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The German Discussion about Past and Future of Company Law before 1900 Albrecht Cordes, a.M.

If you should at some occasion travel to central Sweden, I recommend that you visit the spectacular site of the copper mines of Falun in the province of Dalarna. These mines were active since the 10th century, and in their heyday in the 17th century 2/3 of the world’s copper production came from there. The oldest documents concerning the mine are share certificates from 1288, eight in number, namely for some of the Swedish bishops. And because of these certificates, Stora Kopparberg, “the big copper mountain”, is presented to the tourists as “the oldest stock company of the world”. I don’t bring this up in order to question the Swedish tour guides but rather because I am interested in how my predecessors, the German professors for civil law and legal history from the late 19th century, would have classified the mine in Falun, and then Carlo will have to decide if mining companies classify as “financial institution” and therefore deserve further examination within this project.

If you look closely you will find that I changed the title of my paper: Instead of “past and present” I will speak about “past and future” of company law. The change may be small but it is significant because it explains the role attributed to history in the scientific program of LEVIN GOLDSCHMIDT and his school. They studied history not for its own sake but as an integral part of their occupation with the present and future law: history had to contribute to the improvement of trade law and all other economically relevant fields of law. This conviction earned them the name “Historical school of commercial law”, and they worked alongside with the Historical school of economics and their figureheads GUSTAV VON SCHMOLLER and later JOSEPH SCHUMPETER. It has even been suggested that they were the predecessors of the “New Institutional Economics” which today are in everybody’s mind. GOLDSCHMIDT and his school themselves were indebted to the German Historical School of KARL FRIEDRICH EICHHORN and FRIEDRICH CARL VON SAVIGNY from the beginning of the 19th century, and we will return to similarities and differences between these historical schools.

In this paper, I will proceed in four steps. First, the context of this Historical School shall be described briefly, then their leading personality, LEVIN GOLDSCHMIDT, shall enter the scene with his monumental but uncompleted “Universal History of Commercial Law” under his arm, and after him the slightly lesser known author of a thinner book, KARL LEHMANN, shall take the floor. He examined the history of stock companies before the Code de Commerce of 1807, and that seems to be a subject very closely related to the “Financial Institutions of the 12th–18th centuries” which this workshop wants to explore. I will end with some suggestions the look at GOLDSCHMIDT and LEHMANN may contribute to our common subject.

1. The Historical School of Commercial Law

The 19th century was the period when commercial law was established as an academic subject. Before 1800 the few authors who treated commercial law did it mainly for practical purposes. Their readers were merchants rather than scholars of law. In Germany, things changed in the middle of the 19th •

century, in a remarkable parallel to the legislative activities, reflecting, of course, the industrial revolution and the rise of the liberal bourgeoisie. In 1848 and 1861 the only memorable laws created by the German Federation were passed: The General German Letter of Exchange Bill, and the General German Commercial Code (ADHGB). Next came new codes regulating the Kapitalgesellschaften (limited partnerships), first the Aktiengesellschaft (1870, reformed in 1884) and then the newly invented Gesellschaft mit beschränkter Haftung (1892). The Dutch Wetbok van Kophandel from 1866 may serve as reminder that this wave of commercial codification in the second half of the 19th century was not limited to Germany.

Nor was the accompanying flood of literature a purely German phenomenon as the article of EDMOND- EUGÈNE THALLER on the joint stock companies in France in the Ancien Régime1 shows. But the German lawyers certainly picked up the subject with remarkable speed. In the center of this development stands the work of LEVIN GOLDSCHMIDT and his followers: His journal, the Zeitschrift für das gesammte Handelsrecht (ZHR), and his Handbook of Commercial Law, including its historical introduction which developed into a history handbook in its own right. In my opinion, GOLDSCHMIDT was the best expert on medieval Mediterranean trade law of all times, unsurpassed until today. Please allow me to quickly introduce my hero: LEVIN GOLDSCHMIDT was a Prussian Jew from Danzig, founder and editor of the said Zeitschrift, which still today is one of Germany’s most prestigious legal journals. He was professor at , and Berlin, where the first German chair for commercial law was created for him, and a judge at the Reichsoberhandelsgericht in Leipzig, the highest German court until 1879. As politician, GOLDSCHMIDT was a member of parliament for the National Liberal Party which supported BISMARCK in the first decade of the second Empire. GOLDSCHMIDT was the author of important legislative drafts, namely the so-called pre-commission for the German Civil Code (BGB). All in all GOLDSCHMIDT was one of the leading jurists of the Wilhelmian Empire. He died in 1897, the year when the new German Code of Commerce (HGB) passed the Reichstag.2

The HGB is deeply indebted to its predecessor, the said Code of Commerce of the German Federation from 1861. This ADHGB is described as GOLDSCHMIDT'S victory over his long-time rival HEINRICH THÖL, professor in Göttingen, who had advocated a more positivist character of the code. Under GOLDSCHMIDT'S influence, however, the code gave considerable leeway to trade customs. Thus it was opened to economic and cultural influences, and they, in turn, required comparative and historic studies in order to establish what those trade customs were. 2. Levin Goldschmidt and his Universalgeschichte des Handelsrechts (3rd ed. 1891)

Once the code of 1861 was enacted, the time must have seemed right to start writing a comprehensive handbook, a plan which GOLDSCHMIDT pursued for the rest of his life. He was not able to complete the task, but with the help of the accompanying articles in his journal ZHR, he outlined his plan quite

1 EDMOND-EUGENE THALLER, Les sociétés par actions dans l'Ancienne France, in: Annales de droit commercial et Industriel Francais, Etranger et International 15 (1901), 183–201. 2 SUSANNE LEPSIUS, Art. Goldschmidt, Levin (1829-1897), in: HRG II, 2nd ed., 2012, Sp. 459–463; KARSTEN SCHMIDT, Levin Goldschmidt (1829–1897). Der Begründer der modernen Handelsrechtswissenschaft, in: HELMUT HEINRICHS u.a. (Hg.), Deutsche Juristen jüdischer Herkunft, 1993, S. 215–230; LOTHAR WEYHE, Levin Goldtschmidt. Ein Gelehrtenleben in Deutschland. Grundfragen des Handelsrechts und der Zivilrechtswissenschaft in der zweiten Hälfte des 19. Jahrhunderts. Berlin 1996[Dissertation]; GÖTZ LANDWEHR, Die Handelsrechtswissenschaft an der Universität Heidelberg im 19. Jh., in: Semper apertus, 600 Jahre Ruprecht-Karls-Universität Heidelberg 1386–1986, FS in 6 Bänden, hg. v. WILHELM DOERR, Bd. II: Das 19. Jahrhundert, 1985, S. 61–83 (zu Goldschmidt S. 73–81); WOLFGANG SCHÖN, Recht und Ökonomie bei Levin Goldschmidt, in: FS für Karsten Schmidt, hg. v. Georg Bitter u.a., Köln 2009, S. 1427–1446. •

clearly. In sequence to SAVIGNY'S and EICHHORN'S Historische Rechtsschule, he was convinced that legal history – quite like comparative law – did not merely have explanatory value but was itself part of the law in vigour. But while SAVIGNY had used this point to argue against codification (and thus successfully postponed it), GOLDSCHMIDT took this position directly after a new code had been enacted to a good part under his influence. But even though, and like SAVIGNY, he saw codification with a certain amount of scepticism. He warned against the danger of cutting off and forgetting the past, because it was his conviction that all codification has the disadvantage to petrify legal development and to tear the connection between the law and its roots. GOLDSCHMIDT emphasized that even a codification was just a link in a chain of historical development.3 Thus GOLDSCHMIDT, like SAVIGNY, did not examine history for its own sake or for a better understanding of the roots of the law but as a part of the occupation with the contemporary law.

However, in the 27 years between the 1st and the 3rd edition of the handbook, GOLDSCHMIDT'S conviction about the practical use of legal history seems to have faded. Apparently it had become easier for him to permit the occupation with history in its own right. The historical part, originally little more than an introduction, became longer from edition to edition, and by 1891, in the final edition, occupied an entire volume on its own. Only then, GOLDSCHMIDT introduced the name "universal history", "Universalgeschichte", into his concept. The book was of huge influence on the whole field of economic and commercial legal history and has never been replaced in the exactly 125 years since it was published. The influence was especially important in Germany, and here in Italy, thanks to the Italian translation “Storia universale del diritto commerciale” from 1913. But it also summed up the dynamic movement of the previous decades, and in a way marked the end of the era of this historical school. After World War I the central interest of German commercial law scholars shifted into other directions.

[Offer to explain GOLDSCHMIDT’S understanding of “universal”.]

Already with GOLDSCHMIDT, the turn towards universal history looks a little bit like a turn away from contemporary law. To fill the whole 460 pages of the first volume of a handbook on contemporary commercial law with nothing but its history in the antiquity and the Middle Ages also has a taste of denial to it – denial of finally facing the present and making the connection to the commercial reality of the late 19th century, a reality GOLDSCHMIDT not only knew very well but shaped actively. 3. Karl Lehmann, Die geschichtliche Entwicklung des Aktienrechts bis zum Code de Commerce (1895)

Before turning to KARL LEHMANN and his book on „Aktienrecht before 1807“, let me quickly mention another thesis written under the supervision of LEVIN GOLDSCHMIDT – and according to its foreword even in GOLDSCHMIDT’S private library. I am speaking about ’S „Geschichte der Handelsgesellschaften im Mittelalter [according to Southern European sources]”, from 1889. I left it out here because the small and medium scale societies which WEBER examined probably do not qualify as “Financial Institutions” in your sense. If, however, my understanding that institutions need a somewhat considerable size before raising your interest is wrong, and you are interested in small-size enterprises as well, then WEBER’S book should certainly be opened again. This is facilitated by its

3 „Vielmehr ist hier der Wissenschat die nächste und wichtigste Aufgabe gestellt, die unvermeidlichen Nachteile dieser wie jeder Codification, die formelle Losreißung des durch sie begründeten Rechtszustands von der Vergangenheit, durch den Nachweis des geschichtlichen Zusammenhanges möglichst auszugleichen und überall an diese Vergangenheit anknüpfend, die Ergebnisse der bisherigen Wissenschaft für die Erkenntniß und Fortbildung des geltenden Rechts zu verwerthen." GOLDSCHMIDT, Handbuch 1, 1 (1864), preface, p. VI f. •

excellent new edition (2008) by my Frankfurt colleagues GERHARD DILCHER and SUSANNE LEPSIUS (now Munich). WEBER’S main point is the proof that in medieval Northern Italy sea and land trade developed their distinctive tools in regard to commercial societies, the commendae in their various types on one hand, and the compagnie on the other.

But let us now turn to KARL LEHMANN and his work on Aktiengesellschaften. Like in the case of GOLDSCHMIDT, his book was really a by-product of the work on a handbook on contemporary commercial law. I emphasize this with pleasure because it lets one think that these two experts found history more exciting than the contemporary law. Societies which were actually called Aktiengesellschaften did not occur before the French Code de Commerce from 1807. Therefore a history of Aktienrecht avant la lettre cannot be based on terminology. Instead it has to rely on the distinctive elements of the legal structure of the enterprise. This was the approach which LEHMANN did indeed take. He dissected possible predecessors or early forms of stock companies under this aspect. As possible candidates he identified: the montes, which may perhaps be called early banks, Colonial Companies like the Dutch and English East India Companies, mining companies with their very old and very specific rules, and his favourite: Reedereien (Shipping companies). Not surprisingly he found in each of these types some similarities and some differences. To actually come to a decisive conclusion, it would have been necessary to emply Plantonic idealism and decide which elements are constitutive for calling a company “Aktiengesellschaft” and which are just accidental. But that obviously would have been an arbitrary process, and LEHMANN was wise enough to avoid the trap. The price he had to pay for this reluctance was a certain vagueness of his approach. In his own words (my translation): “Companies which stand close to the [date of the] Code de Commerce followed similar aims. But the further they recede from him in time the more the resemblances dwindle. One link after the other loses itself in the centuries back to the montes and maonae, the fixed capital stock, the division of the capital into a given number of equal shares, the bearer shares, the limited liability within the company, the limited liability to the outside, the corporative constitution, the fixed obligation, the change of membership, and finally even the dividend – everything becomes insecure and wavering, soon one point steps into the foreground, soon another.”

So LEHMANN’S method is to compare the past types of “financial institutions” and measure them against the ideal concept of a stock company – an ideal which happens to be more or less identical to the stock company in the colours of his present days, i.e. Imperial Germany after the stock company law reform of 1884. This is no bash against LEHMANN but quite typical for his days. Let me support that point with an additional quote: GUSTAV VON SCHMOLLER described the said colonial companies of the 17th and 18th centuries as development “which pressured in the direction of the stock companies but had not yet quite arrived there”.4 By this manoeuvre, the past – in this case the typus “colonial company” is reduced to a mere pre-stage of the present – in this case the stock company.

4 Eine Entwicklung, die „zur Aktiengesellschaft hindrängte, jedoch noch nicht ganz bei ihr angelangt war“, SCHMOLLER, Die russische Compagnie in Berlin, 1724–1738. Ein Beitrag zur Geschichte der brandenburgischen Tuchindustrie und des preußischen Exports im 18. Jh. Nebst einer Anzahl von Aktenstücken, in: CONSTANTIN RÖßLER (ed.) Zeitschrift für Preußische Geschichte und Landeskunde 20 (Berlin 1883), pp. 1–116 (15). •

4. Consequences for a project on „Concepts and Origins of Financial Institutions (12th–18th century)

What contribution can GOLDSCHMIDT, LEHMANN and their group bring to our subject? They did not write about “financial institutions” expressis verbis, maybe due to a translation problem. The literary German translation “Finanzielle Institutionen” is not in use. Therefore, if the workshop really wants to revise the concepts of the German jurists of the late 19th century, we need to decide which of the historical objects they examined we want to define as “financial institutions”. The possible candidates for the Middle Ages and Early Modern Era were mentioned above: Shipping companies (Reedereien), Colonial Companies like the Dutch and English East India Companies, Banks, Insurance Companies, mining companies, and general trading houses like those of the Fugger and Welser families.

As the said scholars were professors for civil and commercial law they were nearly only interested in private companies. They paid little attention to state-run enterprises, neither to manufactories like the china-makers in Meissen, Copenhagen and Höchst, nor to State domains, the large agricultural estates like horse farms and vineyards. (Still today the Hessische Staatsweingut is the biggest vineyard in Germany.) But also companies and the other types of enterprises included more often than not a strong public element, when for example the King of Prussia first granted the octroy for a certain trade company and then signed 90% of its shares himself, or, to return to Sweden and to the beginning of my paper, when the majority of the Kuxe, the shares of a mine, were held by bishops who at the same time were reigning princes.

So when reading GOLDSCHMIDT, LEHMANN and the others, one should bear in mind the private law- whiskers they were wearing. The private-law orientation is also important to understand how and to what end they examined the said companies: They wanted to improve future company law, and were guided by the conviction that the history of the types in question was an integral part of their nature. That approach was based on the assumption that legal institutions had a quasi-biologic life of their own.

To sum it up: the scholars I examined here cannot help us with their method of idealistic concepts nor with their private-law bias. But they can help us (a) with their impressive knowledge of sources all around Europe, from antiquity to their own present, and that includes the numerous languages many of them mastered. And they can (b) help us reflect on the method of comparison. Depending on the motive of the study a comparison of words or of concepts or of real-life objects (in German: Wortgeschichte – Begriffsgeschichte – Sachgeschichte) can be the most useful approach. At another level, some studies may invite to simply state functional similarities and differences, what could be called a comparison of phaenotypes, while others will focus on influence and reception of legal concepts, which could accordingly be named comparison of genotypes.

Something what we cannot learn from GOLDSCHMIDT and his school is a functional approach which I would like to recommend (Funktionelle Methode der dt. Rechtsvergleicher). Instead of going through one type of company or institution after the other one could group the various types of enterprises in accordance with the intention their founders had. By founding the companies, they wanted to solve a certain problem, and we should ask which problem that was. Was it question of accumulation of capital for an expensive expedition? Did the crown pursue mercantilist or other goals, for example the establishment of colonies, or economic autarky which was especially dear to the Prussian kings? Was the intention to offer investments without personal liability and therefore no risk for the investor beyond the present investment? Especially when money of the church or of minor pupils had to be •

invested? Or was the most important point to win and secure competent managers and directors who had not enough money to be partners themselves? Which influence had the employees who because of their expertise were essential to the enterprise but who were running important personal dangers, for example miners and seamen?

We may not get help from KARL LEHMANN if we want to add to this catalogue and refine it. But we can count on him when need further proof, additional examples, and access to the archival and printed sources. If for nothing else, we can at least still use the writings I presented today as inspiration and as quarries for our new and future subject in the field of pre-modern trade and trade law.

(24 min)