Developing Commercial Law In Transition Economies

November 1995 Three things are essential to implement decentralized legal frameworks in any setting: reasonable laws, adequate institutions, and market-oriented incentives. The problem in transition economies is that all three must to a large extent be built from scratch. The question to ask at any point in time is not whether there is rule of law, but whether the country is moving in the right direction along all three dimensions. Implementing decentralized legal frameworks requires reasonable laws, adequate institutions, and market-oriented incentives. All three must exist together. Laws or institutions without each other or without a supportive framework of incentives are likely to lie dormant, while incentives by themselves will be frustrated without a reasonable legal framework and institutions to support and enforce them. Developing any of these elements is a major challenge, and progress along all three takes time. In transition economies, not only must new laws be drafted (a daunting task yet perhaps the easiest of the three) but they must be accompanied by the growth of supportive institutions (including formal judicial institutions and the watchdog institutions that we almost take for granted in advanced market economies). And they must be accompanied by economic reforms -- whether privatization (particularly with outside owners) or banking reforms -- that separate actors from the state and reinforce market-based incentives. Gray and Hendley use two case studies -- Hungarian bankruptcy law and Russian company law -- to illustrate the interaction of these three elements in practice. These cases illustrate their general view that Central Europe is somewhat further along on all three dimensions than Russia. Russia is not advanced in the development of either laws or institutions, among other reasons because it lacks Hungary's pre-war legacy of a legal tradition (Russia having never been a society or an economy ruled fundamentally by law) and because it launched economic reform much later. As for incentives, in both countries relevant actors exert weaker demand for proper implementation of the laws on the books -- weaker demand that there be stable rules of the game -- than one would expect in more mature market economies. The cases belie any simplistic notion that the rule of law can be mechanically dictated from above. Top-down reform of bankruptcy law in Hungary appears to have been at least marginally successful in changing expectations and behavior, partly because it stimulated the growth of new supporting institutions. It might have been more successful if other areas of government policy had created more complementary incentives, particularly in banks. Top-down reform of company law in Russia has had little impact to date on either institutional development or firm behavior. This paper -- a product of the Transition Economics Division, Policy Research Department -- was prepared for the John M. Olin Lecture Series at Harvard University.

Poland is rapidly developing a reasonable legal framework to support its transition to a market economy. Yet legal practice lags behind. Precedent and expertise must be built through training and experience.

In developing countries, because of economic development pressures that deeply pervade all aspects of enterprise, international business transactions give rise to crucial issues that practitioners cannot afford to ignore. In this new book Rumu Sarkar, whose Development Law and International Finance has quickly taken its place as the preeminent theoretical analysis of the new legal discipline of development law, at last gives busy lawyers engaged in international business as practical a text as they could desire. Transnational Business Law shows that the decisions and strategies of lawyers involved in the hectic daily routines of creating and executing cross-border transactions can serve the best interests not only of their businesses but of economic development as well. In essence, this is a classic international business transactions handbook, with the overarching dimension of development law added. It offers detailed principles for structuring transactions, negotiating the underlying finance and related documents, and navigating dispute resolution mechanisms. It provides annotated forms, negotiating exercises, hypothetical examples, and actual case summaries and analyses. It presents economic development issues as they arise in such areas of activity as the following: cross-border financing of goods and services, technology transfers, and intellectual capital; structuring cross-border transactions through private equity, corporate debt, and multilateral development bank financing; managing commercial risks; negotiating debt work-outs for non-performing loans; mitigating non-commercial risks through credit enhancement strategies such as obtaining political risk insurance; and contracting for arbitration or other dispute resolution methods. Important factors such as 'long-arm' U.S. law, international legal regulation of business conduct, and relevant underlying local law and local legal traditions are all brought to bear on the issues when appropriate. Transnational Business Law will be especially useful to practitioners in developing countries whose legal decisions in relation to cross-border transactions often involve critical economic and political ramifications. Through her detailed exploration of how international transactions unfold within the context of economic development, Professor Sarkar greatly enhances the growth of a commitment among the international business community to achieve mutually constructive ways to conduct business between developed and developing countries.

This interdisciplinary volume offers a timely reflection on law, development and economics through empirical and comparative perspectives on contemporary Myanmar. The book explores the business that takes place in times of major political change through law and development initiatives and foreign investment. The expert contributors to this volume identify the ways in which law reform creates new markets, embodies hopes of social transformation and is animated by economic gain. This book is an invitation to think carefully and critically about the intersection between law, development and economics in times of political transition. The chapters speak to a range of common issues - land rights, access to finance, economic development, the role of law including its potential and its limits, and the intersection between local actors, globalised ideas and the international community. This interdisciplinary book is for students, scholars and practitioners of law and development, Asian studies, political science and international relations.

This book expands on law-related research by examining the legal aspects of sustainability with a focus on the impact on business strategies. It recognizes that firms must adopt an integrated approach to law and sustainability, considering multiple disciplines and goals, and serve as a forum for bringing together scholarship from fields such as environmental law, energy, government regulation and intellectual property. Firms increasingly have an interest in transitioning to sustainable business practices that take into consideration the fact that global resources are finite and will be increasingly scarce. They acknowledge that current actions have social, economic and environmental consequences and employ options to ensure that future generations have the same options and benefits. Examples of sustainable practices increasingly employed by firms include the institutionalization of “whole life-cycle” analysis in marketing and product design, utilization of sustainable inputs and energy sources, tracking and reporting sustainability performance, attempting the valuation of future generation prosperity and happiness as a discounting mechanism, and integrating sustainability into firm culture and management goals. It is clear that law and regulation have an extremely important role to play in the transition to more sustainable business practices. Broadly stated, law can provide structure for firms responding to forces that pull transition by enabling sustainability leadership and competitive advantage through funding models, intellectual property rights and collaboration means. Additionally, law can work to push transition by compelling firms to act through regulatory structures, accounting and governance mechanisms.

This important and incisive new book examines contractual enforcement mechanisms in Central and South-Eastern Europe and the Commonwealth of Independent States. The volume is an outcome of the cooperation between the European Bank for Reconstruction and Development and the British Institute of International and Comparative Law. The book highlights that after more than 13 years of transition, contract enforcement has not reached a stage where it provides the required basis for economic development. It requires sustained attention from national governments, regional bodies, and the international community. The book concludes by examining the appropriate way forward. The enforcement of contractual rights and obligations is a condition for economic development, and this book should appeal to a wide readership ranging from academics and practitioners to policy makers and the judiciary in both developed and developing economies.