A. Introduction
Over the last fifty years, the concept of constitutionalFootnote 1 rights of corporations has seen an unprecedented expansion in advanced capitalist economies, such as the United States and the European Union. The U.S. Supreme Court (“SCOTUS”) has reinterpreted the freedom of speech and religious freedom to allow corporations to fund political campaigns,Footnote 2 to increase the protection of their patents and trade secrets,Footnote 3 and to exempt them from drug safety and advertising regulations.Footnote 4 On the other side of the Atlantic, the Court of Justice of the European Union (“CJEU” or “Court of Justice”)Footnote 5 has relied on the freedom to conduct a business under Article 16 of the EU Charter of Fundamental Rights (“EU Charter”)Footnote 6 to protect commercial secrets,Footnote 7 to increase the power of managers to fire workers,Footnote 8 and defended their power to impose a policy of religious neutrality on their employees.Footnote 9
This Article argues that despite surface-level doctrinal differences, these doctrines are cut from the same cloth. Both SCOTUS and the CJEU have contributed to insulating corporate power from democratic oversight.
This interpretation reflects recent work by intellectual historians who have begun to describe neoliberalism as a movement united by a single, deeply held belief that the “market” is superior to democracy as a mechanism of social ordering.Footnote 10 Chief among them, Quinn Slobodian argues that neoliberalism, as a political project reaching back to the 1920s, can be understood through the metaphor of “encasement.”Footnote 11 Rather than insulating “free markets” from democratic interference, “encasement” involves constructing a legal order—an economic constitution—that actively shapes economic relations by promoting competition, while ensuring that these economic policies remain safe from political contestation.Footnote 12 Constitutional rights of corporations, protecting the economic initiative of managers from democratic legislation advancing the interests of consumers, workers, or the environment, are precisely an example of such a legal institution pursuing “encasement.”Footnote 13
The expansion of this concept has garnered growing attention from constitutional and corporate scholars. In both the U.S. and EU contexts, scholars have tended to focus on doctrinal analysis, excoriating the incoherence of constitutional adjudication, or questioning the granting of constitutional rights to corporations as such.Footnote 14 But political economy and socio-legal scholars have traced the complicity of law in the neoliberal transformation of political and economic institutions,Footnote 15 including constitutional rights of corporations. Specifically, U.S. scholars have scrutinized how this concept has been deployed to reshape social relations to shield corporate power in the United States.Footnote 16 Likewise, many EU scholars have underscored the bias of EU’s economic freedoms toward deregulation, arguably a neoliberal goal.Footnote 17 Others, mostly EU labor lawyers, have highlighted how the fundamental “freedom to conduct a business” under Article 16 of the EU Charter has been reinterpreted by the CJEU to undermine the post-war welfare regimes of the Member States.Footnote 18
This leaves us with an important gap in our understanding of the development of constitutional rights of corporations on a transnational level and across jurisdictions. Put bluntly, it does not matter how many rights corporations have in different constitutions or their exact content. Even though corporations enjoy free speech protections in the US and the EU and its Member States, their doctrinal differences or similarities do not fully determine the differences in their effects. Therefore, a critique of neoliberal effects of a legal doctrine within one jurisdiction alone cannot fully explain the political economy dynamics of a legal doctrine. Instead, what matters is how these rights are deployed, by whom, to do what, in courts, or other settings, in a comparative perspective. Accordingly, this Article asks how neoliberalism has evolved in different jurisdictions by interacting with similar legal doctrines. By bringing insights from comparative political economy to bear on the comparative analysis of constitutional rights of corporations through qualitative case studies, we can better explain their doctrinal differences and identify differences that are invisible to traditional analysis. Among comparative political economists who have done similar work, Foster and Thelen have, for instance, examined the socio-political factors that shaped the different development of competition law in the U.S. and the EU.Footnote 19
This Article compares two seemingly different doctrines performing a similar function. On the one hand, SCOTUS aggressively expanded “corporate personhood,” the doctrine which grants corporations various constitutional rights by analogizing them to human individuals,Footnote 20 by expanding the catalogue of rights and deepening existing protections. On the other hand, the CJEU took a more restrained approach to the “freedom to conduct a business” under Article 16 of the EU Charter. Unlikely allies, both SCOTUS and the CJEU have generally interpreted these two doctrines to encase the market. But paradoxically, even though the text of Article 16 of the EU Charter appeared much more indeterminate and conducive to deregulation, the CJEU interpreted it restrictively, showing great deference to the legislators, reducing it to an “empty shell.”Footnote 21 In contrast, SCOTUS aggressively interpreted the doctrine despite the absence of any express provision in the US Constitution. This finding complicates the picture and reveals how courts evolve doctrines within unique institutional and historical contexts.
The Article focuses on courts because they are important players in the political economy of the United States and the European Union, a focus further motivated by the enduring fascination of constitutional scholars with courts. It further portrays SCOTUS and CJEU as key players in their respective economies, despite their different powers, institutional roles and institutional structures: They united a continent to create a “national” market, and their rulings affect millions of people. However, as active players, they also operate within a broader field of legal actors pursuing various strategies along different dimensions.
By putting the evolution of the two doctrines and their role in neoliberal transformation in perspective, this Article has two main goals. First, by looking at the EU with American eyes, it aims to warn EU scholars and regulators that the danger of an uncritical expansion of corporate power is not merely an American phenomenon—it inheres in the EU Charter, too. The extreme encasement pursued in the U.S. raises the possibility of a similar expansion of Article 16 in the EU. Second, looking back at the U.S. after learning about the factors that shaped the restricted and cautious development of the freedom to conduct a business in the EU, these insights are useful for reformers as they shed light on dynamics beneath formal law that shape political and legal transformations. In sum, this Article seeks to add a new lens to comparative constitutional law for examining the role of constitutional law in political and economic transformations across jurisdictions.
The Article proceeds as follows. Section B first justifies the comparison of the two doctrines and compares the similar effects of each doctrine in advancing “encasement.” Section C highlights the differences between the two developments and lays out a comparative political economy explanation of the divergence in the outcomes. Finally, Section D concludes this Article.
B. A Tale of Two Encasements
The United States and the European Union share similar political economies, legal and political institutions, and the relative sizes of their markets. Within the body of research on neoliberal transformations of political and economic systems in these two jurisdictions, and within the work on the role of law in this evolution, this Article zooms in on one subfield of law, on a particular legal concept—constitutional rights of corporations—and its two doctrines. It limits itself to examining its dynamic within courts, but not legislatures or administrative bodies, to describe how courts were active in the use of their doctrines to protect the interests of corporations. This Article argues that, by shielding their economic initiative from democratic interference, they pursued what Slobodian termed “encasement.”Footnote 22
In the United States, corporations strategically mobilized in various areas of law to advance their interests.Footnote 23 Corporate personhood is just one part of “corporate America,”Footnote 24 but it has been nothing short of momentous. As a doctrine of U.S. constitutional law, developed by SCOTUS, it grants certain constitutional protection to corporations by analogizing them as human individuals in specific legal contexts. This doctrine has been accused of reviving the Lochner era,Footnote 25 named after the infamous case Lochner v. New York,Footnote 26 in which SCOTUS struck down a state law limiting bakers’ working hours for violating the bakers’ “freedom of contract” under the substantive due process clause of the Fourteenth Amendment.Footnote 27 At the turn of the twentieth century, a conservative judiciary imposed its own vision of a laissez faire political economy and invalidated many economic and social regulations, until it was defeated by Roosevelt’s large democratic majorities and his threat of court-packing.Footnote 28 Yet, in recent cases involving other constitutional rights of corporations, the US is again witnessing a judiciary imposing its own view of the economy against democratic majorities. Now, corporate personhood has been seen as a peculiarly American libertarian phenomenon,Footnote 29 but I argue that the same doctrine inheres in EU law, too.
From a formal perspective, EU fundamental rights enshrined in the EU Charter are its closest counterpart. Even though they apply to corporations in theory,Footnote 30 only a few fundamental rights were expressly granted to them in practice.Footnote 31 Similarly, corporations were granted some human rights under the European Convention on Human Rights (“ECHR”), a human rights mechanism separate from the EU Charter.Footnote 32 Even though this doctrine is the closest to U.S. corporate personhood, there have been few attempts at doctrinal comparisons,Footnote 33 nor were these rights under the EU Charter or ECHR subject to much corporate litigation in general, relative to the United States.Footnote 34
A different doctrine served a closer function by advancing corporate interests.Footnote 35 Since the founding, the EU treatiesFootnote 36 have established four freedoms—“economic freedoms”—which were constitutional rights of corporations avant la lettre: Free movement of goods,Footnote 37 people,Footnote 38 capital,Footnote 39 and services.Footnote 40 Any economic actor engaging in cross-border trade could rely on these freedoms to challenge national measures in the host state which hampered their business activity. Because the alternative for enacting such rules is a cumbersome intergovernmental process, this has structurally privileged deregulation or “negative integration”Footnote 41 and ensured a stable business environment.Footnote 42 While these provisions could be invoked by anyone through private litigation, corporations have dominated private enforcement as repeat players before the CJEU.Footnote 43 Some have drawn parallels between EU economic freedoms and the Lochner era in the United States,Footnote 44 but these rights were intended to prevent unilateral interventions on the market by national governments in order to construct a common market in the first place, not encasing the market as such. They were not necessarily intended to empower corporations to be free from regulation.Footnote 45 Their closest American equivalent is the “dormant commerce clause” doctrine.Footnote 46
This Article, however, not only agrees with those who claim that the freedom to conduct a business under Article 16 of the EU Charter is the European Lochner,Footnote 47 but goes further to claim that Article 16 is the real counterpart to the American doctrine of corporate personhood. This freedom applies to all economic agents, both natural and legal persons. It rests on the German ordoliberal tradition of an “economic constitution” safeguarding the competitive order.Footnote 48 Admittedly, the CJEU has aligned the scope of permissible restrictions of the freedom to conduct a business with its case law regarding the freedom of movement,Footnote 49 which has been a powerful tool of corporations. But Article 16 of the EU Charter is much wider, as it applies to all situations falling within the scope of EU law, even without a cross-border element. It is often invoked in national proceedings between private parties, requiring the balancing of rights or questioning the validity of EU legislation.Footnote 50 As such, it constrains the EU’s regulatory capacity itself,Footnote 51 just like U.S. corporate personhood constrains the U.S. federal government.
I. SCOTUS: The Libertarian Pioneer
Corporate personhood, the idea that for-profit business corporations can hold constitutional rights,Footnote 52 was not foreseen nor discussed by the authors of the American Constitution.Footnote 53 It was pioneered by SCOTUS and evolved over the last 150 years through its jurisprudence.Footnote 54 The cases can be grouped in two major clusters.
The first cluster comprises the “rule of law” protections. Corporations have received protection under the Equal Protection ClauseFootnote 55 and Due Process Clause under the Fourteenth Amendment regarding property,Footnote 56 but not regarding liberty.Footnote 57 SCOTUS has applied the Fourth Amendment’s privacy rights against “unreasonable searches and seizures” to corporations, by emphasizing the protection of collective interests against government interests.Footnote 58 It has afforded corporations protection under the Takings Clause of the Fifth Amendment,Footnote 59 and the due process and double jeopardy clauses under that amendment.Footnote 60 However, SCOTUS held that a corporation’s agent may not assert a corporation’s Fifth Amendment right against self-incrimination in response to a government subpoena.Footnote 61 Finally, corporations also enjoy the Sixth and Seventh Amendment jury trial rights.Footnote 62 They have also succeeded with challenges based on structural provisions of the Constitution, for example separation-of-powers issues.Footnote 63 As a general rule, “most [constitutional] rights do not depend on the corporate identity of the rights bearer,”Footnote 64 and SCOTUS has held that when extending constitutional rights to corporations, it takes into consideration their “nature, history and purpose.”Footnote 65
However, a second cluster of protections emerged in the 1970s, when SCOTUS began applying First Amendment protections to corporate activity. In Virginia Pharmacy,Footnote 66 it held that banning pharmacists from advertising prescription drug prices violated the First Amendment, in particular the consumers’ right to information on competitive pricing. In First Nat’l Bank v. Bellotti,Footnote 67 it ruled that the First Amendment protects corporations’ rights to spend money to influence public opinion on ballot initiatives, emphasizing the role of corporate speech in public discourse. In 1974, SCOTUS struck down a Florida statute which granted political candidates a right to reply to accusations made against them in a newspaper free of charge, because it would constitute “compelled speech.”Footnote 68 Since 2010, SCOTUS has reshaped the First Amendment even further, to constrain the legislators in regulating the buying and selling of data,Footnote 69 campaign financing,Footnote 70 and commercial speech, in particular advertising and labeling requirements.Footnote 71 It has held, for example, that “speech” under the First Amendment covered software code, such as Google’s ranking mechanism.Footnote 72 Interestingly, while the First Amendment has been expanded to protect corporations, it was used in the opposite direction to weaken labor unions, even though its judicial enforcement began as a defense for labor rights and agitation before turning into a neutral, “rights–centered” framework that was co-opted by corporations.Footnote 73 For example, in a 2017 case Janus v. American Federation of State Employees, SCOTUS struck down state laws that allowed unions representing government workers to collect fees from non-union members to support the union’s collective bargaining activity, on the grounds that it violated the non-union members’ First Amendment rights by coercing them to support speech with which they disagree.Footnote 74
SCOTUS also exempted a closely-held corporation from offering insurance coverage for certain kinds of birth control under the Affordable Care Act to its employees. According to SCOTUS, such a requirement would violate the owners’ religious freedom.Footnote 75 As Wendy Brown observed, “ownership is being empowered as Christian ownership, capital is obtaining civil rights as Christian capital. In Burwell v. Hobby Lobby Stores, Inc., this ownership expands control over the lives of employees ….”Footnote 76
Moreover, in 1984, the Court held that trade secrets constituted “property” that could be protected by the Takings Clause, and that compensation could be required if there was interference with “investment-backed expectations.”Footnote 77 Going even further, lower courts struck down a law requiring disclosure of cigarette ingredients without compensation.Footnote 78 In 2021, SCOTUS invalidated a California law allowing union organizers to access company premises to contact employees on the grounds that it interfered with the property rights of the company and thus constituted a “taking.”Footnote 79 Finally, lower federal courts have recently gone as far as to afford corporations the protection under the Bill of Attainder Clause.Footnote 80
SCOTUS has both expanded the catalogue of corporate rights and deepened the existing protections. Deepening of free speech and religious liberty protections for corporations has been most consequential. According to John C. Coates IV, more than half of all First Amendment challenges now protect the interests of corporations rather than individuals.Footnote 81 Amy Kapczynski, one of the key exponents of the law and political economy movement (LPE) in the US,Footnote 82 has argued that the new free speech doctrine and the constitutionalized private property rights reflect assumptions that markets are neutral domains that must be kept free from democratic interference, and encase the market from democratic control, creating a “Lochnerized First Amendment.”Footnote 83
II. CJEU: A Wolf in Sheep’s Clothing?
The freedom to conduct a business was recognized as a general principle of EU law in a 1974 case Nold v. Comm’n of the Eur. Communities,Footnote 84 and formally enshrined in Article 16 of the EU Charter in 2009. The provision was included as a counterbalance to the newly enacted social rights. It was drafted in a less forceful, even “diffident,” language, than some other fundamental rights, suggesting that it was intended to remain a principle, rather than a fully enforceable fundamental right.Footnote 85
The protection afforded by Article 16 of the EU Charter covers the freedom to exercise an economic or commercial activity, freedom of contract and free competition.Footnote 86 In particular, the freedom to exercise an economic or commercial activity protects the entire life cycle of a business—the way it is founded, conducted and ended.Footnote 87 It protects commercial secrets,Footnote 88 the right to commercial communication,Footnote 89 and a degree of legal certainty to foresee the exercise of discretion by the government.Footnote 90 Whereas the right to property under Article 17 protects tangible and intangible assets, Article 16 protects the ability to participate in the market and the opportunity to make profits, rather than actual profit earned.Footnote 91 In its most recent case law, the CJEU has interpreted Article 16 to shield companies from “undue or unfair business costs” but not from “even substantial negative economic consequences,” as the doctrine is not yet systematically developed.Footnote 92
As to the freedom of contract,Footnote 93 it comprises the right to decide with whom to do business,Footnote 94 and the freedom to determine the price of a service.Footnote 95 Lately, the latter has extended to cover the freedom to determine the entire content of an agreement, not merely the price.Footnote 96 Thus, a law can prescribe a framework about the way in which prices or other contractual terms should be negotiated, but not which terms should be concluded,Footnote 97 and the CJEU has recently applied this logic to labor law and the employer’s decision to dismiss workers.Footnote 98
However, the CJEU allows for a wide range of regulatory interventions if they do not interfere with the “essence” of the freedom to conduct a business and pass the proportionality assessment. Take the case BB construct, where the Court found a tax guarantee imposed on a company manifestly disproportionate because it “would deprive, without justification, the company … of its resources from the moment of its creation and would prevent it from developing its economic activities.”Footnote 99 A measure may prescribe how the freedom is to be exercised, but it cannot “prevent a business activity from being carried out as such”Footnote 100 and must allow its “continuation.”Footnote 101
These broad limitations on the freedom to conduct a business are grounded in a specific model of a “highly competitive social market economy” originating in the German ordoliberal tradition.Footnote 102 The concept was explicitly included in the Lisbon Treaty in 2009, in an attempt to balance market integration with the integrity of welfare regimes of the Member States.Footnote 103 According to Everson, the “social market economy” both defines the European economic constitution and determines the “forms of business conduct” that can be exercised within its limits. Thus, the content of the freedom to conduct a business is determined by the positive legal and economic institutions.Footnote 104 Therefore, the freedom to conduct a business is said to play a “simple existential function,”Footnote 105 or a recognition of an interest that should be balanced against social rights.Footnote 106
Nevertheless, as a matter of formal law and as a doctrine, Article 16 seems to be a neoliberal institution, even though it is drafted as a “weak right” and contains a clause about respecting “national legislation.” It rests on the assumption that individual economic initiative on the market is a superior way of ensuring economic growth and political freedom than democratic institutions. It pursues encasement by demanding that the state protect the prerogatives of an entrepreneur and to refrain itself from regulating the market. Depending on how it is deployed, its potential is “simply huge,”Footnote 107 as it could be invoked by corporations to strike down national or EU legislation, threatening European integration.
But just like arguing for or against “corporate personhood” is counterproductive, depending on which right is at stake and who is invoking it, sticking a label on Article 16 can be unproductive. Likewise, the mere content of Article 16 is not the only consideration, as what the CJEU does with it is also important. Only through a granular analysis of individual decisions, the social forces coalescing around the decision and its effects, can we attempt to describe a legal doctrine as “neoliberal” or “ordoliberal.”
It is beyond the scope of this article to look at the entire case law of the CJEU, but like several other authors, I argue that the Court has reshaped Article 16 into a neoliberal tool to pursue encasement in several controversial rulings.Footnote 108 The CJEU has more than just resembled SCOTUS, it has even surpassed it in influence and assertiveness, even though these actions did not receive the same level of attention or criticism.
During a major social conflict in the 2010s, the Eurozone crisis, the CJEU deployed Article 16 to intervene in labor disputes, in a fashion very reminiscent of the American Lochner era. In 2013, it decided the Alemo-Herron case,Footnote 109 which involved the privatization and reselling of the leisure department of a local authority in the UK. The employees’ contracts included dynamic clauses for salary increases negotiated through the national collective bargaining body for local authorities. The new private employer refused to increase the employees’ salaries based on a subsequent agreement from the collective bargaining body, arguing that the dynamic clauses included did not transfer to the new employer. The Court sided with the employer and held that, because they were not represented in the collective bargaining body as a private undertaking, a pay increase would breach their freedom to conduct a business. It seemed that the Court was led by the intuition that privatization necessarily entailed the lowering of labor standards.Footnote 110 This case afforded protection to the employer to prevent any regulatory measure that could impact future profits, in this case the “advantage expected from the purchase of the undertaking.”Footnote 111
Similarly, a few years later, in 2016, the CJEU heard a case from the Netherlands brought by a Dutch-based biocide manufacturer Crop Science, member of the multinational pharmaceutical Bayer Group. They contested their obligation under EU law to publicly disclose documents related to their products, which they had submitted to obtain market authorization. The Court held that a national court must be empowered to examine whether the disclosure would affect the applicant’s commercial secrets and narrowed the scope of information that must be revealed.Footnote 112
In 2016, the CJEU found that national welfare systems could constitute a restriction on the freedom to conduct a business.Footnote 113 At the height of the Greek economic crisis, AGET Iraklis, a cement producer owned by the French multinational Lafarge, set out to close a plant and dismiss 236 workers. Greek legislation, implementing harmonized EU labor legislation on collective redundancies, required an authorization from the Minister of Labor before such a decision was made. The Minister refused the employer’s request because their reasons were insufficient and their arguments for redundancies too vague. AGET Iraklis challenged the decision before Greek courts and, subsequently, the CJEU was presented with the question on whether the authorization regime was compatible with, inter alia, freedom to conduct a business. The CJEU agreed that the authorization regime potentially interfered with the employer’s freedom to contract with workers, which formed part of their freedom to conduct a business. But instead, the CJEU decided the case based on the argument that the Minister’s criteria for authorization were too general and imprecise. Because the Minister exercised too broad a discretion, the law was a disproportionate interference with the right to legal certainty of the corporation, required to plan and take business decisions.Footnote 114
Alemo-Herron and AGET Iraklis were decided against the backdrop of the Eurozone crisis following the Great Recession of 2008.Footnote 115 The cases were exemplary of the Court’s complicity in legalizing the economic governance regime that emerged during the Eurozone crisis, which transferred broad powers over the economy to technocratic bodies operating outside of EU law.Footnote 116 The governance process was dominated by German and French executives who imposed austerity measures on countries in trouble through international law outside of the EU legal framework and the EU Charter—measures even legalized by the CJEU.Footnote 117 Repealing the Greek law on collective redundancies challenged in AGET Iraklis had, in fact, been singled out by the “Troika” as one of the “conditionalities” or reforms Greece would have to carry out to receive financial aid. To bring this point home, even the Advocate General, a Member of the CJEU who provides an individual opinion before judges deliver a judgment, openly emphasized that Greece had to reform its labor market to become “more competitive in the global arena.”Footnote 118 What is more, in Alemo-Herron, the incumbent conservative UK government intervened on behalf of the employer to challenge the labor-friendly statute.Footnote 119
In another series of antidiscrimination cases involving a workplace policy of religious neutrality that indirectly discriminated against Muslim employees, the Court sided with the employers.Footnote 120 It interpreted Article 16 as encompassing the right of an employer to adopt policies necessary for the “prevention of social conflicts and the presentation of a neutral image of the employer vis-à-vis customers,”Footnote 121 which effectively relegated female Muslim employees who refused to obey the rules, to take on backroom jobs, contributing to their marginalization.Footnote 122 These cases bear a striking resemblance to the Hobby Lobby case in the United States.
In much the same way as U.S. corporate personhood, with its free speech, religious freedom, or takings doctrines, the freedom to conduct a business has been a crucial weapon against labor and in resisting environmental regulations. More than doctrinal curiosity, this resemblance reveals a deeper commonality between the two courts in managing the political economy.
Like many doctrines of EU law, the freedom to conduct a business reflects the ideological consensus of the period in which it emerged. But despite its restricted wording and formal safeguards indicating its lower level of protection, Article 16 was not immune to being “weaponized,” to borrow from Justice Kagan’s dissent in Janus. It did not prevent the CJEU from using it to intervene on behalf of corporations in the 2010s. The CJEU, boasting its social orientation, turns out to be much closer to its libertarian counterpart in the U.S. than Europeans would like to admit. And just like “[s]peech is everywhere,”Footnote 123 “conducting a business” can potentially comprise any part of economic life the judges of the CJEU would not like to see regulated by legislation. Its essence is “fully dependent” on our normative understanding of the market.Footnote 124 So far, the dominant “social market economy” paradigm has successfully guided its interpretation. But once this paradigm has been destabilized or, alas, overturned, this opens the way to a radical reshaping of the internal market. This understanding is crucial as the CJEU enters its fundamental rights era, with more and more cases raising Article 16 challenges, and as the EU officials contemplate a shift in competition policy to favor corporate concentration.
This Section has revealed a similar political economy of both courts’ approaches—the encasement of market mechanisms from democratic oversight—situated within their unique institutional and historical contexts.
C. Comparative Political Economy: The “Long 1970s” and the Great Recession
This Section inverts the comparison and looks toward the US. Building on the claim that both courts pursued encasement, this Section examines, more specifically, why SCOTUS developed its doctrine much more aggressively than the CJEU, even though Article 16 appeared more open-ended than the legal materials SCOTUS had at its disposal.
Unsurprisingly, both doctrines emerged—or reemerged—after “the shock of the global,”Footnote 125 a deep economic crisis and severe social conflicts occurring throughout Western Europe and the U.S. during the “long 1970s.”Footnote 126 But while SCOTUS’s decisions pioneering encasement in the 1970s paved the way for subsequent expansion of corporate power, the foundational decision of the CJEU did not evolve along the same trajectory. Neither the CJEU nor the European legal elites understood the emergence of the freedom to conduct a business in the 1974 decision as establishing a self-standing entrepreneurial freedom capable of upsetting the institutional settlement.Footnote 127 At the time, no international human rights document contained such a right, and only a few national constitutions expressly included it, although differently formulated, while some countries’ constitutional courts deduced the right from other constitutional provisions, such as the German Federal Constitutional Court in 1974.Footnote 128 The decision was grounded in the “embedded liberalism” or “social market economy” paradigms prevailing at the time.Footnote 129
The economic recession and social upheavals, however, threatened disintegration of the European Union as national governments turned to protectionism.Footnote 130 A political struggle over the future of European integration erupted between European business networks that mobilized to challenge the “embedded liberalism” paradigm,Footnote 131 and European trade unions and socialists who sought a more socially infused integration, but failed to articulate a common plan.Footnote 132 After the eventual victory of business networks,Footnote 133 Europe’s leaders set out to liberalize many of the previously nationalized industries. In 1979, they created the European Monetary System, set a 6-year deadline for the full liberalization of goods, services, people and capital with the Single European Act of 1986, and finally established the single market with the Maastricht Treaty in 1992.Footnote 134 These subsequent political transformations of the EU were inspired by neoliberal precepts, but the “social market economy” paradigm was never completely overturned and evolved along a distinct path.Footnote 135 As Roberto Ventresca observed, the 1992 Maastricht Treaty was neither “[an] undisputed triumph of market-oriented policy measures [n]or the complete overcoming of … the perpetuation of regulative authorities with social or political aims over market functions.”Footnote 136
Few cases involving the freedom to conduct a business were litigated during these decades. On the one hand, courts and litigation have played a different role in Western European countries than in the US, because political disputes were often resolved by professional hierarchical bureaucracies rather than private litigation; coupled with strong labor unions and employer associations at the time, this might explain why fewer cases reached the courts.Footnote 137 On the other hand, this period witnessed the construction of the single market, which is why the freedom to conduct a business played only a subordinate role to the more intensely litigated economic freedoms.
In the few cases that reached the CJEU, it always rejected the challenges at the proportionality stage.Footnote 138 One way of explaining its passive and cautious approach is by combining insights from political science and comparative political economy. Faced with a broad political consensus of a network of actors—Member State governments and EU institutions—about the specific direction of the creation of the single market, the Court could not deviate from it without facing resistance from national governments through noncompliance or override of its rulings.Footnote 139 In contrast, the Member State governments that led the process of liberalization were constrained by strong business coordination and strong labor coalitions that could resist a full-scale retrenchment of the welfare state.Footnote 140 By contrast, ten years earlier, this same Court actively resisted protectionist national governments by interpreting economic freedoms to strike down trade barriers, leading the creation of the single market.Footnote 141
In the United States, a similar economic crisis featuring falling profits and rising demands from labor, combined with the expanded powers of the federal government, caused a sense of panic in the business community, which sought ways to escape the settlement.Footnote 142 They had been opposed to the New Deal and the strong role of the state in the economy since the 1930s, but the 1970s constituted a turning point. The sense of urgency and the subsequent legal mobilization are best illustrated by the infamous Powell Memorandum, drafted by the future Supreme Court Justice Lewis F. Powell in August 1971. He was an ardent supporter of big business and a former corporate lawyer. In the memo, addressed to the U.S. Chamber of Commerce, he called on the business community to organize and intervene in legal academia, mass culture, and the judiciary, to fend off attacks on the “free enterprise system” by the Left.Footnote 143 Later, the U.S. Chamber of Commerce brought together “sophisticated, well-resourced, repeat players.”Footnote 144 Mimicking the civil rights and labor movements,Footnote 145 the businesses were able to offset the lack of a tradition of non-market coordination characteristic of European coordinated market economies. Exploiting the central role of courts in policy implementation in the US, described as American legalism,Footnote 146 they engaged in strategic litigation, influenced judicial appointments, nurtured networks of lawyers, businesspeople, and politicians, and invested in legal academia, succeeding in the complete overhaul of the judiciary by 2010s.Footnote 147
Moreover, in the United States, labor movements had been historically weak and disorganized compared to Western Europe.Footnote 148 Even though they were strong during the post-war period, they were mostly common in the core manufacturing industries. By the 1970s, these industries began automating, downsizing, and relocating. In the 1980s, the defeat of the air traffic controllers’ strike set the stage for a successful campaign against labor unions by employers.Footnote 149 The subsequent decline of labor unions in the U.S. created a power vacuum, removing a critical countervailing force that once balanced corporate power.
Two months after drafting his memo, Powell was appointed to the Supreme Court by President Nixon, where he authored the main decisions reshaping the First Amendment to grant corporations the right to spend money in politics.Footnote 150 This new free speech doctrine protecting business activity was without a basis in “history and tradition,” as SCOTUS had never invalidated a law for violating the First Amendment before 1931.Footnote 151 But while corporate personhood in general facilitated corporate consolidation and concentration during the Gilded Age,Footnote 152 the current First Amendment jurisprudence does not correlate with any theory of growth. It is a “form of rent seeking” by managers to achieve regulatory outcomes that favor “their personal interests at the expense of shareholders, consumers, and employees.”Footnote 153
While this issue alone would merit a separate article, even a cursory look at the case law involving Article 16 post 2000 reveals a significant divergence from its American counterpart. From the European perspective, the freedom to conduct a business was much more open-ended and conducive to deregulation “on paper” than the American legal materials, where corporate personhood was established through a footnote.Footnote 154 And yet it never reached the same levels of encasement, as the CJEU interpreted it restrictively, staying faithful to its ordoliberal ideological origins. Until 2011, the CJEU had never found a law in breach of this freedom, and ever since, it has allowed many limitations on that freedom. For instance, the CJEU upheld a total ban on tobacco advertisingFootnote 155 and a ban on misleading claims regarding mineral water,Footnote 156 whereas SCOTUS struck down similar regulations.Footnote 157
I argue that the distinct political economy of industrial relations in Europe with its enduring corporatist institutions, strong labor unions and employer associations, and the reliance on bargaining rather than courts to solve political disputes, remain deeply consequential for the different evolution of the freedom to conduct a business when compared to U.S. corporate personhood. The same core dynamics seen in the 1970s reemerged during the Eurozone crisis of the 2010s. However, the deep economic crisis, the power relations between debtor and creditor states, and a consensus that emerged among the legal elites, provided an opening for the “weaponization” of Article 16 in the 2010s, even though this shift appears transitory.
These findings suggest that legal interpretations are shaped by broader socio-economic structures, such as corporatist institutions and countervailing forces, legal mobilization, and unique power dynamics between courts, legislatures, and other legal actors. These factors expose the risks associated with focusing on institutional reforms alone. It is impossible to simply “regulate away” corporate power, for instance, by abolishing corporate personhood in the U.S. Law can never be the only tool used to achieve social change, as social struggles occur within multiple sets of institutions.Footnote 158 But this analysis has equally underscored that, while comprehensive social change cannot rely on formal law alone, strategic legal efforts play a powerful role. The example of legal mobilization of American business networks to reshape legal doctrines through the U.S. judicial system to advance their interests remains a powerful testament to this idea. Therefore, in the U.S., it matters who mobilizes and to what end. By contrast, legal mobilization surrounding Article 16 and the CJEU, similar to what has been described in the United States, remains an underexplored area in EU scholarship. Several scholars have already challenged the conventional “integration through law” narrative and highlighted the active role of corporations and their legal counsel, as well as labor unions in influencing the CJEU’s decisions.Footnote 159 This line of inquiry—focusing on legal networks, legal culture and the structure of European legal education—holds significant promise for comparative analyses of legal doctrines in the U.S. and the EU, by deepening our understanding of how legal mobilization interacts with broader socio-economic forces to shape the evolution of legal doctrines.
D. Conclusion
This Article compared the evolutions of two distinct doctrines—US corporate personhood and the freedom to conduct a business under Article 16 of the EU Charter. It argued that during the last fifty years, SCOTUS and the CJEU have interpreted these doctrines to support the rise of neoliberalism in the United States and the European Union, by pursuing “encasement” of the market order from democratic control. These doctrines have already received much attention in their respective jurisdictions, including for their neoliberal bias, and the broader concept of constitutional rights of corporations on the global level has also been criticized. However, this was the first attempt to compare the political economy of these two doctrines on a transnational level, to examine their relationship with political transformations that have taken place in both jurisdictions.
In the first part, this Article demonstrated that both courts evolved their doctrines toward a similar outcome: The encasement of market mechanisms from democratic oversight. It showed that the freedom to conduct a business under Article 16 of the EU Charter, despite its limited content, has functioned in much the same way as U.S. corporate personhood with its free speech, religious freedom, or takings doctrines. It has been a crucial weapon against labor in cases such as Alemo-Herron and AGET Iraklis, or Samira Achbita v. G4S Secure Solutions NV and IX v. WABE eV, and used to challenge pharmaceutical regulations in Bayer CropScience SA-NV v. Coll. Voor Toelating van Gewasbeschermingsmiddelen en Biociden. The CJEU, boasting its social orientation, turned out to be much closer to its libertarian counterpart in the United States than Europeans would like to admit. This Article’s comparison with the United States exposed the hidden dangers of the EU evolution and highlights the inherent risk of an uncritical expansion of Article 16, especially as the CJEU enters its fundamental rights era.
In the second part, the Article inverted the comparison and emphasized the divergence between SCOTUS and the CJEU in how they interpreted these doctrines. The CJEU appears more cautious and restrained than SCOTUS, even though Article 16 seems more open-ended than the legal materials that SCOTUS has at its disposal. On the one hand, studies from the United States have underscored the importance of legal mobilization of the business community in shaping the development of corporate personhood, whereas this issue has been underexplored in EU scholarship. On the other hand, the Article argues that the subordinate role of courts in settling political disputes in Europe, as well as the existence of a countervailing force, in the form of strong labor unions and employer associations, were the crucial factors that shaped the divergence between the evolution in the U.S. and the EU. This approach to the study of comparative constitutional law also produces useful insights for legal reformers aimed at curbing corporate power on both sides of the Atlantic by drawing attention to deeper dynamics shaping political transformation beyond formal law.
Acknowledgments
I offer my deepest thanks to Professor Yochai Benkler, who introduced me to a new way of thinking about the law. I am also grateful to Professors Peer Zumbansen and Poul F. Kjær for their feedback, as well as the other participants and organizers of the Transnational Junior Faculty Forum in Berlin, where I presented an earlier draft.
Competing Interests
The author has no competing interests to declare that are relevant to the content of this Article.
Funding Statement
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Author Biographical Information
Tim Horvat graduated from the University of Ljubljana with a Bachelor of Laws in 2020 before getting his Master of Laws from the University of Ljubljana in 2021 and Harvard Law School in 2024. An earlier version of this article was written as part of his LL.M. studies at Harvard Law School.
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