March 3 Symposium: Fintech, Privacy, and Developing a Federal Digital Dollar

Latest Issue: Vol. 40, Issue 3

Volume 40, Issue 2

Volume 40, Issue 1

Inefficiency of Specific Performance as a Contractual Remedy in Chinese Courts: An Empirical and Normative Analysis

By: Chen, Lei,DiMatteo, Larry A. | May 1, 2020

This article investigates the values and latent policies in the area of the availability of specific performance (SP) as a contractual remedy, which have shaped the development of Chinese law. The National People’s Congress (Legislature) and Supreme People’s Court in China have addressed the remedial structure of Chinese contract law, namely, the availability of the remedy of SP as opposed to the awarding of damages only. The law is clear that the remedies of SP and damages are ordinary remedies that a claimant is free to choose between. The question that this article confronts is whether in practice the equality of SP and damages as remedies are applied in a neutral, unbiased way by the Chinese courts. Simply put, how often do Chinese courts use SP as a remedy for contract breaches? If SP is seldom awarded, the question then becomes: what are the underlying reasons or rationales given for its underutilization? This article employs an empirical study based on data collected by surveys and follow-up interviews with hundreds of Mainland Chinese judges at various levels of the Chinese court system (related to civil and commercial disputes). Based on the statistical findings of the empirical study, a theoretical inquiry is offered to better understand the relative use or non-use of specific performance as a contractual remedy. The findings show that damages are often favored over SP; additionally, judges in the Mainland Chinese court system take a far more proactive role in the preliminary stages of trials and will actively persuade parties to claim damages over specific performance where expedient. The study also shows that, despite popular belief, the higher supervision costs associated with specific performance are not a determinative factor in the decision not to award SP.

Can Smart Contracts Enhance Firm Efficiency in Emerging Markets?

By: Fandl, Kevin J. | May 1, 2020

Blockchain technology has the potential to eliminate one of the most significant barriers to economic growth through private business transactions in developing countries—lack of trust. In a typical developed country, individuals and firms conduct transactions within an institutional environment that offers security through the enforcement of agreements. Transparent and effective courts, while imperfect to be sure, enable parties to feel secure in their transactions even if their level of trust in the other party is low. This security, in turn, facilitates transactions far afield from high-trust relationships (e.g., immediate relatives), generating transactions based upon economic value rather than party trust alone. Developing countries often lack effective or transparent institutions and are frequently plagued with corruption that weakens substantially their level of security in economic transactions. Accordingly, individuals and firms in developing countries seek contracting parties whom they trust, knowing that it is trust that will ensure enforcement more than courts or law enforcement. Transactions in this type of environment are thus limited to known entities, such as relatives or colleagues who have a trust-relationship with the individual. As a result, potentially valuable transactions are avoided due to lack of trust, which, on a macro-level, limits the economic growth potential of the entire economy. Blockchain technology and smart contracts offer a solution to the trust problem prevalent in developing country contractual transactions. First, because blockchain uses an open architecture, all transactions are publicly accessible, immutable, and verifiable by anyone. This helps to eliminate corruption and fraud from the transaction. Second, because all smart contract transactions are recorded along a blockchain and cannot be modified ex post, a permanent and publicly accessible ledger is available to shed any doubt about payments or other transactions throughout the process. And third, because blockchain systems are automated, security in the enforcement mechanism is all but guaranteed. For instance, failure to deliver goods by a set time will automatically trigger a default clause that transmits payment of liquidated damages to the injured party without the intervention of a judge or arbitrator. Numerous problems with this approach exist. For instance, access to information about technology such as blockchain, especially among firms that would most directly benefit from it (e.g., informal firms), is highly limited for the moment. Second, smart contracts are in their infancy and work primarily with clearly stipulated terms that allow for no interpretation, which are not always common in contracts between firms. In this case, eliminating a neutral arbiter from the transaction also eliminates the possibility of reviewing the circumstances of a breach or other contract mishap. And third, though lack of trust in parties may be reduced through this technology, lack of trust in online financial transactions may be exacerbated. The use of electronic finance options in developing countries is far less common than in developed countries, making implementation of a completely online transmission system particularly challenging. Despite the evident weaknesses in applying smart contracts and blockchain technology to developing country firm transactions, there is great potential for at least small-scale application in certain markets where party trust levels are particularly low. In this paper, I will review literature on the development of smart contract technology and its application in relevant contexts. I will consider the potential impact that this technology could have if properly implemented in emerging markets. And I will offer a set of suggestions for policymakers to consider in educating firms and incentivizing their use of this technology. What follows is an introduction to the area of smart contracts as a substitute or at least a complement to legal institutions. I fully expect a robust literature to develop around this topic in the near future.

Establishing Economic Independence in Haiti Through Public-Private Partnerships and Foreign Direct Investment

By: Armand, Jasmine | May 1, 2020

In 1804, the Caribbean island of Haiti became the first black republic in the world after leading the only successful slave rebellion in history to result in the formation of an independent nation. Overflowing with valuable natural resources and equipped with a strategic Caribbean location, Haiti was positioned to remain one of the most prosperous territories in the world. But the price of independence was steep, and the country failed to thrive under crushing foreign intervention. But its story does not end there. This note examines the opportunities for Haiti to establish economic independence through public-private partnerships and foreign direct investments. First, this note will recount Haiti’s complicated past, from the native Taino Indians, the commencement of African slavery, to the historic slave rebellion and the fight for independence which elicited extreme backlash from the Western world. Next, this note will take an in-depth look at Brazil’s recent anticorruption success and apply those lessons to Haiti. By firmly addressing its own corruption issue, Haiti can create an environment that is welcoming to foreign investors, paving the way for transformative public-private partnerships. This note will then address the characteristics of an effective public-private partnership (P3)—a mechanism by which a government can partner with the private sector to fund and operate key infrastructures and stimulate economic development. Haiti’s lack of essential structure makes it ripe with opportunities for P3s in virtually every industry—water, sanitation, electricity, internet, transportation, education, and more. Developing this infrastructure will not only stabilize daily life for Haiti’s citizens but it can begin to attract foreign investors. As such, this note will explain the role of foreign direct investments (FDIs) in strengthening and expanding Haiti’s economy. In addition to injecting capital into the country, FDIs can also help Haiti develop its human capital by providing jobs and skill training. This note proposes that through the development of essential infrastructure via P3s and the expansion of the economy with FDIs, Haiti can begin to establish economic independence and take its rightful place in the global economy.