📝Placer le droit de la compliance par rapport aux autres branches du droit : une nécessité pratique. L'enjeu du droit économique (Positioning Compliance Law in relation to other branches of Law: a practical necessity. The challenge for Business Law), foreword for the book of🕴️Annika Bauch : 📗Droit de l'entreprise et compliance : une relation symbiotique (Business Law and Compliance: a symbiotic relationship)

Positioning Compliance Law

in relation to other branches of Law: a practical necessity.

The challenges of Business Law

Compliance Law is a new branch of Law.  Its logic, strength and simplicity are, for the time being, almost buried beneath the mass of regulations – which are, after all, merely an illustration of these principles – whilst sanction decisions emerge like thunderclaps, seeming all the more sudden because their logic is difficult to grasp without taking a broader view; as a result, everyone seems to dread the next one. That which is not understood in its entirety and in relation to other rules is always feared. 

The lack of a broader perspective has led many to set themselves the goal, under the guise of ‘deregulation’, of dismantling these regulations – which are, after all, only one part of the picture – whilst others condemn judges, arguing that they have no role to play in the application of compliance techniques, since if one ‘complies’, particularly through the use of algorithms, they would become redundant.

When the description of the current state of Compliance Law is not comprehensive, it then appears to be nothing more than aggression on the part of a foreign entity (which is often US Law, its regulators, its judges and its lawyers), and arbitrary (on the part of regulators, who are said to be inconsistent, and judges, who are said to be incompetent – in both the legal and commun sense of the term).

Therefore the first strength of Annika Bauch’s book is that it provides the ‘big picture’ overview of compliance that practitioners need to grasp the foreseeable legal developments. Her book is highly informative – in the literal sense – as it enables readers to better understand these new compliance mechanisms, which are set to develop further and which legal professionals must master.

Her comprehensive approach—which takes US Law as its starting point and moves towards new corporate governance rules, thereby making compliance rules easier to understand—is difficult to go through amidst the vast jumble of texts. Annika Bauch has achieved this admirably; her mastery of several legal systems has enabled her to pull off this feat, from which the reader will benefit.

The second way in which the author brings order to the topic lies in the subject matter itself: clearly articulating compliance techniques (such as whistleblowing mechanisms, risk mapping, internal investigations, vigilance, etc.), the compliance pillars and their various systemic objectives (such as the fight against corruption, the fight against money laundering, the fight for equality, the fight for information and truth, etc.), with a more firmly established framework within the legal system: Business Law. This requires a high level of technical expertise in both areas, which the author demonstrates, once again to our benefit.

In doing so, the book enables those practising Business Law to gain a better understanding of Compliance Law, which – in the absence of a comprehensive description and by effect of being reduced to a few lines of text – risks being entrusted en masse to machines, which are said to be the only ones capable of absorbing and regurgitating ‘regulatory conformité’. Annika Bauch, in turn, reminds those practising Compliance Law not to forget that it is by no means a autarkic branch of Law, and that one of its major practical challenges lies in its interplay with pre-existing branches of Law.

Consequently, the link with Economic Law is essential. It is described, explained and its implications anticipated in this book. Compliance Law is not limited to this connection alone; within Economic Law – which represents an alternative perspective on the legal rules, focusing on the business as its subject matter rather than on the sources of Law – this approach has already led to the reclassification of a significant number of branches of Law.  In this book, the areas of Economic Law dealing with the functioning of markets take a back seat to those concerned with the structure and operation of businesses.

But it is also to the credit of a work of such scope that it sets its own limits, for the aim is not to define in the book what constitutes Compliance Law, but rather to assess how its techniques have emerged from Economic Law and are in the process of changing it. Compliance Law is emerging as an autonomous branch of Law, but that is another matter. It would involve demonstrating how Compliance Law is, on the one hand, autonomous from the various branches of Law and, on the other hand, as a result, interlinked with many others that lie outside Economic Law, such as Constitutional Law or Procedural Law.

This book has a different and more specific purpose, one of great practical utility: it establishes a one-to-one correspondence between, on the one hand, the technical elements that make up Compliance Law and, on the other, Economic Law. Within this framework, CompanyLlaw is given priority. Other branches of Economic Law are also linked to Compliance Law, with Competition Law being the foremost example. However, it is above all the internal functioning of the company that form the basis of the book, rather than its economic activity. It is true that, in the context of Competition Law, the company remains a ‘black box’, becoming transparent only under the influence of Regulatory Law; this book aims to demonstrate, both in fact and in law, how the company and compliance are intertwined.

The structure of the book reflects this one-to-one correspondence. This correspondence is so strong – expressed in the book title through the expression ‘symbiotic relationship’ – that, indeed, when we think of a company well-structured and well-functioning organisation, it is a well-structured and well-functioning compliance function that we now have in mind. All practitioners know this. Thereforce being unable to keep to terms with so many changing and complicated texts is so problematic. By providing an overview and anchoring compliance within what we already understand (for there is no such thing as a blank page – this applies to the French Revolution and the Civil Code, so it applies to Compliance Law too!), the book enables readers to find solutions within Economic Law that are as yet only implicit in compliance but which a broader perspective allows us to see. 

Annika Bauch demonstrates that the first characteristic of this bijjunction is that Corporate Law – insofar as it (unlike Business Law or Commercial law) reflects what companies are and ought to be – is the most natural framework for compliance. The first part of the book describes how Corporate Law has enabled the emergence of all these compliance innovations which, historically, have developed by becoming integrated into Corporate Law, which is based on this reality, shaped by the fields of Economics, Finance and Management. 

The description of how US Law has dealt with new compliance requirements supports the assertion that it is indeed Corporate Law that constitutes the framework within which these techniques emerged, evolved and subsequently became internationalised. It is also reasonable to assume that it was the guardians of these systems (particularly the financial and banking sectors) who, just as early on, in both the United States and Europe, independently established the standards required by these systems. The two perspectives are not mutually exclusive, however, since political and regulatory authorities have incorporated these standards into companies to protect systems and legitimate interests, whether in relation to, for example, the management of conflicts of interest, prudential standards or obligations to alert public authorities.  Because Company Law ‘nurtures’ compliance instruments, links them together, fills in the gaps and resolves contradictions, establishing this connection offers a source of solutions. Indeed, the ‘regulatory fabric’ is always patchy; the more verbose it is, the more gaps there are, with contradictions demanding ways to be resolved. Placing compliance within the history of Economic Law enables the inductive-deductive reasoning of which we are in need. It is as if the author were offering a spectrum through the ‘normative framework’ that Company Law provides for compliance standards, whether internal, external or ethical.

It is well known that Compliance Law has a penchant for soft law and that businesses – particularly those relying on external financing – maintain a degree of permeability between their internal and external spheres; therefore these traditional categories, which already fit poorly within Economic Law, are even more difficult to apply to Compliance Law. In this respect, the book demonstrates what might be described as the ‘rightful place’ that compliance occupies within Company Law, which certainly seeks to ‘to be conform’ with the regulations that govern it, but which also seeks, to a greater extent, to contribute to the broader ambitions underpinning the body of Compliance Law by utilising a legal instrument that is relatively new to it: soft law, which applies to both internal and external matters. Soft law is so significant within Compliance Law that the latter has sometimes been reduced to this single tool; yet this is more an indication of its existence than a defining characteristic. The book perfectly describes the scope of all these soft law standards issued by companies, which reinforces the assertion that this new branch of Law is cross-cutting not only across the various technical sectors but also with regard to the distinction between Private Law and Public Law – a distinction that continues to be presented as our fundamental division. A closer look at reality should lead us to reconsider such a claim if we wish to train experts capable of meeting the needs of businesses and public authorities.

The second legal instrument through which a company incorporates compliance is the contract, a practice aptly described by Annika Bauch. It is a pleasure to finally read a work that captures this reality: the ambitions underpinning compliance can only be realised through the efforts of companies, and the most natural legal instrument for achieving this is the contract. Indeed, the contract – the quintessential ex ante tool – is ipso facto well-suited to compliance instruments, the object of which is always the future. Whilst sanctions (and even the prevention thereof) take us back to the past, commitments – and at the heart of these, the contract – are the natural instrument of compliance: they must be conceived and developed as such. This book helps to achieve that.

The reader can thus see that even when it is Company Law that ‘feeds’ compliance, the latter already finds what defines it, notably its primary concern for the future. Annika Bauch demonstrates this even more forcefully in the second part of her analysis, namely when the logic of compliance leads to a transformation of Economic Law. This takes the book into the realm of ‘governance’, as the author argues that compliance leads to ‘responsible governance’. What is the current state of this Economic Law ‘nurtured’ by compliance?

Through this development, Annik Bauch demonstrates that this can lead a company to take on board the consequences of its actions and to be held accountable for them. To refer to the book’s concluding remarks, what compliance can bring to Business Law is a ‘culture of compliance’. Indeed, as the book emphasises, companies – particularly large, international ones – develop what the author refers to as a ‘culture of compliance’ of their own accord. At the intersection of Law and Management sciences, particularly in human resources management and partnership management, the aim is to get people on board with the grand ambitions that compliance embodies and that its techniques express. Rousseau is said to have spoken of the necessary ‘love of the Law’. In a centralised France, it is asserted that one must ‘love the State’. The challenge today is to make people ‘love compliance’, in contrast to the rejection we mentioned at the start of this presentation. The contract, insofar as it is based on an agreement; mediation, which serves the interests of the various stakeholders; and training, a central tool of compliance, which is only truly successful if it brings the company and the people it oversees together to safeguard the systems, thereby better protecting the people involved in them.

Indeed, the book demonstrates that compliance is transforming Economic Law by integrating the prevention and management of systemic risks into businesses. The distinction between Market Law – which incorporates this systemic objective – and Company Law in the strict sense is thereby blurred. For example, company directors are expected to draw up long-term general policies not only to secure the company’s future but also, from now on, to ensure the sustainability of various systems – a responsibility that compliance has entrusted to the company, whether willingly or not. Even the definition of a company in the French Civil Code has been altered as a result.

We are thus moving away from Economic Law and into the shifting terrain of liability and Tort Law, and we are familiar with the current debates over whether, in law, a company should be held accountable for the systemic ambitions underpinning these compliance regulations – which certain stakeholders wish to see ‘taken into account’. Barring specific corporate structures, Company Law does not take this view; barring special regimes, general Tort Law does not either. Only new case law could move in this direction, which would require a new role for the courts. This may be desirable. We must therefore delve into the procedural dimension of compliance. To mention this is already to allude to the other links between compliance and the various branches of Law.

The more closely compliance is linked to the traditional branches of Law, the more comprehensible it will be. This book establishes concrete links with Economic Law. Fifty years ago, Economic Law was the most modern and practical branch of Law one could conceive of and observe. The rapid rise of Compliance Law also reveals it to be a wise and traditional branch of Law, which the former has come to revive. It is now the venerable foundation of the dynamic field of compliance, providing it with a solid base, whilst the newcomer offers it fresh momentum. Thank you to Annika Bauch for celebrating a union whose first positive effects are already evident.

________