Fordham Journal of Corporate & Financial Law Fordham Journal of Corporate & Financial Law
Volume 14 Issue 1 Article 3
2008
Approaching Comparative Company Law Approaching Comparative Company Law
David C. Donald
Follow this and additional works at: https://ir.lawnet.fordham.edu/jc7
Part of the Banking and Finance Law Commons, and the Business Organizations Law Commons
Recommended Citation Recommended Citation
David C. Donald,
Approaching Comparative Company Law
, 14 Fordham J. Corp. & Fin. L. 83 (2008).
Available at: https://ir.lawnet.fordham.edu/jc7/vol14/iss1/3
This Article is brought to you for free and open access by FLASH: The Fordham Law Archive of Scholarship and
History. It has been accepted for inclusion in Fordham Journal of Corporate & Financial Law by an authorized editor
of FLASH: The Fordham Law Archive of Scholarship and History. For more information, please contact
tmelnick@law.fordham.edu.
83
APPROACHING COMPARATIVE COMPANY LAW
David C. Donald
∗
ABSTRACT
This Article identifies several common errors that occur in
comparative law analyses, offers guidelines to help avoid such errors,
and provides a framework for studying the company laws of three major
jurisdictions. Part I discusses some of the problems that can arise in
comparative law and offers a few points of caution that can be useful for
practical, theoretical and legislative comparative law. Part II examines
well-known examples of comparative analysis gone astray in order to
demonstrate the utility of heeding the outlined points of caution. Part III
provides an example of using functional definitions to demarcate the
topic “company law,” offering an “effects” test to determine whether a
given provision of law should be considered as functionally part of the
rules that govern the core characteristics of companies. The relevant
company law statutes and related topical laws of Germany, the United
Kingdom and the United States are at the center of this analysis. On the
basis of this definition, Part IV analyzes the system of legal functions
that comprise “company law” in the United States and the European
Union. Part IV selects as the predominant factor for consideration the
jurisdictions, sub-jurisdictions and rule-making entities that have legis-
lative or rule-making competence in the relevant territorial unit, analyzes
the extent of their power, presents the type of law (rules) they enact
(issue) and discusses the concrete manner in which the laws and rules of
the jurisdictions and sub-jurisdictions can legally interact. Part V
examines the way in which these jurisdictions interact on the temporal
axis of history and assesses their actual influence on each other which,
in the relevant jurisdictions, currently takes the form of regulatory com-
petition and legislative harmonization. The approach outlined in this
Article borrows much from system theory and the analysis is detailed
without losing track of the overall jurisdictional framework in the
countries studied.
∗
Professor, Chinese University of Hong Kong faculty of law. I would like to thank
Theodor Baums and Andreas Cahn for their comments on an earlier draft of this Article.
84 FORDHAM JOURNAL OF CORPORATE & Vol. XIV
FINANCIAL LAW
I.
INTRODUCTION
The disciplines of “comparative law” in general and “comparative
company law” in particular are natural companions to the globalization
of social, political and economic activity. The course of economic and
political developments in recent decades has thus increased the amount
of comparative law taking place at every level, whether it be that of fact-
oriented practitioners, result-seeking legislators and development agen-
cies, or theory-focused academics. Each of these factions has its own
interests, priorities and goals. Nevertheless, there are certain approach
coordinates that mark the path for all their comparative studies. This
Article outlines these approach coordinates for the comparison of the
laws that govern public companies in the United States, the United
Kingdom and Germany.
Just as the merchants who engaged in the earliest forms of
international trade developed a commercial law that was trans-
jurisdictional,
1
today’s merchants and their counsel are often at the
forefront of comparative legal activity. When a transaction spans inter-
national borders, the persons responsible for structuring it must, by
necessity, become comparatists. As Professor Klaus J. Hopt has ob-
served, lawyers and legal counsel “are the real experts in both conflict of
company laws and of foreign company laws. . . . Working out the best
company and tax law structures for international mergers, and forming
and doing legal work for groups and tax haven operations, is a high,
creative art.”
2
Legal counsel’s consistent choice of a particular structure
or law can gradually crystallize into a “best practice” which, indepen-
dently or under the auspices of professional associations
3
, can lead to
many jurisdictions adopting that practice and converging toward a
1. See JOHN HENRY MERRYMAN & ROGELIO PÉREZ-PERDOMO, THE CIVIL LAW 13
(3d
ed. 2007).
2. Klaus J. Hopt, Comparative Company Law, in THE OXFORD HANDBOOK OF
COMPARATIVE LAW 1161, 1169 (Mathias Reimann & Reinhard Zimmermann eds.,
2006) [hereinafter H
ANDBOOK].
3. Such “associations” can range from the International Chamber of Commerce
and its international commercial terms for international sales transactions, to the
International Bar Association and its numerous practice guides, to the voluntarily
adopted master framework agreements created by organizations like the International
Swaps and Derivatives Association, Inc. See International Chamber of Commerce
Homepage, http://www.iccwbo.org (last visited Sept. 19, 2008); International Bar
Association Homepage, http://www.ibanet.org (last visited Sept. 19, 2008).
2008 APPROACHING COMPARATIVE COMPANY LAW 85
perceived optimal rule. In this way, the practical choices of lawyers
eventually become recognized legal norms. Comparative scholars like
Professor Philip R. Wood, whose numerous books focus on the practical
details of the financial laws and instruments in many countries,
4
give
internationally active lawyers the information they need to approach
transnational problems. Professor Wood specifically focuses on
providing detailed and accurate information about disparate legal sys-
tems, rather than reflecting on the policy goals of legislation or seeking
an overall coherence of a given system’s solution to a specific problem.
5
Comparative activity with great practical impact also occurs in
venues quite removed from commercial transactions. The unpreceden-
ted level of international cooperation transpiring on the regulatory side
of globalization creates systematic comparative studies that have drama-
tically accelerated legal understanding and convergence. Any project to
harmonize national laws or to draft a convention to govern an area of
law among nations will likely compare laws to find the best (or at least
the most mutually acceptable) solution. Institutions such as the
European Union,
6
the United Nations,
7
the International Institute for the
4. See, e.g., PHILIP R. WOOD, COMPARATIVE FINANCIAL LAW (1995) [hereinafter
W
OOD, FINANCIAL LAW]; PHILIP R. WOOD, COMPARATIVE LAW OF SECURITY INTERESTS
AND TITLE FINANCE (2d ed. 2007) [hereinafter WOOD, COMPARATIVE SECURITY
INTERESTS].
5. The method used, as is appropriate for the goal of the comparative study,
centers around the practitioner’s desire to use the law: “[t]here are three broad steps in
this type of measurement: (1) the legal rules; (2) the weighting of the importance of the
legal rules in practice; and (3) actual implementation or compliance by the jurisdiction
concerned.” W
OOD, COMPARATIVE SECURITY INTERESTS, supra note 4, at 16.
6. See PAUL CRAIG & GRÁINNE DE BÚRCA, EU LAW: TEXT, CASES, AND
MATERIALS 1189-95 (3d ed. 2008). As it developed from an initial six to its current 27
member states over a 50 year period, the European Economic Community (then
European Union) harmonized a core of minimum standards in many areas, followed this
up with mutual recognition of member state law while restricting harmonization to
health and safety, and introduced a parallel movement of European standardization.
This combination of legislative strategies allowed mandatory harmonization to pave an
initial uniformity, making home rule and voluntary convergence acceptable, which in
turn led to unproblematic harmonization so that the laws of the separate member states,
particularly the late entries, which became ever more tightly matched to each other.
This was particularly relevant for late entries, who were forced to adopt packages of
introductory laws. See id.
7. In particular, the Commission on International Trade Law (UNICTRAL) and
the Office of Legal Affairs, Codification Division’s Codification of International Law.
See generally United Nations International Law, http://www.un.org/law (last visited
86 FORDHAM JOURNAL OF CORPORATE & Vol. XIV
FINANCIAL LAW
Unification of Private Law (UNIDROIT)
8
and the Hague Conference on
Private International Law
9
engage in comparative law on a grand scale
in order to produce their directives, regulations and conventions. This
activity falls under the rubric of “legislative comparative law” in the
descriptive schema offered by Professor Konrad Zweigert and Professor
Hein Kötz, and has historically been one of comparative law’s most
solid domains.
10
If legislative efforts seek to achieve a specific result –
such as economic prosperity, stable government or investor protection
11
– then a second level problem arises: the legislator must correctly
ascertain a causal connection between the chosen law or legal system on
the one hand, and the desired social or economic effect on the other.
The latter, second-level type of project falls squarely within the mission
of institutions such as the World Bank, which seeks to “help developing
countries and their people . . . [by] building the climate for investment,
jobs and sustainable growth . . . .”
12
In addition to the studies prepared
by their experts, much of the academic comparative law produced in
universities also supports the activities of legislators and development
agencies.
The increasingly high stakes of correctly understanding foreign law
– both for the success of commercial transactions and for the comparing,
choosing and implementing of laws carried out by international
organizations – have naturally drawn an increasing amount of academic
Sept. 19, 2008).
8. UNIDROIT “is an independent intergovernmental Organisation . . . [whose]
purpose is to study needs and methods for modernising, harmonising and co-ordinating
private and in particular commercial law as between States and groups of States.”
UNIDROIT: An Overview, http://www.unidroit.org/dynasite.cfm?dsmid=84219 (last
visited Sept. 19, 2008).
9. “Since 1893, the Hague Conference on Private International Law, a melting pot
of different legal traditions, develops and services Conventions which respond to global
needs . . . .” HCCH Homepage, http://www.hcch.net/index_en.php (last visited Sept. 19,
2008).
10. See KONRAD ZWEIGERT & HEIN KOTZ, INTRODUCTION TO COMPARATIVE LAW
51 (Tony Weir trans., Oxford Univ. Press 3d rev. ed. 1998) (1977). See also Charles
Donahue, Comparative Law Before the Code Napoléon, in H
ANDBOOK, supra note 2, at
3 (“Modern comparative lawyers . . . tend to date the foundation of their discipline to
the nineteenth century and to the promulgation of the great European codes.”).
11. See ZWEIGERT & KÖTZ, supra note 10, at 11 (explaining how “applied”
comparative law can be used to solve specific legal policy problems).
12. The World Bank: About Us, http://go.worldbank.org/DM4A38OWJ0 (last
visited Sept. 19, 2008).