Harmonizing Commercial Laws: Critical Review

The procedures involved in harmonizing the commercial laws of multiple countries are so flawed that there is no point in pursuing the harmonization agenda. Critically discuss this statement.

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To point out that the world has not clearly evolved over the past three decades would be utterly immoral and disrespectful of the reality that is the global village. The exponential growth experienced by the modern society, mainly through technological advancement, has catapulted the world to a whole new level of doing business. Companies and people from across the globe have been accorded a level playing field oblivious to the fact that different national legal statutes governing trade activities exist. To create supreme conditions that allow smooth flow of business activities, many regional countries indulging in business together have on numerous occasions tried synchronizing their commercial laws to allow ease of transactions by commodity and service providers, a process that has not always been successful. The recent decision by Britain to divorce herself from the European Union through the much-publicized Brexit referendum and other inefficiencies and instabilities in the existing regional union blocks are nothing more than an accurate reflection of the flaws hidden in the harmonization process. This prompts the question is the harmonization agenda still that important despite the obvious procedural obstacles and failures being witnessed from various regions around the world?

The main agenda of this particular discussion is to examine whether the harmonization agenda should be discarded based on the procedural failure of the entire process. This particular discussion will begin by providing a general overview of the alignment process putting into perspective all the benefits and downsides of having the process. This discussion will then move ahead to expound on procedural methods commonly used in the commercial law harmonization, in this case, the codification process and the copying of laws from other advanced states. The concluding part will combine the above discussed segments into upholding the thesis that, regardless of the hitches the harmonization process is experiencing, there is no need of abandoning the entire agenda given the existing reality the process is inevitable to avoid by default.

The Harmonization Agenda

From an observatory point of view, international business is one of the current vehicles besides the media that has sped up the initiatives of globalization (Menon, 2013). With the emergence of the internet as the modern way of doing business, cross-border transactions have just become a normal way of life. A real life scenario is whereby a person from England is sending home goods that have been bought in France and paid for in Germany. Whether or not the law exists, such activities fueled by the internet are deemed to happen. The general significance of the law is to eliminate the anticompetitive advantages created when unsynchronized commercial laws from multiple countries come into play. According to Menon (2013), the reality of globalization through international business activities has made it necessary for companies from different regions to compete together producing a certain impact to the consumers. To create harmony and smooth operation of the modern systems, Andersen, Ashcroft and Andenes (2011) in their analysis of the harmonization theory indicate that it remains a necessary prerequisite for the commercial law harmonization process to take place. The alignment process is the only process through which the international code of doing business is developed. Sharing a similar opinion with Menon (2013) and Andersen, Ashcroft and Andenes (2011), Gopalan (2004) expounding on the need for a harmonized global commercial law system discusses the diminishing significant of individual countries in the entire process and rising place for non-state actors. The harmonization process is no longer a national agenda but rather a regional one where the majority of non-state actors play a huge role (Andenas and Andersen, 2012).

The harmonization plan remains significant due a number of numerous reasons. From a liegemans perspective, a mere mention of the word harmonization creates the notion that commercial laws from various countries have to be customized in a manner that they are uniform. This, however, is not the case. According to Catriona and Nicholas (2004, p.1037), the process is mainly upheld considering the similarities, but differences are also factored in. The need for considering the differences is solely based on the desire of promoting certain growth conditions. For instance, according to Fall (1995, p.82), a feasibility study carried out in Africa by various global financial institutions recommended the commercial law harmonization as a superb initiative to creating economic growth. By considering both similarities and differences of the alignment process, the recommendations of the feasibility study undertaken had put into prospect the dynamic creation of a competitive environment whose end goal was to invite potential investors.

As vividly exploited by Gopalan (2004, p.124), the main reason why the harmonization agenda remains significant despite the existing reality of its flaws is that diverse national commercial laws are a recipe for chaos. It may be true that the procedures of harmonizing commercial laws are the main reason for the instability of the international business law, but a scholarly preview indicates that the world without synchronized commercial laws would be characterized by extreme chaos. While Gopalan (2004, p.125) is quick to insinuate the need of diversity for optimal economic growth, his advocation for uniformity is informed by minimizing legal risks. Common knowledge dictates that without the law, the strong will thrive by cannibalizing the weak, a typical scenario in the commercial world. The rise of online retailers such as Amazon means that cross border commercial activities are booming. Putting into perspective a scenario of countries having diversified commercial laws, it becomes inevitable to avoid anti-competitive activities which eventually end up in consumers or sellers getting hurt.

Taking an example of the European region, the diversity of the contract laws before the harmonization process began presented various impediments to the growth of the region. The difference in respective contract laws among various countries made it difficult for businesses to operate in foreign territories. As laid out by analytical studies, the diversity in the contract laws in the region before the 2000s error cost investors in numerous ways. First of all, the extensive European market lacked diversity of commercial activities. The second factor is that it was expensive for people to invest in foreign nations, an aspect that slowed competition and growth in general. The diverse legal consequences presented by each country acted as a natural killer to the growth initiatives presented on the international platform. Therefore, it remains significant to acknowledge the fact that, flaws or no flaws; commercial law harmonization remains significant, more than ever in this modern era (Sanchez-Lorenzo, 2013).

According to Gopalan (2004, p.127), harmonization also presents the package of modernization and the facilitation of the international trade. As already pointed out by Menon (2013), international trade is a tool that plays a huge role in the globalization initiatives. Without the international trade which is governed by the international commercial law conceived by bringing together multiple laws from the various nations, the world who not be what it is today. Through making sure that legal statutes governing commercial activities are relatable, the regulated flow of commodities and services between states remains a promised surety (Nakagawa, 2011). The harmonization of the commercial law between the North American counterparts, especially the trio of the US, Canada, and Mexico has helped the latter improve subsequently. Mexico was a chaotic place where Transaction law governing credit use were not fully followed, a scenario that compromised the chance of the country receiving foreign lending aids from advanced partners such as the US and Canada. The newly advanced Transaction law enacted in Mexico came as a result of its harmonization of commercial activities with other members of the block. Its modernization initiatives and the ability to participate in international trade have made Mexico realize a substantial economic growth over the last two decades (Gopalan 2004).

The Procedures Involved in Harmonization

It is important to note that harmonization of commercial law is a flawed process that has, on numerous occasions prompted some critics to call for its abandonment. For instance, taking the European Union as a perfect example, its initiative to harmonize the commercial law of the region has managed to excel well in segments such as consumer protection but on the contrary, performed poorly in synchronizing the contract law. The recent removal of Britain, a major economic hub of the region, from the union serves as a severe blow to the harmonization efforts. This segment of the discussion analyzes copying and codification as examples of the procedures used in commercial law harmonization.

Copying

Copying is one of the easiest ways to introduce a law from one country to another. Copying of legislation is not a new mechanism, and it has been around as an effective way to perpetuate harmonization of commercial laws. Developing nations are very much likely to copy laws from developed countries riding on the assumptions that if it worked well for that country, it would also work back home creating a neutral playing ground for all players. A typical old example of this particular harmonization process is between New Zealand and Australia. From a human perspective, these two countries are typical brothers who share several business laws. Based on an early study carried out by Farrar (1989, p. 438), the two nations honoring the desire to create a dynamic business environment have harmonized numerous legal statutes ranging from consumer protection to intellectual property rights.

Despite the act of copying being a simple innovation towards harmonization, a sober review reveals that it has a number of shortcomings that puts in jeopardy the entire process of law synchronization. Despite working in the case of Australia and New Zealand, copying of laws from one country to another to create the much-needed harmony is not feasible when dealing with large regions. In as much the mechanisms promotes the broader goal of unity for the smooth flow of activities, it remains unlikely to happen and kills the element of diversity. Going with the natural instincts that not every legal statute is perfect; a country can copy a law that is in dire need of reforms. This means that the copied law will not be efficient as initially prospected by the authorities. Copying of laws also requires the country to indulge deeper and embrace the baggage that comes with it. Unappealing as the process sounds; it remains significant that the copying party put into consideration all angles before applying the law. Because copying kills the legislative process, it remains the main reason why as a single initiative to move closer to harmonization, it not very attractive.

The Codification Process

By analyzing this particular issue from a legal perspective, the simple definition accorded to the codified laws is that they are civil regulations that intend to bring sanity in the society. Without the international law, the community would be compared to the jungle where the only rule applicable is based on the survi...