ECONOMIC LAW IN FINANCIAL LAW

1 Introduction

Economic law is a term that does not itself cause any difficulty, and I can also say that neither its content in general does not cause any interpretative discrepancy. All this is only at first glance, especially because it is not a term used or anyhow associated with specific legal content (at least in Czech Republic). The purpose of this contribution is not to define content and to fulfil such a term, but rather to analyse and define its scope, in conjunction with the non-fiscal part of financial law.
First what need to be evaluated is financial law as a such and its own place in the system of law and then I can move forward to position and content of non-fiscal part of financial law. In many European countries, there is no such think like financial law or its own meaning is interpreted differently country by country, legal system by legal system. Those different positions of financial law could make financial law less significance in system of law or in society in general. That would be great mistake to overlook financial law as a very important part of law which is strongly connected with national economy. One of the side goals of this article is to promote financial law in the eyes of professional lawyers or economists and public as well.
On the other hand, I would like to point out or adjust usage of term the Economic law as a clearer designation for some part of financial law. Selection of few parts of the Financial law, could be united in subject/field/ term called Economic law.
 

2 The system of financial law

Before delimiting the system of a legal discipline, it is necessary to defend the independence of the given discipline. Financial law undoubtedly is an independent discipline as it fulfils the establishing criteria which generally justify the existence of an independent legal discipline.
According to Mrkývka (Mrkyvka, 2004: 32) these criteria include

• independent and specific subject of legal regulation
• methods of legal regulation.[1]
• internal cohesion of legal norms.
• social acceptance of the discipline

 
All these criteria are met by the discipline of financial law, thereby setting itself free from other legal disciplines.
The subject of financial law is specific social relations involved in various financial activities and reflecting a number of financial phenomena. Financial law governs in particular those relations in which the state is involved and which indirectly or not affect the base money or its parts (Bakeš, 2012: 12) To put it simply, financial law is not concerned with relations with a contractual basis—these rather belong to civil or commercial law.[2]
Financial law is a specific public-law discipline with close bonds with administrative law; in fact it broke free from it. But financial law also has a lot in common with private-law disciplines, which deal with legal relations involving payments and money—the contractual positions of the subjects are, however, equal.
Experts and the lay public alike accept and respect financial law as an independent discipline. Discussions surrounding its position are a thing of the past and to cast doubt on this discipline as public-law part of the Czech legal system is now virtually unheard-of. 
For the purpose of the classification of supervision within the system of financial law is crucial the discipline-defining criterion of internal cohesion of legal norms—the uniqueness of the system of financial law. The defining systemic features are:

• a higher rate of mutual legal norms in contrast with norms from other legal disciplines.
• a relative autonomy of the given set of legal norms from the norms of the other disciplines (Prucha, 1994: 34).

Despite the unquestionable existence of the system of financial law, financial law is not codified in a unified way and is instead fragmented into several independent acts. As a result, there is a wide range of norms with not so rigid links between them. I hold that financial law as a whole defies entire codification, mainly due to the vast scope of interest of all its subdisciplines.
The closest bonds exist between individual subdisciplines of financial law and then also between mutually close subdisciplines which form two different systems on the basis of their purpose and their character: fiscal and non-fiscal parts of financial law. The system of financial law is defined by the internal differentiation of its branches into coherent groups of financial-law norms as regards their content and the similarity of the social relations that they govern (Mrkyvka 2004: 56). With the increasing rate of globalisation the range of public financial activities changes, thereby creating new limits to the scope of financial law.
The scope of financial law naturally increases with the increase in financial activities of the public sector and with the increasing number of state interventions into economy. It means that financial law has a wider scope in those countries where economic interventions are frequent; this subsequently influences the system of financial law there, too.
Most experts in financial law divide the system into two parts: the general and the specific (Bakeš, 2012: 12) part, though there is hardly a consensus about the existence of the general part because it is only with great difficulty that one can find a common core for all subdisciplines of financial law. Likewise, there are no common sources of law in the technical meaning of the word; yet, I am convinced that the general part of financial law can be accepted—chiefly because of the fact that there is a common characteristic for all financial-law norms: they govern financial relations.
The main division within the system of financial law is to be found in the specific part, namely the division into the fiscal and non-fiscal parts. The former is defined by those social relations in which the primary interest is to regulate the cash flow in the public budgets. The non-fiscal part, on the other hand, regulates social relations in which the cash flow is only secondary because the main point of interest is the regulation of money itself and of the monetary system as well. This division is essential for those common notions and principles on which the general basis of both subdisciplines is formed. This in turn enables a better and a more transparent interpretation and application of financial-law norms. The fiscal part of financial law includes the arrangement of budget law, tax law, and customs law.  The non-fiscal part then deals with currency law, foreign exchange law, public banking and insurance law, the legal regulation of supervision of the capital market and credit unions, and, finally, the hallmarking law.
Financial law can also be divided (apart from the abovementioned division into the general and specific parts) into procedural financial law (norms of procedurally legal character[3]), administrative financial law and criminal financial law. These subdisciplines however exceed the scope of this work and will not be discussed in any greater detail.
If we accept the idea that financial market supervision entails supervision of the banking sector, credit unions, the capital market, insurance industry, pension savings companies, pension funds, exchange offices and, finally, institutions in the area of payments, then it is, beyond any doubt, true that financial market consists of basically the same areas as the non-fiscal part of financial law, the only exception being the presence of financial market law in place of currency law (for more information see the subchapter below). Yet, it would be wrong to claim that the financial market is the same entity as the non-fiscal part of financial law; however, it is possible to say that financial market law falls within the realm of the non-fiscal part of financial law. This statement hints at the independence of financial market law; it indeed meets the discipline-defining criteria of independence and specificity of the subject of legal regulation. The subject of legal regulation here is legal relations which are formed within financial markets, i.e. within their various branches. The other discipline-defining criteria of financial market are identical with those met by financial law. Therefore, I do not think that it would be correct to call for a complete independence of the discipline of financial market law; it is nonetheless not erroneous to accept the existence of financial market law within the realm of financial law, i.e. in its non-fiscal part.  Financial market supervision is then conceived of as a branch of financial market law. This theoretical assessment of financial market law enables a more transparent and easier understanding of the structure of financial law, but it also enables a more accurate classification of what this book deals with, namely the issue of financial market supervision. If it is clearly stated what financial market law is and where it belongs within the legal system, it is then much easier to delineate the area of financial market supervision and to determine by which means it is performed and what is the nature of the legal relations under supervision.
It is now time to turn our attention to a branch of financial law which comprises the subject of this book: financial market supervision, which is a section of legal regulation in the non-fiscal part of financial law as the following diagram illustrates.
The above explanation, we came to the area - the sub sector of financial Law, in which it appears and is firmly embedded in the subject of this article, i.e. financial market supervision is section occurring particularly in the context of legal regulation of non-fiscal financial law.
 

3 Financial market and Monetary law

These two areas of non-fiscal part of the Financial law could be unified in term of Economic law. I don’t think there is any sub part of these two, which could be excluded from the Economic law. The main subject of Economic law is Law of the Financial market and that’s also the reason I will analyse it in wider scope bellow, unlike the Monetary law. The reason is quite simple – the Monetary law (and especially monetary policy) is more economic topic and the analysis of this matter with go far over the aim of this article.
 

3.1 Financial market

The financial market in almost all its areas (including that of the capital market in the form of money and capital) has developed rapidly in the past decade. The effects can be seen in the increasingly more and more interwoven web of national markets and the diminishing differences between individual financial sectors. Big financial groups’ importance and influence has been on the increase and, in general, the world has witnessed international financial globalisation. This all called for gradual changes to financial supervision and its organisation. For example in the Czech Republic there used to be four supervisory authorities—conceivably too many for such a small financial market. [4]
The financial market is a system of relations, instruments, entities and institutions that enable the accumulation, distribution and allocation of temporarily available financial funds on the basis of supply and demand. The financial market makes it possible to redistribute available funds on a voluntary contractual basis (Kotáb in Bakes, 2012: 102).
The financial market is primarily used to trade financial instruments, most notably securities and other entities. Most of the trade deals with financial instruments with a long payback period—more than a year. In this case we talk about the capital market. Scheffrin has it that the capital market is a market where money is provided for a period longer than one year (Sullivan, Sheffrin, 2003, 283). Finances from the capital market are obtained with a view to financing long-term investments of trading companies, households but also governments. Typical financing instruments include long-term bonds, bank and consortium loans, mortgage loans and mortgage bonds. The capital market also makes use of equity securities (shares and profit participation certificates), which have basically no fixed payback date. Short-term markets are those financial markets where instruments have paybacks periods of days, months or the maximum of one year. Typical instruments include short-term securities, loans, credits and deposits to be paid back within one year, e.g. bills of exchange, short-term bonds, deposit certificates (deposit slips), interbank deposits, short-term bank deposits etc. Sheffrin (Sullivan, Sheffrin, 2003, 283) concludes that financial markets are used for short-term financing, sometimes for loans to be paid almost ‘overnight’. Capital markets, on the other hand, are used for long-term financing, such as the purchase of shares or credits where the payback date is not expected in less than a year.
This is, indeed, the division proposed by Kotáb (Kotáb in Bakes, 2012: 103), namely the division of financial market into the capital and money markets according to the character of traded instruments (financial claims) and the period of their validity. I consider money markets and capital markets parts of financial law, which is a view confirmed by Zucchi (Zuchi, 2017), who is convinced that the money market and the capital market are not the only branches of financial market, although they are the most important ones and the most frequently employed as well. [5]
It is extremely important to distinguish between securities and financial instruments, for these are most certainly not the same notions. Financial instruments are the most general types of assets which can be traded. Apart from securities financial instruments also include futures, forwards, swaps and other instruments, clearly different from securities. 
Financial markets consist of seven parts, for which I suggest the term ‘the classification of financial market disciplines’: Kyncl 2007: 1-8)  

• money market (including payments, electronic money and systems of payments)
• foreign exchange market
• banking and co-operative banking
• insurance and supplementary pension insurance
• capital market
• precious metals market (the legal discipline is usually called hallmarking).[6]

This classification has one disadvantage, namely the fact that there seems to be a big overlap with the content and classification of non-fiscal part of financial law (excluding currency law). As a result, there might arise a certain amount of confusion over what belongs to the financial market and what does to the non-fiscal part of financial law. This can be avoided if one reminds oneself of the diagram no. 1 above: it is clear that the non-fiscal part of financial law is a broader concept than the financial market, which is, in fact, its (i.e. the non-fiscal part of financial law) subset.
Polouček’s (Šoltés, Kulhánek In Polouček, 2009: 201) classification offers an alternative view—it seems to be, in my opinion, a criteria-based classification:

• primary and secondary markets
• bond markets, stock markets, commodity markets, and foreign exchange markets
• spot markets and terminal markets
• national financial markets and international financial markets (further divided into foreign markets and Euromarkets)

 
In primary financial markets there are traded primary issues of financial instruments whereas secondary markets trade financial instruments which have already been issued. The second group takes into account the nature of the instrument, which is being traded (Šoltés, Kulhánek In Polouček, 2009: 209-2014). Kotáb (Kotáb in Bakes, 2012: 104). adds that the foremost function of primary markets is the acquisition of financial capital for new investment, while secondary markets focus on the sale of already-issued financial instruments where the main objective is to ensure liquidity for investors, i.e. to make it possible to convert financial instruments into liquid finances. The third group mentioned here is centred on the time elapsed; it distinguishes between spot markets (business is realised within several days after it is sealed[7]) and terminal markets[8] (the day of realisation, including the derivatives, is put back to a stated date in the future). The concept of the national financial market is, of course, a relative one: for entities based in the Czech Republic the national market is the Czech one while all the others are, naturally, foreign markets. International financial markets in the currency valid for the given state are foreign markets whereas international financial markets in a foreign currency (from the point of view of the country in which the market is based) are Euromarkets (Kotáb in Bakes, 2012: 2014-2015).  
From the above-mentioned classifications I prefer the discipline-based one, even though it is, taken at face value, a carbon copy of the classification of the non-fiscal part of financial law (with the exception of currency law). This is discussed here in the chapter on the classification of supervision within the system of law. Nonetheless, this does not diminish, I believe, the plausibility of the classification, for it offers an accurate division of the financial market into individual subfields. One cannot deny the fact that the second classification is also valid but it focuses on criteria rather than disciplines, which (when applied) means that each discipline could appear—according to the selected criterion—in a number of groups.
I find the discipline-based classification of financial markets more appealing also because I deal with supervision of the entire financial market including some particularities in individual disciplines. Still, I offer a further modification of the discipline-based classification to make it even more fitting:  
-           credit market (including banking and co-operative banking)
-           capital market
-           monetary market
-           insurance market
-           foreign exchange market
-           commodity market
Banking and co-operative banking can be labelled as credit institutions since their common distinctive feature is the provision of credits (loans)—hence the collective name ‘credit market’. The notion of banking also includes financial services provided by banks; unless these services (though provided by banks) belong to a different financial market discipline. The basic banking activity is the accumulation of temporarily available finances of the depositors; these finances are then made available again in the form of loans. This enables the flow of money in economy and the amount of temporarily available finances in circulation is multiplied (Wikipedia.org). Co-operative banking is realised via credit unions—they differ from banks in the legal form (credit unions may only be founded in the form of a society), the amount of the required basic capital (CZK 35 million as opposed to CZK 500 million for banks), and the range of clients for whom credit unions may offer their services (members only). In all other respects, especially as far as prudential enterprise rules are concerned, credit unions need to meet the same requirements as banks (CNB, 2017). For this activity it is, of course, necessary to possess a licence issued by the relevant state authority.
The capital market is a place where the capital is traded by means of securities and their derivatives. One can say it is a subset of the financial market (Wikipedia.org). Out of all financial market disciplines the capital market is the most interesting for this book and its main topic (supervisory integration) because the capital market’s basis is the transfer of money (in the form of issues) and the purchase of securities from subjects in surplus (investors, often as consumers) to subjects in deficit (issuers—those who issue securities). The capital market is part of the financial market in every country. There are two types of capital markets, namely regulated and unregulated ones. Regulated markets are mainly stock markets (in the Czech Republic it is the Prague Stock Exchange, plc. and RM- System Czech Stock Exchange, plc.). The majority of European capital cities and developed countries have their own regulated market, chiefly in the form of a stock exchange. Unregulated markets trade with securities and other financial instruments; however, they are not regulated (e.g. multilateral commercial systems which can only be run if certain conditions set by the state are met).
Despite being interconnected, these two parts of the financial market must be kept apart since they perform different activities and they behave in a different way when it comes to handling finances.
In the past, highly developed and dynamic capital markets often brought about financial innovations and newly-emerged segments of the market, with which countries had to deal by means of regulation and supervision. Owing to the considerable administrative burden and the sheer complexity of the task, the problem used to be solved by establishing a new institution that took care of those new supervisory and regulatory duties. Thus, a range of specialised institutions gradually emerged, each of which only took care of a certain part of regulation and supervision. It was impossible for it to cover the entire spectrum. Even though this specialisation enabled closer inspection of the securities market, it, of course, also led to a gradual loss of the overall view. This happened for instance in Great Britain or the USA (Pavlát 2003, 17).
The notion of monetary market was discussed above when I talked about the differences between monetary and capital markets. These financial market disciplines are, to my mind, the most dynamic disciplines and their supervision is, therefore, subject to constant changes and modifications which attempt to react to the current situation in the world, both politically and economically speaking.
The insurance market is supposed to secure the most important values (like health or life) often threatened by a number of external factors. Insurance helps to minimise the risks of both economic and non-economic activities. There are specialised institutions which offer insurance services, for which they need a licence issued by the state authority; these institutions are called insurance companies.
The foreign exchange market is a market where foreign currencies are traded in a cashless way. Money only figures here in the form of deposits on foreign currency accounts. The foreign currency market, on the other hand, is a market where foreign currencies are traded in cash. An ordinary foreign exchange office is an example of the clients’ form of the foreign currency market. Anybody willing to enter the business may do so without any restrictions (Mikolášová, 2017). Foreign exchange markets are the sphere of activity for dealers (who are end consumers), brokers (who arrange deals for others; particularly if the dealer in the transaction wishes to remain anonymous), and market makers. A market maker is a dealer who on a working day has the obligation of revealing (on request) the foreign exchange rates. It is a person who seals business with dealers; thus they are, as a matter of fact, foreign exchange officers in a cashless form. The same role of a market maker in a foreign currency market is performed by a foreign exchange officer, who exchanges cash. Regulation and supervision in this area is carried out over both the foreign exchange and foreign currency markets. Any activity can only be performed if one possesses a licence issued by the given state authority.
The commodity market enables the purchase and sale of commodities. The principle operating here is the very same as the one in the capital and monetary markets, but the subjects of transactions are, needless to say, commodities. Commodities are goods which are traded in the market regardless of quality. The supplies from various suppliers are mutually replaceable. Thus, cars cannot be called a commodity, because they are made in many versions at different prices. By contrast, copper is a homogenous product which can be traded at a unified price at global markets (Wikipedia.org).
The overview of financial market disciplines above discussed the characteristic features of the disciplines themselves—the segments and their subjects which operate there. When assessing the importance of the financial market and its segments’ influence on the economic situation, I would like to express my conviction that they affect society and economy enormously; that is why their proper working order and their correct setting play a key role in achieving economic stability and prosperity. Given the fact that the workings of the financial market (and its segments) are not merely customary—the financial market is regulated, i.e. it is delimited by legal norms and then through legal norms supervision is carried out over its activities—it is therefore crucial to set the ‘rules of the game’ and to anchor them in the system of law. In practice, it means delimiting regulation (the rules for entrance into the market and the code of behaviour there as well as the subsequent application of supervision and inspection). All segments of the financial market have existed for some time; they keep developing and so do regulatory and supervisory mechanisms. The very fact that individual segments have evolved, separated and, to a certain degree, standardised in various forms (in particular as part of legal norms) to be later accepted by society is a relevant justification of the existence of regulation and supervision of the financial market. If the financial market existed without regulation and supervision, it would be nothing more than a mere chaotic grouping of entities and their activities without proper rules; this would, no doubt, result in a system of total economic instability.
 

4 Monetary law

Monetary law and monetary policy are quite closely related terms. Monetary law is necessary legal base for national (or supranational) currency and monetary policy comes from the monetary law. I see it currently more and more important internationally as an international Monetary law which is focused on cross border transactions and the Monetary unions. There is of course national monetary law, but these international relations take greater importance for financial stability as such.
In my opinion Monetary law is set of social relations happening between states and/or Financial institutions including central banks based on legal codes, treaties, protocols and unions dealing with currency and cross border transactions.
The very same applies for Financial market and Monetary law – global integration which is strongly connected with economy.
European monetary Integration has never taken place in isolation from international developments. International and European monetary law address the same principled problems of monetary cooperation: how to proceed with financial transactions cross-border where no global currency exists (There is the attempt to make a European currency real for whole European union, but is long time run. With the European Economic and Monetary Union, a full-fledged monetary union. between sovereign States has been established for the first time in history (Herrmann, Dornacher, 2017: 2).
Well-functioning market depends on getting the rules, institutions and instruments that govern it right. And the source of the euro area’s difficulties, is that policy-makers failed to do so. For this reason, it would be wrong to conclude that Europe, or the euro, has failed. It was policy that failed. But importantly, policy can also be fixed. What we need now, therefore, is to finish what we started in 1999 and make the euro area work (Mersch; 2014).
Monetary policy is a method adopted by the monetary authority of a country to control the supply, availability, and cost of money (Definitions.uslegal.com) 
Monetary is economic topic which suits more in national scope policy (although there is for example EU monetary policy of European Central Bank). It belongs to non-fiscal part of the Financial law. On the other hand, Monetary law reflects more international activities of different states and institutions, although there is national monetary law regulating mainly local currency. From this point of view, the Monetary law is part of Economic law.
 

5 Conclusion - Economic law?

In general, let me conclude, that there are only few differences between non-fiscal part of Financial law and the Economic law. One of them I tried to explain above especially in Diagram no. 1. The goal and the aim of this article was to try to find out what Economic law is, where it belongs in the system of law and what are the connection points with Financial law. There is no doubt, that Economic law exists, it set up in Financial law and there are strong connections and similarities with Non-fiscal part of the Financial law
The question I need to answer is whether could be Economic law independent law discipline? The best answer to such a question is maybe to set up a new question. Why? Is there really any need to have another independent law discipline, although it could be unification of few others, especially when they are part of financial law anyway. It really doesn’t need to be independent law discipline, but it could be used as another name for non-fiscal part of financial law in connection with international element. The reason is quite simple, it’s because of the simplicity of the name - the Economic law. It’s just easier for non-professionals to understand, there is something connected with the economy. Its also more understandable for internationals from those countries, where is no Financial law as we know it. So, the question should not stand “Should be the Economic law new branch of law”, but “could be the Economic law used as another name for Financial market law and Monetary law”? The answer is yes, it could be and in some cases, it should be rather used this way, especially when we talk internationally or about only these parts of the Financial law, without wider relations with another part of the Financial law, such as the Tax law.
 
 
 
 

6 References

 
Bakeš M. et al. Finanční právo 6^th ed. C.H.BECK 2012.
Herrmann, Ch., Dornacher, C., International and European Monetary Law, An Introduction, Springer International Publishing, 2017,
Kotáb, P., Bakeš, M. Základní finančněpravní instituty. In BAKEŠ, M. et al. Finanční parvo (Financial law), 6^th rev. ed. Praha: C. H. Beck, 2012.
Kotáb, P., Karfíková, M, Vondráčková, P. Základní finančněpravní instituty (Basic financial legal institutes). In BAKEŠ, M. et al. Finanční právo, 6^th rev. ed. Praha: C. H. Beck, 2012. p. 102.
Kyncl, L. Sjednocení dozoru nad finančními trhy v rámci reformy veřejné správy (Unification of supervision of financial markets as part of public administration reform). In Sborník z konference Dny veřejného práva (Conference Proceedings Days of Public Law), Právnická fakulta, Masaryk University, 2007, pp. 1 - 8.

Mersch, Y. Law, money and market: the legal dimension of monetary policy., Speach at the Information Club Meeting, 
Luxembourg, 31 May 2014.

Mikolášová M. Co je to devizový trh a jak vlastně funguje (What is the foreign exchange market and how it works)? [online]. Důmfinanci. (30/08/2017) Available at http://dumfinanci.cz/clanky/48-co-je-to-devizovy-trh-a-jak-vlastne-funguje.
Mrkývka P., Pařízková, I. Základy finančního práva (Fundamentals of Financial Law). Brno: Masaryk University, 2008.
Mrkývka, P. Pařízková, I. Radvan, M. et al. Finanční právo a finanční správa (Financial law and financial administration). 1.st. ed. Masaryk University, 2004.
Pavlát, V. Regulace a dozor nad finančními trhy ve světě: současný stav a výhled do budoucna (Regulation and supervision of financial markets in the world: current state and outlook for the future). In Sborník z mezinárodní konference Regulace a dozor nad finančními trhy (Conference Proceedings on Regulation and Supervision of Financial Markets). Vysoká škola finanční a správní, 2003.
Prucha P. : Základy správního práva a veřejné správy  - obecná část (Fundamentals of Administrative Law and Public Administration - general part) . Masaryk Univeristy,1994.
Sullivan, A., Sheffrin S. M. Economics: Principles in action. Upper Saddle River, Pearson Prentice Hall, 2003.
Šoltés, V., Kulhánek, L. Finanční trhy (Financial markets). In POLOUČEK, S. et al. Peníze, banky, finanční trhy (Money, Banks, Financial Markets). C.H.Beck, 2009.
Zucchi, K. Financial Markets: Capital Vs. Money Markets [online]. Investopedia. (30/08/2017) Available at http://www.investopedia.com/articles/investing/052313/financial-markets-capital-vs-money-markets.asp.
 
CNB. Dohled nad úvěrovými institucemi [online]. CNB (20/08/2017). Available at https://www.cnb.cz/cs/dohled_financni_trh/vykon_dohledu/postaveni_dohledu/uverove_instituce/index.html.
Wikipedia.org.
Definitions.uslegal.com