Legal Studies Research Paper Series Vol. 10, No. 6

The Faculty has published Volume 10 Number 6 of the University of Cambridge Faculty of Law Legal Studies Research Paper Series on SSRN.

This issue includes the following articles:

Michael Waibel: Financial Crises and International Law (18/2019)

Ten years after the global financial crisis (“GFC”) that started in 2007, the time has come to take stock of the international regulation of finance. This report assesses the causes and consequences of the GFC and the broader context of the changes in the international financial system since the collapse of the Bretton Woods system of fixed exchange rates (Section 2); and then turns to the status and evolution of international financial law (Section 3). It contends that the growth of international financial markets has outpaced the development of international financial law. Section 4 concludes with a brief comparison between the first golden age of capital in the late 19th century and the contemporary second age of global capital – both characterised by recurrent financial crises, rising inequality within countries and backlashes against globalization.

Eyal Benvenisti & Amnon Morag: Regulatory Capture and the Marginalized Majority: The Case for the Constitutional Protection of the Majority’s Disposable Income (19/2019)

The constitutional protection of private property is rooted in the notion that individual rights ought to be insulated from the tyranny of the majority. However, as public choice theory teaches us, democratic decision-making suffers from another systemic failure that is no less pernicious, no less ubiquitous, but less transparent: interest groups are capable of steering government to favor their narrow interests at the expense of diffuse citizens and the broad public interest. In this Essay we argue that this ‘capture’ characteristically results in anticompetitive regulatory measures that inflate the prices of products and services above their competitive market price or reduce their quality. Such measures transfer wealth from the many to the few, as they diminish the value of diffuse citizens' disposable income in terms of purchasing power. We propose to conceive of this loss as a potentially unconstitutional taking of the diffuse citizens’ property. Our account challenges the Madisonian assumption, embedded in the Constitution, that constitutions must protect the property rights of the propertied minority against the tyranny of the deprived majority. We argue that the Constitution must also limit another type of taking, effected when a minority solicits anticompetitive government measures that diminish the value of the disposable income of the marginalized majority. Accordingly, anticompetitive regulation catering to special interests will be deemed prima facie unconstitutional unless it is necessary to promote public purposes.

Eilis Ferran: Revisiting Legal Capital (20/2019)

This paper argues for the UK to revisit the legal capital (maintenance of capital) doctrine. Leaving the EU could present an opportunity but to reform legal capital just because Brexit may make it possible to do so would have little merit. Three more substantial reasons for revisiting legal capital are developed: the evidence against legal capital being an effective bulwark against short termist corporate behaviour has continued to stack up; difficulties associated with applying legal rules on distributions in the context of modern financial reporting requirements have persisted; and we have a clearer sense of how creditors’ interests are affected by moving away from legal capital to solvency standards. The paper locates the need to revisit legal capital within the broader agenda for a system of effective corporate governance and regulation that supports economically worthwhile and sustainable business activity.

Luiza Leão Soares Pereira: The ILC in the Eyes of the ILC: Mirror or Looking-Glass? (21/2019)

This paper addresses the treatment by the International Law Commission of its own work in its latest “Commentary to its Draft Conclusions on the Identification of Customary International Law”. It is argued here that the ILC’s choice not to include its own documents under the heading “teachings of the most highly qualified publicists” is correct. This is so (1) because “teachings” should be construed as only encompassing works that are purely or primarily scholarly, and (2) because ILC works are not merely “subsidiary means for the determination of rules of law”, but rather one of the elements that form customary international law. The Commission’s ambiguous stance towards its own work is symptomatic of the project’s deeper problems – the artificiality of the two-element approach, the excessive emphasis on state practice, and the impossibility of extricating ‘identification’ from ‘formation’ of custom. A closer look at the Commission’s purported mirror-image reveals distortions more akin to a looking-glass.

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