The Futility of Unification and Harmonization in International ...

4world, consider first what a benevolent and public-spirited international lawmaker might wish toaccomplish.A. Managing Legal RiskA benevolent lawmaker’s first objective should be predictability and stability in internationalcommercial relations. In a world of multiple legal systems and uncertainty about where things willgo wrong, the parties must worry about divergent rules applying to their disputes. A carrier or goodsmay end up in one place, the parties may hold assets in another, and courts in any number ofjurisdictions might both make it easy to sue foreign parties and refuse to apply another jurisdiction’ssubstantive law. Knowing that this divergence exists, parties may act opportunistically, such as byclaiming a default and filing suit in a jurisdiction know for its eccentric rules and practices. Expectingthis, parties in turn will invest in ways to protect themselves from this opportunism, including at themargin turning away from otherwise profitable transactions. I will use the term legal risk to capturethe concept of unpredictable rules applying to a business relationship.Reduction of legal risk in turn increases the value of transactions. To understand this point, thinkof increased certainty as a form of information, for which businesses willingly would pay something.Minimizing the possibilities for opportunism also allows parties to cut back on their precautions,further adding value to potential deals. A legal system that allows people to form clear legalcommitments with predictable consequences makes it easier for people to rely on each other andthereby extends the realm of productive cooperative behavior.These benefits seem clear enough. Indeed, a substantial body of contracts law scholarship focuses11on the particular capacity of law to assist people in dealing with the future. What may not seem soobvious is that reduction in legal risk does not come without costs. There is, in other words, anoptimal level of legal risk that is greater than zero.This counterintuitive point becomes clearer if one considers what the reduction of legal riskentails. Greater clarity in legal rules means providing more precise instructions covering a greaternumber of eventualities. As these rules become more exact and all-encompassing, the odds increasethat they will lead to outcomes that parties to a transaction would like to avoid. Even if the rulespermit alternative results, as much of contract and property law does, the parties still must addressall those instances where they would prefer alternatives. Forcing business people to tailor their owntransactional relationships at some point becomes counterproductive. We commonly assume that incommerce people often prefer off-the-rack legal regimes, but these regimes work only if they do notcramp the relationships they govern with excessively detailed requirements. In commercial law wecontinually must make tradeoffs between flexibility and certainty, and business people withinreasonable limits seem to want the former. 1211See Lon Fuller & Perdue, The Reliance Interest in Contract Damages (pt. 1), 46 YALE L.J. 52 (1936); Charles J.Goetz & Robert E. Scott, Enforcing Promises: An Examination of the Basis of Contract, 89 YALE L.J. 1261 (1980).12See Charles J. Goetz & Robert E. Scott, The Limits of Expanded Choice: An Analysis of the Interactions BetweenExpress and Implied Contract Terms, 73 CALIF. L. REV. 261 (1985). See also Clayton P. Gillette, Harmony and Stasis in