Lawyers, Law Firms, and the Stabilization of Transnational Business

Flood, John, Sosa, Fabian | January 1, 2008

Cross-border business transactions are complex. But in this globalized age, as commentators such as Ohmae have argued, business ought to be conducted simply despite national boundaries. Yet there are features of business that run counter to globalization and maintain a resolutely local character. A crucial aspect of this is the nature of law. No transaction can be carried out without a normative structure to provide a framework for the actors to operate within. Obligations, rights, warranties, covenants, and so on have to be specified and allocated. Even economists agree that the rule of law is essential for the conduct of business. States, however, jealously guard their legal systems and resist incursions in their jurisdictions by others. No matter the level of “hyperlegality” states adopt, they will always be incapable of providing all the necessary support structures for cross-border business. Our thesis is that although states’ legal systems are a basic necessary condition, they are no longer a sufficient condition for transnational business and enterprise, because a large part of states’ work has been transferred to and commandeered by other institutions–most notably, the internationally-operating law firms.