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

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  • Stefan Voigt

    ()

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.

Suggested Citation

  • Stefan Voigt, 2005. "Are International Merchants Stupid? - A Natural Experiment Refutes the Legal Origin Theory," ICER Working Papers 21-2005, ICER - International Centre for Economic Research.
  • Handle: RePEc:icr:wpicer:21-2005
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    Keywords

    Legal Origins; International Arbitration; Choice of Substantive Law;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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