Liability Rules Research Articles

Preventive investment, malfunctions and liability

In this paper we study the decision of a firm to undertake a one-time proactive preventive investment to limit the occurrence of future disruptions. The firm is operating in a market with uncertain demand, and its products are subject to a risk of malfunction. Malfunctions lead to direct costs, consisting of, e.g. legal fees, fines and additional costs. But they also make the product less attractive, affecting product demand. Moreover, the firm may be strictly or partially liable for these malfunctions. In order to take into account different levels of liability, we introduce a liability parameter. Our model takes these features into consideration, and we determine the optimal time and size of the preventive investment, depending on the liability rule, that maximize the value of a firm that is already in the market and has the option to invest in a preventive infrastructure. We then determine the liability rule that steers this investment decision in such a way that malfunction damage is minimized.

The Governance of Big Data and Artificial Intelligence in Network Industries

An important precondition for the development of artificial intelligence (AI) in network industries is the access to big data and the attendant necessities of data sharing and data portability. The goal of this paper is to analyze the changing needs of entrepreneurial decision-making to exhaust the innovation potential of AI-driven big data value chains taking into account AI-specific ethical, security and privacy regulations. The analytical concept of AI-powered big data virtual networks is investigated with a focus on the governance of 5G-based big data value chains required for Internet of Things (IoT) applications in particular smart networks. Although several actors may be involved—such as broadband providers, cloud service providers, geopositioning service providers, or sensor network service providers—the final responsibility for bundling these different service components lies in the hands of the AI-powered big data virtual network providers. In addition to the required data privacy and security regulations, the exploration of new liability rules for AI interacting with traditional technologies is becoming relevant, taking into account AI-specific ethical and transparency obligations. Firstly, the complementary roles of the EU data regulatory framework and European AI regulatory framework are examined. Secondly, the network economic concept of AI-powered big data virtual networks is elaborated taking into account the required regulations. Thirdly, the heterogeneity of AI systems—required for a variety of IoT applications—is considered, with a particular focus on the application of AI within the transportation sector.

Emerging Regulations on Content Moderation and Misinformation Policies of Online Media Platforms: Accommodating the Duty of Care into Intermediary Liability Models

AbstractDisinformation, hate speech and political polarization are evident problems of the growing relevance of information and communication technologies (ICTs) in current societies. To address these issues, decision-makers and regulators worldwide discuss the role of digital platforms in content moderation and in curtailing harmful content produced by third parties. However, intermediary liability rules require a balance that avoids the risks arising from the circulation at scale of harmful content and the risks of censorship if excessive burdens force content providers to adopt a risk-averse posture in content moderation. This piece examines the trend of altering intermediary liability models to include ‘duty of care’ provisions, describing three models in Europe, North America and South America. We discuss how these models are being modified to include greater monitoring and takedown burdens on internet content providers. We conclude with a word of caution regarding this balance between censorship and freedom of expression.

The status and liability of executive officers in the Hungarian judicial practice - with particular reference to the new legislation

Under the former Hungarian Labour Code, the employer's manager and his deputy were liable for damages caused by the violation of the rules prescribed in the context of his managerial activity according to the rules of civil law. Under the previously applicable Act on Companies either the labour law rules or the rules of the Civil Code applied to the executive officer.
 According to the new Civil Code, the executive officer is liable to the legal person for damages caused to the legal person during his management activities according to the rules of liability for damages caused by breach of contract.
 The management of the company may be carried out by the executive officer on the basis of an agency contract or an employment contract, according to the agreement concluded with the company.
 The new legislation raises the question of whether the executive officer is liable for damage caused to the company under the rules of employment law or under the civil law rules on breach of contract.

Legal Basis and Problems Regarding the Application of a Higher Tax Rate on State Natural Resources

This Article in the context of common rules of liability for infringements of tax laws discloses the legal regulation establishing a higher tax rate on State natural resources and problems related to its application in Case Law.

Legal Framework for Rear-End Crashes in Mixed-Traffic Platooning: A Matrix Game Approach

Autonomous vehicles (AV) hold great potential to increase road safety, reduce traffic congestion, and improve mobility systems. However, the deployment of AVs introduces new liability challenges when they are involved in car accidents. A new legal framework should be developed to tackle such a challenge. This paper proposes a legal framework, incorporating liability rules to rear-end crashes in mixed-traffic platoons with AVs and human-propelled vehicles (HV). We leverage a matrix game approach to understand interactions among players whose utility captures crash loss for drivers according to liability rules. We investigate how liability rules may impact the game equilibrium between vehicles and whether human drivers’ moral hazards arise if liability is not designed properly. We find that compared to the no-fault liability rule, contributory and comparative rules make road users have incentives to execute a smaller reaction time to improve road safety. There exists moral hazards for human drivers when risk-averse AV players are in the car platoon.

CHANGES IN THE INSTITUTION OF CONDITIONAL RELEASE CONTAINED IN THE ACT OF 7 JULY 2022 AMENDING THE PENAL CODE

The article concerns the latest changes in the institution of conditional release, contained in the Act of 7 July 2022 amending the Act the Penal Code and some other acts. Although these provisions have not been in force yet, their enactment may significantly affect the current shape and tighten the rules of criminal liability. It is worth mentioning that this is another attempt to amend the Penal Code in this respect. The article interprets provisions directly modifying the current form and scope of application of the indicated probation measure, as well as their consequences for the entire criminal law system. The context and ratio legis of the amendment, which includes the discussed changes, related to the tightening of the principles of criminal liability and the increase in the preventive function of criminal law, were taken into account. The article also refers to some controversial solutions concerning, i.a. exclusion of the possibility of applying conditional release in relation to certain categories of perpetrators. At the same time, an attempt was made to assess the constitutionality of some of the planned changes and their significance from the point of view of human rights protection.

The Military Origins of Penal Liability for Causing a Road Accident in Polish Penal Law, according to the Penal Code of the Polish Army of 1944

The aim of the article is to present the impact of military criminal law on the development of the rules of criminal liability for causing a road accident in Poland in the second half of the 20th century. The fundamental question that guides the considerations undertaken here is whether and, if so, how the military criminal law influenced the development of the principles of criminal liability for traffic offences. The analysis of legal provisions and jurisprudence showed that the post-war provisions of Polish military law were a source of inspiration for developing common criminal law, which applies to road crimes. The offence of causing an accident from art. 144 The Penal Code of the Polish Army of 1944 was implemented for the ordinary judiciary only in the Penal Code of 1969. Until then, there was legal chaos in the ordinary judiciary.

On the role of social rules in economic development: historical perspectives

This paper explores the role of social rules in economic development. It reviews the historical evidence on social rules and their linkages with human capital. We present supporting evidence from the historical evolution of four important aspects of society: (1) improved dispute resolution mechanisms; (2) the elimination of debt bondage; (3) reductions in the severity of punishments; and (4) the development of limited liability rules and their linkages with the rise of the modern corporation. In each case, we evaluate how social rules have evolved to protect human capital and support economic development.

Regulating Data Privacy and Cybersecurity

This paper studies firms' data privacy and cybersecurity choices. We emphasise the strategic interdependence between these decisions and demonstrate that security in both the market equilibrium and the social optimum tends to be higher when data is shared. We also identify important market failures in the sense that firms tend to under‐invest in security and over‐share data. Our welfare analysis of a minimum security standard, disclosure and consumer education policies, liability rules and consumer mitigation strategies highlights the need for a co‐ordinated approach to regulation.

Employee firing costs and auditors’ going-concern opinions: Evidence from wrongful discharge laws

This paper examines the impact of employee firing costs on auditors’ going-concern (GC) reporting decisions by exploiting the wrongful discharge laws (WDLs) adopted by U.S. states. We find that auditors are more likely to issue GC opinions to financially-distressed clients headquartered in states that have adopted the laws, in particular the good faith exception, than to clients in states that have not. This finding is robust to controlling for the state-level economics, the strictness of legal liability rules, audit office fixed effects, as well as alternative definitions of financial distress and estimation methods. The impact is concentrated in labor-intensive clients and clients in industries with a higher proportion of nonunionized or permanent employees. We further find that the increased propensity to issue GC opinions is attenuated when the auditor is economically dependent on the client, and is driven by auditors who possess labor-specific expertise. Overall, these findings are consistent with higher firing costs increasing auditors’ propensity to issue GC opinions.

The law and economics of AI liability

The employment of AI systems presents challenges for liability rules. This paper identifies these challenges and evaluates how liability rules should be adapted in response. The paper discusses the gaps in liability that arise when AI systems are unpredictable or act (semi)-autonomously. It considers the problems in proving fault and causality when errors in AI systems are difficult to foresee for producers, and monitoring duties of users are difficult to define. From an economic perspective, the paper considers what liability rules would minimise costs of harm related to AI. Based on the analysis of risks and optimal liability rules, the paper evaluates the recently published EU proposals for a Product Liability Directive and for an AI Liability Directive.

Autonomous vehicles and Italian legal system

The historical period we are living is characterized by very rapid technological innovations, on many different fields. Our society and our legal system are not always ready to immediately embrace new technologies as they usually need a testing and adaptation period, but also adequate regulation. An important innovation already implemented has been the rides sharing (sharing mobility). It is very relevant in the market, especially in Italy, and has changed the way we perceive cars ownership and use. Self-driving cars are also a very important innovation, not only due to the fact that they significantly increase the number of users or the available mobility services, but also mainly for a significant increase in road safety concerns. Based on that, this paper will analyze how the Italian legal system regulates the protection for victims of traffic accidents caused by autonomous vehicles in terms of civil liability and motor insurance rules.

Transforming a child's claim for loss of earning capacity

This article explores the possible constitutional transformation of a child's delictual claim for loss of earning capacity. As such, it is located at the intersection of the law of delict and child law. The current law on a child's claim for loss of earning capacity is explained first. It is shown that such a claim involves a concurrent violation of the constitutional rights to bodily integrity and property which common-law thinkers call a person's "personal immaterial property". A claim for loss of future earning capacity may be brought by or on behalf of a child in terms of the common law's rules for Aquilian liability. In this regard, it is noted that the assessment of future losses is a controversial legal issue because it necessarily involves speculation about future hypotheticals. While controversial, claims of this nature may be reasonably determined with reference to available evidence. In terms of the law, as it stands, factors that courts consider in quantifying a child's damages for loss of earning capacity include the average probable income, the child's schooling and familial context, wage statistics, and broad judicial discretion. It will be shown that these factors could be applied (and sometimes have been applied) in ways that perpetuate past patterns of exclusion and poverty that are often racially determined - ultimately resulting in some children's claims for loss of earning capacity being pitched below a liveable wage. Relying on the constitutional right to equality and the constitutional best interests of the child standard, it is argued that the common law ought to be developed in this regard to move our law of delict in the direction of distributive justice. In this regard, reference to "liveable wages" and "fairness" (as a consideration in exercising judicial discretion) may be appropriate guidelines used to quantify children's claims for loss of earning capacity in future.

Liability Rules for the Digital Age

Abstract With legislative proposals for two directives published in September 2022, the European Commission aims to adapt the existing liability system to the challenges posed by digitalisation. One of the proposals is related and limited to liability for artificial intelligent (AI) systems, but the other contains nothing less than a full revision of the 1985 Product Liability Directive, which lies at the heart of European tort law. Whereas the current Product Liability Directive largely followed the model of US law, the revised version breaks new ground. It does not limit itself to the expansion of the concept of product to include intangible digital goods, such as software and data as well as related services, important enough in itself, but also targets the new intermediaries of e-commerce as liable parties. As such, the proposal for a new product liability directive is a great leap forward and has the potential to grow into a worldwide benchmark in the field. In comparison, the proposal of a directive on AI liability is much harder to assess. It remains questionable whether a second directive is actually needed at this stage of the technological development.

The Digital Services Act (DSA): A New Era for Online Harms and Intermediary Liability

The EU’s Digital Services Act (DSA) marks the biggest shake up to the rules for online intermediary liability in twenty years. The DSA is accompanied by flanking instruments regulating terrorist content, child sexual abuse material (CSAM) and political ads which, together, will create an entirely new framework for the regulation of online harms in the EU. These new and wide-ranging obligations attempt to reconcile the damage caused by unregulated user-generated content, fundamental rights to freedom of information and the practical limitations of moderating content at scale. The DSA is likely to shape the global approach to content regulation in this emerging area of law. Digital Services Act, DSA, Online Harm, Intermediary Liability, Intermediary Services, Hosting Services, Very Large Online Search Engines, Online Platforms, Very Large Online Platforms

The Civil Liability from Medical Negligence of Doctors Treating Complications of Coronavirus in the English Law / A Comparative Study with the Iraqi Civil Law

The Author has tried hard in this study to make a logic comparison between two different legal systems. That is to say the English common law, considered the leading system among other Anglo-American ones. And the Iraqi civil law highly affected and influenced by both the Islamic jurisprudence and the Egyptian civil law. It is worth-bearing in mind that the English common law includes many types of torts and the civil liability arising from them, including the tort of negligence in general. The general principles applied to which, can also be applied to medical negligence in particular. After the wide-spread dissemination of the coronavirus the British national health services organ (NHS) has given the cases of the doctor's treating the complications of this pandemic an ultimate importance. And the English courts based the civil liability arising from the medical negligence on three basic elements: the duty of care taken by doctors, the breach of this duty, and the damage suffered by patients. As well as the causation or the causal link between the tort of negligence and the damage or injury. Whereas the Iraqi civil law No. (40) of 1951 deals with the problems related to the civil liability arising from medical negligence of treating patients from coronavirus pandemic, by resorting to the general rules of the civil liability from the illegal act, which is based upon three basic elements: the trespass or transgression committed by the wrongdoer, the damage suffered by the victim and the causal link between them. As opposite to the Egyptian civil law No. (131) of 1948, which considers the first element of this liability as the fault rather than the trespass or transgression. After discussing the attitudes adopted by both the English and Iraqi laws, the author recommends that the Iraqi legislator should adopt the attitude taken by the English law, and let the Act of God deny both the fault element and the causation element of the civil liability arising from medical negligence. And also let the plea volenti non fit injuria deny both the fault element and the causation element of the civil liability of the defendant doctor arising from medical negligence.

A System Out of Balance: A Critical Analysis of Philosophical Justifications for Copyright Law Through the Lenz of Users' Rights

Ultimately, this Article has three goals. The first is to offer an analysis of users’ rights under copyright law from four commonly used theoretical perspectives. These are labor, personality, economic and utilitarian theories. In doing so, this Article will demonstrate that the philosophies that underpin modern copyright law support a broad and liberal set of rights for derivative creativity. It will argue that current treatment of derivative works is unnecessarily conservative from a theoretical perspective. Second, this Article will demonstrate how, in spite of theory that supports a healthy community of derivative creativity, those who practice it have been further disenfranchised by the law. It will argue term limit extensions, increased protectionist treatment of secondary works online, and the functional lack of access to proper licensing mechanisms have rendered users’ rights impotent. Finally, in conclusion, this Article will offer a solution to the apparent imbalance of power in the form of replacing property-based derivative rights with liability rules. The conclusion, in many ways, merits its own paper and is meant as merely a suggestion of direction rather than a formulated solution.

The value of the market price in contracts of sale: an analysis

Every rule should be valuable to the law. More so if the rule affects the commercial interest of society. A rule may be adopted or formulated to regulate commercial transactions, particularly to support the efficiency of the market. The market price rule is formulated to measure the degree of damages a contract defaulter should pay. The rule should indeed be applied consistently and reasonably to avoid uncertainty and unfairness. It follows that the market value as a rule and measure of commercial liability should not escape analysis to determine its limitations and value in contracts of sale. Thus, this article aims to provide a thorough discourse on the market price rule and how it should be applied in contracts of sale. The purpose of this article is to provide a comprehensive exposition of what informs the market price and how the market price affects the determination of damages in contracts of sale.

A társasági jog történeti áttekintése, a vezető tisztségviselő felelősségének a szabályozása a szocialista államberendezkedéstől a gazdasági társaságokról szóló 1988. évi VI. törvényig

In the study, I attempt a brief historical overview of our corporate law, presenting the rules of executive officer liability from the socialist state structure to Company Law Act 1988/VI. In addition to the presentation of socialist economic management systems, the study includes a brief overview of the socialist legal order, the codification of the old Civil Code, and a review of the legal institution of economic fines that are specific to the socialist legal system alone, serving the specific needs of the time. It also involved forcing the expected behavior. The period of regime change and its corporate law dimension were mostly marked by spontaneous and active privatization. During this period, the view of a universal collectivity based on the existence of state corporations ceased, spontaneous privatization was based on a conscious corporate decision, where the company’s managers themselves chose their privatization partners, the method and conditions of privatization, based on their own interests and sometimes the interests of the company. The right to form business associations was regulated by the First Companies Act of 1988. The legislative objective of the act was primarily to promote a more efficient use of social property, and in particular state property, and to remove obstacles to cooperation between business organizations and citizens. In the study, I also analyze the principles of law developed by judicial practice with the judgments handed down under the first Companies Act, the courts have attempted to pierce the seemingly impenetrable fabric of the corporate veil, and the chief executive officer, who violates the level of due diligence attached to the person holding the position in question has been held liable in a number of cases, applying the rules of the Company Act and the Civil Code.