Round Table Discussion - The Rule of 'non-law'

Stanford, California, USA | 4th April 2016

The Stanford Law Faculty received a grant from the Global Development and Poverty Fund for an interdisciplinary research project that involves the "rule of non-law" as an essential aspect of the alleviation of poverty in developing countries. The basic hypothesis of the Project is that the growth of small and medium-sized enterprises (SMEs) and a host of other economic activities, especially as they serve populations living at the base of the pyramid, cannot await the development of OECD-level legal regimes, and may be facilitated by strategies and techniques that do not depend on formal legal institutions.

In the 1990s, when the World Bank began to support "rule of law" projects, it asserted time and time again that a well-functioning judiciary is necessary for economic growth and development. A corollary assumption was that substitutes for a well-functioning judiciary entail high transaction costs. These assertions were brought into question over the past fifty years by countries that have experienced rapid economic growth and development without an effective judicial system. These economies relied instead on substitutes for well-functioning laws and legal institutions that included self-enforcing contracts, bilateral relationships, social and reputational norms, market intermediaries, and (more recently) technology-aided mechanisms. Formal legal regimes were not in fact a precondition for economic development in these cases and, indeed, appear to follow rather than precede it. At early stages of development, business actors often use poorly functioning legal regimes to their advantage until the complexity of economies reduces those advantages and obfuscates winners and losers. The need for effective legal institutions, then, seems to become more pronounced at a later stage of development.

Understanding the ways in which such non-legal techniques — what the participating faculty call the rule of non-law — can substitute for effective legal institutions, including especially effective and unbiased courts, is central to understanding and thus facilitating economic development and alleviating poverty in the world's poorest countries. The project explores the 'rule of non-law' across six domains: contracts; impact investing; corporate governance; banking; constitutional protection of creditors; comparative law and legal institutions (sequencing).

The round table discussion is jointly organised by the Freeman Spogli Institute for International Studies and the Bingham Centre for the Rule of Law (London) with the support of Jones Day. The purpose of the round table is to take stock and discuss recent findings for the project. This will be complemented by evidence drawn from other research.

This is a closed event