Transformation of Systems in Middle and Eastern Europe and its Consequences for Banks, StockExchanges and Security Rights
Max-Planck Institut Symposium
Hamburg, June 13-15, 1996
Professor of Law
University of Torino, Faculty of Law
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Legal Change in Central and Eastern Europe and the Role of EU:
from Chance to Order ?
SUMMARY: I. THE PLAY OF OFFER AND DEMAND OF LEGAL MODELS. 1. Chance and Prestige as the main factors influencing legal borrowings. 2. Law, Politics, Economics. 3. Readopting Commercial Law. 4. "Path Dependance" and Legal Change. 5. Dishomogeneity as a Rule ? II. THE SUPPLY OF NEW MODELS. 1. Indirect Influence through the Action of International Organizations 2. Integration Through the Law and the EU: Again Optimistic Normativism ? III. CONCLUSION.
I: THE PLAY OF OFFER AND DEMAND OF LEGAL MODELS
1. Chance and Prestige as the main factors influencing legal borrowings.
The prestige of models originated both in continental Europe and in Anglo-American law has experienced an enormous rise in Russia and in post-socialist Europe after the demise of socialist law. Initially, both Eastern and Western jurists probably over-emphasized the needs of an "international traffic of legal ideas". This emphasis was deeply connected with the widely accepted belief that with the introduction of the formal elements of democracy and of the legal pillars of market economies a fast transition would have followed.
Foreign and local jurists cooperating in the law reform process have then entered a second stage, marked by a more critical approach towards "paper laws" and by a more conscious attitude towards the "Anglo-American thinking" of legal advisers and international financial institutions 1 Nevertheless, the dissemination of new models has remained relevant, and it affects an immense area.
As a matter of fact, the changing legal systems of Central and Eastern Europe do not look today as homogeneous as they were assumed to be for decades. It may be that the reception of new models is weakening the cultural links that used to tie the legal cultures of these countries to continental influences (scholarly, and statutory) that were sometimes French, sometimes German, sometimes Italian and Austrian. Moreover, it is certainly true that today, in contrast to the past, reception takes place not only on the initiative of those who receive the new models, but also on that of those who propose them. In this sense, one can speak of an offer of legal models, which interferes with the demand of legal reformers.
The birth (or re-birth) of new states, where the jurists, as a part of the intellectual class, are often animated by a spirit of polemic against the scholarly and statutory model that was previously dominant, poses new questions for them. While the adoption of commercial law rules has been an easy game to play in all legal system, due to the lack of those rules under the planning system, the restyling of civil codes has been influenced by contradictory opinions. From one side, the assumed "neutrality" 2of the core elements of private law has slowed down the efforts to draft new legislation, from the other side, the pressure of external legal advice has generated dishomogeneous legal transplants in the system of civil law. Therefore, it makes sense to investigate, in order to understand the future effects of those transplants. to what models do the Polish, Ukrainian, Estonian, Armenian, Slovakian, or Russian jurists feel related nowadays. The division between the models of positive law and the discourse of scholars and judges is a common phenomenon in many European countries. What is more peculiar in the case of Central and Eastern Europe and CIS states is the random adoption of common law solutions, because of the insistence of proponents and commentators who are more familiar with such solutions, in a body of law having continental style and structure 3.
It then appears clear that, mainly due to the large demand for new models, today's situation has a completely new character. A comparison with the post-war period, when the solutions of bourgeois law were repudiated and the Soviet model was adopted, would not capture its significance. Formerly, the new models were contained within the statutory and scholarly corpus of the Soviet law. Today, the new models under assimilation are spread in national and super-national sources that differ in origin and kind, in uniform legislation, as well as in ideas elaborated by legal scholarship and practice. Moreover, beside the so-called "official" demand, there is a spontaneous demand, that sometimes follows traditional academic channels and depends on the accident of personal relationships, and sometimes it is organized in other ways.
2. Law, Politics and Economics.
Even if Karl Marx can be considered the first economist scholar having made use of a "law and economics" approach, subsequent evolutions of Socialist Law have stressed the supremacy of politics over the objective needs of economic regulations in shaping the contents of the rules.
Today, an example of cultural continuity between the Socialit and the Post-Socialist eras can be seen in the fact that all countries in the area have maintained a strong sense of "optimistic normativism", that is to say a belief in the use of the law as an instrument of "social engineering". In particular, the new codifications, as well as different enactments on privatization, were thought to be a prerequisite for the creation of a free market.This "political belief" has been shared both by the subjects providing legal assistance to the governments of the area, and by those involved in the process legal reform in the different countries. This belief has favored the recodification of civil law.
The international civil law community before the developments of the late 1980's in Eastern Europe shared the opinion that stability in civil codification was of paramount importance 4. With the collapse of the socialist system and the emergence of a new demand for Civil Codes, local scholars and foreign experts were confronted with a dramatic choice between developing transitional Civil Codes or more permanent legal texts. The choice between these two alternatives was difficult because a transitional text, grounded in the current conditions of the post-socialist economy, would have not met the standards of classical codification and would have contradicted the accepted thesis that civil codification must be stable. In contrast, more modern codes that, for example, incorporate rules that favour consumers protection and at the same time weaken the clasical principles of freedom of contract, could raise serious questions of the connection between "new legal models" and the current needs of the post-socialist economies. Their effectiveness would be -at least in the first period- doubtful 5. At the same time one must consider that jurists called to formulate a new civil or commercial codification have necessarily to adopt a comparative perspective, in order to overcome the domestic, socialist grounded, models. They can not, therefore, avoid the temptations embodied in a wide set of "foreign" models: entirely new Civil Codes have recently made their appearance (in the Netherlands, in Quebec); "classical models" have been renewed by ad hoc legislation in almost all fields covered by a Civil Code; amendments to the traditional rules (on contracts as well as on torts) have also been carried out with respect to EU legislation, and uniform legislation increasingly influences the attitude of State legislators.
When broadening the analysis towards the practical side of legal reforms, however, one may see that, beyond the scholarly statements in favor of the restoration of "classical" private law rules embodied in the codifications of Western Europe, the distinctiveness of the post-socialist experience -that is, the project of creating the rule and the market at the same time- makes the relationship between economic change and institutional change particularly complex. The peculiarities of the "pre-market" situation may call for the adaptation of the rules which have been worked out in a developed market context to this new context. As an example we can consider the shortage of liquidity in the recently created equity markets in all post-socialist countries as a result of large privatizations. This structural element changes the way investors can function, and affects, in practice, both the choices of institutional investors and of those drafting financial and commercial legislation 6.
Today, Central and East European Countries seek to integrate into modern Europe. Closer economic and financial ties commend that any new Civil Code reflect EU law and the new laws, rules and regulations that have emerged under the auspices of the EU. As previously mentioned, the economic implications of all imported legal models should be taken into account before their adoption. The adoption of traditional Roman and Continental models is not problematic, but alternative solutions, or "new" models may provide unanticipated problems for post-socialist countries in their transitional period. The problem, then, is to strike a workable balance between the desirability of modernizing and the area's still limited ability to digest the products of avant-garde of "foreign" legal cultures.
3. Readopting Commercial law.
Reintroduction of company law in the post-socialist states has been one of the first concerns of the lawmakers. As compared with the restoration of civil law, however, the reforming of pre-socialist commercial codification, or adoption of new laws or new codes has proved to be a smoother phenomenon.
Basically, in Russia and in the other former Republics of the Soviet Union, the revival of commercial laws has been marked by some common traits, such as:
- the lack of a pre-socialist background, due to the early invalidation of Czarist laws in 1917-1918, and to the weak state of Imperial Russian commercial laws before 1917 7;
- the maintenance of the "unity of civil law" principle 8, which means that the main ruling of commercial entities is contained in the civil code, and that there is no differentiation between commercial contracts and civil law contracts 9.
The situation is quite different if we approach the experience of Central and Eastern European states. Besides the formal continuity between pre-socialist legislation and the socialist one, in some way maintained after World War II by Poland, Czechoslovakia, Romania, Bulgaria, Hungary, one should also consider that in some countries the process of emancipating individual entrepreneurship from state monopoly was rooted in times anterior to the 1980 reforms. In Poland as well as in Hungary and Romania, the foreign involvement in direct investment through the creation of joint ventures was already accepted in the late '70. In particular, in Poland and in Hungary, already during the '70 and the '80 some laws entered into force which not only legalized some aspects of the unplanned economy, but also redrafted the status of the state enterprise. The result was a model inclined towards the Yugoslavian or German framework for self-management and workers control.
However, the emphasis put by domestic legal scholarship and foreign advice on a need for rewriting the sources of commercial law, has resulted in a wide action for renewing those laws, in order to have them consistent with the needs for harmonisation of commercial law, praised by the European Union in the process to have the Central and Eastern European countries entering a relationship of association. In fact, renewal of commercial laws was also meant to offer a conceptual framework to the scattered legislation adopted in the first times of privatization 10.
For example, today, within the area divided between the Czech Republic and Slovakia, pragmatism prevailed over concerns for systematic consistency. In January of 1992 a new Commercial Code (obchodni zakonik) came into force. It absorbed several areas of the law of obligations, that traditionally belonged to the Civil Code 11 (see paragraphs 261-408). The Commercial Code came into effect on 1 January 1992; the Code is divided into four Sections: Section 1 contains provisions on the concept of enterprises, commercial names, entrepreneurial activities, the commercial register, and economic competition; Section 2 contains provisions on the commercial companies (stock companies, limited liability companies, public commercial companies, and limited partnership) and cooperatives; Section 3 contains provisions related to the law of contracts, and obligations in international trade; Section 4 contains interim and final provisions. The pattern for the management of the companies relies on the Czech commercial code of 1863, and the Slovak one of 1875, at their turn patterned on the Austrian HGB.
The new Czech enactment restored traditional rules and concepts: it has, consequently, eliminated quantitative and qualitative limits to the exercise of property rights, and protected possessory rights, and minor rights ad rem. These enactments also recognized great importance of uniform models. Dispositions of the Vienna Convention on the international sale of goods of 1980 have been included in portions of the revised Civil Code, that concern the formation and breach of contract, and in those of the new Commercial Code that concern the delivery of the goods and the obligations of the seller (paragraphs 412 and ff.)12 The Czechoslovakian Commercial Code was also an important step in the reorganization of the sources of law. It repealed both its "socialist" predecessors, the Economic Code and the International Trade Code of 1964. It also repealed enactments of the transitional period (such as the Law on stock companies, borrowed from a German model, enforced in 1990 and now arranged within the second book of the Code, the Law on companies with foreign stake of 1988, and the Law on economic relations with foreign subjects of the same year).
In Hungary, the Law VI of 1988 on economic associations (as amended in 1991 13) has provided for a wide range of company types: the general partnership, which may consist of any combination of legal persons and natural persons; the limited partnership, in which at least one member, the general partner, has unlimited liability, while at least one other member, the limited partner, is liable to the extent of his contribution to the partnership; the joint venture, whose members are legal persons liable for the venture's obligations to the extent of their capital contribution; the limited liability company, which is analogous to the German GmbH; and the stock company.
In Bulgaria, the old commercial code of 1897 has been superseded by a new law on commerce dated 1991 14; here the commercial entities are treated in detail in nine Chapters, mainly devoted to the stock company, the parnership limited by shares and the limited liability company.
In Albania, the result of a technical assistance project with foreign governmental agencies has led to the adoption of a Law on Business Associations 15 as well as of the first part of a Commercial Code 16 in 1992. The proposed model was based on the French droit des soci‚t‚s. More precisely, the parts related to company law are inspired by the French Loi sur les soci‚t‚s commerciales of 1966, whereas the draft of the First Book of the Commercial Code restores part of the content of the Albanian Commercial Code of 1932, based on a draft of C. Vivante, an Italian jurist. The foundation of the commercial register follows the German model. Besides unlimited partnership, the Law on Business Associations provides for two types of companies: the limited liability company, and the stock company, having relinquished the partnership limited by shares, which was included in a pre-socialist commercial code of 1932 17.
A survey of commercial legislation of Central and Eastern Europe shows that many lawmakers have chosen a two-tiered governing structure for the companies, along the lines of the German pattern. The choice has been driven by the prestige of the model. Moreover, the approximation of legal rules does not mean an automatical approximation of their functioning; the evolution of privatizations and of capital markets may result in a diffused ownership in some of the countries in transition, in others in a concentration of control in the hands of a few investment funds, yet in others in a mixture of the two solutions. Whether these possible solutions will all get along with the "German-oriented legal borrowing", in order to duplicate the scenario that has produced those rules, is yet to be seen.
4. "Path dependance" and legal change"
There is no need to prove that during the first decade of "Sovietisation" of Central and Eastern Europe (1945-1955) the socialist model in civil as in economic law reduced the particularities of national legal systems. Already beginning in the late '50, however, the influence of Soviet scholarship and legislation, which promoted uniformity, began to interact with other forces leading to diversity, some of which were inspired by pre-socialist solutions of the different Central and Eastern European states. These solutions, eventually, were rooted in the different cultural links that jurists in the different countries had cultivated with German, Austrian, and French legal thought.
Between 1964 and 1975 civil law was recodified in many countries, including the fifteen Soviet Union republics, Poland, Czechoslovakia and finally (1975), the German Democratic Republic, where the local jurists finally freed themselves from a troubled thirty years of confrontation with the scholarly model contained in the German Civil Code (BGB). When the commissions of codification finished their work in the different countries, the Stalinist age of forced homogeneity was over. The jurists who prepared the drafts could then mention the models that influenced them, acknowledging pre-socialist influences, as well as referring, occasionally, to "international and foreign models".
If the existence of national substrata, protected by the jurists, can explain the emergence of heterogeneity in civil law codification, the existence of national attempts to reform the command economy explains the emergence of alternative models (though still labeled as socialist models) to the Soviet one in the field of economic law. Here, Western law had always had a great influence. In internationale trade, for instance, the socialist countries had used "traditional" models of commercial law, including industrial law and private international law. Such models were sometimes disguised as socialist. They were included in sources that were sometimes very important, such as the Czechoslovakian international commercial code of 1964, and sometimes marginal.
It was not before the early '70, however, that in some socialist countries the relaxation of central planning and the acceptance of a (partial) pluralism of producers began to induce a break with legislation based on the Soviet model. It began covertly, became more and more open, becoming complete during the last period of the Soviet experience. The legislation of the age called perestroyka was greatly influenced by scholarly and legislative proposals elaborated especially in Hungary since the end of the '60, and in Poland since the beginning of the '80.
The economic reforms of the Soviet system during the second half of the 80ies were thus grounded in a body of enactments, including economic and labour law, previously tested in other socialist systems.
The peculiarity of those models was the attempt, one that proved to be ephemeral, of reconciling well-rooted dogmas of socialist law with the new options of economic policy, an attempt captured by the slogan "making of a socialist market". In this way a model that until then was weak, such as the managerial independence of business enterprises, became strong. Poland experienced, since 1980, the working out of new solutions in the sphere of workers' control of management, of enterprise title over goods, and of the organization of the relationship between enterprise and ministerial apparatus. Those solutions became successful, once the ideology changed, because they could reconcile the "classical" principle of collective ownership of the means of production with the new principle of active workers' participation in production.
The Polish model inspired the Bulgarian, Soviet, and lastly Czechoslovakian Acts on company law that from 1987 to 1989 marked the end of the inelastic model of planning.
A similar event affected another weak model: the cooperative. Under socialist law, the requirement of spontaneity of formation had been abandoned, and the cooperative had been transformed into a body subject to the will of the planning authorities. Afterwards, the cooperative took on a new relevance when Socialist legislators at first tolerated and then accepted the development of a private sector. Moreover, the Hungarian (1971) and Polish (1982) Acts on cooperatives, that restored the basic principles of organization of the cooperative, became models for the Soviet legislator at the end of the '80.
The monodirectional flow that had developed, ratione imperii, from the Soviet East towards other European socialist countries, progressively changed its direction. The limited influence of alternative models from socialist countries, which were supposed to be consistent with the socialist ideology, was a brief prelude to today's wider circulation of Western models.
The focus on the formal aspects of legal change has stressed the aspects of discontinuity between the socialist past and the transitional times. Such an emphasis hides the fact that in some legal systems of the area (Hungary, Poland) the dismantling of the planning system had started before 1989. More relevantly, in many countries the liberalization of the legal status of the state enterprises had occured before the privatization process was started. In the Soviet Union, following the project of creating a legal habitat for coexistence of public and individual initiative, the legislators (both Federal and Republicans) of the period of "restructuring" (perestroyka) enacted, between 1986 and 1991 18, a set of rules which released the state enterprises from this subjugation to the ministerial apparatus and the state planning agencies 19. A partial liberalization of the entrepreneurial activity also resulted, at the end of the '80, in the creation of new cooperatives and other entities. The lack of liberalization in the system of allocating fundamental goods, however, forced these entities to enter industrial cooperation arrangements with the large state entities. Not rarely the state enterprises themselves created separate entities, in order to maximize the profitability of certain activities, leaving the losses on the public side, or in order to better deal with foreign partners. The organization of such cooperation between large groups and small entities using contractual ties did not, in a formal sense, disturb the respect of the (fading) principle of state ownership of the fundamental means of production. These contacts, however, along with the increasing recognition of wider managing powers for the workers' collectives and the enterprise directors, influenced the development of the privatization process.
The "legal change" made in the last years of Soviet socialism as a result of partial economic reforms are, perhaps, the less recognised factor of influence over post-socialist transformations. Other "past factors", affecting the pace of transition today, are the result of the interplay between "pre-socialist economic conditions" and the related strategies adopted by the socialist rulers after World War II. Slovakia, for instance, was underindustrialized and underdeveloped at the time of World War II, and received a massive Stalinist-type industrialization after the war. The structural imabalances that resulted from that choice have made the process of reorienting its economy difficult to this day, and privatization can be only partially succesful in creating a real, pluralistic, market economy in that situation. On the other hand, past patterns of economic organization can help today's transformation. One example is Poland, where the lesser degree of nationalization of agriculture (if compared with all countries in the area) helped the private producers maintain a certain level of income, and indirectly helped the government to launch a harsh financial therapy for the transition.
5. Dishomogeneity as a rule ?
The story of the evolution of civil law and economic law during the last phase of the socialist regimes help us to understand that, in spite of a common core of problems, inherited from the previous organization of the economy (such as the monopolistic structure of the enterprises, the lack of financial markets, the weakness of domestic capital to be used as investmentin the divestiture of state properties), dishomogeneity of legal styles and legal solutions is the rule.
Variety, of course, is primarily determined by different economic policies subscribed to by the governments and by political impact that the reform of the economy produced in the Region. Here, a simple analysis of the formal side of legal changes can be highly misleading, due to the double attitude of policy-makers, brought from one side to respect the adjustment policies of international organizations and the desires of the donor agencies, and from another to face internal resistance towards "shock therapies". Therefore, one can expect that the original profile of the privatization programs has been seriously modified by sub-legal enactments in the process of implementation.
Secondly, variety is also determined by different background (both legal and political) of the countries. As mentioned, labor law choices taken during the '80 in Poland, or partial reforms adopted in Russia in the late '80, have significantly hampered the action of privatization agencies in those countries in the '90.
Third, variety is a result of the institutional framework. The evolution of constitutional debates in the Russian Federation, in Ukraine, as well as in Poland, Albania, and Lithuania, has showed in the recent years that the post-socialist orientation towards "imperfect presidentialism" (on a French, more than US inspiration) can lead to the recognition (one would better say to the appropriation) of wide powers in the hands of the Head of State and the Council of Ministers, using the need for rapid improvement of national economic conditions as the stronger argument in support of a transformation led by the center. The picture is made more complex if one considers the changes in the "constitutional rules of the game" experienced by many countries between 1991 and 1994. In the Russian Federation, for instance, the first phase of impasse between the executive and legislative branches (with a growing attitude of the latter to change the privatization plan in the course of its implementation), ended by the by-passing of parliamentary jurisdiction and the adoption (December 1993), through a referendum, of a new Constitution. In the new text the partition of lawmaking powers is unbalanced in favor of the executive and the president 20. The development of the privatization plans, undertaken after the adoption of the Constitution seems to reflect that change of rules.
In other countries the "war of laws" between the legislature and the executive is also affected by electoral laws: fears of a new concentration of powers in the hands of one or two political parties led political leaders to agree, after 1989, upon favoring the representation over the majoritarian rule. Faced with the double task of ensuring governability and legitimacy, the drafters of the new electoral laws in the post-socialist states have eventually adopted a mixed system through a combination of proportional representation with some aspect of majoritarian techniques 21. This has influenced the dynamics of lawmaking and the relationship between the executive power and the parliament. Faced with the confrontation between the highest bodies of the state, new Constitutional Courts set up after 1989 in some countries have taken the stage, issuing decisions which, while affecting the regulatory role of the state in the process of creation of the market 22, can also be understood as the beginning of a process of checks and balances. Basically, the entire process contains elements of "transition"; following the consolidation of the economic and legal orders, and the total renovation of the constitutional charters 23, one may expect that the relationships between the parliaments and the executives will follow a more predictable pattern
II. THE SUPPLY OF NEW MODELS
1. Indirect Influence through the Action of International Organizations
Immediately after 1989, the legal systems of Central and Eastern Europe were influenced by a heterogeneous set of persons and organizations making proposals as part of programs of technical or legal assistance. Sometimes this activity was a part of a larger program, traditionally devoted to developing and emerging countries 24. More frequently it was due to ad hoc initiatives, sometimes from requests of Central and East European governments, and sometimes from outside the area. In certain cases adoption of the proposal merely depends on prestige of the proposed model or of its proponents. In other cases further variables come into play.
Initiatives to propose new legal enactments have taken different forms: assistance given by national bodies, such as the German Technical Cooperation Governmental Office (GTZ), or the French Interministerial Mission for Central and Eastern Europe (MICECO), or the Dutch Government's Center for the Cooperation with Eastern Europe; assistance given by international organizations, such as the EU, the Council of Europe, the EFTA, the UNCITRAL 25, the European Bank for Reconstruction and Development, the World Bank, the International Monetary Fund, the OECD; assistance given by private organizations and foundations, such as the Stiftung fur internationale rechtliche Zusammenarbeit, the Adenauer Stiftung, the Soros Foundation, the American Bar Association, but also big law firms and research centers of multinational companies, and assistance given by University centers.
The type of assistance affects not only the geographical extent of its influence, but also its chances of success. To locate the areas where these proposals have the greatest chances to end in reception, it is useful to consider two types of international organizations: at first the international banking and credit organizations, such as the International Monetary Fund, the World Bank, the EBRD, and secondly the European Union (in particular, the Commission of the European Union).
Membership in the IMF, obtained by all the countries of the area in the early 1990's, was in many cases preceded or accompanied by formal demands for technical assistance in the preparation of statutory texts. The IMF, and particularly its Legal Department, encouraged the development of laws dealing with financial matters such as banking legislation, regulations on the activity of the central banks, monetary orders for almost all of the CIS member states, for the three Baltic republics, for Albania, Bulgaria, Poland and Romania. The Legal Department of the World Bank intervened in order to propose drafts on tax law and foreign investments protection in the same countries.
In certain, highly technical, sectors, the presence of a single proponent can promote uniformity26. The fact that the proponent also grants credits and other economic aids may guarantee the adoption of the proposed model. However, when the assistance involves enactments of great importance (for example, parts of Commercial Codes, or company laws), the casualness variable may concur with the "prestige factor" in the determination of the model to be transplanted. In these cases the organizations commit decisions to foreign experts and to jurists who are working with preparation of legislation, that is, at the Ministries, more than at the Faculties of Law. However, experience shows that bad communication between the foreign and local experts, cultural misunderstandings on the fields that must be covered by the new legislation, and, last but not least, a weak translation can heavily influence both the choice and the drafting of the new rules. Furthermore, the way the project team acts is in some cases reminiscent of the procedures adopted when drafting uniform laws or international conventions. Conflicting opinions (both at the political and technical level) may generate vague formulae.
Therefore, to determine the organization that provides assistance is not always to determine with certainty the origin of the model. Chance and prestige concur to blur the marks of the new map of post-socialist legal systems that is being drawn up by locating uniform technical models.
The picture becomes more complex if we consider that some proponents do not limit their activity to the assistance in drafting legislation, but also train legal personnel and suggest changes in the system of legal education. The division between the models of positive law and the discourse of scholars and judges is a common phenomenon in many European countries. What is more peculiar in the case of Central and Eastern Europe and CIS states is the random adoption of common law solutions, because of the insistence of proponents and commentators who are more familiar with such solutions, in a body of law having continental style and structure.
2. "Integration through the Law" and the EU: again optimistic normativism ?
A more direct harmonization process happens as related to the project of future accession of the Central and Eastern European (as well as Baltic) states to the European Union.
Examples are those Central and East European countries that signed "European Agreements" of association with the European Union, from 1991 on. They have a status similar to the one enjoyed by the EFTA countries in the past in relation to the EU member states. The Association Agreements imposed duties to adapt positive law 27 and collateral technical regulations. These duties have to be combined with the engagements already made by the national legislators by enforcing antitrust acts based on the EU model 28. The direct approximation is supported by a strong awareness, in the countries concerned, of the importance of making domestic legal systems compatible with the one worked out by European legislator: even before the signing of European Agreements both Poland and Hungary have created special offices, called to assist the Parliament and the Government in their efforts to harmonize and coordinate the process of adaptation of legislation to EU requirements. More recently, the EU "White Paper" on the preparation of Central and Eastern Europe for integration into the internal market of the Union has foreseen the establishment of stable institutions, such as a "Technical Assistance Information Exchange Office" to be located in Brussels and supported through a multi-country PHARE program. The assistance offered by the Office aims to provide technical advice on EU and members states legislation to associated countries drafters, and to avoid duplication of consultancy projects 29.
If one consider the "common sentiment in Eastern Europe that less regulation and more managerial freedom are acceptable when a country is moving toward a market economy", the action of European Agreements will foster an opposite understanding of the needs of strict standards of control over commercial and financial activities 30.
When considering the matter of the implementation of the Association Agreements, a substantially new approach towards legal harmonization has been set forward in 1995 by the Coomission with the adoption of a "White Paper" which has set both the general frame for the harmonization of the Associated Countries' legislation and the timing of the legal reforms. 31
Pervasiveness and uniformity characterizes this document: while focusing on the legislation which is meant to be essential for the functioning of the internal market, the "White Paper" also describes the administrative and organisational structures which are required in each sector in order to implement effectively the new (or amended) legislation: "Although every piece of Community legislation is important in principle [...] the Commission considers it is appropriate in the pre-accession phase to propose an appropriate sequence in which the associated countries could take over the legislation for each major area " Having set aside the fromal approach which had marked the major part of proposals for the dissemination of legal models, the Commission has recognized, in its White Book, thet "resources for the approximation exercise are limited in both the Community and the Associated countries, whether in terms of legal or technical expertise, Parliamentary time, or the availability of training. These resources should be focused on areas where they will have the greatest effect. The Commission has therefore presented the legislation for each area in a way that distinguishes 'key measures' from the total number of measures applicable and which then proposes a further breakdown of key measures into two stages"32.
In the most recent years it has been widely recognised that both Comparative Law and Law and Economics have been unable to play their cards in the game of transferring legal systems from West to East 33. Several factors, that can be roughly reduced to lack of time and poor coordination among the donors of legal models explain such a failure. The "White Paper on the Accession Strategy" seems to offer a better consideration of the suggestions set forward by the scholars active in the fields of comparative law and EAL. After years of "blind reception", both donors and recipients seem today more conscious of the pathe dependance problems and of the dangers implied in a hasty drafting of sensitive regulations (such as, for instance those related to financial markets 34.
This awareness will certainly delay the process of carrying out legal harmonization, but it will also increase the chances of the new legislation lasting and receiving within the recipient countries the authority it requires to become effective.
1 The suitableness of Anglo-Americans models for the CIS and Central and Eastern Europe legal reforms has been explained making recourse to several factors, such as more flexibility (in relation, e.g., to bankruptcy law), or more independency of private law rules from public law. See, for instance, Popa, Bankruptcy reorganization and the Death of Communism, SEEL Survey of East European Law, (1994), No.4, at 3. An original, although provocative, thesis, has been sustained by Paul Rubin, arguing that "at least a temporary use of common law principles" in the Post-Communist countries would be useful, saving the costs implied by the shortage of skilled lawyers and practitioners, and the slowness of legislature's work; Rubin, Growing a Legal System in the Post-Communist Economies, Cornell Int. L. J., (1995), 1; for a critical assesment of the role of foreign legal advisors in the drafting of new rules for the markets see: Ann Seidman, Robert Seidman, Drafting Legislation for Development: Lessons from a Chinese Project, Am. J. Comp. L. (1996), 1.
2 "Es erben sich Gesetz und Rechte wie eine ewge Krankheit fort; sie schleppen von Geschlecht sich zum Geschlechte und rcken sacht von Ort zu Ort", Goethe, Faust, ll. 1972-1973; see Watson, Legal Transplants. An Approach to Comparative Law, 1974.
3 One can recall the Russian Federal law on Joint-stock companies, adopted on January 1, 1996. which is widely based on the American model of corporate law, or the Ukrainian law on the stock Exchange; in such enactments the interpreter is bound to operate connections among definitions that are now borrowed from Anglo-American ideas, now from continental models.
4 That is why in many civil law countries the development of new legislation has been pursued outside from the Civil Code frame.
5 See, more generally, J. Langenfeld, M.W. Blitzer, Is Competition Policy the Last Thing Central and Eastern Europe Need ?, in 6 Am. U.J. Int. L. & Pol., (1991), 347.
6 As it is evident, in a scarcely liquid market, investors' opportunities to chose between selling out their interest, or acting for a change of corporate behavior are reduced.
7 Owen, The Corporation under Russian Law. A Study in Tsarist Economic Policy, New York, 1991, 55ff.
8 Dozortsev, One Code or Two ? Parker Sch. J. of East Eur. Law, (1995), 29.
9 The principle was shared in the past by all lawmakers in the Soviet Republics. Today it is still held in the Russian federation, but has los its monopoly: in Estonia, for instance, the emancipation from Soviet law meant a return to the pre-socialist distinction between civil and commercial codifications; in Ukraine a draft of a commercial code has been prepared, and is inspired by the German pattern. See Palmer, Privatization in Ukraine: Economics, Law, and Politics, 16 Yale J. Int. Law, (1991), 453, at 514.
10 For instance, in many legal systems, such as Albania, the Czech Republic, the Slovak republic, Poland, Hungary, the one-partner limited liability company, which was not recognized by the pre-Socialist legislations, has been recognised in the post-Socialist laws, as it covered the speciic needs of the privatization ina all cases when teh Fiscus acts as the only founder of the new commercial units, as well as because the pattern was contained in EU model.
11 It was not by chance that Czechoslovakia was the first country to recodify commercial law; the early civil codification of 1950 (favoured by the presence of a not enforced model of the immediate pre-war period) induced to a new codification, more clearly "socialist" in 1964; the inadequacy (substantial, but also formal) of such last codification to cope with the new economic order that the country entered into after 1989 can explain the pragmatic choice adopted in 1992.
12 Compare, for instance, Art. 30 of the Vienna Convention with par. 411 of the Czech Commercial Code, Art. 31 with par. 412, Art. 32 with par. 32, and so forth.
13 Torveny a Gazdasagi Tarsasagokrol, Hungarian Rules of Law in Force, 1992, no. 3-4.
14 Turgovski zakon, Durzhaven Vestnik, 1991, no.48
15 Law no. 7638 of 19 November 2992 "Per shoperite tregtare", Fletorja Zyrtare e Republikes se Shqiperise, 1992, no. 8, 409.
16 Law no. 7632 of 19 November 1992 "Per dispozitat qe rregullojne pjesen e pare te Kodit Tregtar", Fletorja Zyrtare e Republikes se Shqiperise, 1992, no. 8, 405.
17 Boglia, The New Albanian Act on Business Associations: Ongoing Legal Reforms in Commercial and Private Law, 20 Review of Central and East European Law, (1994) 673.
18 Feldbrugge, Russian Law. The End of the Soviet System and the Role of Law, 1993, 49ff and 262ff.
19 Law of the USSR, 30 June 1987, O gosudarstvennom predpriiatii (ob"edinenii), Ved SSSR, 1987, 26, 385; Law of the USSR, 4 June 1990, O predpriiatiiakh v SSSR, in Izvestija 12 June 1990, 2-3; Law of the RSFSR, 25 December 1990, O predpriiatiiakh i predprinimatel'skoi deiatel'nosti, Ved. RSFSR, 1990, 30, 418.
20 Following Article 90 of the 1993 Russian Constitution, "The President of the Russian federation issues edicts and resolutions. Edicts and resolutions of the President of the Russian Federation are mandatory to be abided throughout the territory of the Russian Federation". The same Article states in a vague formulation that those enactments may not contravene the Constitution of the Russian federation and federal laws.
21 Holmes, Designing Electoral Regimes, 3 East Eur. Constituional Rev. (1994), Spring, 39.
22 See, for instance, Decision 21/994 of 16 April 1994 of the Hungarian Constitutional Court on the "Freedom of enterprise", in Magyar Kozlony No. 40/1994.
23 One should remember that the adoption of new Constitutions has been delayed in many countries (such as Poland, Ukraine, Albania), by the lack of a political agreement in defining the jurisdictions and the prerogatives of the state organs. The maintenance of old charters has produced, notwithstanding their amendments, perverse effects on political behaviors, as the members of the parliaments are inclined to take seriously the rules, dating back to the Soviet times, that proclaim the assembly as the "highest body of the state power".
24 One can think of the activity of the UN's bodies like ILO, UNIDROIT, the United Nations Development Program, but also of the United States Agency for International Development.
25 Among the several models worked out by UNCITRAL and followed by post-socialist legislators one could mention, for instance, the "Model Public Procurement Code", approved by the UN in July 1993. The model has inspired the Polish public procurement law; on its contents see: 4 East Eur. Bus. L., no. 94, 6ff (1994).
26 Similarly, in the field of intellectual property protection, for example, uniform new rules are developed by following the standards prepared by the World Intellectual Property Organization (WIPO). See the Hungarian Laws on utility models and software protection, Nos. XXXVIII e XIX, in force since the 1st January 1992.
27 The point is made explicit in the texts of the Agreements. Sections 67-69 of the Agreement with Hungary, for instance, states that :
"The Contracting Parties acknowledge that the major precondition for Hungary's integration into the Community is the approximation of that country's existing and future legislation to that of the Community. Hungary shall act to ensure that future legislation is compatible with Community legislation as far as possible" (Art. 67).
"The approximation of laws shall extend to the following areas in particular: customs law, banking law, company accounts and taxes, intellectual property, protection of workers at the workplace, financial services, rules on competition, protection of health and life of humans, animals and plants, food legislation, consumer protection including product liability, indirect taxation, technical rules and standards, transport and the environment"(Art. 68).
"The Community shall provide Hungary with technical assistance for the implementation of these measures which may include: - the exchange of experts; -the provision of information; -organization of seminars; -training activities; -aid for the translation of Community legislation in the relevant sectors." (Art. 69).
28 The Association Agreements provide for the activity of Association Councils - to which the task of harmonizing antitrust rules is committed. See: "Competition Policy in Transition. CSFR, Hungary and Poland", East Eur. Bus. L., No. 7-8, 10,(1992); "New Ukrainian Competition Act", East Eur. Bus. L., No. 4, 15, (1992).
The EU level of protection of intellectual and industrial property rights, ex article 36 of the Treaty of Rome, will be reached in 1997. In particular, the Agreement with Poland gives as models the directives 89/104 on marks, 87/54 and 91/250 on softwares.
In a unilateral statement, Poland committed itself to the enforcement of the European Convention on Patterns and to the Nice Agreement on Trade Marks Classification within 1997, as well as to enter the Bern Convention on Copyrights (Paris 1971) and to the Madrid Protocol on Trade Marks Registration.
29 Breskovski, Director's Duty of Care in Eastern Europe, 29 the Int. Lawyer (1995), 78.
30 On the positive influence of the Proposal for a Fifth Directive on the fiduciary duties of corporate directors, see op. ult. cit. 80ff.
31 White Paper on the Preparation of the Associated Countries of Central and Eastern Europe for Integration into the Internal Market COM (95) 163 def., p. 1a, 3.16.
It must be considered, however, that "the criteria used for establishing the recommended sequence for approximation within each area are based on a coeherent approach to the legislation itsaelf, without reference to the economic costs or benefits of its adoption" , op. cit, 3.20.
32 White Paper, cit., 4.1.
33 Ajani, By Chance and Prestige: Legal Transplants in Russia and Eastern Europe, 43 Am. J. Comp. Law, 93.
34 "In the field of financial services, internal market legislation strenghtens prudential requirements and leads to more deregulated markets. Such a regulatory change made too soon could seriously weaken financial entities in Central and Eastern Europe, since mot of them still have to cope with a legacy of bad loans", White Paper cit., 4.11.