Though globalization is a commercial reality, much law remains national. In order to give good guidance, all global lawyers must be trained in comparative law.
Author: Sixto Sánchez Lorenzo, Private international law professor and Member of the International Academy of Comparative Law.
The book Global Law. Anyone There? was recently presented at IE Law School. It represents the first contribution to the ONTIER GLOBAL RESEARCH project, created to capitalize on expert analyses to understand the impact of globalization on the practice of law. The book includes three parts—Globalization and Public Law by Adolfo Menéndez Menéndez, The Problems of Legal Advocacy by Bernardo Gutiérrez de la Roza Pérez, and Globalization and Private Law written by myself.
The paradox of globalization in private law
Although private relationships between companies are becoming increasingly globalized, there has been no corresponding international harmonization of private law. In other words, while markets are now global, law is still national or local. This means international private relationships are usually governed by rigid regulations on a country-by-country basis. This paradox creates legal risk within the conditions of private relationships across borders.
Comparative law, or the study of similarities and differences between the legal systems of different countries, is the only way to address this risk. For instance, when a foreign couple buy a second house in Spain, notaries and land registries are constantly perplexed and frustrated by the role that foreign law plays in managing matrimonial properties.
When foreign owners pass away, sometimes succession is also governed by foreign law and the transfer of the property to Spanish heirs must comply with the laws of another country. Such complicated situations arise almost every day in little towns along the Spanish coastline—and only a handful of specialists are able to properly resolve them.
Although private relationships between companies are becoming increasingly globalized, there has been no corresponding international harmonization of private law. This paradox creates legal risk within the conditions of private relationships across borders.
Globalization in trade law
Globalization in the field of trade law—specifically contract law—is slightly more straightforward. Although SMEs are obligated to offer their products on the international market, the globalization of commercial and consumer contracts is a lot simpler. For example, cyberspace proves very useful for international marketing while also providing consumers with direct and easy access to products and services offered by foreign firms.
While international regulations, like the United Nations Convention on Contracts for the International Sale of Goods or the ICC’s Incoterms and letters of credit do exist, contract law is not completely harmonized on a global level. The UNIDROIT Principles of International Commercial Contracts and other soft-law texts do not play a significant role in international trade practices. Consequently, most international contracts are guided by unbending national laws—particularly those of England, the United States, Switzerland, Germany, and France.
Comparative law and trade law: Contradictions and differences
Despite this lack of international harmonization, comparative law is still necessary. For example, in international trade, a comprehensive understanding of English law is needed to effectively practice and teach contract law—particularly in law schools—because it provides a completely new perspective on contract law.
That said, civil law is essentially contradictory. Traders spend little time drafting contracts due to their confidence in the codified law that is applicable in the absence of express terms. Moreover, ambiguities and gaps are interpreted or filled by judges, so general clauses are more useful.
On the contrary, apart from a few written rules, English contract law is based on common and equity law. This means contracts must be complete and precise as they are the only source permissible under the four corners rule, and any other evidence outside the contract is not allowed per the parol evidence rule.
Contracts are rather literal and implied terms are not often used. That is why Anglo-American contracts are so detailed. They include definitions about legal, economic, and technical words, detailing all obligations and conditions, and even include warranties. What’s more, any specific mitigating circumstances (hardship, force majeure, expiration, a battle of the forms, etc.) must be carefully outlined in the terms of the contract.
The English approach is the most popular method used to draft international contracts. Their completeness and precision help to minimize risk and the intervention of national law. Therefore, it is crucial that international contract law is taught according to the English approach—after all, learning to draft good contracts is more important than learning to solve contract disputes. Casting aside comparative law is not an option for the training of tomorrow’s global lawyers.
Problems in international contract law
Likewise, there is a lack of global solutions for the international activities of companies that are anchored to national systems. Conflicting national laws means companies working together often get caught up in a “race to the bottom,” looking for either the less demanding national legal system—as seen in the Delaware effect—or looking into their options using offshore companies.
Matters regarding the transfer of registered and real seats, the fusion of companies, and the creation of secondary establishments and agencies continue to be inadequately attended to under private international law. With this in mind, the absence of global commercial law for companies gives rise to joint ventures and transnational commercial blocks, but is also responsible for a lack of transparency and control in these same transnational blocks.
How comparative law helps
Consequently, many legal strategies that relate to transnational commercial blocks require a mastery of comparative law. For instance, the transfer of personal data between companies belonging to the same block across borders requires an accurate analysis of the personal data laws applicable in those countries, and demands the existence of safe harbor rules between the groups involved. In the absence of such international agreements, adapting the data transfer practices to the most comprehensive legal regime is recommended, but only feasible after a comparative analysis.
Comparative law in other fields
Comparative law studies also help in other fields of law—even those that appear to already be internationally harmonized. The UNCITRAL Model Law on International Commercial Arbitration, other international conventions, and law firms that practice across borders advance a common misconception about the “international” character of commercial arbitration.
As a matter of fact, international commercial arbitration is far from harmonized. A global lawyer must pay attention to the seat of arbitration in order to effectively identify these differences. For instance, a local lawyer advising a company interested in exporting transactions to China may not be aware of an existing agreement for an ad hoc arbitration in Shanghai. While this is commonplace in other countries, it is void according to Chinese law, and could lead to the company in question ending up before the Chinese courts.
A skilled, global lawyer who has a thoroughly studied comparative law has the skills and knowledge needed to prevent missteps and provide sound guidance in today’s internationalized legal world. At the end of the day, comparative law must be a key ingredient in the training of global lawyers.
Sixto Sánchez Lorenzo (Oviedo, 1962) is a private international law professor at the University of Granada and Member of the International Academy of Comparative Law. He has been a visiting professor at a number of European and American universities. Author of in-depth scientific works, in 2002 he published a satirical essay on universities, titled De Bestiis Universitatis (Dykinson).
Note: The views expressed by the author of this paper are completely personal and do not represent the position of any affiliated institution.