Faculty Bibliography

Despite deep differences in their political systems, legal regimes, and economic structures, countries such as Brazil, Russia, India, and China share a recent history of rapid economic growth and capital market expansion. This chapter for the forthcoming Oxford Handbook of Corporate Law and Governance (Jeffrey N. Gordon & Wolf-Georg Ringe eds.) explores the degree and direction of transformation in emerging markets’ corporate governance in the last decades. Part I surveys the interaction between the ownership structures prevailing in emerging markets and the underlying institutional environment. Part II examines the driving forces of change by comparing the relative roles played by legislatures, regulators, courts, and alternative institutional arrangements in corporate governance reform. Part III then evaluates the degree of convergence and persistence in corporate governance in emerging markets by underscoring the need to consider the particular contextual significance of different practices.

The nineteenth century saw the standardization and rapid spread of the modern business corporation around the world. Yet those early corporations differed from their contemporary counterparts in important ways. Most obviously, they commonly deviated from the one-share-one-vote rule that is customary today, instead adopting restricted voting schemes that favored small over large shareholders. In recent years, both legal scholars and economists have sought to explain these schemes as a rough form of investor protection, shielding small shareholders from exploitation by controlling shareholders in an era when investor protection law was weak.

Business corporations in the nineteenth century often imposed limits on the voting rights of large shareholders. Economic historians have generally interpreted these voting restrictions as a contractual mechanism designed to protect small shareholders in a legal environment that afforded insufficient investor protection. This dominant account, however, fails to explain the variation in the incidence of voting restrictions across different industries and firm ownership structures, as well as their eventual disappearance from corporate charters over time. In this Article, we advance an alternative interpretation for these early voting schemes as efforts at consumer protection employed primarily by firms that were local service monopolies and collectively owned by their principal customers, none of whom wished the firm to come under the exclusive control of their competitors or of profit-maximising investors. We explore and test this proposition by analysing data on shareholder voting rights in the nineteenth century in Brazil, England, and France.

Proliferam hoje instituições de pesquisa e trabalhos acadêmicos em direito que — diferentemente do método jurídico tradicional, mas à semelhança das demais ciências sociais — objetivam investigar os efeitos das normas jurídicas sobre a realidade econômica e social. No presente artigo sustentamos que, no Brasil, a adoção de novas metodologias na produção jurídica liga-se à transformação no modo de aplicação do direito, que vem crescentemente consagrando a utilização de argumentos consequencialistas em juízo. Examinamos, então, os três vetores de caráter ideológico (o triunfo do progressismo), organizacional (a centralidade do Poder Judiciário no arranjo político) e técnico-jurídico (o reconhecimento da força normativa dos princípios) que forjaram tal transformação no contexto brasileiro. Daí decorre que a aplicação do direito cada vez mais exija não apenas a averiguação de fatos pretéritos para determinar a incidência do suporte fático de regras, mas também juízos probabilísticos sobre fatos futuros a fim de concretizar os fins jurídicos consubstanciados em princípios — propiciando, assim, o surgimento de um potencial novo campo de pesquisa para os juristas. Todavia, a persistência de uma incerteza radical sobre o funcionamento do mundo — inclusive sobre as consequências de diferentes normas jurídicas — inviabiliza o consequencialismo extremado como técnica de decisão sobre a organização social. Em razão da inabilidade das ciências sociais em ditar o funcionamento do sistema jurídico, subsistirá o papel do jurista como formulador de doutrina como não ciência. Today, a growing number of research institutions and academic works in law seek to investigate the effects of legal rules on social and economic reality, a goal that differs from that of traditional doctrinal scholarship but is similar to the aspirations of other social scientists. In this Article, we argue that, in Brazil, the adoption of new methodologies in legal scholarship relates to a transformation in the mode of legal interpretation towards greater acceptance of the use of consequentialist arguments in court. As a result, judicial interpretation increasingly requires not only the verification of past facts that are abstractly described in legal rules, but also probabilistic judgments about future facts in order to carry out the legal objectives embodied in legal principles. Nevertheless, the persistence of radical uncertainty about the workings of the world — including the factual consequences of legal rules — thwarts the use of extreme consequentialist reasoning as a decision method for social organization. In view of social sciences’ inability to dictate how the legal system is to operate, the role of legal scholars as authors of doctrine as non-science will subsist.

Latinoamérica posee uno de los más elevados niveles de criminalidad en el mundo. Más aún, los niveles de violencia en varios países de la región han escalado en décadas recientes.[1] De acuerdo con algunas estimaciones, la incidencia del homicidio en la región supera el doble del promedio mundial.[2] Tal esparcimiento de violencia ocasiona importantes pérdidas humanas, sociales y materiales. Los costos directos de la violencia incluyen pérdidas derivadas de actos criminales (pérdida de vidas, daño emocional y físico, y el resultante desincentivo para invertir) así como también los gastos en que se incurre para prevenir el crimen. Las pérdidas atribuibles a la violencia son significativas en la región. Algunos economistas estiman que los costos de la criminalidad en Latinoamérica alcanzaron el 14% del PBI en 1997, mientras que otros entienden que el PBI per cápita en la región sería hasta un 25% superior si las tasas de delincuencia fuesen similares a las de otros países.[3] En particular, los costos de las medidas dirigidas a la prevención de la violencia son considerables. Por ejemplo, en 2001, las subsidiarias de General Motors en Brasil invirtieron en seguridad casi tres dólares por cada dólar invertido en la casa matriz de la compañía en EE.UU., a pesar de su menor tamaño.[4] [1] Ver Rafael Di Tella, Sebastian Edwards & Ernesto Schargrodsky, Introduction, en THE ECONOMICS OF CRIME: LESSONS FOR AND FROM LATIN AMERICA 2 (en prensa, University of Chicago Press), disponible en http://www.nber.org/books (“The Economics of Crime”) (analizando la literatura sobre los efectos económicos del crimen en Latinoamérica). [2] Walter C. Prillaman, Crime, Democracy, and Development in Latin America, Center for Strategic and International Studies, Policy Papers on the Americas, vol. XIV, study 6 (2003), p. 3. [3] Tella et al., supra nota 1. [4] A Conta Vai para Todos Nós, REVISTA VEJA, Junio 13, 2001.

The growing recognition of the role of law in financial and economic development has generated significant disagreement about what determines the structure and content of legal institutions in the first place. Legal traditions and local politics have emerged in the literature as the most likely sources of legal development, but the relationship between these two forces remains largely unexplored. This Article investigates the determinants of legal evolution by examining the development of corporate laws in Brazil since the early nineteenth century. Contrary to standard views, foreign commercial law models were neither forcefully imposed by Portuguese colonizers nor followed automatically due to language or cultural affinity with the French legal tradition. Brazilian lawmakers deliberately picked and chose among the laws of different civil and common law jurisdictions, and substantially altered their essence, in order to best fit the interests of incumbent elites. Politics mattered from the outset, while legal family considerations were not a significant constraint to early transplant decisions. This Article also suggests that selective legal transplants and local adaptations were one of the channels through which elites periodically recreated inefficient institutions over time.

State ownership of publicly traded corporations remains pervasive around the world and has been increasing in recent years. Existing literature focuses on the implications of government ownership for corporate governance and performance at the firm level. This Article, by contrast, explores the different but equally important question of whether the presence of the state as a shareholder can impose negative externalities on the corporate law regime available to the private sector. Drawing on historical experiments with government ownership in the United States, Brazil, China, and Europe, this study shows that the conflict of interest stemming from the state’s dual role as a shareholder and regulator can influence the content of corporate laws to the detriment of outside investor protection and efficiency. It thus addresses a gap in the literature on the political economy of corporate governance by incorporating the political role of the state as shareholder as another mechanism to explain the relationship between corporate ownership structures and legal investor protection. Finally, this Article explores the promise of different institutional arrangements to constrain the impact of the state’s interests as a shareholder on the corporate governance environment, and concludes by offering several policy recommendations.

The effort to group jurisdictions around the world into a handful of legal families based on common characteristics of their laws has traditionally occupied a central role in the comparative law literature. This Article revisits the intellectual history of comparative law and surveys the evolution of legal family taxonomies from the first efforts at classification in the late-nineteenth century to the influential categorizations advanced by René David and Zweigert and Kötz in the 1960s. The early taxonomies differed from their modern counterparts in important ways. Although the nineteenth century is usually viewed as the apex of the common-civil law dichotomy, this distinction was conspicuously absent from legal family classifications until the twentieth century. A number of economic and political factors – ranging from economic liberalism to anti-colonialist sentiment – likely played a role in minimizing the salience of legal traditions in nineteenth-century legal thought.

Countries pursuing economic development confront a fundamental obstacle. Reforms that increase the size of the overall pie are blocked by powerful interests that are threatened by the growth-inducing changes. This problem is conspicuous in efforts to create effective capital markets to support economic development. Controlling owners and managers of established firms successfully oppose corporate governance reforms that would improve investor protection and promote capital market growth. In this Article, we examine the promise of regulatory dualism as a strategy to defuse the tension between future growth and the current distribution of wealth and power. Regulatory dualism seeks to mitigate political opposition to reforms by permitting the existing business elite to be governed by the old regime, while allowing other firms to be regulated by a new parallel regime that is more efficient. Regulatory dualism goes beyond similar but simpler strategies, such as grandfathering and statutory menus, by incorporating a dynantie element that is key to its effectiveness, but that requires a sophisticated approach to implementation. A paradigmatic example of regulatory dualism is offered by Brazil’s Novo Mercado (New Market), a voluntary premium segment within the Sao Paulo Stock Exchange that allows companies to commit credibly to significant protection of minority shareholders without imposing reform on companies controlled by the established elite. Yet regulatory dualism as a strategy for capital market reform is not unique to Brazil, nor is it suited just to developing countries. The long-standing U.S. approach to state-level corporate chartering is arguably better understood as incorporating a form of regulatory dualism than—as is the custom—as an example of regulatory competition, and the same can be said of EU corporate law post-Centros. The dramatic failure of Germany’s Neuer Markt illustrates some of the pitfalls of regulatory dualism. If thoughtfully deployed, however, regulatory dualism holds promise in overcoming political barriers to reform, not just of corporate governance and capital markets, but of other economic institutions as well.

Latinoamérica posee uno de los más elevados niveles de criminalidad en el mundo. Más aún, los niveles de violencia en varios países de la región han escalado en décadas recientes.[1] De acuerdo con algunas estimaciones, la incidencia del homicidio en la región supera el doble del promedio mundial.[2] Tal esparcimiento de violencia ocasiona importantes pérdidas humanas, sociales y materiales. Los costos directos de la violencia incluyen pérdidas derivadas de actos criminales (pérdida de vidas, daño emocional y físico, y el resultante desincentivo para invertir) así como también los gastos en que se incurre para prevenir el crimen. Las pérdidas atribuibles a la violencia son significativas en la región. Algunos economistas estiman que los costos de la criminalidad en Latinoamérica alcanzaron el 14% del PBI en 1997, mientras que otros entienden que el PBI per cápita en la región sería hasta un 25% superior si las tasas de delincuencia fuesen similares a las de otros países.[3] En particular, los costos de las medidas dirigidas a la prevención de la violencia son considerables. Por ejemplo, en 2001, las subsidiarias de General Motors en Brasil invirtieron en seguridad casi tres dólares por cada dólar invertido en la casa matriz de la compañía en EE.UU., a pesar de su menor tamaño.[4] [1] Ver Rafael Di Tella, Sebastian Edwards & Ernesto Schargrodsky, Introduction, en THE ECONOMICS OF CRIME: LESSONS FOR AND FROM LATIN AMERICA 2 (en prensa, University of Chicago Press), disponible en http://www.nber.org/books (“The Economics of Crime”) (analizando la literatura sobre los efectos económicos del crimen en Latinoamérica). [2] Walter C. Prillaman, Crime, Democracy, and Development in Latin America, Center for Strategic and International Studies, Policy Papers on the Americas, vol. XIV, study 6 (2003), p. 3. [3] Tella et al., supra nota 1. [4] A Conta Vai para Todos Nós, REVISTA VEJA, Junio 13, 2001.

This Article offers a novel account of the doctrines of good faith and fiduciary duties under a functional perspective that reconciles the theoretical contributions of law-and-economics scholarship with the actual application of the law. The traditional doctrinal statements on this matter assert that fiduciary duties impose high standards of behavior on the parties named fiduciaries, while the duty of good faith is highly context-specific and constantly escapes definition. Law-and-economics scholars argue that although good faith and fiduciary duties differ in the strength of the obligations imposed, a continuum exists between these different doctrines. In this view, both share the same nature as contract gap fillers that help promote efficiency by providing the parties with the terms they would have contracted for in a world of zero transaction costs and unlimited foresight. This Article adds to the conventional wisdom and demonstrates that good faith and fiduciary duties embody distinct gap-filling methods. While fiduciary duties are untailored defaults that supply the term that most parties in a certain fiduciary category would have wanted, the doctrine of good faith mandates the application of a tailored gap-filling method that fills in contractual gaps with the terms that the parties before the court would have contracted for. I show how the hidden tension between a tailored and an untailored gap-filling method sheds light on the outcome and the dissenting opinions of prominent fiduciary law cases. Finally, I argue that there is reason to believe that the existence of these different gap-filling methods represented by the doctrines of good faith and fiduciary duties is not only descriptively accurate, but also normatively desirable.

In the recent past, Brazilian courts have steadily embraced the award of punitive damages in tort cases involving non-pecuniary loss. This essay aims to analyze how the reception of punitive damages took place in Brazil by contrasting the elements of this doctrine in the Anglo-American context with the traditional legal framework for the treatment of non-pecuniary damages under Brazilian law. While scrutinizing the intricate paths of the Brazilian jurisprudential developments, the authors show concern about the “decontextualized” and anachronistic application of punitive damages in Brazil. First, the authors compare the concept of peine privée with the use of punitive damages in the common law tradition, thus providing a legal history and comparative law framework to approach the paradoxes and adjustments that the doctrine of punitive damages suffered in Brazil. Although the authors admit that possible uses of punitive civil liability may be viable under Brazilian law, they warn against the dangers of its abuse arising out of the superposition of doctrinal labels and content, which is an enduring difficulty in comparative legal studies.