The legal origins theory claims that the two main legal traditions or origins, civil law and common law, crucially shape lawmaking and dispute adjudication and have not been reformed after the initial exogenous transplantation by Europeans. [1] Therefore, they affect economic outcomes to date. [1] According to the evidence reported by the initial proponents of such a theory, countries that received civil law would display today less secure investor rights, stricter regulation, and more inefficient governments and courts than those that inherited common law. [1] [2] These differences would reflect both a stronger historical emphasis of common law on private ordering and the higher adaptability of judge-made law. [3]
Legal origins theory became popular among economists in the late 20th century, at the same time that practitioners of comparative law were largely abandoning taxonomic classifications of legal systems. [4]
While English common law originated in thirteenth century England and has then been transplanted through colonization and occupation to England’s ex-colonies (United States, Canada, Australia, and several countries in Central America, Africa and Asia), the Scandinavian common law was developed in Denmark and Sweden and the German common law sprang in Germany and Switzerland. These last four countries then exported their common law model to the respective colonies or to those jurisdictions (China, Greece, Japan, Romania, South Korea, Taiwan, Thailand, and Turkey), which were never colonized but borrowed their initial legal order from the European codes considered most advanced at the time.
Civil law instead has its roots in Roman law, was incorporated by the Napoleonic codes first and then by both the Austrian and Russian Civil codes, and has been then introduced via mainly colonization and occupation into continental Europe, the Near East, Latin America, Africa, and Indochina. Bulgaria, Ethiopia, Iran, and Kazakhstan instead purposely borrowed their initial legal order from either France, Russia, or England.
Structurally, the two legal traditions constitute a well-defined bundle of lawmaking and adjudication institutions and operate in quite different ways [Merryman 1969, p. 52, 123–127; Zweigert and Kötz 1998, p. 272]. [5] [6] While common law entrusts a key role to the precedents selected by appellate judges and allows more procedural discretion to lower adjudicating courts, [5] civil law relies on legal codes designed by political representatives and bright-line adjudication rules. [6]
In a series of influential papers published between 1997 and 2008, [2] [1] Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert Vishny exploited the exogenous assignment[ clarification needed ] of these very different institutions and assumed that they have not been reformed later on to provide evidence consistent with the idea that common law is correlated with:
"(a) better investor protection, which in turn is associated with improved financial development […], (b) lighter government ownership and regulation, which are in turn associated with less corruption, better functioning labor markets, and smaller unofficial economies, and (c) less formalized and more independent judicial systems, which are in turn associated with more secure property rights and better contract enforcement." [1]
Operationally, the "legal origins" scholars assigned the majority of countries in the world to either the English-common law, the French-civil law, or one among the German, Scandinavian, and Socialist legal traditions and then they calculated correlations between these legal origins dummies and proxies for the aforementioned economic outcomes. [1]
The "legal origins" scholars suggest that common law has at least two favorable consequences. First, historical events in England and in France built into the common law a stronger emphasis on the independence of the judiciary, private ordering, and human capital. Second, judge-made law would make common law more adaptable to the contracting needs of the economy. [1]
Edward Glaeser and Andrei Shleifer contend that the development of a system of adjudication by lay juries in England and one of adjudication by professional judges in France were conscious choices reflecting the different political power of the English and French barons during the 12th century. [7]
"The former were concerned about the powerful English king’s ability to interfere in adjudication and bargained for trial by local, lay juries, a right enshrined in Magna Carta. The relatively weak French crown, by contrast, was less a threat than other barons. French barons accordingly desired a centralized adjudication system controlled by royal judges who would not be easily captured by local interests." [8]
Napoleon’s attempt to turn through its codes the judiciary into bureaucrats controlled by the State and the post-1688 Glorious Revolution success of the English judiciary in establishing its independence should have reinforced these dissimilarities, instilling at the same time into the common law a stronger emphasis on judicial independence and on private ordering. This divergence would imply that common law will always shore up markets and the civil law will always restrict markets or replace them with state command. [7]
This analysis of the medieval European history has been criticized by Daniel Klerman and Paul Mahoney, who conclude that a system of adjudication by lay juries was initially favored in England because of low literacy levels and later enforced to place the judicial power in the hands of the crown. They argue that both French and English judiciaries had the de facto power to make law through precedent, and that French judges enjoyed a greater independence because their office could be inherited as property. Hence, the only permanent divergence between the legal orders in England and in France originated from the different fortunes of the judiciary in the aftermath of their respective revolutions. [8]
The key institution differentiating the two legal traditions is the lawmaking institution, which determines the identity of the lawmaker. [6] Common law relies on case law, whereby precedents set by appellate courts guide subsequent adjudication by courts of the same or lower standing and can be changed by appellate judges only with a costly justification effort. [5] Civil law instead relies on statute law, which comprises legislation enacted by political representatives. [6]
"Legal origins" scholars identify three main advantages of judge-made law compared with statute law:
Common law is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions. The defining characteristic of common law is that it arises as precedent. Common law courts look to the past decisions of courts to synthesize the legal principles of past cases. Stare decisis, the principle that cases should be decided according to consistent principled rules so that similar facts will yield similar results, lies at the heart of all common law systems. If a court finds that a similar dispute to the present one has been resolved in the past, the court is generally bound to follow the reasoning used in the prior decision. If, however, the court finds that the current dispute is fundamentally distinct from all previous cases, and legislative statutes are either silent or ambiguous on the question, judges have the authority and duty to resolve the issue. The opinion from a common law judge agglomerates with past decisions as precedent to bind future judges and litigants, unless overturned by subsequent developments in the statutory law by Legislature or in the case law by Appeal Courts.
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Case law, also used interchangeably with common law, is a law that is based on precedents, that is the judicial decisions from previous cases, rather than law based on constitutions, statutes, or regulations. Case law uses the detailed facts of a legal case that have been resolved by courts or similar tribunals. These past decisions are called "case law", or precedent. Stare decisis—a Latin phrase meaning "let the decision stand"—is the principle by which judges are bound to such past decisions, drawing on established judicial authority to formulate their positions.
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