Endowment, Fundamentals and Fashion in the Market for Corporate Law
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AbstractThe “market” for law generally, and for corporate law specifically, entails transmission of law between leading jurisdictions and institutions and those other jurisdictions expected or willing to adopt such law. When the quality of the law transmitted has been demonstrated in its fundamentals to be superior to other solutions, adoption is constructive. If the quality of the law transmitted has not been adequately demonstrated, but rests on something comparable to fashion, or a momentum of general acceptance, then the expectation of adoption by other
jurisdictions can be considered coercive. Increased clarity regarding the fundamental quality of law will reduce the element of fashion in the market for law and increase the sharing of improved solutions.

Three different types of jurisdictions will interact in different ways with the transmission of law from the leading jurisdiction or institution. Developing countries will do best to learn from the experience of more developed countries and constructively adopt solutions. However, for reasons of history, inability, institutional flaw, or even the nature of the advice, they may dissimulate adaptation of the solutions offered. IFCs exist as sellers of law, institutions and services offered in connection with these, and therefore seek to adopt leading law and regulation, even if its reputation rests on fashion rather than fundamental quality. However, IFCs are aware of their market position and will reject even highly popular law if it can damage their competitive offering to international clients. Developed countries with legal endowments that are currently considered “second-best” to the leading law will have an incentive to sift fundamentals from fashion and promote internationally accepted solutions based on their own legal system. When this is
not possible, they will seek complementary solutions to adapt their legal system to the internationally leading law.

The work of a legal academic engaged in comparative corporate and securities law is therefore important from a policy perspective. Moreover, it takes on a certain urgency when the leading jurisdiction offering law has both announced
that “history has ended,” meaning it need no longer improve, and is racing toward multiple failures of its law and regulation. At such a time, developed countries with legal endowments that differ from the leading jurisdiction face the danger of contagion. Legal academics will have to parse the leading law, separating fundamentals from fashion and constructing workable solutions that allow international progress in the quality of law, and reject the propagation of errors. All this would have to be done with a great deal of insight into the workings of foreign and domestic legal systems and a diplomatic awareness of the extent to which a market often dominated by the momentum of fashion can be made to grasp fundamental quality.
All Author(s) ListDavid C. Donald
All Editor(s) ListHelmut Siekmann, Andreas Cahn, Tim Florstedt, Katja Langenbucher, Julia Redenius-Hövermann, Tobias Tröger, Ulrich Segna
Book titleFestschrift für Theodor Baums zum siebzigsten Geburtstag
PublisherMohr Siebeck
Place of PublicationGermany
Pages305 - 324
LanguagesEnglish-United States
Keywordscorporate law, comparative law, law and development

Last updated on 2021-07-05 at 11:13