The world has different legal traditions, with some countries basing their legal system on the Napoleonic Code and others on common law. Common law countries, including former British colonies, rely on tradition and precedent from case law. Implementation of common law varies, with some countries coexisting with native legal systems. Research has found that common law countries have stronger capital markets and smaller companies’ access to fundraising is more dependent on the legal system.
There are different legal traditions in the world. Belgium, France, Italy, the Netherlands, Portugal, Spain and much of Latin America, as well as the state of Louisiana, have legal systems based on the Napoleonic Code, the French civil code. The Bürgerliches Gesetzbuch (BGB), the civil code of Germany, is the basis of civil law in Greece, Japan, Portugal and South Korea. In a number of other countries, however, the legal tradition is based on the common law tradition which originated in England. These countries can be called common law countries.
Common law is law based on tradition, rather than law arising from legislation, and can change over time. It builds on the precedent provided by case law as cases are decided in areas not covered by the statutes. Countries that rely on this type of law include England and other countries that were former colonies of England at one time or another. This includes Australia, Barbados, Brunei, Canada, Hong Kong, India, Malaysia, New Zealand, Northern Ireland, Pakistan, Republic of Ireland, Scotland, Singapore, South Africa, Sri Lanka and the United States of America.
Although common law countries have something in common in their history, the implementation of the common law is different in different nations. One element that can have an impact is the existence of a body of a native legal system or body of law. For example, in Australia, common law coexists with Aboriginal customary law, as stated in Mabo v Queensland (No. 2). In the United States, however, the common law coexists with the tribal legal system in matters of reservations-based claims, as stated by Williams v Lee.
Even within a country, the common law system can be variously applied. As noted, the state of Louisiana follows a statewide Napoleonic Code-based legal system, while other US states follow a common law system. However, if a federal matter not covered by a federal statute were to arise in Louisiana, federal common law would still apply.
Research has found some other commonalities in common law countries in addition to their legal systems. For example, research has shown that these nations also have stronger capital markets than countries with legal systems based on the Napoleonic Code or the BGB. The study also concluded that smaller companies’ access to fundraising is more dependent on the country’s legal system than it is for larger companies.
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