Legal Systems and Regulatory Frameworks
Sources and Hierarchy
Compliance work starts with knowing which instrument actually binds. Constitutions sit above statutes, statutes above delegated legislation (regulations, rules, ministerial orders), and all of these above agency guidance, circulars and industry codes. Guidance is generally not binding, but regulators frequently treat departure from it as evidence of weak controls - a favourite exam trap.
Distinguish common-law systems, where appellate precedent binds lower courts (stare decisis) and statutes are read against case law, from civil-law systems, where comprehensive codes dominate and prior decisions are usually persuasive rather than binding. Mixed jurisdictions exist, and sector regulators often blend both.
In the EU, a regulation applies directly in every member state, while a directive must be transposed into national law by a deadline and binds through the national implementing measure. Questions love this distinction: "When does the directive bind a company?" - through its transposing statute, read in light of the directive's text and purpose.
Watch extraterritoriality: nationality, territorial conduct and effects-based jurisdiction can each apply, so one group may face EU, UK and US rules simultaneously. Compliance mapping should record, per obligation, the source, the enforcing body and the maximum penalty.
Rule of thumb: statute authorises, regulation implements, guidance explains, case law interprets - and the strictest mandatory standard governs the group.
Worked example: a regulator cites a new EU directive that has not yet been transposed. Generally there is no direct vertical obligation against a private party; the national transposing law is the operative hook, interpreted consistently with the directive.