Defending students

The end of the semester is the period where TILEC bids goodbye to those Ph.D. students defending their dissertation before embarking on new challenges. On 23 November 2009, TILEC member Eckart Ehlers successfully defended his dissertation about electricity and gas supply network unbundling, supervised by TILEC members Leigh Hancher and Pierre Larouche. Eckart's thesis analyzes the legality of supply network divestiture measures, as threatened by the European Commission, and the legislative unbundling measures which entered into force in Summer 2009, on the basis of European law and the constitutional framework of the United Kindgom, the Netherlands and Germany. On 1 December 2009 at 10 AM, TILEC member Alan Littler will defend his dissertation about the regulation of gambling, supervised by Tilburg University professor Cyrille Fijnaut and TILEC director Pierre Larouche. Alan´s thesis emphasizes that "although EU Member States take different approaches to regulating the supply of gambling services in many respects" their objectives are broadly similar and that coordination between national regulatory bodies is required to ensure that the national competence to regulate gambling does not undermine the internal market. Ph.D. defences always take place in the Aula of the university; the public is welcome.

The law and economics of contractual duress

Virtually all modern legal systems provide that a party who concluded a contract under unacceptable pressure has a right to avoid the offending agreement. Yet what is unacceptable is difficult to establish. Legal doctrines and economic models approach contractual duress with little communication and, therefore, at times reach divergent outcomes. In a recent TILEC discussion paper, TILEC Member Péter Cserne goes on a journey to the heart of duress and attempts to increase communication between doctrinal, jurisprudential and various economic approaches to this fluid and contested doctrine of contract law. The paper finds that in the traditional core of duress i.e. when physical threat was used, jurisprudential and economic justifications converge. It is more controversial whether the range and quality of opportunities available to the contracting parties should also matter or the doctrine should be used to promote substantive fairness or ambitious policy objectives. The paper is forthcoming as a chapter in the new 12-volume edition of the Elgar Encyclopedia of Law and Economics, one of the main references works in the field of law and economics.

Europeanisation of private law: progress and shortcomings

On 27 November, the Economic Impact Group (EIG) led by TILEC within the Joint Network on European Private Law (CoPECL) held its final conference in Brussels. The EIG regrouped many leading and emerging European scholars in the economic analysis of private law. Since 2005, it has worked on a collection of articles on the main elements of the Draft Common Frame of Reference (DCFR), a restatement of European private law prepared by a large network of academics. The final conference offered the opportunity to present the results of the work of the EIG to interested policymakers and academics. It featured papers on non-discrimination in contract law (Ann-Sophie Vanderberghe, Erasmus University Rotterdam), contract formation (Mitja Kovac, University of Ljubljana), non-performance (Urs Schweizer, Bonn University), termination of long-term contracts (Fernando Gomez, Pompeu Fabra University) and review of standard terms (Hans-Bernd Schaefer, Hamburg University). In conclusion, the EIG found that the DCFR would have been strengthened by a greater use of economic analysis, in order to identify trade-offs more clearly and to take account of the effect of the law on private incentives. The resulting book, edited by TILEC director Pierre Larouche and TILEC extramural fellow Filomena Chirico, will be published by Sellier shortly.

Is EU competition policy still "special"?

The Modernisation Project decentralised the enforcement of EU competition policy and increased the symbiotic relationship between the national and supranational enforcement regimes through the formation of a network between the national competition authorities and the European Commission. Regulation 1/2003, the legal background of Modernisation, has now completed its fifth year in operation and the Commission released a report regarding the initial functioning of the system. In a recent TILEC discussion paper, TILEC member Firat Cengiz takes a retrospective look at the institutional elements of Modernisation in response to this report. In general, the paper comes to positive conclusions regarding the initial experiences, particularly due to the increased communication between competition officials with concrete policy outcomes. Nevertheless, there are significant accountability problems in the functioning of the new regime. Overall, the paper argues that as an unanticipated consequence of Modernisation, competition policy has lost its special status in Europe and become prone to the general systemic problems of multi-level governance. The author urges the Commission to give due consideration to these problems and the epistemic community to place competition policy within the broader debate on multi-level governance.

Short-sighted bankruptcy law?

Bankruptcy was once seen as a major moral failure, revealing the reckless nature of the impecunious entrepreneur unable to face up to his obligations. Even nowadays, there are conflicting views about the ultimate goal of bankruptcy regimes: orderly liquidation of failed businesses or efficient re-organisation of viable concerns. In that respect, one often contrasts the "soft" US regime with the "tough" regime which until recently prevailed in most EU Member-States. In a recent TILEC discussion paper, TILEC member Emanuele Tarantino challenges the received wisdom according to which "soft" regimes have positive effects on the financing of long-term projects. Indeed, in the presence of moral hazard, the discontinuation of such projects is the optimal punishment for initially poor performance. If a lender can increase recovery rates in bankruptcy, then such punishment will no longer be credible, as the parties will always prefer renegotiating. Clearly, this exacerbates the difficulty for a lender ex ante to commit capital to long-term projects and may bias business activities towards short-term, less valuable investment projects.