STEP IN AND PAVE YOUR WAY TO A SUCCESSFUL LEGAL CAREER

VOL. 3 | ED. 2 June 9, 2015

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Managing Editor

Ioana Stupariu (LL.M in International Business Law, Central European University)

Assistant Managing Editor

Călin Mureşanu (4th year, Babeş-Bolyai University)

Senior Editors

Andrada Rusan (LLM in International Commercial Arbitration, University of Bucharest) • Alexandru Coraş (4th year, Babeş-Bolyai University) • Andreia-Gemma Moraru (4th year, Babeș-Bolyai University) • Oana Cristina Gligan (4th year, Babeş-Bolyai University) • Ralu-ca Alexandra Maxim (3rd year, Babeş-Bolyai University) • Radu Șomlea (3rd year, Babeş-Bolyai University)

Junior Editors

Alexandra Mureșan (3rd year, Babeş-Bolyai University) • Anamaria Pintea (3rd year, Babeş-Bolyai University) • Dan Moroşan (LL.M in International Law, Maastricht University) • Io-ana Bărăian (4th year, Babeş-Bolyai University) • Mădălina Perțe (4th year, Babeş-Bolyai University) • Mădălina Moldovan (3rd year, Babeş-Bolyai University) • Mircea Farcău (4th year, Babeş-Bolyai University) • Oana Iulia Irimia (3rd year, Nicolae Titulescu University in Bucharest) • Raluca Trîncă-Găvan (3rd year, Babeş-Bolyai University) • Ruxandra Popescu (4th year, University of Bucharest)

PR Coordinators

Adrian Condrașov (4th year, Nicolae Titulescu University in Bucharest) • Delia Cristiana Stamate (4th year, Ovidius University from Constanța) • Dora Maria Demble (3rd year, University of Vienna - Juridicum) • Paula Alexandra Ungureanu (3rd year, Alexandru Ioan Cuza University in Iași) • Stella Turnsek (5th year, University of Zagreb) Paula Ungureanu (3rd year, Alexandru Ioan Cuza University in Iași) • Oana Silea (4th year, Ștefan cel Mare University in Suceava)

Disclaimer: Given that Lawyr.it is a fully student-run magazine, nothing from its pages should be understood as legal advice of any kind. Any questions about legal assertions, conclusions, sources used or representations made in these pages will be re-directed to the person who made them. If you do want to get in touch with one of the authors, please write to us at editors@lawyr.it at any time.

This eighth issue stands for continuity. Despite all the changes it suffered and all the obstacles encountered, Lawyr.it has never ceased to strive for growth and progress. With every issue published, we tried to improve. We had to adapt. We needed to react to our colleagues’ feedback and respond to all types of challenges that occurred, from administrative (such as our website being hacked three times in a month not so long ago) to editorial (the never easy decision-making process when selecting the articles for publication). Every issue has offered something new: a new rubric, new partners and team members, fresh opportunities for law students, or simply a new design. Every issue has been special from at least one perspective. However, this issue is, for me, far more special than the others. This eighth issue closes an extremely important chapter in my life: it is my last one as a Managing Editor. Three years after founding the project, I can only hope that we managed to offer you, law students and editors, read-

ers, supporters and followers, a minimum guidance and support in becoming better in your future legal careers.

You will read in this issue twelve articles which the editorial team has selected for publication. In the Domestic section, you will notice that civil and commercial matters remain a central area of focus for law students, treating topics such as the abusive clauses in consumer contracts, or the institution of trust in Romania seen as a way to avoid insolvency. However, criminal law has not been neglected either: two other articles, about media coverage in preventive arrest proceedings, and the crime of omission in Romania exhibit the legal framework designed by the current legal provisions regulating these matters, pointing out potential problems which may arise.

The Reflections section approaches hot constitutional law topics such as whether the parliamentary immunity represents a threat to democracy, or why legislating with two-thirds majority may not be a desirable policy deci-sion, the authors comparing here three different legal experiences: France, Spain, and Hungary. This issue also contains the second part of the article ‘Beyond Tort Reform: Some Policy Alternatives to Fight Defensive Medi-cine’ written by our guest, Ary Ferreira da Cunha, which was introduced in our previous issue, in December.

The articles in the International section explore several topics focused mostly on the European Union framework and legislation. Challenging matters such as the leniency policy of the EU, the new EU Regulation on Inheritance Law, or the quest to find the right balance between protecting competition on the market and preserving con-sumer’s interests have been chosen by this issue’s authors as a point of analysis. Public international law remains as well a field preferred by law students, this issue offering a read about Iraq and the implementation of the right to liberty and security.

This issue’s Interview section features an exclusive interview with Elena Virginia Botezan, currently a judge at the Cluj Court of Appeal and former Chief Prosecutor at the National Anticorruption Department (NAD) Cluj. With regards to our most interactive rubric, Question of the Issue, this edition brings together both students and experienced lawyers, who present some of the obstacles and challenges they had to face during their law studies and legal career, whilst exposing the solutions found to overcome them.

The Devil’s Advocate section continues our regular series of debates with the arguments of two outstanding LLM students from the Central European University in Budapest, analysing whether the prevalence of the ‘piercing the corporate veil’ doctrine benefits limited liability corporations.

Seeing the results of the last four months of work compiled in the pages of this issue, I must confess that leaving the editorial team is far from easy. However, I look forward with optimism, and hope that Lawyr.it will grow big-ger and become better at serving you, law students in the CEE. We hope you will enjoy the read!

EDITOR'S NOTE

By Ioana Stupariu

VOL. 3 | ED. 2

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The warranty against apparent and latent defects in construction contracts (p. 10)

Media coverage impact in preventive arrest proceedings (p. 12)

Is the trust institution from the Romanian legislation a way to avoid the effects of the insolvency proce-dure? (p. 14)

The crime of omission under the Romanian Penal Code (p. 16)

Abusive clauses in the life cycle of a consumer contract (p. 18)

Loan Assignment: the subtleties behind a relatively new institution in Romanian legislation (p. 20)

IN THIS EDITION

VOL. 3 | ED. 2

5

Domestic Focus

Professional SpotlightInterview: Elena Virginia Botezan, Judge at Cluj Court of Appeal and former Chief Prosecutor at NAD Cluj (p. 52)

Reflections

Devil's AdvocateDoes the prevalence of the ‘piercing the corporate veil’ doctrine benefit limited liability companies? (p. 66)

BriefingOpportunities for law students: what's next (p. 6)

Some points against legislating with two-thirds majority (p. 26)

Parliamentary immunity: a threat to democracy? (p. 28)

Special: Beyond tort reform: some policy alternatives to fight defensive medicine. Part II (p. 30)

International FocusPrisoners’ dilemma – Some thoughts about the EU leniency policy (p. 38)

The implementation of the right to liberty and security in Iraq. Arbitrary arrest and the reasonable de-tention time-frame (p. 40)

The Regulation of the European Parliament and of the Council on Inheritance Law (p. 43)

The Price to Pay in Competition Law (p. 48)

Question of the IssueWhat is the biggest obstacle you have had to overcome during law school and how did you manage to do it? (p. 58)

BRIEFING

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BRIEFING

VOL. 3 | ED. 2

June

June 23: Deadline for applications for a Transgender Europe (TGEU) internship

Transgender Europe is offering a full time internship in Berlin, Germany. The interns will have various re-sponsibilities, like: supporting TGEU’s advocacy, pol-icy and campaigning activities, conducting research to support TGEU’s advocacy work, managing small projects, handling administrative and logistical tasks, cooperating with the TGEU team, taking over other tasks as required.

The applicants must be interested in advocacy work and EU law and must have fluency in English.

June 30: Deadline for applications for an In-ternship in the German Bundestag

The German Bundestag (The German Parliament) is searching for persons willing to participate in a paid internship by getting to know the German parliamen-tary system and political decision-making processes. The internship will take place from March, 1 to July 31, 2016.

The applicants must have an university degree, very good knowledge of German (level B2) and be under the age of 30.

July

July 20-26: UN Youth Romania Summer School, Bucharest

The UN Youth Summer School on Diplomacy is an educational programme addressed to students from Romania and their peers from all around the world.

This year’s Summer School on Diplomacy will take place in Bucharest, Romania with the general theme Ukraine: Beyond the Headlines.

August

August 4 – 7, 2015: EAPL’s Psychology and Law Conference, Nuremberg

The Psychology and Law Conference is organised by the European Association of Psychology and Law, with focus on forensic and criminological psychol-ogy. It will take place in Nuremberg, between August 4, 2015 and August 7, 2015. Later registration is avail-able until July 17, 2015, part-time research assistants and students (bachelor/masters/Ph.D.) being required a proof of their status.

September

September 3-5, 2015: EUROCRIM 2015, Porto

The European Society of Criminology, in partner-ship with the School of Criminology, Faculty of Law of the University of Porto, is hosting a new edition of EUROCRIM – the 15th Annual Conference of the ESC, in the second largest city of Portugal. The event will take place at the beginning of September 2015.

Early registrations can be done by June 15, 2015.

December

December 31, 2015: Deadline for applica-tions for an Internship at the UN Develop-ment Programme

The United Nations Development Programme is of-fering internships to students interested in gain-ing experience with the UN. The purpose of the in-ternship is to serve as a complement to the intern’s studies. The intern’s duties will include conducting research, writing documents, cataloguing informa-tion. The selected intern must speak fluent English, while speaking Russian and Belarusian are an asset.

This internship is open to students who have com-pleted at least four years of full-time studies.

On-going opportunities

Internships at the International Court of Justice

Students and post-graduates interested in broaden-ing their knowledge and improving their professional

Opportunities for law students: what's next

8

skills can apply for internships within the Interna-tional Court of Justice. The internships last for one to three months and are done under the supervision of Registry officials. At the end of the internship, the par-ticipants are given a certificate which describes and evaluates the activities performed during the intern-ship.

Internship at the ICC Sales Administration

The Sales Administration unit offers the opportunity to students willing to complement their studies with a contact with the professional world to acquire a practical experience in an international organisation. As Sales Administration Interns, students will have the opportunity to work across several departments (Training and Conferences, Publications, and the In-stitute of World Business Law).

The applicants must undertake the application pro-cess two or three months in advance.

Internships at the Organisation for Secu-rity and Cooperation in Europe

The OSCE is offering unpaid internships from one to six months to young people interested in working in the organisation’s sphere of interest. Interns can work in one of their offices in Viena, Warsaw, Prague or the Hague, as well as with the OSCE’s missions in Alba-nia, Armenia, Bosnia & Herzegovina, Croatia, Ko-sovo, Serbia, Montenegro, Ukraine. Candidates must be in their last year of studies, or fresh graduates, and must speak English fluently. The age limit is 30.

Internships at the UNHCR

Internships at UNHCR are on an on-going basis and are offered throughout the year, depending on the availability of meaningful assignments and the needs and capacity of units/offices to receive and supervise interns. There is no deadline for sending in your ap-plication form. UNHCR does not provide any finan-cial support for interns.

For the internship to be worthwhile and effective, they will normally last no less than two months and no more than six months.

By Alexandra Mureșan

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VOL. 2 | ED. 3VOL. 3 | ED. 2

More information about these opportunities and many others can be found on our website on the

Opportunities section

179

DOMESTICFOCUS

One of the novelties intro-duced by the new Romanian Civil Code is the express reg-ulation of Construction Con-tracts. Classified by the old Civil Code as a subspecies of lease contracts, legal theorists as well as case law have recog-nised its individuality. There-fore, it is not a surprise that the new Code dedicates an entire chapter to this contract

(Chapter VI, Title IX, Book Five). There are, however, some surprising aspects regarding the new rules. I will focus my analysis on the apparent and the latent defects, in the attempt to corroborate them with the general provisions in the matter of prescription and the special provisions referring to the warranty for la-tent defects in construction contracts, as they appear in Law 10/1995, in the search for possible solutions.

Firstly, in what concerns the apparent defects, the pro-visions of the Code seem to be flawless, at least at a first glance over Article 1862. The article assumes that the same rules applicable in the matter of sales apply to constructions as well (Article 1690, para. 3), in the sense that the client’s accept to receive the building without reserves is the equivalent to the exoneration of the contractor and the forfeiture of the client’s right to invoke the apparent defects. However, at a more de-tailed look, Articles 1880 and 2530 show a lack of con-sistency in matters of legislating. Thus, even though Article 1862 refers to the forfeiture of the client’s right to invoke the defects in the case of an unreserved ac-ceptance, the above-mentioned articles lead to a dif-ferent solution. Specifically, this might be interpreted as the prescription of the right to legal action resulting from the defect, which starts at the date of the final re-ception. Now, how exactly could a non-existent right

become prescribed (Reghini, 2013)? In my opinion, a correlation between these articles cannot be made without underlining the difference between the recep-tion of the completion of work and the final reception.

The difference between the two notions is made in Annex 5 of Government Decision 273/1994, which, seemingly, remains applicable in the context of the new Code (Baias, 2012). According to the provisions, the reception is defined as the act by which the inves-tor certifies the completion of the construction and the related facilities, in conformity with the contract provisions and the official requirements, further de-claring that he accepts the works performed and that these can be used. More precisely, the reception is split into two distinct phases: the reception at the comple-tion of individual parts of the construction, and the final reception (made at the expiration date of the defects liability period, which covers the period be-ginning with the aforementioned reception date and the completion of work. The period is established by contractual means and it involves the developer’s obli-gation to remedy all the defects which result from the failure to observe the contract provisions or the tech-nical regulations. As noticeable from the definition, invoking the apparent defects subsequently to the un-reserved reception is a nonsense proposition, since it constitutes the very mechanism by which certain ap-parent defects should be invoked (Philippe, 2009). A contrary interpretation would leave the very notion of apparent defects void of meaning.

I believe that the only reasonable solution is to of-fer a different interpretation to these provisions. As showed by legal theorists with regard to Law 8/1977 (Beleiu, 2008), repealed by Law 10/1995, a distinction between the reception at the completion of work and the final reception should be made. Consequently, the apparent defects must surface during the liability pe-riod of the guarantee offered by the contractor. To be

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The warranty against apparent and latent defects in construction contracts

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more specific, if this happens between the two recep-tions - the apparent defects have to be invoked the lat-est at the final reception. Otherwise, the unreserved reception will lead to the forfeiture of the client’s right to hold the contractor liable. Within this perspective, I believe that the interpretation of the legal provisions referring to the prescription of the right to legal action (Articles 1880 and 2530) must be done in the sense that the prescription will start at the final reception (this is an objective point in time, as are the terms of one year and three years in the matter of latent defects, according to Article 2531). This implies that the re-ception did not take place because of the contractor’s default (the lack of interest from the client is equiva-lent to an unreserved reception, according to Article 1862 para. 2). Secondly, the debates on the starting point of the pre-scription of legal action for latent defects, which have caused quite a stir in the context of the old Civil Code, seem to have been silenced by Article 2531 of the new Civil Code. This article provides that the prescription period starts, in case of a construction, at the end of a period of three years from the date of the final recep-tion. However, there is an exception to this rule: if the defect was discovered before, the discovery date be-comes the starting point of the prescription. Simulta-neously, paragraph 4 of the same article mentions that this term is a warranty one in which the defect has to appear. Although paragraph 5 specifies that the arti-cle does not influence the special warranty periods, a problem arises if we attempt to corroborate this article with Article 29 of Law 10/1995.

Although it offered an interpretation to Law 8/1977, which remained valid in regard to Article 29 of Law 10/1995, legal scholars have never reached to an agreement with regard to the starting point of the ten year period provided by this article (the article pro-vides that the period starts at the ‘reception of work’). Some authors believe that the starting point should be the date of reception of the completion of work, while others have expressed the view that it should start with the final reception (Beleiu, 2008). By interpreting the last part of Article 30 and Article 31 of the Govern-ment Decision 273/1994, it would seem that this ten year warranty starts at the moment of the completion

of work.

In this context, the correlation of the latter article with Article 2531 of the Civil Code proves problematic, since the latter provides that the warranty for latent defects starts at the final reception. Although the most obvious solution would be that Article 29 is a special regulation, and therefore we are not interested in the new general regulation (Reghini, 2008), the implied repeal of a special regulation can only be done by an-other special regulation).

For example, in the case in which a warranty period of ten year is attached to a construction which does not fall under the regime prescribed by Law 10/1995, at the end of which the final reception is made, the war-ranty for latent defects will run from the moment of the final reception. That means a total number of thir-teen years, as the warranty period covers both appar-ent and latent defects (considering the lack of other stipulations, as shown in the case of Article 1878, I consider that the definitions provided by Annex 5 to the Government Decision 273/1994 remain applica-ble).

Therefore, following such a hypothesis, a construc-tion which was previously not deemed as sufficiently important by the law makers so as to enjoy the provi-sions of Article 29 of Law 10/1995 will enjoy an ex-tended warranty for latent defects than a construction under the regime of Law 10/1995. Such an interpreta-tion would undoubtedly leave the special regulation inapplicable, as the reason of its existence is to offer an extended warranty period of hidden defects, given the importance of these constructions and the dan-gers they may pose in the case of defects.

To conclude, considering all these arguments, I be-lieve that the warranty for latent defects will also run from the final reception in what concerns the works performed under Law 10/1995. This is because the in-tention of the law makers must be interpreted in the context of the new Civil Code, as a progressive inter-pretation.

By Vlad Druța

VOL. 3 | ED. 2

The aim of our study is to bring to surface whether or not excessive publicity of an of-fence up until, or during preventive arrest proceedings breaches the de-fendants’ right to the benefit of the doubt, to a fair tri-al, and maybe the

most important matter in question, does public opinion have any bearing on a judge’s ruling?

To begin with, we should acknowledge the fact that the justice system is under constant scruti-ny; thus, in order to maintain the transparency of the proceedings, we often encounter statements given by authorities to the media during the trial or more so, even before it begins, while the al-leged culprit is under preventive arrest or await-ing a decision in a preventive arrest hearing. This gives the citizens the ‘power’ to bring to trial and convict a man in the public eye. Whether or not he will be found guilty by the judge will not be of any importance to them anymore, since they were left to draw they own conclusions via infor-mation presented to them by biased media con-glomerates.

Since the media scrutiny usually begins at the moment of the crime, more precisely, at the mo-ment of its discovery by the media, we shall di-rect our attention towards how this impacts the preventive arrest proceedings. According to the Romanian Criminal Procedural Code, preven-tive arrest measures could be taken if the culprit had committed a crime that poses real threat to public order. Thus, we can state that the judge must keep a balance between public opinion and ensuring that he makes use of the law in a proper manner, which means that the rights of the de-fendant must be respected. Whether or not the culprit is a high profile person should be of no to little relevance to the judge and the prosecutor; even more so, if the media is covering the case, the prosecutor should refrain himself from mak-ing statements that he could not back with evi-

dence, or make statements that could be viewed as slanderous, because it could lead to a breach of the defendants’ rights.

For instance, The European Court of Human Rights (ECtHR) convicted Romania in the case Păvălache v. România, for breaching Article 6 para. 2 of The European Convention of Human Rights (ECHR), concerning the benefit of the doubt. The prosecutor started making statements to the media, these statements got picked up by others, and so a huge media campaign against the defendant emerged. This excessive publicity was seen by the court as a transgression because slan-derous accusations were made, accusations that breeched his right to the benefit of the doubt, be-cause he was already portrayed as guilty even be-fore the ruling. Even more, in the interpretation of ECtHR concerning Article 10, those statements are known as factual statements, which usually must be supported by evidence; bearing in mind that some of those were only vile assumptions or those words were said for the mere enjoyment of the public, we are inclined to say that due to this, that behaviour should have been sanctioned. We believe that it is the state’s job to protect even the culprit from his rights being harmed.

Another instance when the information dis-closed to the public can shape the justice system’s perspective is in the cases where the prosecutor claims there is no doubt that a person will be put behind bars. This type of statements are made in order to increase the public faith in the justice system, and when the ruling comes and someone is freed or receives a mild sentence, we see the prosecutor stating in the media that the judge did not do his job, because he gave a light sentence or dismissed the case, and by doing so belittles the belief in the justice system, and also forwards the idea that the justice is corrupt because they let a felon free (Samoilă, Cioncă v. Romania).

Keeping Article 10 ECHR in mind, value judg-ments are allowed as long as they do not harm others, or are denigrating, but most important they need not be backed up by evidence. Now, given the situation presented above we feel that under the provisions of the Article 10 we can speak of a clear harmful effect of those value judgments, because it puts pressure on the judge

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Media coverage impact in preventive arrest proceedings

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to give stronger sentences in order to maintain the citizens’ faith in the system, at the expense of the rights of the defendant.

Moreover, because the prosecutors of high profile cases have the tendency to bring the media with them when they are doing a raid, or when they are searching the suspect, they present him as al-ready being convicted in the eye of the public, so he no longer receives the benefit of the doubt, which is a clear violation of article 6.2. ECHR (Chiriţă, 2008, p. 360).

Confronted with that picture, the only question that seems natural is: since when does the prose-cutor have the authority to give a ruling and pub-licly say that a certain person is guilty, if he has not even been put to trial, and is only in preven-tive arrest? As we can see, the media clearly push-es the justice system to work improperly, and we become the witnesses of a system where the only word that carries weight is the one of the pros-ecutor. In the light of the interpretation set by the claim Letellier, we state that media coverage cases may lead to an infringement of the right to a fair trial. This is happening because the media repeatedly presents the case to the public being trialed in a manner where the facts are different from the truth.

Moreover, according to most recent Eurostat sur-veys, the most reliable sources of information for the citizens, in Romania, are: television (53%), newspapers (41%) and internet (32%). And from the users questioned, only 28% of those who use the internet feel that they can have faith in the websites of public institutions. The vast major-ity though, trusts the news brought to them by media sources that come from the private sec-tor. The private sector media, however, lacks the guarantees of impartiality, as described by Arti-cle 6.1 ECHR. Moreover, it lacks any liability for the mishaps shown above.

If we were to make a fair comparison between the news painted in the media concerning the same case, we can say that the statements issued by public institutions, use a far more reserved and specialised language, whereas the media uses catchy phrases as: ‘shocking discoveries’, which are often simple value judgments issued by re-porters.

We keep in mind that there were many situations where the assumptions we spoke of were vicious enough to make the ECHR convict states for breaching Article 6. para. 2 ECHR, concerning the benefit of the doubt (Allent de Ribemont v.

France, Vitan v. Romania).

InquirieWs are even more problematic when these concern complex criminal cases, which make the disclosing of the entire case unavailable to the public. This leads to misinformed report-ers, who cannot get a clear picture of the case, leading to the public not being able to acknowl-edge the entire circumstances under which the preventive arrest measure was taken. And yet, if during the measure of preventive arrest, the of-fender has clear rights concerning his defense, in a public trial, due to excessive media coverage he no longer has any reliable guarantees for defend-ing himself in the public eye, neither from the media producers, nor from the state.

Under this situation, we believe that the doubts concerning the fairness of the feeling of public disapproval created by mass media are under-standable. Moreover, such an opinion can serve as a rWeasonable and objective indicator for which the fair resolution could be based on, bearing in mind that our society still keeps in mind some old mishaps of the totalitarian regime, where the following preconceived notion was born: that justice could be served only by implementing drastic imprisonment measures, and when they lack, justice wasn’t served (Chiriţă, 2008, p. 359).

Of course, we do not doubt the necessity of in-stitutional transparency nor the right to access public information by the citizens, guaranteed by Article 31 of the Romanian Constitution. What we doubt, in fact, is the harmful result that ex-cessive publicity of such trials can cause to the rights of liberty and security or to the right to a fair trial of the charged person. This is especially relevant when publicity comes with the purpose to sell media, which we have to admit, is the main goal of the mass-media sector.

All this considered, and given the fact that the interest in preventive arrest measures for the service of the public is being put into balance with the interest of media conglomerates to sell ‘shocking’ news to the public, we feel that it is obvious that the one which should be held into higher esteem by the public should be the former. And for this reason, we feel that it is understand-able that sometimes the public faith in the jus-tice system should be a lower priority, in order to consolidate the fundaments of a fair trial: the right to defense, the benefit of the doubt, and the impartiality of the justice system.

By Mircea Grozavu & Denisa-Nina Şibneschi

VOL. 3 | ED. 2

Legal transplants from the Anglo-Saxon common law to continental law were made possible and became a ne-cessity due to the constant globalisation of markets and to the need to straighten the Single European Market. The Hague Convention on the Law Applicable to Trusts and on their Recognition(1985) came into force in 1992 for

twelve states, four of which belonging to the continen-tal law system: Italy, France, Switzerland, and Luxem-bourg.

The Anglo-Saxon and American institution of Trust, combined with the French Civil Code (Articles 2011 – 2030) was also introduced in the Romanian legisla-tion, namely in the 2009 Civil Code, under the name of ‘fiducie’ and is used in the relationship of both persons and the business environment alike. Its use is very rare due to its complexity and legal difficul-ties that involve credit institutions, investments or administration of investments societies, financial ser-vices, insurance societies, lawyers or public notaries. Among these difficulties they also have the obligation to register all the documents to the fiscal institution, to the local administration and to the Land register, depending of course on the transferred rights, goods or obligations.

The application of such an instrument raised numer-ous debates, such as various scenarios in which it could be applied to surpass insolvency procedures.

Fiduciary obligation in Law 51/1995 and in the Civ-il Code

Article 3 from Law 51/1995 as modified by Law

71/2011 stipulated among the activities of the fiduci-ary lawyer the receiving in deposit amounts of money or goods, in the name and in another party’s interests (client’s interests), goods and money obtained as a re-sult of enforcement titles, other succession or liqui-dation procedures, and also that of exploiting them, on behalf of the client or by managing the funds and values where they were placed.

The original singleness patrimony theory promoted by the previous Civil Code was firstly modified by the Government Emergency Ordinance (G.E.O) no. 44/2008 that legally established the notion of ‘the spe-cial purpose patrimony’, which allows the temporary transfer of property from the owner to the trustee.

According to Article 773 of the New Civil Code (2011), the ‘fiducia’ is ‘the legal operation whereby one or more grantors transfer(s) various patrimonial rights or a group of such patrimonial rights, present or future, to one or more trustees, who administer those with a given purpose, to the benefit of one or more beneficiaries (they can also be identical with the grantors). These rights constitute an autonomous pat-rimony, separate from other rights and obligations in the fiduciary’s own patrimony.

The instrument of fiduciary contracts as counter-measure for insolvency situations

The ‘fiducia’ is a very useful asset management tool, for transfers of property from one person to another or for securing an obligation.

G.E.O no. 44/2008 stipulates in Article 2 that the sig-nificance of special purpose patrimony as a distinct fraction, separate from the general pledge of his/their personal lenders, is that this fraction having the ob-vious advantage of protecting the commercial under-taking of the personal lenders, who will not have the possibility to claim and pursuit the assets and debts

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Is the trust institution from the Romanian legislation a way to avoid the effects of the insolvency procedure?

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assigned by their debtor for carrying out the commer-cial activity.

The fiduciary contract terminates in several ways ac-cording to the Civil Code (2011). Article 790 stipu-lates that by reaching a certain term established by the parties or by reaching the fixed term of thirty three years established by the law, the grantor can denounce it unilaterally if the trustee did not accept the offer; if all trustees choose to give up the contract and it was not stipulated in the contract that it would continue and how in this situation; or when the process of in-solvency started against the trustee or, more strangely, when the effects of reorganising the legal person start. We can conclude that the insolvency of the grantor of the beneficiary does not represent a reason for end-ing this kind of contract. The function of the trustee, a temporary owner in its relationship with third par-ties during the contract, is supposed to be obliged to pay all sums and obligations to the third parties, and, finally, after reaching the term of the contract, to transfer all rights, goods and amounts of money to the grantor or beneficiary.

According to Article 785 of the Civil Code (2011), the opening of the insolvency procedure against the trustee does not influence the fiduciary patrimony as the goods or assets can be executed by the creditors of the grantor only if their rights and publicity formali-ties are prior to the contract. According to Article 786, only a definitive sentence given by a court can repeal the contract and offer to the creditors the possibility to fulfil their rights. The entitled creditors can follow only the goods for which they have demonstrated their rights, except in the cases in which the contract stipulated that the grantor assumed the obligation to offer as guarantee its entire passive patrimony.

In conclusion, there are many possibilities for both the grantor and the beneficiary of a trust contract to restrain the rights on the assets and goods of their creditors, especially in the tensioned situations of an insolvency procedure if the stipulations from the con-tract are not very clear and restrictive regarding the obligation of the grantor to guarantee its good faith with passive and active parts of their patrimony.

By Oana Iulia Irimia

VOL. 3 | ED. 2

Did you know that there are over 20 articles published in this ru-bric? Read now the articles from

Domestic Focus

The lines bellow present a short review over the crime of omission stipulated in Article 17 of the Romanian Penal Code. The crime of omission is characterized by a failure to act from a person who does not fulfil an obliga-tion imposed on him by law. It is divided into proper omis-sion and improper omission, the latter being also known as

commission by omission.

Under the 1968 Penal Code, there was no provision to regulate an improper omission: only the proper ones were recognized by Article 262, 263, and 315, although the legal doctrine and the judicial practice admitted their existence. As noted in the doctrine a circumstance in which a failure to act attracts crimi-nal liability, because there is no legal text to condemn it, is alarmingly close to the analogy against the de-fendant (Streteanu, 2008, p. 397) which is forbidden. Moreover, another author stated that the crime de-scribed in Article 333 of the 1968 Romanian Penal Code, named the infringement of an order, could be committed either by action or inaction, so both situ-ations would have the same outcome under criminal law. In this case, due to the fact that the failure to act is not explicitly mentioned as a way of committing the crime, the principle of legality of criminal offence is not respected (Basarab, 1992, p. 98). As a conclusion, the principle mentioned required a legal base in order to consider an omission a crime, so Article 17 of the 2014 Romanian Penal Code came to satisfy this ne-cessity.

As far as the proper omission is concerned, the failure to act is specifically mentioned in the text of incrimi-nation as a way of committing the crime (Streteanu, Niţu, 2014, p. 284). The second category, the improp-er omission, stipulated in Article 17, is characterised by the fact that the author of the crime does not take

all the required measures in order to prevent a result which, due to a particular situation, he or she had the obligation to prevent (Streteanu, Niţu, 2014, p. 285). The classic example is that of the mother who no long-er feeds her child, leading to its death. Also, if a nurse notices that a patient recently operated on develops difficulty in breathing, but neglects to help, and the patient dies because of lack of medical care, he or she is guilty of a crime committed by improper omission. However, in order to incur criminal liability for this type of crime, courts have to conclude not only that the individual could have averted the outcome, but also that the law imposed a special obligation on him or her to do so, as required by Article 17. This special obligation is necessary due to the fact that Article 203 of the Romanian Penal Code incriminates the failure to help a person in need or in danger, and provides a punishment in case of failure to act. Moreover, be-cause the Romanian Penal Code condemns only a se-ries of actions that are detrimental to important social values, one cannot infer that all the citizens have the obligation of preventing those actions to take place (Streteanu, Niţu, 2014, p. 286).

Article 17 exhaustively presents the situations in which a person might have the obligation of protect-ing a social value that belongs to another person, who is in a temporary incapacity of protecting it himself or herself. In other words, Article 17 has introduced the legal position of guarantor, on which the crime com-mitted by improper omission is based. It can either derive from the law, a contract, or a previous action or inaction. In any other circumstance, even if the deed might be considered immoral, it will not be consid-ered a criminal act.

The position of guarantor has two main applications: it either protects certain social values or controls a source of danger. In the first situation, the theory of the guarantor is based on the existence of a rela-tionship of dependence between the one who must act and the owner of the social value to be protected, which forces the former to act when it is impossible for the latter to protect himself or herself (Streteanu,

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Niţu, 2014). Therefore, it is based either on a familial connection, such as the relationship between parents and children or between spouses, or on a contractual relationship. In the first case, if, due to an infirmity, a parent is looked after by his or her child, but the child does not fulfil this duty properly, leading to the par-ent’s death, the child is in the position of a guarantor, and will be guilty of murder by omission. In the sec-ond situation, it can be based on any type of contract. An example is that of a doctor who, according to his labour contract, is responsible for the life and safety of his or her patients.

If the guarantor has the obligation of protecting from a source of danger, one of the next three situations is applicable: he created the peril by a previous action or inaction, he is liable for the action of certain people under his care, or it is mandatory for him to supervise an animal or object which may produce an injury. In the first situation mentioned, due to a previous action which can lead to injuries punished by the criminal law, Article 17 makes it compulsory for the author to take all the reasonable steps in order to prevent the damage. In this case, a distinction between legal and illegal actions must be made.

A former illicit action always entails the position of guarantor (Streteanu, Niţu, 2014, p. 289). For instance, if an intoxicated person drives a car and provokes a traffic accident in which the driver of another car is hurt, that person is in the situation of a guarantor. As a result, if the guilty driver does not take any meas-ures to help the injured one and it is obvious that he or she will die due to lack of medical care, the former will be held responsible for the death of the latter, pre-cisely because of his or her failure to act. The intoxi-cated driver will be held responsible for aggravated murder, and not involuntary manslaughter, because the form of culpability is established at the moment of the omission, not the moment of the accident. In this example, though the accident is characterized by guilt, at the moment of inaction the author, by seeing the condition of the victim and failing to act, at least accepts that the person might die.

An interesting situation is that of a culpable inaction when the author, although anticipating that damage might occur, due to some objective circumstances mistakenly judged as being sufficient, considers that

the injury will not happen (Pascu et al., 2014, p. 128). For example, if a driver hits a pedestrian and, being a doctor, he or she considers that no injury was pro-duced because the pedestrian is not bleeding or does not report any pain, but the victim later dies because of internal bleeding, the doctor is responsible for his or her failure to protect the pedestrian’s life. This omission belongs to those described by Article 17 due to the fact that his or her previous action, the accident, made it compulsory for him or her to try to save the endangered life.

As far as the supervision of an animal or object is con-cerned, if an owner has an aggressive dog, he or she must make sure that the animal does not bite anyone on the streets, making it mandatory to use a leash. Also, if an owner digs a foundation on his or her prop-erty, he or she must mark the excavation in order to prevent a possible injury of a person who might fall in it. If the owner does not do this, he or she will be held responsible for the injuries of the victim due to the failure to act in order to prevent it.

Liability for the actions of third parties includes situa-tions where third parties are under the authority of the guarantor. Due to special circumstances, those under the authority of a guarantor are not legally responsible for their actions. Instead, those responsible for their care will be legally liable. In this particular situation, it is not the guarantor that provokes the danger, but a third person under his or her care. For example, if the nurse at the psychiatric ward observes a patient hitting another patient with a blunt object, causing wounds, and does nothing to prevent it, he or she is in the position of a guarantor and will have to legally answer for his or her inaction, and not for the action of the mentally ill.

In any of the situations presented above, the theory of the position of guarantor finds its place, but, in order for the author to legally answer for an improper omis-sion, all the conditions mentioned in Article 15 of the Romanian Penal Code for the existence of a crime must be met.

By Diana Lucaciu

This article was awarded the 1st prize at an essay competition organized by ELSA Cluj-Napoca.

VOL. 3 | ED. 2

Given that the problem of abusive clauses in loan contracts is currently at the forefront of public debate in Romania, as well as in other European States, I believe it is a subject of interest to ana-lyse the conduct of the banks in Romania who have abusive clauses.

My analisys is based on the decisions of the European Court of Justice in this matter, and the interpretation of the European rules in this situation. Consumer protection is integrated among the principles that de-fine the default action of the European Union (Article 169, Treaty on the Functioning of the European Un-ion - TFEU) and the subsidiarity principle, so that a minimal harmonization of the legal system, providing a high level of protection for consumers will reduce the diferences between all European legal systems.

Within the European context, the legislator (by means of Directive 2011/83/UE, Directive 2008/48/CE and Directive 93/13/CEE) wanted to harmonize at the Eu-ropean Union level all national laws establishing di-rect and indirect criteria for determining the situation in which consumer rights are considered to have been violated (Howells, Reich, 2009). This goal was desired to be achieved by increasing transparency and giving the consumers a set of clear and understandable pre-contractual information, in a standardised form used by all the financial institutions.

The most important regulations in this domain are Directive 1993/13/CEE on uunfair terms in consumer contracts, Directive 2008/48/CEE on loan agreements for consumers, and Directive 2009/22/CE on injunc-tions for the protection of consumers’ interests. The

European pieces of legislation were transposed into Romanian law by the Government Emergency Ordi-nance 50/2010 on loan agreements with consumers. The most recent piece of legislation that has not been yet implemented is Directive 2014/17/EU on loan agreements for consumers relating to residential im-movable property.

For instance, the European Directive 1993/13/CEE, whose provisions were transposed into Romanian leg-islation by Law 193/2000, defines abusive clauses as being those contractual clauses which have not been negotiated directly with the consumer, and will be considered abusive if by themselves or together with other provisions generate disadvantage for the con-sumers and, in a manner contrary to good faith, a sig-nificant imbalance between the rights and obligations of the parties (Goicovici, 2007, p. 71). Based on this definition, I observe that the most frequent problems in loan agreements refer to unilateral increase in inter-est rates (Civil Sentence no. 12470, October 28, 2011), risk and account administration fees (Civil Sentence no. 12014, October 14, 2011), and clauses providing for the extension of mortgage in favour of the bank.

Court actions are usually individual actions, but there have also recently appeared class actions, which are considered questionable by the courts in terms of procedural guarantees. The issue is raised in terms of evidence. In class actions, the court usually takes into account documents (loan agreements), while in indi-vidual actions the courts also proceed to direct hear-ing of the claimant. This is very important because it offers the court the possibility to correctly assess the facts.

The biggest problem for the consumers is that the bank has the possibility to appreciate discretionarily when financial imbalance occurs in the market. The consequence is the modification of the contract terms

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Abusive clauses in the life cycle of a consumer contract

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without any real negotiation between the parties. Fur-thermore, if the consumers do not agree with these terms, the banks notify them to pay back in advance the money (ECJ, Kušionová v. SMART Capital a.s, 2014) within 30 days. Analysing the conduct of the banks in Romania, parting from the decisions which I mentioned, it seems that they try to convince the con-sumers to waive their claims by offering a reduction of interests form 4-5% to 10-12%. This practice is seen as a poisoned apple because the banks may increase again their interest rates.

Romanian courts (Civil Sentence no. 966, 2013, Târgu Mureș Courthouse, Civil Sentence no. 11608, 2010, Bihor Tribunal Civil, Sentence no. 741, 2013, Cluj Court of Appeal) deem abusive the clauses which offer the financial institutions the power to modify the interest rate (Civil Sentence no. 230, 2014 Galati Courthouse) and clauses that include set up fees and risk management fees. In a recent ECJ decision, Kasler v. OTP Bank Jelzalogbank Zrt, 2013, which refers to a loan contract in Swiss francs, the Court ordered the ’freezing’ of the exchange rate at a historical rate.

The Court of Justice of the European Union appreci-ates that when a consumer contract is concluded, the consumers must be able to assess the economic con-sequences in the loan contracts so that the national court can bowdlerise the abusive clause and restore the order. The national and European legislator want-ed in certain cases to alleviate the pacta sunt servanda principle (i.e. agreements must be kept), and give the possibility to the national courts to compel the banks to either modify or invalidate the clauses if they are abusive (ECJ, Oceane Editorial SA v. Rocio Murciano Quintero, 2000).

On the other hand, judgments of the ECJ are based on the idea that the consumers are in a position of inequality in relation to financial institutions when it comes to power of negotiation and awareness. This situation leads to concluding the agreement and ac-cepting pre-drafted terms established by banks alone (ECJ, Krajský súd v Prešove – Slovacia, 2010). The German Supreme Court surprisingly stated that a

sign of unfairness in a standard clause consists in the ability of the clause to be returned in favor of who re-quired it. In Croatia, for example, the national courts decided that the banks have to transform Swiss francs mortgage loans in national currency.

What do banks plead in their defence?

1. That the court is not allowed to modify the price of the product, an essential element of the contract that was accepted by the consumer.2. That the consumer signed the contract, so they have assumed all the clauses and terms of the contract.

Nevertheless, the national courts decisions that took shape lately tend to protect consumers just like we see in ECJ decisions (Pereničová și Perenič, 2010), of-fering a high degree of protection, emphasising that these unfair terms are not binding on the consumers because those clauses are contrary to good faith and cause imbalance between the rights and obligations of the parties.

To draw a conclusion, in my opinion, these abusive clauses in loan agreements must be eliminated even in cases where the consumers have not denounced them yet. The economic imbalance between consum-ers and banks is obvious and the lack of predictability of consumers is seriously affected. The financial insti-tutions’ second argument does not hold because every time when a contract has an abusive clause, it remains without effect, the national legislation allowing courts to declare the nullity of that clause. Furthermore, in contracts of adhesion, the consumers have no option but to adhere to the contract, negotiation being im-possible. So, I believe it is necessary to eliminate all the abusive clauses and ensure predictability of the contracts if we want to protect the consumers.

By Ioana Rațiu

VOL. 3 | ED. 2

This article will emphasise the differences and the simi-larities between the assign-ment of a loan agreement secured by a mortgage and the assignment of the enti-tlements that result from the same kind of contract, in the context of Romanian civil legislation. This comparative presentation aims to help any student or graduate that in-tends to practice law.

First of all, an assignment is the transfer of a right, interest, or title, or the instrument of transfer (Pop, 2012). In order to be valid, the assignment of a loan agreement secured by a mortgage must meet the gen-eral requirements of any legal contract. In general, the mere agreement of the parties may validly conclude a loan contract assignment if benefits have not been fully executed and the other party consents. The par-ties involved in an assignment are the transferor (the lender under the loan agreement) and the assignee. The assigned debtor is the original borrower. He is not part of the contract, so certain formalities must be met for the assignment to be effective. The assigned debtor’s consent is necessary and required, even if he is not part in the assignment (Pop, 2012). For ex-ample, assignments of loans occur quite frequently between bank units. In general, the transferor bank-ing unit needs liquidity and, therefore, gives the loan agreement to another bank. If a bank suffers from lack of liquidity, it might lose her creditworthiness.

Assignment of contract is especially found in more recent codes, for example, art. 1406-1410 New Ital-ian Civil Code admits the assignment of the contract, art. 424-427 New Portuguese Civil Code, admits the assignment of a contractual position and art. 6159 Dutch Civil Code admits the assignment of a contract. The Romanian Legislator gave in to the ubiquitous so-lution in comparative law and regulated, in the end, the assignment of the contract. In the new regulation,

the contractor’s given consent plays a key role in the structure of this operation. The actual regulations proved that the Romanian legislator focused on the idea of substituting the contractor rather than the en-tire contractual position, but the effects are similar to the comparative law.

If the assignment is free of charge, all legal require-ments related to a donation contract will apply. In the case of bailment, which is defined as the placing of property in the possesion of another, in order for the assignment to be enforceable to the assigned debtor and any interested third parties, certain requirements must be met (Pop, 2012). The debtor must accept the assignment and there must be a written notification of the assignment, as well as the inclusion of the as-signment in an electronic archive or the land registry, and a request for summons. Regarding an assignment free of charge, an interesting decision was the Civil Decision nr. 523/COM/03.07.2008. In this case, the existence of the fraudulent act which was detriment to the creditors has been appreciated to be made by the assignment free of charge clinched by the com-pany’s administrator to his daughter. This was a situ-ation of fraud against the company’s creditors whose rights have been affected, in the sense that the chances of meeting their requirements lowered.

The assignment of rights that stem from a loan agree-ment secured by mortgages can be concluded, in principle, by the mere agreement of the parties. If the transfer is free of charge, then it must be concluded in authentic form. Unlike the previous case, legal re-quirements must be fulfilled for the assignment to be enforceable against the debtor (borrower), but his consent is not necessary. In this case there has not been a transfer of the entire loan contract from one side to another, but only the rights which stem from the contract, while the obligations remain to the origi-nal lender. On the other hand, in the case of a transfer of the rights arising from a loan, transmission occurs only for these certain aspects of the contract. A situa-tion in which this legal operation can be useful would be when the assignee wants to assume a lower number

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Loan Assignment: the subtleties behind a relatively new institution in Romanian legislation

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of risks, thus the obligations that arise from the origi-nal contract would remain with the transferor. This might also occur when the assignee operates in a dis-tant geographic area, where undertaking the obliga-tions that stem from a contract might be problematic or simply not lucrative.

The main effect of the assignment is the transfer of the contractual position existing in the loan agreement, from the transferor’s patrimony to the transferee’s. The loan is transmitted as it existed in the transfer-or’s patrimony, along with all the rights that were in connection with the claim, all warranty rights, and all its accessories. The assignment of the contract oc-curs only if the benefits have not yet been fully ex-ecuted. The assignment takes effect at the moment it was signed, after obtaining the acceptance of the bor-rower (Pop, 2012). If the possibility of concluding an assignment was included in the initial contract, the ef-fects happen at the time the change is communicated, along with the real estate mortgage that guarantees it. In Romania’s judicial practice, there is another situa-tion in which the existence of an assignment can be observed. The Court’s validation of a garnishment is, from the point of view of the substantial law, a forced assignment. This should not be ignored, as in contem-porary society garnishments play an important role, being used more and more frequently in the relation-ships between participants in legal operations due to the advantages these proceedings present.

It is very important that the transferor provides the transferee the document confirming the loan agree-ment and any other written evidence of the claim. There is also a transfer of the transferor’s obligations in connection with the loan agreement. In the case of bailment, the transferee is required to repay the bor-rower advanced contingencies (incidental expenses) to preserve this asset; he is liable to the borrower for hidden defects of which he was aware when they signed the contract and which were not disclosed to the borrower. I personally believe that the guarantee for hidden defects should be applied to the transferee only to the extent that he/she knew, both of their exist-ence and of the transferor’s failure to disclose them. If, at the time of the assignment, the hidden defects did not cause any injury and the transferee had learned of their existence and of the disclosure failure, he will be liable for the damages incurred to the borrower. However, when the damage was produced before the assignment, but the borrower made his claims against the transferee, then he could defend himself by invok-ing the transferor’s fault (Pop, 2012). The lender of a

loan with interest has the right to obtain a benefit as-set from the borrower which is called remunerative interest (Pop, 2012).

When the assignment is onerous, the transferor is re-quired to guarantee the existence of a current and valid loan agreement and all of its accessories (Pop, 2012). The transferor shall be liable for eviction, which is de-fined by Black’s Law Dictionary as abandoning one’s property as the result of a civil sentence (1910). With the assignment of the contract, there is also a release of the transferor’s obligation to the assigned debtor, unless otherwise expressly stated. In this case, if the transferee fails to fulfil its contractual obligations, the contractor may act against the transferor.

Unlike the assignment of the loan contract, when there is an assignment of the rights arising from a loan, there is no transmission of the entire contractual positions, but there is a transmission of all the trans-feror’s rights in relation to the assigned claim and all guarantees and accessories. In the case of an onerous assignment, the transferor is forced to give the trans-feree the documents confirming the loan agreement and any other written evidence of the claim. All obli-gations of the borrower remain in the responsibility of the transferor. In addition, the transferee is entitled to obtain from the debtor a remunerative interest, in the case of a loan with interest (Pop, 2012). If the assign-ment is concluded free of charge, the intent to gratify the transferee is greater than in the situation of an as-signment of the whole contract. This might happen between family members. For example, the father as-signs the rights arising from the loan agreement se-cured by mortgage to his son, giving him a more ad-vantageous position.

Unlike the previous case, where the contractor’s given permission was needed, in this case the condition re-quires only communication for the transfer of rights to take effect against the assigned debtor. In this case, the assigned debtor may oppose the assignee all de-fences which he could have raised against the assignor as well as the payment made in good faith to an ap-parent creditor.

In conclusion, even though these legal relationships look very similar, several subtle differences can be observed at a detail level. Knowing exactly how these operations work in practice and how they differ can make practitioners understand them better. By Răzvan Boștinaru

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REFLECTIONS

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Qualified law is a spe-cial category of statutes with clear constitutional background, which covers certain domains of crucial subject matters, and which is adopted with stricter procedural rules, than the ordinary legislative process (Camby, 1998). This article will compare two forms of

qualified majority requirement, and will argue against the introduction of two-thirds majority. For this pur-pose, I compare three national solutions: the French, the Spanish and the Hungarian experience.

All relevant models of qualified law contain a quali-fied majority component: these laws should be passed by a two-thirds majority, or at least by absolute major-ity, which is the support of the majority of all depu-ties. In case of stable support behind the government, the absolute majority would not radically modify the separation of powers between the government and the opposition. Thus, the governments’ will can prevail regardless of the disagreement of the opposition. The role of the absolute majority, as well as an additional vote at the end of the process (Conseil Constitution-nel, Decision no. 2007-559 DC, December 6, 2007) is to provide a further check on the power of the major-ity: qualified statutes should not be promulgated with-out the wide support of the deputies.

These requirements have multiple functions. With the help of a heightened level of minimum support, the stability of certain circles of law could be increased. Apart from this, since most of the democratic gov-ernments are coalitional, smaller groups in the gov-ernment side could play a decisive role, since their consent is needed for absolute majority. This is a cru-cial safeguard of pluralism. To set an example, some

smaller fractions benefited from this situation regu-larly in France during the 1980s (Avril, 2010).

However, within this model, non-political actors play stronger role in the control of the qualified legislation, than the parliamentary opposition. Qualified law is not a crucial instrument within the hands of the oppo-sition, because these parties mostly use the traditional methods of parliamentary obstruction (Arlettaz and Bonet, 2012). This statement is also valid for second chambers (Avril, 2014). As a further consequence, mi-nority governments are almost eliminated from coun-tries that follow an absolute majority model.

The French and Spanish models show that abso-lute majority does not tend to be the sole special re-quirement in the field of qualified law. However, the Spanish model does not operate with a wide circle of guarantees; organic laws differ from their ordinary counterparts only by an additional round of vote, and by the prescription of absolute majority. By contrast, in France, this concept has been completed with fur-ther elements, such as a prior mandatory control of constitutionality, additional procedural safeguards, and bicameral consent.

For example, the French Senate is entitled to block the legislation of the first chamber in such matters, which are related directly to the Senate (Conseil Constitu-tionnel, Decision no. 85-195, DC, July 10, 1985). This competence was founded as a compromise, after ex-panding the right to vote to EU citizens in local elec-tions. In light of the traditional oppositional attitude of the French Senate, this is not only a mere theoretical consideration (Ardant and Mathieu, 2014). Another special case is the cohabitation, when the majorities of the two chambers are different (Avril and Le Pourhiet, 2008).

To continue with the stricter form of qualified major-ity, from a separation of powers perspective, the two-third majority (l\e.g. in Hungary, Article T of the Fun-

Some points against legislating with two-thirds majority

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damental law of Hungary), raises a number of issues. This framework would prevent the government from amending qualified laws unilaterally, unless it has a two-third majority. A government in a simple major-ity position would be forced to negotiate, or at least cooperate with the opposition to make compromises. The rules from the status of the members of the Parlia-ment had not been amended for twenty years, due to lack of required consensus (Antal, 2011).

This means that the opposition has a direct impact on the regulation of some basic matters, such as the electoral system or the institutional framework of the state, and the legislator does not overlap with the gov-ernment. As a result on the one hand, the minority interests should be respected at least within the scope of qualified law (Kilényi, 1994). This approach is in conformity with the current interpretation of demo-cratic representation, as Avril and Le Pourhiet (2008) notice and was also a relevant consideration for the amendment of the French Constitution in 2008 (The Committee of Reflection and proposals for the mod-ernization and the rebalancing of institutions of the V. Republic, a more democratic

V. Republic, 2008, p. 209). On the other hand, when there is a lack of political culture and willingness to cooperate, the opposition could abuse its rights, and it could block all attempts of the government to amend qualified law. What is more, in the field of ordinary law, the government is responsible for the passed laws; still, a qualified law is also supported by oppositional deputies, therefore the responsibility for the text is not very clear, and the basic logic of the parliamentary system breached.

When a government has two-third majority, the su-permajority requirement would exclude the opposi-tion from all opportunities to influence the decisions and it would be extremely hard to repeal or modify these qualified laws later, on the basis of the two-thirds requirement. Furthermore, the two-thirds re-quirement would not only play a significant role in the current model of separation of powers, but would also affect the margin of movement of the actors in the future (Szentgali-Toth, 2014). The stricter form of qualified majority would also highlight the role of

direct democracy regarding qualified laws, since not only ordinary, but also qualified laws are available for referendum (Németh, 2015).

To sum up, the two-thirds majority within the con-cept of qualified law could easily distort the rela-tions between the government and the opposition, it would either give the opposition too much power, or it would almost eliminate it from the political process for the long term. From this perspective, the absolute majority model with additional checks is more com-patible with the traditional understanding of separa-tion of powers, while the two-thirds requirement is more risky. Usually, it does not serve real consensus-making, but requires unwanted compromises from the political parties, which generates inconsistent so-lutions. Accordingly, two-thirds majority should be re-evaluated.

By Boldizsár Szentgáli-Tóth

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Once regarded as an important part of the Eu-ropean tradition and a protector of democracy, nowadays, the concept of ‘parliamentary immu-nity’ faces harsh criticism for failing to reach its main purposes, facilitat-ing abuses and protecting corruption. The aim of this article is to examine how parliamentary im-

munity works, while also providing a glimpse into the controversial and debated aspects regarding this issue in Romania. Lately, this subject has received a lot of attention from both members of the Parlia-ment and citizens alike, and it is viewed as a rising problem in the context of corruption and abuse of power (Caian G, 2009).

1. Parliamentary immunity – concept and mecha-nism. The concept of parliamentary immunity de-picts a procedure that applies to members of the Parliament, which consists in a partial protection against criminal or civil rules applicable to regu-lar citizens. Traditionally, immunity is divided into two main concepts: non-liability and inviolability (Maria Crespo Allen, 1999). Non-liability refers to protection against repercussions regarding any votes, opinions or decisions made in the exercise of parliamentary duties. Inviolability, on the other hand, meaning immunity in the strict sense, is the protection against arrest, detention or prosecution, unless the consent of the Chamber to which the member accused of breaking the law belongs is ex-pressed.

The rise of political parties in democratic states re-quired a wider protection for those who were cho-sen to represent citizens’ interests, so that independ-ence and freedom of opinion would be guaranteed. Its main purpose was to avoid that elected repre-sentatives be pressured by the threat of prosecution for their actions and decisions, in order to freely ex-press their beliefs and take independent decisions (Wigley S, 2009). Although immunity prohibits that members of the Parliament be held responsible for their actions and duties as parliamentarians, they can however be held responsible for their actions as private citizens, although with some limitations.

As a consequence, members of the Parliament can-not be detained, searched, arrested or indicated for any offences until after their immunity is removed, with the exception of flagrant crimes. In Roma-nia, immunity is guaranteed by the Constitution and can be removed only after the members of the Chamber to which the member of the Parliament belongs give their consent, after hearing that mem-ber. Therefore, it constitutes a wider system of par-liamentary immunity, one that offers an extended protection, also known as the ‘French model’. While most countries adopted the French Model, a num-ber of states, usually where there is a common law system, use the ‘Anglo Saxon model’ of immunity, which offers a weaker protection, usually consisting only in freedom of opinion (Venice Commission, 2014). Although parliamentary immunity is meant to reassure the protected position held by mem-bers of the Parliament in a state, in some legal and political systems it is viewed as an easy way to ob-struct the law. As a consequence, due to an increase in corruption crimes committed by high officials (Transparency International, and Global Integrity Reports), citizens have lost confidence in their cho-sen representatives and in the values promoted by democracy (Transparency International Research, Corruption Perceptions Index).

2. Case Study: Romania and the Șova Case. In Romania, parliamentary immunity is a highly con-troversial subject, especially in the light of recent events. There have been a series of requests to re-move immunity for some members of the Parlia-ment accused of acts of corruption to which the votes were negative, thus restricting prosecutors from holding them accountable for their crimes. The main problem is that the lack of transparency and groundless decisions have created a favorable environment for high level corruption, and that has caused an unprecedented lack of confidence in the eyes of the regular citizen in the state’s representa-tives. While recent changes in legal procedures re-garding parliamentary immunity have made it even harder to guarantee a fair trial, the main problem remains how these rules are applied. The Euro-pean Convention of Human Rights does not regu-late strict rules regarding parliamentary immunity (Resolution 97 (10) by the Committee of Ministers, Twenty Guiding Principles for the Fight Against Corruption) therefore it is up to each state as to how it chooses to protect its representatives, as long

Parliamentary immunity: a threat to democracy?

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as there are no conflicts with the rights protected by the Convention. As a consequence, many believe that immunity is no longer a protector of democ-racy, but a personal privilege given to those who are already in a position of power, and that obstructs the fight against corruption (Lane C, 2007).

The main argument against parliamentary immu-nity is the lack of fixed criteria to follow by rep-resentatives of the legislative power when voting against or in favor of maintaining one’s immunity `(Venice Commission, 2014). This is believed to be an important factor for the decreased public con-fidence in elected representatives, mainly because it leads to abusive decisions. Evaluations done by GREGO showed that people who have committed crimes took shelter behind their parliamentary sta-tus. While it is normal that members of the Parlia-ment benefit from a more extended form of protec-tion than regular citizens, this should not prevent the normal course of justice. In other words, justice should be equally served.

Also, another disadvantage is that parliamentary protection tends to be granted to members of the ruling majority, while under protecting members of the minority (Lane C, 2007). On March 13, 2015, public prosecutors formulated a request to approve the arrest of a member belonging to the Romanian Senate, Dan Șova. The charges against the ex-min-ster consisted in complicity to abuse of office. The request failed to pass, after 67 of the members of the Senate voted against the proposal, and 79 voted in favor. The results of the vote were disputed, with many, including the President, arguing that the le-gal provisions regarding these votes were unconsti-tutional.

This particular case received a lot of attention from the media, and not only members of the Parliament were resentful towards this situation, but also reg-ular citizens. Besides the issue regarding the legal procedure which aggravates judicial prosecution, the population’s frustrations increased as the num-ber of elected representatives accused of corruption that cannot be arrested or detained due to their im-munity grows every day. This resulted in protests and demands that Parliamentary immunity be re-moved due to the fact that it is believed to leave room for abuses and encourage corruption. Fur-thermore, the subject of parliamentary immunity in Romania caught the attention of international embassy officials. Although they did not comment on the Șova case, they did state that the situation is alarming and unacceptable, and that the law should apply equally to all citizens (statement available on the UK’s embassy in Romania’s website).

Furthermore, The High Council of Magistracy, the guarantor of the independence of Justice, an-nounced in a press release that its concern is that a protective attitude towards parliamentarians who break the law may result in an obstacle for justice (statement available on the institution’s website). Moreover, it stated that immunity should not lead to obstruction of justice, and laws should apply equally to members of the Parliament and regular citizens. It further stated that, in order for a demo-cratic system to function, it is of utmost importance that members of the legislature be responsible both politically and legally for their actions. The role of immunity is to protect the legislative process, and not the individual legislative member, therefore when this goal fails to succeed, law reforms regard-ing political immunities should be seriously consid-ered. For example, in countries such as the Czech Republic, Lithuania or Slovak Republic, the major-ity of requests to lift immunity are granted (Office for Promotion of Parliamentary Democracy), due to the fact that their national system has a stricter approach on how immunity is granted, in compari-son with the system we currently have in Romania.

As far as I am concerned, I believe that it is nec-essary to grant parliamentary immunity in order to protect democratic principles. Elected repre-sentatives should be able to take actions and fulfill their duties freely, without fear of retaliation from higher Courts or political opponents. However, parliamentary immunity becomes an obstacle for legitimate legal actions and leads to obstruction of justice when it is misused. As a consequence, it is my firm belief that parliamentary immunity should be applied in a restrictive manner. Also, a series of guidelines and criteria should be considered when applied.

In conclusion, having a Parliament where its rep-resentatives are guaranteed freedom of speech and freedom of opinion without fear of repercussions is meant to assure that the key principles of democ-racy are respected and valued. In other European states, such as the Netherlands, the UK or Ireland, members of the Parliament are offered little to no parliamentary immunity, and researches on corrup-tion show that, in fact, these states have among the lowest perceived levels of corruption in the world (Transparency International Research). However, countries such as Romania, where immunity of-fers a wider protection, confront themselves with a higher number of corruption cases. In the end, the question remains: is immunity still a necessary part of a democratic society, giving its many ways in which it is being misused?

By Cristiana A. Baltag

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[Part I in previous issue]

Health courts applying avoidability as the thresh-old for compensation have been in place in Swe-den for 30 years. The system relies on strict separation between compensation goals, which are achieved through the health courts, and de-terrence goals, which are achieved through dis-ciplinary and criminal norms. If the patient or the hospital want think there are grounds to start disciplinary procedures, they can freely make their claims, but these are separate procedures.

The system has yield good results. In Denmark claims are dealt on average within 7 months, against 5 years in the US; the number of patients to receive compensation per million people is at least seven fold in Sweden and Denmark compar-ing to the United States, even if average awards are lower; defence costs are lower; decisions are more consistent; there are initiatives to harness the potential of a more accurate reporting of er-rors to improve patient safety; and the policy has a wide stakeholder support from patients and physicians (Kachalia et al., 2008).

There can be some difficulties though in apply-ing this system to countries with no universal healthcare and less protective labour legislation.

Part of the reason the system works is because it has lower average awards, but this is partly so be-cause it doesn’t need to cover all medical expens-es or all lost wages. It could also be argued that such low compensations are only possible thanks to an undervaluation of non-economic damages by judges and experts that deal with evidences, statements and reports, when comparing with ju-ries that always talk directly with the patients and may thus better empathize with their pain and suffering.

5.2. No-Fault Model

If the health courts have Scandinavian blood, New Zeeland is the father of medical malpractice no-fault proposals. Both models share the will to compensate more patients regardless of fault from the provider, but the New Zeeland model doesn’t even require avoidability, just an “un-expected treatment-related injury”. This means that all injuries that are not necessary or ordi-nary consequences of treatment and diagnostic procedures can be compensated. The no-fault model started with workplace injuries, and was then progressively expanded during the 60’s and 70’s to other kinds of personal injuries, including those suffered as a result of medical malpractice.

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Beyond tort reform: some policy alternatives to fight defensive medicine. Part II

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Ary Ferreira da Cunha is a doctoral student at the University of Porto, and a re-searcher and the Centre for Legal and Economical Research (CIJE). He has a LL.B. and a M.A. in Legal and Economic Studies from the University of Porto, with a dissertation on Anti-Corruption Public Policy (forthcoming). He was also visiting doctoral student at the universities of Oxford and Utrecht.

Lawyr.it will publish his article about different policy solutions to fighting defen-sive medicine two parts. In this issue we invite our readers to check on the first part if his article.

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Unlike in Scandinavia, patients need the support of a doctor to file a claim. The claim is handled by experts that determine the compensation, cover-ing economic and non-economic damages. There can be periodic reviews if the injury is of indefi-nite duration. There is no minimum threshold, and perhaps because of that the average award is fairly low even comparing with the Scandinavian countries. Because claims are handled by an inde-pendent third party, the Accident Compensation Corporation, both patients and providers can ap-peal. The appeal is dealt with by a wholly owned subsidiary of the ACC, instead of a health court. A second appeal can be done to district court.

In New Zealand there is communicability be-tween the compensation path and the discipli-nary one, since the ACC may share information with professional oversight authorities.

The model has yielded positive results, despite some friction with doctors during the 1992-2005 period, when the concepts of “misadventure” and “mishap” carried a stigma that prevented doctors from addressing adverse events more openly. To further avoid that stigma, the communication procedure between the compensation and the disciplinary routes was restricted to situation in which there is risk to harm the public. The system also retains wide stakeholder support, perhaps because of its incredibly efficiency in delivering a decision within an average of 16 days (Kachalia et al., 2008).

Roughly the same limitations and critics we enu-merated in the previous section should apply for this one. One of the key arguments against no-fault systems is that it endangers patients by decreasing incentives for safe behaviour. No-fault systems in auto-insurance have provided evidence of this effect. There have been a few ex-periments with no-fault systems in Florida and Virginia, with results from Florida surprisingly showing higher average awards and one-sixth of the transaction costs (Kessler, 2012). But these were very limited experiments, with only 24.5

claims per year in Florida and 3.3 in Virginia.

6. Just Culture

The patient safety movement has long demanded for a safety culture in healthcare, inspired in the practices of highly reliable sectors, such com-mercial aviation or nuclear waste management, where the room for error is very thin. In those sectors, organizations had both to set the level of expected adverse events at a very low level, and to create rules that allowed them to learn from mistakes, and even hazards and near misses, in order to create a system that compensates for fal-libility (Hudson, 2003). Since “mistakes, miscon-ducts and disaster are systemically produced by the interconnection between environment, cog-nition and choice” (Vaughan, 1999), learning can help us understand those interactions, while de-terrence can only act upon choice.

A just culture assumes that human fallibility ex-ists, but that human error, negligence, reckless-ness and intentional rule violations are very dif-ferent evils, and can be best prevented in very different ways.

Human error (as in an inadvertent action, slip or lapse) has often little to do with a lack of care and it’s likely to more strongly correlated with the context doctors operate or with inadequate training, procedures, equipment or operation’s design. We can achieve better outcomes if prac-titioners are able to discuss these events openly with their superiors and their peers, and to re-port them both to the patient and to continued improvement mechanisms, without the fear of blame and litigation.

Marx (2001) emphasizes that this approach is based on a “culture” of openness in communica-tion, which cannot be implemented over night. Health professionals often see rhetorical appeals from management to report incidents as a way for them to store information that can later be used against them in unrelated disputes (War-ing, 2005). Interestingly enough senior managers

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seem to be interested in more reports not only to improve patient safety, but also to help sup-port their claims for more equipment or staff, by helping them establish that lives could be saved only if they had more resources. This suggests that managers can be more interested in shifting blame of poor outcomes upwards and demand-ing more resources, than downwards to doctors. This can be a relief for doctors, and a step for more evidence-based budgeting in the medical field. Finally, another concern is that reports are pointless bureaucratic rituals. They fear no one will ever read their reports, and no learning will be made through them.

There has been a call for a just culture in health-care by specialists and scholars (Helmreich, 2000). Kaiser Permanent, has adopted a just cul-ture approach, by implementing Reason’s (1997) “Unsafe Acts” algorithm that seeks to access whether errors are individual or systematic. The method is based in four questions: “Did the em-ployee intend to cause harm? Did the employee come to work drunk or equally impaired? Did the employee knowingly and unreasonably increase risk? Would another similarly trained and skilled employee in the same situation act in a similar manner?” (Frankel, Leonard & Denham, 2006: 1698). The authors suggest that a just culture in healthcare has been a successful experience, though we couldn’t find research to quantify its effects.

7. Disciplinary and Criminal Law

Discussing the goals of disciplinary and criminal law would go beyond the scope of this paper, but, as far as medical malpractice go, we believe it is fair to say that their main purpose here is deter-rence. The fear of sanctions provides an incentive for both the defendant and doctors everywhere not to repeat whatever wrong was made in the past.

Tort and disciplinary, criminal law must send consistent signals in order to produce an optimal

level of deterrence. Apology laws would probably be meaningless if apologies were considered in-admissible evidence in medical malpractice liti-gation, but then had the value of a full confession in a disciplinary board hearing, or in a criminal court. But this doesn’t mean the same standard must be applied: the criminal justice system is designed to respond only to the more serious threats to community values.

Even if less present in practitioner’s minds these days, the fear of being prosecuted for medical would lead them to the exact same defensive mechanisms, especially since negligence can lead to criminal charges (Monico et al., 2007). So if we magically solved the fear of tort liability, we could still have defensive medicine.

To ensure patient safety we must find a dynamic balance between openness and deterrence. Un-conscious negligence is likely to be better dealt with awareness raising practices and coaching than with punishment. After all, “punishment deters those who consciously choose to disregard risk or intend to harm others, but has little to no impact on the individual who does not intend to make a mistake” (Marx, 2001: 14). Even repeti-tive errors might not translate into any kind of disciplinary sanction, because it all depends on the source of those repetitive errors: if it has to do with system failure, or individual failure. Er-rors need to be therefore scrutinized so that the underlying roots are found and addressed. But when there is disregard of substantial and unjus-tifiable risk, or when there is intentional breach of norms, the deterrence effect may be more use-ful to safety.

8. Informed Patient Decisions

At least since Feldstein (1977), the doctor-patient relationship has been described as an agency re-lationship, where a patient (the principal) asks a doctor (the agent) to act on her behalf, seeking to treat the patient. Patients can use their right to decide over the matters that concern them to

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allow doctors to act in their best interest. Conse-quentially, doctors have a duty to act in the best interest of the patient.

It can good for patients know, understand, and consent to necessary and ordinary risks impli-cated by medical decisions, the ones selecting between different possible alternatives, and thus choosing one set of risks over the other. First, patients can be treated according to their per-ception of what’s best for them, while taking full advantage of the doctor’s skill and knowledge. Secondly, because of that they are more likely be more satisfied or at least more conformed with the results, preventing lawsuits. Thirdly, commu-nication helps to foster trust, which is essential if an adverse event occurs later down the line. Fourthly, a patient that was involved in the pro-cess of decision and was informed of the risks is less likely to file a claim when a probable adverse event occurs because it is partially his decision too and he was likely able to manage his expecta-tions in order to accommodate for the possibil-ity of complications. Finally, if the patient gives written consent and is informed in writing of the likely complications of the alternative he is choosing, it can be said he agreed to a certain standard of care that allowed for the possibility of a given number of complications to arise during a given procedure.

We think there are many benefits of proposals that mandate informed consent and give pro-viders that offer it some protection regarding the standard of care at which they are required to perform medicine; provided that it is in line with one of the plausible interpretations of the reasonably prudent practitioner criteria. Thaler & Sunstein (2008) propose the possibility of pa-tients waiving their right to sue for medical mal-practice, a solution rightly criticized by Baker & Lytton (2009).

We believe patients and providers, in possession of their contractual freedom, should be able to elaborate, and determine with greater precision

what they consider to be the standard of the rea-sonably prudent practitioner, within the grey area that such indeterminate concept allows for. These documents should be under similar scrutiny as other consumer contracts, thus they shouldn’t be interpreted as a license to exploit the fragility of the patients’ position, often inherit to the health conditions they are receiving treatment for, in or-der to make them sign a contract accepting sub-standard of care or making them renounce access to justice.

We understand some scepticism when hearing someone advocate for consent forms and for-mal contracts that set the standard of care, and concede that often these mechanisms are the product of blame avoidance impulses trying to shift blame to the patient and just avoid liability (Hood, 2011). But patients making informed de-cisions can have bigger benefits than those, as we have stated, and so if blame avoidance is pushing people in this direction we shouldn’t condemn it, but try to make the best out of it. Having the pa-tient signing these forms shouldn’t be a goal in itself, but rather an opportunity for doctors to sit down with their patients, talk about preferences, manage expectations and build trust.

Concluding Remarks

We should try to refocus the debate on defensive medicine and medical malpractice away from tort reform and into more comprehensive solu-tions, since “there is no evidence that fear of law-suits does anything useful to reduce the rate of medical error, and indeed current leaders in the field on medical error prevention and quality im-provement view the blaming of individual phy-sicians as a largely counterproductive strategy for improving patient safety” (Hermer & Brody, 2010).

Legal reform, not just tort reform, must foster pa-tient safety, preventing both negligent and non-negligent errors; and compensating, fully and fairly, at the very least those who suffered from negligence for their economic and non-economic

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damages.

From this critical review of literature we believe we can take a few significant lessons. Firstly, stakeholders need to look at medical errors as natural features of human action, so punishing lapses and shortcomings is forbidding doctors from being humans. Errors should be systemati-cally analysed and prevented through training, peer discussion of cases, coaching by senior doc-tors, acquisition of appropriate equipment, the use of safety procedures, detailed and easily ac-cessible medical records, better communication with patients, etc.. Error prevention is also not an individual task, but that safety is part of the institutional culture.

Secondly, the example of high reliability sectors shows us a possible route to improve patient safe-ty not through more individual deterrence, but often less deterrence and more communication and a systematic prevention of errors. Individual deterrence, when necessary, can be provided by disciplinary and criminal norms, so there is lit-tle need for a tort or compensation-related deter-rence at an individual level.

Compensation-related deterrence can also be rather useful to make systemic prevention of er-ror a priority. If we take a look at high reliability sectors they all have in common the fact that mis-takes can be damaging for the whole institution: if a pilot crashes a plane compensation to the vic-tims is provided by the airline and bad publicity can effect revenue streams; if there is a problem with a nuclear reactor there is good chance the whole industry has to close down.

Of course one could argue that managers in insti-tutional providers would rather pressure health professionals to underreport errors and adverse events, rather than to implement a safety culture. But disciplinary power isn’t only in the hands of employers in the medical profession, it also is the power of medical boards, and underreporting

is or should be grounds for disciplinary proce-dure to take place; and criminal charges can be brought against negligence professionals by pub-lic prosecutors.

Furthermore, lowering the threshold for compen-sation could make it easier for patients to prove eligibility for compensation. So rational health-care managers might choose to preserve doctor-patient and provider-patient relationships by be-ing transparent about their mistakes and offering immediate compensation.

Thirdly, both the Scandinavian and New Zea-lander experience tells us that a lower standard for compensation allows for more disclosure and more people compensated and is compatible with a reduction in the system’s costs, with both doc-tors and patients more satisfied with the compen-sation scheme than they usually are in traditional tort designs.

Fourthly, perhaps the most general finding of the analysis of the impact of several different legal re-forms on defensive medicine is the importance of more communication. This can be done through early disclosure and mediation initiatives, in-formed medical decisions, and lower thresholds for compensation.

This should stimulate policy makers to think outside the box, look at examples from other in-dustries, and other countries, for inspiration, not just to help solve the medical malpractice crisis, or tackle defensive medicine, but to actually im-prove patient safety and ensure fair compensa-tion.

By Ary Ferreira da Cunha

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Our competitors are our friends, our customers are the enemy is a statement made by an executive of Archer Dan-iel Midland, in the famous case of the lysine (a feed ad-ditive) cartel (United States of America v Archer-Dan-iels-Midland Company and Minnesota Corn Processors, LLC). This statement briefly summarises why cartels can

be considered entities which hinder competition. My aim is to provide a short overview on the leniency pol-icy of the European Union, which is one of the most successful tools in the fight against cartels.

Introduction

Firstly, it must be underlined that the fight against cartels is not unprecedented, making its first appear-ance in the USA in 1890, when the Congress passed the Sherman Antitrust Act. Since then, fighting against cartels has been a recurring issue. Nowadays, taking up the gauntlet against cartels is a vital topic all over the world; countries ranging from Canada to South Korea are using different remedies to help solve the problem, from financial rewards to bounties and many others.

Cartels are agreements and concerted practices be-tween two or more competitors aimed at the coordi-nation of their competitive behaviour on the market and influencing the relevant parameters of competi-tion (Draft Commission Notice on Immunity from fines and reduction of fines in cartel cases for Public Consultation, p. 3.). For example, practices may in-clude price-fixing or fixing of other trading conditions, market-sharing including bid rigging, restriction of imports or exports, and anti-competitive actions against competitors (see Article 101 of Treaty on the

Functioning of the European Union). Without doubt, by their very nature, secret cartels are often difficult to detect, therefore the cooperation of undertakings tak-ing part in the cartels is needed. It must also be noted that, due to the secretive nature of the cartels, investi-gation often ends up in a long-lasting, expensive and unsuccessful endeavour (Carmeliet, 2011, p. 464). This way, the Commission has shown interest in rewarding those who participated in the illegal practices men-tioned above and who are willing to put an end to their involvement in the cartel, and provide useful informa-tion thereof. This is what the leniency policy of the EU is actually about.

The nature of the leniency policy

Inspired by the success of the USA’s leniency policy in 1996, the EU introduced its own version. However, in the first few years only a limited number of companies took advantage of the opportunity offered by the Eu-ropean Commission; it took another ten years for the policy to be in its present form.

In essence, the leniency policy offers companies in-volved in the cartel either total immunity from fines or a reduction of up to 50% of the fines which the Com-mission would have otherwise imposed on them. It also benefits the Commission, allowing it not only to pierce the secrecy veil in which cartels operate, but also to obtain insider evidence of the cartel infringement. The leniency policy also has a very deterrent effect on cartel formation and it destabilises the operations of existing cartels as it seeds distrust and suspicion among cartel members.

In order to qualify for immunity from fines, the whis-tle-blower must be the first to submit enough infor-mation or evidence for either a targeted inspection be carried out, or an infringement of Article 101 of TFEU be found in connection with the alleged cartel. In order to fulfil these requirements, it is a must for the

Prisoners’ dilemma – Some thoughts about the EU leniency policy

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involved party to cooperate genuinely, fully, and on a continuous basis. Also, they must promptly provide all relevant information and evidence, making employ-ees and directors available for questioning, and finally, not destroy or falsify relevant evidence relating to the alleged cartel (see Commission Notice on Immunity from fines and reduction of fines in cartel cases).

It must be noted that once full immunity is no longer available, any remaining leniency applicants compete against each other for lenient treatment. As a result, each is forced to dig deep, as quickly as possible, and gather as much relevant information as available. This approach is reasonable; where immunity is no longer available, the Commission requires the remaining le-niency applicants to provide evidence that significant-ly adds value to the Commission’s existing evidence at the time. The concept of ‘added value’ refers to the extent to which the evidence provided strengthens, by its very nature and its level of detail, the Commission’s ability to prove the alleged cartel. In this assessment, the Commission will generally consider written evi-dence originating from the period of time to which the facts pertain to have a greater value than evidence sub-sequently established.

It can be seen that the leniency policy of the EU lays on the ‘winner takes it all’ principle, as only the first whistle-blower of the cartel is granted total immunity from fines.

From an economic point of view, the parties involved are in the prisoners’ dilemma. Why? Prisoners’ dilem-ma is based on the idea that purely rational individuals might not cooperate, even if it appears that it is in their best interests to do so. This concept applies to the car-tels as well. A whistle-blower that takes part in a cartel is pursuing its own individual interests, acting in a self-ish manner, despite the fact that each of the individuals would benefit from a more substantial payoff if they would choose to join forces and collaborate (Carme-liet, 2011, p. 465).

The applied policy in the context of competition law is also known as the principle of opportunity in criminal law: removing cartels which pose a threat to the goals of the European Union is a much more important pub-lic interest than punishing the whistle-blowers.

Pros and Cons

Without a doubt, the EU leniency policy is a success-ful story as it encourages cartel participants to disclose the existence of the cartel activity. One of the main ad-vantages of the leniency policy is that it prevents the maintenance and development of a well-established cartel structure between undertakings, thus destabi-lising cartels. The EU leniency policy is also lowering the costs of fighting against cartels, as for example it is not needed to maintain a complex institution system, as lengthy investigations are not needed either. It must also be emphasised that another advantage of the leni-ency policy is that authorities have much more use-ful and more complex information about how cartels function in real life.

Thereby, not only the competitive processes will be simpler, but the criminal proceedings too. As a con-sequence of more thoroughly investigated cases and more evidence in such situations, there will be more serious criminal penalties, thus presenting a serious preventive nature as well. Finally, leniency ensures a well-balanced internal market, based on normal mar-ket processes. It must be added that according to some analysts, it is a downside that there is no power of de-terrence: indeed, the more leniency is granted, the less cartel infringers are deterred. From others’ point of view (Buccirossi, Spagnolo, 2005, p.1.), leniency has an immoral effect, as it might suggest someone who does not have specialist knowledge on this issue that the EU lays its policy on reward rather than on punishment.

Conclusion

The introduction of leniency in the European Union has been a recent phenomenon, affecting most devel-oped countries (e.g. the EU, United Kingdom, USA, Japan, Canada, Australia and South Korea). In my opinion, the leniency policy can be considered a suc-cess even though there are still some minor problems in the system. The continuation of this success greatly depends on the future acts of the Commission. As long as the potential benefit for undertaking taking part a cartel more beneficial than the potential penalty, the system will work successfully.

By István Szakács

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Iraq, as a state party to the International Covenant of Civil and Political Rights (ICCPR) since 1969, and also as a member of the Unit-ed Nations (since 1945), has obliged itself to respect hu-man rights that are included in the ICCPR and the Char-ter of the United Nations.

The purpose of this paper is to analyse the implementa-tion process and the status of the right to liberty and security in Iraq, as defined by the ICCPR, focusing on some specific issues.

In the following lines, the issues of justification of ar-rest and the time-limit requirement of continuous ar-rest will be discussed. The paper will be divided into 4 parts. The first part will be an overview of the concepts used and the safeguards that need to exist so as to re-spect the right to liberty and security. The second part will go through the normative framework that exists in Iraq and the present gaps in legislation. Given the word count restriction, the third part will be comprised of an analysis of only two events – the measures taken against the protestors in the Al-Hawija demonstrations and the impact of the Anti-Terrorist Law enacted in 2005. Finally, in the fourth part, a conclusion will be drawn with regard to the rights discussed.

Definition of concepts

When discussing the right to liberty and security, four key issues must be addressed: (1) the scope of the right, (2) the concept of arbitrary arrest, (3) the acceptable time frame of arrest, and (4) the guaranteed safeguards.

The right to liberty and security, as defined in the IC-CPR in Article 9, aims to ensure that individuals as citi-zens of state parties will not be subjected to arbitrary arrest and deprivation of liberty. In case they are sub-jected to justified deprivation of liberty, the ICCPR es-tablishes the time frame for continuous arrest and what is considered reasonable (Bantekass and Oette, 2013).

With regard to the concept of arbitrary arrest, some of the scholars have considered that the term describes the situation in which an individual is deprived of his right to physical liberty with no grounds that would justify such a measure (Bantekass and Oetter, 2013), both in a substantive and a procedural manner (Mar-coux, 1982). As far as Treaty Bodies are concerned, the Human Rights Committee (HRCtee) stated that ar-bitrary deprivation of rights is a situation in which a right guaranteed by the Convention is deprived so that it would infringe appropriateness, justice, predictability and due process of law (Mukong v. Cameroon, 1994). In this regard, an arrest or detention may be authorised by domestic law and nonetheless be arbitrary if the el-ements above mentioned are infringed (HRCtee Gen-eral Comment 35, 2014), since pre-trial detention and arbitrary detention are seen as an exception (HRCtee General Comment 8, 1982) to the rule.

With regard to the accepted time frame of the arrest, there are multiple opinions and thresholds that should be taken into account. However, at the present mo-ment, a general universal position does not exist. The HRCtee was adamant in stating that remand in custody on criminal charges must be reasonable and necessary in all circumstances (Felix Kulov v. Kyrgyzstan, 2010). ‘The decision to keep a person in any form of deten-tion is arbitrary if it is not subject to periodic re-eval-uation of the justification for continuing the detention’

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(Danyal Shafiq v. Australia, 2006). In its recent General Comments, the HRCtee underlined that the overall length of possible detention must be limited and regu-larly reviewed by a court or other tribunal possessing the same attributes of independence and impartiality as the judiciary (General Comment 35, 2014).

With regard to the safeguards in place so as to ensure the right to liberty and security, they are provided in article 9 of the ICCPR. Such safeguards are the pre-sumption of innocence, the right to judicial review, the right to legal assistance, the right to compensation and the right to be immediately informed about the charges brought and the basis for the arrest.

Normative framework of the right to liberty and se-curity in Iraq - normative implementation of the IC-CPR

The Constitution

Articles 15, 17, 19 and 30 of the Iraqi Constitution refer to the need to respect the human right to life, security and liberty. Among the principles referred to in the Constitution, it is provided that the liberty of individu-als may be restricted only in accordance with the law. Thus, every person is presumed innocent until proven guilty, judicial review of arrest warrants are obligatory, arrests may be made only after the release of a warrant by a judicial body, and the detained must be brought before a judge immediately (HRCtee, Fifth periodic Re-port, 2013).

The Code of Criminal Procedure

The Code of Criminal Procedure contains in many ar-ticles a more detailed version of the principles existing in the Constitution. However, a special place is taken by Article 109 of the Code of Criminal Procedure that states in three paragraphs the maxim length of the pe-riod of detention. Therefore, according to the article, if an offence is punishable by less than 3 years or more, but not by death penalty, the maximum period of de-tention is 6 months and the length must be reviewed and protracted from 15 to 15 days. If the punishment is

death penalty, the maximum period of detention does not exist, it being prolonged as long as necessary so as to arrive to a conclusion with regard to the alleged of-fence (HRCtee, Fifth period Report, 2013). In point C of Article 109 it is stated that the period of 6 months may be prolonged under judicial review if necessary, but it may not exceed one quarter of the maximum permissible sentence. In this specific case, the judicial 15 days review does not apply.

The Presidential Orders no. 207/S, no. 35/S, no. 173, no. 92/S and no. 105

Presidential orders were allegedly enacted in order to reinforce human rights protection. Most of them re-state or complete the existing legislation by repeating the safeguard that already exist in the Code of Crimi-nal Procedure and in some cases extend the protection to other areas of law. A specific type of protection was however implemented by Presidential Order No. 207/S. This created a special force responsible with the inves-tigation of the current number of detainees. Its main purpose is to send to trial the people against whom enough evidence has been gathered and to release the other ones. As supervising authorities, the Order men-tions the Department of Public Prosecutors and the Ministry of Human Rights (HRC, Fifth period Report, 2013).

The Al-Hawjia demonstrations and the Anti-Terror-ist Law

The Al-Hawija demonstrations and the Anti-Terrorist Law are two examples in which the implementation of the Article 9 of the ICCPR was not properly realised. The Al-Hawija case raises issues regarding the conduct of the authorities, while the Anti-Terrorist Law high-lights the normative impairments that are not in ac-cordance with the ICCPR.

The Al-Hawija demonstrations were a series of peace-ful demonstrations that started on December 25, 2012, and took place in the Al-Anbar province. The partici-pants were protesting against the government because

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of the gross human rights violations (Geneva Interna-tional Centre for Justice, Urgent Appeal on the Mas-sacre of Iraqi Demonstrators in Al-Hawija). Faced with this situation, the military forces representing the Iraq Government fired live ammunition against the people who gathered. Then, they dissipated the people with extremely hot water and made a large number or ar-rests. According to the government, only seventy-five persons were arrested arbitrarily with no arrest war-rants and no grounds for arrest (Human Rights Watch, Iraq: Investigate Deadly Raid on Protest). However, as reported by other entities (HRC, Oct-Nov 2014, Stake-holders information), a number of approximately one thousand five hundred civilians were arbitrarily arrest-ed.

The Anti-Terrorist Law is a piece of legislation still in force in Iraq, which was drafted and enacted in order to stop and punish the terrorist groups that are activating in the territory (HRCtee, Fifth period Report, CCPR/C/IRQ/5, 2013). The Law is deficient from a human rights perspective given three main reasons; these are: (1) the lack of foreseeability, (2) the vagueness of the concepts used, and (3) the punishment by the death penalty. These three issues combined inevitably lead to the con-clusion that this piece of legislation does not meet the

requirements of the ICCPR given that it entrusts too much discretion in characterising an offence as an act of terrorism. Also, the period of detention is essentially indefinite given the existence of the death penalty for all the vague offences (United Nation Assistance Mis-sion in Iraq Human Rights Office Report, 2013)

Conclusion

To conclude, the current situation in Iraq is of a dra-matic nature. As showed above, progress has been made, nonetheless it is insufficient. It is certain that if desired, much can still be done in order to fully respect the right to liberty and security. More precisely, the ob-ligation of the state to justify arrests and provide a rea-sonable time of the arrest, without any unnecessarily prolonged periods.

The major issues that exist therefore are that pre-trial detention is prolonged over the maximum limit even for the death penalty, as witnesses can attest on the one hand, and on the other hand, the fact that an interfer-ence of the executive in the domain of the judiciary still exists given that the Ministry of Human Rights actively engages into the review of detention (UNAMI Human Rights Office Report, 2013).

By Dan Moroșan

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The European Un-ion (EU) regulation No 650/2012 of the European Parliament and the Coun-cil regarding the succes-sion upon death entered into force as of August 17, 2015, according to Article 83 Section 1 and Article 84.

The regulation contains provisions which regard the jurisdictional competence (Article 4 and the following), but also provisions about the applicable law (Articles 21 and 22), the appoint-ment and powers of an administrator of the estate (Article 29 and the following), and the recognition and execution of foreign court decisions and authentic documents regarding issues of law of inheritance (Ar-ticle 39 and the following). The regulation also intro-duced a European Certificate of Succession (Article 62 and the following) through which every claimer at the succession can prove their entitlement in a Member State of the EU without further formalities.

The aim of the regulation is to create a unity between the applicable law and the jurisdictional competence. Therefore, the inheritance proceedings should fall un-der the jurisdiction of a single court which applies (if possible) the law of its state. Furthermore, foreign court decisions and authentic documents regarding issues of law of inheritance should be recognized automatically to avoid an unnecessary delay of the proceedings and execution. Due to the large range of the regulation, this article will only analyze the applicable law according to the regulation.

Field of application

Universal application

The regulation is applicable in all Member States of the EU with the exception of Denmark. The United King-dom and Ireland are not bound by the regulation, but do not reject the possibility of its acceptance in the near future (Frodl). All those states can make use of the regulation through opting in (a legal process through which a regulation or a part of it is being applied on a certain case due to the decision of the court or of the parties, even though the case is not being covered by the statutory regulation). In Croatia the regulation applies because the state is bound by acquis commu-nautaire (Rudolf), which is a basic principle of the EU-law. It covers all treaties, EU legislation, international agreements, court verdicts, fundamental rights provi-sions, and horizontal principles in the treaties such as equality and non-discrimination.

The referred jurisdiction is to be applied even if it is not the jurisdiction of a Member State. This may be the case if, for example, the testator has his habitual residence in Serbia, a non-Member State of the EU. According to Article 21 Section 1, Serbian law is to be applied on the succession as a whole (under the condi-tion that Article 21 Section 2 does not apply, as it will be later explained).

Temporal application

The ordinance is to be applied, according to the pro-visions of the regulation (Article 83), if the testator’s death occurs on or after August 17, 2015.

Material scope

The law which is to be applied according to the regula-

The Regulation of the European Parliament and of the Council on In-heritance Law

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tion regulates the succession as a whole: for instance the causes, time and place for the opening of the suc-cession, the capacity to inherit, the particular causes of the incapacity to inherit or receive, disinheritance and debarment from the succession etc. (Article 23 Section 1 Letters a to j). However, it leaves certain issues un-regulated (see Article 1 Section 2 Letters a to l).

This may be a problem for the clarification of prelimi-nary issues. Before referring to the applicable law of a certain state there can be other question which would need to be cleared. For instance, in Austrian law, an adopted person can only inherit, if the adoption is val-id, in case of a legal (and not arbitrational) heritable succession. This validity of the adoption is not cleared by the regulation, which means it is preliminary. The issue must be cleared either by the referred law or by the law of the State, whose court has been called to solve the matter of inheritance. The prevailing opinion pronounces itself for the second view.

Applicable law

General comments

The subject of the regulation is the conflict-of-laws. The references of the regulation are in most cases compre-hensive (Article 34). This means that if the regulation refers to the law of a Member or Non-Member State, it refers not only to its domestic but also to its Private International Law. Therefore, the ordinance allows ‘the renvoi’, which means that the referred law can either refer to the one of another state or back to the referring one. The exceptions to the rule are Article 21 Section 2 (appliance of the law of the state with which the testa-tor had the closest connection), Article 22 (appliance of the chosen law), Article 27 (the law which is to be applied on the formal validity of dispositions of prop-erty upon death made in writing), Article 28 Letter B (the law which is to be applied on validity as to form of a declaration concerning acceptance or waiver) and Article 30 (appliance of mandatory rules). These are transmission provisions, which means that they refer

directly to the domestic law of a specific state, exclud-ing its Private International Law.

No matter which law applies on the inheritance mat-ter, the mandatory rules of law shall always have prior-ity, according to Article 30. Those are the provisions which regulate a special succession, due to familiar, economic, or social reasons. An example could be § 14 WEG in Austrian law, which contains special rules for the succession in case of the death of a co-owner of a residential property. The mandatory rules apply only if the objects of succession are immobile assets (for instance, an enterprise) or special categories of ob-jects, located in the state whose courts are called upon to give a decision on the inheritance issue. This state may apply its mandatory rules along the referred law.

Succession upon death of the testator

Article 21 Section 1 provides that, regarding the suc-cession, the law of the state in which the testator had his ordinary residence must be applied. If it is clear from all the circumstances of the case that, at the time of death, the deceased was manifestly more closely connected with a State other than the State whose law would be applicable under paragraph 1, the law ap-plicable shall be the law of that other State (Article 21 Section 2). For example, if the deceased had his habit-ual residence in Germany, but he had Austrian citizen-ship and his family lived in Austria, Austrian Law is to be applied. In practice, the so called escape clause may lead to legal uncertainty, as it is very difficult to prove closer connection with another state. The regulation does not provide for concrete criteria in this regard.

The deceased can also make a choice of law and clear all uncertainties (Article 22). He may choose only the law of the State whose nationality he possesses at the time of making the choice or at the time of death. In case the testator has multiple nationalities he may choose the law of any of the States whose nationality he possesses at the time of making the choice or at the time of death. Article 22 is an expression of private au-

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tonomy. Its limitation aims to avoid attempts of eva-sion from the jurisdiction of a state. If for example the testator has his ordinary residence in Austria as well as Austrian citizenship he may attempt to bypass the rela-tive strict Austrian forced heirship (Rabl) by choosing English law, which does not provide for it. Such a re-sult is highly undesirable. On the other hand, such at-tempts may also be undertaken by successors. Article 21 Section 2 gives them the possibility to choose the jurisdiction which is to be applied on the succession as a whole by determining his ordinary residence (in cir-cumstances in which the testator is not in possession of mental health). The relatives get to choose through this method, the law of a state which provides for ex-ample forced heirship (Scheuba).

Dispositions on property upon death other than agreements as to succession

Dispositions upon death are for example the testamen-tary dispositions which the testator makes before his death and which are revocable. An agreement as to succession is being concluded between two living per-sons. Through it, one person will be appointed irrevo-cably as heir. Agreements as to succession have prior-ity in front of disposition upon death, which means the entitled person may exercise her rights against the other heirs. Agreements as to succession are being concluded between spouses and laps in case of divorce. (This description applies on the agreement as to suc-

cession from the perspective of Austrian law.)

The presented rules apply also on the admissibility and the modification or revocation of a disposition on property upon death other than agreements as to succession (Article 24). The term ‘substantive valid-ity’ regards questions which concern the conditions under which the disposition upon death is valid. For example, in Austrian law, a person has the capacity to make a disposition upon death only if she reached the age of eighteen and is mentally healthy. Persons who have reached the age of sixteen or who are mentally ill may dispose only in front of a notary or before the court. The disposition is valid if the person in cause had the cognitive faculty required by the disposition upon death (§§ 569, 568, 566 ABGB). Among those there are certain other requirements which have to be fulfilled like, for instance, the will to make such a disposal (animus testandi), which is not existent if the disposition is, for example, only a draft.

Agreements as to succession

If the agreement to succession regards the succession of only one person (for instance A appoints B as an heir through the agreement in question), the same rules are to be applied on its admissibility, its substantive valid-ity, and its binding effects between the parties, includ-ing the conditions for its dissolution (Article 26).

The admission of an agreement as to succession re-

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garding the succession of several persons succession (for example, A and B mutually appoint each other as heir through the agreement) is subject to the law which applies on the succession as a whole of all the parties involved (see 3.2.). If one party has his ordinary residence in Germany and the other in France, both French and German law could be applied on the ad-mission. According to the law, the agreement must be admissible according to both statutes. If the agreement is admissible, then the law which applies on its sub-stantive validity, its binding effect, and the conditions for its dissolution is the one which governs the succes-sion of a single party (French or German law). The ju-risdiction to which the agreement as to succession has

the closest connection prevails (Article 25 Section 2).

Formal validity of dispositions of property upon death made in writing

The form of a disposition of property upon death must correspond to one of the laws listed in Article 27. The relevant law concerning the form is the one of the State in which the disposition was made or the agreement as to succession concluded. Another source of relevant law is that of a State whose citizenship the deceased or at least one of the persons whose succession is con-cerned by an agreement as to succession possessed or in which those persons had their domicile, either at the time of the disposition or of the agreement’s conclu-

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sions, or at the time of death.

The law of the state in which the persons in question have their ordinary residence is also relevant. The time which is to be considered in this case is the same. In so far as immovable property is concerned, the applicable law is also the one of the State in which that property is located.

The Austrian citizen A made a disposition upon death in England, where he was on a business trip. His domi-cile was in France, his ordinary residence in Germany where he had some businesses. The form of the dispos-al is valid if it corresponds to Austrian, English, French or German Law. The object of the disposition was a house located in Spain. Spanish Law is therefore to be applied on the formal validity.

The same rule applies to the form of modification or revocation of dispositions of property upon death (Ar-ticle 27).

Validity as to form of a declaration concerning ac-ceptance or waiver

The relevant laws for this issue are the ones which ap-ply to the succession upon death (Articles 21 and 22, as previously explained). A declaration concerning ac-ceptance is a declaration of the heir through which he agrees to take possession of the real estate. A waiver is the exact opposite.

Adaption of in rem rights

If a person invokes an in rem right, to which he/she is entitled under the law applicable according to the regulation, and the law of the Member State in which the right is being invoked does not know the in rem right, then it is to be adapted according the law of the Member State (Article 31). In rem rights are those which grant the entitled person a direct ownership over an item, are noticeable on the outside (for exam-ple through possession) and have absolute protection by law (the infringement of an absolute right is – ac-cording to Austrian Law - always illicit, the one of a

relative right only under certain circumstances). In rem rights are for example: property law, the pledge, the easement etc. Some jurisdictions do not know the difference between absolute and relative rights which implies structural adjustment.

The ‘Commorientes’

If two or more persons die in circumstances in which the order of their deaths is uncertain, they have no rights on the succession against each other (the so-called ‘Commorientes’ according to Article 32). A and B made an agreement as to succession through which they mutually appointed each other as heirs. A and B die in a car accident, but the order of their death can-not be established. The heirs of A cannot make any claim against the heirs of B. The same rule is to be ap-plied reversely.

Conclusions

The Regulation is an expected result of the increasing need for clarity in cross-border inheritance cases. It is true that it does not cover all the legal issues, like legal capacity or capacity to contract, but it has contributed to the elimination of the complicated process of refer-ence through the Private International Law of different states. This purpose was achieved through the limita-tions of the comprehensive reference. Due to the align-ment of forum and law, which determines that the in-heritance issue has to fall solely under the jurisdiction of the courts of a single state, in which the courts apply the law of their state, the problem of separation of the estate has been solved. Separation of the estate means that on different parts of the estate, different jurisdic-tions are to be applied because of the different provi-sions of the Private International Law of the states in which those parts where located. The Regulation pro-vides for a unified criterion for the reference, which is the ordinary residence, the state with the closest con-nection with the testator or the choice of law.

By Dora Maria Demble

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The present article aims to emphasise the fine line be-tween protecting the com-petition or the consumer’s interests within competition law. Whilst it has already been stated (CJEU, GSK Services Unlimited v Com., 2009) that competition au-thorities seek not only to protect consumers’ benefits,

but also markets’ structure, it is interesting to observe the impact that the consumers’ harm or lack thereof may have on the finding of a breach, such as the abuse of dominant position.

Certainly, one cannot deny that, while examining the effects on the market of an abusive practice, we shall also take a glimpse at the effects it has on the con-sumer. But what happens when no such harm can be identified and, however, an infringement is found and penalised with no less than the record-breaking fine of €1.06 billion? This was one of the many question that arose in the doctrine, after the Intel Decision was is-sued, leaving the historical fine applied to Microsoft (€561 million) far behind. While this appears to be ‘the price to pay’ for ‘cheating’ in competition law, it is not hard to assume why much controversy emerged with so many urging interests at stake. Thus, I intend to pre-sent the issue of consumer harm in the light of compe-tition law, seen throughout the Intel Case (CJEU, Intel Corp. v Com., 2014).

In order to accomplish that, it shall be drawn to the reader’s attention the definition of the abuse of domi-nant position, along with the tendencies occurring towards this anticompetitive practice, in order to con-clude whether an effect-based analysis should be the future of analysing any anticompetitive practice.

As a preliminary observation, the verge of the debate appears to be whether identifying an impairing effect on the market and a consumer’s harm is or not neces-sary for an infringement to be found. On one hand, it has been stated (Collino, 2011) that although an abusive conduct is not necessarily an anticompetitive one, abuses, per se, cannot be approved in a commu-nity which recognises the rule of law (CJEU, Ahmed Saeed v Comm., 1989). Thus, an abuse of dominant position can occur under condition of no actual harm, but purely a potential one. However, this position se-verely damages a dominant’s freedom of action on a competitive market, as the one on which Intel acted, where decreasing prices, increasing output, and con-stant innovation are required (Geradin, 2009).

To begin with, an abuse of dominant position is an an-ticompetitive conduct currently covered by Article 102 of the Treaty on the Functioning of the European Un-ion (TFEU). It mainly expresses a breach of the special responsibility incumbent to a position of dominance. In order to identify an abuse of dominant position, an algorithm can be applied.

Firstly, dominance can be identified on a relevant mar-ket. This implies some specific tests referring to fac-tors such as substitutability and the product’s capac-ity to be interchangeable. In the Intel Case, the market identified by the European Commission (herein after the Commission) was that of Central Processing Units [CPUs] (the brains of a computer, in non-technical words). Once this aspect settled, the Commission went further on to prove that Intel was a dominant under-taking on the relevant market, and that Intel conduct-ed an abusive practice.

With regard to the first issue, the Commission re-ferred to Intel’s market share among with the barriers to entry, which both seemed to express its dominance. However, Intel brought into the Court’s attention that

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the continuously descending prices that characterise the market of CPUs along with a countervailing buyer power (the power that its contractual partners had) considerably diminishes its independence and might have repercussions with regard to its qualifications as a dominant. Unfortunately, these arguments were ig-nored.

The second issue was whether the rebates offered by Intel were of such nature as to be seen as abusive. Mainly, Intel offered conditional discounts along with payments made to its customers for not launching or postponing the launch of products that contained CPUs manufactured by its competitor, Advanced Mi-cro Devices Inc.[AMD]. However, in order for such a practice to represent an abuse of dominant position, it has to preclude competition on the respective mar-ket or on a significant part of it in so far it may affect trade between Member States. This appeared to be the field for the most intense battles between the parties: determining the effects that Intel’s conduct had on the market.

The Intel Case brought into light a new perspective upon the abuse of dominant position. It was argued that an abuse of dominant position with no foreclo-sure effect (Intel actually proved that AMD’s market share grew during the period in which the practice took place) should no longer be seen as a breach. This position towards assessing an abuse appears to be on the same line of reasoning with the new guidelines (Guidance Paper) and discussion papers (Competi-tion discussion paper on the application of Article 82 of the Treaty to exclusionary abuses). Nonetheless, even the Commissioner Kroes declared (Kroes, 2005) that they intend to ‘revamp’ the analysis of the abuse of dominant position - a justified intention if we were to observe that, especially in the cases of low pricing and rebates, they are to be welcomed and not ‘punished’ (Geradin, 2009). After all, discounts are beneficial to consumers.

Therefore, all case-law that used to see rebates as a per se abuse was heavily criticised by economists and businessmen. In this regard, the US Courts had a more relaxed and economic-oriented point of view. They

considered that as long as low prices are not predatory ones (prices set in order to wipe out competitors off the market), they are at the very heart of competition and any inference should, therefore, be seen with a sceptical eye.

Moreover, the rebate-system established between Intel and Dell (one of its buyers) was not written. In order to prove a breach, the Commission had to prove that the rebates limited Dell’s freedom of choice and imposed it to buy all or nearly all of their x86 CPUs from Intel. In doing so, the Commission allowed itself to work with many assumptions, constantly relying on-not-so-reli-able pieces of information as emails (Geradin, 2009). Moreover, reducing consumer’s choice and ‘stealing’ your competitor’s clients is the mere purpose of any rebate. However, rebates still have to permit a reason-able access to other products. For example (Geradin, 2009): you might want to buy a different brand of yo-gurt that the one selected by your supermarket; as long as you have a reasonable access to other brands, that rebate is not anticompetitive. Whether this access was actually denied to Intel’s consumers was not proven by the Commission.

In conclusion, neither the Commission, nor the CJEU have offered much importance to the new effect-based analysis. Unfortunately, they continued to apply the abuse of dominant position for ‘big fish in high profile markets’ (Tupper, p.1) and restrained Intel’s freedom to ‘compete normally on a tough market”’ without tak-ing into consideration the lack of consumer harm, the fact that AMD was far from being actually affected by Intel’s conduct and that such conducts were held on a very aggressive market. These decisions, thus, appear to contradict the healthy tendencies emerging since 2005, imposing an enormous fine with little evidence of any harm. Hopefully, this type of rationale will not become a milestone in following case-law, permitting, thus, the normal development of competition law to-wards a more economic and effect based analysis – which should, at least in my opinion, be the future of any assessment of breach under competition law.

By Carina Vermeșan

PROFESSIONALSPOTLIGHT

Elena Virginia Botezan has been a Judge at the Cluj Court of Appeal since the beginning of 2015. Before this she was a successful prosecutor for 18 years. In 2005 she started work at the National Anticorruption Department (NAD), Cluj Local office, an institution that had a lot of great results in Romania, and that was praised for its work in Europe. She became the Chief Prosecutor there in 2009, and during her five year term there she made a name for herself by successfully handling big corruption cases, that people thought were untouchable. According to her achievements, the press dubbed her ‘The anticorruption iron lady of Cluj’.

Lawyr.it: What drove you towards prosecution?

E.V.B.: Funny story! I became a prosecutor pure-ly by chance. In university I was pretty certain I was going to become a lawyer. But my plans were thwarted when the lawyer for whom I worked as an intern during the final two years of study could not take me as a trainee anymore because of some personal issues. At that point it had become too late to find another mentor so I signed up for the pros-ecutor exam, on the last day, although I have never even considered this path before. It seems that fate chose better than I could have at that point, because as it turned out prosecution was the perfect fit for me. This is why, for eighteen years, I have been a prosecutor happy with my work.

Lawyr.it: How different do you think every-thing would have been if you became a lawyer as planned?

E.V.B.: I cannot imagine how things would have been, but I think it is hard to achieve the level of satisfaction and accomplishment that I had as a prosecutor. Once installed in the office, I received job offers as lawyer that offered way more, materi-ally. I immediately refused them because I felt really

happy with my work and my financial state.

This is because investigative work is very exciting! Trying to put yourself in the shoes of the suspect, to figure out how he committed the crime, to know where to place yourself and where to look for weak points, it was like a puzzle. That is why, for me, work was not work per se. It was a passion.

Things went even better after I became a prosecutor in the National Anticorruption Department (NAD). That is where I felt that I can, and wanted to craft much better and ‘beautiful’ case files, because each and every one of them was built from the ground up by us. We could see them grow before our very eyes. I felt like I was creating... art!

Lawyr.it: Speaking of NAD, where did your pas-sion for corruption crimes start, and how did you become a part of NAD?

E.V.B.: At the beginning of my career, I was pas-sionate about economic crimes. To me, the most interesting crimes were crimes like tax evasion, forgery, fraud and so on. After almost seven years of investigating economic crimes, corruption was the natural next step. I finally felt ready enough to properly deal with them, because in my opinion the anticorruption fight was and continues to be the most challenging for a prosecutor’s mind.

In addition to this, I chose to join the NDA when Daniel Morar was appointed as the chief prosecutor of the structure. I knew he was an honest and in-telligent prosecutor and I was absolutely convinced that this would be the mark of a profound reform of the structure and the start of the real fight against

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“The anticorruption fight was and continues to be the most challeng-

ing for a prosecutor’s mind.”

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corruption. As we can see today, this turned out to be true. I am what I am today because he was, and still is, a role model for me. I learned to be stubborn, perseverant, and to trust myself as long as each and every step of my work is done by the book. So it was simple: I wanted to be part of his team!

Lawyr.it: What were some of your duties as the chief prosecutor of the National Anticorruption Department (NAD), Cluj local office?

E.V.B.: Firstly, I wanted to build a strong team of professional prosecutors, who needed to work to high standards in order to produce a high quality finished product and with whom to work on sig-nificant cases of corruption jurisdiction. Secondly, as a prosecutor myself, I worked on cases normally, as before. The difference was that as the leader in charge of my team, I tried to give all my best to lead by example and inspire confidence that they can investigate any person, while giving them my full support. In the NAD, the outcome of a case that is visible to everyone is the result of the work of an entire team, not just one person. It is true that I had established a certain style of teamwork, a consist-ent, punctual, and coherent one, focused on the es-sence of the investigation. When examining a case, it is a continuous change, and the key to success lies in permanently staying informed. Decisions are thus easier to make and better overall. It also clearly means a lot of hard work, but it ensures far better results.

Lawyr.it: Have you ever felt a glass ceiling being imposed on you for being a woman prosecutor? How about any kind of political pressure, especial-ly on high profile cases?

E.V.B.: Zero discrimination. At most, I sometimes felt a disbelief in my abilities, although it rapidly dissipated. After a while, the only thing I felt was that all the people I worked with wanted to be part of my team, even though I was a really rigorous, de-manding, and harsh prosecutor with my team.

Zero political or any other external pressure. The only kind of pressure I felt was from getting things

done and doing them right. I had a great amount of work and little time to do it in.

Lawyr.it: To what extent do you think that you have to have a calling for being a judge?

E.V.B.: I think you most certainly have to have a calling to be a good judge. The issue is that there is no way you can tell you are meant to do this un-less you actually do it. Only then will you be able to assess whether you are ready or not. A magistrate who does not feel like this is their calling becomes a mere clerk. Every case one judges, one party will lose, so they will be unhappy. The purpose of the judge is to justify their decision in order to make the party who lost understand the reason why they lost.

Lawyr.it: Speaking of which, what made you trade robes?

E.V.B.: The truth is that during my time as a pros-ecutor I have done a multitude of things. I built beautiful case files and worked with passion. How-ever, after 18 years of doing one thing, anyone can wish to start doing something else. Working as a judge seemed a natural favourable step forward in my career. I never regretted my choice. I go to the office with pleasure; I enter the court with joy. It is a great thing to enjoy your work after being a part of the judicial system for so long. I feel like I have gained new energy!

Lawyr.it: Which one of the two professions do you find most difficult and why? How do they compare in terms of workload and responsibilities?

E.V.B.: I have been a judge for only four months now, so my assessment may be slightly skewed af-ter eighteen years as a prosecutor. Yet in this short

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“The purpose of the judge is to jus-tify their decision in order to make the party who lost understand the

reason why they lost.”

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time I managed to form the opinion that a prosecu-tor’s workload and need for action according to the specific of their activity makes their work slightly more consuming. I am referring to the investigat-ing prosecutors, because there are those who only argue cases in court. Their work is difficult too but somehow comparable to the volume of work of law-yers and judges.

On the other hand, the responsibility you have as a judge cannot be compared to the one you have as a prosecutor. For instance, as a prosecutor, I went before the judge with an arrest proposal to arrest, arguing for it unreservedly. Now, as a judge, I ful-ly understand and feel the responsibility of each measure taken, because beyond the papers, there are real people, and what I decide can greatly influ-ence their lives.

Lawyr.it: After being the accuser as the prosecutor for all those years, do you feel your impartiality affected as a judge? Or rather, do you think this previous experience gives you an advantage in the position of judge?

E.V.B.: I do not feel any less impartial and I hope that is visible from the outside as well, and my pre-vious experience is definitely a perk. The benefit is clear: I understand and see things easier. The expe-rience gained from years of investigation and pros-ecution, however we put it, can only be useful. It did not deform my thinking process and I do not always see guilty people around me. On the con-trary, I am very eager to see the evidence, to hear the defences and so on. The judicial duel is very beautiful, and now that I see it before me, rather than taking part in it, it is a lot more interesting. And although I previously thought no matter what I argued in court, the judge’s ruling is solely based on his opinion, now I realise how wrong I was. I cannot wait to hear all the arguments of both sides, and to form my opinion based on them.

Lawyr.it: In a recent NAD review it was shown that the Romanian Government managed to recover only 10% of the damages caused by corruption crimes. Do you think that we need a specialised law enforcement agency that focuses on recovering

illegally acquired assets?

E.V.B.: In short, yes. For criminal instruction to be efficient and have final on this very important issue, we need more legal instruments than the current legislation offers. You cannot ask for prosecutors to accurately and procedurally correct prove facts and at the same time to look for money, accounts, and assets hidden by the criminals in...Madagas-car. Therefore, I believe we need a small, supple, dynamic, and efficient institution with clear du-ties and powers, made up of professionals. I think we should follow the Dutch model, their institu-tion called BOOM (Bureau Ontnemingswetgeving Openbaar Ministerie) being quite efficient in this area.

Lawyr.it: And lastly, our trademark question: any advice for law students?

E.V.B.: Beyond the classic advice to study thorough-ly, I would recommend them to take advantage of the free time on their hands and to apply to apply to as many internships as they can. Work at law firms, get familiar with the Palace of Justice, and assist cases throughout their entire course, from the reg-istry, archive, the actual debates in the courtrooms, to the enforcement of the judgement. All the steps are important and none should be skipped. Such an experience will help them in deciding on their future careers. In addition, the current educational system provides so many opportunities to broaden their horizon, and students should not leave any of them to fly past them. You always have to want more, and always ask yourself for more!

By Radu Șomlea

“As a judge, I fully understand and feel the responsibility of each

measure taken, because beyond the papers, there are real people, and what I decide can greatly in-

fluence their lives.”

QUESTION OF THE ISSUE

QUESTION OF THE ISSUE

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“I see balance between my compulsory tasks while as university, and extracurricular activities as the biggest obstacle in my legal higher ed-ucation. The issue appears to be substantial, as in the modern competi-tive society, one has to stand out, not only by its high level of academic performance but also by evidence of an external experience. Therefore based on the latter, I focus on time management. I find it very effective and the only way to meet these two very important objectives.”

Peter Puzio

University of Essex, United Kingdom

What is the biggest obstacle you have had to overcome during law school and how did you manage to do it?

“The hardest thing for me during law school was the transition from high school to college. I followed a math and science track, because when I finished secondary school I wanted to become an engineer. Besides, in small towns like the one I come from, a humanities track is often chosen as a second option for someone who wants to learn a little bit more. So imagine the shock of having to learn hundreds of pages only by reading them two or three times after four years of applying formulas and writing codes. I had to develop my own way of recalling the materials for an exam. Even now, after four years of law school I cannot say I found the right way to do it. Anyway, in my opinion success in law school comes not only from hard work but also from a lot of luck and that is an element which cannot be controlled.”

Ioana Tătaru

Babeș-Bolyai University, Romania

For this eighth issue, we decided to see how students and lawyers would respond to the same question, adapted to their professional level. We firstly have interviewed several law students from different coun-tries and cities regarding what were the biggest difficulties they have encountered throughout law school and how they managed to overcome them. We then invited two lawyers, former guests of our Professional Spotlight rubric, to talk about their professional challenges.

We invite you to read our guests’ contributions, to whom we are truly grateful for their time.

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“As a student, for me there were two major obstacles. The first was to remain faithful to a promise made to myself. When I chose to study Law I had challenged myself that I will never lose my humanity in my path for a successful career. Probably, this principle pushed me in a carousel of dilemmas that will never stop spinning: How will I constantly motivate myself to study, to make decisions, to be part of a team whether as a participant in a Moot Court Competition or as a volunteer? Will I play the devil’s advocate role in order to repre-sent noteworthy the interest of my colleagues though it comes into collision with some of my values? Does the Romanian judicial sys-tem truly encourages growth mindsets or are the students just some dreamers that hope and fight for the ideal of justice?

In fact, all these questions helped me to discover my goals and to assume some life choices. Moreover, analysing a juridical fact, in-terpreting the law, discussing certain events with teachers, friends or family, not only gives to a student a better perspective about the society, but it will improve study-ing and accepting failure and progress as two frienemies. In the end, even as students we should have in mind as our motto: It is a beautiful day to bring justice in the world, so let’s have some fun with those books and those cases.”

Maria Andrieș

Babeș-Bolyai University, Romania

“What could be more exciting for a law student than the difficulty of Criminal Procedure and Civil Procedure examinations?

Looking back, the difficulties began from the first year. Starting with the plentiful subjects and the flock of information from every class, the legal language which is a foreign way of speech for someone who has not met with the domain before, and ending with the first exami-nation session. Each year is difficult and each year you discover a new challenging class (which implies an equally hard exam), more chal-lenging than the classes that you had before, because it sums them.

Let us not forget that the challenges and the difficulties are those ele-ments which throw us out of the comfort zone and push us to reach new heights, in such a manner that at the end of the day, your new capabilities will be the foundation on which society can rely.

Finally, I don’t know if I can strongly affirm that Law school is very difficult. All I can say is that it takes lots and lots of hard work and perseverance, which ultimately transforms in new capacities and abilities which deliver value to humanity.”

Cristina Pripon

Babeș-Bolyai University, Romania

“The biggest obstacle I have had to overcome during law school (be-sides the low investments of my University in the material base, often translated in not so happy teachers, lack of many necessary specialty books and the list could continue) was the fact that the legislation of our country changed almost entirely during the four years of faculty. Of course, the change of legislation is welcomed and was necessary but the real obstacle that comes from this is the fact that the judicial practice still needs time to crystallize and is not unitary. Also, and this is the thing that really affects the students, the doctrine is quite poor yet. I managed to overcome this obstacle by looking at it as to an op-portunity, the opportunity to be contemporary with the great changes of legislation and by making a lot practice which gave me the chance to have a better look on how the law is applied.”

Patricia Sarca

Oradea University, Romania

“I think one of the biggest obstacles one has to overcome when ap-plying for law school, or any other college, is the major difference in approach in terms of teaching and learning. The training wheels come off and suddenly you find yourself in a highly competitive envi-ronment, in which you have to work a lot harder than you did in high school. Unlike high school teachers, in college, the professors have a more distant relationship with the students and therefor students have to rely mainly on self-study and not on the support of the pro-fessors. I was deceived by the free time and liberty I gained without a strict schedule, as the one from high school, that I had to follow, but it was merely an illusion. The requirements were a lot higher than in high school and without the helpful “directions” meeting them meant a lot more effort than before. I had multiple tasks at a time and solv-ing all of them was difficult without good organizational skills. With time I learnt how to manage my time and effort in an efficient way

so that no matter how many tasks I had to solve, I was sure I never missed a deadline. However, the first time you step into such an environment can be overwhelming in especially without much support from professors. All you can do is keep you head up and continue forward.”Radu Zmaranda

Babeș-Bolyai University, Romania

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What is the biggest obstacle you have had to overcome during law school and how did you manage to do it?

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“The biggest obstacle to overcome was the pressure from everyone around me. Good grades, having several jobs, and still talking care of my friends and family, with the knowledge of how big the com-petition is when you graduate. I managed to overcome it with moti-vation and support from friends but primarily from my family. I’ve managed to overcome it, together with a great determination to suc-ceed.”

Christian Krogh

Aalborg University, Denmark

“I think the biggest obstacle I had to deal with in law school was managing my time. When I first started, I had not really realised what it meant and that you really have to start studying from the beginning of the term. I was hit full on when it dawned on me while faced with the first exams and at first it seemed that I would not learn from mistakes. While I would always say that I would start studying from day one, I never got around to doing that. However, my greatest help overcoming my terrible time management was experience, and learning from past years, I managed to pull myself together and start studying sooner. I guess that, in the end, the biggest help you can get, is by helping yourself.”

Sonia Benga

Babeș-Bolyai University, Romania

“Okay, so probably the biggest obstacle is when you have too many exams and not enough time to study for all of them, because they are scheduled quite close to each other (for example last year I got 11 exams, in one semester). How to deal with it? Good time manage-ment and efficiency is always a key. Very important was setting up my priorities and choose, which exams are the most important ones and study for these at first and then finish the others.”

Jakub Caja

Slovak Republik

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“Looking back some ten years, I believe I am still facing the same obstacle: a constant refusal of (some) judges to rule solely on the arguments provided to them, paying respect to national and European law. Unfortunately, this seems to be the source of many evils: judgements in breach of European law, no rea-soning at all for important decisions, constant delays in the procedure, violations of the European Con-vention, poor developments of the jurisprudence.

As Martin Luther King once said, I have a dream, that one day I shall be a lawyer in an equitable trial in Romania.”

What is the biggest obstacle you’ve had to overcome in your professional life and how did you manage to do it?

Cosmin Flavius Costaș

Senior Partner at Costaș, Negru & Asociații, Cluj-Napoca, Romania

Mr. Costaș has been our guest for our seventh issue in the Professional Spotlight. We invite you to read his interview for more details about his activity and his perspective.

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“The biggest obstacle for me is the temptation to always give the answers your client wants to hear, or to promise that you can do miracles. This moment is overdone by telling the best lie which is, ‘THE TRUTH’. By saying the truth you can save your honor and the honor of your profession.

You can give everybody the chance to decide when knowing everything there is to know. The rest comes from within.”

Eugen Iordăchescu

Senior Partner at Iordăchescu & Asociații, Cluj–Napoca, Romania

Mr. Iordăchescu has been our guest for our fifth issue in the Professional Spotlight. We invite you to read his interview for more details about his activity and his perspective.

Would you like to read about a specific topic? Tell us your sug-gestions at editors@lawyr.it and we will consider them for the

next issues!

DEVIL'S ADVOCATE

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Does the prevalence of the ‘piercing the corporate veil’ doctrine benefit limited liability companies?

PROs: Jana Bencova

Jana graduated from the Masaryk University in the Czech Repub-lic and practiced law at the Supreme Court of the Czech Republic and in a law firm in Slovakia. During her practice she has provid-ed legal advice mainly in fields of commercial law, IP, litigation, public procurement, and arbitration. Last year she passed the Slovak bar exams entitling her to practice law as an attorney. Currently, she is study-ing in a LLM program in Internation-al Business Law at CEU in Budapest.

CONs: Albana Karapanco

Albana graduated from the University of Tirana, Faculty of Law in 2010. She

holds a LLM degree from University of New York Tirana and currently is a LLM Candidate at Central European University (International Busi-ness Law program) in Budapest, Hungary. She is an attorney at law in

Tirana, Albania and has worked for some years in insurance and pension funds field.

Dear readers,

The following debate questions whether the ‘piercing of the corporate veil doc-trine’ benefits the limited liability companies. The particularity of this form of company is that it allows limited liability to its owners. The ‘piercing of the cor-porate veil’ doctrine allows for the otherwise immune corporate officers, direc-tors, or shareholders to be held liable for the corporation’s wrongful acts.

Keep reading the interesting arguments put forward by our debaters, to decide whether this doctrine benefits the limited liability companies.

By Andreia Moraru

Debate Foreword. Moderator's note

This issue's advocates:

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Jana Bencova: According to the Black´s Law Dic-tionary, the doctrine of piercing the corporate veil is defined as the judicial act of imposing liability on otherwise immune corporate officers, directors, or shareholders of the corporation´s wrongful acts (Gar-ner, 2009). I argue that application of this doctrine benefits the limited liability companies (LLCs).

The doctrine leads to disregarding the fact that a company and its shareholders are separate legal en-tities (Kosmopoulos v. Constitution Insurance Co., 1987). This can be crucial in cases when the share-holder, which is in many times the parent company with regard to the LLC in question, interferes with the activities of the subsidiary and as a result, the company´s operations are influenced in various different ways by the interests and decisions of the shareholder. If such operations cause harm to the company or its creditors, it is fair to hold liable the shareholder.

Several examples suggesting that the doctrine of piercing the corporate veil prevents unfairness and benefits the company, can be found. I will point only to the most important ones that arise in the context of bankruptcy and criminal proceedings and in connection to the fraudulent conduct.

In the bankruptcy proceedings in some jurisdictions, the persons that are otherwise separate and immune from the company´s debts can be held liable, if the company goes bankrupt and the company´s credi-tors cannot satisfy their claims because the assets of the company are insufficient. The rationale behind is that although the separation between the compa-ny and its shareholders exists by definition in law, in practice many times the shareholders conduct the company´s business while their actions, such as undercapitalization or reckless borrowing, can lead the company into insolvency.

The doctrine can prevent unfairness also with re-gard to the criminal liability. This is the case es-pecially when an offender uses the company as a façade (Jones v. Lipman, 1962) or a shield to hide his/her acts that constitute a criminal offence for

Albana Karapanco: The notion of limited liability of a company is presently well established in both common law (referring herein to United States and United Kingdom) and civilian law systems (refer-ring herein to the member states of the European Union) (Becker 2002). The limited liability concept arose out of the need to protect the investors, con-sequently helping enterprises’ growth, and though it originated in Europe, it was recognized in Unit-ed States in early times. (Vanderkerckhove, 2007). In simple terms, without entering into the differ-ences of incorporated and unincorporated forms, it means that the members (owners) of a limited liability company (LLC) are not held liable for the obligations or debts of the entity.

Piercing of the corporate veil is an equitable rem-edy that changes the financial risk that sharehold-ers had anticipated and relied upon (Soderquist et all, 1997). The liability is extended to immune cor-porate officers, directors, or shareholders for the wrongful acts of the company (Garner, 2009). The veil piercing was created in United States but it is met in European legal systems in diverse forms and approaches, mostly under the vesting of sharehold-er liability (Vanderkerckhove, 2007).

The doctrine does not benefit LLCs from legal and economic perspectives. First, the limited liability gives to the entity the most attractive feature in do-ing business and valuable contribution to the eco-nomic progress (Cortenraad, 2000). Currently LLC represents an important vehicle of doing business worldwide. The lifting of the veil challenges the le-gal personality of the company (Salomon v A Salo-mon and Co Ltd [1897] AC 22) that is distinct from its members and a cornerstone of company law. Ad-ditionally, it puts the shareholders in uncertain and unpredictable situations.

Second, the limited liability decreases monitor-ing costs from shareholders to managers and other shareholders (Wheeler, 1993). On the contrary, the uncertainty of the liability makes the sharehold-ers very active and they intervene in management operation. Thus, the managers are not allowed to perform their duty and act efficiently. Despite leav-ing the delegated control to specialists, shareholders

Opening Remarks

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which he/she would otherwise be criminally liable. For example, a parent company profits from the ac-tivities of its foreign subsidiary company that cause environmental damage. In such cases the doctrine permits to hold the parent company liable for the damages, provided that the parent company has a decisive impact on the subsidiary´s actions and therefore the activities of the subsidiary and the parent company are closely linked. But the doctrine can apply also to other persons acting wrongfully besides the company´s shareholders. Particularly directors, managers or other persons entitled to act in the name of the company can commit a crimi-nal offence (Crown Prosecution Service v. Jennings, 2008). Since the act is legally the act of the com-pany, the company should be liable. However, it is fair, under certain requirements, to hold liable also (or instead) the acting person.

Moreover, the corporate veil can be pierced as a remedy against an act that would under specific conditions constitute fraudulent conduct. For in-stance, a person acting on behalf of the company (such as a director) or the company´s shareholder can cause the other party to a contract to believe that he/she is in fact contracting with the person who has a personal liability over the debt arising there from, instead of (or in addition to) the liabil-ity of the company (Macey, 2014). In such a case, it would be in many cases unfair for both the compa-ny and the creditor, to hold liable only the company.

In conclusion, I have argued that the doctrine of piercing the corporate veil aims to prevent unfair-ness resulting for a company from the activities of otherwise immune persons and I provided some ex-amples that support this argument. On the basis of the foregoing it can be concluded that the doctrine and its application benefits the companies.

will look after their assets creating a chaotic situa-tion (Dooley, 1995).

Third, crucial arguments against the prevalence of the doctrine are the substantial economic benefits deriving from the limited liability notion. Some ad-vantages of limited liability are the diversification of investment, increase of liquidity of shares, and undertaking useful risky projects (Smith, Ssrn). In-vestors are willing to invest if they are not exposed to the risks and the whole society benefits from it (Vanderkerckhove, 2007). The prevalence of the doctrine would discourage the participation in the capital markets and impair large corporations (Dooley, 1995).

Also, when piercing the corporate veil, courts take into consideration different factors and circum-stances. Although courts rely on labels or charac-terizations such as alter ego, instrumentality, sham, it is viewed that case law has not shown any sensible rationale or policy why several factors are decisive (Garner, 2009).

The abolition of the corporate veil may be very radi-cal, but the decision to lift the veil and hold respon-sible the people behind the entity must be strict. If not, it will lead to uncertainty and unpredictability. Instead of bringing social benefits, it would lead to abuse. In my opinion it is advisable that parties en-tering into contractual relationship with LLCs pro-vide for ex ante measures and do not rely on the veil piercing as an ex post measure due to disadvantages previously mentioned.

One has to bear in mind that the issue itself is com-plex and must keep in mind the remarkable state-ment of Justice Cardozo that the concept of pierc-ing the corporate veil is still enveloped in the mists of metaphor. Metaphors in law are to be narrowly watched…they end often by enslaving it. (Becker 2002)

Moderator’s Note:

By now we have learnt that the ‘piercing of the corporate veil’ doctrine can both benefit and work against the LLCs. On one hand, Jana argues that this doctrine benefits the LLCs because the shareholders should be held liable for their unlawful actions, not the company itself. On the other hand, Albana argues that the doctrine does not benefit the LLCs since it will prevent the shareholders to invest and take financial risks.

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Jana Bencova: My opponent presented several ar-guments why, in her opinion, the doctrine of pierc-ing the corporate veil does not benefit LLCs.

Firstly, she argues that LLC is a very attractive entity for doing business mainly because the shareholder´s personality is separated from the company´s per-sonality. According to her, the limited liability has many advantages; especially it encourages diversi-fied and risky investments. However, it does not provide any supporting arguments suggesting that the doctrine makes investing in a LLC less attractive, or that founders and shareholders are discouraged from establishing or entering into a LLC as a conse-quence of the doctrine. Therefore her argument has to be rejected. My argument is that LLC remains to be a very popular form of company for the inves-tors despite the fact that the corporate veil can be in exceptional cases pierced. It should be stressed that the limited liability of the shareholders remains a basic rule prevailing most of the time, while ap-plication of the doctrine is only an exception to this rule which should be applied restrictively.

My opponent further argues that the doctrine puts the shareholders in uncertain and unpredictable sit-uations. From this statement, however, it does not follow that the company (as opposed to its share-holders) does not benefit from it. On the contrary, as showed in my opening statement, the doctrine often improves the situation of the company as it corrects unfairness caused by the shareholders.

Similarly, the opponent argues that the limited li-ability decreases monitoring costs of the sharehold-ers. Again, this fact, if true, only means that in-creased monitoring costs put the shareholders into a worse position, but not necessarily the company itself. On the contrary, the company will usually benefit from the fact that the shareholders are more aware of possible consequences of their acts if the corporate veil can be pierced. This makes them dili-gent and it prevents them from undertaking actions that could cause harm to the company.

Excessive activism and intervention in the manage-ment of the company by the shareholders also does not support the statement that the doctrine does not benefit LLCs. Although, there might be such ef-

Albana Karapanco: While analysing the piercing of the corporate veil, the main argument that goes in its favour is the fraudulent conduct of the people behind the entity. My opponent focuses on the fraudulent conduct in the context of bankruptcy and criminal proceedings mentioning the remedial nature of the doctrine itself and concluding that as a means of pre-venting unfairness, it benefits the companies. These arguments do not weaken all the disadvantages the doctrine brings to the companies.

The incentive provided to the business by limited lia-bility has been considered a very important legal de-velopment of the nineteenth century (Barber, 1981). Though years have passed limited liability continues to contribute to the development of commerce and economy, because shareholders are not afraid to take risks.

My opponent argues that the doctrine prevents un-fairness and benefits the company. It is accepted that the veil piercing is an ex post facto remedy used to justify the liability of shareholders, directors and managers. Hence, the piercing of the veil is decided by courts after the events have taken place and more than precautionary nature, it may keep away the in-vestors and frightens directors or managers to work on that position. On one side, the investors/share-holders main argument is that they decide to start a business only because they risk up to their contri-bution. While on the other side, the directors and managers are protected by the business judgment rule and are not held personally liable as long as their decision serves to the best interest of the entity (Cau-dill, 2003).`

Bankruptcy or insolvency of the company does not necessarily means that the veil must be pierced to sat-isfy the creditors’ claims. Several other grounds and factors must be taken into account. Judge Posner in On Command Video Corp. v. Roti opined that A per-son who signs a contract after months of negotiation is in a position to determine whether his counterparty is solvent, and if he makes no effort to do so…he’s on weak ground complaining if the other party turns out to be insolvent. In similar cases, the reliance on the doctrine may impair the reputation of the company

Rebuttal

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forts by the shareholders, they are limited by statu-tory and contractual provisions. The competences of the managers are specified in law and there are very limited possibilities for the shareholders to in-terfere with them.

Furthermore, the opponent states that the case law does not provide for any sensible rationale for the factors that are decisive when piercing the corporate veil. Firstly, it does not follow how this statement proves that the doctrine does not benefit LLCs, and secondly, this statement is in my opinion oversim-plified. Each individual case decision, not only one relating to the piercing of the corporate veil, has its reasoning and arguments that are applicable to the particular facts in question. Sometimes, it might be difficult to deduct general rules, but this is the case for many other legal doctrines.

The opponent further argues that the piercing should be applied strictly, because it can lead to uncertainty and unpredictability or even to abuse. Firstly, the opponent does not further develop the argument regarding possible abuse. But in my open-ing statement it was shown that it is rather the lim-ited liability that is often abused to the detriment of the company. Secondly, the doctrine is actually applied strictly, because it is only an exception to otherwise prevailing rule of limited liability of the shareholders.

Finally, the opponent suggests that ex ante contrac-tual measures should be adopted instead of relying on the doctrine. I agree that ex ante measures are advisable; however if they are not in place or if they nevertheless fail to provide a fair outcome, the doc-trine can operate in order to correct the unfairness.

and the people behind it. Therefore, parties must look after their interest and not counting and claiming the piercing of the corporate veil as the first solution to the problem.

Additionally, the academic literature is characterised by confusions, incoherencies, and contradictions on the doctrine application. Thus, the conviction how the doctrine benefits the companies is not straight-forward. If the benefits of the LLC were so evident, the courts would not struggle from case to case whether to pierce or not and trying to balance all the advantages and disadvantages involved. As a general rule, courts are reluctant to pierce the corporate veil and the grounds on which the veil must be pierced are not clearly established. It follows from this that the decision may be highly subjective and may vary from one court to another.

In order to prevent the veil piercing due to all ad-vantages it provides, more can be done with regard to the compliance with the formalities and LLC su-pervision.

Even if the limited liability of the company has been set aside and courts have held decisions on the is-sue, this does not imply that the piercing of the cor-porate veil may be perceived as a trend. The impact of the doctrine on the business, resulting in market and economic consequences, most likely may show the need to reconsider the doctrine and require its application only under strict specific situation when it may be considered as the last remaining remedy favouring the public good. The veil piercing does not benefit LLC, but imposes ambiguity, uncertainty and additional unnecessary costs.

Moderator’s Note: We have now seen how each debater formulated solid counter-arguments to the argu-ments of their opponent. On one hand, Jana demonstrates that there is no proof of any kind to indicate that the LLCs will not be anymore an attractive form of investment if the doctrine is applied. On the other hand, Albana shows that since the doctrine is not coherent enough it create uncertainties for both the shareholders and the judges who have to apply it and the same results which should be achieved through this doctrine can be reached by implementing a more thorough supervision system over LLCs.

I hope you enjoyed the debate and the conclusions will help you form an opinion of your own!

VOL. 3 | ED. 2

71

Jana Bencova: A general conclusion that the doc-trine does not benefit LLCs, as stated by my oppo-nent, has to be rejected, because such a broad state-ment was already disproved by some of a number of examples found in case law where the doctrine ac-tually proved to be beneficial. I previously stressed that the doctrine has an exceptional character, which is also an answer to the two additional arguments my opponent presented, mainly that the application of the doctrine is inconsistent and that the doctrine impairs the reputation of the company. Firstly, the doctrine is applied exceptionally in order to correct unfairness and the unfairness is far from being de-fined or settled. This, together with different facts and circumstances in individual cases, explains to a large extent the argued inconsistency. Secondly, it is not clear how could the doctrine that is used only ex post and exceptionally, impair the reputation of a particular company. If anyone´s reputation is at stake, it is the reputation of those persons that are eventually held liable.

Finally, it is undisputable that nobody should count on that doctrine and I do not think any reasonable person actually does. On the contrary, any subject entering into a commercial relationship with a com-pany should be vigilant and cautious. Nevertheless, this does not disprove a conclusion that, despite possible disadvantages, the doctrine does benefit LLCs, mainly when the circumstances of the case do not allow other remedies to correct unfairness.

Albana Karapanco: As discussed in my opening and counter arguments, it is clear that the prevalence of piercing the corporate veil doctrine does not ben-efit LLCs. The limited liability notion protects the existing investors and attracts the new ones. Putting the limited liability concept in question, more than legal concerns may affect the market. If investors are not willing to invest and directors and managers fear the consequences of their decision, the situa-tion will not be desirable.

The issues argued by my opponent with regard to bankruptcy and criminal liability are possible but they do not provide the rationale how the LLC it-self benefits from them. Indeed, the veil piercing is a remedy to the creditors and serves to the public interest but the arguments of the opponent are not clear how the prevalence of the doctrine benefits the LLC. Simply put, an exception to the rule must not be considered beneficial in broad terms.

Finally, the disadvantages that the prevalence of the doctrine brings to the LLCs are clearly articulated. The prevalence impairs not only the LLC as a well accepted and successful entity but also the market. Hence, parties must provide for their protection and the doctrine must be applied as the last resort.

Closing Remarks

Who do you believe won this debate? Express your view on our platforms!

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WE WOULD LIKE TO THANK ALL THOSE WHO CONTRIBUTED TO THIS EIGHTH EDITION:

Andreia-Gemma MoraruAlexandra Muresan

Ary Ferreira da CunhaBoldizsár Szentgáli-Tóth

Carina VermesanCristiana A. Baltag

Dan MorosanDiana Lucaciu

Denisa-Nina Sibneschi

Dora Maria DembleIoana Ratiu

István SzakácsMadalina PerteRadu Somlea

Razvan BostinaruMircea GrozavuOana Iulia Irimia

Vlad Druta

We would like to extend special thanks to Elena Virginia Botezan for taking the time to offer us an interview, to Jana Bencova and Albana Karapanco, for their contribution to this edition’s debate, as well as to Ana Condor, for contributing with photos. We also thank to all students as well as lawyers who answered this issue's question.

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