,178 it was thought useful as a means ofdescribing the power relations between the centreand periphery. Yet, it has all but vanished bynow179: we rarely use the term pre-emption inCommunity law, and when we do, it is usually as

Twomey (eds.), Legal Issues of the Maastricht Treaty(London 1994), 13-33, esp. at 19.

178The seminal contribution perhaps is MichelWaelbroeck, `The Emergent Doctrine of CommunityPre-emption - Consent and Re-delegation', in TerenceSandalow & Eric Stein (eds.), Courts and FreeMarkets: Perspectives from the United States andEurope, vol. II (Oxford 1982), 548-580. See alsoEugene D. Cross, `Pre-emption of Member State Law inthe European Economic Community: A Framework forAnalysis', 29 Common Market Law Review (1992), 447-472, and Jan H. Jans, `National Legislative Autonomy?The Procedural Constraints of European Law', 25 LegalIssues of European Integration (1998/I), 25-58.

179Arguably, the Court of Justice has itself been keen toavoid any rigid doctrine of pre-emption, givenjudgments such as case 174/84, Bulk Oil (Zug) AG v.Sun International Limited and Sun Oil TradingCompany, [1986] ECR 559, para. 33: ambiguouslegislative silence was construed to form a specificauthorization for member states to act.


more or less synonymous to exclusivity.180

Somehow, we have come to think that thedoctrine of pre-emption lacks explanatory powerin the EC context; somehow, it has not survivedthe transplantation to a different setting.181

The reason why US federal notions might notquite work in Europe, or why they becometransmogrified beyond recognition, is perhapsobvious, but well worth stating: the US is a federalsystem; the EC is not. The EC is, to use a tiredlabel, sui generis, and is likely to remain an"unprecedented polity."182 Usually, the label sui

180So, e.g., Jans, supra note 8.

181Not surprisingly perhaps; Bermann already observedthat the doctrine was so typically federal as to bevirtually useless in a different setting. See George A.Bermann, `Taking Subsidiarity Seriously: Federalism inthe European Community and the United States', 94Columbia Law Review (1994), 331-456, at 358.

182See Christian Joerges & Jürgen Neyer, `FromIntergovernmental Bargaining to Deliberative PoliticalProcesses: The Constitutionalisation of Comitology', 3European Law Journal (1997), 273-299, at 294.


generis is seen as something to be proud of ("we'reunique; we're not like anything else") but withoutpractical consequences. Yet, being sui generis

has of course one important practicalconsequence: if we are truly sui generis, then itfollows that the educational value of any model,federal or otherwise, is bound to be limited.

The federal principle has been described, andrather cogently so, as having one overridingcharacteristic: power is divided between centreand periphery: "... general and regionalgovernments are each, within a sphere, co-ordinate and independent."183 While there may beconflicts at the fringes, the basic principle is clearenough and accepted by all participants. Intheory, if not necessarily in practice, there are noinstances of overlapping powers, or none thatcannot be settled through the intervention of afederal supreme court.

183K.C. Wheare, Federal Government (Oxford 1947), at11.


There are good grounds to believe that thefounding fathers of the Community had somethingsimilar in mind,184 yet practice proved tooresilient: the situation in the Community is not somuch characterized by a clear division of powers,but rather by an unclear labyrinth of powers,185 theeffects of which are aggravated by thecircumstance that even where a power division isrelatively clear, it is none the less possible,

184Note the ease with which Monnet's biographer cancasually remark that federation must have seemed "thenatural response of former great powers to acatastrophic decline in fortune." See Francois Duchêne,Jean Monnet: The First Statesman of Interdependence(New York 1994), at 181.

185See Weatherill, supra note 7; with respect to the EC'sexternal relations, see Marise Cremona, ÈxternalRelations and External Competence: The Emergence ofan Integrated Policy', in Paul Craig & Gráinne de Búrca(eds.), The Evolution of EU Law (Oxford 1999), 137-175. Scharpf observes that the Community and itsmembers share powers at least when exercising thosepowers, and suggests that this is closer to the Germanfederal model than to the US model. See Fritz W.Scharpf, `The Joint-Decision Trap: Lessons fromGerman Federalism and European Integration', 66Public Administration (1988), 239-278.


perhaps even likely, that in exercising a power,the member state may end up frustratingCommunity action or, conversely, that byexercising a Community power, the Communitymay unwittingly (or wittingly) step on the toes ofthe member states.186 Perhaps the best examplethereof resides in the circumstances giving rise tothe Court's decision in SPUC v. Grogan187: inexercising its right to regulate abortion, Irelandnonetheless had to recognize the possibility thatits regulation of abortion (clearly a member statepower) might affect the free movement of servicesand thus violate Community law.188 In otherwords: the Community system is characterized by 186This is further explored in Jan Klabbers, `Restraintson the Treaty-Making Powers of Member StatesDeriving from EU Law: Towards a Framework forAnalysis', in Enzo Cannizzaro (ed.), The EuropeanUnion as an Actor in International Relations (TheHague 2002), 151-175.

187Case C-159/90, Society for the Protection of UnbornChildren Ireland Ltd. v. Stephen Grogan and others,[1991] ECR I-4685.

188See Gráinne de Búrca, `Fundamental Human Rightsand the Reach of EC Law', 13 Oxford Journal of LegalStudies (1993), 283-319.


intertwining and interlocking powers, rights andprivileges, rather than by any transparent divisionof power.

With this in mind, it might be the case that thereis not a whole lot to be gained from looking at theUS experience. If the EC is indeed, as the Courtso proudly proclaimed in Van Gend & Loos189 andCosta v. ENEL,190 a new legal order, unlike anyother, then perhaps Community law should try tocreate new legal concepts and doctrines for thisnew legal order. One contribution to the legalvocabulary has already been made: thephenomenon of mixity.191 Where federationstypically centralize foreign affairs and provide forsome input for their constituent parts either ex

189Case 26/62, N.V. Algemene Transport- en ExpeditieOnderneming Van Gend & Loos v. Netherlands FiscalAdministration, [1963] ECR 1.

190Case 6/64, Flaminio Costa v. ENEL, [1964] ECR 585.

191See generally Joni Heliskoski, Mixed Agreements as aTechnique for Organizing the International Relations ofthe European Community and Its Member States (TheHague 2001)


ante or ex post, the Community has developed anentirely different model, in which the constituentparts play as prominent a role as the Communityitself.192 While mixed agreements may createproblems of a different nature,193 at least politicallythey seem to work.

In short, we should be careful in borrowing legalconcepts and institutions from other legalsystems, and might well consider MichaelIgnatieff's penetrating observation made a fewyears ago that most federations seem to be inserious trouble: and this even includes relativelystable democracies such as Canada.194

192As recognized by Joseph H.H. Weiler, `The ExternalLegal Relations of Non-Unitary Actors: Mixity and theFederal Principle', reproduced in J.H.H. Weiler, TheConstitution of Europe (Cambridge 1999), 130-187.

193For instance when it comes to internationalresponsibility. For a discussion, see Martin Björklund,`Responsibility in the EC for Mixed Agreements -Should Non-Member Parties Care?', 70 Nordic Journalof International Law (2001), 373-402.

194Michael Ignatieff, Blood and Belonging (London1994), at 110.


Now if we should indeed be careful in borrowinglegal concepts, is there then nothing relating tothe constitution of the political order of the USwhich can be instructive?195 I would like tosuggest that there is one level of thought wherethe American experience can be very relevant,and that is the level which ought to precede legaltransplantations: the level of political theory or, ifyou will, constitutional theory.

The political theorist Larry Siedentop suggestedrecently that our current attempt to look forguidance to the US is not the first, but actually thesecond time we have ogled and admired the USexperience as something which could serve as amodel for Europe. The first time occurred almosttwo centuries ago, when Alexis de Tocquevilleinvestigated US federalism "as a model forreforming one nation-state [France - JK] which

195Of course, all this leaves unaffected the possibilities ofdrawing wise and important lessons from, say, UScriminal law, or US tax law, or US intellectual propertylaw.


had taken the despotic form of a continentalempire."196 And inspired by this guidance, hereached the conclusion that the proper recipe forFrance was not to re-invigorate a decayingaristocracy (as Montesquieu had advocated), butto somehow change the entire structure ofgovernance in an attempt to balance centralpower and local autonomy. In Siedentop's words:"American federalism seemed to offer a newmeans of combining central government and localautonomy in a levelled or democratic society."197

In De Tocqueville's wake, perhaps the mostextensive work in political theory on the virtues ofAmerican federalism can be found in the writingsof Hannah Arendt, in her usual somewhatroundabout manner. For Arendt, the overridingcharacteristic of US politics was the separationbetween `the political' and `the social'. Arendtobserved that already the American revolutionhad one rather peculiar feature when compared to

196Larry Siedentop, Democracy in Europe (London2000), at 7.

197Ibid.


the French revolution or pretty much any otherrevolution. The problem at issue in the Americanrevolution was not the eradication of poverty orsome suchlike problem, but was a politicalproblem: the American revolution "concerned notthe order of society but the form of government."198

Indeed, the American revolution, to Arendt, was"the only revolution in which compassion playedno role in the motivation of the actors."199

The US was to retain this peculiar quality of asociety where the political sphere was largelyisolated from the social sphere for quite sometime. Where elsewhere (and not least in Europe)the conduct of politics had become tainted by allsorts of mundane concerns (clashes of interestsmore than anything else), US politics retained aform of purity in its concept of politics. In the US,according to Arendt, politics was still what itshould be: a continuous debate, necessitated by

198Hannah Arendt, On Revolution (London 1990, firstpublished 1963), at 68.

199Ibid., at 71.


the plurality of human existence, on how best toorganize our lives together. Indeed, in 1946, shecould still approve of Karl Jaspers referring to theUS as "lucky America": the US was still a place"where, because of a basically sound politicalstructure, so-called society has still not become sopowerful that it cannot tolerate exceptions to therules."200

Arendt's distinction between `the social' and `thepolitical' has met with some criticism201, and mayhave occasionally inspired her to write pieceswhich would provoke debate and criticism almostregardless of their contents202, but may 200Lotte Kohler & Hans Saner (eds.), Hannah Arendt -Karl Jaspers: Correspondence 1926-1969 (San Diego1992, Kimber & Kimber trans., first published 1985), at30: letter to Jaspers, 29 January 1946.

201See, e.g., Hanna Fenichel Pitkin, The Attack of theBlob: Hannah Arendt's Concept of the Social (Chicago1998).

202So, e.g., her well-known `Reflections on Little Rock',first written in 1959 and reproduced, with a reply tocritics, in Peter Baehr (ed.), The Portable HannahArendt (New York 2000), 231-246. For a charitableinterpretation, see Julia Kristeva, Hannah Arendt(Princeton 2001, Guberman trans.), at 114.


nonetheless prove instructive. The one thingArendt admired about US politics (and thus, byextension, about US federalism), was its capacityto think strictly in terms of public life, and to keeppublic life separate from private life.203 This was,to her, the hallmark of politics: to retain a publicspace, an agora if you will,204 in which people arefree and equal and can together decide on theircommon futures.205 In their economic and social 203How strict exactly this separation was historically maybe a matter of taste and personal judgment. It has beensuggested, e.g., that early American discussions on theabolition of slave trade and slavery were influenced inno small measure by the interests of participants. SeeJoseph J. Ellis, Founding Brothers: The RevolutionaryGeneration (New York 2000), ch. 3.

204A different, but sufficiently similar concept waslaunched recently by Zygmunt Bauman, In search ofpolitics (Cambridge 1999).

205Note also her characterization of international politics:"Only foreign affairs, because the relationships betweennations still harbor hostilities and sympathies whichcannot be reduced to economic factors, seem to be leftas a purely political domain." See Hannah Arendt,'What is Freedom?', reproduced in her Between Pastand Future (New York 1977, first published 1961),143-171, at 155.


lives, people are neither free nor equal: some arerich, some are poor, some own factories in whichothers have to work, and some are hugely talentedwhereas other are not. Still, at least in the publicsphere freedom and equality could be guaranteed,but on one condition: and that is that the politicalprocess remain shut off from social and economicconcerns, that the world of politics remainsseparated "from the life-world of labor andsubsistence."206 As soon as those concerns enterthe political process, then freedom and equalitywill "be surrendered to necessity."207 The needs orinterests of one or another group will take over.As one observer summarizes: "It is in the publicspace in which we enter as equals under the ruleof law that the space is created for politics and aform of power based on plurality rather thansameness, on common citizenship rather thanparticular identity."208

206Jeremy Waldron, Àrendt's Constitutional Politics', inDana Villa (ed.), The Cambridge Companion toHannah Arendt (Cambridge 2000), 201-219, at 206.

207Arendt, supra note 28, at 60.

208James Bohman, `The Moral Costs of PoliticalPluralism', in Larry May & Jerome Kohn (eds.),


An inherent element in the success of US politics,to Arendt, was its federal structure: it was only thefederal structure which allowed the foundingfathers to retain their pouvoir constituant.209

Without the federal structure, the connectionbetween the grass-roots level and the nationwidelevel would have been lost; what federalism standsfor is "a new type of republican government whichwould rest on èlementary republics' in such away that its own central power did not deprive theconstituent bodies of their original power toconstitute."210

There is, then, an intimate connection in Arendt'swork between politics proper, and federalism.211

Hannah Arendt Twenty Years Later (Cambridge MA1996), 53-80, at 67.


210Ibid., at 267.

211Indeed, so much so that she has been criticized for notshowing enough awareness of the parochialism whichmight accompany federal divisions. So, e.g., JohnMcGowan, Hannah Arendt: An Introduction(Minneapolis 1998), at 93.


Politics proper presupposes relatively small units,where those interested in the public realm, in"public happiness", can come together and benoticed. Those small units can then be broughttogether in a federal structure.212

Where now does all this lead us? After all, Arendtherself has never explicitly devoted much timeand attention to European integration, except forthe odd exhortation. Thus, she wrote to KarlJaspers in 1954 that she'd be "very pleased" withthe creation of a European Defence Community,213

and had indeed earlier confessed to Jaspers to"cling fanatically to hope for a united Europe."214

But she never specifically addressed the question

212Siedentop, supra note 26, argues along similar lines,observing that federalism facilitates the bringingtogether of the public and private realms (at 63) and"makes it possible to combine the advantages of smallstates and of large states, without at least some of thedisadvantages attaching to each." (at 26).

213Arendt - Jaspers Correspondence, supra note 30, at237: letter to Jaspers, 7 February 1954.

214Ibid., at 168, letter to Jaspers, 4 March 1951.


what this united Europe might look like, or how itmight work.

Still, her writings do contain a few useful insights.An obvious one is about the value of federalism:for Arendt, it is only a federal structure whichmight facilitate the proper conduct of politics, yet,with respect to Europe, she could remark withsome justification that the federal principle was"practically unknown in Europe and, if known,nearly unanimously rejected."215

That raises an awkward question: in westernEurope, only the Germans and the Belgians haveembraced federalism,216 and it would seemplausible to explain at least the German case in


216Lenaerts adds Spain, while realizing the unorthodoxyof doing so. See Koen Lenaerts, `Constitutionalism andthe Many Faces of Federalism', 38 American Journal ofComparative Law (1990), 205-263, esp. at 251. At anyrate, the Spanish version of federalism is, not unlike theBelgian version, an attempt to prevent the state fromfalling apart.


light of the particular circumstances in whichGermany found itself after 1945; indeed, thepresent German federation owes much to post-war Allied plans.217 The Belgians, in turn, whilearguably still fragmenting, have adoptedfederalism only as a means of last resort, as a typeof band-aid to keep the nation together and hopethat the wounds don't start to fester or get worse.

This concentrates attention on the questionwhether Europeans are temperamentally andculturally inclined or capable to think in terms offederalism as a model to be followed, and perhapsthe conclusion must be reached that such is notlightly to be presumed. Both the German andBelgian experiences seem to suggest thatfederalism is regarded not so much as somethingpositive, something to strive for, but rather assomething to fall back on if all else fails. And 217Then again, Germany has had a relatively longdecentralized history, albeit one with occasionally`strong unitary characteristics'. See Hans-Jochen Vogel,`Die bundesstaatliche Ordnung des Grundgesetzes', inErnst Benda, Werner Maihofer & Hans-Jochen Vogel(eds.), Handbuch des Verfassungsrechts (Berlin 1983),809-862, at 812.


recent experiences elsewhere in Europe(Czechoslovakia, Yugoslavia, the USSR) will nothave done much to improve the image offederalism.

The curious thing is that Europeans generally donot seem to realize the double-edged nature offederalism. They usually regard it, exemplified byspeaking in terms of the "f-word", as somethingwhich stands for centralization, something whichcan be applauded, as the Dutch used to do, orrejected, as the English do. Occasionally, butrarely in public debate, might people suggest thatfederalism is not about centralization but ratherabout firmly locking a decentralized structure intoplace. Thus, Siedentop asserts rather venomouslythat the tradition

"which once inspired Montesquieu and theAmerican federalists today producesspokesmen who seem not to understand thatfederalism seeks to disperse authority andpower between the centre and periphery,creating a political system which protects


local autonomy in the absence ofaristocracy."218

But the tricky thing is, of course, that federalismcan be regarded as both, can be regarded ascentralizing as well as decentralizing.219 It is thisdecentralizing aspect which both the Germansand Belgians have seized on domestically; whereasit is federalism's centralizing potential whichscares so many Europeans when thinking of theEuropean Union.

218Siedentop, supra note 26, at 79. Empirical support forSiedentop's position can be found in Herbert Wechsler,`The Political Safeguards of Federalism: The Rôle ofthe States in the Composition and Selection of theNational Government', in Mark V. Tushnet (ed.),Constitutional Law (Aldershot 1992), 397-414; firstpublished in 54 Columbia Law Review (1954), 543-560.

219Which is related, but not quite identical to thedistinction Lenaerts (supra, note 46) makes betweenintegrative and devolutionary federalism. For him, thetwo seem mutually exclusive, and the main ground fordistinction is that they seek different goals. I wouldargue, rather, that my point is descriptive rather thannormative and, more importantly, that the two areintimately related.


If the federal principle is something theEuropeans have a hard time embracingwholeheartedly, it is also doubtful whether thesecond insight Arendt offers will be warmlywelcomed in Europe or, indeed, has any chance tobegin with. To create Europe as a body politic(whether organized along federal lines ordifferently) would seem to presuppose two relatedthings, if we follow Arendt's line of thought. Oneis, that people have a certain engagement with thepublic realm; that people feel a certainresponsibility for the common wealth. Second,and related, is that they try to isolateconsiderations relating to everyday life andsubsistence, or relating more plainly to their owninterests, as much as possible.

For Arendt, a proper political solution is not onethat combines all contending interests, but ratherone that combines contending opinions. Yet, theEuropean political tradition has generally beeninterest-based. Traditionally, Europeans arebrought up with stories about clashes betweenvarious estates (nobility, clergy, burghers), which


presupposes that politics is a matter of interestsnot opinions.

Less traditional, but perhaps equally forceful, itwas particularly in Europe that the concept of theMarxian class struggle has gained any popularity,and it is still taken seriously in some Europeanacademic circles. Again, the very ideapresupposes that politics is a matter of interests;the very structure of Marxism holds that politics isa mere reflection of economic power relations.

Other leftist conceptions of politics do away withthe cherished distinction between the public andthe private realm: the feminist battle-cry that thepersonal is political may, ironically, have resultedin a fading of the public realm into the privaterealm with the eventual result that nothing isreally `political' anymore.

And even liberalism, so ostensibly value-neutral,still regards politics as something inherently tied-up with economics, with its more extremeversions advocating that decision-making is bestleft to the market. In short, where Arendt's


concept of politics is radically non-interest-based,if there is one thing characterizing Europeanpolitics throughout the centuries it is preciselythe interest-based nature of politics in Europe.220

This again raises a similar question to the oneraised by the federal principle: are the Europeanscapable of developing and creating the type ofpublic spirit which Arendt, at least, would insiston as a precondition for successful politics? Atthe least, such Arendtian thinking seems to goagainst our cultural grain. We may be so used tothinking of politics as having to do with ourinterests that it does not even occur to us to thinkin other terms.221

220Similarly, Siedentop (supra note 26) observes a"legacy of class-consciousness and of class conflict" (at230), and contrasts this with the US political scene,dominated from the beginning by a middle-class andthus largely devoid of status differences (at 228).

221Grimm also questions the possibility of there being aEuropean public space; for him, though, this wouldpredominantly be due to Europe's linguistic diversitywhich renders political communication unlikely. Inthese circumstances, so he cautions, federalism is not an"immediately desirable goal". See Dieter Grimm, `Does


Both these Arendtian considerations seem to leadinexorably to the conclusion that there is littlechance that Europe will somehow follow thefederal American model: the federal principle isdeemed too scary, and the type of public spiritwhich, at least following Arendt, characterizedAmerican politics for so long, is rather alien toEuropean conceptions of politics. If that's thecase, then it follows that there is little to learnfrom the American experience. Or is there?

Obviously, if we accept that Europe is not likely tofollow the US model lock, stock and barrel, thereis little point in importing legal notions lock, stockand barrel. As already noted, federal doctrineswill either develop their own distinct meaning inCommunity law (as with the implied powersdoctrine), or simply have a problem fitting theCommunity's peculiar structure (as with thedoctrine of pre-emption).

Europe Need a Constitution?', 1 European Law Journal(1995), 282-302, at 296, 297.


But there are none the less two importantpotential lessons (courses, perhaps). One is moreor less policy oriented: in systems wheregovernment is somehow divided, similar problemsmay occur, despite the fact that the precisedivision of powers between those systems may bequite different. Thus, even though the EC is not afederation and might not develop into one, andeven though the way in which powers betweencentre and periphery are divided is unclear at bestand downright messy at worst, it may none theless be possible to draw practical lessons fromcomparisons with other systems of dividedgovernment, such as the US but also a host ofother examples. Why not study Canadian orAustralian federalism, or even the Austrian-Hungarian monarchy?222 It is not alwaysnecessary to look only toward the US: a goodexample is the powerful phenomenon of the"joint-decision trap" which came up by looking atthe EC and the German federal system.223

222A fine but rare example of what I have in mind isWeiler, supra note 22.

223Scharpf, supra note 15.


The second broad lesson is this, and goes back tomy earlier characterization of the differencebetween a federal system and the EC. A federalsystem, as noted, is typically (idealtypicallyperhaps) characterized by divided authority,whereas in the Community, authority is rathershared. What might be useful to find out is theextent to which federal systems develop (or maydevelop) into similar power-sharing entities. Icould very well imagine that in the US, Indianasay, or Maryland, might discover that whenlegislating within their proper powers, they mightnonetheless frustrate the exercise of centralauthority: how, then, is such a situation handledin the US?

In short, the main lessons to learn have to do withthe workings of the legal or constitutional order,rather than with federalist legal doctrines orconcepts. Indeed, importing the latter may wellrun the risk of being mistaken for politicalarrogance on the part of Europe's political elites.After all, the conscious borrowing of notions fromfederal legal systems presupposes that the


borrower either considers itself a federation oraspires to become one. Yet, Europe is not afederation, and might not become one anytimesoon (or at all).224 With this in mind, it might bemore useful to try and develop uniquely Europeanlegal concepts worthy of a new legal order, andhumbly accept that the gaze across the Atlanticought not to be over-ambitious.

224Siedentop, supra note 26, at 231, is somewhat moreoptimistic when he concludes his study by saying:"Federalism is the right goal for Europe. But Europe isnot yet ready for federalism."

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Ius Gentium Volume 9 Fall 2003 FederalismIUS GENTIUM · Fall 2003 PREFACE The European-American Consortium for Legal Education Mortimer Sellers University of Baltimore Volume 9 of