Showing papers on "Principal (commercial law) published in 2003"

A Team Production Theory of Corporate Law

Abstract: Contemporary corporate scholarship generally assumes that the central economic problem addressed by corporation law is getting managers and directors to act as loyal agents for shareholders. We take issue with this approach and argue that the unique legal rules governing publicly-held corporations are instead designed primarily to address a different problem - the "team production" problem - that arises when a number of individuals must invest firm-specific resources to produce a nonseparable output. In such situations team members may find it difficult or impossible to draft explicit contracts distributing the output of their joint efforts, and, as an alternative, might prefer to give up control over their enterprise to an independent third party charged with representing the team's interests and allocating rewards among team members. Thus we argue that the essential economic function of the public corporation is not to address principal-agent problems, but to provide a vehicle through which shareholders, creditors, executives, rank-and-file employees, and other potential corporate "stakeholders" who may invest firm-specific resources can, for their own benefit, jointly relinquish control over those resources to a board of directors. This alternative to the principal-agent approach offers to explain a variety of pivotal doctrines in corporate law that have proven difficult to explain using agency theory, including: the requirement that a public corporation be managed by a board of directors rather than by shareholders directly; the meaning and function of a corporation's "legal personality" and the rules of derivative suit procedure; the substantive structure of directors' fiduciary duties, including the application of the business judgment rule in the takeover context; and the highly-limited nature of shareholders' voting rights. The team production model also carries important normative implications for legal and popular debates over corporate governance, because it suggests that maximizing shareholder wealth should not be the principal goal of corporate law. Rather, directors of public corporations should seek to maximize the joint welfare of all the firm's stakeholders - including shareholders, managers, employees, and possibly other groups such as creditors or the local community - who contribute firm-specific resources to corporate production.

The Wrong Kind of Transparency

Abstract: In a model of career concerns for experts, when is a principal hurt from observing more information about their agent? This Paper introduces a distinction between information on the consequence of the agent's action and information directly on the agent's action. When the latter kind of information is available, the agent faces an incentive to disregard useful private signals and act according to how an able agent is expected to act a priori. This conformist behaviour hurts the principal in two ways: the decision made by the agent is less likely to be the right one (discipline) and ex post it is more difficult to evaluate the agent's ability (sorting). The Paper identifies a necessary and sufficient condition on the agent signal structure under which transparency on action is detrimental to the principal. The Paper also shows the existence of complementarities between transparency on action and transparency on consequence. The results on the distinction between transparency on action and transparency on consequence are then used to interpret existing disclosure policies in politics, corporate governance, and delegated portfolio management.

The Endowment Effect and Legal Analysis

Abstract: I. INTRODUCTION Over the last forty years, neoclassical economics has become embedded in the normative analysis of two broad areas of law: (1) how the law distributes entitlements amongst various competing claimants and (2) how the law regulates the consensual exchange of entitlements after their initial allocation. In the first area, economics can help lawmakers to allocate entitlements efficiently to the claimants that value the entitlements most. In the second area, economics can help lawmakers to facilitate efficient transactions and to impede or prohibit inefficient transactions. Economic analysis also has become a standard tool in the positive analysis of law. That is, the present state of the law is often explained as the direct result of an implicit or explicit concern with efficiency. Economic analysis has become so central to both the normative and positive study of law that, although many, or more probably, most legal scholars do not believe efficiency is or should be the law's prime virtue, few would argue that the efficiency implications of law are entirely irrelevant to the policymaking process. In order to determine whether the law is efficient or how it could be made efficient, a theory of preferences is required. Just as the concern with efficiency is borrowed from economics, so too is the dominant theory of preferences used in the analysis of law's efficiency: rational choice theory (RCT). There is no single definition of RCT, but most versions of it assume that the intensity of individuals' preferences for an entitlement derive solely from the inherent utility of that entitlement to the individual.1 The value of an entitlement is subjective and might vary from individual to individual. But each individual presumably determines the value that she places on an entitlement independently of external siruational characteristics, which are subject to change. Most relevant to this Article, RCT assumes that the value of an entitlement to an individual is independent of the relationship between the individual and the entitlement in the current state of the world. An individual may prefer to own either a house in the city or a house in the country, but the location of the house that she presently owns should not affect her preference or the intensity of that preference. Likewise, an individual might prefer cheap gas and dirty air or expensive gas and clean air, but his preference should not depend on whether gas is cheap or expensive or whether the air is dirty or clean, nor should it depend on which of these combinations the law favors. I will refer to this premise as the "status irrelevance" assumption.2 The status irrelevance assumption seems somewhat arcane when described in the abstract. As this Article will demonstrate, however, it turns out to be quite central to the analysis of a range of areas of substantive law. Much of the normative analysis of law in legal scholarship in fact relies on the assumption. A robust body of social science scholarship, however, demonstrates that the assumption is incorrect, at least in many circumstances. The much studied "endowment effect"3 stands for the principal that people tend to value goods more when they own them than when they do not. Move a person from a city house to a country house and, low and behold, he is quite likely to prefer the country house more than he did when he resided in the city. A consequence of the endowment effect is the "offer-asking gap,"4 which is the empirically observed phenomenon that people will often demand a higher price to sell a good that they possess than they would pay for the same good if they did not possess it at present. A third term-the "status quo bias"5-is often used interchangeably with the other two, but actually has a slightly broader connotation:6 individuals tend to prefer the present state of the world to alternative states, all other things being equal. The present state of the world may be defined by ownership or by non-ownership, but it might have nothing to do with ownership per se. …

From Enron to Worldcom and Beyond: Life and Crime After Sarbanes-Oxley

Abstract: In roughly two years since the corporate meltdown began, federal and state regulators have initiated criminal fraud investigations involving dozens of corporations, including Enron, WorldCom, Adelphia, HealthSouth, McKesson, and Qwest. To date, some ninety corporate owners, executives, and employees have been criminally charged, and the investigations are ongoing. It was against this backdrop that zeal for corporate governance reform gained unexpected momentum in Congress and resulted in the surprisingly quick enactment of the Sarbanes-Oxley Act. Although its principal purpose is to address systemic weaknesses in corporate governance structures, Sarbanes-Oxley also augments prosecutorial tools available in major fraud cases. Critics complain that Sarbanes-Oxley's criminal provisions are needlessly redundant, rely too heavily on enhanced criminal penalties to achieve their goals, and attach far too much importance to filling minor gaps in the coverage of existing laws. This article presents the alternative view that the Act's criminal provisions make significant strides toward piercing the veil of corporate silence. Using as its central focus the essential roles that whistleblowers and cooperating witnesses have played in recent corporate fraud investigations, the article evaluates key criminal provisions in Sarbanes-Oxley that extend new legal protections to whistleblowers and that are likely to provide powerful incentives for potential targets of fraud investigations to become cooperating witnesses. An appendix to the article tracks criminal charges brought against nearly ninety corporate officers and employees in some fifty major fraud prosecutions the Justice Department filed between March, 2002 - when it first charged Arthur Andersen with obstruction of justice - and August, 2003.

Simester and Sullivan's Criminal Law: Theory and Doctrine

Abstract: 1 Criminal law: definition and ambit 2 The rule of law and the European Convention 3 Interpretation and proof 4 The actus reus 5 Mens rea 6 Strict and constructive liability 7 Secondary participation 8 Vicarious and corporate liability 9 The inchoate offences 10 Homicide 11 Non-fatal offences against the person 12 The principal sexual offences 13 Theft 14 Related offences 15 Fraud 16 The moral limits of criminalisation 17 Defences: an overview 18 Failure of proof: mistake and intoxication 19 Mental condition defences 20 Defences of circumstantial pressure 21 Permissible conduct 22 Defences and blame: some observations

When is a Bribe a Bribe? Teaching a Workable Definition of Bribery

Abstract: In this paper I present an approach to teaching about and defining bribery that starts with the presumption that a payment, once defined as a "bribe," is prima facie unethical. That is, I make no distinction between "good bribes" and "bad bribes." In short, bribery cannot be justified. In this context, how could you determine precisely when a particular payment constitutes a bribe and when it does not? I present a framework for defining bribery in such a way that it (1) retains the presumption that bribery is unethical, (2) reflects our intuitive understanding of bribery, and (3) is flexible enough to effectively discriminate between bribe and non-bribe payments. This definition is based on the principal-agent relationship in that bribes are payments to agents to induce them to act against the interests of their principals. I begin the paper by describing a classroom exercise designed to force students to think about what a good definition of bribery ought to be. First, I give students a sheet of paper describing 11 brief scenarios in which a payment is to be made from one person to another. These scenarios are reproduced in the paper. Second, I ask them to identify which scenarios constitute the payment of a bribe, according to their understanding of bribery. Third, I challenge students to formulate a general definition of bribery that justifies their assessments of the specific cases they have identified as bribery. That is, they must develop one definition of bribery to account for each of the cases of bribery they identified. Fourth, I invite students to offer to the class whether or not a particular scenario is an example of bribery, what their definition of bribery is, and why their definition supports their conclusions. Finally, I apply their definitions to other scenarios to determine whether the definitions force the students to agree with their original assessments of what cases involved bribery. Examples of definitions typically offered are provided, along with my responses as to why they are inferior. I then offer a definition of bribery based on the principal-agent framework. A principal-agent relationship exists when a principal delegates some task or assignment to an agent, who is then made responsible for acting in the principal's interest. The important idea here is that the agent, by agreeing to enter into a principal-agent relationship, accepts the obligation to act in the interest of the principal. The concept of a principal-agent relationship provides a straightforward means of defining bribery. A bribe is a payment, made by a third party to an agent of a principal, in which the agent explicitly or implicitly agrees to take an action that is contrary to his duty as an agent of the principal and is thus not in the interest of the principal. A bribe cannot be, by definition, a payment made to a principal (although a payment made to a principal may be unethical for other reasons); only agents can be bribed, not principals. Effectively, this means that in assessing whether business payments are bribes, one should determine whether the person receiving the payment is an agent of a principal, and if the payment is going to be retained by the agent.

Incentive Problems in Banking Supervision - The European Case

Abstract: This paper discusses the incentive conflicts that arise in banking supervision in the EU in a principal-agent framework, where the regulator is the agent and the taxpayers is the principal. The regulatory agent in addition to maintaining financial stability (the objective of the principal) may pursue private interests. Incomplete information, insufficient accountability of the agent and lack of enforceability of compliance result in an incentive problem. A reform of the European supervisory system complemented by strengthening market discipline based on improved disclosure of both the supervisor and the banks may help to solve the European incentive problem.

Alternatives to Public Provision: The Role of Legal Expenses Insurance in Broadening Access to Justice: The German Experience

Abstract: The literature suggests that the main barriers to justice range from a general lack of knowledge about legal rights, and the related prevalent use of technical language within justice systems (which has led to commentators describing law as a "leviathan"), to a vague "fear of the unknown". In Germany the principal barrier is thought to be the problem of funding legal services. Empirical research indicates that the question of whether or not to consult a lawyer is primarily one of cost, although over one-third of potential clients have little idea about lawyers' fees. To find ways to surmount this barrier is therefore of paramount importance for a modern society. In broad terms, there are three potential attitudes to legal costs: reliance on one's own resources; hope for third party assistance (such as legal aid or pro bono); and insurance. This article concentrates on the last of these three options, comparing, in particular, the systems in Germany and England and Wales.

The Surprising Retreat of Union Britain

Abstract: After expanding in the 1970s, unionism in Britain contracted substantially over the next two decades. This paper argues that the statutory reforms in the 1980s and 1990s were of less consequence in accounting for the decline of unionism than the withdrawal of the state's indirect support for collective bargaining. The principal goal of the reforms was to boost productivity so the paper examines the link between unions and productivity finding only a small association by the end of the 1990s. Private sector unionism has become highly decentralized which renders it vulnerable to the vagaries of market forces.

Alternatives to Public Provision: The Role of Legal Expenses Insurance in Broadening Access to Justice: The German Experience

Abstract: The literature suggests that the main barriers to justice range from a general lack of knowledge about legal rights, and the related prevalent use of technical language within justice systems (which has led to commentators describing law as a ‘leviathan’), to a vague ‘fear of the unknown’. In Germany the principal barrier is thought to be the problem of funding legal services. Empirical research indicates that the question of whether or not to consult a lawyer is primarily one of cost, although over one–third of potential clients have little idea about lawyers’ fees. To find ways to surmount this barrier is therefore of paramount importance for a modern society. In broad terms, there are three potential attitudes to legal costs: reliance on one's own resources; hope for third party assistance (such as legal aid or pro bono); and insurance. This article concentrates on the last of these three options, comparing, in particular, the systems in Germany and England and Wales.

The Grounds and Extent of Legal Responsibility

Abstract: This article identifies and discusses the three principal limitations on the extent of legal responsibility for tortiously caused harm and explains and justifies them by reference to the principle of interactive justice, which holds one legally responsible for causing (or being imminently about to cause) harm to another's person or property as a result of conduct that is inconsistent with others' right to equal freedom. The three principal limitations prevent liability for a tortiously caused harm when (1) the harm almost certainly would have occurred anyway in the absence of any tortious conduct or condition (the "no worse off" limitation), (2) there was a superseding cause of the harm (an actual cause of the harm that (i) intervened between the defendant's tortious conduct and the plaintiff's injury, (ii) was a necessary ("but for") cause of the plaintiff's injury, and (iii) was highly unexpected), or (3) the harm did not occur as part of the realization and playing out of one of the foreseeable risks that made the person's conduct tortious, before the hazards created by the realization of that risk had dissipated (the "risk playout" limitation). None of the three limitations match the usual academic prescription for limiting the extent of legal responsibility for tortiously caused harm, which would rely solely on a harm-matches-the-risk ("harm-risked") limitation that is often confused with, but which differs significantly from, the risk-playout limitation. However, as this article demonstrates, the results reached by the courts are consistent with the three stated limitations rather than the harm-risked limitation, despite the longstanding efforts of the academic drafters of the Restatements to install the harm-risked limitation as the sole, comprehensive limitation on the extent of legal responsibility for tortiously caused harm. These three limitations are neither exclusive nor absolute. Some of them do not apply or apply less broadly to some intentional torts and some strict liability actions. Moreover, there are other limitations on the extent of legal responsibility, such as the de-minimis-contribution limitation, as well as limitations on legal responsibility for certain types of losses - such as pure emotional distress, pure economic loss, and wrongful birth - that are more appropriately handled as categorical limitations on the scope of a person's duty rather than as limitations on the extent of legal responsibility for tortiously caused harm.

The Reformation of Deterrence: Moving On

Abstract: The purpose of this study is to advance the deterrence reformation that has as its principal manifesto Keith Payne's book, The Fallacies of Cold War Deterrence and a New Direction (2001). The argument complements and augments that of Payne. It reflects the view that in order to succeed, this reformation requires many studies, much persuasion, considerable time, and an official commitment to a new approach to the problem of deterrence. The study is not critical of the concept of deterrence, only of the particular theory which has guided U.S. policy. Far from being an attack upon deterrence, the intention here is to help enable deterrence policy to be all that it can be. The reform literature seeks to increase the prospects for policy success with deterrence, while also scaling back expectations of such success.

Two steps forward, one step back: towards accountability for workplace deaths?

Abstract: This paper examines the origins of the UK government’s proposals for reform of the law of ‘corporate manslaughter’ and evaluates some of the possible outcomes. The paper begins by outlining the principal legal barriers to determining liability for manslaughter where the offender is a corporation, not least the doctrine of identification. It then goes on to discuss key common law developments in involuntary manslaughter cases involving corporations. This is followed by a discussion of the emergence, nature and progress of long-standing proposals for the introduction of new statutory offences regarding corporate killing, and an appraisal of the likely impact of these proposed legal changes. Finally, the paper sets out a series of policy recommendations and insists that the proposals must not be diluted any further by New Labour’s relationship with private business interests.

Derivative Usage by Nonfinancial Firms in Sweden with an International Comparison

Abstract: This paper provides survey evidence on the use of derivatives among Swedish nonfinancial firms. The evidence is compared with the findings by Bodnar et al. (1995, 1996) and Berkman et al. (1997) for the USA and New Zealand, respectively. By comparing firms in Sweden with firms in New Zealand and the USA differences in derivative usage can be related to differences in their underlying economies and history of trading in derivatives. Among other issues, the results showed that (1) 52% of the nonfinancial firms in Sweden used derivatives compared with 53% in New Zealand and 39% in the USA; (2) the usage of derivatives was more common among larger than among smaller firms; (3) the principal use of derivatives was for hedging purposes and those firms that engaged in speculative activity tended to be larger rather than smaller firms; and (4) lack of knowledge about derivatives within the firm was the issue of most concern for financial directors. The latter was in contrast with the USA where lack of knowledge was the issue of least concern.

The agency challenge: How Woolley, Woodley, and other cases rearranged the hotel-management landscape

Abstract: A series of court cases have redefined the relationship between hotel owners and their management companies and their frachisors. Beginning with a 1991 California decision, courts have determined that hotel-management firms are agents for the owners with whom they contract—even if the management contract says otherwise. In part, a key indication of agency is when one party provides services to the other for a fee—which is the nearly universal arrangement in a management contract. Two key aspects of agency have tripped up such industry giants as Embassy Suites, Hyatts, Marriott, Radisson, and Sheraton. The first element of agency is that the principal (i.e, the owner) can dismits the agent at any time, despite what the parties' contract says. Second, the management company as agent is required to act in the principal's best interest. So, when a Washington, D.C., jury determined that some practices common in the hotel industry are not in the owner's best interest, that jury ordered Sheraton to pay compensatory and punitive damages to the hotel's owners. Franchisors may also be considered as “agents” when they services to their licenses—as occurs, for instance, when hotel chains provide reservation services for a franchise. Following the logic of the management-contract cases, a New York court determined that Radisson was an agent for a hotel in that city, even though it did not operate the hotel itself, because it did provide a serve (the reservation system) for a fee. Taken together, the lesson to be learned from the cases reviewed in this article is that, no matter what the owner-manager contract states on paper, it is the characteristics of the relationship and existing legal precedent that will dictate the terms during any dispute.

Principal-Agent Liability

Abstract: This essay is a new chapter in An Introduction to Law and Economics (Third Edition, forthcoming 2003). It reexamines some of the principles of liability from earlier chapters when harm is caused by an agent who is under the supervision of a principal. The primary questions addressed are: Is the optimal level of liability different when harm is caused by an agent of a principal rather than by a single actor? Should liability be imposed on the principal, the agent, or both? If on both, what is the optimal mix of liability between the principal and the agent?

The Cost of Delegated Control: Vicarious Liability, Secondary Liability and Mandatory Insurance

Abstract: Vicarious liability, secondary liability and mandatory insurance are three systems to attain judgment-proof or disappearing injurers' precaution through the direct control of a second party (the vicariously liable principal, the secondary liable party, or the insurer). In this way, the legal system delegates control over some injurers to private entities. Such mechanisms generate monitoring costs. In this paper, we consider who bears the cost of such monitoring and the effect thereof on the equilibrium level of precautions under different liability rules. We use these findings to explain some of the patterns in the coupling of substantive standards of liability and legal regimes of delegated control.

Shift Happens: Pressure on Foreign Attorney-Fee Paradigms From Class Actions

Abstract: "You know what they say about paradigms--shift happens." (1) I. INTRODUCTION The class-action device, still unique in its degree of prevalence in American civil litigation, (2) has begun to spread--some would no doubt say metastasize (3)--beyond the United States. Five Canadian provinces now have some form of the device, (4) as do the Australian Federal Court and the state of Victoria. (5) For over a decade Brazil has authorized collective actions on behalf of private parties by designated government offices and by private associations with relevant institutional purposes. (6) The People's Republic of China has since 1991 provided for class-action-like representative lawsuits, (7) and the Indonesian Supreme Court recently adopted a regulation to authorize and govern class actions. (8) A Swedish law authorizing class actions was to take effect January 1, 2003, (9) and Finland, Norway, and Scotland have considered or are considering adoption of the device. (10) The South African Law Commission in 1998 recommended recognition there of class and public-interest actions. (11) This essay does not discuss these developments in depth; nor does it wade into whether, and if so how, other nations should implement class actions. Rather, it explores the tensions between the class-action device and norms governing attorney-fee liability and class-action financing practices in most of the world outside the United States, the pressures resulting from those tensions, and possible resolutions. Given differences among legal systems that have, or might adopt, class actions, the essay also largely avoids arguing for or against particular choices that might be made. I hope that this exploration can, by clarifying some of the issues that are likely to arise and the alternatives available, be useful where adoption or modification of the class action is being or may be considered-perhaps even including in the United States. II. THE UNVIABILITY OF CLASS ACTIONS WITHOUT CONTINGENT FEES AND UNDER LOSER-PAYS ATTORNEY-FEE SHIFTING As others have long recognized, class actions could find barren soil if they were transplanted to systems that, like much of the world, maintain bans on contingent fees for plaintiffs' lawyers and adhere to the near-universal loser-pays rule on liability for a winning side's attorney fees. (12) The American class action exists in a system under which losing plaintiffs are rarely, and losing defendants only sometimes, liable for the attorney fees of their victorious adversaries; (13) contingent percentage fees are allowed and are the dominant means for financing plaintiffs' non-class and class damage litigation; (14) and entrepreneurial plaintiffs' lawyering--with attorneys often being the main impetus behind, and principal persons financially interested in, a class action for damages--is at least tolerated. (15) In nearly all the rest of the world, prevailing practices and attitudes hew in varying degrees to an opposite paradigm in which losers in civil litigation are usually liable for a substantial portion of winners' reasonable attorney fees (loser-pays or the English as opposed to the American rule (16)); contingent fees--percentage or hourly (17)--have been frowned upon, with the client at least in principle obligated to pay the lawyer the same rate no matter whether success be great, small, or nil; (18) and lawyers' financing of and stakeholding in litigation have tended to be regarded as unacceptably commercial and unprofessional. (19) Moreover, financing of litigation by third parties aside from clients and their own lawyers could run afoul of the traditional common-law barrier to "maintenance." (20) American practices are in several ways obviously hospitable to the flourishing of plaintiffs' class actions for damages. While small chance of a significant recovery may (or at least should) deter the pursuit of class claims, individual class representatives' or class members' fear of down-side liability for large defense fees will not. …

TPL Cooperative Game Analysis Based on the Asymmetric Information Theory

Abstract: Supposing both operation ability and effort level are primary information to a third party logistics service provider, here was established a cooperative game model between a third party logistics buyer (the principal)and the supplier(the agent).Furthermore,we applied maximum principle to our analysis and obtained both the players' cooperative strategies.Finally,on the assumption that the supplier is risk-neutral the risk cost,incentive cost and total agency cost were analyzed respectively.

‘Ethical Foreign Policy’ Where Does the Ethics Come from?

Abstract: Human rights have been the principal ethical ingredients of ‘ethical foreign policy’. Some human rights promulgated in UN and other Declarations are more aspirational than achievable; others are of variable importance. So we need to look behind the Declarations to see which human rights claims should be taken most seriously. I shall argue that we take rights seriously only if we take the counterpart obligations seriously, and can take obligations seriously only if we connect them to the capabilities of the agents and agencies who will have to discharge them. A realistic view of those agents and agencies cannot be based on the assumption that the relevant agents are all of them states, since this line of thought collapses where states are weak or failing. A realistic account of agency, or of obligations, a fortiori of rights has to take certain types of non-state actors and their obligations seriously.

What If You Could Sue Your HMO? Managed Care Liability Beyond the ERISA Shield

Abstract: The legal environment that afforded managed care organizations protection from liability for harm resulting from their cost containment activities has shifted and the risk of liability under state law has increased. This article combines conventional legal analysis with empirical findings from a large number of confidential interviews with experienced health care lawyers, health plan managers, and industry observers to explain why managed care liability has been low and why it is increasing. It also analyzes liability statutes enacted by the states and proposed by Congress to describe their differing scopes and standards of liability. The article then addresses the costs and benefits of enhanced liability of managed care organizations to develop a framework for the adjudication of lawsuits challenging the clinically based actions taken by managed care organizations. The authors conclude that a medical professional standard should govern vicarious liability claims that seek to hold health insurers responsible for the quality of care rendered by their physician agents and that a process standard should govern claims that challenge managed care organizations' clinically based coverage determinations. In cases seeking personal injury damages for wrongful coverage determinations, the principal focus should be whether the managed care organization had an acceptable system in place, and followed it, for making reasonable assessments of clinical factors that determine what the insurance policy covers.

The Incoherence of Punishment in Antitrust

Abstract: Antitrust began with the common law tort of restraint of trade but has long since separated itself from the rest of tort law, particularly in the area of punishment. Since the passage of the Sherman Act in 1890, the principal remedies for antitrust violations have been criminal penalties and private treble damage suits. Antitrust stands relatively unique in the American tort universe with its treble damage remedy, its lack of punitive damages, its rejection of in pari delicto defenses, and the peculiar combination of joint and several liability, the lack of contribution, and the way that settlements are credited against the potential liability of the remaining defendants in a case.

The Duty to Monitor: Emerging Obligations of Outside Lawyers and Auditors to Detect and Report Corporate Wrongdoing Beyond the Securities Laws

Abstract: Recent legislation - Section 10A of the Securities Exchange Act of 1934 for auditors and Section 307 of the Sarbanes-Oxley Act for lawyers - has imposed on corporate outsiders certain duties to monitor unlawful activity within a corporation, and to report that activity to designated corporate actors. It is generally understood that the monitoring obligations of lawyers and auditors extend to corporate activity which might constitute a violation of federal securities law and state fiduciary duty standards. But do the monitoring and reporting obligations extend to unlawful activities beyond the securities laws - for example to violations of the laws prohibiting racial, religious, ethnic, age and sex discrimination? This article suggests that a strong set of arguments exist to support the answer - yes. The article first demonstrates that the monitoring rules create a broad obligation to detect and report that extends to any violation of law that could have a direct or indirect material effect on the financial condition of the corporation. The article then suggests that the nature of the detection and reporting obligation is active - requiring auditors and lawyers to implement procedures for detecting violations. The failure to comply with the detect and report obligations can contribute, under certain circumstances, to auditor or lawyer liability as a principal under the securities laws, to liability as a principal under the discrimination laws, and to greater exposure to discovery from private plaintiffs. The article ends with an extended hypothetical, involving outside counsel, auditors and a client corporation engaging in potentially discriminatory conduct, in which the insights developed in the article are applied.

Incentive Problems in Banking Supervision: The European Case

Abstract: This paper discusses the incentive conflicts that arise in banking supervision in the EU in a principal-agent framework, where the regulator is the agent and the taxpayers is the principal. The regulatory agent in addition to maintaining financial stability (the objective of the principal) may pursue private interests. Incomplete information, insufficient accountability of the agent and lack of enforceability of compliance result in an incentive problem. A reform of the European supervisory system complemented by strengthening market discipline based on improved disclosure of both the supervisor and the banks may help to solve the European incentive problem.

The Advisory Functions of the Attorney-General

Abstract: Her Majesty’s Attorney-General and Solicitor-General, jointly known as the Law Officers of the Crown for England and Wales (‘the Law Officers’), have been described as “sui generis: not quite like other lawyers; not quite like other politicians; not quite like other ministers.” Although any function of the Attorney-General may be exercised by the Solicitor-General in accordance with the Law Officers Act 1997, the Attorney-General has long been regarded as the Principal Law Officer. As such, the Attorney-General performs a number of functions, which have been depicted as falling within “four broad categories”:

The development of asset forfeiture law in the United States : transnational and organized crime

Abstract: Asset forfeiture came into prominence as a law enforcement tool in the United States during the 1990s. At the beginning of that decade, the Department of Justice - the principal federal law enforcement agency - was forfeiting approximately $200 million per year in criminal assets, mostly from drug cases. By the end of the decade, it was forfeiting over $600 million per year in assets involved in an enormous variety of serious crimes. In short, in the last decade, asset forfeiture became institutionalized as an essential weapon in the arsenal that the federal law enforcement agencies in the United States could bring to bear on the perpetrators of crime. But the statutes, procedures and policies that govern the application of the forfeiture laws did not spring full-grown from a single Act of Congress. Nor were the various statutes that were enacted piecemeal over many years accepted by the courts without scepticism or controversy. To the contrary, laws and concepts that were slowly developed throughout the nineteenth and twentieth centuries were greatly expanded in the last 20 years, applied in new contexts, and subjected to close scrutiny by a sceptical judiciary. Only now, after more than a dozen constitutional challenges in the Supreme Court of the United States and the enactment of comprehensive reform legislation, can it be said that most of the major issues have been settled. Many issues remain, but to a large extent when the practitioners of forfeiture law go to federal court today, they are litigating over the details.

Cost-sharing in Group Litigation: Preserving Access to Justice

Abstract: Plainly there is a need for the English courts to restate the application of remoteness criteria to money claims against defaulting trustees. The dicta in Target Holdings and Collins v Brebner as well as the statement in Lewin on Trusts provide an unsatisfactory basis for deciding future cases. A more refined approach would recognise that whether remoteness criteria apply at all depends on the nature of the claim advanced, for they are only apposite where the beneficiary seeks compensation for loss incurred by reason of the defendant’s misconduct. Remoteness criteria have no purchase where the beneficiary instead overlooks the breach and requires his trustee to perform his primary duties, even if that performance is to be effected in money. Greater refinement is also needed in formulating the criteria that condition liability where the claim is for reparation of loss. In this the English courts should adopt the two principles that underpinned Fisher J’s approach in the Guardian Trust case: they should tailor the applicable criteria to the different types of breach of trust that may be committed and they should develop those criteria harmoniously with the law as it applies to cognate common law wrongs. The progress of the law is towards treating reparation claims for breach of trust in two broad compartments that correspond to the two major compartments discernable in tort law. The first includes claims arising from unintentional and judicious breaches of trust; here the principal remoteness test should be reasonable foreseeability of the kind of loss. The second includes claims arising from intentional disloyalty; here unforeseeable losses should be recoverable so long as they are the direct result of the breach.

When is a Principal Charged with an Agent’s Knowledge?

Abstract: I. INTRODUCTION Within the common law of agency, rules of imputation govern when a principal is deemed to know facts that are known by an agent. The common law defines agency as a consensual and fiduciary relationship in which one person's actions have power to affect the legal relations of another person; an agent acts on behalf of a principal and is subject to the principal's control. (1) Imputation comes into play in determining a principal's legal rights and obligations as between the principal and third parties with whom the agent deals on the principal's behalf, when knowing a fact is relevant to legal relations. Imputation has been characterized as a disorderly doctrine that is difficult to rationalize and to justify or explain in any satisfying of comprehensive way.(2) The doctrine presents challenges because it applies broadly and to widely ranging circumstances. Imputation also requires a counter-intuitive willingness to assume that one person's knowledge, without more, is known by another person. These difficulties are worth confronting, though, because imputation is central to the bases on which agency ascribes responsibility for one person's actions to another person and thus to agency doctrine as a whole. This essay begins by exploring the basics of how imputation doctrine operates, including the circumstances under which an agent is treated as knowing a fact. Although the primary focus is on cases from the United States, contrasting English cases are discussed at points. The essay next evaluates competing justifications for imputation. It argues that the traditional justifications for imputation, though helpful, are incomplete and ultimately unsatisfactory because they rail to account for well-settled aspects of imputation doctrine and its consequences. The essay then advances alternate justifications that achieve a closer correspondence between imputation and other agency doctrines. In particular, imputation recognizes that the relationship between principal and agent may create incentives for an agent to be reticent in transmitting information to the principal when the agent believes the principal may prefer not to know the information. Imputation may seem a counterintuitive or primitive legal doctrine or practice. It's natural to think that what one person knows becomes known by others only as a result of some intermediate process of communication or learning. Likewise, we don't assume that what one person knows, another person also knows simply because of the relationship between them. We naturally assume that the contents of a person's mind are just that--tied to or embedded in that person's conscious and unconscious mental states and not automatically within the mind of another person. Thus, imputation may seem to require some suspension of ordinary assumptions about how human cognition in fact works. Imputing one person's knowledge to another could be characterized As a quintessential legal fiction. It is a representative instance in which the law for some reason deems something to be true that is not in another respect. (3) Moreover, basic aspects of the common law of agency could be characterized as fiction piled upon fiction. For example, like much else in the law, agency includes within its cast of characters actors who are not natural persons, such as nation-states and corporations. Treating nations and corporations as legally consequential persons necessitates doctrines--like imputation and other agency-law doctrines--that explain how such persons may take action in the physical world with legal consequences. (4) Thus, one fiction--corporate personality--may necessitate another fiction--imputation. As it happens, many legal fictions are unproblematic because they are not deceptive. This is because some consequences of legal doctrine, like corporate personality, may have originated as fictions but now fool no one because their operation is so widely known. …