Overview of Commercial Code - Essay Example

Critically evaluate whether the UK should have a Commercial Introduction There are many aspects and components of commerce for every given country. Therefore, regardless of the growing spate of commercial globalisation, individual countries continue to have different models of operating business and commercial ventures. One of the most important factors that affect commerce in almost every other country however has to do with the fact that commerce is “undertaken in a well regulated manner and by the use of a series of regulations and acts that govern the way things are done”1. In the absence of such regulations and acts, many are those who have said that “the core objective of undertaking commercial and thus creating a commercial atmosphere in any country would fail”2. For example if commerce or the act of doing business is not regulated, chances are that people would seek to make money through the wrong means and there will be no way of checking how much a person makes and through what means so that the needed agencies including government would have the right allocation of taxes to benefit the larger population. But when arguing for the regularization of businesses or commercial activities, many are those who have questioned how the regulations should be carried out, with a lot more people touching on the possible use of a commercial code3. This paper therefore addresses the question of whether or not the United Kingdom needs such a commercial code that have been practiced and used in other jurisdictions including Germany and Turkey. Overview of Commercial Code A commercial code is a form of regulation that guides and governs the way and manner in which the commercial institution of any country or given region should operate. It is therefore said to be “a codification of governing laws for all commercial entities within an identified setting including trade, merchants, companies, commercial bargains, and commercial contracts”4. The emphasis here therefore is that the commercial code is a standardised document that clearly states all laws that should guide the way commerce should be undertaken from both a practical and theoretical perspective. These laws are also taken from a private law perspective even though it may be regulated on a national basis in most cases. Commonly, the aspects of private laws that will be included in a commercial code includes but not limited to “sales of goods, leases of goods, business contractual agreements, negotiable instruments, fiscal deposits, letters of credit, investment securities, among others”5. Once the laws that should guide trade and business are selected from the various components, they are codified. By codification, we imply that some fundamental aspects of the laws are picked and generalised for implementation and use among all parties concerned. Therefore, if the paper conclude that the United Kingdom needs a commercial code, what this would imply that standardised laws are going to be picked from various aspects of private laws and put together as a code to which all parties and agencies in the commercial area are going to adhere to. The German Jurisdiction of Commercial Code The German commercial code was instituted in 1897 and currently covers several aspects and areas of German commercial operations. By German commercial code, it would be observed that reference is being made to all commercial jurisdictions that “are identified to be of German origin or being undertaken on German soil”6. Legally, this means that a German who establishes an international business would somewhat have provisions of the commercial code covering him. In the same way, a non-German who establishes a commercial venture in German would also be covered under the commercial code. The German commercial code looks at aspects of commerce such as mercantile trade, under which provisions are made for mercantile traders, the mercantile register, mercantile books of account among others. There are also provisions for mercantile associations and dormant partnership, which looks at aspects of commercialisation such as unlimited partnership, limited partnership and share companies. For each of these three, the general rules, rights and liabilities that exist for companies and their members are studied7. The final major component of the commercial code looks at mercantile transactions, under which regulations are made for mercantile sale, commission business, forwarding agency, business of warehousemen among others. Impact of the German Commercial Code on Business As far as the German experience is concerned, the major impact that experts say the German commercial code have had on businesses is that it has brought about sanity in the conduct of trade and business. First, it would be noted that the commercial code has been effective in clearly defining commercial entities. For instance the commercial code identifies the sale of goods and commercial transactions as the two major commercial entities of Germany. Under this, Kent (2012) notes that “the sale of goods refers to the buying or selling of a tangible product whiles commercial transactions include many banking activities, such as personal, bank, certified and cashier checks.” By such definition of the commercial entities, it is easier for the legislatures to also define the laws and legislations that will be used in settling cases involving such entities. What is more, the commercial code has been instrumental in ensuring that the otherwise lost trust in non-monetary commerce transactions has been done away with. For example in the central bank of Germany’s bid to reduce the direct use of coin and note currency in doing business, there is no way commercial partners would have settled for alternatives other than the aforementioned if the commercial code did not spell out clear rules on negotiable instruments like checks. There are also regulations on bank transactions, which give commercial partners confidence that their transactions with banks are covered by laws that serve their interests as well as those of the bank. Such has been the way that sanity has been brought on the commercial climate so that partners are not sceptical in their business dealings.8 Weaknesses of the German Commercial Code and its implications for UK Regardless of the fact that the German commercial code has seen a number impacting benefits on the German commercial climate, there remain some key challenges that the commercial code has not addressed. In trying to find out whether or not the United Kingdom needs its own commercial code, it is important to critically review some of these challenges to know how grievous or mild they may affect commercial transactions in the United Kingdom. Once the benefits and challenges are weighed, it would be easier to decide whether or not United Kingdome is ready to a commercial code. As far as challenges are concerned, the German commercial code has been criticised for not understanding the different commercial needs of stakeholders. Many are those who have for instance stated that “the German commercial code only seem to protect the larger interest of government and the banking institution to the neglect of the business personnel”9. The reason for such an argument is that as much as possible, the commercial code generalises the code of conduct of commerce in a way that would ensure that commercial entities do not benefit unduly at the expense of their financial roles that they ought to play for government. Most sanctions spelt out in the code also looks at legal sanctions that commercial entities would face if they default against banks. But it would be very important that the interests of commercial entities are also not just protected but also promoted through the commercial code. Once this happens, there will be no hesitations as to whether or not a particular business outlet would want to be part of the code10. The case of Turkish Commercial Code The Turkish commercial code is not as old as that of Germany as it was first introduced in 1956. However, “the Turkish commercial code has been very instrumental in commercial regulations in Turkey and have the accolade of being one of the world’s most effective models of commercial code”11. Already, the commercial code of Turkey say a review on 1st July 2012 in which what became known as the New Turkish Commercial Code was introduced. Experts have indeed described the new Turkish commercial code as “a major overhaul of Turkish business life in terms of auditing, accounting requirements and Merger and Acquisition”12. Most of the other aspects of the commercial code of Turkey that did not touch on the aspects of auditing, accounting and merger and acquisition however seem to remain unchanged. The need for a change in the Turkish commercial code has been attributed to a number of factors. One of this has to do with the country’s negotiations for the European Union and the world trade organisation obligations. By this, Turkey was making a giant move through its commercial code to come at par with the larger regional business and trade provisions made by the European Union and the world trade organisation. The new law therefore looks at areas of commercial dealings including “commercial books and registration, capital structure and shareholder rights, auditing principles and group companies, website requirements, marine commerce”13, among others. Impact of the Turkish Commercial Code on Business and its implications for UK Unlike what exists in Germany, the Turkish commercial code has been said to be a major motivation for venturing into the commercial arena. This is because the commercial code of Turkey has been structured in such a way that it helps in protecting and promoting the interest of all commercial entities so that they would have the best out of their commercial involvement and adherence to the code. If for nothing at all, the commercial code of Turkey has been made to synchronise with international and regional trade standards and practices such that Turkish commercial players and stakeholders are opened to meeting international standards and thus performing well in such international trade. For the United Kingdom therefore, this is a major call for an unforeseen benefit whereby the United Kingdom will be having the fortunes of the business community within the kingdom transformed by the business opportunities that a similar commercial code would open to all commercial partners in the country14. In Turkey to, it has been outlined that the “development of the new code has also been motivated by the Turkeys need to increase inward investment and technological changes such as the internet and e-commerce”15. Essentially therefore, investment has been promoted in Turkey and this has been energised by the presence and use of internet based commerce, which makes commerce globalised16. Challenges with the Turkish Commercial Code Though the Turkish commercial code has been praised extensively, it comes with its own challenges and criticisms. Generally, it has been argued that even though the commercial code, especially the new one will be highly effective in making the opening of new businesses easier. However, it cannot guarantee the growth of such businesses at the initial stages and would actually hinder the growth of these businesses. This is said because as part of the European Union’s provisions of which the commercial code of Turkey has been made part of relieves obstacles that remove difficulties for new entrants. This notwithstanding, the companies after starting business are obliged to comply with a number of regulations that normally alter the original strategic plans and missions of the companies. Other experts even warn of the case getting worse when it comes to other categories of businesses as Gray (2012) notes that “for the social enterprise sector, that is continually challenged by small margins and that is slowly emerging in Turkey, the challenge will be even greater.” In the United Kingdom context therefore, this point will be used to admonish that as much as it will be necessary for any future commercial code of the country to be associated with international standards, it will be necessary to clearly differentiate aspects of the international standards that will benefit the local people and those that will hinder the growth of their businesses17. Reasons why UK needs a Commercial Code The very first argument that can be held as part of the merits of having a commercial code in the United Kingdom is that such a commercial code will bring about commercial uniformity among member nations within the kingdom. Presently, the United Kingdom is known to be made up of different nations and regions, all of whom undertake one form of commercial activity or the other. Meanwhile, there exists a single commercial growth focus for the kingdom. The use of a commercial code has thus been suggested as one of the means to ensure that “such growth focuses are achieved by having all members adhering to a single uniform commercial code”18. As goods are manufactured in one part of the kingdom, distributed to other parts of the kingdom and yet sold to customers in other different parts, a single commercial code would ensure that the commercial processes that are involved in all such cases are uniform and binding to all parties so that there can be a single legislative judgment in case breaches of commercial dealings occur. Indeed, the same kind of uniformity would occur in the use of banking and credit transactions as most of these are likely to occur among customers and commercial parties from different parts of the kingdom. Indeed, “uniform law is meant to make the complex law that applies to business transactions applicable across the nation and make business people and their customers confident that they understand the law applicable to their transaction” Law Info (2013) and so the process needs would become advantageous in this regard. Another strong point that justifies why United Kingdom could be said to need a commercial code at this moment is that the presence of a commercial code would not only ensure that there is uniformity in the conduct of business but that the conduct of inter-state and inter-national commerce is encouraged and harmonised. This is because experts have said that “commercial codes are useful mechanisms for breaking trade and commercial barriers that often hinder transversal commercial activities from taking place”19. Should a commercial code come into force therefore, basic trade barriers that normally acts as disincentive and de-motivation for cross sectional commercial activities from taking place are going to be catered for. As the business climate of the United Kingdom has been identified to be made up of different nations, states and regions, Law Info (2013) notices that once a commercial code comes into existence, “it encourages interstate commerce which allows businesses to partner with the best partners, such as distributors and manufacturers, in the country rather than limiting them to one state.” The long term implication of this is that the United Kingdom market or commercial base is going to be very large: in fact far larger than it is today. This is because all units that exist as independent entities such as distributors, suppliers and customers are going to come together as a common unit20. Reasons why Commercial Code should be waited for the UK experience Other schools of thought have also argued against anything like a commercial code for the United Kingdom due to a number of factors or reasons. The first of such arguments has it that the United Kingdom presently operating as a collection of separate or different commercial units in terms of the distribution of nations and regions would mean that any of such commercial code would have to satisfy the individual law that exists in each of these states. In their opinion, the commercial code will be a “source of disintegrated functioning of commercial activities that would mean that the core commercial culture that has been the success line of most of these individual units would have to be destroyed and started from the scratch”. Whiles this reconstruction will be taking place, other countries and jurisdictions that have started working with their individual commercial codes would be making great progress with their commerce and the United Kingdom would lag behind them. Instead of a commercial code therefore, these debaters suggest a system in which the existing commercial and civil laws in place in the United Kingdom will be revised to factor in limited components of international trade laws that will benefit specific jurisdictions within the kingdom. In sum, these people are against any form of uniform commercial code but would only want the existing codes to be fortified in such a way that meet international standards21. There are also those who have argued that sticking to a commercial code like what exists in Turkey would “make the commercial gates of the United Kingdom too fragile to unnecessary entry and exit points that may not necessarily benefit the kingdom”22. This means that whereas others have debated that it is a good thing that the United Kingdom would have its commercial regulations being synchronised with the rest of the international community, these latter debaters see this as a disadvantage. They believe that once the United Kingdom begins to operate like any other European country that has a commercial code, what exists today as the commercial rights of the indigenous English people to do business in their own land will be taken away from them and given to other people. Furthermore, they believe that as much as a commercial code that synchronises with the rest of European would mean an opportunity for people in the United Kingdom to also penetrate other European markets, the competition will be too great for the United Kingdom market as a new entrant to withstand the pressure of such open market competition23. Even in terms of the application and interpretation of basic rudiments of the law covered in the commercial code, chances are that the United Kingdom market will be found more wanting than those who have practiced their individual commercial codes for long24. Conclusion Having considered the various debates from the start of the paper, a very clear conclusion will be drawn on whether or not the United Kingdom needs a commercial code. Before drawing on the conclusion, some major summaries will be made of what has been looked at so far. So far, it has been established that Germany and Turkey have all had commercial codes that they have practiced for long and continue to practice. It has also been established that in the two jurisdictions, the presence and application of commercial code has brought about a number of successes to business communities in those countries. This notwithstanding, there are basic weaknesses and shortcomings with the commercial codes. On the advantages of a commercial code in the United Kingdom, it was seen that the legal atmosphere in the kingdom will become harmonised and controlled by a single pact or code. This will subsequently make the conduct of business across the region easier. However, some debaters observed that a commercial code would also open the floodgate of commercial invasion on the United Kingdom. Putting the analysis on the merits and demerits of the presence of commercial code for the United Kingdom together, it could be realised that once there is a similar practice there is going to be a better processing of commercial activities though this will have some minor challenges. Regardless of the challenges though, it is admonished that the United Kingdom gets a commercial code. After all, if the process does not start from a point, it may never end. 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