In-House Counsel

Beyond the Law of the Jungle

By Hanna

After a brief sabbatical, Legalliteracy is back; and what better day to return than today — May 1st — Law Day.  While some people hiss and boo at lawyers and lawsuits and otherwise poke fun at a profession they think takes itself too seriously, let’s not forget that a mature legal system and rule of law does have some real business advantages.  Advantages that should be celebrated.

An enforceable system of contracts and reliable property rights provides the stability necessary to support solid economic growth and prosperity.  The process of accountability creates trust and confidence.  It is precisely that trust and confidence that lets a business deal be a calculated risk instead of a gamble.

Indeed, the consequences of a developing rule of law and the business risk it creates was driven home last week by Home Depot’s top legal beagle, Jack A. VanWoerkom, who shared his views about the risk of doing business in fast growing foreign markets.  His views were informed by his international experiences at Home Depot as well as the chief legal positions he has previously held at three other global companies.

Here are a few of his candid observations: 

Sao Paolo is a very dangerous place to do business, if you are in Brazil, you operate with a body guard.  [One of my former employer’s competitors in Brazil] paid bribes, the other [competitor] didn’t pay taxes.  It was widely accepted and considered a competitive advantage

[Indian] courts are overwhelmed.  I have great concerns about the enforceability of contracts.  [Extreme poverty and separation of people into social and economic groups causes] people to either manipulate or buy justice.

China has only had property ownership for about 15 years, [its economy and business infrastructure is] very immature.

I did not buy a business in Russia because the level of corruption was so great it just didn’t seem worth it.

Doing business in the world’s fastest growing markets sounds very good; but when things go bad they can go bad very quickly simply because there is no effective recourse when contracts are breached.  Unfortunately, there is no foolproof way to contract around the law of the jungle. 

Full post as published by Legal Literacy on May 01, 2008 (boomark / email).