nep-law New Economics Papers
on Law and Economics
Issue of 2015‒07‒25
twelve papers chosen by
Eve-Angeline Lambert, Université de Lorraine

  1. Property crime and private protection allocation within cities: theory and evidence By Decreuse, Bruno; Mongrain, Steve; van Ypersele, Tanguy
  2. Practices of case proceedings by the Supreme Court of Finland, suspect's right to defence by means of legal assistance. By Vladimir Jilkine
  3. Legal aid in Civil Cases in Turkish Law By Halil Dursun
  4. Legal Evolution and Contract Evolution under Imperfect Enforcement By Gennaioli, Nicola; Ponzetto, Giacomo AM
  5. The Experience of Forming the Institute of Legal Responsibility for Economic Crimes in the United States By Shatalov, S.
  6. Financial Crime Persecution in the U.K: Time for an Alternative Approach By Mark Lokanan
  7. Multiple Activities for Socially-Connected Criminals By Chen, Ying-Ju; Zenou, Yves; Zhou, Junjie
  9. Investing to Cooperate: Theory and Experiment By Jean-Pierre Benoît; Roberto Galbiati; Emeric Henry
  10. Surcharges and penalties in UK tax law By Rita de la Feria; Parintira Tanawong
  11. Unfair Dealing and Consumer Protection in Asset-Based Lending in Australia By Pelma Rajapakse
  12. The Private Ordering Solution to Multiforum Shareholder Litigation By Roberta Romano; Sarath Sanga

  1. By: Decreuse, Bruno; Mongrain, Steve; van Ypersele, Tanguy
    Abstract: We model the allocation of property crime and private protection within cities. We provide a theory where city-specific criminals choose a neighborhood and whether they pay a search cost to compare potential victims, whereas households invest in self-protection. The model features strategic complementarity between criminals' search efforts and households' protection investments. As criminals' return to search increases with neighborhood wealth, households in rich neighborhoods are more likely to enter a rat race to ever greater protection that drives criminals towards poorer areas. The mechanisms of our model are tested with the Canadian General Social Survey. Household protection increases with household and neighborhood incomes, neighborhood protection, and neighborhood victimization.
    Keywords: economics of crime; private protection; search frictions; social multiplier
    JEL: K14 K42
    Date: 2015–07
  2. By: Vladimir Jilkine (Baltic International Academy, Riga , Latvia)
    Abstract: The right to protection of the suspect or accused of a criminal offense established by the Council of Europe, the UN General Assembly and the European Court of Human Rights, is one of the basic constitutional guarantees, designed primarily to provide reliable protection of human rights in criminal proceedings. The practices of the European Court (the case-law of the European Court) should be a defining aspect in the interpretation of national provisions of the Convention. This article is dedicated to a problematic issue of protecting the rights of detained suspects and defendants in criminal proceedings of the national courts of Finland and the implementation of jurisprudence of the European Court of Human Rights, supported by the principles and standards of the International Covenant on Civil and Political Rights as well as the decisions of the UN Committee on Human Rights. The article analyses norms of international law, judicial precedent of the European Court of Human Rights in the decisions of the Supreme Court of Finland and the review of applications to rescind prior court decision on the basis of a ruling by the European Court of Human Rights.
    Keywords: European Convention, international law, national law, the right to the protection of the suspect, a fair trial, the Supreme Court of Finland.
    JEL: K33 K14 K10
  3. By: Halil Dursun (Selcuk University Faculty of Law)
    Abstract: The constitution of Republic of Turkey Article 36 regulates the freedom to claim rights; “Everyone has the right of litigation either as plaintiff or defendant and the right to a fair trial before the courts through lawful means and procedures”. Legal aid was adopted in order to ensure the realization of these constitutional principles.In the Turkish private law, legal aid is regulated in two different laws. Article 334 and following of Civil Procedure Law sets basic regulations about legal aid service. Parties who don’t have sufficient income are exempt from court fees and expenses and in this case the Bar assigns a lawyer free of charge. Secondary regulation is Attorneyship Law. The purpose of legal aid is explained in Attorneyship Law as to make attorneyship services available to those who lack the wherewithal to pay attorneyship fees and jurisprudence costs with a view to overcoming the obstacles to the right of the individual to seek justice and to ensure equality in exercising the right to seek justice.In accordance with the regulations mentioned above this presentation focuses to give general information about legal aid in Turkey, individuals who request legal aid, scope of legal aid and procedure of legal aid service.
    Keywords: Legal aid, Bar Association, Attorneyship Law, Civil Procedure Law, Court Fees.
  4. By: Gennaioli, Nicola; Ponzetto, Giacomo AM
    Abstract: We model the joint evolution of contracts and precedents by introducing imperfect enforcement into a standard incomplete contracts setup. We assume that biased trial courts can refuse to verify novel evidence but are bound to respect precedents, namely to verify evidence that other judges verified in past cases. We find that optimal contracts are innovative (contingent on both precedents and novel evidence), but noisy evidence and judicial biases introduce enforcement risk and cause incentives to be low-powered. Litigation of innovative contracts refines the law, making it more informative. This evolution improves enforcement and makes contracts more complete, thereby enabling higher-powered incentives and improving welfare. This beneficial mechanism is hampered by judicial bias, which slows down legal evolution and causes enforcement risk to persist for a long time.
    Keywords: contracts; imperfect enforcement; legal evolution; precedents
    JEL: D86 K12 K40 K41
    Date: 2015–07
  5. By: Shatalov, S. (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: The article discusses the U.S. experience in fighting white-collar crime. It is concluded that a number of approaches used have a high propensity for corruption and therefore direct borrowing of the U.S. experience in Russia seems undesirable.
    Keywords: white-collar crime, corporate crime, liability, prosecution
    Date: 2015–07
  6. By: Mark Lokanan (Northumbria University, Newcastle Business School)
    Abstract: The recent global financial crisis resulted in a litany of financial scandals involving senior executives, corporate officers and accountants from some of the United Kingdom (U.K.) largest institutions. In this paper, I explore the key issues relating to enforcement of these individuals by critically appraising the historical and contemporary perspectives of financial crime’s enforcement in the U.K. Historically, judges in the U.K. were very reluctant to imposed criminal sanctions for serious financial crimes. When criminal sanctions were imposed, they were nothing more than a regulatory wrist slap. Using three recent financial crime cases (Cattles Plc, LIBOR Scandal, and UBS and rouge trader Kweku Adoboli), I illustrate how this pattern of lax enforcement continues. Informed by both individual and structural theories of motivation, the evidence reveals that the special characteristics of financial crimes coupled with the current regulatory and criminal law framework in place in the U.K. makes it difficult to successfully litigate and prosecute these offences. Instead of arguing for stronger criminal response, I presented a model that urges authorities to consider persuasive and self-regulatory alternatives to criminal law and deterrence to address financial crimes.
    Keywords: Financial crimes; Enforcement
    JEL: G01 K14
  7. By: Chen, Ying-Ju; Zenou, Yves; Zhou, Junjie
    Abstract: We consider a network model where individuals exert efforts in two types of activities that are interdependent. These activities can be either substitutes or complements. We focus on criminals that either exert efforts in crime and education (substitutable activities) or crime and drug consumption (complementary activities). We provide a full characterization of the Nash equilibrium of this game for any network structure and show under which condition it exists and is unique. We then derive some comparative statics results that offer strong empirical predictions on the effect of own productivity on both efforts and how network density affects equilibrium outcomes. Finally, we re-examine the key-player policy that consists in determining the criminal who, once removed, reduces total crime the most. We show that, if the planner ignores the fact that criminals have multiple activities, then she can wrongly determine who the key player is.
    Keywords: criminal networks; key player; multiple activities
    JEL: A14 D85 K42 Z13
    Date: 2015–07
  8. By: Emre Atsan (Hacettepe University Inst); Mete D (Çorum University, Inst)
    Abstract: Turkey, always in a process of transition in many areas, and a vicious cycle may not exceed beyond this process has been a long time in an effort to take its place in the globalized world. Our economy has entered a transition to a free market economy in the 1980s and has taken important steps in this process. The share of economic crime has increased while the crime has changed dimension after the accrete of the settlement of the free market economy. In our study, we made a brief introduction to the concept of economic crime, especially of Turkish tax system are evaluated in terms of economic crimes and punishments. Then, by making comparison with the legislation of some developed countries, one of the reforms in the Process of the European Union, the new Turkish Penal Code has been assessed the effects on the Turkish Tax System and problems and solutions are listed.
    Keywords: Economic Crime, Turkish Tax System, Comparative Analysis
    JEL: K34 O57 K14
  9. By: Jean-Pierre Benoît (London Business School (LBS)); Roberto Galbiati (Département d'économie); Emeric Henry (Département d'économie)
    Abstract: We study theoretically and in a lab-experiment how legal protection affects the level and type of investments in a setting where a player chooses an investment level before interacting repeatedly with the same set of agents. The investment stochastically affects the payoffs of the game in every subsequent period. We show that without legal protection: investments will be made since repeated interactions can serve as a substitute for legal enforcement; investments with less volatile returns are more likely; the investor might be forced to invest more to keep other players cooperative. Experimental results are broadly consistent with the theoretical findings.
    Keywords: Investment; Experiments; Repeated Games; Property Rights
    JEL: C72 C73 C91 C92
    Date: 2014–05
  10. By: Rita de la Feria (Durham University); Parintira Tanawong (Durham University)
    Abstract: This paper reviews the tax penalties' regime in the UK, in the context of a general anti-evasion policy. It argues that the global economic crisis has had a significant impact in the UK surcharges and penalties system, intensifying the process initiated before, towards a much tougher regime. This new approach can be explained party on the basis of traditional considerations, such of deterrence and punishment; there is the suspicion, however, that it may be also based on other considerations, namely as an additional source of revenue, or as compensatory measure for the revenue lost through fraud. It concludes that tax penalties whose ratio is no longer (solely) deterrence are disproportionate, and as such, contrary to EU law, and the ECHR.
    Date: 2015
  11. By: Pelma Rajapakse (Department of Accounting, Finance & Economics, Griffith University)
    Abstract: The lenders and mortgage brokers operating in Australia have introduced variety of credit products to consumers which include ‘subprime’ or ‘non-conforming’ loans, which are made to borrowers who cannot obtain loans from traditional lenders, and ‘low-doc’ or ‘no-doc’ loans, which ‘do not require as rigorous proof of creditworthiness’. Another type of credit product namely ‘asset based’ lending or ‘equity stripping’ has attracted borrowers, where lenders grant housing loans based solely on the value of the borrower’s security ( i.e. the sole residence) without regard to his or her income or ability to make repayments. These inappropriate practices have the potential to lead to unconscionable dealing, and they have opened the door for unscrupulous lenders to engage in ‘morally repugnant’ lending practices. This research is significant in light of the recent judicial decisions that exemplify the tough stance that Australian courts are taking against lenders that operate in the business of providing non-conventional loans with higher risk factors. It considers the possibility of a loan made to a borrower unable to conserve his or her own interests and secured on the family home being set aside through common law and equitable principles of unconscionable dealing and the courts' jurisdiction to reopen an unjust contract under the National Credit Code 2009 or the Contracts Review Act 1980 (NSW). Firstly, this paper examines some judicial decisions where loans secured over the family home were made to borrowers with little capacity to repay and who were arguably limited in their ability to protect their own interests. It discusses the circumstances leading to the creation of unconscionable conduct as borrower redress against asset-based lending, and the recent development of the doctrine of unconscionable conduct in the case law, including the current requirement to show a ‘situational special disadvantage’. Secondly, this study considers the knowledge being attributed to a lender on the ground that a broker was its agent. In addition, this part considers the role of knowledge in setting aside a loan contract made through a broker on the grounds of unconscionable conduct against the borrower by a third party.Thirdly, this paper considers the legislation that has been enacted in Australia to combat irresponsible lending practices. This section will also involve suggestions for law reform to adequately respond to the challenges posed by the global financial crisis and the victims of inappropriate asset-based lending.
    Keywords: Sub-Prime Lending, Unfair and Unconscionable conduct, Consumer protection, Mortgage Brokers, Australia.
    JEL: K20 K30
  12. By: Roberta Romano; Sarath Sanga
    Abstract: This paper analyzes a private ordering solution to multiforum shareholder litigation: exclusive forum provisions in corporate charters and bylaws. We examine what drives the growth in these provisions and whether, as some critics contend, their adoption reflects managerial opportunism. We find that nearly all new Delaware corporations adopt the provision at the IPO stage, and that the transition from zero to near-universal IPO adoption over 2007-14 is driven by law firms. Characteristics of individual companies appear to play little or no role in adoption decisions. Instead, the pattern of adoption follows what can be described as a light switch model, in which law firms suddenly switch from never adopting to always adopting the provision in the IPOs they advise. For midstream adoptions, we compare corporate governance features of adopters to a matched sample of non-adopters to test the hypothesis that midstream bylaw adoption reflects managerial opportunism. If the hypothesis were correct, then we would expect to find that adopters exhibit poor corporate governance compared to non-adopters (using the metrics of good governance practices as identified by critics of the provisions). We find, however, that there are either no significant differences in governance or that it is adopters that have higher quality governance features. We also find no significant differences in governance and ownership structures between firms whose boards adopt the provisions as bylaws and those who obtain shareholder approval.
    JEL: G34 K22
    Date: 2015–07

This nep-law issue is ©2015 by Eve-Angeline Lambert. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.