The Myth of Transformation Through EU Law: A Case-Study of the Company Law Reform in Ukraine

Abstract

The paper examines the efficiency of the institutions created in Ukraine with the view to approximate its laws to the acquis communautaire and tests the limits of the transformative power of the acquis and the European Union’s ability to effect positive domestic change in non-EU countries by “exporting” EU law. The findings suggest that although Ukraine has created an elaborate statutory mechanism to ensure that its new laws comply with the acquis, this has no meaningful effect on the improvement of the quality of the country's company law. The study argues that the failure of approximation can be explained with reference to the concept of demand for law developed in comparative law theory. The process of approximation is particularly studied in several areas of company law: shareholders’ preemptive rights, distributions through dividends and transfer pricing, disclosure of companies’ charters and accounts, and effects of limits on contracting powers of the company’s executive organ. These areas have been chosen because while being mostly harmonized at the EU level they are deemed to be crucial in solving agency costs problems (in particular self-dealing) in the context of transitional economies. These aspects of Ukrainian law and the depth of their approximation to EU law are examined by looking at the 2008 Ukrainian law on joint-stock companies and the 2004 law on disclosure of corporate information. This comparative study is supported by the empiri-cal survey of recent judgments of the Ukraine’s High Commercial Court. In particular, all cases involving limitations on contractual powers of management decided from May 2006 to June 2009 are examined to establish how often the court actually relied on the protec-tions to third parties imported from the EU law. This study is a pioneering attempt to test empirically the success of approximation of Ukrainian law to the EU law. The study finds a very low success rate for parties invoking EU-inspired legal norms and attempts to explain this failure of approximation.