|
on Law and Economics |
| By: | John Armour |
| Abstract: | The characterisation of a security interest as 'fixed' or 'floating' has generated much litigation in English courts. This is because a floating charge is subordinated by statute to other claims in the debtor's insolvency, whereas a fixed charge is not. This paper uses the example of the floating charge to argue that such statutory redistribution between claimants in corporate insolvency is generally undesirable. |
| Keywords: | corporate insolvency, law and finance, history of floating charge, bankruptcy priorities, secured credit. |
| JEL: | G32 G33 H23 K22 N43 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp319&r=law |
| By: | John Armour |
| Abstract: | This paper reviews the case for and against mandatory legal capital rules. It is argued that legal capital is no longer an appropriate means of safeguarding creditors' interests. This is most clearly the case as regards mandatory rules. Moreover, it is suggested that even an 'opt in' (or default) legal capital regime is unlikely to be a useful mechanism. However, the advent of regulatory arbitrage in European corporate law will provide a way of gathering information regarding investors' preferences in relation to such rules. Those creditor protection rules that do not further the interests of adjusting creditors will become subject to competitive pressures. Legislatures will be faced with the task of designing mandatory rules to deal with the issues raised by Ônon-adjustingÕ creditors in a proportionate and effective manner, consistent with the Gebhard formula. |
| Keywords: | Corporate Law, Creditor Protection, Legal Capital, Regulatory Competition |
| JEL: | G32 G38 K12 K22 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp320&r=law |
| By: | Mathias M Siems |
| Abstract: | In the last few years law and finance scholars have 'discovered' the usefulness of comparative law. Their studies look at the quantifiable effect that legal rules and their enforcement have on financial development in different countries. Moreover, they link their results with the long- standing distinction between Civil Law and Common Law countries. Whether this revival of 'legal families' is a useful way forward is, however, a matter of debate. The following article challenges these studies and looks for characteristic features which are more precise and meaningful than the use of legal families as such. |
| Keywords: | legal origins, legal families, legal traditions, numerical comparative law, law and finance, law and development, Civil Law, Common Law |
| JEL: | K00 K20 K22 N20 N40 O10 P51 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp321&r=law |
| By: | Simon Deakin |
| Abstract: | Prior to the industrial revolution, the predominant form of economic organization in western Europe and north America was the guild. Guilds were network forms, loose associations of independent producers, with strong local and regional identities, in which cooperation and competition were combined. The decline of the guild was brought about in large part by legal changes which privileged the emerging conjunction of the vertically integrated enterprise and mass consumer market. If present- day network forms are not be consigned to the margins of capitalism as their predecessors were, we need a set of legal concepts and techniques which can underpin and protect network relations, most importantly in the context of competition law. |
| Keywords: | networks, guilds, vertical integration, industrialisation, competition law. |
| JEL: | K21 L14 L22 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp322&r=law |
| By: | Simon Deakin |
| Abstract: | Two models of regulatory competition are contrasted, one based on a US pattern of Ôcompetitive federalismÕ, the other a European conception of Ôreflexive harmonisationÕ. In the European context, harmonization of corporate and labour law, contrary to its critics, has been a force for the preservation of diversity, and of an approach to regulatory interaction based on mutual learning between nation states. It is thus paradoxical, and arguably antithetical to the goal of European integration, that this approach is in danger of being undermined by attempts, following the Centros case, to introduce a Delaware-type form of inter-jurisdictional competition into European company law. |
| Keywords: | corporate law, labour law, regulatory competition |
| JEL: | K22 K31 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbr:cbrwps:wp323&r=law |
| By: | Arndt Christiansen and Wolfgang Kerber (Faculty of Business Administration and Economics, Philipps Universitaet Marburg) |
| Abstract: | Abstract: Both in US antitrust and EU competition policy a development to a broader appli-cation of rule of reason instead of per se rules can be observed. In the European discussion the attempt to base competition policy on a "more economic approach" is mainly viewed as im-proving the economic analysis in the assessment of specific cases. In this paper it is shown from a general law and economics perspective that the application of rules instead of focus-sing on case-by-case analyses can have many advantages (less regulation costs, rent seeking and knowledge problems), although an additional differentiation of rules through a deeper assessment can also have advantages in regard to the reduction of decision errors of type I and II. After introducing the notion of a continuum of more or less differentiated rules, we show - based upon law and economics literature upon the optimal complexity of rules - in a simple model that a competition rule is optimally differentiated, if the marginal reduction of the sum of error costs (as the marginal benefit of differentiation) equals the marginal costs of differen-tiation. This model also allows for a more detailed analysis of the most important determi-nants of the optimal degree of rule-differentia¬tion. From this law and economics perspective, competition policy should consist mainly of (more or less differentiated) rules and should only rarely rely on case-by-case analysis. Therefore the main task of a "more economic ap-proach" is to use economics for the formulation of appropriate competition rules. |
| Keywords: | Competition Policy, European Competition Law, Rule of Reason |
| JEL: | K K L |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:mar:volksw:200606&r=law |
| By: | Wolfgang Kerber (Faculty of Business Administration and Economics, Philipps Universitaet Marburg) |
| Abstract: | Should the EU introduce an Optional European Contract Law Code and what should it look like? By applying economic theories of federalism and regulatory competition (legal federalism), it is shown why an Optional Code would be a very suitable legal instrument within a two-level European System of Contract Laws. By allowing private parties choice of law to a certain extent, it can combine the most important advantages of centralisation and decentralisation of competences for legal rules. Through differentiated analyses of three kinds of contract law rules (mandatory substantive rules, mandatory information rules and facilitative law), important conclusions can be reached: which kinds of contract law rules are most suitable to be applied on an optional basis (e.g. facilitative law) and which might be less so (e.g. information regulations). Furthermore a number of additional general conclusions about the design and scope of an Optional EU Code and some conclusions in regard to sales law are derived. |
| Keywords: | contract law, European Union, legal federalism, regulatory competition |
| JEL: | H7 K12 K33 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:mar:volksw:200607&r=law |
| By: | Oliver Budzinski (Faculty of Business Administration and Economics, Philipps Universitaet Marburg) |
| Abstract: | The jurisdictional elements of the comprehensive 2004 reform of EU merger control are worth being analysed against the background of economic theory. Competence allocation and delimitation represent important factors for the workability of multilevel merger control regimes. The economics of federalism offer an analytical framework that can be adopted in a modified version in order to assess competence allocation regimes in competition policy. According to these theoretical insights, a given competence allocation and delimitation regime can be evaluated in regard to four criteria: internalisation of externalities, cost efficiency (the one-stop-shop principle), preference orientation, and adaptability. The ‘old’ competence allocation and delimitation regime of EU merger control consisted of two elements: turnover thresholds and post-notification referrals. Analysis along the lines of the economics of federalism reveals considerable deficiencies of the ‘old’ regime. Thus, the results of the theoretical analysis are compatible to the dissatisfying empirical experience, which represented a major motivation for launching the reform process. However, the actual reform eventually left the turnover thresholds untouched. The main element of the jurisdictional reform was the introduction of pre-notification referrals and the addition of institutionalised network cooperation. |
| Keywords: | competence allocation, economics of federalism, jurisdictional reform. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:mar:volksw:200608&r=law |
| By: | Jean Michel Josselin (CREM - CNRS); Alain Marciano (University of Reims – CNRS – EconomiX – IDEP) |
| Abstract: | In spite of the clear objective assigned to the integration process in the 1950s, the institutional status of the European Union remains ambiguous and uneasy to define. The argument that we present in this article is that Europe has always hesitated between two forms of federalism. We use an agency framework and demonstrate that before the landmark cases Van Gend en Loos and Costa v. E.N.E.L., the European Union is mainly a confederation but it already contains elements of a federation. Afterwards, the institutional structure of the Union evolves towards a more centralised federalism but still shows lasting elements of a confederation. |
| Keywords: | Federation, confederation, political economy, European Union. |
| JEL: | D72 H11 K10 N41 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:200607&r=law |
| By: | Stefano Comino; Antonio Nicolò; Piero Tedeschi |
| Abstract: | In this paper, we prove that two firms may prefer not to include a termination clause in their partnership contract, thus inducing a costly termination in case of failure of the joint project. This ex-post inefficiency induces partners to exert large levels of non-contractible efforts (investments) in order to decrease the probability of failure. Therefore, the absence of a termination clause works as a "discipline device" that mitigates the hold-up problem within the partnership. We show that writing a contract without a termination clause is a credible commitment even when partners can add such a clause in the contract in any moment of their relationship. Comparative statics analysis suggests that contracts lacking a termination clause are suited to alliances in R&D, when partners are not rivals or when they have strong technological complementarities. |
| Keywords: | hold-up; termination clauses; partnerships; joint ventures |
| JEL: | D82 K12 L24 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:mis:wpaper:20060505&r=law |