THE DOCTRINE OF TORT LAW AND METHODS OF COMPENSATION FOR FINANCIAL MARKET

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The above subject form part of the compendium of study under the Law and Economics as a post-doctoral work in a specialty focus of Constitutional Economics resulting in the below foundational theory for advanced empirical study.

  • FOUNDATIONAL THEORY

In the subject of Jurisprudence, the proper application and the role of Law in a Society is the central tenet of study. Therefore, the doctrine of Tort Law in all instances is required to uphold onto the standards of Jurisprudence. ‘Tort Law’ is simply defined by the Cornell Law School as an “Act or omission that gives rise to injury or harm to another and amounts to a civil wrong for which the court imposes liability.”

The author acknowledges that Modern Tort Law is defined into two boundaries of application, which are the Common Law and the Statutory Law. And this dichotomy is shaped by underlying theories and basic features expected of a Tort Law, which are classified as Strict Liability and Fault Liability.

The article takes into cognizant how the various theories of Tort Law including economic theories, continue to interpret the ‘Strict Liability’ and the ‘Fault Liability’ as a doctrine thereby presenting a more sophisticated challenge to the principle of corrective Justice. The article further admits the fact, modern critiques on some of these theories have presented a reviewed documentary to guide as in the methods and procedures admissible to the Common Law practices and Judicature.

In furtherance to the relevance of this study is to awaken an old debate of the nexus of Law and Finance, with its related effect on national investment and financial market development, which was initiated through the academic paper of (La Porta et, al, 1997) on legal protection of investors and its consequence. (Clark, 1986: Shleifer and Vishny, 1997) in their submissions made emphasis on legal protection of outside investors’ limits, and standards of corporate Law to promote investment and financial development to any given economy. The outcome of the submission of La Porta et al (1997, 1998a,b) presented contrary debates and controversies within the mainstream academic circle and among the industrial practitioners as a whole. This resulted in a revised study work and presented a new paper under a new caption, “The Economic consequence of legal origin” with the central argument that the historical origins of a Country Law is highly correlated with the broad range of its legal rules and regulations, as well as the economic outcomes ( La Porta et al, 2008), and thereby has a significant impact on investment and financial development of that given economy.

(La Porta et al 1997; 1998a,b) argued that English Common Law countries have better prospects for financial development than their French Civil Law counterparts. And advanced their argument that Countries with Common Law legacies provide the strongest legal protection to creditors and shareholders. On the basis of positive theory (Demirguc-Kunt et al 1999: Asongu, 2013) submitted that financial depth is a channel to investment, and in consistent with the Law-Finance theory, financial depth should be higher in countries with English common Law. 

Sarkar (2011) in a counter-argument questioned the theoretical and empirical basis as a critique to (La Porta et al 2008) presentation of the Legal Origin postulates on Common Law countries, ‘providing more protection to shareholders and creditors, and as well as promote financial development.’

Sakar advanced his argument that classification of countries by reference to legal origin is not always clear because in reality most modern legal systems are hybrids relying on both Civil and Common Law. (Deakin & Singh, 2008) indicated that the modern French Judges interpret the Law whereas English Judges on the other hand have less scope than before as a description contained in modern English Law such as the company Law. Sakar (2011) empirically established that while a proper legal framework could promote financial development and economic growth, it is also plausible that financial development influences the creation of an appropriate legal environment and intra-cited (Cheffins, 2001; Coofee, 2001) on the very fact that the evolution of company Law at the national level deduces that both USA and UK financial market developments preceded legal changes.

The brief orientation above does not necessarily accustom the foundational argument of this paper to the old traditional debate of ‘For’ and ‘Against’ on the subject of the nexus of Law, Investment and Financial Development of any given economy. On the contrary, it holds a disposition to the ‘For’ and ‘Against’ theory in the interest of the nexus of Law and Financial market development to address the dynamics of observed Financial Tort, and its central contribution to the impediment of investment and the menace to financial development within the developing and underdeveloped economy as a critical dimension of study to the debate.

  • CENTRAL STUDY OF PHENOMENON

The study is poised to accurately examine modern investment injuries within the financial market, which are experienced by victims, yet observed to fall below the threshold of what constitutes a Contract Law for appropriate civil case adjudication, yet uphold the features of the Tort Law character.

The study effort is to analyze all such defects in the context of injury, in other to examine and map-out the ‘injurer’ and the ‘injured’ to enable an appropriate underlying theory to be developed, and compensational methods to be designed, which may grant a precept of a statutory law where necessary, and a foundational base for common law to advance the principle of corrective Justice in the financial market, especially within developing economies for investment stimulation and financial market development.

Though cases relating to Tort Law and Financial Crises are not entirely a new field of study by referring to the works of (Karner 2013; Loser 2013) whose efforts were to analyze the responsibility of providing incorrect information in connection to the issuance of financial securities and creation of dangerous investment products, which could be treated as tortious and may require a victim’s claims of compensation legally at any competent Court of Jurisdiction within the European Financial Market. Yet such fields of study have had a less academic interest and scholarly contribution strictly within Europe.

The author thereby submits that the examination of tortious acts under the dynamics of shallow financial markets within Africa, have had no archived library publicly known in any Law faculty, which makes the very task of the lab-team a unique call.

  • CONCLUSION

It is an ongoing project of study, which the author is raising awareness in favour of its technical set-out lab for grants and other scholarly funding opportunities to aid in presentation of quality papers in Law and Finance, which is expected to become the canon upon which positive Laws of Tort and accompanied normative rules shall be propounded for the financial market to stimulate investment growth, which in its application is expected to attract competent and reliable investment agencies into the ecosystem of shallow financial markets.

REFERENCE

  1. Cheffins, B.R. “Does law matter? The separation of ownership and control in the United Kingdom.” Journal of Legal Studies 30 (2001): 459-84.
  2. Clark, Robert. “Corporate Law”. New York: Aspen Publishers (1986)
  3. Coffee, J.“The rise of dispersed ownership: the role of law in the separation of ownership and control.” Yale Law Journal 111(2001): 1-82.
  4. Cornell Law School, Legal Information Institute (1992). Accessed from https://www.law.cornell.edu/wex/tort
  5. Deakin, S. and Singh, A,. “The stock market, the market for corporate control and the theory of the firm: legal and economic perspectives and implications for public policy.” CBR (University of Cambridge Working Paper) (2008): 365.
  6. Demirgüç-Kunt A, Beck T, Levine R. “A new database on financial development and structure”. International Monetary Fund, WP(1999): 2146.
  7. Karner, Ernest. “Tort Law and the Financial Crisis: Basic Questions.” Journal of European Tort Law 4(2013). Accessed https://doi.org/10.1515/jet1-2013-0011   
  8. La Porta R., Lopez-de-Silanes F., Shleifer A. and Vishny R. “Legal determinants of external finance.” Journal of Finance 52(1997): 1131-1150.
  9. La Porta R., Lopez-de-Silanes, F., Shleifer A. and Vishny R. “Law and finance” Journal of Political Economy 106(1999): 1113-55.
  10. La Porta, R., Lopez-de-Silanes, F., Shleifer, A. “The Economic Consequence of Legal Origins.” Journal of Economic Literature 46 (2008):2, 285 -332
  11. Loser, Peter. “Financial Crisis-The Liability of Banking Institutions”. Journal of European Tort Law 4 (2013). Accessed  https://doi.org/10.1515/jet1-2013-0012
  12. Shleifer, Andrei, and Robert W. Vishny. “A Survey of Corporate Governance.” Journal of Finance, 52(1997): 2, 737–83.
  13. Simplice A. Asongu., “Law, Finance and Investment: Does legal Origin matters in Africa”. The Review of Black Political Economy 41(2011): 145-175

Emmanuel Tweneboah Senzu, Ph.D., is professor of Economics and Finance, with speciality in monetary economics, Banking Law, Econometrics, investment and risk analysis. Member of World Economic Association. President of Frederic Bastiat Institute Africa, Mercatus Center fellow; Law and Economics, George Mason University-USA, Fellow of the College of Social Sciences and Humanities, University of Makeni-SL, Faculty Fellow of University of Management and Technology, Sierra Leone.  Research Fellow of West Africa Monetary Institute, Ghana.

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