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Summary

Legal certainty can influence the life of a bargain at a three crucial phases. These can be divided into pre-contractual, contractual and post-contractual. The logic behind this division in relation to legal certainty could partly be explained by understanding the emphasis that English contract law places on individual ethics, on the one hand and sanctity of agreements on the other. Thus the emphasis on bargaining [Atiyah] rather than on exchange of promises imposes a reading of the concept of legal certainty in that light. As a result pre-contractual negotiation may have little influence if any on the bargain, to some degree this fortified legal certainty rather than compromises it. on the other hand English doctrine of contract law would not concede except in exceptional circumstances to any variation to the bargain [unless freely undertaken, or agreed upon in the contract], nor a walk away from the bargain. The English court will not write a bargain for the parties, nor tolerate parties walking away from the bargain. There is a minimal role to substantive fairness or cooperative ethics in this phase. There is absoluteness to the bargain Parties are expected to comply with those obligation freely undertaken in the contract. Thus the contractual phase is also characterised by a great degree of certainty, possibly greater than the pre-contractual phase. Finally the pre-contractual phase, where one may argue that legal certainty will depend on the conduct and behaviour of the parties. On the one hand parties are expected to uphold a certain standard, for example mitigate a loss, or would be substituted by the reasonable man, taking into account principles common to open and fair dealing, and the principle of proportionality, which would affect the expected bargain [limits to the expectation interest- See Ruxely electronics]

Theory of English Contract law that shapes legal certainty

The ethos of English contract law can be best described as ‘essentially individualistic’ (Brownsword). The corner stone of that nature of English contract law are none other than the principles of freedom of contract, and the sanctity of agreements. This notion has survived despite the resurrection of welfarism ethics into English Contract law, and insofar as parties enter into binding agreements, under a 19th-century paradigm conforming to a carefully delineated doctrinal application, i.e. offer, acceptance, consideration, etc… The parties must agree on all the essential terms of the contract in order to have a binding agreement.

Summary

As we stated in the Introduction and as mentioned by David Marrani in his “Introductory remarks on comparative law and interdisciplinarity”, this book is the result of an ambitious project. Our initial aim was to assess the efficiency of legal instruments used to register real estate property transactions in order to provide legal certainty. We have addressed this issue through a multidisciplinary approach altogether combining legal with economic analysis and drawing a comparison between a Common Law country (using English and Welsh law) and a Civil Law country (France). As such, our project was also a project of comparative law in action, in similar sense as what is described by Esin Orücu.

This project was built on a bet for a new methodology and on an assumption. The bet was to test a methodologsy which we could call “monographic and comparative economic impact assessment of law”. The assumption was that legal certainty is deeply linked with local legal culture and is not a by-product of the standardisation of law and legal procedures. In this regard, this project is clearly a pilot project and should be assessed as such.

But to address these issues and to try to draw some lessons from this research project, we first have to come upstream and to recall its genesis as a reaction to the World Bank Doing Business reports. The methodology and results of the World Bank gave birth to the “New comparative economics”, a recent school within economics, and to the “Legal origins theory”,4 which led to hot debates among economists as well as interdisciplinary exchanges between economists and comparative lawyers. Therefore, our analysis should also be put in perspective within these academic debates.

These concluding remarks will then be organized around the answers to three successive questions. Firstly, what “New comparative economics” does to comparative law? Or more precisely, what harm “New comparative economics” and its subsequent theories, such as “Legal origins” but also the economic assessment of the quality of law through indicators, may cause to comparative law? Secondly, what economics could do to comparative law? This second question then leads to what we may call the “Economic Attractiveness of Law” paradigm, bringing up an attempt to build new methodologies to compare the economic efficiency of legal instruments and institutions.

Summary

“From time to time it is probably necessary to detach oneself from the technicalities of the argument and to ask quite naively what it is all about”

Friedrich Hayek

Many legal concepts seem to be perfectly clear to neophytes but in fact prove to be highly complex when it comes to determining if not their meaning, then at least their gist. Legal certainty definitely belongs to this category. As for beauty or democracy, it is possible to sense its meaning without being able to explain it clearly.

It formed part of the collective legal unconscious for many years until it was given a firm legal basis in case law by the ECJ in 1962 (SNUPAT and Bosch judgements) and then by the ECHR in 1979 (Marckx judgement). It was not incorporated into the French legal grammar until 2006 via the KPMG judgement made by the Conseil d'Etat (Council of State). Since then, post-rationalisations have led to its recognition in the French Declaration of the Rights of Man and of the Citizen (in a clever combination of articles 2 and 7 – on certainty – and 16 – on the guarantee of rights), as an implicit constitutional “value”, or indeed as the basis of the rule of law. As for any new concept, it has led to new readings and new ways of structuring the law, which seems to be unaware of its constitution.

This late appearance of the concept in legal history could be explained by the Tocqueville effect. When a particular phenomenon declines, any reappearances of this phenomenon become increasingly intolerable. The concept of legal certainty may thus have appeared at this precise moment in history in which legal certainty is already very prevalent within modern legal systems and, in a certain sense, no longer poses problems, becoming established as an implicit requirement of a “good” legal system.

Without really seeking to theorise this notion, law, case law and their reinterpretation by the doctrine, have caused legal certainty to become a “global concept” – a concept defined by a sum of components whose completeness is never postulated: nonretroactivity, accessibility and intelligibility, normativity and quality of the law, consistency of the law and case law, and the need for transitional measures in order to cope with an instability or unpredictability of the law, etc.

Summary

Assessing the legal security of a real estate transaction involves presenting the operation's various phases.

From the outset, we can stress the importance of the real estate transaction in our cultural and, consequently, our legal tradition. Associated with the law of contract in its technique, the specificity of the real estate transaction ties in with the nature of the property, which represents a portion of the national territory and, as such, one that is subject to the rules that fall under the authority of the State and its territorial communities. In this respect, we must emphasize the growing number of controls and restrictions that have been imposed upon the real estate market by the State since the second half of the 20th century, at a pace that shows no signs of slowing down. Any modification of real property infers an administrative authorisation. The prerogatives of the State and the numerous standards it imposes, for various objectives (land-use planning, environmental protection, etc.), beset any real estate transaction, and represent essential elements that have a profound effect on the value of the private property and the conditions of its transfer.

The prerequisite to the real estate investment is the initial decision which, in the context concerned, i.e. the purchase of an office building by a company, assumes that various factors are analysed (market conditions, economic growth, taxation, political stability) and that they have proven positive in the eyes of the investor. This decision is the starting point of the operation that involves finding a property asset corresponding to the selected criteria.

Searching for the asset to acquire/selling an asset

The search for a property asset can be carried out by an intermediary, the real estate agent, who will be mandated to search for the asset on behalf of the investor and/or the vendor. The scope of the agent's mission may vary. As a minimum, it will entail searching for the asset. At the other end of the scale, it may include the negotiation and even the drafting of a pre-contract.

The vendor may also task the real estate agent with the sale of an office building by adjusting the scope of the mandate of sale.

Summary

1. This project was ambitious. Not only because of the scope of the research undertaken, but also because it aimed to consider multiples and mixed approaches of different legal cultures. It is therefore fundamental in my opinion to analyse some ideas on the operation comparison itself in the context of an inter disciplinary work, which we have undertaken here, to really try to understand or at least grasp what is at stake in this project.

We should primarily keep in mind the debates surrounding legal systems, legal cultures and legal traditions. Within the debate, culture, or (sometimes) its very close ‘ally’, tradition, have become a crucial notion. The idea of culture in general and legal culture in particular, gives a large place to memory, a social memory conceptualized as a sort of super ego, a sort of entanglement of heideggerian temporality combining time, chronology of past, present and future.

There are of course types of societies that are traditional and some non-traditional. The main point for us here has to be the law itself, as it connects to these conceptions. Each type of society faces a certain type of law, and the matter escalates when we link those points to the classical divide tradition and modernity, but also its Enlightenments’ derivative, the new rearranged divide tradition and rationality.

For Western Europe (or Western European and country) and its tradition of comparison (Twinnings) in civil law tradition, there are according to Glenn elements of traditional chtonic and talmudic that give clues about why and where some legal definitions are coming from, opening our eyes to what are specific legal identities. In the common law tradition, it all derives, again for Glenn, from an accident resulting from the conquest of England by the Normans. The smallest common denominators, important elements of the comparison, are definitely the alleged core of the ancient traditions. On the one hand, in common law, we have the use of oral “through the accumulation of precedent,” creating “a body of common experience” through memory/ ies. On the other hand, in Southern Europe, the civil law tradition, appears rooted in writings, in the tradition of chthonic and Talmudic, as explained by Glenn, that goes much deeper than the rational explanation of roots located in the writings of Roman Empire, through the codex.

Summary

The role of the lawyer

Lawyers in the English legal system who work in a law firm partnership (or, very rarely, as a sole practitioner) are called solicitors. They are subject to extensive and strict regulation. Before 2007, the solicitors’ governing body, the Law Society, regulated the solicitors’ profession. Since 2007, a new independent body called the Solicitors’ Regulation Authority regulates the profession. The SRA has made the Solicitors’ Code of Conduct which contains mandatory rules and guidance which all solicitors must follow. Firms are regulated in matters relating to accounts and care of clients’ money, the provision of financial advice, relations with other lawyers, with clients, and with third parties. No solicitor may practise without a Practising Certificate.

Professional ethical standards under the Code of Conduct regulate dealings between lawyers so that one lawyer may not act in an unethical manner towards another. At the same time, the interests of the client are paramount. There are strict rules governing the relationship not only between lawyers but between the lawyer and his client and between the lawyer and a third party.

In this connection, it should be noted that in England, a sufficient level of professional indemnity insurance is compulsory; lawyers cannot practise without such insurance. Such compulsory insurance is by no means to be found in all European countries. Th e level of cover is objectively determined so that it is adequate to cover risk. Accordingly, if a client suffers loss because of the proven negligence of his lawyer, that loss will be wholly compensated by insurance.

Under Rule 3.07 of the Code of Conduct, the parties to a commercial lease (hereafter ‘lease’) must be separately represented. Of course, this is designed to avoid any conflict of interest. Not only the landlord and the tenant should have separate representation but also any surety and also any mortgagee. This contrasts with the civil code legal system in which a notary acts for both sides, and, to a degree, represents the state. This difference illustrates the fact that the English common law system is adversarial; it is up to each party to secure for itself the best position it can gain.

Summary

How to Assess the Legal Framework Used to Secure Real Estate Transactions in France and England?

This research has been launched in reaction to the assessment of property registration law published in the World Bank Doing Business reports (DB). The research team was chaired by Bertrand du Marais, Marie-France Nicolas and David Marrani. The aim of the research was to identify the methodology of a rigorous and comparative assessment of the legal certainty produced by French and English law, pertaining to real estate properties with professional use. Like the DB reports, this work is one of the rare legal impact assessments dealing with real estate property focused on real estate properties with professional use.

This comparative research was carried out simultaneously in France and England by a multidisciplinary academic team, with the assistance of practitioners, composed on the one hand, of lawyers, and on the other hand, of economists and management specialists. The “GIP Mission de recherche “Droit et Justice””, in the framework of the Economic Attractiveness of Law Program sponsored this research.

The team work is described in this introduction along with the major findings of the research in a policy oriented way for the use of policy makers (especially the ministry of Justice) and of the relevant professions (especially the notariat).

The main operational lessons from the research are threefold:

Summary

Ownership of land: historical introduction

The terminology of English land law, and some of the concepts found in this area of law, are notoriously complicated. Much of this complexity can only be explained by reference to history. A detailed examination of the history of English land law is outside the scope of this project, but a few brief remarks may be appropriate.

The first point to note is that in English law it is technically incorrect to refer to any individual other than the King or Queen as the “owner” of land. As a direct consequence of the universal introduction (in 1066, following the Norman Conquest) of the so-called “feudal system” of land-holding, the King or Queen is, in theory, owner of all land; everyone else is merely a “tenant” in the feudal sense – one who holds land of the Crown in return for services (note that this use of the word “tenant” is distinct from its modern meaning – see section 2 below). Historically, there were a great many different types of feudal tenure, conventionally classified according to the type of service the tenant might be required to perform. The practical aspects of feudal tenure (including the tenant's obligation to provide services) had mostly disappeared by the 19th century, and the last trace of the distinction between the different types of tenure was abolished in 1922 (Law of Property Act 1922, s.128, Sch.12, para.1), but it remains true, as a matter of legal theory, that the most that a subject can own is an “estate” in land – an interest that is less extensive than the absolute ownership of the Crown. The only circumstances in which this has any practical consequences in the modern law are when an individual dies leaving no heirs who can inherit the land and having not made a will, and when an individual or company has become insolvent and the trustee in bankruptcy or company liquidator disclaims the estate: in such cases the land will “escheat” (i.e. revert back) to the Crown.

The second historical point relates to the terminology used to describe estates and other interests in land.

This comparative research was triggered by the assessment of property registration law published in the World Bank Doing Business reports (DB). The international and interdisciplinary team aimed to assess how legal certainty was imagined and put in practice in French and English law, using commercial real estate as a case study. Not only this study identifies the economic impact of the law in both jurisdictions, it also looked at the practitioners' functions in the dealing with commercial real estate transactions. In other words, it analyses the topical position of practitioners such as the French notaires and the role of solicitors in England. Nowadays, the profession of notaires is confronted to numerous challenges. For instance, nationality requirement for its access, has been ruled by the ECJ as contrary to the freedom of establishment and art. 49 TFEU and not justified by the exercise of public authority". In this study, the authors argue that the actual nature and the quality of the work done by the practitioners should be considered as well as financial cost and delays. They also argue that a liberalisation of professions such as civil law notaires would have very little impact on the cost associated with doing business. As a matter of fact both the English and the French mechanisms are very similar in their objectives and outcome even though they handle the same transaction differently, because of the culturally different relevant angles.

Summary

Headnote

The World Bank's successive reports on the efficiency of national law have caused much ink to flow. Despite the fact that their shortcomings have been repeatedly emphasized, the international organisation continues with its annual surveys, having only amended its method marginally. And yet, the most vigorous objections call into question its approach. Indeed, certain presuppositions in relation to the economic analysis of the law are applied with the utmost naivety, and even with a certain bias. The results are biased by a lack of knowledge and a failure to understand the legal systems that are the very focus of the study. A change of approach was thus required. At attempt has been made to understand how the rules of law are integrated in the economic transaction via interviews with professionals specialised in real estate transactions conducted by French and overseas purchasers. The result is unexpected; the rules are greatly denounced. They hide the conflicts associated with the allocation of competences among the different actors involved in the transaction.

Summary

Introduction

This chapter will focus on legal certainty and company law. It will attempt to shed light on aspects of English company law which are marked with such a degree of lack of clarity that issues related to their interpretation are raised. The English legal system is one of the most prominent legal systems at international level. It has been shaped through many centuries and thrived on the basis of very distinctive principles such as the pivotal role played by the judiciary and the relatively limited in relation to continental European jurisdictions employment of legal codes and statutory instruments. The ability of the judicial authorities to shape rules and provide their own interpretation of the existing statutory texts has led to a system which is marked by an impressive level of flexibility with a judiciary that in practise complements the existing legislative framework with its rulings to a degree that cannot be detected in civil law jurisdictions.

Company law could evidently not constitute an exception to this rule. When one refers to company law one refers to a body of jurisprudence and statutes which have evolved continuously over centuries. English company law follows the general trend and has established itself as point of reference for international lawyers; it is a jurisdiction whose regulatory and in many ways cultural influence has crossed the national borders to transcend the laws of divergent nations across the globe as a testament to the country's impressive legal heritage. The UK has therefore emerged as one of the most attractive destinations for investment as it provided potential investors with the dual benefits of a solid company law which granted to them an attractive degree of flexibility; English company law is centred around two basic principles that stand at the heart of every investor: the sanctity of the right to property and the almost religious adherence to contractual obligations. Both principles have rendered the country a safe haven for international investment and a destination attractive enough to convince companies from around the world to establish themselves in Britain.

English company law, however, remains distinctive in the fact that the very principles on which it is based – the sanctity of property and contracts – present certain particularities within its context.

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B - Practical Approach

Contractual Certainty under English Contract Law

Summary

Comparative Law, “Economic Attractiveness of Law” and Legal Certainty: Some Concluding Remarks from a Pilot Project

Summary

What is Legal Certainty? A Theoretical Essay

Summary

Overview of how a Real Estate Transaction is Conducted in France

Summary

Introductory Remarks on Comparative Law and Interdisciplinarity

Summary

Commercial Leases in English Law

Summary

Frontmatter

Comparing Legal Certainty in France and England

Summary

Property Transactions in English Law: General Principles

Summary

Part I - The Idea Of Legal Certainty

Conclusion

Legal Certainty in Real Estate Transactions

How to and Why Measure the Efficiency of Real Estate Transactions in France?

Summary

Comparing Company Law

Summary

A - Theoretical Approach

Contents

Miscellaneous Endmatter

Part III - Measuring Legal Certainty

Part II - Legal Certainty In Property Transaction: A Comparative Approach

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