Abstract
There is a popular statement of a former Bank of England official in 1987 regarding the definition of beneficial owners:
They are like elephants; you know them when you see them.
This reference to the now well-known Elephant Test is not uncommon in English Law. Already 23 years before the English official, U.S. Supreme Court Justice Potter Stewart said “I know it when I see it” in his concurring opinion in the decision Jacobelli v. Ohio.
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Notes
- 1.
GEIGER, Der Wirtschaftlich Berechtigte 1; Zulauf, Urs, Gläubigerschutz und Vertrauensschutz – zur Sorgfaltspflicht der Bank im öffentlichen Recht der Schweiz, ZSR 113, N 245, n. 70.
- 2.
Cadogan Estates Ltd v. Morris, EWCA Civ 1676 (1998).
- 3.
378 U.S. 189 (1964).
- 4.
Belleau & Johnson, I Beg to Differ: Interdisciplinary Questions about Law, Language and Dissent 176; D’Amato, Legal Uncertainty, 71 Cal. L. Rev. 9 (1983); an example in federal Indian law is the dissenting opinion in United States v. Alcea Band of Tillamooks (Tillamooks I), 329 U.S. 40 (1946) (propagating to differentiate between recognized and aboriginal Indian title in connection with compensation for taking) and Tee-Hit-Ton Indians v. United States, 248 U.S. 272 (1955) (applying such differentiation), see infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 3e).
- 5.
Tamanaha, Law As A Means To An End: Threat To The Rule Of Law 73.
- 6.
198 U.S. 45 (1905); Hand, Due Process and the Eight-Hour Day, 21 Harv. L. Rev. 500 (1908) and for the aspect of due process: Cohen, Transcendental Nonsense and the Functional Approach, 35 Colum. L. Rev. 819f (1935); Grechenig & Gelter, The Transatlantic Divergence in Legal Thought, 31 Hastings Int’l & Comp. L. Rev. 312 (2008); for the impact of Lochner on federal Indian law see: Lee, Rediscovering the Constitutional Lineage of Federal Indian Law, 27 N.M. L. Rev. 286 ff. (1997).
- 7.
198 U.S. 75; Katherine, John R. Commons and the Origins of Legal Realism; Or, The Other Tragedy of Commons, UCLA School of Law, Law and Economics Research Paper Series, Research Paper No. 08-19, 1-28 (2009).
- 8.
Hart, American Jurisprudence through English eyes: The Nightmare and the Noble Dream, 5 Ga. L. Rev. 978 (1958).
- 9.
Jacobelli, 378 U.S. at 187.
- 10.
Id.
- 11.
Nietzsche, Über Wahrheit und Lüge im aussermoralischen Sinn 309. English translation available on: http://www.e-scoala.ro/biblioteca/friedrich_nietzsche.html.
- 12.
Kant, Prolegomena §13, Note II.
- 13.
Umbeck, Might Makes Rights: A Theory of the Formation and Initial Distribution of Property Rights, 19 Econ. Inquiry, 39 (1981), 245 N.Y. 602 (1927); Grosswald Curran, Comparative Law and Language 9.
- 14.
Quoted in Hohfeld, Fundamental Legal Conceptions as Applied in Judicial Reasoning, 26 Yale L.J. 711 (1917) n. 4.
- 15.
Bederman, David J., Beneficial Ownership of International Claims, 38 Int’l & Comp. L. Q. 938 (1989).
- 16.
By John Godfrey Saxe (1816–1887) available at: http://www.suite101.com/content/theadventure-of-culture-writing-a7944.
- 17.
For the interpretation of non-legal, illegal, and anti-legal see infra chapter “Common Law, Equity, and Beneficial Ownership”.
- 18.
Macauly, The New versus the Old Legal Realism, 2 Wis. L. Rev. 401 (2005).
- 19.
Bowers & Carpenter, Challenging the Narrative of Conquest: The Story of Lyng v. Northwest Indian Cemetery Protective Association 492 ff. (explaining the cultural significance of a certain area of land which was largely ignored by the Supreme Court); see infra chapter “Fundamental Aspects of Federal Indian Law” Sect. 3b).
- 20.
Mattei, Basic Principles Of Property Law 19, 74.
- 21.
About the general application of this notion of limited absolute ownership in modern civil law codes see Parisi, Entropy in Property, 50 Am. J. Comp. L., 605, 609 (2002) with references to § 903 of the German BGB and the Italian Codice Civile.
- 22.
Zweigert & Koetz, An Introduction To Comparative Law 171 (3rd ed. 1998) (“With the coming into force of the Swiss Civil Code the concert of European private law codes was enriched with a powerful new voice representing the particular style of Swiss legal thinking”).
- 23.
Official translation by the Swiss Government available at: http://www.admin.ch/ch/e/rs/c210.html.
- 24.
Zweigert & Koetz, id. at 172.
- 25.
Kent, Michael B., From ‘Preferred Position’ to ‘Poor Relation’, 39 N.M. L. Rev. 8 (2009).
- 26.
Claeys, Jefferson meets Coase, Land-use Torts, Law and Economics, and Property Rights, Notre Dame L. Rev. 154 (2010).
- 27.
Guarantee of ownership: Art. 26 of the Swiss Federal Constitution.
- 28.
Zweigert & Siehr, Jhering’s Influence on the Development of Comparative Legal Method, 19 Am. J. Comp. L., 220 (1971).
- 29.
See infra chapter “The Beneficial Ownership Concept Applied in Federal Indian Law”, Sect. 1.
- 30.
Zweigert & Koetz, Comparative Law 46 (3rd ed. 1998).
- 31.
For the German equivalent Freirecht movement see Grechenig & Gelter, The Transatlantic Divergence in Legal Thought, 31 Hastings Int’l & Comp. L. Rev. 348 ff. (2007).
- 32.
Cohen, Transcendental Nonsense, 35 Colum. L. Rev. 821 (1935), with a passionate plea for functionalism as a defense against meaningless concepts.
- 33.
Zweigert & Siehr, Jhering’s Influence, 19 Am. J. Comp. L., 217 (1971); see also Mattei, Basic Principles Of Property Law 22; Grechenig & Gelter, The Transatlantic Divergence in Legal Thought, 31 Hastings Int’l & Comp. L. Rev. 347 (2007).
- 34.
Tamanaha, Law As A Means To An End 103; Cohen, supra n. 32.
- 35.
Leff, Some Realism about Nominalism, 60 Va. L. Rev. 453 (1974); Macauly, The New versus the Old Legal Realism, 2 Wis. L. Rev. 369 (2005); Grechenig & Gelter, id. at 359 (2007).
- 36.
Leff, id at. 473; Georgakopoulos, Principles And Methods Of Law And Economics 57; for the United States, see Zweigert & Koetz, Comparative Law 44, 247 (3rd ed. 1998).
- 37.
Hart, American Jurisprudence through English eyes, 5 Ga. L. Rev. 987 (1958) (giving a valid account of the cultural differences between US- and English Law using this problem as an example).
- 38.
See infra chapter “Beneficial Ownership Used in U.S. Supreme Court Decisions”.
- 39.
Holmes, The Path of the Law, 10 Harv. L. Rev.
- 40.
Goethe, Faust, Der TragÖdie Erster Teil 57; English translation from E-text released in 2002 and prepared by David Reed from Project Gutenberg: www.gutenberg.com; Von Kleist wrote an amusing anecdote about a soldier who demands to be executed for the violation of an antiquated code which the legislator had simply forgotten to abrogate; Von Kleist, SÄmtliche Anekdoten und andere Prosa 59.
- 41.
See supra Sect. 1 of this chapter.
- 42.
See id.
- 43.
Geiger, Der Wirtschaftlich Berechtigte (VSB) 1 f.
- 44.
Cohen, Transcendental Nonsense, 35 Colum. L. Rev. 812, 820 (1935).
- 45.
Mauthner, WÖrterbuch der Philosophie 290 ff., gives a concentrated overview of the history of the term and meaning of experience reaching from Xenophon (with “εμπειρια μεθοδικα” as the expression word that, according to him was poorly translated but still provides the root for the term “empirical”) to Kant.
- 46.
Holmes, The Common Law 30; See also Zweigert & Koetz, Comparative Law 246 f. (3rd ed. 1998).
- 47.
Hart, American Jurisprudence through English eyes, 5 Ga. L. Rev. 975 (1958).
- 48.
Zweigert & Koetz, supra n. 48 at 244.
- 49.
Grechenig & Gelter, The Transatlantic Divergence in Legal Thought, 31 Hastings Int’l & Comp. L. Rev. 311 (2007).
- 50.
Wetlaufer, Systems of Belief in Modern American Law: A View from Century’s End, 49 Am. U. L. Rev. 2 (1999).
- 51.
Tamanaha, Law As A Means To An End note 23; Grechenig & Gelter, id. at 309.
- 52.
Cardozo, The Nature Of The Judicial Process 31.
- 53.
Singer, Property and Coercion in Federal Indian Law, 63 S. Cal. L. Rev. 1823 (1990).
- 54.
See id.
- 55.
Georgakopoulos, Principles And Methods Of Law And Economics 132 f.
- 56.
Holmes, The Path of the Law, 10 Harv. L. Rev. 457 (1879); Llewellyn, A Realistic Jurisprudence – The Next Step, 30 Colum. L.J., 448 (1930); Ostas, Postmodern Economic Analysis of Law, 36 Am. Bus. L.J., 195 (1998), with a comprehensive summary of the central characteristics of Langdell’s view on the law; Cohen, Transcendental Nonsense, 35 Colum. L. Rev. 835 (1935).
- 57.
Mauthner, WÖrterbuch Der Philosophie 294.
- 58.
Quote in Zweigert & Koetz, Comparative Law 193 (3rd ed. 1998).
- 59.
Grosswald Curran, Comparative Law and Language 1.
- 60.
Cohen, Transcendental Nonsense, 35 Colum. L. Rev. 812 (1935) with further references to anthropologists.
- 61.
Hohfeld, Fundamental Legal Conceptions, 26 Yale L.J., 715 (1917).
- 62.
Zweigert & Koetz, Comparative Law 187 (3rd ed. 1998).
- 63.
Kaser, RÖmische Rechtsgeschichte 61f, 160 (15th ed. 1986).
- 64.
Llewellyn, A Realistic Jurisprudence, 30 Colum. L.J., 436 (1910).
- 65.
Pound, The Maxims of Equity, 34 Harv. L. Rev. 811 (1921).
- 66.
Pound, id. at 813.
- 67.
Zweigert & Koetz, Comparative Law 186, refer to Peter, Actio Und Writ, Eine Vergleichende Darstellung RÖmischer Und Englischer Rechtsbehelfe, Eine vergleichende Darstellung römischer und englischer Rechtsbehelfe, Tübingen (1957); a concrete example is the ejectment action which played an important role in the proceeding at the outset of Johnson v. M’Intosh, 21 U.S. 543 (1823), one of the most important leading cases of federal Indian law, see Robertson, The Judicial Conquest of America 31 ff.
- 68.
Wood v. Lucy, Lady Duff-Gordon, 222 N.Y. 88, 118 N.E. 214 (1917).
- 69.
Powell, “Cardozo’s Foot”: The Chancellor’s Conscience and Constructive Trusts, 56 Law and Contemp. Probs. 16 (1993) (showing that Cardozo’s influence on the development of the constructive trust concept in U.S. law “lies not in the holdings of the court for which he [Cardozo] spoke, but in the language he used.”); see generally Radin, The Chancellor’s Foot, 49 Harv. L. Rev. 44 ff. (1935) (referring to the origin of the metaphor).
- 70.
Von Jhering, Im juristischen Begriffshimmel 4 ff.; Zweigert & Siehr, Jhering’s Influence, 19 Am. J. Comp. L., 219 (1971); Cohen, Transcendental Nonsense, Colum. L. Rev. 809 (1935) (using Von Jhering’s essay as an introduction to his criticism of the all too abstract legal thought of his days).
- 71.
See infra chapter “Common Law, Equity, and Beneficial Ownership”.
- 72.
Literally translated from German: Lawyer’s Latin.
- 73.
The first U.S. court decision found is Leadman v. Harris, 14 N.C. 144 (1831). The case deals with a claim for the payment of a security (“deed”) which according to defendant Harris was fraudulently issued. The debt has been issued by the heavily indebted Mr. Levin Kirkman, Jr., himself not a party to the dispute who, as the defendant claims, fraudulently issued the security to the plaintiff. The term beneficial ownership comes into play in connection with the judge’s statement regarding the evidence of fraud: “[…] in every case, where it is made manifestly to appear, that notwithstanding the deed, the debtor is to have the real use, as it were, the beneficial ownership of the property, it is a presumption of law, to be delivered to the jury, the deed is fraudulent.” The judge seems to have a clear understanding of what beneficial ownership is. He uses the term to point at the discrepancy between the contractual agreement (the deed) on the one hand, and the reality, i.e. the fact that the use remains with the debtor on the other hand. This suggests an early conceptual understanding of beneficial ownership as a factual ownership to be discerned clearly from legal ownership.
- 74.
Holmes, Common Law 278.
- 75.
Holmes, The Path of the Law, 10 Harv. L. Rev. 464 (1879); see also Grechenig & Gelter, The Transatlantic Divergence in Legal Thought, 31 Hastings Int’l & Comp. L. Rev. 317 (2007).
- 76.
The finding is mainly based on the works of a group of representative authors of the Law and Economics movement. The sources can be found in the bibliography of this thesis. The most important names are Posner, Calabresi, Bebchuk, Carruthers, Sunstein, Claeys, Mattei, Parisi, Strhilevitz, Sunstein, Wright. Special mentioning deserves Georgakopoulos for his very comprehensive introduction of Law and Economics by using the famous Meinhard v. Solomon case, 249 N.Y. 458 (1928), as a recurring example. The author also provides a very comprehensive overview of the major contributors and their contributions to L&C, Georgakopoulos, Principles And Methods Of Law And Economics 7.
- 77.
The oldest source that could be found dates back to the 1830s (Leadman v. Harris, 14 N.C. 144 (1831), while Law and Economics dates back to the 1960s or even later (Posner’s chef d’oeuvre Economic Analysis of Law was originally published in 1973).
- 78.
See infra chapter “Common Law, Equity, and Beneficial Ownership”.
- 79.
See infra chapter “Beneficial Ownership as a Concept”.
- 80.
See infra chapters “Beneficial Ownership used in U.S. Supreme Court Decisions” and “The Beneficial Ownership Concept Applied in Federal Indian Law”.
- 81.
See infra chapter “Fundamental Aspects of Federal Indian Law”.
- 82.
Hohfeld, Fundamental Legal Conceptions, 26 Yale L.J., 715 (1917) with further references.
- 83.
New Oxford American Dictionary (2nd ed. 2008).
- 84.
Green, Dworkin’s Fallacy, 89 Va. L. Rev. 1946 (2003).
- 85.
Id.
- 86.
Heinsohn & Steiger, Eigentum, Zins Und Geld 89 ff. (4th ed. 2006); New Oxford American Dictionary (2nd ed. 2008).
- 87.
According to Mauthner, WÖrterbuch Der Philosophie 228 ff., the term property was originally reserved for individual as opposed to common property.
- 88.
Mattei, Basic Principles Of Property Law 73.
- 89.
See infra chapter “Beneficial Ownership as a Concept”, Sect. 2b).
- 90.
See supra Sect. 2a) of this chapter.
- 91.
The term proprietor is used here as a synonym of owner. This may be contradictory to the etymology of this term. But it is not unusual that namely a Latin or Greek term, depending on the purpose and time of entry into another language reach a different meaning than the original one. The Greek term for private person is ιδιωτησ (idiotes), a term etymologically related to ιδιαζουσα (idiazousa), the Greek term for property. Who would have guessed the ιδιωτησ would become the idiot?
- 92.
Leadman v. Harris, 14 N.C. 144 (1831); see supra note 75.
- 93.
Wirtschaftlich can also be translated into frugal or economical. But this has obviously no further bearing to the subject matter presented here.
- 94.
See supra Sect. 2f) of this chapter.
- 95.
Cunningham, Traditional Versus Economic Analysis: Evidence from Cardozo and Posner Torts Opinions, 62 Fla. L. Rev. 5 (2010), who, with further references, compares Posner with Cardozo, the “fox who knows many things”.
- 96.
Calabresi & Melamed, Property Rules, Liability Rules, and Inalienability, 85 Harv. L. Rev. 1089 ff. (1972).
- 97.
753 So. 2d 60 (Fla. 2000).
- 98.
Geiger, Der Wirtschaftlich Berechtigte Im Sinne Der Vereinbarung Über Die Standesregeln Zur Sorgfaltspflicht Der Banken (VSB) 53.
- 99.
Meyer, Trusts and Swiss Law, 1 Int’l Comp. L. Q., 378 (1954).
- 100.
See infra chapter “Beneficial Ownership Used in U.S. Supreme Court Decisions”.
- 101.
Ronald Harry Coase (1910), Nobel Prize carrier, famous for his Theorem (Coase Theorem) dealing with economic externalities. His major works are The Nature of the Firm (1937) and The Problem of Social Cost (1960); Georgakopoulos, Principles And Methods Of Law And Economics 95 ff.
- 102.
Guido Calabresi (*1932), Legal Scholar (former Dean of Yale Law School, senior judge on the United States Court of Appeals to the Second Circuit, his most quoted work (with Douglas Melamed) is: Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089–1128 (1972).
- 103.
See supra Sect. 3b).
- 104.
Holmes, The Path of the Law, 10 Harv. L. Rev. 457 (1879).
- 105.
Cardozo, The Nature Of The Judicial Process, 87; Von Jhering, Im juristischen Begriffshimmel 4 ff.
- 106.
Georg Friedrich Puchta (1798–1846), most famous representative of the Begriffsjurisprudenz, a movement villanized by the followers of von Jhering’s Interessenjurisprudenz, Zweigert & Siehr, Jhering’s Influence, 19 Am. J. Comp. L., 217 (1971).
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Reinhard-DeRoo, M. (2014). The Term Beneficial Ownership. In: Beneficial Ownership. Springer, Cham. https://doi.org/10.1007/978-3-319-01686-3_2
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