Legislative Policy, Law and Competitiveness: A Mysterious and Difficult Relationship in the EU

• DOI: http://doi.org/10.1111/j.1468-0386.2008.00452.x
• Published date: 01 January 2009
• Author: Irene Lynch‐Fannon
• Date: 01 January 2009

Legislative Policy, Law and

Competitiveness: A Mysterious and

Difficult Relationship in the EU

Irene Lynch-Fannon*

Abstract: The Lisbon Agenda places Europe in a uniquely difficult position globally, most

particularly as an example of a social and regulatory experiment which many consider to

be doomed to failure. The drive towards economic competitiveness has led to a focus on

regulation and its effect on entrepreneurship, productivity and business growth but assess-

ing this relationship is complex for a number of reasons. First, not all regulatory effects

can be predicted precisely in relation to behavioural outcomes. Path-dependency scholars

have also demonstrated that the regulation will have varying effects depending on context.

Second, theoretically it is clear that many non-regulatory factors may contribute to

economic and competitive success. Third, there is evidence of internal conflict within the

Commission as to the relative importance of the Lisbon goals. Finally, the experience of

distinct Member States presents challenges both for assessment and prescriptive remedies.

The Commission has estimated that the cost of regulatory compliance obligations on

businesses in the EU is between 4% and 6% of gross domestic product and that 15% of this

figure is avoidable ‘red tape’ (the term used specifically to signify unnecessary compliance

burdens). This article proposes to assess the likely outcomes of de-regulation as we rapidly

approach 2010, the year for attainment of the Lisbon goals.

However, the difference in legal infrastructure does not result from the California legislature’s efforts to

provide the proper conditions for the development of high technology industrial districts. Rather...a

serendipitous result of the historical coincidence between the codification movement in the United States

and the new state’s efforts at developing a coherent legal system out of its conflicting inheritance of

Spanish, Mexican, and English law.1

Introduction

The Lisbon Agenda, which has attempted to combine the attainment of ambitious

competitiveness goals with social progression and inclusiveness, places Europe in a

uniquely difficult position globally, most particularly as an example of an experiment

* Professor, Faculty and Department of Law, University College Cork, Cork, Ireland.

1R. J. Gilson, ‘The Legal Infrastructure of High Technology Industrial Districts: Silicon Valley, Route 128,

And Covenants Not To Compete’, (1999) 74 New York University Law Review 575.

European Law Journal, Vol. 15, No. 1, January 2009, pp. 98–120.

© 2009 The Author

Journal compilation © 2009 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford, OX4 2DQ, UK

and 350 Main Street, Malden, MA 02148, USA

which many consider to be doomed to failure.2As Europeans continue to examine ways

in which Europe can become more economically competitive (compared, in particular,

with US economic indicators) the focus has increasingly been on legislative policy,

regulation and its effect on entrepreneurship, productivity, business growth and capital

liquidity. Assessing this effect or relationship is complex for a number of reasons.

Before these reasons are outlined, the term regulation must be considered and eluci-

dated. At present in some academic literature there has been a growing interest in the

concept of regulation and in the architecture of the regulatory landscape. This study

has a multi-disciplinary dimension which includes both lawyers and political scientists.3

Nevertheless, considerable literature has emanated from a different school considering

the relationship between law, legislative policy and economic outcomes. This literature

also tends to focus on the topic of regulation which describes not only legislative policy,

but legal outcomes in terms of both statutory and judicially developed principles in

addition to what is termed the regulatory framework encompassing the entirety. It is in

this latter sense that much attention has been focused recently at EU level on the

regulatory and administrative burden imposed on businesses.4In addition it is in this

latter sense that much of the literature which seeks to examine the relationship between

law and economic outcomes refers to the regulatory landscape.5

In considering the relationship between law, legislative policy and economic perfor-

mance, first, it is clear that many non-legal factors contribute to economic and com-

petitive success.6Clearly, legislative policy is not the only significant element in the

2H. Hansmann and R. Kraakman, ‘The End of History for Corporate Law’, (2001) 89 Georgetown Law

Journal 371. There is some evidence that the failure concept has been internalised, at least by certain parts

of the EU civil service. See Lisbon mid-term assessments: Communication to the Spring European

Council: Working Together for Growth and Jobs. A New Start for the Lisbon Strategy, Communication

from President Barroso in agreement with Vice-President Verheugen, COM (2005) 24 final; Communica-

tion from the Commission on the Social Agenda, COM (2005) 33 final—the Commission issued docu-

ments on other matters less central to this discussion such as the Communication on Sustainable

Development; Communication from the Commission to the Council and the European Parliament: The

2005 Review of the EU Sustainable Development Strategy: Initial Stocktaking and Future Orientation,

COM (2005) 37 final. European Commission: DG for Employment and Social Affairs, Report of the High

Level Group on the Future of Social Policy in an Enlarged EU (May 2004). Kok Report on the Lisbon

Strategy in an Enlarged Europe (November 2003) (The Kok Report).

3Much of this work is emanating from a group at the LSE in the UK; see, eg, M. Lodge, J. Black and

M. Thatcher (eds), Regulatory Innovation: A Comparative Analysis (Edward Elgar, 2005); J. Black,

‘Decentering Regulation: The Role of Regulation and Self-Regulation in a “Post-Regulatory” World’,

[2001] Current Legal Problems 103; C. Scott, ‘Regulation in the Age of Governance: The Rise of the Post

Regulatory State’, in J. Jordana and D. Levi-Faur (eds), The Politics of Regulation (Edward Elgar, 2004)

and C. Scott, New-ish Governance and the Legitimacy of the EU, CLPE Research Papers (17/2007).

4See extracts from the EU documents referred to in text accompanying nn 23 and 24 infra.

5Much of the author’s interest in this area derives from literature which has considered the relationship

between corporate governance models and economic outcomes, for example K. Gugler, Corporate

Governance and Economic Performance (Oxford University Press, 2001); F. Barca and M. Becht, The

Control of Corporate Europe (Oxford University Press, 2001); M. Calderini, P. Garrone and M. Sobrero,

Corporate Governance, Market Structure and Innovation (Edward Elgar, 2003) and D. Murphy, The

Structure of Regulatory Competition: Corporations and Public Policies in a Global Economy (Oxford

University Press, 2006).

6See previous study in relation to EU–US comparative labour market regulation and its relationship to

overall economic competitiveness: I. Lynch-Fannon, Working Within Two Kinds of Capitalism (Hart

Publications, 2003). See also I. Lynch-Fannon, ‘The European Social Model: Prospects for Success in an

Enlarged Europe’, in P. Ali and G. Gregoriou (eds), International Corporate Governance after Sarbanes-

Oxley (John Wiley & Sons, 2006), 423–443, on the very strange dissonance between extensive legislative

January 2009 Legislative Policy, Law and Competitiveness

© 2009 The Author 99

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