Comparison of Law, Legal Transplants and International 'Legal Fashion' in German and Japanese Corporate Law

Abstract

Comparison of law has always shaped or at least influenced legislation to varying degrees either directly or indirectly, and it continues to do so all the more in today’s arena of globalization and universal availability of comparative legal information. Where foreign concepts are integrated into national laws, one speaks of legal transplants. There is a heated discussion as to whether a reception of foreign legal institutions is actually feasible in a sensible way.
Today’s national regulators seem obliged to navigate a kind of regulatory Scylla and Charybdis. On the one hand, they have to conform to the expectations of the global investment community (as to what constitute internationally perceived “good” corporate governance standards along the lines of
Anglo-American practices) if they want to attract capital in the international financial markets. They have to comply, in other words, with the latest international “legal fashion”. At the same time, however, they face the task of designing an optimal regulatory architecture suited for their national markets with their path-dependent institutional frameworks.
This dual obligation may cause frictions if the global standards and the given institutional set-up derive from different regulatory and organizational traditions. In such a case it is far from certain whether conforming to the international expectations actually improves corporate governance in the given jurisdiction. Rather, the regulator may feel forced to adopt regulatory standards, i.e. the prevailing “legal fashion”, which are unnecessary or even unsuitable when viewed from the national perspective. As all regulation comes with a price tag of compliance costs and a crowding out of potentially better alternative solutions, the outcome may be suboptimal.

Note: This contribution is published in the Max Planck Private Law Research Paper Series with the generous and exceptional permission of the Journal of Japanese Law.

Keywords: Comparison of Law, Legal Transplants, “Legal Fashion”, From Corporate Law to Corporate Governance, Corporate Governance Codes, Independent Directors, Regulatory Tools