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These past twenty years have witnessed very substantial developments in the legislation relating to consumer protection and the provision of financial services. During this period, the law in these two areas has evolved rather rapidly and beyond recognition. However, it is not always easy to decipher whether and how the two sets of laws dovetail with each other. It would be therefore interesting to explore whether the two sectors constitute a coherent framework and whether there are lessons that two sectors may learn from one another. Many of the legislative changes were home-grown, but significant influence has been predictably exerted by the island’s moves towards accession to the European Union. Indeed, one may claim that in the past ten years, EU law has become the most important inspiration for new legislation.

Independently of the growing EU influence on both its formal and substantive aspects, the Maltese legal system already presents a sophisticated and comprehensive framework. It is also an increasingly complex framework. One can speculate whether the complexity of our legal framework may be a reflection of the varied foreign influences that have designed the island’s history. Over the years, Malta has been ruled by a series of foreign powers too numerous to list. These have included the Romans, the Greeks, the Phoenicians, the Kingdom of the Two Sicilies, the Knights of St. John and, albeit for a few years, the French under Napoleon. For long stretches of its history, the island used to form part of the Italian mainland to its north. More recently, roughly between 1800 and 1964, Malta formed part of the British Empire. For all these reasons, Roman law, Italian law and English law have all contributed towards the development of Maltese legal rules and culture.

While most of public law is inspired by the UK practice, the country’s private law is largely continental. Malta is basically a civil law jurisdiction, and much of its law has been codified. Five codes of law still provide the bulk of Malta’s civil and criminal rules and procedures, closely following the model originally introduced by the Napoleonic Code Civil. This system, which traces its origins to Roman law, still prevails in large parts of Western Europe including France, Italy, Belgium and Germany. It is interesting to note that the codified system on the continental model was introduced here in the second half of the 19th century during the British administration which had been governing the island as a crown colony since the overthrow of the French occupying force. The original idea to introduce the common law system of law was scrapped following resistance from the local judiciary and professional classes.

To this day, Malta follows what is usually referred to as the continental model of private law. Accordingly, as a rule, English common law does not apply. Nonetheless, the influence of the common law is greatly, if indirectly, felt in certain sectors of local commercial practice and regulation, including company legislation and administration, in insurance and banking which have traditionally closely followed practice in the United Kingdom. Most recent local legislation, including the various financial services laws adopted in 1994, owe some debts to equivalent UK statutes. The Investment Services Act borrowed concepts from the equivalent English law at the time, the then Financial Services Act of 1986; the same applies to our shipping, insurance, money laundering and insider dealing laws, to mention a few other instances. Several parts of the new Companies Act represent a simplified version of the English Companies Act of 1985, incorporating many of the provisions dealing with the limited liability company, accounting and auditing requirements and winding-up. Since 1988, Malta has also been progressively introducing within its legal system the English common law concept of trust.

It may therefore be legitimate to suggest that the Maltese legal system absorbed a number of different legal and cultural influences from the two European countries which have shaped a large part of its history, and whose cultural influence remains very high to this day: Italy its closest neighbour to the north, and Britain. Currently, EU laws have become the most important source of new legislation and policies.

The promotion of the island as an open financial location may be viewed as part of the move away from undue dependence on manufacturing. The Maltese economy is becoming increasingly dependent on the services sector which has been gradually replacing manufacturing as the primary creator of jobs. Malta has no raw materials and its main resource is probably its well-educated bilingual workforce and strategic position in the Mediterranean. Like the tourism industry, the financial services sector has expanded rather rapidly over recent years, and as new services and investment opportunities are made available to the Maltese consumer-investor, new additional rules have had to be formulated in order to guarantee high standards of performance by operators as well as minimum levels of protection for investors.


SCOPE OF THE PAPER

Maltese consumer legislation and financial services legislation have only recently achieved a degree of complexity and sophistication. The two sectors have evolved separately and distinctly. One of the main reasons is that they traditionally fall under different ministries, with their own policies and priorities. The object here is to briefly look at these two areas together, examine their inter-action, if any, and try to assess whether the result is one of harmony and co-ordination or one reflecting confusion and ambiguity. Thus the subtitle “Allies or Strangers?”. This exercise shall require a brief overview of the evolution and current state of Maltese legislation on general consumer protection and financial services.

This paper must therefore be concerned with the legal position and status of what we may describe as the ordinary general consumer, or more specifically the consumer of financial services. This exercise shall serve as an occasion to consider the basic elements constituting financial services legislation and investor protection in Malta, and the safeguards available to the individual investor. Inevitably, one shall find that consumer and investor protection are conceptually close and inevitably overlap in a number of respects, often not easy to detect.

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