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What are the Applicable Norms and Principles of International Law Delimitation of the Caspian Sea?
Get PDFThe purpose of this research was to identify the law applicable to the delimitation of the Caspian Sea and selecting the best approach in this regards. In this sense, in the beginning, the geopolitical significance of the Caspian Sea in the region and the importance of the Convention on the Legal Status of the Caspian Sea were reviewed. In order to examine applicable law, international legal resources under Article 38 of statute of international court of justice (ICJ) and the best current approaches, standards, principles and methods for international maritime delimitation were discussed. Furthermore, the main source of current and past legal statutes of the Caspian Sea, Soviet-Iranian agreement, bilateral agreement on the northern part of the Caspian Sea delimitation and the Caspian Sea Convention was considered. In addition, special conditions and circumstance of the Caspian Sea coast were assessed, and the best approach for the demarcation of the Caspian Sea, the three stage approach, was analyzed. It is worthy to mention, this work is a compressed and update version of my Master thesis1 at world maritime university.Keywords: Norm of sea delimitation, Caspian Sea, International law of the sea.
Introduction
The Caspian Sea is known as the world\u27s largest inland water body, located in a geopolitical location, between Europe and Asia, having an area of 390,000 km2, mean and maximum depths of 208 m and 1025 m respectively (Kosarev, 2005)[1]. It is a source of 48 billion barrels of oil, 292 trillion cubic feet (TCF) of gas (Kalanter, et al., 2021)[2], special biodiversity, and species such as sturgeons. According to the report by the Food and Agriculture Organization of the United Nations (FAO)[3], “the Caspian Sea is the traditional home of sturgeon, and the main producers of caviar in the world are four states bordering the Caspian Sea: Azerbaijan, Iran, Kazakhstan and Russia”.
After the collapse of the Soviet Union and the independence of three new countries, the number of neighboring countries was increased to five, Azerbaijan, Kazakhstan, Turkmenistan, Iran and Russia, and disputes arose over the legal status of the sea. since, the only way to reach the World Ocean from the Caspian Sea is via the man-made Volga-Don Canal, which lies entirely within Russian territory and connects the Caspian Sea with the Black Sea (karataeva, 2019)[4], the Iran and Russia argued that Article 122 of the United Nations Convention on the Law of the Sea (UNCLOS)[5] does not apply, which defined enclosed and semi-enclosed seas as “gulf, basin or sea surrounded by two or more States and connected to another sea or the ocean by a narrow outlet or consisting entirely or primarily of the territorial seas and exclusive economic zones of two or more coastal States”. Although UNCLOS didn’t explain the type of “narrow outlet” whether it must be natural or artificial, Iran and Russia to reduce the risk of the presence of third parties and due to shorter coastline, insisted, the Caspian Sea is not the sea, semi-enclosed or enclosed sea and it is a lake and common property. Furthermore, Iran was not a member state of UNCLOS since didn’t ratify it and Kazakhstan and Turkmenistan have neither signed nor acceded either the Convention.
Lack of co-operation, growing disputes and unilateral action have increased opportunities for pollution, illegal fishing, and drug trafficking and illegal migration. (Zhekenov, 2020)[6]. However, states noticed that the Caspian marine environment became fragile, with excessive exploitation, habitat destruction, invasive species and oil pollution threatening the sea. (Tsutsumi and Robinson, 2008)[7]. In light of this, the Caspian Maritime Environmental Protection Agreement, known as the Tehran Agreement, was signed in 2003 and entered into force in 2006. Apart from the Tehran Convention, four protocols were signed and the uncertain legal status was one of the most important obstacles to the implementation of the protocols. In addition, the discovery of oil fields in the northern part of the Caspian Sea led to a trend of bilateralism, which Zimnitskaya and Geldern (2011)[8] called an innovative approach to the principle of "common waters, a divided bottom" in the region, and by 2003 the northern part of the Caspian seabed was divided by agreements between three states, the Russian Federation, the Republic of Azerbaijan and the Republic of Kazakhstan, but the agreements concerned only the seabed. Finally, in August 2018, in Aktau, Kazakhstan, five states signed the Convention on the Legal Status of the Caspian Sea[9]. It was a monumental achievement, as the UN Secretary-General welcomed the signing of the Caspian Sea Convention, stated "this historic document illustrating the importance of regional cooperation, which is fundamental to maintaining international peace and security and an important step towards weakening regional tensions”, and, Iranian President Hassan Rouhani remarked[10] “the signing of the Caspian Sea convention is a successful model for guaranteeing peace, stability, friendship, good neighborliness”. From a security point of view, the agreement actually provides regional security since countries have agreed to ban the presence of third parties in the Caspian Sea and brings various political, environmental and economic benefits to the states, as Janusz-Pawletta (2020)[11] believed it is an important factor for sustainable development since it regulates the environment protection and access to energy. However, there are some negative views toward the convention which for instance argued, some Articles of convention act as obstacles to the exploration of oil and gas in the Caspian Sea and Iran and Russia intentionally put these Articles, such as article 14(2) which declared “The Parties may lay trunk submarine pipelines on the bed of the Caspian Sea, on the condition that their projects comply with environmental standards and requirements embodied in the international agreements to which they are parties” (Gurbanov, 2018; Bayramov, 2020)[12]. In parallel, Prichin and Anschchi (2019)[13] argued the new convention only gives environmental surveillance powers to Russia and Iran. Besides that, there were important issues of dispute that needed to be resolved.
Article 8(1) of the new convention states “Delimitation of the Caspian Sea seabed and subsoil into sectors shall be effected by agreement between States with adjacent and opposite coasts, with due regard to the generally recognized principles and norms of international law, to enable those States to exercise their sovereign rights to the subsoil exploitation and other legitimate economic activities related to the development of resources of the seabed and subsoil” and it does not clarify what norms and principles of international law should be applied. In the same vein, Article 7(3) and Article 9(1) of the convention declared delimitation of internal and territorial waters and delimitation of fishery zone between States with adjacent coasts shall be effected by agreement. Additionally, Iran subjected ratification of the Caspian Sea convention to the delimitation agreements. Since “each maritime delimitation case differs and flexible consideration of relevant factors is required to achieve an equitable result” (Tanaka, 2019)[14] and delimitation of maritime zones is crucial for peaceful relations between neighboring States (Lagoni and Vignes, 2006)[15], defining the norm and principles of delimitation will be a vital factor for the success of the new convention.
The Norms and Principles of International Law for Delimitation
Before discussing international rules, standards and principles of maritime borders, it is appropriate to introduce the sources of the law of the sea. It is generally accepted that the source of the recognized international law is reflected in the Article 38 of the ICJ Constitution[16] which states:
“The court whose function is to decide under international law such disputes as are submitted to it shall apply:
general or particular international conventions, establishing rules expressly recognized by the contesting states;
international custom, as evidence of a general practice accepted as law
the general principle of law recognized by civilized nations,
judicial decisions and the teachings of the most highly qualified publicists of the various nations as subsidiary means for the determination of rules of law”
This Article lists sources of formal and material international law (Fitzmaurice, 2017)[17].one of the most important one are legal procedures by which legal rules come into existence. Customary law has two categories of public and private or local customary law. Since treaties are binding only on the parties involved, the rules of common law are binding on all countries in the international community as the International Court of Justice (ICJ) stated:
“General customary law must have equal force for all members of the international community and cannot be subject of any right of unilateral exclusion.” (The North Sea Case, 1969)[18].
Tanaka (2015)[19] argued that, customary law comes from two elements, namely an objective element, state practice, and a subjective element, judicial opinion. In addition to state practice, a treaty may also generate a new common law rule. Roach (2014)[20] listed in his study the rules of the UNCLOS that the international court has recognized as customary international sea law, such as Article 15 and 83.
The boundary delimitation is governed by legislation, which over time has been expanded by codification given in treaty provisions. Its growth has also been substantially aided by the jurisprudence of the ICJ and ad hoc tribunals. Miron (2020)[21] believed “The law on maritime delimitation is often characterized as judge-made law”. In this regard, the source of maritime delimitation was considered as follows.
Conventions Provisions Concerning Maritime Delimitation
Three conventions relating to maritime delimitation of sea are, the 1958 Convention on the Territorial Sea and the contiguous Zone[22] (hereinafter referred to as TSC), the Convention on the Continental Shelf and the Convention on the Law of the Sea (UNCLOS) 1982.
Paragraph 1 of Article 12 of TSC and Article 15 of UNCLOS provided the triple rule of “agreement- equidistance (median line) special circumstance.” for delimitation of territorial sea. These two provisions are generally considered to reflect customary law, which is consistent by applying the median line method if the states do not reach agreement. However, the conventions did not define the special circumstances and it must be clarified during the development of jurisprudence and state practice in the field of maritime delimitation. In addition, Article 6 of the convention on the continental shelf 1958[23] introduced the notion of a special circumstance, similarly, UNCLOS contains special provisions, Article 74 and 83, for EEZ delimitation and continental shelf which stated: “the delimitation of the exclusive economic zone [the continental shelf] between states with opposite and adjacent coasts shall be effected by agreement based on international law, as referred to in article 38 of the statue of the international court of justice, to achieve an equitable solution.” These two Articles omit any reference to a method of delimitation. However, it is noteworthy that the fundamental procedural principle has been introduced by UNCLOS to sea delimitation is the peaceful settlement of international disputes and emphasis on an agreement in good faith as the ICJ stated:
“Any delimitation must be effected by agreement between the states concerned, either by the conclusion of the direct agreement or, by some alternative method which must be based on consent” (the Gulf of Maine, 1984)[24].
The most essential implication of the fundamental rule that maritime border delimitation should be accomplished via agreement is that parties are free to choose any delimitation line they choose based on political, economic, geographic, or other considerations (DOALOS, 2000)[25].
Approaches of Jurisprudence to the Maritime Delimitation
Delimitation by judicial process is a legal operation and it is based on consideration of the law and there is the distinction between delimitation based on legal rules and delimitation by states during negotiation which is based on political consideration. There are different approaches towards delimitation as is described in the following parts.
Equidistance
Equidistance is the predictable method and delimitation line mathematically determined. After 1958 in many cases, governments did the negotiations by considering an equidistance line and the majority of bilateral treaties on maritime delimitation used this method. However, there may be complications if one state uses normal baselines that follow the sinuosity of the coastline while the other uses a straight baseline system that connects the outermost islands, promontories, and rocks (Charney and Alexander, 1993)[26]. The ICJ and arbitral tribunals reduced the equidistance technique\u27s privileged standing as the basis of entitlement to both the EEZ and the CS within 200 nautical, viewing it as a method that, in some situations, may result in inequitable and irrational outcomes.
Equity principles
The equitable principle stems from court jurisprudence, which is the general guiding principle. It combines two types of principles: procedural and substantive. The procedural principle is that the delimitation is done by agreement, and the substantive include equity. Cottier (2015)[27] believed equity has been a companion of the law ever since rule-based legal systems emerged, and it provides a path to justice if the law is unable to appropriately respond. The equitable principle as customary law became the main aspect of the law of maritime delimitation (Østhagen, 2020)[28]. The principle of equity and relevant circumstances has been stressed in article 59 of UNCLOS as a basis for the resolution of conflicts regarding the attribution of rights and jurisdiction in the EEZ. However, the approaches toward this principle were different as is described in the following parts.
A) Result oriented equity approach
In the North Sea Case 1969, which involved disputes of the Federal Republic of Germany with the Netherlands and Denmark as regards their continental shelf delimitation, the ICJ held “there is no single method of delimitation the use of which is in all circumstance obligatory” and court decided delimitation should be effected by agreement on the basis of equitable principle. The ICJ stated equidistance line is not appropriate due to the shape of the coasts of the Federal Republic of Germany, which was concave (Guernsey, 2000)[29]. In the same manner in the case of Guinea and Guinea-Bissau before Arbitration Tribunal in 1983, the arbitral decided to reject the application of the equidistance method because of the existence of geographical circumstances, such as the concave coasts of the States (McLarky, 1987)[30]. This approach has been called the result-oriented approach. It, focused on the equitable outcome rather than the techniques to be used and provides the international court and tribunal’s opportunity to do not bind any method and decided each case based on its own circumstance, as the IJC stated:
“The result of the application of equitable principles must be equitable and the result which is predominant, the principles are subordinate the goal. The equitable of a principle must be assessed in the light of its usefulness for the purpose of arriving at an equitable result”. (Tunisia v. Libya case, 1978)[31].
B) Corrective Equity Approach
In the Libya/Malta case[32] of 1985, the ICJ used the equidistance method just as starting point and equity as a corrective element and shift the equidistance line based on special circumstances. This approach has been called “corrective –equity approach”. In 1993, regrading delimitation of the continental shelf and fishery zone, the court by considering Article 6 of CS convention and customary law held:
“Even if it were not appropriate to apply, not Article 6 of CS convention, but customary law concerning the continental shelf as developed in the decided cases, it is in accord with precedents, to begin with, the median line as a provisional line and then to ask whether special circumstance require any adjustment or shifting that of the line” (Greenland v. Jan Mayen case, 1993)[33].
In this case, the court applied this approach as customary law. In the Cameron v. Nigeria case[34], the court adopted a new interpretation, and since there was no particular reference to any technique of delimitation in UNCLOS, it determined that a specific method, namely the equidistance method, should be incorporated into these provisions.
C) Three Stage Approach
For the first time in the Black sea case 2009 between Romania and Ukraine, the ICJ used new formula which called “three-stage approach”. Based on this approach, establishing the equidistance line is first stage, then court will check the relevant circumstances in order to adjustment of provisional line and at the third stage, to avoid any inequality the disproportionality test has to be applied. This approach also called the equidistance/relevant circumstances method. This approach has made maritime delimitation more predictable and transparent (Miron, 2020)[35]. However, till now courts have not established any recommended technique for disproportionality test calculation (Fietta and Cleverly, 2016)[36]. In 2012, the ITLOS used this approach and held:
“At the first stage it will construct a provisional equidistance line, based on the geography of the casts and mathematical calculation, it will proceed to the second stage of the process, which consists of determining whether there are any relevant circumstances to adjustment, if so, it will make an adjustment the produces an equitable result. At the final stage, the tribunal checks whether the adjusted line results in any significant disproportion between the ratio of the respective coastal lengths and the ratio of the relevant maritime areas allocated to each party.” (Bangladesh v. Myanmar, 2012)[37].
Additionally, the ICJ, and arbitration used this approach, the ICJ in the Chile v. Peru case[38], and the arbitration in the Bangladesh V. India case. Nowadays, international courts have transited from the result-oriented-equity approach to the three stage approach (Chuanxiang, 2016)[39].
Relevant Circumstances
The relevant circumstances are those circumstances are taken into account in the delimitation process by States and the courts. Most relevant and dominant geographical, historical, political, economic, socio-economic, security, and other kinds of factors can be taken into account by states, open-ended categories, since till today not only the conventions, especially Article 6 of the convention on the continental shelf and Article 15 of UNCLOS but also courts did not provide the list of circumstances. In the Angelo- French case the United Kingdom argued it does not mean there is no limitation for a special circumstance under Article 6 of the convention on the continental shelf but the court rejected this claim (Evans,2018)[40], which means there is no limitation. However, DOALOS (2000)[41], stated “in the delimitation based on legal rule the international court has interpreted “relevant” criteria and factors as directly relevant to the delimitation, therefore, of a non-political or economic nature.”, Consequently in the negotiation stage, states have the flexibility to influence the outcome in favor of their interest.
Sources of International Law for the Caspian Sea Delimitation
Agreements
To find the applicable law of maritime delimitation for Caspian Sea, ascertaining whether there is any pre-existing agreements relating to the maritime delimitation is crucial, in this regard Soviet-Iran agreements, additionally, delimitation agreements of the north part of the Caspian Sea will be reviewed.
Soviet –Iran agreements
During the era of the USSR, the Caspian Sea was treated based on two agreements between Iran and USSR, the first one was signed on 26 February 1921(Mehdiyoun, 2000)[42], and two parties were given equal shipping rights in the Caspian Sea as well as the right to fly their flags on their commercial vessels and both reaffirmed the 10-nautical mile fishing zone in the Treaty of Commerce and Navigation agreement in 1941 (United Nation, Treaty Series, 1959).
After the disintegration of the USSR, these two agreements were inadequate to deal with the presence of the new littoral states and their demand toward delimitation and consequently exploration and exploitation of natural resources in the seabed of the sea. The treaties of 1921 and 1940 solely addressed navigation, fishing, and trade and did not clarify the legal status of the Caspian Sea, and neither provide an official and final delimitation line. In addition, in this period (1921-1940) the concept of EEZ and continental shelf was still some long years away, while its general acceptance in practice and being introduced in the UNCLOS 1982. In this regard riparian states took various measures, which demonstrated that they did not accept the validity of these agreements, nevertheless Turkmenistan in its letter to the UN general assembly (UN General Assembly, 1998)[43] accepted agreements. Additionally, by increasing the heated contention in the region, Iran, and Russia as a party to these agreements, in their joint statement (UN General Assembly, 2000)[44] stated: “until the new legal status is devised for the Caspian Sea, these two treaties retain their full legal validity”. This statement gave the valid duration to
სისხლის სამართლის პოლიტიკის გავლენა არასრულწლოვანთა მართლმსაჯულებაზე
Get PDFThe present article discusses the impact of criminal policy on juvenile justice. The current state of repressive and liberal criminal policy and its consequences in Georgia in 2004-2021 are analyzed. Explains what repressive and liberal criminal policy means and what positive and negative impact criminal policy can have on juvenile justice. The years 2004-2021 are conventionally divided into two parts: ● 2004-2012 – When a repressive criminal policy was announced in the country, which in itself fully reflected on juvenile justice; ● 2012-2021 – When, in conflict with the law, the policy of liberal criminal justice towards juveniles was unequivocally and clearly pursued. The article discusses the Juvenile Justice Code as one of the most prominent legislative acts of liberal politics. Also, the legislation of different countries (both Continental European Law and Anglo-American Law Countries) is presented and analyzed for the purposes of this article. The article also discusses the ruling of a number of European courts. Finally, the positive and negative consequences of pursuing a repressive/liberal criminal policy on juvenile justice are analyzed, and recommendations and remarks are issued, which will make the juvenile justice process more complete. წარმოდგენილ ნაშრომში განხილულია სისხლის სამართლის პოლიტიკის გავლენა არასრულწლოვანთა მართლმსაჯულებაზე. გაანალიზებულია რეპრესიული და ლიბერალური სისხლის სამართლის პოლიტიკის მიმდინარეობა და მისი თანმდევი შედეგები საქართველოში 2004-2021 წლებში. განმარტებულია, თუ რას ნიშნავს სისხლის სამართლის რეპრესიული და ლიბერალური პოლიტიკა და რა დადებითი და უარყოფითი გავლენა შეიძლება იქონიოს სისხლის სამართლის პოლიტიკამ არასრულწლოვანთა მართლმსაჯულებაზე. 2004-2021 წლები პირობითად დაყოფილია ორ ნაწილად:● 2004-2012 წლები – როდესაც ქვეყანაში გაცხადებული იყო რეპრესიული სისხლის სამართლის პოლიტიკა, რაც თავისთავად სრულად აისახა არასრულწლოვანთა მართლმსაჯულებაზე.● 2012-2021 წლები – როდესაც კანონთან კონფლიქტში მყოფი არასრულწლოვანების მიმართ ცალსახად და აშკარად მოხდა ლიბერალური სისხლის სამართლის პოლიტიკის გატარება. ნაშრომში განხილულია არასრულწლოვანთა მართლმსაჯულების კოდექსი, როგორც ლიბერალური პოლიტიკის ერთ-ერთი თვალსაჩინო საკანონმდებლო აქტი. წარმოდგენილია და გაანალიზებულია სხვადასხვა ქვეყნების (როგორც კონტინენტური ევროპის სამართლის, ასევე, ანგლო-ამერიკული სამართლის ქვეყნების) კანონმდებლობა სტატიის მიზნებისათვის. ნაშრომში, ასევე, განხილულია არაერთი ევროპული სასამართლოს მიერ მიღებული გადაწყვეტილება. და ბოლოს, გაანალიზებულია, რა დადებითი და უარყოფითი შედეგები გამოიწვია სისხლის სამართლის რეპრესიული/ლიბერალური პოლიტიკის გატარებამ არასრულწლოვანთა მართლმსაჯულებაზე და აღნიშულიდან გამომდინარე, გაცემულია რეკომენდაციები და შენიშვნები, რომელთა გათვალისწინებაც უფრო სრულყოფილს გახდის არასრულწლოვანთა მართლმსაჯულების პროცესს. 
კიბერდანაშაულის გამოძიებისას არსებული პროცედურული პრობლემების ანალიზი
Get PDFThe approach used to investigate cybercrime in developed nations is examined in this article, along with the innovations that might be implemented in Georgia to ensure successful investigations. Detailing the procedures outlined under the Budapest Convention on Computer Crimes, attention is given to the procedural issues that crop up while gathering and presenting electronic evidence in criminal investigations. The conventions individual articles are examined, including those that deal with information requests, and a comparison between the conventions legal provisions and the standards incorporated into Georgian law is made. The article examines the practice of collaboration between developed country law enforcement bodies and Internet service providers. The absence of computer data classification in Georgian law is highlighted, which results in the existence of a single, all-encompassing rule for all forms of electronic information. The paper also covers court rulings on the admissibility of electronic evidence and offers advice on whether it would be wise to clarify or improve the criminal procedure laws. The article explains the need for varied time limits and tactics for getting and maintaining information from internet service providers based on the classification of cybercrimes into distinct crime categories, such as serious, particularly serious, and crimes against national securit
სმარტ კონტრაქტის დადება
Get PDFWhen we talk about blockchain and smart contracts, it is necessary to consider the parties participating in them, their rights and obligations, as well as the prerequisites for concluding a smart contract, namely, offer and acceptance. We also have to understand how it is used in different fields of law. As we are aware, blockchain is considered as the fourth generation industrial revolution. Its creation is related to a person named Sabo, it is still unknown who he was – it means that we do not have exact information, whether it was one person who created blockchain – part of the fourth industrial revolution or a group of people. At the same time, lets define the meaning of the contract in general, we can formulate the definition of the agreement (contract) as follows, the agreement (contract) is a deal concluded by two parties, which must have legal consequences, i.e. the parties participating in it have rights and obligations. It should also be noted, that thousands of years have passed since the first contracts were signed, however, the most significant change in the development of contracts occurred during the last century. The article will discuss all the issues and problems that are very important in relation to this topic. The role of offer and acceptance in blockchain and smart contracts and how it differs from the usual standard contract will be described, we will also talk about the parties of the smart contract and how we can use it in different fields of la
A scrutiny of the demand deposit (current account) through the lenses of law and Islamic jurisprudence
Get PDFDemand deposits (current accounts) are crucial to banks activity, particularly with regards to granting loans. For commercial banks, the primary source of funds is bank deposits. This article attempts to analyze and discuss the legal nature of the demand deposit contract, with a particular focus on the widely agreed upon characterization of this contract as a loan contract in all today’s legal systems (Common law, Civil law, Islamic law and hybrid legal systems). After discussing the arguments and building blocks of the loan theory and examining the essence of both contracts through the lenses of economics, law and Islamic jurisprudence, this paper concludes that the demand deposit contract cannot be considered a loan contract, with supporting arguments from economic, legal and Islamic jurisprudential perspectives.
Keywords: Demand deposit contract, Loan contract, Civil law, Common law, Islamic law and jurisprudence
Introduction
Money deposit operations are legal actions between the bank and the customer, and not just a physical procedure that is limited to the customer handing over the money to the bank employee (or transfer funds), and then recovering it whenever he wants, or as agreed upon.
Given that the bank deposit is distinguished by a set of characteristics; the jurisprudence differed about its legal nature. There are those who consider it a complete deposit to which the general rules stipulated in the Civil Code are applied, while another part of the jurisprudence considers it an abnormal or irregular deposit, because the bank is not obligated to return the same deposit, but rather to return a similar or an equal to it. As for the third opinion, which is the overwhelmingly accepted and adopted one, they consider it a loan because of the financial conduct of the bank regarding the use of the deposited money as its own implying and assuming a transfer of ownership of the deposited amounts from the customer to the bank upon deposit.
By adopting a descriptive analytical approach, the article explores the roots and background of the widely established characterization of the demand deposit as a loan contract in all today’s legal systems (Common Law, Civil Law, Islamic Law and hybrid legal systems). The paper looks into the economic and legal elements of the demand deposit with the aim to detect its characteristic distinctive features in comparison with the loan contract. This paper makes a unique contribution by examining the demand deposit contract from economic, legal and Islamic jurisprudential perspectives. It discusses the arguments put forward in support of the characterization of the demand deposit as a loan contract, provides compelling arguments to refute this characterization and concludes that the demand deposit cannot be a loan contract.
Prior research on the subject of Huerta de Soto[1](2006) and Bagus & Howden (2009[2], 2013[3]) mostly revolved around the fractional reserve banking system and whether it should be considered fraudulent or illegal, with the proposition of a full (100%) reserve system as a solution to remedy that. Huerta de Soto provided compelling arguments to support the characterization of the demand deposit as an irregular deposit contract, and this article expands on his work by delving deeper into the loan theory in order to expose its inherent flaws and loopholes from the perspectives of economics, law and Islamic jurisprudence. Even argumentative papers of Rozeff[4](2010) and Huber[5](2013) in response to the full reserve banking proponents focused merely on putting forward arguments against the full reserve system from an economic perspective, largely ignoring the legal perspective (and in the case of my article the Islamic jurisprudential perspective). These discussions did not address some major economic, legal and Islamic jurisprudential issues related to the characterization of the demand deposit as a loan contract (which is essentially known to be the main driver of the fractional reserve banking system).
Since the core element of this article is to discuss the characterization of the demand deposit account as a loan contract, the first section describes the basic economic concept of a demand deposit. Section two presents an overview of the stance of all different legal systems on the classification of this contract. The final part of this article tackles the subject matter with a thorough and detailed discussion of the characterization of the demand deposit as a loan contract from these three different (yet interlocked) perspectives: economics, law and Islamic jurisprudence.
1.The economic concept of the demand deposit:
Deposit (the noun) in English language is defined in the Merriam Webster dictionary as ‘the state of being deposited, something placed for safekeeping: such as money deposited in a bank’. The Britannica dictionary defines it as ‘an amount of money that is put in a bank account’, so the deposit is what is deposited - i.e. left – whether it is money or other things with the one who keeps it, in order to return it to the one who deposited it whenever he asks for it.
In Islamic Jurisprudence ‘Fiqh’ Deposit is called Wadiah, which is defined as money entrusted to others for safekeeping; That is, money that a person ‘the owner’ took and handed over to someone else to keep it safe and return it to him when called upon. In other words, it is simply transferring the preservation (safe keeping) of the owned thing that can be transferred, such as animals, house furniture, gold and silver, to be entrusted to the depositary. In this covenant or contract depositing does not involve the transfer of ownership itself as in selling and buying, gift, charity, mortgage and other contracts in which the property (title) is transferred from one person to another.
In short, wadiah according to the Hanafi school is to delegate and entrust someone else to protect and safe keep his money, for the Malikis it is to authorize and entrust the safe keeping and preservation of money, and according to the Shafi’is it is the contract that requires safe keeping. Similarly, the Hanbalis define it as an authorization – procuration- to preserve and safe keep, benevolently.[6]
In economics, deposit can be defined as everything that individuals or organizations put in banks temporarily, short or long, for the purpose of safekeeping. These deposits are often embodied in the form of legal money, although they can sometimes take other forms. The demand deposit, which is also called the current deposit or the current account (even checking account and transaction account in some countries), is considered one of the most common bank deposits, as it represents the largest part of the bank’s resources. It is an agreement between the bank and the customer according to which the latter deposits a sum of money with the bank, provided that he has the right to withdraw it upon request. Demand deposits have characteristics that distinguish them from other deposits, and as its name indicates, these deposits are always at the disposal of their owners, who can resort to withdrawing them in whole or in part whenever they want, and without prior notice – this is true for almost all forms of current accounts –[7].
The deposit, even if it is in the possession of the bank, is at the absolute disposal of its owner. The bank is not entitled to impose restrictions or conditions on its owner during the withdrawal, and it may not use any argument that would constitute an obstacle for depositors to use these deposits. In return for this feature, the owners of this type of deposit cannot benefit from interests. They cannot impose this on banks due to the nature of this type of deposit, even though the bank can use these deposits to make loans, and nothing prevents it from doing so. This banking practice enables banks to exploit and use inexpensive financial resources allowing for expansion of loans at a relatively very low cost. This underlines the importance of this type of deposit, as it constitute the main source of money and loan expansion in banking activity, making the bulk of its external resources.[8]
Demand deposits make up most of a particular measure of the money supply—M1[9]. As of October 2022, the total amount of demand deposit accounts in the U.S. was 1.4 trillion five years ago and $733 billion 10 years ago.[10]
2. The legal characterization of the Demand Deposit:
This section portrays the current legally accepted characterization of the demand deposit account in different legal systems and jurisprudences.
Before going through the modern era’s legal characterization of the demand deposit, it has to be noted that Roman legal tradition described in detail the covenant of monetary ‘demand’ deposit and the principles that govern it, along with the crucial differences between this contract and other legal contracts, such as the loan. Roman bankers’ operations included two different types of contract. The first one was in the form of a deposit, which involved no right to interest and obliged the depositary to maintain the full, continuous availability of the money in favor of the depositor, who had absolute privilege in the case of bankruptcy. And, the second form of operation they carried out was receiving loans, which obligated the banker to pay interest to lenders, who lacked all privileges in the case of bankruptcy. This offers an unequivocal clarity in the distinction between the two contracts.[11]
2.1. Common law - English Law
Acting as a depository for the money of members of the public is essentially the most basic service a bank can provide. Commercial banking is based on this service; as it provides a legal definition for banking. The public generally holds its deposits with banks in the form of accounts. As a matter of English law current account holders are entitled by contract to demand cash over the bank\u27s counter and to have checks (cheques) honored and collected.[12]
The characterization of the demand deposit account as a loan comes from the identification of the relationship between customer and bank in relation to the current account as basically that of creditor and debtor. That is why banks can be served (third party debt/garnishee orders) by the judgment creditors of its customers. This means that a third party debt/garnishee order obliges the bank to pay the judgment creditor rather than its customer what is owed.[13]
In common law, other important obligations associated with the current account are contained in the classic statement in the judgment of Atkin LJ in Joachimson v. Swiss Bank Corp., (1921):
The bank undertakes to receive money and to collect bills for its customer\u27s account. The proceeds so received are not to be held in trust for the customer, but the bank borrows the proceeds and undertakes to repay them. The promise to repay is to repay at the branch of the bank where the account is kept, and during banking hours. It includes a promise to repay any part of the amount due against the written order of the customer addressed to the bank at the branch, and as such written orders may be outstanding in the ordinary course of business for two or three days, it is a term of the contract that the bank will not cease to do business with the customer except upon reasonable notice. The customer on his part undertakes to exercise reasonable care in executing his written orders so as not to mislead the bank or facilitate forgery.[14]
The legal position in relation to the banker-customer is largely expressed as being constituted by implied terms.[15]
Going back in the common law precedents’ history, Foley v. Hill was a historical development when, in 1848, the House of Lords characterized the banker-customer relationship as fundamentally a debtor-creditor relationship. This enabled banks to treat money deposited with them as their own. Consequently, the only obligation they had was to return an equivalent amount. This brushed aside all rival characterizations—bailment, trust, or agency— on the grounds of limitations on how the moneys could be employed which was essentially incompatible with the envisaged ownership of the deposited money by the bank. As Lord Cottenham LC noted, the characterization of the bank as debtor meant the money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it.[16]
Lord Cottenham LC said:
Money, when paid into a bank, ceases altogether to be the money of the principal; it is by then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into a banker’s is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker’s money; he is known to deal with it as his own; he makes what profit of it he can, which profit he retains to himself, paying back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places. The money placed in custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands. That has been the subject of discussion in various cases, and that has been established to be the relative situation of banker and customer. That being established to be the relative situations of banker and customer, the banker is not an agent or factor, but he is a debtor.[17]
2.2. Civil law - French Law and Spanish Law:
In French law, when explaining deposits received by banks Article 02 of the Law n° 84-46 of January 24, 1984 relating to the activity and control of credit institutions stipulates ‘Funds received from the public are considered to be funds that a person collects from a third party, in particular in the form of deposits, with the right to use them for their own account, but on condition that they be returned.’[18]
Similarly, in Spanish law we find that the Law 10/2014 of 26 June 2014 on the regulation, supervision and solvency of credit institutions defines credit institutions by mentioning their exclusive job of collecting funds from the public to be used in granting loans, Article 01 stipulates ‘Credit institutions are authorized companies whose activity consists of receiving deposits or other reimbursable funds from the public and of granting loans on their own account’[19]. Moreover, Article 309 of the Spanish Commercial Code stipulates that:
Provided, with the consent of the depositor, the depositary of the goods subject to deposit disposes of these, either for himself or his business, or for the operations he is entrusted, the rights and obligations inherent to depositor and depositary shall cease, and the rules and provisions applicable to business loans or agencies or the contract in substitution of the deposit into which they may have entered, shall apply.[20]
2.3. Arab hybrid legal systems – a mixture of civil law and Islamic ‘sharia law’:
Many Arab legislations defined the cash bank deposit in its commercial law, or in a law specific to banking - bank operations - , as in Article 301 of the Egyptian Trade Law which stipulates that ‘a cash deposit is a contract that authorizes the bank to own the deposited money and use of it in accordance with its activity, with an obligation to return the same amount to the depositor in accordance with the terms of the contract.’[21]
Article 339 of the Omani Commercial Law defines a cash bank deposit as ‘a cash deposit, a contract that authorizes the bank to own the money deposited with it and to deploy and use it in accordance with its professional activity with an obligation to return the same amount to the depositor and the refund shall be in the same type of currency.’[22] And that is exactly what Article 115 of the Jordanian Commercial Law stipulates in its first paragraph; stating that, ‘The bank that receives as a deposit a sum of money becomes its property, and it must return it with an equivalent value in one payment or in installments at the depositor’s first request, or according to the conditions, dates or prior notification specified in the contract,’[23] and this is similar to what is stipulated in Article 307 of the Lebanese Commercial Code as well.[24] Articles 414 and 416 of the Qatar Commercial Law[25] provide similar concepts and rules stating that the ownership of the deposited money shifts from the hands of the current account holder to the bank. Article 992 of the UAE civil code stipulates that ‘If the property bailed (deposited) is a sum of money or a thing which can be destroyed by use and the depositor permits the depository to use it, it shall be regarded as a contract of loan.’[26] And similar conceptualization can be found in the Syrian Law in Article 402, and the Libyan Law in Article 232.
The Algerian legislator set a definition of the deposit in the Civil Code (1975), similar to other Arab legislations, Article 590 stipulates that ‘a deposit is a contract whereby the depositor delivers something transferred to the depositor, provided that he maintains and safe keeps it for a period of time.’[27] However, Article 598 of the Algerian Civil Code, which explores types of deposits, states that ‘if the deposit is a sum of money, or something else that is consumed and the depositor is authorized to use it, the contract is considered a loan.’[28] Now the Algerian Money and Credit Law of 2003, defines banking operations according to Article 66 as following ‘Banking operations include receiving money from the public and loan operations, as well as providing and managing means of payment.’[29] Furthermore, Article 67 states ‘Money received from the public is considered money received from others, especially in the form of deposits with the right to use them for the account of the recipient, provided they are returned.’[30] Unsurprisingly, the Algerian legislator’s definition of money deposits is largely similar to the aforementioned French law.
2.4. Contemporary Islamic financial jurisprudence opinion:
The overwhelming majority of modern jurists and scholars identify the demand deposit as a loan contract,[31] which was approved by the Council of the International Islamic Fiqh (jurisprudence). The council declared in its 9th session in Abu Dhabi, United Arab Emirates, that:
Demand deposits (current accounts) whether at Islamic banks or conventional (usury-based) banks, are considered as loans in the Sharia perspective, since the bank receiving these deposits is answerable for their safety and is Sharia bound to returning them on call. The ruling applicable to the loan is not affected by the bank’s (borrower) solvency or otherwise.[32]
Proponents of this characterization put forward two main arguments:
The current account, even if it is called a deposit, is in fact a loan. Because the meaning of the loan is verified in it: as the bank owns the money deposited in the current account, and has the right to use it, with the obligation of returning a similar amount upon demand, and this is the meaning of the loan, this is in contrast to the deposit in the fiqh terminology, which is money that is placed with a person for the purpose of preservation, with no right to use it, and an obligation to return it ‘the particular deposited good’ to its owner. And the jurisprudence ‘fiqh’ rule says “The essence of the contract is based on the purposes and meanings, not the words and premises.”
The bank is a guarantor ‘responsible’ of the amounts deposited in current accounts if they are damaged or lost, whether that was due to negligence or not, which is in accordance with the loan contract. This is unlike the deposit from the jurisprudential point of view, as it is a trusteeship or custody, the depository does not guarantee it except in case of infringement or negligence.[33]
3. Discussion of the characterization of the demand deposit account:
I must draw the attention to the fact that this discussion (and the article in its entirety) deals with the demand deposit (current account) and not the other types of deposit contracts (time deposit and all its subtypes). In addition to that, keep in mind that both conventional and Islamic banks operate under the fractional reserve system (they do not keep 100% reserves), which is relevant to the ensuing discussion.
All today’s legal systems and the majority of jurists consider the current account (demand deposit) as a loan contract, as displayed in the previous part of this article, and in an effort to challenge this characterization, this part of the research paper will discuss this conceptualization by providing solid arguments from economic and legal perspectives, as well as the Islamic jurisprudence viewpoint.
First, we can all agree that there is an objective nature of legal concepts such as “deposit”, “loan” and “property.” Hence the essence of loan and deposit exists independently of subjective interpretations.
It is very important to draw the attention to the fact that the debtor-creditor characterization adopted by all legislations and legal systems contradicts many aspects of the debtor-creditor covenant. Evidently, the bank cannot be obliged to seek out its creditor, or to
A critical analysis of personal data protection bill 2018 with reference to data protection and the right to privacy in India
Get PDFThe purpose of writing this research is to find an analysis of the Data Protection bill with reference to the parameters of data protection and the right to privacy attached to it. The bill contains lot many aspects of creating privacy standards and the legislation related to data protection is much needed for an hour. Aim: The aim of the study specifically covers the aspects of digital data and its protection related to it. The study covers aspects related to bill wherein the individual data protection considers to be an important part that creates trust between the person and entity/organization handling data. Methodology: This study is based on a doctrinal approach and analyzes the recent bill and existing laws for the data protection bill. The study specifically represents the recent bill of data protection and existing laws related to data protection and how the statistics show that there is an increase in digital transactions required to share data. Outcome: The outcome of this paper suggests that the data protection bill incorporates various in the form policies and mechanisms to drive out the personal and individual protection of data. The graphical representation in this study shows that there is a rapid change in technology wherein digitalization is required to keep the legislation related to data protection. Across the world, there are many countries that have a comprehensive regulatory framework wherein the expert committee was set under the Chairmanship of Justice B N Srikrishna to examine to requirements and issues of data protection and its probable solutions.
Keywords: Data Protection bill, right to privacy, constitutionality, regulatory framework
Introduction
A new regulatory framework to control the protection of personal data is now being adopted in India. The Committee of Experts, under the direction of Justice B.N. Srikrishna, drafted the draught Personal Data Protection Bill, 2018. We observe that, notably in relation to processing by private entities, the draught Bill provides data subjects with a sizable number of data protection principles and rights. But there are a few crucial areas where the stances taken by the Bill need to be reviewed. This comprises rules governing the composition and layout of the Data Protection Authority, the function of adjudication officers, the flow of data across international borders, and the range of legal exceptions, particularly as they apply to government organizations. In Article 21 of the constitution, the right to privacy is recognized as a derived or implied fundamental right. The court stressed the necessity of enacting strict rules regarding data protection and privacy when it announced its decision on the Privacy Judgement. Indeed, there was a pressing need for such a law to protect the personal information of Indian data subjects because their privacy was in danger due to the crucial role that data played in the development of the digital economy.
Key suggestive areas of the bill for revisiting
Firstly, reviewing the regulations controlling cross-border data transfer is necessary, especially in light of their overbroad nature, the minimal privacy improvements it would provide, and the potential repercussions on freedom of speech and other rights. Second, the scope of exemptions granted to government agencies for security and law enforcement purposes needs to be reviewed in order to bring the provisions into compliance with the Supreme Court\u27s decisions in Puttaswamy v. Union of India and ensure an adequate balance between the rights to individual privacy and the needs of state security. Thirdly, it has analyzed the jurisprudential development and current status of the law of privacy in India as well as the numerous model privacy laws that have been created over time. The State was primarily the source of privacy worries in the beginning. Fourthly, aside from the exemptions listed in Chapter IX of the Bill, a number of points need to be reviewed. A more acceptable balancing of privacy with competing rights, such as the freedom of expression and the right to employment, will be achieved through introducing categories like academic and creative activity and nuanced changes to the scope of current exemptions.
Multi dimensionality of Right to Privacy vis-à-vis Data Protection Bill, 2018
The concept of a person\u27s right to privacy is complex. An individual\u27s special right to manage the gathering, use, and disclosure of his personal information is referred to in the context of personal data. Personal information includes things like a person\u27s name, address, phone number, email address, likes and dislikes, daily routine, family history, education, communication, health, and finances, among other things. We now live in a time where individuals\u27 personal information can be creatively exploited for a variety of reasons, such as government surveillance and commercial revenue generation. The fact that certain methods, such as clustering, geotagging, and geocoding, allow for the unauthorized use of a person\u27s personal data is noteworthy. Other companies may be able to contact the person who shared the photo and give him unwanted adverts, leading to a possible sale. This should highlight the fact that \u27data\u27 has the capacity to both empower and hurt, as well as to reveal its salient implications. Innovations in technology have made it possible to communicate and access.
The fact that "data" may empower people as well as cause them damage. Innovative technologies undoubtedly make personal data more accessible and transferable. As a result, it is crucial to create a strong and efficient data protection policy that will strike a balance between innovation and privacy protection. Therefore, resolving all the competing interests in information should be the main goal of a successful data protection law.
Prominent Features of the Bill
It is better to evaluate the proposed Bill in the context of the European Union General Data Protection Law since the latter has emerged as the initiative leading data protection efforts while the former is still in the executive branch. The research will include two distinct narratives: the anatomical, or exclusive rights, examination of fundamental label and provision; and the skimming orientation of the ruling class. The Committee stressed the importance of striking a balance between privacy and speech when determining whether the right to be forgotten is appropriate. Instead of the right to be forgotten, this matter should have been addressed under "the lawfulness of the processing." When it is determined that the data principal\u27s disclosure of the information is solely personal in nature and unrelated to the public interest, there is a greater balance of expediency for the data theme than for the fiduciary.
Constitutionality on Right to Privacy in India vis-à-vis Shortcoming of Data Protection Bill, 2018
The right to privacy is not stated expressly in the Indian Constitution. While taking into account various cases of government interference with personal privacy, Indian courts had taken the argument that the right to privacy is a basic right into consideration. The Personal Data Protection Bill, 2019, is the latest in a long line of privacy laws in India that have been impacted by both national and international trends. A right to privacy exists even though it is not expressly stated in the constitution, according to Indian courts, because Article 21\u27s guarantee of the right to life also includes a right to privacy.[1]
In Kharak Singh v. State of Uttar Pradesh[2], K. Subbarao and K.C. Shah, JJ., delivered a minority/dissenting judgement of the Supreme Court and recognised the right to privacy as a fundamental right protected by Articles 21 and 19(1)(d) of the Indian Constitution. This is another significant ruling worth mentioning. The U.P. Police Regulations\u27 daily surveillance rules were being examined by the Court in this case. Following a dacoity accusation, the petitioner was found not guilty. According to the majority decision in the case, there is no constitutionally protected right to privacy. Two causes that grew more important made it necessary to clarify this ambiguity: (1) vociferous complaints of loss of privacy following the government\u27s adoption of its initiative for unique biometric identity; and (2) concurrent worldwide developments.
Another judgment where the right to privacy will bring out an edging outcome is that in this case[3], CBI requested access to the Unique Identity Authority of India\u27s database in this instance in order to look into a criminal offense. According to a temporary ruling from the Supreme Court, the Unique Identity Authority of India is not allowed to give any other agency any biometric data about a person who has been given an Aadhaar number without that person\u27s express written permission.
The K.S. Puttaswamy v. Union of India[4] case, where the Unique Identity Scheme was considered in relation to the privacy problem, was decided, was significant. Given that there is no explicit privacy provision in the Indian Constitution, the Court was asked if the right to privacy is guaranteed by the Constitution and, if so, what constitutes the source of such right. Privacy is not a fundamental right, according to India\u27s attorney general. In the end, the Court deferred to a bigger Constitutional Bench to consider the issue because past rulings that rejected the right to privacy were rendered by benches larger thn those that determined instances where the right was acknowledged as a fundamental right.
A number of challenges challenging the legality of the legislation enabling the system, the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act of 2016, were filed before the Supreme Court as a result of privacy concerns regarding Aadhaar. The five-judge bench of the Supreme Court that examined the petitions stated that it was crucial to first establish if the right to privacy was recognised by the constitution because the petitions alleged infringement of that right. It sent this matter to a bench of nine Supreme Court justices, who then determined that privacy was a part of this right to privacy under Article 21 and that the Supreme Court had erred in its Kharak Singh decision.
Challenges of Data Protection in an Epoch of Big Data
Big data and data are now a new source of enormous economic and social values as well as the basic building blocks of manufacturing. Businesses, governments, and individuals now have access to a much wider range of information thanks to developments in data mining and analytics as well as a dramatic rise in processing power and data storage capacity. Scientists have had to coin new terminology, such as zettabyte and yottabyte, to depict the flood of data due to the rapid growth of the amount of data being generated and stored worldwide. According to Andeson and Raini, when determining whether the right to be forgotten was appropriate, the Committee placed a strong emphasis on striking a balance between the right to privacy and the freedom of speech.
A number of fundamental principles serve as the foundation for international data protection measures like the OECD Guidelines, European Directive, APEC Privacy Framework, and national data protection laws around the world. Restrictions on further use include I ensuring that personal data isn\u27t processed excessively or for purposes other than those for which it was originally collected (generally, personal data cannot be used for other purposes without the consent of the individuals), (ii) providing individuals with information about any personal data processing, and (iii) ensuring that personal data is only used for legitimate purposes.
Whether GDPR-Style Data Protection Law Work for India?
India currently lacks a cross-sectoral data protection law, despite the EU having recognised a right to the protection of personal data for some time (under the Treaty on the Functioning of the European Union). Although it has some rules regarding the protection of personal data, the Information Technology Act of 2000 largely regulates matters like cybercrime and the accountability of internet intermediaries, such as social media platforms. For instance, the act\u27s section 43A offers compensation for harms brought on by a failure to uphold appropriate security procedures to safeguard sensitive personal data. But only a hodgepodge of sector-specific legislative standards governs the requirements for data protection and confidentiality.
The EU IA stated that harmonising privacy standards would be one of the primary economic benefits of implementing the GDPR in the EU. It is important to consider what economic advantages the proposed bill would bring to India given that it does not have the issues associated with an outdated, disjointed legislative structure for data protection. The patchwork of existing privacy-related central regulations in India was passed by the federal parliament and is consequently uniform throughout the country. As a result, if one were to analyse the GDPR\u27s three key advantages for the EU in reference to India, at least one of them would not be immediately applicable.
Development of Personal Data Protection in India
Data can be used for good, but the arbitrary and unchecked use of data, particularly personal data, has sparked worries about an individual\u27s liberty and privacy. This was also the topic of the Supreme Court\u27s historic decision, which recognised the right to privacy as a basic human right. A Committee of Experts has been formed by the Indian government to examine various data protection-related concerns and make recommendations for a draught data protection law. The purpose is to "promote the expansion of the digital economy while maintaining citizen privacy and personal data security and protection.
Source: Representation developed by National Informatics Centre
The distribution of online transactions clearly shows that it is increasing every year and to make it secure a data protection bill is required. The distribution curve clearly shows that the digital transaction significantly increases with time due to which there is a requirement of creating a comprehensive framework. The imminent data protection rule will broaden the scope by providing a thorough data protection outline that shall apply to the dispensation of personal data by any method and to processing activities carried out by both the government and the sequestered entities—not just body corporate—instead of just body corporate.
Implication of Data Protection Law in India
Information has become the only resource people rely on in the modern world. With the help of social internet platforms like Facebook, Skype, Whatsapp, and others, society is now interconnected through a single informational thread. These social media platforms have become so important to people nowadays that they are used as a conduit for sharing every last detail of their lives. People from all over the world now communicate with one another on these social media platforms, creating a new dimension of the world. Therefore, through developing effective legislation, it is crucial to secure data from being misused by people or the government.
Social media is a form of Internet-based communication. In addition, there are numerous additional forms of social media, such as blogs, microblogs, wikis, webpages, widgets, and virtual worlds. The popularity of social networking services like Facebook, Twitter, WhatsApp, and others has increased significantly in recent years. To use a social media site, however, and to find other accounts, the person needs first to create a database.
Digitization is a term used to describe the process of creating a numerical sequence that describes a distinct set of an item, image, sound, document, or signal points. The third industrial revolution, known as the digital economy, is a new productivity platform that has emerged globally. It is also known as The Internet Economy or The Internet of Everything (IoE), and it is predicted to create new job prospects, market growth opportunities, and the largest commercial opportunity in human history. It is interesting how quickly our technological advancement has accelerated thanks to Digital India. The goal of the Digital India Program is to make India a hub of global connectivity.
Conclusions & Suggestion
A person\u27s or group\u27s right to privacy refers to their capacity to conceal or separate information about themselves in particular. Although the definition of what is personal and its content differ between cultures and people, they all have some common ground. Privacy is occasionally associated with namelessness, the desire to go unnoticed or anonymous in the public sphere. When something is personal to a person, it typically means that they perceive it as exceptional or delicate in some way. The extent to which private information is revealed in this way will vary depending on how it is gathered in the open, contrasting between locations, and over time.
A protected modification is needed whereby privacy rights can be explicitly guaranteed by adding another agreement, therefore the necessity for a constitutional amendment. A change like that is necessary to provide protection by offering side recognition. In this sense, the law would impose limitations on how individual data customers might gather and utilize personal information. Clients for personal data would be expected to clearly inform the public about the purpose of collecting and using personal data. It is essential to have a thorough confidentiality agreement in place to protect each person\u27s right to exercise resistor over the collection and transmission of their own personal data.
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Coleman, D. (2018). Digital colonialism: The 21st century scramble for Africa through the extraction and control of user data and the limitations of data protection laws. Mich. J. Race & L., 24, 417.
Wachter, S., & Mittelstadt, B. (2019). A right to reasonable inferences: re-thinking data protection law in the age of big data and AI. Colum. Bus. L. Rev., 494.
Hoel, T., & Chen, W. (2018). Privacy and data protection in learning analytics should be motivated by an educational maxim—towards a proposal. Research and Practice in Technology Enhanced Learning, 13(1), 1-14.
Oganesian, T. D. (2020). The right to privacy and data protection in the information age.
Bailey, R., Bhandari, V., Parsheera, S., & Rahman, F. (2018). Comments on the (Draft) Personal Data Protection Bill, 2018. Available at SSRN 3269735.
Paterson, M., & McDonagh, M. (2018). Data Protection in an era of Big Data: The challenges posed by big personal data. Monash University Law Review, 44(1), 1-31.
Park, G. (2019). The changing wind of data privacy law: A comparative study of the European Union\u27s General Data Protection Regulation and the 2018 California Consumer Privacy Act. UC Irvine L. Rev., 10, 1455.
Footnotes
[1] Govind v. State of Madhya Pradesh AIR 1975 SC 1378; R. Rajagopal v. State of Tamil Nadu AIR 1995 SC 264; PUCL v. Union of India AIR 1991 SC 207. State of Maharashtra v. Madhukar Narayan Mardikar AIR 1999 SC 495
[2] 1964 SCR (1) 332.
[3] Unique Identification Authority of India v. Central Bureau of Investigation (2017) 7 SCC 157
[4] (2017) 10 SCC 1
წარმომადგენლობის ინსტიტუტის ტიპოლოგიური დახასიათება
No full text One of the forms of realization of the principle of private autonomy in civil law is fiduciary relations. In general, in contemporary law, the institution of representation is the basic cornerstone upon which many legal relationships are built. The importance of the institution increases one or two times in private law, when a person or an organization that, due to the various reasons in legal relations, is unable to represent its interests, starts to act and conduct legal actions through a representative. There are many reasons, however, the legislative is one, about which there are still some question marks, How comprehensive the Georgian legislation provides for the institution of representation, and what is the basic legislative framework, can be used to distinguish between forms of representation. For the development of the doctrine of private law, it is of great importance to bring to the fore the relevance and importance of the institution of representation. And for this, it is appropriate to conduct a study of the theoretical issues of the institute - the way from its historical beginnings to modern times. The typological characterization of the issue allows identifying problems on such important issues as the function of representation, its essence, its specific features, and signs, and how harmoniously the Georgian legislative framework is compatible with the standards established at the international level. And for this, it is appropriate to conduct a study of the theoretical issues of the institute - the way from its historical beginnings to modern times. The typological characterization of the issue allows identifying problems on such important issues as the function of representation, its essence, its specific features, and signs, and how harmoniously the Georgian legislative framework is compatible with the standards established at the international level. And for this, it is appropriate to conduct a study of the theoretical issues of the institute - the way from its historical beginnings to modern times. The typological characterization of the issue allows identifying problems on such important issues as the function of representation, its essence, its specific features, and signs, and how harmoniously the Georgian legislative framework is compatible with the standards established at the international level.
Keywords: Representation, Typology, Problem
Introduction
Representation is a legal institution regulated by the Civil Code of Georgia, the theoretical meaning of which acquires a characteristic legal nature during its practical implementation. The study will focus on several legal aspects of the typological characterization of representation. Representation is a legal institution regulated by the Civil Code of Georgia, the theoretical meaning of which acquires a characteristic legal nature during its practical implementation. The study will focus on several legal aspects of the typological characterization of representation.
The issue of clarifying the characteristic features of the Georgian, German, Romanian and Anglo-American legal systems of representation is a criterion for evaluating the essence and functioning of this institution. This is what makes the system comparative context interesting, which, together with the challenges of Georgian private law, also includes the issue of regulation of the institution of representation by the code, which reveals the main concepts in the possibility of typological characterization of the issue.[1] Also, the typological characterization of representation implies the clarification of the meaning of the reception of law and legal transplant in private law. The purpose of the research is: to outline the essence and signs of representation; showing its origin as a Georgian institution of private law and its relation to legislative regulation in response to today\u27s challenges; determining whether representation is permissible in all types of legal relationships under comparable legal systems. Normative, dogmatic, comparison, synthesis and analysis methods are used in the research.
1.Historical Aspects of Representation
Representation, as an institution of Georgian private law, existed in the form of customs and traditions even before the formation of the codified system.[2] In different social environments, representation acquired the form of both rights protection and tradition, which formed the moral, ethical and legal responsibility of the representative and represented person.[3] In Alexander Kazbegi\u27s work “Khevisberi Gocha”, the episodic issue of Onise and Gugua is significant, where the control of the actions of the presented person was ensured by the phenomenon of moral justice.[4] Vazha Pshavela\u27s poem “Bakhtrioni” in the form of Sanatha portrays the representation of issues of the deceased family members and men in a place where, as a rule, women are not allowed.[5] In the mediation process in Svaneti, representation was accepted in both criminal and civil cases.[6] The representation of the community and the representation of an individual are interesting. So, for example, the name of a mediator as a representative of justice and a neutral person can be found in the following form: judge, man of the law, makvshi, btche-mediator, khevisberi. A representative of an individual could be a family member or another person. In Adjara, “men to be called in advance” represented the opinion of the community. Representation in socio-political relations also had the function of guarantee.[7]
The regulation of the Civil Code of Georgia gave the institution of representation a characteristic (imported) form for the legal responsibility of natural or legal persons and private legal relations, including clarity of time and space.[8] Depending on the nature of legal relations in private law, the need is forming, that a person or an organization in the legal form of a legal entity, which, for some reasons, cannot directly exercise its interests, rights and duties, to be represented by a third person.[9]
This issue appears not only in private law, but also in public law relations.[10] Accordingly, the regulation of Articles 103-114 of Chapter 7 of the Second Book of the Civil Code of Georgia creates the legal basis for characterizing representation as an independent institution of Georgian private law. The named normative base also puts the issue of sectoral reflection and typological characterization in the private and public relations of the institution of representation on the agenda.[11]
Representation, as an institution of Georgian private law, is characterized by a heterogeneous manifestation of typological characterization for study disciplines in the same field. For example, for the method of solving a case in civil law, it is essentially a problem of manifestation of will,[12] more specifically: any problem arising at the time of making a transaction, which includes cases when it is possible to make a transaction, although the person who should become a direct party to the transaction does not participate in the conclusion of the transaction or this person makes an offer, but not an acceptance.[13] In the sciences studying the forms of alternative dispute resolution, representation is related to the ethical and procedural issues of the lawyer-representative\u27s participation in mediation and notary mediation.[14] Also, the association agreement with the European Union represents an important stage in the Europeanization of Georgian private law, including the field of representation.[15]
Georgia is approaching European law step by step.[16] The process of development of Georgian private law, along with the general idea of law development, includes the development of separate legal institutions and legislative norms. Accordingly, the association agreement with the European Union, along with the convergence with the European legislation, carries the goal of developing Georgian private law. If Cicero thought that “all other laws ... were vague and ridiculous compared to the law of Rome”, in contrast to this concept, today, the development of different laws and separate legal institutions is an equal necessity today.
The adoption of the Civil Code of Georgia is the legal crown of Georgian statehood.[17] The regulation of representation as an institution of Georgian private law in the form of Articles 103-114 of the Civil Code, in turn, includes the possibility of its typological characterization.[18] It should be taken into account the fact that the legal acts of European countries, the European Union and the Council of Europe were studied while working on the draft of the Civil Code of Georgia, which shows the importance of the reception of the legal norm or the legal transplant as an example of the practical implementation of a separate institution.[19] It is natural that the institution of representation was formed on the basis of comparisons of Georgian peculiarities and legal norms and systems of different states.[20] If we compare from a historical point of view, for example, the ten-man commission (decemvirate)[21] of the Romans was responsible for the first plural law of Rome (the Law of the XII Table),[22] in which the creation of legal norms of representation as an institution of Roman law did not take place, the issue was regulated by other norms regulating Roman customary and social law, at the same time, it was related to the status of persons,[23] that is, their authority. Later, in the terminology of Roman law, the mandator was called[24] mandans, and the mandatary - procurator.[25] It is worth mentioning Savin\u27s opinion that “the law grows with the people, is based on the people and disappears as soon as the people lose their individuality”.[26] Accordingly, the typological characterization of representation as an institution of Georgian private law is a definition with legal consequences of the current legislative regulation, which is based on a certain history in the sense of origin, concept or content. Representation as an institution of Georgian private law and its typological characterization is not only the subject and challenge of Georgian private law research, and within the framework of the obligation imposed by the association agreement with the European Union,[27] it is possible to develop a concept for a broad discussion of current issues.
2. Typological Characterization
2.1. Georgian Legal System
The typological characterization of representation as an institution of Georgian private law is a challenge of legislative reality and judicial practice in Georgian law. From a dogmatic point of view, the established sectoral classification,[28] in individual cases of practical reflection, is on the institutional border of private and public law, where the classification of legal families is of great importance from the point of view of discussion of the issue, and the typological characterization of sectoral forms of representation is the basis of its different perception for academic disciplines. It is interesting that the systematicity and institutionality of the institution of representation is conditioned by the historical formation of the institution and the current normative reality of the legislative regulation within the framework of the German, Roman and Anglo-American legal systems.
Moved by the spirit of the first constitution of the Democratic Republic of Georgia, the Georgian legal system (later - the legislature) after gaining independence, rejected the continuous operation of the constitutions, legislative acts and norms of the Soviet Socialist Republic, thus connecting the issue of state law and order and the development of law with the need to develop a form of reception and legal transplant.[29] According to the first sentence of the first part of Article 103 of the Civil Code of Georgia, the transaction can be concluded through a representative.[30] The named reservation gives natural and legal persons (hereinafter - representatives) the right to participate in private legal relations through a representative (capable person). According to the second sentence of the first part of the same article, the authority of the representative either derives from the law, or arises on the basis of a mandate (power of attorney).[31] In this form, the legislator determined the type of action based on the institution of representation: the code-based form of regulation and the consequential nature of voluntary reception.[32]
The current legislative version of the institution of representation, at the beginnings of the formation of Civil Code and afterwards, along with the similarity of this institution to the modern German legal system, it also forms separate features:
a) regulation of legal representation in the regulatory chapter of transactions, as a necessity to refine the legislative technique;[33]
b) the rule determined by the second part of Article 103 of the Civil Code of Georgia and the spirit of the legislator regarding the demarcation of the form of concluding a will, marriage, and at the same time other transactions that must be concluded directly;
c) mandate (power of attorney) and authority, as the same basis for the origin of representative powers, as cases of common content and different terminological names.[34]
Similarity to the German legal model distinguishes the Georgian legal system from the Romanian and Anglo-American legal systems. It is possible to distinguish the following:
a) The issue of regulation of representation as a private law institution by the Code. Also, the importance of voluntary reception and legal transplant in relation to the establishment of the institution of representation;
b) issues of terminological naming and mutual separation of parties (subjects) of representation;
c) issues of regulation of the rights and duties of subjects of representation as an institution;
d) the question of the division of types and sectoral forms of the institution of representation.
One of the peculiarities of the Georgian model is the absence of a clear legal boundary between power of attorney and mandate. We can present the issue of terminological compliance with a problematic character, on the example of the legislation regulating notarial law. The title of Article 28 of Order No. 71 of the Minister of Justice of Georgia “On the procedure for performance of notarial acts” is: Performance of notarial acts on the basis of a power of attorney (authority, mandate agreement).[35] Let\u27s look at the title and turn to the second sentence of the first part of Article 103 of the Civil Code of Georgia: the power of an agent may arise either by operation of law or out of a mandate (power of attorney). It is interesting why power of attorney includes the issue of authority and mandate agreement in the notary legislation, when in the Civil Code of Georgia, the legislator gives priority of reference to the mandate, and indicates the basis of the power of attorney in parentheses.[36] I wonder if this is a peculiarity or a legal flaw? The regulatory nature of Article 28 of Order No. 71 does not give specific importance to the issue of the power of attorney and mandate, and it distinguishes[37] the mentioned issue only by the peculiarity of drafting a public[38] and private[39] notarial deed. Unlike the named order, the Law of Georgia “On Notary” does not indicate the issue of mandate and power of attorney at all, but considers the latter within the framework of general or other notarial activity.[40]
It is necessary to assess what basic approaches have been established in judicial practice regarding the mentioned complex issue. According to the definition of the Supreme Court of Georgia, the granting of representative authority and the conclusion of an mandate agreement are two independent legal relations.[41] The court notes that the power of attorney, which confirms the representation, is very different from the contract of mandate, since, from a practical point of view, the latter regulates the relationship between the representative and the represented, while the power of attorney is aimed at ensuring the legal relationship between the represented and a third party.[42] i.e. the addressee of the power of attorney is a third party and serves to confirm the authority of the representative before him. The court draws a clear line between these two institutions and brings to the fore the main distinguishing features that establish the final legal framework for separating these two legal forms, in particular, according to the mentioned definition, the contract of mandate belongs to the type of contracts where the parties are: on the one hand, the mandator (the assignor), same as the creditor, and on the other hand, the mandatary, who performs the assigned action and appears in the role of the debtor. The subject of such a relationship can be the implementation of both legal and factual actions, for which a power of attorney can be issued or not issued at all. In this case, it is clear that the power of attorney can only be the basis for the existence of the relationship arising from the contract of mandate, but does not equate to this relationship itself. That is why, doctrinally, the grounds for terminating the contract of mandate (720-721 of the Civil Code) and the termination of authority (109 of the Civil Code) are regulated by different norms of the Code, which, as a rule, should avoid the existence of similar ambiguities and uncertainties in practice. We will touch on these and other issues more specifically in the third chapter of the work.
Representation in the Georgian legal system from the point of view of a separate part of the institution, echoes the broker, mediator, commissioner and other persons/institutions containing the actions of transferring the will, although despite the similarities, their legal nature and legal consequences are different. Legal representation may be called mandatory representation, and contractual representation - voluntary,[43] it is significant that the Anglo-American legal system does not dogmatically establish legal representation in the form recognized by continental law states. Division with mandatory and voluntary form as a division criterion derives from the nature of legislative regulation. For example, the division of notary mediation into mandatory and voluntary types in Georgian law is also determined by the form and nature of the regulatory norm. The legislator establishes the institution of representation in the Civil Code of Georgia with the following numbering and name:
Article 103 – Concept;
Article 104 – Agency and the effects of a transaction on an addressee;
Article 105 – Limited legal capacity of an agent;
Article 106 – Defect of the declaration of intent in agency;
Article 107 – Power of agency;
Article 108 – Obligation of notification upon changing the authority;
Article 109 – Grounds for termination of power of agency;
Article 110 – Obligation of agent upon extinguishment of authority;
Article 111 – Entering into a transaction without a power of agency;
Article 112 – Right to repudiate a contract;
Article 113 – Agent’s obligation when there is a defect in the power of agency;
Article 114 – Inadmissibility of entering into a transaction with oneself.
2.2. German Legal System
The German legal system with its history of formation and development, on the one hand, from the disintegrated state formation to the German Empire, from the Empire to the Weimar Republic, from the Weimar Republic to National Socialist Germany and after that, to the present day, and on the other, under the conditions of the state legal order of the Federal Republic of Germany, forms the centuries-old history of the institution of representation.[44] Title 5 of Division 3 of the First Book of the German Civil Code regulates the issue of representation and power of attorney.[45] We consider it permissible to indicate the numbering and name of the representation institution in the German Civil Code:[46]
Section 164. Effect of declaration made by the agent;
Section 165. Agent with limited capacity to contract;
Section 166. Absence of intent; imputed knowledge;
Section 167. Conferment of authority;
Section 168. Expiry of authority;
Section 169. Authority of authorized representative and the managing partner;
Section 170. Period of effectiveness of the authority;
Section 171. Period of effectiveness in the case of announcement;
Section 172. Letter of authorization;
Section 173. Period of effectiveness in the case of knowledge and negligent lack of knowledge;
Section 174. Unilateral legal transaction by an authorized representative;
Section 175. Return of the letter of authorization;
Section 176. Declaration of invalidity of the letter of authorization;
Section 177. Entry into contract by an unauthorized agent;
Section 178. Right of revocation of the other party;
Section 179. Liability of an unauthorized agent;
Section 180. Unilateral legal transactions;
Section 181. Contracting with oneself.
In terms of the volume of norms and the importance of the discussed issue, the German legal system indicates the institution of representation clearly, widely and inseparably to the substantive aspects of the issue.[47] This issue is characterized by a precise and complete legal regulation, which implies that representation in the German legal system should be allowed, first of all, in the legal relationship[48] in which the will of the representative is manifested on behalf of another person and within the scope of representative authority.[49]
Consider a practical example. In one of the German Federal Court cases, it was held that when consenting to enter into a contract using another p
ინდივიდუალური შეფასების ანგარიშის როლი არასრულწლოვნისათვის სასჯელის დანიშვნამდე მისი საუკეთესო ინტერესის განსაზღვრისათვის (სასამართლო პრაქტიკის ანალიზი)
Get PDFThe importance of the scientific paper is due to the combined theoretical and practical analysis of the norm-principles of juvenile justice and the report of individual evaluation; in particular, the study of case law. The research uses the method of analysis and comparison, the method of logical reasoning and reasoning, the method of studying and generalizing specific criminal cases and established judgments. The structure of the paper is a kind of chain that is logically related to each other, which is consequently reflected in the sentencing of a judge. In particular, it analyzes what is meant and how to prioritize the best interest before the judge imposes a sentence, then logically links it to the principle of individual approach to the juvenile, which is also inherent in juvenile justice and the principle of best interest priority. These norms find practical viability in an individual assessment report, in particular, the paper discusses in detail what issues a social worker will explore before sentencing a juvenile. An individual assessment report within juvenile justice is the basis for a combination of outlining principles and making decisions tailored to the best interests of the juvenile. After taking into account a number of circumstances analyzed in the individual assessment report, the judge will have a clear idea of what will be the best decision for the juvenile to re-socialize-rehabilitate
უცხოური სამართალი საერთაშორისო არბიტრაჟში
Get PDFArbitration is the most common form of dispute resolution in international transactions and commercial relations. The reason for its success is attributed to a number of advantages that arbitration has over court proceedings. There is no lex fori in international arbitration, it can be said that all laws are foreign. Because the principle of autonomy of the parties gives the parties the freedom – regardless of where the arbitration takes place – to decide which law to apply, a wide range of different laws apply to international arbitration proceedings. In international arbitration, in the context of competition between the laws of different countries, the arbitrators are faced with the choice of the law to be applied. They often have to apply law that is foreign to professional qualifications and common practice. The arbitrator may have difficulty ascertaining a substantive law as this law may be unfamiliar to her/him. Naturally the question arises, the task of determining the law to be applied rests entirely with the parties in accordance with the traditional approach of common law, if the arbitral tribunal is empowered to determine the content and resolve the dispute, as the court does in civil law.საქმის განმხილველი ორგანოს შერჩევის მნიშვნელობიდან გამომდინარე, ტრანსნაციონალური ბიზნეს ხელშეკრულების მხარეები ხშირად თანხმდებიან გამოსაყენებელი სამართლებრივი ნორმებისა და იმ იურისდიქციის თაობაზე, სადაც დავა უნდა გადაწყდეს.საერთაშორისო არბიტრაჟი ხშირად განიხილავს ტრანსსასაზღვრო ბიზნეს დავებს. ამდენად, არბიტრები უმეტესად აწყდებიანუცხოური სამართლის დადგენისა და გამოყენების პრობლემებს. საერთაშორისო არბიტრაჟს lex fori (თავისი ეროვნული სამართალი) არ გააჩნია, ამიტომ გამოსაყენებელი სამართალი, განურჩევლად იმისა, მხარეთა მიერ არის არჩეული, თუ საარბიტრაჟო ტრიბუნალის განსაზღვრული, ყოველთვის იქნება „უცხო“ არბიტრებისათვის. ამ სამართლებრივ-ტექნიკური პრობლემის გათვალისწინებით, პრაქტიკაში ერთადერთი შემთხვევა, როცა გამოსაყენებელი კანონმდებლობის დადგენის აუცილებლობა არ წარმოიშობა, არის მაშინ, თუ ეს უკანასკნელი არბიტრის ეროვნული სამართალია ან არბიტრი, ეროვნების მიუხედავად, იცნობს რელევანტურ კანონს. არსებობს პრაქტიკული არგუმენტები საერთაშორისო საარბიტრაჟო განხილვებში jura novit curia პრინციპის გამოყენების საწინააღმდეგოდ, რომლებიც დაკავშირებულია იმ ფაქტთან, რომ არბიტრი არ ფლობს იმგვარ რესურსებს, რასაც ადგილობრივი მოსამართლეები იყენებენ რელევანტური მატერიალური სამართლის კვლევის პროცესში. ეს გარემოება არბიტრებს, გარკვეულწილად,ზღუდავს შინაარსის დამოუკიდებლად დადგენისა და გამოყენების პროცესში. 
Regulations of the Agricultural Cooperatives in Georgia
Get PDFFootnotesAgricultural cooperatives have a huge history in Georgia. Roots of cooperation in Georgia date back as early as the 19th century. Although, legal regulations of the agricultural cooperatives in Georgia appeared only in 2013 when the Georgian Law on Agricultural Cooperatives was created and entered into force on the 12 of July. Before the specific provisions for the agricultural cooperatives, the regulation on different types of cooperatives existed in the law on Entrepreneurs, however, provisions were general and at the same time scarce. Due to EU approximation, the Georgian Law on Entrepreneurs was changed and the new version entered into force on 1st January of 2022. Consequently, the part of the cooperatives was rewritten, hence Law on Agricultural Cooperatives needs further amendments. In this article, the impact of the change of the law on Entrepreneurs on the regulations of the agricultural cooperatives will be provided regarding some aspects. A comparison with the regulations in the different European countries will be provided where needed. Analyzing the impact of existing changes and further possible changes will illustrate the existing situation of the Georgian regulation on agricultural cooperatives and the necessity of some amendments.
Keywords: Agricultural Cooperative, Georgia, law, tax exemptions.
Introduction
Agricultural cooperatives are regulated by the Law of Georgia on Agricultural Cooperatives and the Law of Georgia on Entrepreneurs. The regulations of agricultural cooperatives are compelling, as the Law on Agricultural Cooperatives is a relatively new regulation in Georgian reality and has some particular moments, which need to be discussed in detail.
The following article will analyze Georgian regulations for agricultural cooperatives. The articles of the two main governing documents are considered, and the comparative analysis is given where needed.
In this work not only regulative issues are present. One can discover the current social situation which impacted the way the law is written and functions. This paper’s main goal is to show the existing situation step-by-step and underline problematic moments.
Definition of the Cooperative
The main sources of agricultural cooperative law in Georgia are the Law of Georgia on Entrepreneurs[1] and the Law of Georgia on Agricultural Cooperatives[2].
The Law of Georgia on Entrepreneurs defines the general structure and basic rules for different types of cooperatives, including agricultural, when the Law of Georgia on Agricultural Cooperatives gives provisions regarding matters related to the agricultural cooperatives specifically. While these two legal documents provide regulations on the same subject in different scopes, the interesting overlapping part, on the one hand, is the definition of the cooperative in the Law of Georgia on Entrepreneurs and on the other hand the definition of the agricultural cooperative in the Law of Georgia on Agricultural Cooperatives.
The definition of the agricultural cooperative is a core of the law and the whole cooperation system. Deriving from this idea, one can conclude that there is the highest interest in determining the definition of an agricultural cooperative. The definition of the cooperative differs from country to country. Still, in the legislation of every developed and democratic country, the spirit of cooperation and the pure notion of cooperation is conserved.
The universally recognized definition of cooperatives as contained in ILO R. 193, Paragraph 2 not only reflects a certain understanding of what cooperatives are, it also pre-shapes the contents of the whole law. It reads: A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.[3]
Not only ILO guidelines are defining the notion of the agricultural cooperative, but International Cooperative Alliance (ICA) has also elaborated on the following notion of the agrarian cooperative: an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.[4]
While these two have recommendation characteristics, countries - especially Europeans tend to incorporate in their legislation the above-mentioned definitions.
Meanwhile, Georgian law on Entrepreneurs offers the following: A co-operative is a company based on the labour activity of its members or incorporated to support the economic or social activities of its members, the objective of which is to satisfy the needs of its members, and the primary goal of which is not to make a profit. The terms concerning agricultural co-operatives must be determined in the specific law[5].
The Law on Agricultural Cooperatives defines cooperatives by its 3rd article in the definition of terms stating the following: a legal entity organised under private law and legally established as a cooperative according to the Law of Georgia on Entrepreneurs, which carries out the agricultural activity and which has been given the status of an agricultural cooperative under this Law[6].
If we compare these two definitions in the Georgian legislation, one can assume that Law on Entrepreneurs follows the spirit of cooperation and internationally recognized definition of agricultural cooperative, while the Law on Agricultural Cooperatives makes reference to the law on entrepreneurs and does not define agricultural cooperatives in the same way.
Given the fact that the Law on Agricultural Cooperatives is a document regulating the specific type of cooperatives[7] and the agricultural cooperative as a term has a tremendous meaning and behind it is a whole complex of business, management and cooperation among persons. Deriving from this, the law on agricultural co-operatives needs a definition of the agricultural cooperative which is in conformity with the internationally recognized definition, despite the fact that the definition is given in the Law of Georgia on Entrepreneurs.
Cooperative as a company
The legal status of the Cooperative
The Law on Entrepreneurs determines that cooperatives have limited liability, in spite of the definition of the cooperative as the entity whose primary purpose is not the making of a profit. A cooperative is a purposefully distinct organizational unit from other legal forms. The uniqueness of the cooperative is manifested in the fact that it is an entrepreneurial society based on the labour activities of its members or created to promote the economic or social activities of its members, whose primary task is not to make a profit but to meet the needs of its members directly.[8]
On the one hand, the limited liability of the cooperative and on the other hand the above-mentioned non-for-profit purpose, working for the social and economic needs of its members may create ambiguity regarding the legal nature of the cooperative. Is it a commercial society as LLC, or is it a union of persons like a General Partnership, where partners are liable for all of the liabilities of the union? These characteristics create the fact that the agricultural cooperative disposes of the sui generis nature.
The cooperative is the union of the persons interested in working together or creating and receiving some goods and services that are unavailable for them solely but reunited they can do so. The fact of carrying out activities together, working with and for its members may create a sort of appearance that a cooperative is more a partnership with no legal status or unlimited liability of its members.
The limited liability cooperatives are not only in Georgia. The German Cooperative Societies Act (Genossenschaftsgesetz–GenG) in paragraph 2 states the following “Only the assets of the cooperative are liable to the creditors for the obligations of the cooperative”.[9]
Creation of the cooperative and agricultural status
The interesting phenomenon in the Georgian cooperative regulations, concerning agricultural cooperatives is the granting of the status “agricultural” to the registered cooperative.
To begin with, the Law on Entrepreneurs in the 3rd part of the second article recognizes a cooperative as a company stating the following: A general partnership, a limited partnership, a limited liability company, a joint-stock company and a cooperative shall all be deemed companies[10].
In Georgia, the company is deemed established from the moment of its registration[11], meaning that after the registration in the National Agency of the Public Registry[12] cooperative is able to conduct any activities which is allowed by the legislation. However, the Law of Georgia on Agricultural Cooperatives requires, that the agricultural cooperative must be granted the status[13] by the Ministry of Environmental Protection and Agriculture of Georgia[14]. As the status of an agricultural cooperative is granted by the Ministry, the termination of the status is upon the decision of the same authority. The termination of the status can have different reasons[15] the most important and frequent in the Georgian reality is the negative results of the monitoring[16] which is held by the Agency.[17]
Monitoring serves as the guardian of the compatibility of the activities of the agricultural cooperative with the Law on Agricultural Cooperatives.[18] If the compliance is interrupted, cooperatives face consequences. The agricultural status has the importance, not only for the registration or functional purposes - having agricultural status has several tax impacts for the cooperatives, which will be discussed in the further part of the article.
One can assume that special circumstances pushed the legislator to create particular regulations for the agricultural cooperatives, which may not seem conventional, however, they may be necessary for the proper functioning of the cooperation.
Members of agricultural cooperative
The Law on Entrepreneurs regulates membership of the cooperative in a general manner and defines that members of the cooperative can be both legal and physical persons, and the minimum number of them must be 5.[19] In addition, the Law on Entrepreneurs offers a new type of member – Investor member.[20] Essentially a cooperative is an entrepreneurial society based on the labor activities of its members, which aims to meet the needs of its members. However, this does not exclude the possibility of the cooperative attracting additional capital to achieve the set goal. Large investors usually claim special rights in corporate governance to protect their investment. Accordingly, …, the investor member of the cooperative may be given a veto by the charter regarding the decisions related to the investments made by him. However, an investor member may not have more than 25% of the vote.[21]
On the other hand, Law on Agricultural Cooperatives defines the membership possibilities in a different manner.[22] According to the last, the member of the agricultural cooperative can be a shareholder[23] and the associate member. The shareholder can be Georgian citizen above 18 and another agricultural cooperative[24], while other legal entities (Georgian or foreign) and foreign citizens above 18 can be only associate members.[25]
The main difference between the shareholder/member and the associate member is the voting rights. Shareholder/member gets the right to vote on general meeting and take the part in the decision-making process, while the associate member has only a deliberate vote, meaning that they can express their idea, but their position will not be considered while voting.[26] Another difference is the possibility to receive back the associate members’ belonged share from the agricultural cooperative in the event of the liquidation or reorganization and after covering the liabilities of the agricultural cooperative, and receive a dividend under the procedure defined by this Law and the contract signed with the agricultural cooperative, before the distribution of the remained property between the shareholders of the agricultural cooperative.[27] In other aspects, members and associate members share the same rights. They both can be elected as members of the administrative organ or supervisory board[28] of the cooperative or receive information about activities of the cooperative[29].
Neither Law on Entrepreneurs, nor the definitions of the project of the Law of Georgia on Entrepreneurs[30] explain the notion of the investor member. The answer about who is the investor members can be found in the legal doctrine.
A recent solution, which legislatures are increasingly adopting, is the possibility to admit to cooperative membership investor members, namely, members who do not make use of the cooperative enterprise (so that they are not user-members), but enter the cooperative for other reasons, notably to obtain a return on capital… In order for a cooperative to raise capital through investor members’ subscriptions, investor members are usually granted a preferred status as regards the distribution of profits (profit distribution constraints do not apply to them or apply only to a limited extent) and the devolution of residual assets. [31]
The doctrinal answer to the definition of the investor member and the definition of the associate member[32] of the Law on Agricultural Cooperatives gives the possibility to assume that the associate member is the investor member. At this level, there is a need to consolidate these two regulating documents.
Still, they are the carriers of the exact same financial character, it must be mentioned that the law on entrepreneurs limits the voting right of the investor members up 25% of total votes, while the Law on Agricultural Cooperatives does not consider voting right at all for the associate members.
Not only associate member and investor members need to be unified on the level of the terminology. In the Georgian version of the Law on Agricultural Cooperatives, the law needs consolidation of the terms. In some articles, the term shareholder is used[33] and in some cases the term member.
Another inconsistency between Law on Entrepreneurs and Law on Agricultural Cooperatives is the minimum number of cooperative members. According to the new law on Entrepreneurs the minimum number of members is five, while in the Law on Agricultural Cooperatives minimum number of members in order to establish the cooperative is 9 in general, and as an exception 3 in mountainous areas[34]. In this case, the law on Agricultural Cooperatives needs to augment the number of members up to 5 in the mountainous areas, as in the Law on Entrepreneurs exemptions are not envisaged.
Transactions with the non-members are not opted out of the Georgian regulations. There is no word about this matter in the law on Entrepreneurs, however, the Law on Agricultural Cooperatives defines that a cooperative is not entitled to render the service or buy goods the amount of which exceeds the 50% of the annual turnover of the agricultural cooperative.[35]
The Law on Agricultural Cooperatives does not speak about the consequences if the provisions of Article 134 are breached. However, the agricultural cooperative could be deprived of the status of agricultural in case of inconsistency with the Law on Agricultural Cooperatives, meaning that the results of the monitoring can be negative. Being deprived of the status means that members of the agricultural cooperative and the agricultural cooperative itself will not be able to enjoy different perks deriving from the above-mentioned status.
Similar regulations regarding transactions with non-members can be found in Scandinavian countries, for example, In Norway, Sweden and Denmark, the question of trade with non-members depends upon the legal definition of a cooperative, more precisely on the requirement of promotion of member interests. All legislations accept transactions with non-members without fixing a specific limit. According to Norwegian and Swedish law, society does not qualify as a cooperative if the major part of its business is with non-members. The dominant view of Danish law is that there is no limit to such transactions, but that substantial transactions with non-members might be disadvantageous from a tax perspective.[36]
Limitations of transactions with the non-members are justified, especially in the cooperatives with a small number of members. In some cases, especially in countries with scarce land resources, where cooperatives are the only device for people to produce, create some goods or receive services only reunited and they should have the chance to enjoy each and every opportunity that cooperation can offer. Otherwise, if cooperative works with non-members, it becomes mostly like a for-profit organization which is created under the cooperative veil, in order to have tax exemptions or some type of assistance from different authorities.
Governance of the Agricultural Cooperative
Effective management of the cooperative is achieved through the division of competencies between the governing bodies and the achievement of interdependence and balance between them as a result of this division.[37]
Agricultural cooperatives in Georgia are created with the same spirit as in the most of the European countries, meaning that its purpose is to work for its members and with its members and be independent and governed by the members.
The Georgian Law on Agricultural Cooperatives provides the principles of the activities of the agricultural cooperatives, which are consistent with the Principles of the ICA.[38] The second of them is democratic governance.
One of the main characteristics of large cooperatives is the large number of members. An increase in the number of decision-makers proportionally increases the transaction costs incurred in the decision-making process. In order to save such costs, it is necessary to create a separate, relatively flexible and highly efficient governing body that will oversee the activities of the cooperative\u27s governing body. In other, relatively small, cooperatives, the formation of such a body may be associated with additional, disproportionate costs.[39]
The Georgian model of cooperative governance is simple. The Law on entrepreneurs offers two types of management monistic and dualistic. Consequently – monistic is cooperative with only one organ of the management and in the dualistic model exists one management body and the supervisory board. The Law on Entrepreneurs stipulates that if the charter of the cooperative remains silent on the choice of governance, it is considered that the cooperative has a dualistic model of governance.
The Law on Agricultural Cooperatives does not have any provision regarding governance, meaning that the only source on cooperative governance is the Law on Entrepreneurs.
Notwithstanding that Law on Agricultural Cooperatives does not speak about the governance of the cooperatives, it mirrors one of the ground rules - “one member one vote”.[40] This rule is particularly for the agricultural cooperatives and is the second principle of ICA – Democratic Member Control.[41] This fundamental rule is depicted in every charter of the agricultural cooperative and each agricultural cooperative and its members follow this rule.
Agricultural cooperatives are unions of persons gathered to undertake common activities, which contribute to their individual interests. In the agricultural cooperative, the number of members can be hundreds and the interest of each of them must be considered and the voice of every member must be heard. For these purposes, each member, not considering their economical engagement or the size of their contributions, are having equal voting rights, in order to maintain the balance in the decision-making.
Capital of the Agricultural Cooperative
As other issues, capital matters are regulated by the Law on Entrepreneurs. The law on Entrepreneurs states that the cooperative may have subscribed capital[42]. The notion of the subscribed capital is the new notion in the Law on Entrepreneurs. The placed capital is called Equivalent to authorized capital (statutory capital, legal capital, charter capital, subscribed capital). The main function of invested capital in establishing capital-type societies is to equip the community with start-up capital, which, even if minimally, is a kind of limited liability filler, balancing.[43]
The existence of subscribed capital, or as the creators of the new Law on Entrepreneurs the equivalent of the statutory capital, is not mandatory in the case of different types of cooperatives. While this rule applies to the eight other cooperatives, in the case of agricultural cooperatives member contributions on the level of establishment is mandatory, as it is requested in order to obtain agricultural status.[44]
Despite the fact that no one calls it a statutory or subscribed capital, during registration, founder members of the cooperatives must make monetary contributions of a minimum of 300 Gel[45].
The contribution of 300 Gel was introduced in December of 2019[46] and evoked debate on its nature, which are active even today.
Before the introduction of the existing version of share[47] the Law on Agricultural Cooperatives defined it without mentioning any amount. The paragraph e1 of 3rd Article stated that share is the contribution made in the shares fund, additional share contribution and contribution of the associate member[48].
The above-mentioned perspective of the Law on Agricultural Cooperatives is very concrete, when the Law on Entrepreneurs does not provide a definition of the shares in the cooperatives. In spit