The Futility of Unification and Harmonization in International ...

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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
Imagine, for example, a legal regime that held that late deliveries voided a contract of sale, nomatter what delayed the goods. This rule optimizes certainty by making the legal relations of theparties turn on an objectively knowable event, namely the moment of delivery. But many partieswould prefer a more lenient if ambiguous rule that distinguished between serious delays and deminimus tardiness, with further refinements perhaps depending on the nature of the goods, the marketin which the goods might be resold, and the preferred method of shipment. A legal regime that forcedparties individually to negotiate each of these conditions would burden persons wishing to engage inrepetitive standardized transactions, but saddling them with a rule of absolute liability for delay mightforce just such negotiations.A related explanation for the costliness of legal risk reduction relies on general observations aboutrisk preferences. Substantial evidence indicates that in general the taste for risk, like that for spicyfood, varies considerably among people, and that many persons (often those who becomeentrepreneurs) prefer a certain amount of risk. There is no reason to believe that attitudes towardlegal risk differ. Some traders will prefer undertaking a deal not knowing for sure what the legalconsequences of a lapse might be to having to confront inevitable legal consequences of failure.We thus must consider unification and harmonization as desirable to the extent it achieves adesirable reduction of legal risk, but not if it imposes such a highly developed and specific set of rulesthat a considerable number of transactions require substantial individualized negotiations.B. Improving the LawA second objective of unification and harmonization might be the substitution of better rules forthose extant in the legal systems of individual states. By “better rules,” I mean rules that improve onthe status quo with respect to some normative social goal, such as redistributive justice or enhancingeconomic welfare. Here the goals of harmonization and law reform blend. But disconcertingquestions immediately arise. What distinguishes an international pursuit of good law from a domesticone? When might international law reform succeed where domestic efforts have failed?Several possibilities exist. First, drawing from an international pool of legal talent might increasethe quantity and quality of expertise available to address a problem, and better expertise might leadto better rules. Second, systematic study of the experience of different legal systems might providelaw reformers with more and better data for drawing conclusions about which rules work best. Thesearguments have special appeal to academic specialists, who combine disinterest with expertise andtend to believe that their talents, properly applied, may improve the law.But it does not seem obvious why international projects to unify and harmonize commercial lawshould enjoy any special advantage due to the quality of expertise and data available to inform thereformers. A purely domestic law reform project also can draw on a wide range of legal talent andemploy comparative analysis to determine optimal rules. One need think only of the many efforts in5Trade Usages for International Sales, __ VA. J. INT’L L. ___ (1999).
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