The Notarial Act – An Instrument of Investment Security

The following is a summary and commentary of a paper that appeared in issue 119 of Revista Internacional del Notariado by Lionel Galliez.*

As mentioned in our brief report concerning the publication of that issue, Lionel Galliez was the recipient of the André Ducret Award for the best scientific contribution to the notarial practice in the 2012 Congress of the Unión Internacional del Notariado (International Union of Notaries) for the presentation of his illuminating paper.

It should be noted from the outset that Lionel Galliez’s paper is drafted from the perspective of the civil law notary. He states that:

“The notarial act does not influence the profit  that an investor will make, but it does help reduce and control the risks. Risk control thus forms the basis on which to assess what the notarial profession can offer investors and to distinguish it from the competing models proposed in traditionally Anglo-Saxon nations.” [p. 225]

Reflecting on a recent report from the French notarial profession, Galliez suggests that – based on an “economic analysis of the law” – the notarial profession “guarantees investors optimal legal certainty” [ibid.]. Galliez therefore embarks on a comparative analysis between the notarial framework of civil law and common law jurisdictions in relation to what they can offer investors business interests. His paper focuses on three types of contracts [p. 228]:

• Sale of property;
• Loan agreement; and
• Lease agreement.

In light of the broad ranging contractual typology above, investors will encounter different kinds of legal risks which are associated with different kinds of agreements; those agreements will define the particular commercial investments with is being entered into and secured. Galliez states that:

“Out of the different kinds of risks, a risk can be described as legal if the threat weighing on the investor results from a legal relationship. The notarial act only has a direct influence over that sort of risk, because controlling legal risks is the core business of notaries.” [p. 225]

Galliez’s analysis reveals that there are four basic legal risks that arise from the consequences of the following [p. 230]:

• Loss of or delay in the collection of funds;
• Increase in the costs born by an investor;
• The depreciation in value of an asset; and
• Reduction in the value of, or loss of, asset liquidity.

These risks will precipitate financial loss on the part of the investor, and the notarial profession (in civil law countries) can assist in mitigating or avoiding those risks because “the notarial act is much harder to contest than a private writing” [pp. 225-226]. What Galliez is suggesting here is that parties to a notarised agreement will feel more inclined to discharge their respective obligations and duties by reason of the fact that the agreement, once notarised, carries with it greater legal or evidentiary weight; in other words, it is “difficult, and even risky, for them to dispute the value of the instrument” [p. 226].

This is because, as a general proposition, the role and status of the notary public in civil law countries is greater than that of public notaries in common law countries: a civil law notary has what may be perceived from the common law perspective as almost a quasi judicial function; a notarised act, although it certainly can be contested in legal proceedings, is in-and-of itself strong evidence of a fact or proposition. Galliez states that “this quasi-incontestability [of the notarial act in a civil law country] is constituted ab initio, without the need to confirm it by the posteriori intervention of a judge” [ibid.]. Furthermore:

“Probative value secures transactions as it makes it easier for the parties to make reasonable forecasts. It reduces  the risks of disputes and is thus a factor of trust which encourages the parties to enter into agreements. The security it provides helps dispel the reluctance of people who fear that the terms of the exchange will be challenged after its conclusion.” [ibid.]

It appears from the text of Galliez’s paper that a notarised agreement in civil law countries is considered to be better evidence (in the event a dispute arises) than an agreement between parties itself. Galliez’s terms of reference is notable: “[t]he mere existence of the title deed [i.e. the notarised act] is a factor that adds value to the asset” [ibid.]. The intervention of a notary into the commercial bargain between parties therefore enhanses the trust  between the operative parties because the terms of the agreement being entered into are “checked” for “balance” and “effectiveness” by a profession that is “strictly regulated and controlled” [ibid.].

The contrasts between the notarial function in civil as opposed to common law countries becomes evident. The civil law notary is expected to provide legal and other advice that the common law notary may be reluctant or even professionally prohibited from tendering to his client. In contradistinction to the notary of the “Anglo-Saxon” jurisdictions, Galliez states that the civil law “notary’s role is not that or a mere attestator; he actively contributes to the effectiveness of the act he certifies” [ibid.]. The notary public in the civil law jurisdiction is effectively involved in the creation or amendment of the terms and provisions of the commercial relationship between the parties who seek his services.  As such, the notarial act will bring with it the legitimising force of an impartial authority whose intervention imports a higher level of probaty to the terms of that relationship.

* The paper, as published in the aforementioned journal, can be cited according to the following convention: Lionel Galliez, “The Notarial Act – An Instrument of Investment Security” Revista Internacional del Notariado No 119 (December 2013) pp. 223-230 (English Translation); Lionel Galliez, “L’Acte Authentique Notarial au Service de la Sécurité des Investissements” Revista Internacional del Notariado No 119 (Décembre 2013) pp. 215-222 (French translation); Lionel Galliez, “El Documento Notarial al Servicio de la Seguridad de las Inversiones” Revista Internacional del Notariado No 119 (Diciembre 2013) pp. 207-214 (Spanish translation). The above is a summary of some key facts and salient points of interest; for more information about the issues discussed here, readers are strongly advised to refer to the original paper, as published.

Additional Comment

The civil law notarial system described by Galliez does appear to have its advantages insofar as it creates an environment in which contractual relationships between parties are ‘reviewed’ – so to speak – by an impartial professional with a view to achieving an equitable relationship between the parties. Indeed, this could be achieved in common law jurisdictions by way of obtaining independent legal advice on a contract (and advice from any other professional, such as an accountant, financial planner etc.). However, in the event that a term of the contract was ever to be disputed in court, such legal advise would not confer the weight of a “title deed”, in Gallez’s language, vis-a-vis the contract, despite the high professional standards expected of legal practitioners by the public.

Obtaining legal advice in the common law jurisdictions does not have the same effect as having a contract notarised by a civil law notary. Galliez’s paper therefore provides a useful comparison of the notarial profession between civil and common law countries. The common law jurisdictions do not have a comparable institution that can provide the certainty and impartial assessment of proposed commercial transactions in the same way that might be available through the operation of a notary in civil law jurisdictions.

To this reviewer, the difference between the civil and common law systems appears to be a function of a different legal culture in which similar commercial interests are mediated – and the legitimacy of same is established – through different institutional norms: whereas in the common law system these interests are pursued in the private sphere and only become subject to external legal authority if and when a dispute arises between parties, the civil law jurisdiction seems to favour a paradigm whereby private interests are ‘legitimised’, as it were, through the intervention of an external quasi-legal authority before duties, obligations and responsibilities inter partes in fact arise.

For more information on what a Sydney Notary Public may offer to a local or overseas business that wants to secure its commercial interests, see our section on Services Offered.  Notary Public in Sydney may, in some situations and depending on the location of the client or his business, be able to visit a client’s office to provide notarial services. For more information on the extent of our mobile notary, see our brief on Availability. More information for potential clients can also be found at Client Conferences and Distance Instruction as well as Foreign Language Documents.