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Summary Company Law - Required articles - University of Twente - International Business Administration - I&E-module €4,48
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Summary Company Law - Required articles - University of Twente - International Business Administration - I&E-module

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Summary of all the required articles for the company law test, University of Twente. The summary consists of the following articles/chapters: - Olivier Borraz, Governing Standards: The Rise of Standardization Processes in France and in the EU, Governance Vol. 20 (1), 2007, p. 57-84. - International...

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Voorbeeld van de inhoud

1.Olivier Borraz, Governing Standards: The Rise of Standardization
Processes in France and in the EU, Governance Vol. 20 (1), 2007, p. 57-
84.

1.Introduction
The rise of standardization processes highlights two different paths toward a regulatory state: (1)within
the EU, the New Approach serves as a model for co-regulation, and European standards have become
instruments of supranational governance, (2)in France, standardization is much more part of a
renegotiation of the state’s role and influence in a changing society. It was undertaken with different
motives, but evolved to answer the strains and constraints exerted upon regulatory processes.

According to the International Organization for Standardization (ISO), a standard is a “document
established by consensus that provides, for common and repeated use, rules, guidelines or
characteristics for activities or their results, aimed at the achievement of the optimum degree of
order in a given context.” Standards enable products to circulate, to be compatible with other goods,
services, or procedures, or even to be made predictable in nature.

Standards can fall under two categories: de jure and de facto standards. A de jure standard is a written
document establishing technical specifications for goods, services, or processes, resulting from a
consensus, and whose application is voluntary. It is designed to fulfill coordination functions
through production (by giving producers information useful in designing new products) and exchange (by
making explicit the specified properties of a product). A de facto standard results from a unilateral act
and emerges through the mediation of market processes: “the dynamic in which purchasers on a market
take up particular products finally leads to one or more lasting standards being selected from among
diverse possible alternative technologies”. In what follows, we shall be mainly interested in
de jure standards.

Standards present several characteristics. For example: they are the product of a balance of power
between economic actors(competitors/subcontractors) as well as between economic actors and non-
governmental organizations(such as consumer or user groups). Thus they contribute to a shift in
rulemaking from the state to civil society. The legitimacy of standards derives from scientific, technical
and democratic rationality. In a way, standardization could amount to a pacified decision-making process
because it leaves the matter to the interested parties, without political intervention. Technological
democracy and technical diplomacy have been used to characterize this process.

Apart from issues of politicization and incentive-based instruments, the study of standards tell us more
about the nature and content of a state. This is the case on four accounts: (1)re-regulation,
(2)intentionality, (3)policy-capture and (4)the management of complex issues.

Even though part of a deregulation movement, standards simultaneously contribute to a proliferation of
rules framing economic activity. Thus, according to the French Standardization Association (AFNOR), a
standard “is a public policy tool that acts as a supplement to regulation and a reference point for
opening up public markets and promoting their transparency.” While the European Parliament

,specifies that “standardization can constitute an effective, generally acceptable and readily adaptable
supplement to legislation, and can in some cases, if given a clear legal framework, provide an alternative
to binding rules and regulations.”

In fact, standard-setting is a clear case of “meta-regulation,” in which “direct intervention and
enforcement are replaced here with allegedly lighter demands on economic actors to institutionalize
processes of self-regulation”, allegedly because in fact this type of regulation often proves to be as
intrusive as direct intervention aimed at monitoring and enforcing competition. Furthermore, this trend
is compatible with the advent of the regulatory state, and such notable features as “the proliferation of
new mechanisms and techniques of regulation, meta-regulation, and enforced self-regulation”.

The question of intentionality is central to the study of instruments. As the two cases presented in this
article will make clear, standards are instruments that “open new perspectives for use or interpretation
by political entrepreneurs, which have not been provided for and are difficult to control, thus fueling a
dynamic of institutionalization”. Hence, they contribute to stabilizing collective action, by making the
actors’ behavior more predictable, but simultaneously they offer new opportunities along with new
resources for actors to pursue other goals. Standards became an instrument of state transformation, but
for France as well as for the EU that wasn’t intended.

The study of standards also enables us to reconsider the thesis of the “policy capture” of decision-
making processes by economic interests, because standardization explicitly provides for industry
representatives to participate in drawing up rules that concern them. Standardization strengthens the
public authorities’ situation because it protects them from most of the pressures but still gives them the
capacity to have a say on the outcome of negotiations.

Standards occupy a special place in relation to the crisis of legitimacy affecting public intervention, the
complexity of the issues tackled and the theme of accountability in public policy—and they raise new
questions of legitimacy, efficiency, and accountability.

This article will show that standardization processes play a different role with regard to the strains and
constraints exerted upon French and EU regulatory processes. In this respect, standards are not neutral
devices but instruments that produce specific (and sometimes unintended) effects, depending on the
regulatory framework within which they take place.


2. Defining standards
Standards share four major characteristics: (1) They are the result of a work carried out among
interested parties, (2) They are based on scientific and technical data, (3) They rely on consensus and
(4) Their application remains voluntary.

(1)The concept of interested parties is variable, because it may come down to just a given sector of the
industry or include consumers etc. France distinguishes between a period when industry alone invested
in standardization and a period when consumers joined committees. At the EU level, European standards
institutes provide for the participation of various representatives. Standard-setting thus constitutes a
procedure in which the participants have formally the same rights and the same influence.

,However, there are generally profound inequalities between them in terms of access to information.
Furthermore, acting as secretary to a standardization committee offers a strategic position, from which it
is possible to determine both the agenda and the pace of work.

(2) Even though the process of standardization brings together interested parties, their exchanges are
based on scientific, technical, or experimental data. It has been stressed that standardization relies on
expert knowledge. However, there is still a very wide variation between the participants’ levels of
expertise and—even more so— their resources to mobilize scientific and technical data: it is very
often the largest firms, which have their own interest in standardization, that provide the data on which
the discussions are to be based, while small and medium enterprises (SMEs) rarely have the
capacity to take an active part in standardization work. Scientific and technical data also act as a formal
constraint.

(3) Consensus is a core principle of the standardization process. Consensus occurs when, at the end of a
process in which the different parties have been able to express their expectations and integrate them
into a proposed standard, no participant is openly opposed to this proposal. Once the standard has been
adopted, it becomes irreversible.

(4)The final characteristic is that they are presented as voluntary. Economic actors aren’t obliged to
comply with a standard, and they are not subject to any sanction. Standardizers must convince potential
adopters that they would benefit from following the standards. This can be contested on three accounts.
(1)Industrials must show that their product, service or activity conforms to regulatory requirements or
meets the quality and safety criteria. (2)Regulation explicitly references consensus-based, privately
developed standards as bases for gauging compliance with the regulation. (3)Regulation can even make
standard-compliance compulsory. Standardization isn’t a peaceful process, but it offers a framework for
solving conflicts.

In the area of standardization, all actors do not try to seek confirmation for previously formed views, but
frequently enter committee discussions without clear preferences, or are prepared to change their
positions. This does not mean, however, that positions and interests play no part whatsoever in
committee negotiations. Nevertheless, in a significant number of cases, the main focus was upon the
discussion of a problem where solutions had to be found without those participating being able to fall
back upon pre-formulated positions. Moreover, comitology(refers to a process by which EU law is
modified or adjusted and takes place within "comitology committees") operates as a long-term oriented
process of working and learning, that has a potential, over time, to condemn and overcome individual
attempts on the part of participants to impede reliance upon valid knowledge.

3.The European “New Approach”
On May 7, 1985, the European Council adopted a new approach to technical harmonization and
standards. Up to then, technical harmonization had been covered by directives or by the mutual
recognition procedure. But the technical complexity of the subjects concerned, the difficulty of bringing
all countries into agreement, and the single-market perspective encouraged the European authorities to
take recourse to standard-setting.

,The 1985 Council Resolution is based on the conclusions approved by the Council of July 16, 1984, which
read: “ The Council believes that standardization goes a long way towards ensuring that industrial
products can be marketed freely and also towards creating a standard technical environment for
undertakings in all countries, which improves competitiveness not only on the Community market but
also on external markets, especially in new technology.” The objective, therefore, is to bypass obstacles
to free movement.

The 1985 resolution was supplemented by another resolution on a global approach to conformity
assessment, dated July 24, 1989. In the context of this new approach, European legislation became
responsible for establishing the essential requirements to which products must conform, while the
European standards institutes (CEN, CENELEC, ETSI) were charged with drawing up technical
specifications in order to ensure conformity to defined thresholds or levels of protection.

This wider use of standards comes at a particular moment in European history. This can be observed on
two accounts: (1)Several writers associate the development of standards with the limits of the European
integration project from the 1980s onwards. Thus, the choice of standards rather than directives stems
from the difficulties encountered by European institutions in imposing compulsory measures. The
recourse to standards is therefore a response to the absence of any constraining means at the EU’s
disposal to accompany its regulatory activity—an absence for which the incentives linked to the
application of standards can compensate. Other authors suggest that the use of standards is a
consequence of the Commission’s difficulties in arriving at agreement between the member states in a
number of fields. (2) the recourse to standard-setting is an intrinsic feature of the rise of a European
“regulatory state”. Standard-setting allows the public authorities to achieve credible political
commitments, which take into account the phenomena of political and economic interdependence
among nations and, at the same time, allows the behavior of multiple actors to be guaranteed other
than by command-and-control techniques.

4.The invention of the new approach
The New Approach is based on the distinction between essential requirements and technical
specifications. A “New Approach directive” applies either to a broad, sufficiently homogenous range of
products or to a horizontal risk; most often, it covers the risks linked to a family of product. “Essential
requirements” define the results to be achieved or the dangers to be dealt with, without going into the
content of the technical solutions needed to attain this (they are functional or performance standards, as
opposed to prescriptive or specification standards). This avoids having to regularly amend directives to
take account of technical progress because a product’s conformity is not assessed on the basis of the
state of the art at a given time.

The concept of risk became a vehicle for the setting of standards. It allowed broad objectives (reducing
or eliminating all risk linked to the use of a product) to be laid down, and off-loaded onto the standards
institutes the task of arriving at documents that, while integrating health and safety imperatives, also
contributed to technical harmonization at the European scale and the competitiveness of European firms
at the international level. This approach thus offered the advantage of leading more easily to an
agreement between the member states and transferring the constraints of negotiation onto the
standard-setting process. In dissociating general objectives from the means of reaching them,

, the Council wanted to avoid technical considerations (reflecting in fact economic, political, or social
interests) disrupting the terms of requirements on which all countries must be able to agree. The payoff
for this is a relative vagueness in the objectives: although the Council insists that requirements should be
“worded precisely enough in order to create, on transposition into national law, legally binding
obligations,” directives often state very general objectives.

The New Approach rests on several pillars, three of which should be mentioned here.
(1)Standards institutes: CEN, CENELEC, and later ETSI must have suitable staff and infrastructure to carry
through the setting of standards.
(2) The second pillar concerns “the association of public authorities and interested circles (in particular
manufacturers, users, consumers, unions).” Extend responsibility for drawing up standards to the largest
number of interested parties in order to ensure their efficient implementation.
(3) The third pillar relates to methods of monitoring standards: this is the object of the 1989 Council
Resolution on a global approach to assessing conformity , supplemented by two Council decisions
establishing detailed specifications for testing and certification procedures and providing guidance for
use of the “CE” marking. Conformity is assessed on the basis of the manufacturer’s internal activities for
monitoring design and production; examination by an outside body of the type, design, or products;
approval by an outside body of overall quality assurance systems.

The New Approach, nonetheless, faces an important limiting factor: there are markets in which the
actors are not interested in setting standards. In this case, a directive has little chance of leading to
technical specifications. As the Commission points out, “acceptance of standardization is related
to the market relevance of standards, and not only to the participation of the parties concerned.”
Therefore, if it does not want to go unheeded, any directive that delegates the definition of means and
methods of implementation to the standard-setting process must take into account the state of the
market and of technological advances.

5. The debates over European standard setting
The Council and the Parliament on the one hand, and the Commission on the other hand agreed on the
need to reinforce the role of standards during the 1990s. The Commission saw these as a means to
achieve more effectively and rapidly a single market, while the Council and the Parliament aimed to
maintain standard-setting within an intergovernmental framework of negotiation. Another difference
was that the Commission intended to promote standards as instruments of supranational governance,
capable of bypassing national obstacles to the free movement of goods and services. The Council and the
Parliament considered that standards could improve intergovernmental negotiations because they relied
for the most part on technical arguments. The Commission’s reservations were of three types: (1)Delays
in the standardization process, (2)direct representation of interest and (3)monitoring standard
compliance. As remedy for the delay(because of including the largest number of interested parties, while
still favoring consensus, the Commission had a favor for using qualified majority voting at certain stages.
The delays were reduced for ETSI as well as for CEN, but the Commission maintained that the delays
were too long, and introduced qualified majority voting again. The Parliament opposes the use with the
argument that the standardization process is based on mutual agreement, which safeguards the
participation, involvement and confidence of all parties. The Commission wished to use standards to
achieve a single market with shorter delays, and could use ETSI for it, because of the shorter time.

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