In their new book, The Law Market, Vanderbilt Associate Dean for Academic Affairs Erin O’Hara and coauthor Larry Ribstein, the Mildred Van Voorhis Jones Chair in Law at the University of Illinois, address an unforeseen byproduct of globalization: the increasing ease with which corporations and individuals can “shop” among various countries and states for the laws most favorable to the actions they want to take.
See a video interview with Erin O’Hara about the “law market."
The owner of a merchant marine company headquartered in Virginia that operates a fleet of ships that transport goods to nations around the world, for example, might incorporate his business in Delaware, register his ships in the Cook Islands, maintain his company’s assets in an offshore bank account in the Cayman Islands, contract with his employees to litigate disputes under Virginia state law and specify in his contracts with customers that any disputes will be litigated in the United Kingdom. “Countries and states with favorable laws governing everything from business incorporation to gambling to marriage to banking have always existed,” O’Hara says, “but you used to have to travel to or live in these areas to engage in the activity. Faster communication via the internet, combined with a global trade and transportation network, now make it relatively easy to shop for the legal system that benefits you the most in many areas of your life. You are no longer stuck with a single legal system that governs all of your business or personal activities.”
According to O’Hara, who has spent much of her academic career studying the impact of choice of law for the resolution of legal disputes, the “law market” has a significant drawback. “It limits the ability of any individual government to enforce regulations and protect people from harmful activities,” she says. At the same time, she notes, a law market also offers significant potential for improved, streamlined laws that offer rules better suited to larger numbers of people.
In The Law Market, O’Hara and Ribstein explore the implications of law as a commodity for which individuals and businesses can shop, and they propose a system of simple, contractual choice-of-law rules designed to maintain a healthy trade-off between solid legal protection and the positive evolution of laws in a global environment. “If we want the ‘law market’ to achieve its potential for improving our laws, we need to take a conscious approach to it that reflects an understanding of how it’s structured and how it currently operates as well as the economic, legal and political forces that influence it,” O’Hara says. “A contractual approach is the simplest, most effective way to maximize the benefits of the law market while tempering its social costs.”
Although the law market has always existed in some form, its emergence as a driving force in the evolution of law on a global scale had neither been pinpointed nor clearly addressed before O’Hara and Ribstein’s book, according to Richard Nagareda, who directs Vanderbilt’s Cecil D. Branstetter Litigation & Dispute Resolution Program. “The Law Market offers a clear analysis of how the ability of private persons to choose the law that governs them – in business and in their personal lives – is transforming our legal system,” Professor Nagareda says. “Professors O’Hara and Ribstein draw on public policy and economics in a commonsense way to explain how the law market works, sketch its implications for our world today, and show how its emergence calls for a careful balance between individual freedom and regulation to advance the public good.”
The Law Market was released by Oxford University Press in January 2009.