Are International Merchants Stupid? - a Natural Experiment Refutes the Legal Origin Theory

22 Pages Posted: 10 Oct 2005

See all articles by Stefan Voigt

Stefan Voigt

University of Hamburg - Institute of Law & Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 2005

Abstract

In economics, there is currently an important discussion on the role of legal origins or legal families. Some economists claim that legal origins play a crucial role until today. Usually, they distinguish between Common Law, French, Scandinavian and German legal origin. When these legal origins are compared, countries belonging to the Common Law tradition regularly come out best (with regard to many different dimensions) and countries belonging to the French legal origin worst.

International arbitration provides an ideal natural experiment to test this view empirically: in international trade, the contracting parties are free to choose the substantive law that suits their interests best. If the literature just cited was correct, we would expect that rational traders would structure their interactions according to some substantive law based on the Common Law tradition such as British or US American law. Although exact statistics are not readily available, the evidence from cases that end up with international arbitration courts (such as the International Court of Arbitration run by the International Chamber of Commerce in Paris) clearly demonstrates that this is not the case.

Keywords: Legal Origins, International Arbitration, Choice of Substantive Law

JEL Classification: F23, K12, P48

Suggested Citation

Voigt, Stefan, Are International Merchants Stupid? - a Natural Experiment Refutes the Legal Origin Theory (September 2005). Available at SSRN: https://ssrn.com/abstract=813624 or http://dx.doi.org/10.2139/ssrn.813624

Stefan Voigt (Contact Author)

University of Hamburg - Institute of Law & Economics ( email )

Johnsallee 35
Hamburg, 20148
Germany
+49-40-428385782 (Phone)
+49-40-428386794 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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