ANTI-FORMALISM AND ANGLO-AMERICAN COMMERCIAL LAW

Professor John Glover

RMIT University

Melbourne, Australia

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Introduction

Change in the world’s developed economies.

Electronic communication and computers replacing paper-based records.

Production of services, by value, is eclipsing the value of goods produced.

Effect on commercial law.

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The significance of title and ownership in common law jurisdictions.

Reliable means of proving ownership is

an important feature of commercial law systems.

How do you prove ownership of an apartment, a car . . . or shares/securities transferred electronically?

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Electronic title:

US Uniform Commercial Code (“UCC”) and Uniform Electronic Transactions Act 1999 –

Title = control of an electronic document (including through agents).

A vague and indeterminate criterion?

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Can “control” of an electronic dealing – a momentary sequence of electrons – ever match the certainty of documentary titles?

Do electronic transactions have any hallmarks or distinguishing features?

Surely fraud in an “open” system will flourish?

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But the UCC electronic title protocol will doubtless work effectively.

Many thousands of businesses now rely on the new legal regime for electronic commerce.

This is the realm of praxis – where solutions have to work.

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Electronic commerce changes typified in the UCC’s amended definition of “good faith”:

Requiring the “observance of reasonable commercial standards of fair dealing” in place or mere “honesty”.

More woolly words – or is the benchmark for commercial interaction changing?

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More about electronic title systems:

Contrasting “closed” systems of electronic title – where participating members agree to play by the rules.

Systems of land title registration are “going electronic” all over the developed world – these are closed systems, too.

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How the prevalence of “closed” electronic title systems make the UCC’s “open” system based in control all the more remarkable.

But electronic money is different. How “DigiCash” or “ECash” has not

become fully negotiable yet – like notes and coins.

Legal doctrine is causing problems.

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What do these examples show?

• That the form of commercial interaction is changing;

• Exchange is becoming more fluid;

• The system requires higher levels of trust and reciprocity between participants in order for it to work.

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Commercial law has adapted to the new regime of production and exchange.

In structural terms:

standards and principles are taking the place of rules and regulations in common law commercial law systems.

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“Mechanical jurisprudence” of rules is in decline:

e.g., consider the size of the rule-book needed for regulation of UCC electronic title.

Rules could not cover all the possibilities for fraud - requiring “reasonableness and conduct-evaluation are the only way that the system could be policed.

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Ways of teaching commercial law and argument in commercial courts has also changed.

Commercial lawyers reason purposively.

Legal outcomes are preferred according as they advance or retard commerce.

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Changes in society and its commercial law – accompanied by a moral change?

Is robust individualism dying?

Is there still a capitalist “right to be selfish”?

Does the law increasingly require people to make sacrifices and share?

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Legal norms have a more good-neighbourly aspect.

The idea that justice inheres in outcomes rather rules for action is “anti-formalist”.

Max Weber wrote about the phenomenon in the early 20th century.

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Weber believed that trusting was increasingly required by modern commodity exchange.

Weber said that regulation of commerce had to be through categories which expressed meanings and intention – and not a “mechanical jurisprudence” of rules.

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Vehicles for anti-formalism differ in different countries.

In the US, change in commercial law led by statute.

In Britain, Australia etc caselaw has been more significant.

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An example of US anti-formalism in commercial law:

Article 242 of the UCC – the multi-purpose “unconscionability” criterion for disallowing commercial contracts.

The age of unrestrained self-interest has passed.

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How the commercial law in non-US common law countries prohibits aspects of transactions which are morally objectionable.

e.g., estoppel doctrine require commercial actors to be consistent and not deceive others.

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e.g., the fiduciary relationship and maintaining the social value of trust.

How this is even efficient –

well-ordered commercial systems work better if clients trust attorneys, suppliers can trust distributors etc

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Conclusion

Is this the “reclusive inner morality of capitalism” – a “moral territory” where

• commercial actors are regularly acknowledged to be unequal.

• people regularly promise to act and do business in the interests of others?

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