Sources of law - Business Environment

Laws invariably derive from a number of sources including custom, judicial precedent, legislation and international and supranational bodies (e.g. the EU). All of these so-called legal sources of the law can be illustrated by reference to English law, which applies in England and Wales. Where laws made by Parliament are to apply only toScotland or Northern Ireland the legislation will state this. Similarly, any Act which is to apply to all four home countries will contain a statement to this effect.
Early societies developed particular forms of behaviour (or ‘customs’) which came to be accepted as social norms to be followed by the members of the community to which they applied. In England many of these customary rules ultimately became incorporated into a body of legal principles known as the common law. Today customs would be regarded as usage recognized by law, whether by judicial precedent(case law) or through statutory intervention and hence they are largely of historical interest. Occasionally, however, they are recognized by the courts as being of local significance and may be enforced accordingly as exceptions to the general law(e.g. concerning land usage).
Judicial precedent
Much of English law is derived from judicial precedent (previous decisions of the courts). The present system of binding precedent, however, is of fairly recent origin, dating from the latter part of the nineteenth century, when advances in recording legal judgments and a reorganization of the court structure facilitated its general acceptance.In essence, judicial precedent is based on the rule that the previous decisions of a higher court must be followed by the lower courts hence the significance of the court structure. In any judgment will be found a number of reasons, arguments, explanations and cases cited and these must all be considered carefully by judges to determine whether there are material differences in the case before the court and the earlier decision. To reach a decision, the court must find what is termed the ratio decide ndiof the previous case. Put very simply, the ratio of a case are the essential steps in the legal reasoning which led the court to make that particular decision. Anything which cannot be regarded as a ratio nesis termed obiter dicta or things said by the way. The whole of a dissenting judgment in a case is regarded as obiter. Obiter dicta are not binding but maybe regarded as persuasive arguments if the facts of the case permit.Clearly there are times when, perhaps because of the position of a court in the hierarchy, decisions are not to be regarded as binding precedent. However, if the judgment has been delivered by a jurisdiction which has a common law system(e.g. Canada, Australia) or, most importantly, by the Judicial Committee of the Privy Council, then those decisions will be regarded as being of persuasive precedent, and may be used to help the court reach its own decision.

A substantial proportion of current law including laws governing the operations of business organisations derives from legislation or statute, enacted by the Queen (or King) in Parliament. As indicated, the initiative in this sphere lies effectively with the government of the day which can virtually guarantee a bill will become law, if it has a working majority in the House of Commons.Apart from a limited number of bills proposed by backbench MPs (private members’bills), the vast majority of legislation emanates from government and takes the form of Acts of Parliament or delegated legislation. Acts of Parliament are those bills which have formally been enacted by Parliament and have received the Royal Assent and, except where overridden by EU law, they represent the supreme law of the land. In addition to creating new laws (e.g. to protect the consumer), statutes may also be used to change or repeal existing laws. In some instances they may be designed to draw together all existing law (a consolidating Act) or to codify it or to grant authority to individuals or institutions to make regulations for specific purposes (an enabling Act). Under the Consumer Credit Act 1974, for instance, the Secretary of State for Trade and Industry is permitted to make regulations governing the form and content of credit agreements under delegated authority from Parliament.As its name suggests, delegated legislation is law made by a body or person to which Parliament has given limited powers of law-making as illustrated by the example above. More often than not, authority will be delegated to a Minister of the Crown, but it may also be conferred on local authorities or other public undertakings, either through the use of a statutory instrument or by some other means of delegation. Since Parliament remains sovereign, such legislation is required to receive parliamentary approval and scrutiny, but time tends to prevent anything other than a cursory glance at a limited proportion of the legislation of this kind. It does, however, remain subject to judicial control, in so far as the body granted authority may be challenged in the courts for exceeding its powers (ultra virus).In addition to these two principal forms of domestic legislation, developments in the law also emanate from Britain’s membership of the European Union. Under the Union’s main treaties or those parts to which the British government has agreed Union legislation becomes part of the law and takes precedence over domestic legislation, although the latter may sometimes be required to implement it. Accordingly, law which is inconsistent with Union law is repealed by implication and British citizens, like their counter parts elsewhere in the EU, become subject to the relevant Union laws (unless an ‘opt-out’ has been negotiated).Whereas the provisions of the main treaties represent primary legislation, the regulations, directives and decisions emanating from the Union’s institutions are secondary (or subordinate) legislation, made under the authority conferred by the Treaty of Rome (1957) and by subsequent Acts (e.g. the Single European Act 1986,the Maastricht Treaty 1992). As indicated, regulations are of general application throughout the Member States and confer individual rights and duties which must be recognized by the national courts. Their purpose is to achieve uniformity throughout the EU, as in the requirement for heavy goods vehicles to fit tachographs to control drivers’ hours.

Directives, by contrast, are not directly applicable; they are addressed to member states and not individuals, although a directive may create rights enforceable by an individual citizen, as they become directly applicable if a member state fails to implement its provisions within the prescribed time limits. The aim of EU directives is to seek harmonization or approximation between national laws rather than to achieve uniformity; hence the method of implementation is left to the discretion of the individual state, usually within a given time limit (e.g. the Companies Act of 1981 implemented the Union’s fourth directive on company accounts by allowing small and medium-sized companies to reduce the amount of information provided to the Registrar of Companies).

Decisions, too, are binding, but only on the member state, organisation or individual to whom they are addressed and not on the population generally. In practice, EU decisions become effective from the date stated in the decision, which is generally the date of notification, and they are enforceable in national courts if they impose financial obligations.

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