Document Type

Article

Publication Date

2003

Abstract

This Article develops a framework for analyzing the relation between basic features of statutory and case law and the design and functioning of institutions that enforce this law. The basic premise is that law is inherently incomplete and that this has important implications for law enforcement. In particular, when law is incomplete, special emphasis needs to be placed on the allocation of lawmaking and law enforcement powers (LMLEP) to different institutions such as legislatures, courts, or regulators, in order to attain optimal levels of law enforcement.1 Using the development of the legal framework governing financial markets as an example to illustrate the conceptual framework, this Article examines how different legal systems have responded to the problem of incomplete law by reallocating lawmaking and law enforcement powers from courts to regulators. Most examples are drawn from the U.K., which has spearheaded financial market development since the mid-19th century. A comparative analysis of the U.S. and German experiences is also presented.

This Article regards a law as complete if a law enacted today unambiguously stipulates for all future contingencies; otherwise a law is incomplete. 2 A law may be incomplete if it attempts to specify comprehensively actions that shall be covered but fails to include some which could result in similar harmful outcome. Alternatively, law may be incomplete because it uses open-ended, vague wording, as a result of which the boundaries of the law are not clearly delineated. 3

Incomplete law may be a function of bad drafting, but it is not limited to that. While failure to include all relevant issues that are known at the time a law is drafted or a court verdict is rendered may be the result of oversight, there are a number of other causes for incomplete law, including environmental factors and deliberate design.

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