Intra-Firm Trade Law - Contract-Enforcement & Dispute Resolution in Transnational Corporations

in: S. Lundan (Ed.), Transnational Corporations and Transnational Governance, London: Palgrave Macmillan (2014) 211-246

ZenTra Working Paper in Transnational Studies No. 01/2012

32 Pages Posted: 14 Oct 2012 Last revised: 16 Nov 2016

Gralf-Peter Calliess

University of Bremen - Faculty of Law

Stephan Freiherr von Harder

University of Bremen - Faculty of Law

Date Written: October 13, 2012

Abstract

While intra-firm trade accounts for at least one third of world exports, we know very little about the institutions which are employed to resolve intra-firm trade conflicts. According to Oliver Williamson, courts are not accessible and conflicts resulting from intra-firm trade are resolved by directives based on the authority of ownership instead (law of forbearance). Williamson's description of the law of forbearance, however, depicts an ideal typical form of a firm, which is characterised by low incentive intensity and high administrative costs. Yet, in order to improve on these attributes, large transnational enterprises changed their organisational structure in the past decades. Nowadays, large-scale enterprises usually have a decentralised structure and use intra-firm pricing and incentive systems. Against this backdrop, Williamson's description of the contract law regime of intra-firm trade appears all too general.

This paper addresses the question of how contract enforcement in transnational corporations is institutionally organized on the basis of preliminary results of expert interviews conducted with officials from transnational corporations. In a first step we illustrate that conflicts originating in intra-firm transactions are basically of the same type and nature than conflicts arising out of market transactions. We argue that the settlement of these disputes is of relevance both for legal (e.g. corporate and tax law) and economic reasons (e.g. coordination, control and motivation functions of profit centers). In a second step we analyze the governance mechanisms which are employed by transnational corporations to resolve intra-firm trade conflicts.

Keywords: transaction cost economics, intra-firm trade, private ordering, alternative dispute resolution, mediation, arbitration, transnational law

JEL Classification: D23, D29, D74, K12, K40, L22, M52

Suggested Citation

Calliess, Gralf-Peter and Freiherr von Harder, Stephan, Intra-Firm Trade Law - Contract-Enforcement & Dispute Resolution in Transnational Corporations (October 13, 2012). in: S. Lundan (Ed.), Transnational Corporations and Transnational Governance, London: Palgrave Macmillan (2014) 211-246; ZenTra Working Paper in Transnational Studies No. 01/2012. Available at SSRN: https://ssrn.com/abstract=2161314 or http://dx.doi.org/10.2139/ssrn.2161314

Gralf-Peter Calliess (Contact Author)

University of Bremen - Faculty of Law ( email )

Universitaet Bremen
Fachbereich Rechtswissenschaft
D - 28353 Bremen
Germany
+49-421-218-66207 (Phone)
+49-421-218-66212 (Fax)

HOME PAGE: http://www.handelsrecht.uni-bremen.de/

Stephan Freiherr von Harder

University of Bremen - Faculty of Law ( email )

PO Box 330440
Bremen, 28334
Germany

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