8. Propuesta de valor
8.2. Producto real
As shown in the previous sections, legal rules are designed to diminish transaction costs amongst parties, creating certainty for future behavior, allowing parties to plan and
77 Hence the regulatory character they assume.
78See generally, Patrick S. Atiyah, The Rise and Fall of Freedom of Contract (Clarendon Press 1979) 219-570. 79 For example, by the 1860s the caveat emptor doctrine was weakened with cases such as Bigge v. Parkinson
[1862] 7 H. & N. 955, 158 E.R. 758 and Jones v. Just [1868] L.R. 3 Q.B. 197. After these cases, caveat emptor
was only to be applied in situations where the buyer had examined the goods sold, which had to be specific, and had exercised judgment. On generic goods the seller was responsible for their merchantability. This is clearly a ‘consumer common law’, which displaces the ‘freedom of contract’ formerly available. See ibid 474-75
80 In the legislative, there were many statutes that limited freedom of contract and regulated private
relationships, such as The Trade Union Act of 1871, The Truck Act of 1818 and the modifications came with The Poor Law of 1795, The Trade Union Act of 1871, The Anti-Truck Act of 1818 and The Passengers Act of 1803, among others. For an overview of the legislation on the period that influenced freedom of contract,
see ibid .
81 On different concepts of social justice, see Hans- W. Micklitz, The many concepts of social justice in European private law (Edward Elgar 2011) 3-57.
82 Even in 19th Century England freedom of contract was viewed as the starting point and any interference
with it had to be justified. See Atiyah 386 (n 78).
83See Roger Brownsword, ‘The Theoretical Foundations of European Private Law: a time to stand and stare’
in Roger Brownsword and others (eds), The Foundations of European Private Law (Hart Publishing 2011) 161-64.
invest in activities that they know will be protected, while at the same time correcting imbalances that exists in specific markets. Since these rules need to be effective, an enforcement system has to be in place. Within modern society where states exist and claim a monopoly on the use of force, the legal enforcement system, since it is a system that if necessary can use force to achieve its ends, will have to be anchored in the power of the state, with institutions designed to facilitate enforcement. On practical terms, this means a wide array of mechanisms, from the police officers that will protect property to technological systems that may block bank accounts with a simple order from a judge.
Enforcement can be initiated by public institutions or by private parties, either before the harmful event occurs or afterwards. Generally speaking, public enforcement emphasizes deterrence while private enforcement emphasizes compensation and the fulfillment of private interests.84 While this is the classical distinction, private parties also have a role in enforcing regulatory rules, either on an individual basis or by becoming ‘private attorney generals’ to defend the interests of a collective.85 This is one of the underlying themes of this work and will be developed further in Chapter 4.
Private legal enforcement is the second step to the problem of a dispute arising within a social context. Before any rule can be enforced, it is necessary to firstly establish what the rule is in the specific dispute and to then apply it.86 For the execution of these two functions, modern western states have institutions, the judiciary, and rules shaping the development and solution of the disputes and the enforcement of the outcomes. Through adjudication, ‘the legal process of deciding a dispute’,87 courts produce two outcomes: the resolution of a dispute, which is beneficial to the parties of the dispute since it solves their problem with finality without resorting to aggression; and rule-making,
84 Christopher Hodges, ‘Public and Private Enforcement: the practical implications for policy architecture’
in Roger Brownsword and others (eds), The Foundations of European Private Law (Hart Publishing 2011).
85 William B. Rubenstein, ‘On What a "Private Attorney General" is - and Why it Matters’ (2004) 57
Vanderbilt Law Review 2129.
86 Many times when rules are clear and information asymmetry is low disputes will not arise because it will
be clear who will prevail.
which in clarifying a certain aspect of the rules governing economic activities, attributes a higher degree of certainty to future cases and is therefore socially beneficial.88
The creation and maintenance of these systems of law and the dispute resolution, as well as these enforcement institutions, have a cost attached to them and are only worthwhile as long as there is a critical mass of people and transactions in which the aggregate costs of self-dealing would be higher than having them mediated and solved through the alternative legal channel. In simpler terms, the social benefits of the existence of laws and courts have to be higher than the costs of maintaining them.
One character of these institutions is that they have been formed by human beings who possess their own incentives to act in a certain way. Judges have to be well- remunerated and immune from political influence to be able to exercise their duty of deciding disputes according to the Rule of Law. Otherwise corrupt pressures might be too strong to be resisted and the essence of the Rule of Law would itself be compromised, transforming the court into just another political forum and destroying any economic benefits that the legal system might attribute to private relationships. This theme will be further developed in Chapter VI.
4.
Concluding Remarks
This chapter tried to establish the relationship between states, law and dispute resolution, assessing it with a view to the economic utility of these institutions.
The state is a creature of political organization that has arisen out of long-lasting disputes amongst different human groups. Within the state the legal system serves economic purposes by giving rights to people and allowing them to engage in binding commitments to exchange resources, as well as correcting market failures when they appear and where they operate to undermine the economic health of a given market.
When there are disagreements regarding the rights or the commitments that people have towards each other or towards the state, an available forum is necessary to
88 Robert D. Cooter and Daniel L. Rubinfeld, ‘Economic Analysis of Legal Disputes and Their Resolution’
effectively solve these disputes; this is a role that has been normally performed by the state through its court system. The role of the state is to function as a source of trust; the state becomes the guarantor that the counterparty in a transaction will behave according to the rules, either imposed by the state or agreed upon between the parties. This allows for people to plan and make investments based only on the guarantee that rules will govern their relationships with other parties. This is especially important in the context of regulated markets such as financial markets, as the identities of the counterparties to a transaction are often unknown.
As different states have different sources legitimating their power, each legal system is often closed within itself,89 operating through its own internal logic and having few mechanisms to communicate with other states. Therefore, in the transnational context, legal mechanisms have to be built as bridges between different legal systems in order that transnational transactions can have the economic benefits that the legal system can provide.
The chapters in Part III will analyze the institutional framework of dispute resolution systems, identify the characteristics that they should have in order to perform this role in society and discuss the different designs that can be used to achieve such an aim; finally, it will survey the possible regimes that can be used for transnational dispute resolution.
89 On the autopoietic nature of legal systems, see Gunther Teubner, Law as an Autopoietic System (Blackwell