INTRODUCTION

The Directive 2014/59/EU has considerably widened the crisis prevention measures used to intervene when a bank is experiencing difficulties, to prevent them from worsening. Indeed, due to the limitation on shareholders and creditors’ rights that is entailed as a consequence of a decision adopted by a public authority, ‘resolution’ should be only adopted as a last resort measure when there are no reasonable prospects that any alternative supervisory action or private sector measure can prevent the bank's failure.

Yet, the new recovery and resolution framework provides for neither special negotiated solutions of the crisis, nor harmonised rules on financing arranged by the bank during the recovery or early intervention phase (‘funding for recovery’). In addition, the more volatile market environment linked to the new ‘bail-inable’ regime and the lack of a credible public backstop may make it more difficult to arrange early intervention measures and private sector solutions.

Crisis prevention measures and the resolution framework provided for in the Bank Recovery and Resolution Directive (BRRD) can affect the contractual relationships between banks and investors and the incentives to the latter to provide funding for recovery.

We will first recall the current provisions in the Bank Recovery and Resolution Directive on preventive, preparatory and early intervention measures that are especially relevant for the effects that they may have on contracts.

INTRODUCTION

The problem of liability of national financial supervisory authorities (FSAs) transcends the classical division between public and private law. The duties of the authorities are regulated by public law, but liability claims by aggrieved persons are rooted in private law. Entitlement to private law remedies is not limited to individuals such as depositors and embraces other actors in the financial markets (banks, insurers, stock exchange, etc.) which can suffer damage to reputation or to their financial position in the market, and possibly their shareholders.

In recent years European courts have increasingly admitted the possibility of seeking civil remedies, specifically based on tort law, against FSAs and/ or the state. The nature of the liability of FSAs is tortuous, as a contractual relationship between a public authority and an injured individual cannot be established. This contribution reviews the case law and provides a theoretical framework for such claims. Latest comparative research by R.J. Dijkstra has shown that no common approach to financial supervisory liability exists in the EU Member States. Nevertheless, we should try to identify some convergences or at least common trends in the present developments.

PUBLIC AUTHORITY LIABILITY MATRIX

We should begin with a sketch of the current state of the liability of public authorities in Europe. Depending on the national system, the rules on liability of public authorities belong to either the private or public law domain, or to both. Thus, the problem discussed here may be approached from different angles: civil law, constitutional law, administrative law and EU law.

INTRODUCTION

The legal assessment of foreign currency loans under the Unfair Contract Terms Directive has recently become a topic of major importance in the scholarship on European private law. Litigation regarding foreign currency mortgage loans in several Member States of the European Union, mostly in Central and Eastern Europe, led to dozens of judgments by the Court of Justice of the European Union (subsequently CJEU). This contribution gives a brief account of the Polish experience with foreign currency loans. It focuses on the CJEU jurisprudence inspired by requests for preliminary rulings by Polish courts and its implications for the jurisprudence of Polish courts. The chapter advances the claim that a national legal system which provides no significant regulatory intervention of its own to remedy the consequences of foreign currency lending is far more susceptible to the influence of CJEU law-making than legal systems offering national solutions.

Poland is one of the countries most affected by the legal and economic consequences of foreign currency lending. Early in the 2000s, as interest rates were much lower in Switzerland than in Central and Eastern European countries, the Swiss franc emerged as an attractive currency index for mortgage loans. In 2010 around 64 per cent mortgage loans in Poland were indexed in foreign currency (mostly CHF) with the total value of 40 billion euro.

INTRODUCTION

The European Union incorporated the responsible lending programme into legislation in an attempt to tackle the high levels of indebtedness resulting from the expansion in access to credit and new credit products and lending practices. It did so first, and rather timidly, into Directive 2008/48/EC of 23 April 2008 on Consumer Credit, and then more forcefully into Directive 2014/17/EC of 28 February 2014 on Credit Agreements for Consumers Relating to Residential Immovable Property. The aim was to ensure that professional lenders took consumer needs and interests into account throughout the entire duration of the credit agreement, which entailed both the need to enable consumers to make maximum savings (e.g. via early repayment without penalty) and to prevent borrowers from succumbing to the temptation to commit themselves to risky loan agreements. The expression ‘responsible lending’ is generally associated with good practices in the granting of credit (unfair practices in credit card approval and subprime mortgages would be clear examples of irresponsible practices to be tackled) and with the measures proposed to prevent over-indebtedness: e.g. transparency in the marketing of loans, creditworthiness assessment and the granting of a right of withdrawal. However, it also covers creditors’ obligation to show reasonable forbearance when claiming repayment, for example, by limiting default interest, preventing the abuse of acceleration clauses and seeking to avoid foreclosure actions being carried out before attempts have been made to negotiate with debtors.

INTRODUCTION AND OVERALL THEME

European Contract Law has been affected by mega-developments in society of the last decade in multiple ways. These range from the digital revolution that led to a host of EU legislation, both regulation of individual contractual relationships and of markets and platforms, to a similar revolution with respect to sustainability, which, again with EU legislation as the dominant layer, has led deep into contract and adjoining company and capital markets law as well. Many authors consider these two as the mega-trends of today's law of the enterprise – with the particular characteristic that regulation, company law and banking law are intertwined in particularly dense ways with contract law in these new mega-topics. Much less central in the apprehension of a larger contract law public in Europe is a development that had been triggered by the first mega-crisis in Europe in this decade, the Global Financial Crisis (followed by a whole series of mega-crises in Europe). This development, however, can well be seen as being just as important and indeed pointing in a similar direction. Moreover, it may even predate the other developments named. It may well be that the European Banking Union – created as a response to the global financial crisis (in 2008) and to the Euro sovereign debt crisis (in 2010) – constitutes the first instance of a decidedly common (public) good oriented reform. In other words: this may well be the first instance of a public good trend in the areas where autonomous party decisions typically reigned supreme, a trend that can be seen as a fundamentally new ‘green box approach’.m

LEGAL SYSTEM

SOURCES OF LAW

The Russian legal system is a civil law system conceptually based on statutes and codes. The statutory provisions are rather abstract and require interpretation when they are applied to a particular legal relationship or in a court case.

Being a federal state, the Russian legal system comprises federal and regional statutes and codes. The Constitution of the Russian Federation (the Constitution)1 draws a fundamental borderline between the competence of the federal and regional authorities. A more detailed division of powers is provided by federal agreements between the Russian Federation and its regions. For example, civil, criminal, tax, customs, land, forestry, water resources, inland water transportation, and civil and criminal procedure matters are regulated at the federal level. Centralised regulation of fundamental matters under federal legislation creates a homogeneous legal environment in all regions of the Russian Federation and consequently, as will be discussed further below, a rather unified application of law by Russian courts.

The statutory law regulates nearly all spheres of activities and is regularly supplemented and amended by the legislator. In those fields where there is less or no statutory regulation, sub-laws fill the gap.

A large part of Russian legal acts are sub-laws enacted by the state executive bodies and other state organs.

Although there is no statutory definition of the hierarchy of sources of law, it is accepted doctrinally2 that the sources of law form the following hierarchy:

• 1. the Constitution;

• 2. ratified international treaties;

• 3. federal constitutional laws; and

• 4. federal codified laws (codes) and federal laws.

INTRODUCTION

Precedent is rooted in the doctrine of stare decisis, which in fact corresponds to the reduction of the legal maxim stare decisis et non quieta movere (‘to stand by and adhere to decisions and not disturb what is settled’). In Brazil, this doctrine has been embraced to express the idea that the courts, through their decisions, are expected to convey certainty, confidence, equality, and efficiency.

In a broad sense, a precedent is commonly referred to as a judicial decision rendered to address a legal dispute, which may potentially serve as a basis for resolving future cases based on the factual similarities between the cases.

The use of precedent does not require that the facts – between the two cases, previous and subsequent – are absolutely identical, as no legal proceeding is entirely identical to another. The use of precedent presupposes the identification of pertinent factual similarities between the two cases. It is essential to discern what is important and what can be disregarded in order to resolve the dispute, employing precedent techniques.

In Brazil, the assertion that precedent serves as a source of law has gained prominence. For this reason, precedent is equated with other formal sources of law (such as statutes, decrees, regulations, etc.). Consequently, whenever a judicial body is called upon to decide a similar legal issue, it cannot depart from the precedent to apply a different rule.

A GENERAL INTRODUCTION TO LEGAL PRECEDENT

The South African legal system is of comparative interest for two main reasons. The first is that it is a mixed legal system, blending civilian and common-law elements. The second is that in the mid-1990s, when the racist and authoritarian system of apartheid was replaced by full democracy, the country enacted a famously ambitious Constitution. Both these features have important implications for the role of judicial precedent in South Africa, as this contribution to the volume will discuss. This contribution introduces the country's doctrine of precedent in Section 1. and sketches its historical background in Section 2. Sections 3. and 4. discuss the mechanics of the doctrine's operation. Sections 5. and 6. situate the role of precedent in a wider geographical, theoretical, and methodological context. The main themes are summarised in the conclusion.

South Africa adheres to a doctrine of judicial precedent (or stare decisis) on the same broad model as England and Wales and other common law jurisdictions. The South African doctrine of precedent arose in the early nineteenth century through judicial custom. For over 150 years, it had no statutory or constitutional authorisation. However, the courts have recently held that respect for precedent is an incident of the rule of law, which is one of the founding values of the new Constitution.

INTRODUCTION

Does China embrace a ‘case law system’? The title of this contribution suggests that an affirmative answer should be given. However, much seems to depend on how ‘case law’ or ‘precedent’ is defined. If generally understood as ‘a past event – in law the event is nearly always a decision – which serves as a guide for present action’ or ‘prior decisions that function as models for later decisions’, ‘case law’ or ‘precedent’ appears to have existed for a long time in the history of China. It is commonplace that even in today's Chinese courtrooms, judges routinely look at past cases when adjudicating the dispute at hand. However, if a stronger common law sense is given to the term, such as by equating ‘precedent’ with ‘any past constitutional opinions, decisions, or events which the Supreme Court or nonjudicial authorities invest with normative authority’, then it is clear that ‘case law’ in the Chinese context is dissimilar to and much broader than what ‘precedent’ strictly connotes.

The present contribution intends to offer an overview of the Chinese ‘case law’ system, attempting at times a deeper exploration into some of its key features. By ‘case law’, the more relaxed definition above is preferred but it is envisaged that two preconditions must be met. First, ‘case law’ is predicated on a court rendering an effective decision (including judgment and ruling/award) in the adjudication of a real-life dispute. Any other sense in which the term ‘case’ or ‘precedent’ is used, such as an example set by any other body or in any other process, however authoritative it might be, is not accommodated here.

A GENERAL INTRODUCTION TO LEGAL PRECEDENT

The doctrine of precedent is fundamental to the common law system, and therefore to English law – the law of England and Wales. Other common law legal systems around the world, which have drawn their systems from English law, share an understanding of the need for a system of precedent as an inherent feature of the common law method, but their details are inevitably different, and this contribution will discuss only the doctrine of precedent as it has been developed and now applies within English law.

There are two separate aspects to precedent. In its most general form, the doctrine of precedent is based on the principle that judicial decisions (case law) are a source of law, operating alongside but independently from legislative sources of law. However, once it is accepted that case law constitutes a formal source of law, a second question arises: how binding is the judicial decision given by a court in any particular case? The answer to this second question will lead to the detail of the doctrine of precedent, and its role within the English legal system, which will be discussed in the following sections. A general discussion of the issues will first be given here.

1.1. CASE LAW AS A SOURCE OF LAW IN ENGLISH LAW

It is of the essence of a common law system, such as English law, that judicial decisions are accepted to be a source of law – not only historically, but also in the modern, living law.

A GENERAL INTRODUCTION TO JUDICIAL PRECEDENTS IN ITALIAN LAW

Under Italian law, judicial precedents are formally not recognised as an independent source of law. In fact, the hierarchy of legal sources established by the Civil Code does not recognise case law as an independent source, in line with a formalistic and positivist approach rooted in the theory of the separation of powers: judges, who are not democratically selected and accountable, can only interpret and apply the law, but not make it. The declaratory theory of case law formally still applies, but in fact all lawyers, both academics and practitioners, as well as the general public, are acutely aware of the fundamental role that case law plays in establishing the law. There is no legal area where it is possible to understand the law only through the applicable statutory rules; in most areas, case law is a crucial component, and this is definitely true also in private law.

The law in the books/law in action cleavage in case law also affects the position of judicial precedents among the sources of law. The specific features of the Italian legal (and particularly the judicial) process, and more generally the structural features of the Italian legal system, tend to stress the importance, rather than of individual judicial decisions (i.e. a judicial precedent in its proper meaning), of a coherent line of judicial decisions that establish a rule (giurisprudenza consolidata or conforme). This feature implies a very different role of case law compared to other systems (of which the English one is the quintessential example), where every precedent establishes a rule that must (under certain conditions) be followed by other judges.

A GENERAL INTRODUCTION TO LEGAL PRECEDENT

A precedent is a court decision on a legal issue which is raised anew in a subsequent case. In the German legal usage, the term precedent (Präjudiz) does not imply any statement as to its binding force because German law does not recognise the principle of stare decisis. In the absence of explicit legal requirements, the role of precedents in private law has, due to the importance of legal decisions, always been controversial in jurisprudence. Related to the question of their binding nature is the question of their legal source quality. From a constitutional perspective, any binding effect can be disputed, for example, because the judge is bound only by law and statute, but not by precedent.

CONCEPTUAL DELIMITATION

Among the sources of law, precedent must be distinguished from statutory law and customary law.

Statutory Law and Precedent

The most important source of German private law is statute. Unlike past codifications, today's statutes lay down the legal position using abstract rules rather than casuistry. Being bound by the rule of law under Article 20(3) of the German Constitution (GG), courts must apply these abstract rules in their decision-making. Due to the abstract and general character of statute, a rule of the German Civil Code (BGB), for instance, applies to a multitude of different cases, whereas judicial precedent applies only to the specific circumstances.

A GENERAL INTRODUCTION TO LEGAL PRECEDENT

SOURCES OF SWEDISH LAW

Swedish law does not belong to the common law or the civil law legal families. It is in a legal family of its own, together with the law of Denmark, Finland, Iceland and Norway. This Nordic legal family is a mix between common and civil law. Although Swedish lawyers perceive themselves as closer to civil law – mainly the German legal family – Sweden lacks a coherent all-encompassing civil code. Its statutes are fragmentary and non-hierarchal. Many of the private law rules are ‘unwritten law’, i.e. not codified in statutes.

Sweden lacks legislation on the sources of law. Legal scholars and courts generally agree that precedents from the Supreme Court are a source of law.

Whether there is any hierarchy among various sources of law is disputed, but everyone agrees that after statutory law, precedents and preparatory statutory works are important sources of law.

THE SWEDISH COURT SYSTEM

Sweden has two supreme courts, one for criminal, private and procedural law, and another for administrative law. Specialist courts deal with certain areas or matters of law. For example, labour law disputes are resolved by a special court. This contribution will only refer to the Swedish Supreme Court (for criminal, private and procedural law), as the Swedish Supreme Court for Administrative law is not relevant for this volume