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The relation of compliance norms to legal norms is important, among other things, because it may influence the assessment of one of the basic demands addressed to legal systems, which is their consistency. The effect of compliance norms is not only to ensure compliance with the law, i.e. the effectiveness of the law, but also to regulate issues previously reserved for the competence of lawmakers. The question therefore arises as to whether this does not jeopardise the coherence of entire legal systems. The purpose of this chapter is to examine this issue.
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Both the description and the verification of the assumptions contained in this section are based on the analysis of compliance regulations relating to selected examples, the further development of which is included in the following sections of the book. Research on the transfer of commercial data and other data held by corporations, matrix management issues affecting the assessment of corporate governance and legislative and regulatory arbitrage, which is the choice of a place of conducting business activity made by corporations, which is more advantageous from the point of view of the normative environment, were conducted on the basis of analyses carried out in a number of international corporations. The data used for the analyses are also derived from information from international industry associations.
More on consistency, see W. Lang, J. Wróblewski, Współczesna filozofia i teoria prawaw USA, Warsaw 1986, pp. 74–89; G. Skąpska, J. Stelmach, Współczesne problemy i modele legitymizacji prawa, Colloquia Communia 41/1988–1989, pp. 5–18; S. Wronkowska, Podstawowe pojęcia prawa i prawoznawstwa, Poznań 2005, p. 120; K. Pałecki, Prawoznawstwo zarys wykładu, Warsaw 2003, p. 126.
Z. Ziembiński, Wstęp do aksjologii dla prawników, Warsaw 1990, p. 176.
For the purposes of this text, the term norm shall be understood as the smallest reasonable form of provision, formulated as a demand or authorization to conduct a particular type of general abstractive behavior derived from the law applicable in the system. See T. Stawecki, P. Winczorek, Wstęp do prawoznawstwa, Warsaw 2003, p. 63.
The first example is the directive on the clarity of the text, the second one is the directive which establishes that laws are divided into articles and regulations into paragraphs. So M. Błachut, W. Gromski, J. Kaczor, Technika prawodawcza, Warsaw 2008, p. 6. Also S. Wronkowska, M. Zieliński, Komentarz do zasad techniki prawodawczej z dnia 20 czerwca 2002 r., Warsaw 2012, p. 20.
About the quality of law see, e.g., S. Kaźmierczyk, O trzech aspektach jakości prawa, Studia z Polityki Publicznej 1(5)/2015, p. 83 et seq.
See footnote 62 on the rules that prescribe the realization of a specific value that is essential for the law. In this context, this important value for the law is the coherence of the whole system and the non-contradiction of the norms that constitute it.
More about the principles of law in the political order of the state, including the principle of non-contradiction: J. Kuciński, W. J. Wołpiuk, Zasady ustroju politycznego państwa w konstytucji Rzeczypospolitej Polskiej z 1997 roku, Warsaw 2012, p. 92.
It is precisely the axiological references, which are the basic element legitimizing good law or, more precisely, the rule of good law, that have become the main axis on which the theses formulated by Fuller and developed by the continuators of his concepts are based. One of these theses concerns the principle of the need for the law to avoid conflicting rules. See L. L. Fuller, Moralność prawa, Warsaw 1978, p. 68 et seq.; K. Pałecki, Uwagi o dobrym prawie – wprowadzenie do dyskusji [in] P. Mochnarzewski, A. Kociołek-Pęksa [ed.] Dobre prawo, złe prawo – w kręgu myśli Gustawa Radbrucha, Warsaw 2009, p. 91.
The situation in which no element of the group violates the accepted formal and substantive rules (natural), the order of internal relations in this group means the feature of coherence. So e.g. A. Sulikowski, W poszukiwaniu zasad prawa, Wrocław 2006, p. 65 et seq. Also e.g. A. Aarnio, R. Alexy, A. Pecznik, W. Rabinowicz, J. Woleński, On Coherence Theory of Law, Lund 1998, p. 7 et seq. and newer relations to these positions: A. Amaya, Justification, Coherence, and Epistemic Responsibility in Legal Fact-Finding, Journal of Social Epistemology 5/2008, p. 306.
Cf. B. Brożek, Legal Interpretation and Coherence [in] M. Araszkiewicz, J. Savelka [ed.] Coherence: Insights from Philosophy, Jurisprudence and Artificial Intelligence, Law and Philosophy Library 107, Springer 2013, p. 113 et seq.
When trying to decide whether the cohesion of the normative system is a principle or a value, it is worth noting the view that the principles of law, including the principle of cohesion, are the kind of norms that form the order of realization of a certain value. They differ from the rules, i.e. ordinary norms, by the subject of the obligation formulated in them, which in their case is not a specific course of action. Therefore, the principles do not refer to the sphere of obligation to act (refrain from acting) in relation to a specific deed but order the realization of a specific value important for the law. See M. Kordela, Zasady prawa studium teoretycznoprawne, Poznań 2012, p. 150 et seq. In contrast to the principles of law, it distinguishes between directive and descriptive principles, among which directive principles are those which aim at influencing the behavior of certain entities in the direction of their behavior. In this sense, these are legally binding norms, but in a sense superior to other norms of the system. Descriptive principles, in turn, refer to the patterns of specific subjects of the norm and indicate the way of resolving a given issue, distinguished from a specific point of view, or the pattern of shaping a legal institution. See S. Wronkowska, Z. Ziembiński, Zarys teorii prawa, Poznań 2001, p. 187. More on the consistency resulting from the linguistic clarity of normative expressions, see M. Zieliński, Wykładnia Prawa. Zasady, reguły, wskazówki, Warsaw 2012, p. 150.
When dividing the systems of law, its theorists, depending on the concept they pursue, will point to an independent genesis, free from human creative interference, either as legal naturalists or, on the contrary, as anthropogenic, being the product of human activity, as positivist schools. From the point of view of the incidence of these disputes on the subject-matter of these considerations and given that the genesis of the legal system is much more complex in nature, the most useful here seems to be to ignore these differences. See T. Stawecki, P. Winczorek, op. cit., p. 114 et seq.
Although such a situation may seem to be worrying for a long time now, there is a belief that it is not an unnatural phenomenon at all. J. Rawls argues that it seems natural to suppose that the distinct character and autonomy of the various elements of society require that in certain spheres they operate on the basis of their own rules, designed to suit their specific nature. J. Rawls, Liberalizm polityczny, Warsaw 1998, p. 356.
This applies in particular to internal regulations issued by corporations—international business organizations with global reach. These regulations take the form of internal normative acts (e.g. of different rank of internal regulations of very different scope and detail of regulations), but also regulations statued in a much less unambiguous form (e.g. in all kinds of “standards”, “policies” or “manuals”). Importantly, those regulations contain rules imposing a certain type of behavior not only applicable to employees or other entities in direct relations with those corporations, but also much more broadly. More on this subject is included further in this book.
It is primarily international corporations that create their own normative systems. In practice, however, at least some of these norms also affect the outside world. Similarly, regulations resulting from mutual agreements between corporations may have a broad impact. These are not only simple agreements relating to their dominant or monopolistic position, but also much more complex agreements such as those relating to the fixing of interest rates on certain interbank markets, for example LIBOR or EURIBOR, agreements concerning the level of fees and the clearing method between payment institutions such as Visa and MasterCard and banks, etc.
Cf. A. Bator, Integracja i globalizacja z perspektywy filozofii prawa [in] J. Stelmach [ed.] Filozofia prawa wobec globalizmu, Kraków 2003, pp. 9–26.
About the pressure groups as one of the forms of intermediary bodies see, e.g., D. T. Ostas, The Law and Ethics of K Street: Lobbying, the First Amendment and the Duty to Create Just Laws, Business Ethics Quarterly 17(1)/2007, p. 33.
More on the autonomous relationship between some normative systems and law—a monographic study W. Gromski, Autonomia i instrumentalny charakter prawa, Wrocław 2000 passim.
An example of such norms is the corporate compliance norms described in this text, but not only these. Other similar norms shaping the normative situation of broad groups of actors are created by agreements between corporations, by various types of trade unions, as well as by private international organizations and associations, e.g. lex sportiva or lex internet.
Examples can be commonly used guidelines such as ISDA—International Swaps and Derivatives Association Inc., which are renewed every few years, as economic relations become more complicated. It is currently difficult to find such practices in relations between financial institutions and entities concluding derivative agreements with them that would not be based on ISDA templates detailing the scope of powers of financial institutions and the responsibilities of their clients. The generally abstract nature of these norms, their widespread application and the actual impossibility of any different shaping of relations between the parties speaks in favor of looking at these acts as normative rules rather than typical contractual patterns.
The broad reach of these norms is due, inter alia, to the fact that these organizations often operate simultaneously in several jurisdictions, with hundreds of thousands of employees and hundreds of millions of customers. Cf. B. Roach, Corporate Power in Global Economy, Medford 2007, p. 28. Also C. Derber, Corporation Nation: How Corporations Are Taking Over Our Lives and What We Can Do About It, New York 1998; I. Hobson, Jr., The Unseen World of Transnational Corporations’ Powers, New York 2004, p. 26.
Examples include information security standards, how corporations consent to their use of data, methods of settling international transactions, and even the conditions required for the performance of specified benefits. The beginnings of this process and its evolution, see E. M. Dodd, R. J. Baker, Cases and Materials on Corporations, New York 2000, p. 99.
High-frequency transactions and their impact on the macroeconomic situation in global markets can be one of many examples. Cf. E. T. Swanson, Let’s Twist Again: A High- Frequency Event- Study Analysis of Operation Twist and Its Implications for Quantitative Easing, San Francisco 2011, p. 20 et seq.
There are many attempts to establish a legal definition of a corporation under different legal systems. The descriptive definition adopted in the US legal doctrine is based on its jurisprudence and specifies that a corporation is: “a legal person created under State law in rare cases by a natural person and his successors, albeit usually by a group of natural persons who, acting jointly and under the law, collectively, have a legal personality distinct from the legal personality of the individual persons, having the capacity conferred upon it to maintain continuity notwithstanding any change which may occur in its composition, for a specified or indefinite period of time, and capable of acting as one body for matters relating to a common purpose, within the limits laid down for legal persons”. The derivation of this definition is based on the case-law of the courts and the literature relating to it: Sutton’s Hospital, 10 Coke. 32; Dartmouth College vs. Woodward, 4 Wheat. 518, 636, 657. 4 L. Ed. 629; the United States vs. Trinidad Coal Co., 137 U.S. 160, 11 Sup. Ct. 57. 34 L. Ed. 640; Andrews Bros. Co. vs. Youngstown Coke Co., 86 Fed. 585, 30 C. C. A. 293; Porter vs. Railroad Co., 76 111. 573; State vs. Payne, 129 Mo. 468, 31 S. W. 797. 33 L. R. A. 576; Farmers’ L. & T. Co. vs. New York, 7 Hill (NY) 2S3. State Business Law Dictionary, Washington 2013. It reflects the essence of how the concept of corporation is understood today in legal practice and in many other languages. For the purpose of this analysis, a definition can be proposed, according to which it is assumed that this is a specific type of entrepreneur, conducting business on an international scale, usually in the form of a complex ownership structure consisting of interconnected entities with common management at the highest level of consolidation.
Even the doctrine of formal sources of law, complemented by the distinction between autonomous and dependent sources of law, indicates that norms arising from dependent sources of law cannot be an independent source of rights and obligations. A contrario, only those rules and principles that can constitute an independent basis for a judicial decision or other act of law application can be considered an autonomous source of rights and obligations. Cf. L. Morawski, Główne problemy współczesnej filozofii prawa. Prawo w toku przemian, Warsaw 2005, p. 244.
D. Shelton [ed.] Commitment and Compliance : The Role of Non- binding Norms in the International Legal System, New York 2000, p. 9 et seq.
The fact that still too little attention is paid to the norms created by group norms and private law systems, which influence both the whole society and the behavior of its individual members, is noticeable, L. E. Mitchell, Understanding Norms, Toronto 1999, p. 200.
An example is the inclusion of any form of non-contractual gratuity for services rendered in a relationship between a corporation and its customers as prohibited conduct, because it is considered to be corrupt in such situations. We are talking here about such a tightening of standards that, in a given jurisdiction, a certain action remains both fully compliant with the law and not only does not violate good manners but is even advisable in accordance with these customs. It is precisely this global application of uniform standards, which are absolutely binding on the entities cooperating with a given corporation, without taking into account local legal and customary specificities, that in practice raises a number of doubts about the nature of these regulations.
On axiological justifications for the existence of standards, see A. Bator, W. Gromski, A. Kozak, S. Kaźmierczyk, Z. Pulka, Wprowadzenie do nauk prawnych. Leksykon tematyczny, Warsaw 2015, p. 114 et seq.
More on soft laws, see J. Jabłońska-Bonca, Soft justice w “państwie sieciowym” [in] S. L. Stadniczenko, H. Duszka-Jakimko [ed.] Alternatywne formy rozwiązywania sporów w teorii i w praktyce. Wybrane zagadnienia, Opole 2008, p. 65 et seq.; A. T. Guzman, T. Meyer, International Soft Law, The Journal of Legal Analysis 2(1)/2011; G. C. Shaffer, Mark A. Pollack, Hard vs. Soft Law: Alternatives, Complements and Antagonists in International Governance, Minnesota Law Review 94/2010, p. 712.
These administrative bodies and regulators have powers to undertake regulatory actions in relation to particular sectors of the economy, but these powers do not necessarily mean the authority to undertake legal actions. In relation to regulatory and supervisory powers in the area of banking law, see M. Bączyk, E. Fojcik-Mastalska, L. Góral, J. Pisuliński, W. Pyzioł, Prawo bankowe. Komentarz, Warsaw 2003, p. 509.
At the same time, since the purpose of these standards is to ensure compliance, they must take into account the entire legal system constituting the normative environment of financial institutions. On financial law standards, see C. Kosikowski, J. Matuszewski, Geneza i ewolucja oraz stan obecny i przewidywana przyszłaość prawa finansowego [in] C. Kosikowski [ed.] System Prawa Finansowego, vol. I, Warsaw 2010, p. 15 et seq. And also C. Kosikowski, Samodzielny byt prawa finansowego jako działu prawa i problem jego autonomiczności, Warsaw 2010, p. 419.
About the importance of the value criterion in the process of establishing and interpreting legal norms in general: M. Safjan, Wyzwania dla państwa prawa, Warsaw 2007, p. 25 et seq.
Cf. G. R. Weaver, L. K. Trevino, Compliance and Values Oriented Ethics Programs: Influences on Employees’ Attitudes and Behavior, Business Ethics Quarterly 9(2)/1999, p. 315.
More about cultural conditions of international corporations: J. Galli, Plemienna korporacja, Warsaw 2013, p. 33 et seq. See also about creating desired patterns of corporate behavior based on values and culture: M. Baczewska-Ciupak, Przywództwo organizacyjne w kontekście aksjologicznych i moralnych wyzwań przyszłości, Lublin 2013, p. 65 et seq.; W. Gasparski [ed.] Etyka biznesu w zastosowaniach praktycznych: inicjatywy, programy, kodeksy, Warsaw 2002, p. 32.
See B. Makowicz, Compliance w przedsiębiorstwie, Warsaw 2011, p. 37.
Cf. A. G. Scherer, G. Palazzo, Toward a Political Conception of Corporate Responsibility: Business and Society Seen from a Habermasian Perspecive, Academic Management Review 32(4)/2007, p. 1100 et seq.; M. S. Ausslaender, J. Curbach, Corporate or Government Duties? Corporate Citizenship from a Governmental Perspective, Business and Society 5/2015, p. 90.
An example is the self-regulation of financial institutions aimed at creating binding standards for prudent risk management in response to emerging cyclical crises. Legal regulations are often the consequence of sanctioning earlier industry self-regulations. The most significant example, in terms of the scope of impact and scope of regulation, are the recommendations of the Basel Committee, which have been mentioned several times in the paper, and discussed in more detail in Chapter 3.
There are many examples of areas that are largely outside the scope of legal regulations and where the need to regulate has been reflected in corporate norms. These include, for example, matters related to managing the security of confidential information, resolving conflicts of interest, ways of protecting resources contained in IT clouds, etc.
Extensively on the globalization of law and its consequences for the science of law resulting from globalization phenomena, see B. De Sousa Santos, Towards a New Legal Common Sense: Law, Globalization, and Emancipation, London 2002.
On the subject of the separation of branches of law through its differentiation, see A. Bator, Dyferencjacja [in] A. Bator, W. Gadomski, A. Kozak, S. Kaźmierczyk, Z. Pulka [ed], Wprowadzenie do nauk prawnych. Leksykon tematyczny, Warsaw 2012, p. 148.
These differences result from many factors, beginning with differences resulting from the sphere of a business in which each of these corporations operates (because the normative systems of banks will look different, and insurance companies, energy companies, consulting companies, and yet also multi-sector industrial corporations such as GE, Siemens, or some Korean chebols). Another feature that significantly influences the shape of the normative system within a corporation is the age-related tradition of regulation in a given company (differently these regulations will look like in old enterprises like Mercedes-Benz or ThyssenKrupp, and differently in young Google and Facebook. The factor that cannot be overestimated is the cultural tradition of the corporation’s home country (the internal normative systems in the Japanese bank Namura are different, in the British bank Lloyds, and in the American Citigroup). See B. Scholtens, Cultural Values and International Differences in Business Ethics, Journal of Business Ethics 75(3)/2007, p. 273 et seq., as well as G. Hofstede, B. Neuijen, D. Ohayv, G. Sanders, Measuring Organizational Cultures: A Qualitative and Quantitative Study Across Twenty Cases, Administrative Science Quarterly 35(2)/1990, p. 290.
An unobvious empowerment in the understanding proposed in this text is any situation in which corporations regulate the sphere of duties of entities entering into relations with them regardless of, and especially to a greater extent than it results from, the provisions of law. Numerous examples include the obligation for customers and business partners to provide additional information concerning them, the collection of which is not related to the transaction in which the information was requested. See N. Hsieh, Does Global Business Have Responsibility to Promote Just Institutions? Business Ethics Quarterly 19/2009, p. 260 et seq.; J. M. Kline, TNC Codes and National Sovereignty: Deciding When TNCs Should Engage in Political Activity, Transnational Corporations 14(3)/2005, p. 30.
More about the law as an element that defines the whole social and economic life and at the same time unites this life—R. Stammler, Gospodarka i prawo [in] M. Szyszkowska [ed.] Europejska filozofia prawa, Warsaw 1995, p. 80.
More on matrix management e.g. J. Wieland, Corporate Governance, Values Management, and Standards: A European Perspective, Business Society 1/2005, p. 74 et seq.; C. A. Barlett, S. Ghoshal, Matrix Management: Not a Structure, a Frame of Mind, Harvard Business Review 60(4)/1990, p. 138; E. W. Larson, D. H. Gobeli, Matrix Management: Contradictions and Insights, California Management Review 29/1987, p. 126; D. I. Clelant, W. R. King, The Cultural Ambience of Matrix Organization, Wiley 2008 (download 6 March 2019); M. R. Gottlieb, The Matrix Management Organization Reloaded, London 2006, p. 26 et seq.
A major problem of admissibility of non-compliance with selected legal norms occurred in the situation of prior criticism of them from the position of their place and tasks in the hierarchy of norms—R. Dworkin, Biorąc prawa poważnie, Warsaw 1998, p. 68.
According to the definition of the Financial Times Lexicon, regulatory arbitrage occurs when companies take advantage of loopholes in their regulatory systems by avoiding compliance with certain regulations. It takes place through conducting business activities, creating products and services in locations outside the area appropriate for selected regulators. Example: there are concerns about the possibility for UK banks to relocate to other countries to avoid disclosure of salaries and bonuses of their employees. More on regulatory arbitrage, see B. Minton, A. Sanders, P. E. Strahan, Securitization by Banks and Finance Companies: Efficient Financial Contracting or Regulatory Arbitrage? Ohio State University Papers, 2004, p. 19 et seq.; J. F. Houston, C. Lin, Y. Ma, Regulatory Arbitrage and International Bank Flows, Hong Kong 2012; A. K. Shah, Regulatory Arbitrage Through Financial Innovation, Colchester 2007, p. 85.
More on decontructivism where the reading of the normative language happens through the contact with the text, from which the privileged meanings are derived with the use of the valuating notions that reverse the the existing relations. See J. Derrida cited by: M. Zirk-Sadowski, Wprowadzenie do filozofii prawa, Warsaw 2011, p. 163.
See, e.g., Critical Legal Studies and also K. Llewellyn, The Common Law Tradition: Deciding Appeals, Boston 1960, pp. 135 and 228.
This complication is also due to the fact that, in the case of corporations operating worldwide, such conflicts of corporate norms occur at the same time when they clash with the legal norms of many countries with different legal traditions and cultures. Lawyers from continental European countries that are members of the European Union have a different approach to this type of collision than those from the United States, Brazil or China. The methods of interpretation and legal conclusions, especially from the perspective of the role and function of evaluation: S. O. Hansson, The Structure of Values and Norms, Cambridge 2004, p. 30 et seq.; A. Marmor, Interpretation and Legal Theory, Oxford 2005, p. 74 et seq.; M. Safjan, The Universalization of Legal Interpretation [in] J. Jemielniak, P. Mikłaszewicz [ed.] Interpretation of Law in the Global World: From Particularism to a Universal Approach, Berlin 2010, p. 107.
More on the subject of the lawyers’ intuition by various legal theories T. Pietrzykowski, Intuicja prawnicza, Warsaw 2012, p. 162.
The reflections undertaken as part of the economic analysis of the law are useful here. See J. Stelmach, Law and economics jako teoria polityki prawa [in] M. Soniewicka [ed.] Analiza ekonomiczna w zastosowaniach prawniczych, Warsaw 2007, pp. 45–66.
Cognitive science calls it a framing phenomenon, which is based on the difference in perception of the situation depending on the perspective of profit or loss. Cf. J. N. Druckman, The Implications of Framing Effects for Citizen Competence, Political Behavior 23(3)/2001, p. 225.
About the contemporary school of economic law analysis and its influence on the contemporary interpretation of the interdependence of legal norms and economic processes: J. Stelmach, R. Sarkowicz, Filozofia prawa XIX i XX wieku, Cracow 1999, p. 184 et seq. and also A. Bator, W. Gromski, A. Kozak, S. Kaźmierczyk, Z. Pulka, Wprowadzenie do nauk prawnych. Leksykon tematyczny, Warsaw 2012, p. 34.
Recognition of the existence of ‘sovereignty outside the legislature’, as the legislature outside the sovereignty, see H. L. A. Hart, Pojęcie prawa, Warsaw 1998, p. 104 et seq.
- Compliance Norms and Legal Coherence
- Chapter 2
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