Drivers of the Formalization of Banking Supervision

In this chapter, the drivers of the formalization of banking supervision are examined from seven perspectives: (a) charter requirements, (b) banknote issuance, (c) liability rules, (d) ensuring the public’s trust, (e) financial crises, (f) economic control, and (g) financial globalization. Our analysis shows that formalization occurred in response to the shifting needs of the time/era and that the formalization process was basically incremental. Notably, financial crises, which are generally considered to be the primary drivers of major regulatory and supervisory reforms, did not always play a leading role in the formalization of banking supervision. It should also be noted that from a historical perspective, regulation and supervision were not “natural” responses to a dysfunctional banking system. Rather, the formalization of banking supervision was the product of complex political actions negotiated by relevant stakeholders with divergent interests in a specific social, political, and economic environment.

Liability for robots I: legal challenges

In robot torts, robots carry out activities that are partially controlled by a human operator. Several legal and economic scholars across the world have argued for the need to rethink legal remedies as we apply them to robot torts. Yet, to date, there exists no general formulation of liability in case of robot accidents, and the proposed solutions differ across jurisdictions. We proceed in our research with a set of two companion papers. In this paper, we present the novel problems posed by robot accidents, and assess the legal challenges and institutional prospects that policymakers face in the regulation of robot torts. In the companion paper, we build on the present analysis and use an economic model to propose a new liability regime which blends negligence-based rules and strict manufacturer liability rules to create optimal incentives for robot torts.

Firm Liability When Third Parties and Consumers Incur Cumulative Harm

This paper analyzes liability rules when consumers and third parties/the environment incur harm. Expected harm is convex in the level of output and modeled as a power function. We show that the social ranking of liability rules previously established for the case in which only consumers suffer harm (Strict Liability dominates No Liability and Negligence) may be reversed if harm to third parties or the environment is sufficiently important.

A note on organizational structure and environmental liability

This paper employs a multi-task principal-agent model to examine how a corporation’s organizational structure and liability rules for environmental damages affect the incentive schemes offered to managers. We derive environmental liability rules for risk averse managers under two alternative organizational structures: a product-based organization (PBO) and functional-based organization (FBO). For a PBO, it is shown that efficiency is independent of whether the firm or managers are liable for environmental damages; in a FBO it is optimal either to hold the firm liable for environmental damages or, equivalently, to only hold the environmental managers liable for damages. It is also shown that the two organizational structures are equally efficient when there is no correlation between environmental damages from products and no spillover between managerial effort across products or functions. Numerical results further reveal that beneficial spillovers between functions for the same product favours a PBO over a FBO; beneficial spillovers across functions favours a FBO.

The Reform of Civil Legislation on Legal Liability

The article is devoted to the research of the institute of civil liability through the prism of recoding of the civil legislation of Ukraine. Particular attention is paid to the experience of a number of European Union countries in reforming civil legislation. The study used the following methods: dialectical, formal and legal, comparative legal. In the process of future recoding of the civil legislation of Ukraine, it is proposed to focus the attention of the expert community on the following problems: defining a system of non-contractual obligations; overcoming the dominance of blanket norms in the main act of civil law; revision of fundamental approaches to terms of exemption from civil liability; full revision of the rules governing liability for breach of monetary obligations; the need to enshrine pre-contractual liability rules; the implementation of institution of collective redress in substantive civil law; rethinking of approaches to the regulation of conditioning obligations.

Liability rules for autonomous vehicles

PurposeThe coming use of autonomous vehicles has kindled an extensive debate over the choice of a desirable liability regime. This article contributes to that debate by explaining how rules for liability and damages ought to be constructed to deal first with stranger (including highway) cases and then with consensual cases (like medical malpractice). It concludes that an output regime based on events as they unfold is applicable in the former but not in the latter. It then argues that this legal regime carries over without a hitch to autonomous vehicles. It then further notes that in private disputes there are no fixed rules for deciding how to mix rules for injunctions and liabilities for threatened harms, and further notes that the regulatory regime for IoT will face those same difficulties, which are best solved by trying to minimize the sum of Type I and Type II errors, as in other cases.Design/methodology/approachLegal reasoning/analysis.FindingsOne salient point is that the rules of the road should change in response to technical innovation, but liability rules should not. The sound approach for dealing with damages for past incidents ought to be constructed to deal first with stranger (including highway) cases in which there is a dichotomous decision on compliance or not. That regime is based on events as they unfold, and carries over without a hitch to autonomous vehicles. For dealing with the prevention of future harms from violation of these rules, by contrast, there are no fixed rules for deciding how to mix damages with injunction, and the substitution of a system of direct state enforcement faces the same difficulties of implementation. In both settings, the rules of the road should be held constant, after which the ideal remedial mix follows the traditional approach of trying to minimize the sum of Type I and Type II errors, relating to over and underenforcement. The basic rules of tort liability stand in contrast to the different standards of liability that arise in consensual situations, and in all cases, they must necessarily be supplemented by rules of vicarious and product liability. Overall, the bottom line is this: autonomous vehicle innovations are relevant to designing regulations for future and uncertain harms, but irrelevant to liability for past harms.Originality/valueThis is an original legal analysis on the topic of Autonomous Vehicles.

Equilibria Under Negligence Liability

In many accident contexts, the expected accident harm depends on observable as well as unobservable dimensions of the precaution exercised by the parties involved. The observable dimensions are commonly referred to as the ‘care’ levels and the unobservable aspects as the ‘activity’ levels. In a seminal contribution, Shavell, S (1980). Strict liability versus negligence. J. Leg. Stud. 9: 1–25 extended the scope of the economic analysis of liability rules by providing a model that allows for the care as well as activity level choices. Subsequent works have used and extended Shavell’s model to predict outcomes under various liability rules, and also to compare their efficiency properties. These works make several claims about the existence and efficiency of equilibria under different liability rules, without providing any formal proof. In this paper, we re-examine the prevalent claims in the literature using the standard model itself. Contrary to these prevalent claims, we show that the standard negligence liability rules do not induce equilibrium for all of the accident contexts admissible under the model. Under the standard model, even the ‘no-fault’ rules can fail to induce a Nash equilibrium. In the absence of an equilibrium, it is not plausible to make a claim about the efficiency of a rule per-se or vis-a-vis other rules. We show that even with commonly used utility functions that meet all of the requirements of the standard model, the social welfare function may not have a maximum. In many other situations fully compatible with the standard model, a maximum of the social welfare function is not discoverable by the first order conditions. Under the standard model, even individually optimum choices might not exist. We analyze the underlying problems with the standard model and offer some insights for future research on this subject.