More on Legal Origin

4 May 2007 at 10:06 am Peter G. Klein 4 comments

| Peter Klein |

Back to the debate over the role of legal origin in economic performance (see here and here). Stefan Voigt proposes an interesting natural experiment: In many international transactions parties can choose the contract-law regime governing their relationship by designating a particular national legal system in a mandatory arbitration clause. As expected, English common law is most frequently chosen. Surprisingly, however, Swiss (German civil law) and French civil law are chosen almost as much. Unfortunately the data do not permit an econometric analysis of legal-regime choice that controls for other possible influences. Still, the fact that civil-law codes are chosen so often raises questions about the view of LLSV (not to mention Hayek, Leoni, and many others) that common law is fundamentally superior to civil law.

Entry filed under: - Klein -, Classical Liberalism, Institutions.

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4 Comments Add your own

1. Paolo MARITI | 5 May 2007 at 5:02 am

Perhaps the nature of the transaction is crucial in determining the choice between the two law regimes . Common law may be superior to civil law in some cases but not in others. By nature of a transaction I mean such characteristics as the type of product(s) or service(s) or right(s) involved, the contract length over time, the frequency of exchange and so on.
2. Marcin Tustin | 6 May 2007 at 5:12 am

For starters, I fear that it is a fundamental mistake to conflate all civil codes with the French code. Germany is generally acknowledged as one of the great commercial jurisdictions, with a very developed system of jurisprudence. By contrast, I suspect that the choice of French civil law is purely an effect of the former French empire, and their failure to leave adequate court systems in place in many places (not that the British haven’t left any failed states behind).
3. spostrel | 9 May 2007 at 3:26 pm

Besides, a Swiss court just sounds so…neutral.
4. twofish | 12 May 2007 at 11:12 am

The other complicating factor is that many of the detailis of corporate law are jurisdiction dependent and often don’t map cleanly to legal family. For example, the German system of codetermination and two-tier boards may have a huge impact on financial performance, but none of that has to do with the fact that German is a civil law jurrisdiction.

Also Swiss Civil Law is *VERY* different from both the German Civil Law and French Civil Law. One of the goals of Switzerland was to prevent legal dominance by its larger neighbors and so it tried as much as possible to make their civil code different from Germany’s and France’s. In particular, the Swiss Civil code leaves a lot more room for judicial interpretation than either Germany or France.