Book

Legal Strategies. How Corporations Use Law to Improve Performance

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Abstract

Far from regarding the law as supreme, corporations approach law as an element of executive thought and action aimed at optimizing competitiveness. The objective of this book is to identify, explore and define corporate legal strategies that seek advantage in the opportunities revealed when the Law is perceived as a resource to be mobilized and aligned with the firm’s business and economic agendas.

Chapters (20)

Strategic Management does not ignore legal reality but the impact of legal parameters on strategy of the firm is not sufficiently formalised. In this paper, the author proposes to formalise the way in which a firm’s recourse to the law can maintain or generate a sustainable competitive advantage. The development of a core legal competency requires the recognition of a legal capability within the firm. This capability can be defined as the firm’s ability to create legal resources which includes taking into account legal elements from the external environment so as to secure and increase the value of other resources. Legal mechanisms as key factors in a firm’s environment are first highlighted. These mechanisms must be associated with or connected to the company’s resources. The role of internal legal resources is then examined along with the need to recognise legal capability. The author concludes with an examination of how legal resources and legal capability can be a source of sustainable competitive advantage.
This chapter sets out to determine the origin of legal strategies by attempting to include and/or identify the possible resources that might be mobilized in the realisation of a legal strategy. Following this line of attack, the chapter first looks at the potential sources of legal strategies by identifying the legal opportunities that arise out of the misuse of norms. The chapter then shifts its focus to responses and examines the difficulties encountered by a given legal system in fully addressing legal strategies in action.
By the conventional view, case outcomes are largely the product of courts’ application of law to facts. Even when courts do not generate outcomes in this manner, prevailing legal theory casts them as the arbiters of those outcomes. In a competing strategic view, lawyers and parties construct legal outcomes in what amounts to a contest of skill. Though the latter view better explains the process, no theory has yet been propounded as to how lawyers can replace judges as arbiters. This chapter propounds such a theory. It classifies legal strategies into three types: those that require willing acceptance by judges, those that constrain the actions of judges, and those that entirely deprive judges of control. Strategies that depend upon the persuasion of judges are explained through a conception of law in which cases and statutes are almost wholly indeterminate and strategists infuse meaning into these empty rules in the process of argumentation. That meaning derives from social norms, patterns of outcomes, local practices and understandings, informal rules of factual inference, systems imperatives, community expectations, and so-called public policies. Constraint strategies operate through case selection, record making, legal planning, or media pressure. Strategists deprive judges of control by forum shopping, by preventing cases from reaching decision, or by causing them to be decided on issues other than the merits. The theory presented explains how superior lawyering can determine outcomes, why local legal cultures exist, how resources confer advantage in litigation, and one of the means by which law evolves.
In the formalist view of legal process as inspired by deontic logic, the law consists principally of rules in which the outcomes of cases are already implicit. In this view, the written law is the most important factor to legal outcomes. In the anti-formalist versions of legal positivism, courts are able to exercise judgment and discretion; they are not seriously constrained by written law, hence, judges are the most powerful factor. In both these views however, the role of lawyers and strategies is relatively unimportant. Contrary to this perspective is the work of LoPucki and Weyrauch which asserts that it is the strategic view of the legal process that captures its reality. LoPucki and Weyrauch claim that the evidence supports the view that lawyers are able to overcome both law and judicial discretion and determine legal outcomes. Under this perspective, the legal process itself is not just a matter of formal legal rules. Rather, the legal process is concerned with the strategic use of legal rules and principles. In this chapter, the authors challenge this perspective and identify that significant differences arise under their proposed alternative approach which takes relevant social processes into consideration. This chapter identifies some of the difficulties inherent in comparing the existing methodologies or approaches to legal strategy and defends an approach based on interpretations and strategic coordination of legal resources.
In this chapter, the author examines firms’ potential to launch legal strategies. To this end, the author first attempts to identify what creates the capability within a firm to transform a legal resource or legal opportunity into a competitive legal advantage. Second, the author looks at the circumstances under which a firm decides to invest in the enhancement of this legal capability. Third, the author discusses why a firm might decide to mobilize such a capability to initiate a legal strategy.
Starting with a simple economic model of the value of civil litigation from each side’s perspective, this paper analyses a wide range of potential litigation cost strategies, settlement offers and negotiations, together with relevant applications and insights from game theory. Specific issues examined include: optimal settlement agreements, optimal settlement timing, optimal choice of lawyers; principal–agent problems aligning lawyer cost incentives; optimal client–lawyer contracts; “Conditional Fee Agreements” (CFAs); success rules and size of success premia; the exploitation and mitigation of liquidity and bankruptcy constraints; impact of collateral, “Security for Costs” and “Freezing Orders”; optimal “Part 36 Offers”; public and “without prejudice” offers; fixed rate and state-contingent offers; the role of mediation and alternative dispute resolution (ADR); the effect of litigant group size, co-ordination and class actions; rationale for confidential no-liability settlement agreements; effects of legal aid; time-value to trial and “optionality” of news; the impact of the “Law of Costs”; optimal trial cost applications and requests for “leave to appeal”. Both familiar and paradoxical new results are confirmed by the analysis.
French public opinion has long been disenchanted with its judicial system. Throughout history, popular images of Justice have usually been negative ones. In many cases, judges are shown to be partial, incapable of establishing truth or subject to the most powerful institutions. This poor image of Justice has significant consequences on the opinion of business people and on corporate judicial strategies: from prioritising out of court settlements, to deterring the opposing party from asserting its rights, and by the taking advantage of the slowness, costs and hazards of going to the public court.
In this chapter, legal strategies are discussed in the context of Alternative Dispute Resolution (ADR), primarily from a Canadian perspective. When ADR was established as an alternative to the traditional and often unsatisfactory dispute resolution regime, i.e. litigation, the element of choice was introduced causing ADR to be recognised by legal and business communities alike as a powerful tool in the formation of strategic resolutions to a client’s given dispute. Early strategies included the ability to avoid, manipulate or even block aspects of the traditional litigation process. Recently, many ADR legal strategies have become more sophisticated and in turn, appear more elusive, as strategists become aware of the regulatory and public response to previously deployed strategies. Accordingly, by reference to specific examples, the authors present a novel typology of ADR legal strategies by classifying strategies on the basis of their increasing levels of sophistication, with particular emphasis on arbitration. This typology classifies strategies as they move from opportunities implicit in the ability to choose between legal processes (cataloguing; positioning; oppositioning) to opportunities illuminated by legislative or judicial response to other strategies once implemented (flipping) to the assumption of ADR culture into corporate practice to the exclusion of traditional legal players (appropriation). The authors place ADR legal strategies into such a typology for the purposes of discussion and analysis. They conclude that strategy “captures the reality” of the ADR regime – that is, for many disputants it may not be as much about transforming conflict as it is about appropriating the process for its own objectives.
In this contribution, the author comments on a recent statutory amendment to the law of organizational liability in Canada. Specifically, he argues that, in the case of partnerships, the statutory language allows for strategic planning in the operations of the organization so as to limit the applicability of the criminal law to the organization. The author describes why this analysis is important, as it may lead to further statutory amendment. Although the language of the statute does provide an opportunity for legal strategy, the result of such strategy would be inconsistent with many areas of the law. These include the law of partnership, fiduciary law and agency law. In addition, strategic planning is antithetical to the criminal law in general. More specifically, both the common law roots of organizational criminal liability (in the corporate context) and the general Parliamentary intent in passing the statute were designed to hold organizations more accountable to the criminal law, and not allow the avoidance of accountability. Finally, the author provides comment on some potential options for legal reform that might eliminate strategic planning opportunities.
The board of directors has ultimate responsibility for strategies implemented by corporations. This chapter provides a link between the board’s risk management activities and corporate legal strategies. In this context, there are two relevant regulatory elements: the corporate governance rules that require companies to establish a risk management policy and the associated disclosure, and the specific legal requirements that the particular company risks breaching due to the nature of its operations. The theoretical part of the chapter examines the concept of strategy and explores the connections and tensions between corporate risk management policy, the expectations generated by risk management disclosures, the company’s true exposure to legal risks, and the implications for enterprise. The chapter then shifts focus to look at a number of examples that reveal the problems associated with treating the law as fixed. Examples include: the introduction of new statutory law where the company’s ability to generate and preserve useful evidence may become an issue (e.g. Corporate Manslaughter and Corporate Homicide Act 2007, UK); established statutory duties where a degree of uncertainty remains due to difficulties in statutory interpretation (e.g. aspects of United Kingdom health and safety law); and established law that becomes subject to change in a common law system (e.g. the duty of care to those injured on company premises). These examples are linked back to the opening discussion of corporate governance principles with the aim of highlighting difficulties and inconsistencies faced by a board in coping with both its governance role and its role in corporate legal strategy.
In this chapter, the author provides a case study to demonstrate how a trust can be used to alter the outcome of certain basic transactions. The particular focus of the case study is a securitization where a trust is used as part of a transaction to transform a secured borrowing into a transaction more advantageous for the corporate borrower. The essential elements of a securitization are first examined and compared with elements of the more traditional secured borrowing. This is followed by an examination from the perspective of “strategy” and explains how the use of the trust is designed to avoid the application of the legal rules that would otherwise apply to a borrowing and the consequences that would flow from such a borrowing transaction. The author then goes on to point out that, although the use of a trust may be strategic, it does not necessarily mean that negative results flow. Indeed, this particular strategy, in certain circumstances, can lead to advantages for parties other the initiator, such as creditors.
Hedge funds are increasingly being acknowledged as significant players in the financial markets area. Although hedge funds are considered as enjoying a “light” regulatory regime, they are still obliged to comply with the prescripts that govern corporate decision-making and resulting financial market processes. In order to make these rules less restrictive in nature, hedge funds are utilising legal strategies which are proving to be a very lucrative source of rule manipulation.
With regard to resource and skill theories, this chapter explores a new way of thinking about business law as it relates to Intellectual Property (IP) and patent and trademark law in particular. The author advances the concept of legal astuteness as articulated and developed by Prof. C. Bagley as a means of exploring the nexus between managerial decisions of the firm and its IP legal environment. This chapter envisages IP law as a contingent component of the strategic project that can be optimised by legal astuteness and demonstrates how IP law can be both a resource and tool of value capture.
This chapter examines the legal issues associated with offering what might appear to consumers as a brand extension of a brand owned by someone else. It identifies four possible strategies for associating with a famous brand: brand resale, compatible products, imitative substitutes and parody products. It also examines how various judicial trademark decisions in the United States of America and the European Union have addressed these tactics. The chapter concludes with strategy recommendations for marketers.
This chapter proposes that complexity of the law inspires litigation strategies. The chapter illustrates through reference to different areas and jurisdictions, but does not prove, the central contention that the legal system has become so complex that the rule of law has been damaged to the point where the system has become detached from the subjects it is meant to serve. The chapter points to the absence of a remedy by the legal system itself against these systemic flaws and consequently the legal strategies exploiting them, and propounds that litigation strategy is distinct from strategy merely embraced in litigation. The paper is a reflection on the complexity of law and presents some general examples of intra-systemic failures of the litigation process, with particular focus on those caused by delay. The paper proposes that the legal system fails both in concept and in practice in that the system is incapable of administering its own complexity and provides no remedy against itself.
In this chapter, the author discusses a number of evidential strategies and considerations that might be adopted or explored to increase the chances of success in litigation. To this end, particular focus is given to the laws applicable to digital data.
This chapter demonstrates the problem-solving nature of creative legal work, focussing on an example of how cross-border transactions in emergent economies have been satisfactorily constructed in the absence of established local law and regulation. Lawyers use contract to create private regulatory structures as surrogates for state or international controls. The chapter however, also demonstrates the negative consequences of legal creativity, which is routinely used not to replace regulation but to circumvent it. Though legal creativity can be a force for regulation, the driving force behind it – innovation for competitive advantage – is more likely overall to frustrate regulation than to promote it.
This chapter examines the difficulties in finding an appropriate response to strategies. Specifically, this chapter examines the concept of abuse by minority and the way in which a Civil law system might respond to offensive minority strategies.
Innovation is a commercially risky and legally perilous process. It is risky because large sunk costs are often required to initiate and sustain research, product development and other steps involved in the offering of the product and winning of the market. At the cusp of commercial success however, firms have to contend with uncertainty as to whether the manner in which they exploit any intellectual property (IP) rights they have, or may be acquiring, will pass the scrutiny of competition laws. In the wake of a recent Microsoft decision in the European Union and developments elsewhere, companies have had to reassess their corporate strategies, not merely at a local or regional level, but because of the nature of IP exploitation today, on a global scale as well. This paper begins with a reflection on how courts and competition authorities regard various legal strategies implemented in the exploitation of IP rights. The discussion includes an evaluation of the legitimacy of regulatory responses to these strategies as well as the regulatory schism that impacts trans-border IP strategies. The paper then considers how firms can maximise the value of their IP within the present regulatory environment by influencing the normative framework of competition policy. The limits of this influence are explored and the paper concludes with a discussion on how global trends are likely to shape the strategic landscape arising out of the interface between IP and competition law in the years ahead.
The objective of this chapter is to apply a legal strategy framework to a non-economic context. Through reference to the decision-making process utilised at the International Criminal Court for violations of the Rome Statute, this chapter underscores the importance in considering a “law and management” analysis for any research on legal practice and process and the cogent role that can be played by legal strategy in achieving transparency, objectivity and legitimacy.
... Unii autori 24 susțin că esența medierii constă în "înlesnirea negocierilor către un acord, în condiții de confidențialitate". Mediatorul încearcă să îndrepte interesul părților către natura litigiului, facilitând ajungerea la un acord avantajos mutual, acestea din urmă protejându-și relațiile de cooperare economică 25 . Acest lucru trebuie realizat prin menținerea atenției părților pe obiectul litigiului, precum și prin facilitarea interacțiunilor și comunicării dintre ele. ...
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Rezumat: Prezentul studiu analizează oportunitatea utilizării mijloacelor amiabile de soluționare a litigiilor între companiile din industria farmaceutică, domeniu complex ce prezintă multiple particularități. Complexitatea litigiilor apărute în comerțul internațional cu produse farmaceutice, valorile ridicate ale acestora, dorința părților de a continua cooperarea și avantajele mijloacelor amiabile de soluționare, determină părțile să le ia în considerare și să recurgă la ele în detrimentul instanțelor de judecată. Studiul cuprinde analiza principalelor mijloace amiabile de soluționare a litigiilor din domeniul farmaceutic, reliefând avantajele și dezavantajele utilizării acestora. Abstract: This study examines the opportunity of using alternative dispute resolution procedures among the companies in the pharmaceutical industry, complex field that displays multiple particularities. The complexity of disputes arising from international trade of pharmaceuticals, their high values, the parties' desire to maintain the business relationship as well as other advantages of alternative dispute resolution, encourages the parties to take them into consideration and to choose them tothe detriment of courts. The study contains an analysis of the major alternative dispute resolutions procedures used in the pharmaceutical industry, highlighting their advantages and disadvantages.
... n, 1985). A l'inverse, le naturalisme juridique prend en compte la rationalité économique des managers et permet d'utiliser le droit à des fins économiques. Le droit devient un levier potentiel d'actions et de ressources dans les entreprises (R. Amit et P.J.H. Shoemaker, 1993 ; R. Nelson et L.B.Nielsen, 2000 ;L. Downes, 2004 ;A. Masson et al., 2008A. Masson et al., , 2010). Notre analyse s'inscrit dans cette seconde approche. ...
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The intellectual property strategies and legal engineering : a new managerial approach of business law based on the use of tricks With regard to resource and skill theories, this work explores a new way of thinking about the interweaving of strategic management and business law as it relates to intellectual property (IP) (patents and trademark law in particular). We use the concept of legal astuteness or strategic tricks as means to explore the link between the managerial decisions of a firm and its legal environment for intellectual property. Tips or tricks ? This work considers the law of intellectual property as part of the strategic project which can be optimized by legal astuteness or tricks and shows how IP can be both a strategic resource and a tool for capturing value. We try to illustrate how legal tips contribute to strategic tricks in the case of technological innovation. This work, in conclusion, evokes many cases where the legal engineering no longer apprehends the law as a structured framework for corporate behavior, but as a source of strategic opportunities to promote the capture of rents dissociated from innovation practices themselves.
Purpose – This paper aims to study an advanced third/fourth party logistics (3/4PL) relationship in which the logistics service provider extended normal services by taking ownership of the goods during global distribution. It also aims to describe and analyze the approach to the legal rules a 3/4PL provider and its client company took in their contract, and present some remarks on the extent to which these contract solutions are legally sound. Design/methodology/approach – A cross-functional (business law and logistics) approach is applied to a single case study. The main data source is a written contract, complemented by in-depth interviews with the 3/4PL's managing director. A legal analysis is made from four perspectives of non-mandatory and mandatory commercial legal rules. Findings – Issues between the offered service, the legal function and reaction in contracts are pointed out, e.g. doubts regarding the legal risk of sales uncertainty, the ownership of goods, the product liability, and the roles as commercial agent and as freight forwarding agent. These kinds of advanced logistics services are not clearly handled, e.g. in the standard-form contracts for freight forwarding. Research limitations/implications – The research is limited to one case and to some aspects of Swedish commercial law, but put in an international perspective. It adds a legal perspective to previous studies on 3/4PL contracts, and it contributes to legal research by its analysis of how firms in real life react to law in their contracts. Practical implications – Practitioners can get inspiration from an innovative logistics service setup, but also realize what legal challenges to consider when they make their contracts. A tentative approach to aligning logistics' and lawyers' work is suggested. Originality/value – The paper combines legal and logistics research, and description/analysis of a 3/4PL case where ownership of the goods is transferred to the service provider.
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