Why transplants rarely work –

Why transplants rarely work – why convergence is insufficient in

commercial law – methodical changes of paradigm in the

harmonisation of commercial law

Commercial Law – where from and where to?

Conference, Law School – CCLS, Queen Mary College, University of London

London, 7 and 8 February 2008

Herbert Kronke, Secretary-General UNIDROITwww.unidroit.org

Legal Transplants I

Successful: - transplantation through imperialism (Rome; France to sub-Saharan

Africa; England to colonies)

- invited transplantation and transplantation based on shared

values/ ideology (France to other European and Latin American countries, Quebec, Louisiana; Swiss Civil Code to Turkey; German BGB to Greece, Japan, China)

Doubtful/failure: - invited or solicited by scholars, donor countries, business interests, etc

(René David-Ethiopia; USA and others - Central- Asia; USA-Rwanda; special case Vietnam)

Legal Transplants II

• Motive power for adoption of foreign law- Imposition by conqueror or settler- Urgent need for off-the-shelf set of laws governing

investment and commercial transactions guides decision to borrow elsewhere

• Sustainability of imported/imposed laws- Depending on circumstances at receiving end (Turkey

(+); Ethiopia (-))

• The Quest for autonomy, and the difficulty to let go– Example: draft OHADA Uniform Act on Contracts

Legal Transplants III

• Special issue: transplantation of specific legal institutions

- German law of groups of companies to Portugal, Brazil,

Croatia - trust to pure civil-law

countries

• Hypothetical transplants with high likelihood of failure: reasons

- Article 9 UCC (umbrella "security interest" based on publicity) to Germany

- German system of secured transactions (retention of title and

fiduciary transfer of ownership without disclosure) to any other system

Convergence I

Three groups of comparatists

- Legal systems differ fundamentally and are unique

- Praesumtio similitudinis as point of departure; global economic activities, migration, etc. are pushing legal systems towards convergence in many areas; task of comparative law and transnational commercial law is helping convergence come about

- Neither uniqueness nor inexorable move towards convergence: comparative law’s responsibility to provide tools that enable us to fathom the degree of and the reasons for similarity, diversity, convergence (and maybe, to make recommendations in favour or against maintaining diversity, embarking on harmonisation efforts)

Convergence II• Extreme convergenists

- unlikely that elements of diversity will resist pressure from economic

realities

- planned and intergovermentally structured harmonisation [= treaties] as well as lex mercatoria [= harmonisation not based

on sovereignty] sometimes contribute to, sometimes only reflect existing convergence – consequently, restatements needed

• Realistic assessment- neither uniqueness nor inexorable convergence; spontaneous and

autonomous convergence too slow to respond to the needs of commerce and finance, in particular where legal infrastructure underdevelopped

- Two conditions for high degree of convergence: (1) supra- national starting point for legal reasoning; (2) administered by skillful supra-national judicial system

- except in federations or Regional Economic Integration Organisations neither condition satisfied

Need for innovative methods in planned and targeted harmonisation of commercial law

• The "commercial approach" to harmonisation of commercial law- comparative studies & economic impact assessment studies

(example: 2001 Cape Town Convention and Protocols)- objectives and participants in process- conduct of negotiations (example: default & insolvency)

• The "functional approach" - example: Article 7 draft Convention on Substantive Rules regarding Intermediated Securities- results

• Why transplant impossible – why convergence no solution – why planned intervention required and promising