European System of Private Laws: An Economic Perspective

Abstract

A theoretical framework for the analysis and design of a European System of Private Laws and Regulations is presented. Since private laws also encompass a considerable amount of mandatory legal rules (increasingly fuzzy distinction between public and private law), both traditional private law rules that facilitate market exchange as well as mandatory (public or private law) rules for the regulation of markets are taken into account. Based upon a multi-level governance approach, economic theories of federalism and regulatory competition are used to analyze the optimal degree of centralisation/ decentralisation of legal rules for markets within a two-level legal system (EU and Member States). An overview of the most important criteria for the vertical allocation of regulatory powers and of different types of regulatory competition is given (including their advantages and disadvantages). The most important conclusion is that the optimal structure depends on the specific regulatory problem and detailed analyses are necessary, because complex trade off problems between manifold positive and negative effects of centralised/ decentralised solutions and regulatory competition can emerge. For the governance of such a European two-level system of private laws and regulations an appropriate shaping of conflict of laws- and choice of law-rules is crucial. The theoretical analysis of multi-level legal systems, especially in regard to their innovativeness and adaptability to changing circumstances and preferences, suggests that the EU should be more cautious in pursuit of legal harmonisation than they have been in the past.