A Strategic Interpretation of Legal Transplants

Abstract:     
In this paper we provide a strategic explanation for the spontaneous convergence of legal rules but which nevertheless, in many instances, falls short of unification across jurisdictions. We identify a free-riding problem and discuss its implications for legal integration. We argue that countries hesitate to adapt their laws to those of another jurisdiction because they hope to free ride on efforts towards convergence. Unification (by transplant) and harmonization (by convention) of legal rules emerge as an obvious corrective intervention to a coordination failure, thus solving the free-riding problem. However, it could also be a serious policy mistake either because convergence is absent due to very high costs of importing and adjustment or due to agency costs.

Keywords: Legal transplant, game theory, convergence, harmonization, unification, agency costs

JEL Classification: C7, K0

Accepted Paper Series