Chapter 15
Pavla Slavíčková
Introduction
As Urfus (1975, p. 45) has already pointed out, the need to regulate the credit markets in the countries of Central Europe most likely became necessary during the 14th century in the context of economic development and outgoing political and social transformation. While the ideas of medieval scholastics regarding the credit market were often far removed from economic reality, increasing business and monetary relations generated the demand for a legal framework. At that time, the law in the countries of Central Europe operated under the principle of legal particularism where different laws applied to different social groups of feudal society, such as nobility, burghers, peasants, clerics, etc., and even to different territorial units (Gábriš 2018, p. 54).
Besides the canon law of the Catholic Church, the law of the land consisted of the laws of nobility, the peasant laws that defined the particular rights and obligations of landlords and peasants, the constitutional laws that contained the relationship between the nobles, the monarchs, and the leadership of the state, and the municipal laws that governed the inhabitants of the so-called royal and dowry towns. With this system legal unity did not exist, even within a particular section of law. The body of valid law was formed partly by legal books, by the legislation, and by court judgments in various jurisdictions (Slavíčková 2012). Although there had been several attempts to unify these laws within the countries of Central Europe since medieval times, the process was completed no earlier than the very end of the early modern period. Regulating the credit market was only one part of a long process of codification.
Based on this background, this chapter discusses how the legislature treated the credit market, what the attitude of the law was regarding interest on loans, and how legal opinion evolved during the medieval and early modern periods. Moreover, this chapter describes the differences between particular rights in the Czech lands, it compares the findings with the opinions of the most influential personalities of economic thought of the time and, finally, it considers the influence of foreign law on Czech rights and, vice versa, the influence of Czech law on the legal regulation of the credit market in other countries in Central Europe.
Early opinions on the credit market
The body of law used in the countries of Central Europe during the Middle Ages was chiefly unwritten. It was based on the legal customs that had been settled upon within a community and were universally recognized, sanctioned, and respected (Gábriš 2018, pp. 53–61). References to the regulation of interest rates on loans can be found in even the oldest of texts such as legends and chronicles. Almost without exception, these ancient sources condemned lending money for interest and considered it a form of usury (Slavíčková 2015, p. 896). In contrast, the later theoretical treatises of the 14th century from the Czech lands made it possible to lend money for profit. This was most likely through the influential thoughts of Thomas Aquinas (1223–1274), as can be seen in the works of Štěpán of Roudnice (around 1300–1365). In the treatise known as Quaestiunculae he declared an understanding of trade and associated loans. According to Svoboda (2008, pp. 379–84), these opinions formed the basis for a liberal approach to the credit market that was typical of the High Middle Ages.
The Maiestas Carolina, the legal code proposed by the Roman Emperor and Czech King Charles IV in 1350, also allowed cash loans, but only in connection with playing dice, and prohibited all other types of loan, especially those connected with a pledge of personal property (Maiestas Carolina, art. XXXI, p. 190). This code was based both on previous legal customs as well as the Liber Augustalis of 1231, the legal code for the Kingdom of Sicily promulgated by Emperor Frederick II. However, due to strong resistance from the nobility, King Charles IV had to withdraw the code and it never came into effect.
Several mixed views of the credit market were included in many early legal texts. The oldest preserved text from the Czech lands is the so-called Book of Rosenberg (Brandl 1872). It was written by an unknown author and is a body of noble law that most likely comes from the 13th century. As a reflection of traditional Czech law, it also included the earliest regulation of the credit market; although only in the form of a few brief references. The book mainly describes procedural law as used in the Territorial Court (Zemský soud), similar to the Ordo iudicii terrae (Palacký 1842), a legal book from the second half of the 14th century. Articles 159 and 210 of the Book of Rosenberg, and article 61 of Ordo iudicii terrae contained instructions on how to judge the repayment of loans (Brandl 1872, pp. 78–9, 156; Palacký 1842, pp. 108–9). The peak in the evolution of law in the pre-Hussite era featured the Czech Territorial Law (Čáda 1930) written by Ondřej of Dubé (around 1320–1412/13). As Marečková points out, his perfect knowledge of Czech procedural law was supplemented by extensive practical experience (Marečková 2006, p. 27). In several articles, Ondřej of Dubé declared that the creditor had the right to recover not only the loan, but also interest from the debtor, and defined the procedures for doing this in court (Čáda 1930, art. 5, 9, 39, 69, 72, 74, and 144, pp. 118–19, 120–2, 138, 148, 149, 150, and 177–8). The articles also included the situation where a debtor could not pay a debt even after the term had been extended three times. In this case, the court could order the seizure of property (Čáda 1930, art. 73, pp. 149–50).
Later, Jan Hus (1369–1415), Czech theologian, philosopher, church reformer, and key predecessor to Czech Protestantism, turned to a more conservative concept of the credit market that was viewed though strong moralism. He relied on the argument that time belongs to God and therefore does not deserve to be sold (Erben 1865, p. 214). He identified many types of trade as usury, not only placing interest on loans, but also pledges of property, adding penalties for delay, and even the resale of goods at increased prices and the sale of unnecessary goods. The only ‘proper’ business was when a farmer or craftsman sold the goods he produced without profit. According to Jan Hus, this was good business that could be described as pleasing to God (Erben 1865, pp. 127–8).
Thomas Štítný (1333–1401/9) was already urging buyers to run their business with respect to both the common good and the benefit of the people. Those who traded for profit were committing the ‘sin of covetousness’. Based on this presumption, he considered money to be sterile; interest should not be taken on a loan (Slavíčková 2015, p. 899). Other adherents of the Hussite movement were of the same opinion, such as Mikuláš of Dresden (d. 1417) and Jakoubek of Stříbro (1371/3–1429). Their treatises known as De usura argued for the rule of sola spes facit usuram, which is contrary to the later attitudes of other church reformers such as Luther, Calvin, or Zwingli (Urfus 1975, pp. 49–51).
Regulation of the credit market in the first codifications
The process of legal codification achieved success throughout Central Europe in the 15th and 16th centuries (Slavíčková 2012, pp. 31–3). This happened in the Czech lands after the Hussite Revolution, under the strong influence of the Estate, various especially powerful social groups with different kinds of political rights (Marečková 2006, p. 38). After a long period of resistance, the nobility used the codification of territorial law as a tool to consolidate power under the rule of Vladislav II (1471–1516). The Territorial Constitution (Kreuz & Martinovský 2007), approved by the Estates in 1500 and signed by the king two years later, collected constitutional, procedural, administrative, criminal property, and family law provisions. However, it had a non-exclusive character and an inconsistent structure. Even in this legal codification, the regulation of the credit market was not comprehensive. In article 431, the codification explicitly prohibited usury which was defined as an amount in excess of ten out of one hundred borrowed. The usurer was to be punished and the money to go to the state (Kreuz & Martinovský 2007, p. 222). More often, loans and interest were treated in the context of procedural law (art. 117, 118, 167, 315). While the creditor could have asked the court for support in cases when the debtor had not paid the debt properly and in time, the usurer was not entitled to judicial protection (Kreuz & Martinovský 2007, art. 402, p. 213). This article referred to the Czech Territorial Law by Ondřej of Dubé, which may be considered a continuation of the content of the private legal books.
The quality and importance of the private legal books can be seen in the books of Viktorín Kornel of Všehrdy (1460–1520). The author was a famous lawyer and humanist, and his book known as the Nine Books on the Laws of the Czech Lands (Jireček 1874) represents the most comprehensive publication on Czech territorial law at the end of the 15th and the beginning of the 16th century. Kornel’s legal book is a critical discourse of Czech territorial law, supported by exact citations of not only the Czech common and territorial laws, but also the Bible and various works of ancient and medieval philosophers (Marečková 2006, pp. 29–31). It defined the basic requirements for business contracts, ordered the registration of real estate sold as debt, and determined rules for repayment and possible recovery of debt (Jireček 1874, art. 16, 17, pp. 60–7). The increase of debt by interest was considered a matter of course (Jireček 1874, art. 24, pp. 87–91).
The territorial law of the Moravian nobility was included in the legal book written by Ctibor Tovačovský of Cimburk (around 1438–1494) and its amendment by Ctibor Drnovský of Drnovice (d. 1543). The works known as the Tovačovský Book (Brandl 1868a) and the Drnovský Book (Brandl 1868b) were used in practise at the Moravian territorial court during the 16th century despite the official release of the codification of Moravian territorial law in 1535 and 1562 (Slavíčková 2012, p. 32). Compared to Czech territorial law, the Moravian legal books also contained the full wording of a loan agreement, which, if observed, had the certainty of legal enforceability at the Moravian territorial court (Brandl 1868b, pp. 96–8; Brandl 1868a, pp. 84–5). Significant parts of these books were incorporated in the official codification of Moravian territorial law from 1535 and 1562 (Čáda 1937), together with the older resolution of the territorial parliament and judgments of the territorial court. According to Čáda (1937, p. XXXIII), the resolution of the territorial parliament from 1500 mainly concerned Jews and usury. Based on previous arrangements, the Moravian territorial law accepted loans provided by Jews with a maximum interest of ‘two coins out of ten coins’ per year (Čáda 1937, art. 111, p. 123). All such loans had to be made under the supervision and knowledge of the municipal authorities. Credit business performed by Jews outside of towns was forbidden (Čáda 1937, art. 111, p. 126).
The highlight of the evolution of law in the Czech lands in the early modern period was the Renewed Territorial Constitution of 1627 for Bohemia, and 1628 for Moravia (Obnovené zřízení zemské, 1890). This constitution was issued by the Habsburg king Ferdinand II after his victory over the Protestant opposition and brought many fundamental changes to build a bureaucratic and centralized state (Marečková 2006, pp. 66–71). Compared to previous codes and legal books, the Renewed Territorial Constitution treated the legal relations of the credit market in a very detailed and systematic way. It ordered forms of procedure for lending money and all its consequences, including protections for the creditor as well as the debtor (Obnovení zřízení zemské, part LXX, and LXXI, pp. 265–73, 273–7). All disputes over debt were to be settled in court. According to article 317, those who did not pay the loan were to be imprisoned; on the other hand, those who falsely accused someone were to be sentenced to death. In the case of several borrowers, they all guaranteed the loan equally. Debts were to be paid in a quality coin and, last but not least, if the creditor lost the contract, he had to witness the existence of the debt (Jireček 1890, pp. 265–73). According to article 349, usury, whether conscious or subconscious, was forbidden. The constitution set 6% as the maximum interest rate. However, usury was defined more broadly. Examples were when someone entered into a contract for a different amount than what was lent, selling goods with undue profit, or lending goods for sale instead of cash (Jireček 1890, pp. 279–89).
The Renewed Territorial Constitution reflected the interests of the Catholic monarch and remained valid until 1848. All members of Protestant churches were forced to emigrate and their property was confiscated by the state. This included, among others, John Amos Comenius (1592–1670), who was a philosopher and pedagogue, led several schools, and advised governments across Protestant Europe (Polišenský 1996). His views on the credit market reflected the attitudes of Protestant society and suitably complemented the legislative dimension of the issue. One example is the work called Letters to Heaven (Listové do nebe, 1970) from 1619 which was published before Comenius was forced to depart and was intended for the Czech audience. It is a dialogue of Christ with poor people on one side and rich people on the other. The poor complained, inter alia, about a lack of money, high interest rates, and injustice in borrowing money from the rich. According to Comenius, this social inequality should never occur because it is not desirable and the poor should be satisfied with their situation. Moreover, he criticized them for their complaints; they should work hard instead. He encouraged the rich to care for and be kind to the poor (Imrýšek 1970). In his later book General Consultation on an Improvement of All Things Human (De rerum humanarum emendatione consultatio catholica) published abroad in Latin in 1666 (Sedláček 2008), Comenius openly condemned borrowing money, especially from Jews. He claimed that this is not the solution; one was supposed to save rather than lend and to take care of the family rather than property. However, if necessary, lending money had to follow rules and fairness as guaranteed by the state (Sedláček 2008, chapter V). This is an obvious reference to the existing legislative background and a significant advancement compared to the works of medieval authors.
Obligation and business law in municipal codes
The municipal law in Central Europe was based on the customary law of local communities, mixed with the law of German colonists, and adapted in later developments through statutes enacted by the towns proper (Gábriš 2018, p. 60). The connection between towns based on the system of appellation (the mother town served as appellate instances for filial towns) created a more or less coherent region that followed the law of the leading municipal authority. Three different types (areas) of municipal law could be found in the Czech lands before unification (Hoffmann 1975).
The municipal law of Brno, the capital city of the South Moravian Region, is usually considered the most important for future developments. In its very early history, it was influenced by the privileges of Vienna (Weizsäcker 1953), later it adopted some of the principles of Roman law and also created its own statutes containing both public law norms and private law regulations (Gábriš 2018, p. 84). As Flodr points out, it was especially the law of obligations and business law which underwent the greatest transformation from its origins due to the incorporation of judgments from the municipal courts (Flodr 2001, p. 248). This shows the frequent occurrence of these cases in municipal courts.
The municipal law of Brno divided loans according their origin: debita ex delicto, which means unlawful debts awarded to the creditor by the court, and debita ex contractu, those based on a contract between creditor and debtor. Further criteria were the amount of the loan (small, medium, large), whether the debtor was a single person or a group, and if the observance was joint or separate (Flodr 1990, art. 128, and 131, pp. 192–4). All these factors were considered by the court when deciding on the procedure to recover the debt. Especially in the case of small debts, the court’s decisions were complicated by formal shortcomings in contracts and therefore pressure grew to record loans by official means (Flodr 2001, p. 249).
The law defined a loan as handing over a thing for temporary use. The legal and factual ownership of the thing continued to belong to the creditor. The loan could be money, but also things including real estate or even animals (Flodr 1990, art. 132, p. 194). The loan contract also included a pledge of property called pignus or ipoteca vel pignus. (Flodr 1990, art. 546, p. 336) It was formed from part of the debtor’s assets, both current and future; however, some things were excluded by law such as bed linen, the clothes of the debtor, as well as religious artefacts or stolen items. (Flodr 1990, art. 397, 548, pp. 219, 336) The municipal law of Brno was the first to define an exchange in the market as either the exchange of thing for thing or thing for money, known as permutatio. (Flodr 2001, pp. 260–1) A contract could be in verbal or written form and concluded before witnesses. The influence of Roman law on these provisions is obvious, which could be described as a typical feature of municipal law. It adopted not only the main ideas, but also the specific Roman law terminology that eventually became used in daily practice (Boháček 1924).
The main principles of the municipal law of Brno were generalized and compiled in the compendium known as Manipulus vel directorium iuris civilis, whose influence exceeded the borders of Moravia and fundamentally influenced the law in Prague. (Slavíčková 2012, p. 21) It was also used in 1534 as the basis for the first failed attempt to codify municipal law in the Czech lands, as well as in 1579 for the more successful draft written by Pavel Kristián of Koldin known as the Town Privileges of the Kingdom of Bohemia (Malý 2013). This codification was of very high quality and contained provisions for town administration, duties of the council, property rights, procedural law, obligation law, inheritance law, family law, and a few rights from criminal law. The issues of the credit market and of usury were treated in several chapters. The first, known as De Venditionibus, dealt with sales and the different types of markets (Malý 2013, art. G.XXXV–H.XXII, pp. 207–22). A section on loans and pledges of debt followed (Malý 2013, art. H.XXIII–XXXVIII, pp. 222–7). The content of the chapter was mostly based on rules defined by the municipal law of Brno with an even greater inclusion of Roman law together with generalization of its key principles (Skřejpková 2013, p. 712). In this form, Town Privileges received subsidiary validity in relation to the Territorial Law in the second half of the 17th century and remained in force until the issuance of the General Civil Code of the Austrian Monarchy in 1811.
Town Privileges was approved by the King and was used as a tool to unify municipal law in all countries belonging to the Kingdom of Bohemia. Towns that followed the Magdeburg Rights resisted this unification for long time (Slavíčková 2013). This alternative legal system was found in many parts of Central Europe including North Bohemia with Litoměřice in its centre, and in North Moravia with Olomouc in its centre (Spáčil & Spáčilová 2018). Throughout the existence of these legal islands, close relations with mother cities outside of the Czech lands were maintained, which had Litoměřice aligned with German Magdeburg and Olomouc with Polish Wroclaw (Biedrzycka & Kutylak-Hapanowicz 2007). Yet the provisions of the Magdeburg Rights were not incorporated in the Town Privileges at all, despite official requests by the councils of these towns (Slavíčková 2013, pp. 48–51). Their proposals in 1571, known as the Extract of the Main Articles (Jireček 1883), included rules for lending money. However, most of these articles focused on procedural matters relating to the recovery of outstanding loans before the courts (Jireček 1883, art. 17, 19, 38, 39, pp. 16, 17, 27) and brought nothing new to the issue. The towns in North Bohemia eventually agreed to use the Town Privileges and abandoned the Magdeburg Rights in 1610. The towns in North Moravia followed them by the end of the 17th century (Slavíčková 2013, pp. 51–3).
Conclusion
In the early period of customary law, the basic rules of the credit market were already in place. We can see this in the earliest theoretical treatises by authors from the pre-Hussite period, whose views match the content of the oldest legal books. While the law during the Middle Ages focused on procedural rules for the recovery of outstanding loans, the concept of the credit market was defined by the regulatory texts written by theologians such as Jan Hus and his followers. Change came with the first codifications that treated the credit market as an integral part of business law and the laws of obligation. The inclusion of Roman law played an important role and formed the basis of the early modern business law as well as the laws of obligation. The resulting municipal laws found themselves incorporated into foreign legal provisions. The process of development was led by the municipal law of Brno, which had a significant influence on Prague. Despite the long history and development, the regulation of the credit market as contained in the Magdeburg Rights, was not taken into account in the unification of municipal law.
The contents of the Territorial Law reflected the political and religious changes to the Czech lands in the early modern period. While the Renewed Territorial Constitution was open to lending money with interest, Comenius, a member of the Protestant opposition, refused it and recommended more diligence instead. Although he was forced to leave the Czech lands, it seems most likely that neither his opinions nor any other legal regulations of the credit market used in the Czech lands influenced other countries in Central Europe. Although the development of nobility, peasant, and municipal law within the countries of Central Europe was quite similar, as was already shown by Gábriš (Gábriš 2018), the ruling power usually preferred domestic customs. It was the Magdeburg Rights, the most widespread legal system used in Central Europe, that was first able to adapt itself to local conditions, but was eventually pushed out. Last but not least, we should mention the territorial law in Upper Silesia, such as the territorial law of the Duchy of Opole and Racibórz, that first adopted the content of Moravian territorial law during the 15th and 16th century (Kapras 1922). However, this was due to the annexation of this territory to the Czech lands after the Hussite wars and it had no effect on future development.
Funding
The research was funded by the Czech Science Foundation, Grant No 19-07805S.
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