1.1 Introduction
The Law and Development movement, launched in the 1960s by the US Agency for International Development, the Ford Foundation, and other private American donors, placed law at the centre of the development process. Although this movement soon faltered, largely due to its emphasis on encouraging countries to transplant laws without requiring them to adapt these to their contexts, its failure underscored the importance of compatibility of the borrowed laws.Footnote 1 A review of the literature relating to the movement reveals that laws that were not compatible with the context of the adopting country sometimes did not ‘take at all’: in many cases these laws though ‘promoted by the reformers, remained on the books but were ignored in action’ while in other cases these laws ‘were captured by local elites and put to uses different from those the reformers intended’.Footnote 2 The evidence for the importance of compatibility that emerged in relation to this movement was so overwhelming that by the time the movement had ended there was ‘explicit recognition’, even at the World Bank, ‘of the failures of transplants and of top-down methods, which […] led to a rejection of one-size-fits-all approach and […] placed a renewed stress on the need for context specific project development based on consultation of all “stakeholders”’.Footnote 3
Notwithstanding the recognition that compatibility was, and is, important for law reform to deliver the results for which it is undertaken, there has been little clarity, particularly in comparative law literature, as to how this compatibility may be generated or how it impacts the subsequent success of the borrowed law. This chapter argues that compatibility between the adopted law and the context is generated in the course of adoption of the borrowed law and affects not only the extent to which the law is understood, utilised, and applied in the adopting country but also the pace at which it integrates into the adopting country’s pre-existing legal system. To study the connection between the adoption and implementation of borrowed laws, particularly economic laws, this chapter proposes an analytical framework that integrates elements from comparative law literature, the political science literatures of policy diffusion and transfer, and new institutional economics (NIE) literature. Policy diffusion and transfer literatures indicate that countries have diverse motivations for adopting laws which also impact the mechanisms through which they adopt these laws; comparative law literature suggests that the context of the adopting country, through the actors that engage in the adoption process, plays a critical role in shaping the content of the adopted law and thereby lays the foundations of its subsequent performance in the adopting country; and new institutional economics literature elaborates the connection between the institutions through which laws are adopted on their subsequent implementation.Footnote 4
This chapter is, therefore, organised as follows: Section 1.2 discusses comparative law, diffusion and transfer, and new institutional economics literatures as the three pillars of this analysis and highlights their respective contribution to the proposed framework; Section 1.3 outlines the attributes of successful transplants as derived from the different literatures and explores whether compatibility alone is sufficient to generate these attributes; Section 1.4 presents the integrated analytical framework and explains how it may be configured for analysing the competition experience of individual South Asian countries; Section 1.5 outlines the framework in action.
1.2 The Theoretical Pillars
Comparative law literature, the literature on policy diffusion and transfer, and new institutional economics offer insights into different aspects of the adoption of laws. This section examines each of these literatures to glean factors that may be used in designing a framework for analysing the links between the adoption and implementation of borrowed laws.
1.2.1 Legal Transplant Literature: The Clue is in the Context
Legal transplant literature as a branch of comparative law literature recognises that legal rules or systems of law move from one country or people to another,Footnote 5 but warns against the borrowing of laws that are not compatible with the context of the adopting countries or spirit of the peoples for whom they are intended. The emphasis on context notwithstanding, there is little consensus amongst scholars as to what is included in context, why it matters, or how compatibility with context may be generated.
Montesquieu and Kahn-Freund, speaking nearly two centuries apart, view context as the institutions, political law, and social and political context of a country,Footnote 6 whilst Mattei suggests that context also includes the pre-existing legal system of the adopting country.Footnote 7 Amongst scholars, writing specifically about competition law transplants, Shahein is of the view that context comprises the ‘specific political, economic and social environment’ of countries,Footnote 8 Trebilcock and Iacobucci suggest that ‘particularities of history, initial conditions, institutional traditions, and political economy considerations’ of countries are also relevant,Footnote 9 and Gal argues that the context encompasses ‘almost all issues which relate to the relationship between law and society’.Footnote 10
Watson includes actors within the meaning of context arguing that ‘legislators, jurists, or judges’ allow ‘social economic, and political factors to impinge on legal development’ and suggests that ‘this culture has to be understood and injected into the equation before one can begin to erect a theory of law and society’.Footnote 11 Sacco expands upon the role of actors arguing that the meaning of the transplant in the adopting country, not only in implementing but also in deliberating and enacting it, is likely to be influenced by all factors that may be capable of influencing the views of an interpreter, including the implicit patterns along which the adopting society is organised.Footnote 12 Legrand and Chen-Wishart endorse the role of actors as interpreters; however, they appear to focus on the interpretation that takes place at the implementation rather than the adoption stage.Footnote 13
For Montesquieu, context is significant because in his view laws, whether they form the government or support it, are related to the nature and principle of the government of the country in which they are made.Footnote 14 Similarly for Kahn-Freund, legal rules ‘which organize constitutional, legislative, administrative or judicial institutions and procedures … are … ”organic”’ and ‘any attempt to use a pattern of law outside the environment of its origin continues to entail the risk of rejection’.Footnote 15 Legrand considers context significant because it informs the meaning of the law. He argues that whilst it may be possible to transplant the words of a law, it is not possible to transfer its original meaning because the ‘epistemological assumptions [of interpreters of the law]’ in the adopting country ‘are … historically and culturally conditioned’ to the adopting country rather than to the originating country, and, therefore, it is likely that as they interpret the words of the adopted legislation they will not provide them with the meanings ascribed to them in the originating country.Footnote 16 Teubner, whilst agreeing with Legrand to the extent that the meaning of laws is rooted in their originating contexts, argues that this means that transplants may be ‘legal irritants’ in the host country and force the law to develop in unexpected directions.Footnote 17
Watson is an outlier in this discussion to the extent that he argues that ‘a foreign rule can be successfully integrated into a very different system … which is constructed on very different principles from that of the donor’Footnote 18 because ‘usually legal rules are not peculiarly devised for the particular society in which they now operate’.Footnote 19 However, a closer reading of his work suggests that he recognises that the law of one country may diverge from that of another due to the impact of ‘the Spirit of a People’ in that country.Footnote 20 Ewald explains this apparent dichotomy in Watson’s writings by distinguishing between ‘Strong Watson’, who takes the rigid position that there is no ‘interesting relationship to be discovered between law and society’, and ‘Weak Watson’, who argues that compatibility between the legal transplant and the context of the borrowing country must be examined with ‘cautious awareness of [its]… complexity’.Footnote 21 Grossfeld also attempts to square Watson’s thesis with that of Montesquieu and Kahn-Freund by arguing that whilst the ‘recurrence of legal forms’ endorses ‘Watson’s observation that the native element in the law of any country is relatively slight’, it is necessary to draw a distinction between legal rules, which may be transplanted relatively easily, and institutions that are more attuned to the context of their country of origin and therefore cautions that importing institutions ‘without such evaluation [of compatibility with the context of the adopting country] is “un grand hazard”’.Footnote 22
Context is important for competition scholars for its role in operationalising competition transplants. Trebilcock and Iacobucci emphasise that context is important for designing appropriate competition authorities because ‘no single institutional model of a competition agency will be optimal for all countries … given particularities of history, initial conditions, institutional traditions, and political economy considerations’.Footnote 23 Discussing the Israeli competition law experience, Gal argues that ‘the receiving state’s knowledge, commonality with the state of origin’ are essential pre-conditions for it to be receptive to the legal transplant,Footnote 24 and Shahein, speaking of competition transplants generally, argues that competition laws, like most other laws, are embedded in a specific political, economic, and social environment and must be appropriately ‘contextualised’ to operate in the adopting country.Footnote 25
Interestingly, however, although legal transplant scholars accept the importance of compatibility with context, they do not fully examine how this necessary compatibility may be generated. Legrand, for instance, recognises that historical and cultural factors affect how a borrowed law is interpreted in the host country. However, he focuses on the divergence in the meanings given to the law in the originating and host country rather than on strategies for generating compatibility at the adoption stage, and thereby bridging this gap.Footnote 26 Teubner too emphasises the importance of a positive relationship between the transplant and the legal system of the host country but does not offer any suggestions for creating conditions for harmonising this interaction.Footnote 27 Similarly, Chen-Wishart stops short of considering whether the subsequent development of a borrowed law may be correlated with the extent of compatibility created in the course of adoption, even though she makes the important point that more interesting than the issue of whether or not legal transplants are possible is the question of ‘how the transplant develops in the recipient legal system’.Footnote 28
Amongst comparative law scholars, Sacco, Mattei, and Berkowitz et al. are unusual in their attention to the adoption stage. Sacco, for instance, recognises the possibility of actors at the adoption stage considering and generating compatibility in selecting and interpreting a transplant.Footnote 29 Mattei adds to the understanding of the adoption stage by highlighting the ‘efficiency’ of a legal doctrine as a possible reason for a country adopting it; however, he does not explore the relationship, if any, between efficiency and compatibility with the machinery of justice, which he claims is necesary for the transplant to succeed.Footnote 30 Berkowitz et al. emphasise the process through which laws are introduced, arguing that transplants imposed either directly or through colonisation are less likely to be compatible with the host country; however, they do not recommend an alternate processes of adoption.Footnote 31
Legal transplant literature also provides some insight into what may be considered a successful legal transplant. Whilst Kahn-Freund alludes to success in negative terms as the adopted law ‘not being rejected’,Footnote 32 Watson refers to it more directly as the legal transplant continuing to grow in and becoming a part of the borrowing country, and clarifies that simply ascribing a different meaning to the transplant should not be confused with its rejection in the adopting country.Footnote 33 Mattei sees success as the compatibility of the transplant with the ‘machinery of justice’ in the adopting country, without which he believes the ‘impact’ of the transplant may be lost.Footnote 34 Teubner is of the view that the success of a legal transplant lies in its ability to interact productively with other elements in the legal organism in which it is transplanted,Footnote 35 whilst Berkowitz et al. argue that the performance of a transplant may be judged by the extent to which actors in the adopting country are able to understand, apply, and utilise it.Footnote 36
Competition law scholars add to this discussion by approaching the success of transplanted competition laws as a process rather than an end goal which, once achieved, may be forgotten. So, for instance, Trebilcock and Iacobucci consider performance of competition authorities to be an indicator of the success of the transplanted law under which these authorities are established, and suggest that the quality of performance is directly linked with the compatibility and suitability of the transplant for the adopting country;Footnote 37 for Shahein, the success of a legal transplant depends on the extent to which the adopting country is able to appropriately ‘contextualise’ the transplant for its purposes;Footnote 38 whilst Gal, in her analysis of the Israeli competition legislation, recognises that the benchmarks of success may vary from the adoption to the implementation stages due to the country’s different goals at each stage. She observes that while in the course of transplantation, actors engaging with the Israeli competition law were motivated by the desire to meet the country’s international political objectives, in implementing the law their focus had shifted to having their decisions understood and accepted within the country.Footnote 39
1.2.2 Policy Diffusion and Transfer: Bringing a Method to the Spread
Comparative law and diffusion and transfer scholars have long called for synergies between the two.Footnote 40 Policy diffusion and transfer are defined as processes through which knowledge about policies, administrative arrangements, institutions, and ideas in one political system are used in the development of policies, administrative arrangements, institutions, and ideas in another political system. Diffusion and transfer are deemed to be ‘a consequence of interdependence’,Footnote 41 and are increasingly recognised for providing an important explanation for the spread of a policy or a practice.Footnote 42 However, diffusion and transfer must not be considered synonymous with convergence. Although diffusion and transfer sometimes results in convergence, it is not necessary that it should, and even when convergence does occur, it is relative rather than absolute.Footnote 43
The commonalities between diffusion and transfer notwithstanding, there are important differences between them. Diffusion, also referred to as ‘pattern finding’,Footnote 44 refers to the often wave-like spread of ideas and policies across geographically clustered countries that are distinguished by variegated socio-economic, political, and cultural characteristics.Footnote 45 On the other hand, transfer, also described as ‘process tracing’Footnote 46 refers to the intentional import of policies or programs by a country for implementation in its own context.Footnote 47 Therefore, while diffusion is a disembodied process which takes place independently of actors or agents,Footnote 48 the element of intentionality in transfer integrates the motivations, epistemological leanings, and institutional constraintsFootnote 49 of agents at work in the transfer process.Footnote 50 Finally, while diffusion is studied through quantitative, statistical methods of analysis, transfer may be analysed qualitatively, taking into account the ‘preconditions for transfer in the recipient state’, the ‘kind of actors pushing … the transfer process’ and so on.
Diffusion and transfer literatures bolster the idea of context so important to legal transplant literature by suggesting that the outcome of diffusion and transfer may vary according to the setting in which it takes place, which includes the initial conditions of the diffusion or transfer as well as intervening factors that may affect its operation and force.Footnote 51 More particularly, policy transfer literature argues that all institutional constraints of rules, norms, expectations, and traditions that limit free play of individual will and calculation, also structure the actions and values of agents transferring policies through these institutions, and thereby not only impact the outcomes of transfer, but are also themselves transformed in the process.Footnote 52 The literature also indicates that as a policy develops and moves through the cycle of transfer, new actors and institutions become involved, that may shape the outcome according to their unique knowledge, interests, and preferences regarding transfer strategies.Footnote 53 Integrating elements from diffusion and transfer literatures to a study of transplanted laws enables an examination of the motivations for the spread of legal rules from one country to another and of the institutions that shape this spread, and thereby offers a deeper insight into the structure and development of legal systems.Footnote 54
Mechanisms for the diffusion and transfer of policies are categorised as ‘voluntary or coercive’ or ‘horizontal or vertical’. A country may either voluntarily adopt policies due to dissatisfaction with an existing policy, policy failure, elections, the need to reduce uncertainty, or to legitimize previous decisionsFootnote 55 or it may be coerced into adopting a policy due to express or implied pressure from foreign governments or multi-lateral agencies.Footnote 56 Coercive transfer is more likely to take place in developing countries reliant on multi-lateral agencies for financial and other assistance.Footnote 57 Voluntary and coercive diffusion and transfer overlap with the categories of horizontal and vertical diffusion and transfer: diffusion or transfer is considered horizontal when states learn about different policies from other states, compete with each other, or adopt a policy that neighbouring states may have adopted, while diffusion and transfer is considered vertical when states receive incentives for adopting the policy innovation from politically or economically more powerful bodies.Footnote 58
The literature describes several different mechanisms through which diffusion and transfer takes place, however, the terminology used to identify these mechanisms is often inconsistent. For instance, there is considerable overlap between coercion and contractualisation. Coercion refers to diffusion or transfer of policies through international organizations or countries; it is deemed to be direct when a policy is transferred from one government to another or through supra-national institutionsFootnote 59 and indirect when it is brought about by externalities such as advancements in technology and economic pressures.Footnote 60 Contractualisation on the other hand refers to the diffusion and transfer of policies in response to a bargain between states in relation to a legal rule; when their negotiations include trade-offs linking two or more issue areas; and when the results are formalised by an international treaty (or any other form of bilateral agreement).Footnote 61
Similarly, the term emulation whether absolute or partial, is used interchangeably with learning,Footnote 62 mimicry, socialization, copying,Footnote 63 lesson-drawing, cost-saving, and problem-solving,Footnote 64 while also being independently defined as the mechanism ‘whereby knowledge of policy innovations is borrowed from other entities’Footnote 65 for its normative and social characteristics rather than its objective content or consequences.Footnote 66 Emulation is therefore distinct from socialisation and learning which refer to the range of mechanisms whereby adopting countries learn from the laws and experience of others in order to develop laws suitable for their domestic contexts. Learning for this purpose, includes ‘rational or comprehensive’ learning in which policymakers aggregate statistical information about the experience of the original country,Footnote 67 and ‘bounded’ learning where policymakers rely on cognitive shortcuts in arriving at their conclusions regarding the attractiveness or appropriateness of a policy even if doing so may introduce errors in the process.Footnote 68 To complicate matters further, learning is sometimes referred to as lesson drawing as well as copying, emulation,Footnote 69 hybridization, and synthesisFootnote 70 all of which represent different degrees of learning.Footnote 71 Learning is described as socialisation in situations where a state ‘clearly frames the cognitive dimension of the appropriate rule … as well as the internalization of international norms and policies and their domestic counterparts’Footnote 72 to understand the appropriateness of a foreign rule and to ensure that the rule in question resonates with established social norms and fits with the collective identity of the adopting country.Footnote 73
In adapting the typology of diffusion and transfer mechanisms for the spread of laws, it is important that only such departures are made from the existing terminology as are absolutely necessary for rationalising and clarifying terminology.Footnote 74 To this end these mechanisms may be consolidated in four broad categories: (a) coercion, which has the same meaning as given to it in diffusion and transfer literatures but includes contractualisation on the basis that contracting parties (especially if one of these is a developing country) do not have equal bargaining power and their contractual agreements do not always result in balanced outcomes;Footnote 75 (b) emulation, which is redefined to refer only to mechanisms through which a country adopts a law for its normative and legitimation value without an attempt to understand or apply the principles contained in the legislation; (c) regulatory competition, also referred to as ‘international economic competition’ or simply ‘competition’ refers to a situation in which a country adopts a law or policy because it is engaged in a ‘race to the bottom’ (ie when law-makers adopt the lowest regulatory standards of competing countries to avoid capital flight) or ‘race to the top’ (ie when law-makers focus on reputational rather than economic competition) to attract or retain economic resources, with another country;Footnote 76 and (d) socialisation which includes all mechanisms that a country employs to persuade itself of the appropriateness of the law for its domestic context and to the internalising of the principles, beliefs, and norms of a foreign community (Table 1.1).
| New Categories | Mechanisms included |
|---|---|
| Coercion | Coercion; Contractualisation* |
| Emulation | Copying; Mimicry |
| Regulatory Competition | Competition; International Economic Competition |
| Socialization | Learning; Lesson-drawing (excluding emulation); Hybridization, Synthesis |
*This categorisation may not be appropriate if the contracting countries are of equal bargaining power.
A closer reading of the diffusion and transfer mechanisms indicates that countries are often motivated to adopt foreign policies or ideas in their search for legitimacy. Weyland, for instance, hints at the need to ‘look good before global public opinion’ and concern for ‘international legitimacy’ as important factors in this regard,Footnote 77 while Marsh and Sharman suggest that ‘emulation may be a deliberate ploy by governments to acquire legitimacy’, particularly in the case of developing countries that often seek to ‘legitimize themselves by mimicking developed states’.Footnote 78
Giraldi further clarifies that a country’s desire for international legitimacy stems from its need to secure domestic legitimacy because states ‘are sensitive to the reaction of the international community as it can affect their domestic legitimation and power’.Footnote 79 Linos, like Giraldi, affirms the significance of domestic legitimacy. She argues that polices and ideas diffused or transferred through ‘democratic institutions’ have the potential of conferring ‘critical domestic legitimacy’ on the diffused policy or idea.Footnote 80 More specifically she is of the view that when laws spread through democracy, elected leaders have an interest in maintaining their popularity to win re-election and, therefore, are likely to pay greater attention to the preferences of ordinary citizens and domestic interest groups rather than blindly following the dictates of their foreign colleagues or international organizations.Footnote 81 Democratic institutions are therefore more likely to generate legitimacy than if the laws had been adopted through non-democratic institutions. In her view, therefore, domestic legitimacy while partly attributable to international legitimacy is equally shaped by the domestic institutions engaging in the process of diffusion or transfer.
The discussion of legitimacy in the context of policies and ideas may be easily extended to the spread of laws. It may be argued that countries adopt foreign laws, as they adopt foreign policies or ideas, not only due to a need to gain or enhance their international legitimacy but also to bolster their domestic legitimacy. It may further be argued that as in the case of diffused or transferred policies or ideas, domestic legitimacy while linked to and, at least partly derived from international legitimacy, may also be created by the engagement of appropriate institutions in the adopting country. Legitimacy, so defined, is both a motivation for and an outcome of the domestically executed process of adoption; however, the literature does not explore these aspects of legitimacy in any depth.
1.2.3 New Institutional Economics: Bridging the Gap between Process and Outcome
Both legal transplant and diffusion and transfer literatures leave certain critical questions unanswered: legal transplant literature does not fully explain the processes and institutions through which compatibility with context may be generated or enhanced, while diffusion and transfer literatures do not link the mechanisms of the spread of laws with the outcomes beyond the primary outcome of the law being introduced in a new context. New institutional economics, with its focus on institutions and outcomes not only offers insight into these questions but also affords a fuller understanding of the notion of the ‘success’ of adopted economic laws and policies.
Although the term institutions feature extensively in the discussion of context in legal transplant literature and of the process of diffusion and transfer in diffusion and transfer literature neither literature defines institutions nor explains the precise role they play in the spread or adoption of laws. In placing institutions at the heart of economic development and defining ‘institutions’ broadly to include both formal and informal rules that organize social, legal, and political aspects of a society as well as ‘any form of constraint that human beings devise to shape human interaction’ whether formal or informal, created, or evolved over time new institutional economics offers important insight into the role of institutions in generating successful economic law reform.Footnote 82
In particular this literature argues that the compatibility of new institutions with the context of the country in which they operate is critical to their ability to yield high economic growth. According to North, institutions may be compatible with context, if they evolve organically from the context of the country through an evolutionary process rather than being introduced by ‘a discontinuous change’ brought about by revolution or conquest or adopted due to any other external pressure.Footnote 83 Rodrik endorses the importance of compatibility for high-performing economic institutions, however, he recognises the possibility of institutions being introduced in a country other than through organic processes and argues that such institutions may be made compatible by being adapted for the context of the adopting country through bottom-up, participatory institutions.Footnote 84 He argues that economic institutions are a form of ‘technology’ which may either be ‘general purpose … codified and … readily available on world markets’, or ‘highly specific to local conditions’ and containing ‘a high degree of tacitness’ due to the fact that ‘much of the knowledge that is required [about the technology] is in fact not written down …’.Footnote 85 He further argues that when the desired ‘technology’ is general purpose, a country may simply import a blueprint by following a ‘largely top-down’ approach which relies ‘on expertise on the part of technocrats and foreign advisors’, while if the ‘technology’ is highly specific to context, a country must resort to ‘bottom-up’ mechanisms for eliciting and aggregating local information in devising the technology most appropriate for the country.Footnote 86 Most importantly for present purposes, Rodrik clarifies that the categories of general purpose and specific technology are ‘only caricatures’, and that in actual fact, even ‘an imported blueprint requires domestic expertise for successful implementation’ and ‘when local conditions differ greatly, it would be unwise to deny the possible relevance of institutional examples from elsewhere’.Footnote 87
Acemoglu and Robinson strike a somewhat different note by arguing that economic institutions need to be ‘inclusive’ to yield economic growth. They distinguish between inclusive economic institutions that ‘encourage participation by the great mass of people in economic activities’, and extractive institutions that are ‘designed to extract income and wealth from one subset of society to benefit a different subset’.Footnote 88 In an argument reminiscent of Rodrik, they state that an economic institution is inclusive or extractive depending on the political institutions through which it is created: extractive political institutions allow the concentration of power in the hands of a narrow elite and place few constraints on the exercise of this power, and thereby allow the all-powerful economic elite to structure economic institutions to extract resources from the rest of society. In contrast, inclusive political institutions distribute power more broadly in society and make it harder for any one group to usurp power. This in turn generates inclusive economic institutions that distribute resources more equitably.Footnote 89 Reading Acemoglu and Robinson in conjunction with Rodrik, it may be argued that bottom-up-participatory institutions are also inclusive, and are, therefore, critical for creating compatible and inclusive economic institutions that may yield economic growth in the adopting country.
In elaborating the role of political institutions in generating high yielding economic institutions, new institutional economics plugs the important gap between the process through which countries acquire economic institutions and the outcomes these economic institutions may deliver in the adopting country. More importantly, North’s rather broad definition of institutions, and by extension, of economic institutions, may be deemed to include legislation while Rodrik’s discussion on economic institutions as a form of ‘technology’ which developing countries may acquire from their more developed counterparts and adapt for their contexts, suggests that economic institutions, like legal transplants, are transferrable and indeed are often codified in the form of statutes. Given these overlaps it may be argued that the attributes of successful legal transplants are also relevant for successful economic institutions and the benchmarks for assessing the success of legal transplants may be equally utilised for measuring the success of economic institutions included in these legal transplants.
1.3 Constructing the Integrated Framework
This section integrates elements from the theoretical pillars discussed in the preceding section and maps them on to the life cycle of an adopted legislation to construct a framework for evaluating the impact of the adoption process on the subsequent implementation of the adopted legislation.
1.3.1 The Life Cycle of a Statute
The life of a statute, bounded on one side by the moment in which a country first conceives the idea of adopting a new legislation and on the other when the adopted legislation is repealed, goes through at least three distinct phases: in the first phase, the adopting country considers and deliberates the parameters of the proposed statute, in the second phase, the country formally introduces the statute in its national legal corpus, and in the third phase, the country proceeds with the interpretation and enforcement of the adopted statute. The first two phases comprise the adoption stage while the third phase belongs to the implementation stage. It is important to emphasise here that this delineation of phases and stages is heuristic only and does not detract from the complexity of continuing diffusion, transfer, and adoption of legal principles in interpreting the adopted legislation in the implementation stage (Figure 1.1).
Figure 1.1. Adoption and implementation stages of adopted statutes
In each of the phases comprising the adoption and the implementation stages, different institutions and actors acting through the constraints of these institutions interact with and shape the legislation proposed to be adopted. The institutions that a country engages in the adoption process depend, at least in part, on the country’s motivation for adopting a law and the mechanism it engages in this regard. In turn, the nature of these adopting institutions that is whether they are bottom-up, participatory, and inclusive or top-down and exclusive, determines the extent to which the proposed legislation is adapted to the context of the adopting country and later, accepted as valid and authoritative in that country. The adoption process also shapes the content of the adopted legislation including the provisions for the structure, mandate, and composition of the enforcement authorities that it proposes to establish. In doing so, the institutions engaging in the adoption process lay the groundwork for the operation of these authorities at the implementation stage.
1.3.2 Adoption and Implementation: A Stepwise Enquiry of the Literature
The literatures explored in Section 1.2 provide the building blocks for a sequential, stepwise analysis of the adoption stage (comprising the deliberation and enactment phases) and the implementation stage. Each step of this analysis includes institutions relevant to that stage. In doing so it automatically includes actors operating through the agency conferred upon by institutions and subject to their constraints.
1.3.2.1 Step 1: Setting the Stage
The first step of the analysis relates to the adoption stage which includes the deliberation and the enactment phases. It combines the concept of context from legal transplant literature and pre-conditions of transfer particularly from policy transfer literature to establish the institutional backdrop against which the transfer or adoption of law takes place. This step, therefore, involves an examination of key legal and political institutions pre-existing in the context of the adopting country and engaged by it in the process of adoption. To understand whether these institutions are participatory, bottom-up and inclusive or top-down and exclusive, this analysis evalutes their operation, experiential depth, and authority in the context in which they operate with reference to their structure and historical evolution.
1.3.2.2 Step 2: Tracing the Process
The next step which also relates to the adoption stage utilises the idea of policy transfer as process-tracing to track the stages of adoption as these unfold in the context of the adopting country, starting from an evaluation of the country’s motivations for considering the idea of adoption of a particular legislation through to when the legislation is formally introduced in the pre-exisitng legal system of the country. This step also entails identifying the country’s preferred diffusion and transfer mechanisms as well as an assessment of the range, nature, and depth of the institutions engaged in each of the deliberation and enactment phases of the adoption stage.Footnote 90 The aim of this step is to gauge the adopted legislation’s compatibility with the context of the adopting country (as emphasised in the legal transplant and new institutional economic literatures) as well as its legitimacy in that context (as highlighted in the diffusion and transfer literature) and thereby to estimate the potential for its successful implementation (discussed more fully in Step 3).
1.3.2.3 Step 3: Evaluating the Outcome
The third and final step proceeds from the underlying premise highlighted in the Law and Development movement that an adopted law may be considered successful if if is transformed into a ‘law in action’ rather than remaining merely a ‘law in the books’ and if local elites do not capture it for for their own ends.Footnote 91 The benchmarks of success identified in the literatures discussed in Section 1.2 suggest that to assess the success of an adopted legislation its independent performance as well as its interaction with the country’s pre-existing legal system must be examined.Footnote 92 To evaluate the performance of the adopted legislation and, therefore of the enforcement authorities that it establishes, this step draws upon legal transplant literature to assess the extent to which the adopted law continues to grow in, and is understood, utilised, and applied in the adopting country;Footnote 93 whilst to understand the interaction between the adopted legislation with elements pre-existing in the legal organism of the adopting country, this step examines the extent to which the interaction facilitates or obstructs the performance of the adopted legislation.
To this end, this step requires an analysis of the decisions of the enforcement authorities which interpret and apply the provisions of the adopted legislation, as well as the decisions of general authorities pre-existing in the country’s legal system which render their opinion on the constitutive, substantive, or procedural aspects of the adopted legislation (Table 1.2).
1.3.3 The Framework of Analysis
The adoption and implementation stages as described above when integrated into a framework reveal factors generated in the adoption process that impact its subsequent implementation. (Figure 1.2).
Figure 1.2. The integrated analytical framework
In the adoption stage the deliberation and enactment phases may also be independently examined to yield distinct insights. Evaluation of the deliberation phase helps identify the country’s preferred diffusion or transfer strategy as it unfolds in the pre-existing institutional landscape of the adopting country, its motivation for adopting the legislation, and the range and nature of institutions engaged in the phase. In the enactment phase the adopting country engages new institutions, which may lead to a shift in its diffusion and transfer strategy. An analysis of this phase, therefore, entails a fresh evaluation of the diffusion and transfer strategy employed by the country and the nature and range of institutions directly engaged in the enactment and helps understand the extent and qualtiy of compatibility and legitimacy generated at the adoption stage. In considering institutions in both these phases it is important to consider the branches of state to which these institutions relate; the quality and extent of their interaction with each other, and their ability (or lack thereof) to aggregate local knowledge and adapt the adopted legislation in light of this knowledge. Cumulatively, this phase-wise analysis of the adoption stage is expected to yield a more nuanced understanding of the institutions and strategies that have shaped the provisions of the adopted legislation particularly those relating to the structure, mandate, and composition of the competition authorities the legislation purports to establish.
The implementation stage comprises the interpretation and enforcement phases and is, therefore, analytically distinct from, though connected to the two phases of the adoption stage. The analysis of the implementation stage entails an evaluation of the independent performance of the adopted legislation by an assessment of the decisions of the enforcement authorities and of the interaction of the adopted legislation with the country’s pre-existing legal system, as reflected in the decisions of the general courts pre-existing in the country in respect of the challenges to the orders of these authorities. This analysls offers insight into the extent to which the adopted legislation is ‘understood, utilised and applied’ in the adopting country and has thereby become a law in action rather than simply remaining a law in the books. It also helps understand the extent to and pace at which the adopted legislation has integrated into the context of the adopting country.
While some overlap in successive stages and phases of this analytical framework is inevitable, it has the distinct and important advantage of being segmented and modular and, therefore, capable of being re-configured and adapted for countries located at different points in the adoption-enactment-implementation continuum. In practice this means that regardless of whether the country is only deliberating upon the legislation it proposes to adopt, has formally adopted the legislation, or has commenced the interpretation and enforcement of its provisions, this framework may be employed to understand the extent of its compatibility and legitimacy in the adopting country and to predict the implementation trajectory of the adopted legislation. An important insight derived from arranging the adoption and implementation of a statute in a single continuum is the significance of the related factors of compatibility and legitimacy: arguably the greater the compatibility and legitimacy generated in the adoption stage, the greater the likelihood that not only will the adopted legislation will be understood, applied, and utilised in the implementation stage but also that it will enjoy a productive interaction with its pre-existing legal system.
1.4 Compatibility, Legitimacy, and the Interplay of Institutions
Although the concept of compatibility appears in both comparative law and new institutional economics literatures and legitimacy is explicitly mentioned in the diffusion and transfer literatures, these literatures appear to assume that these concepts are widely understood and therefore, do not explore these in any depth. This section examines these concepts and their interrelations and offers suggestions as to how these may be measured.
1.4.1 The Nature of Compatibility
In emphasising but not defining compatibility comparative law and new institutional economics literatures appear to suggest that the word may be understood in its ordinary English meaning. Authoritative English dictionaries state that any two objects (or ideas) may be considered compatible if they are able ‘to exist or occur together without problems or conflict’.Footnote 94 It follows that ‘compatibility’ is ‘the fact of being able to exist, live, or work successfully with something or someone else’.Footnote 95
This common core notwithstanding, compatibility as discussed in comparative law literature is somewhat static and binary while that referred to in new institutional economics literature has a dynamic and evolutionary quality. Comparative law seems to hold that compatibility with context either exists or does not at the time of adopting a legislation. Also, it focuses more on describing elements within the context that the adopted legislation must be compatible with, rather than on processes through which compatibility may be generated or enhanced.Footnote 96 In terms of this literature an adopted legislation is compatible with the context of the adopting country if it is compatible with the social and political institutions pre-existing in the country, particularly its machinery of justice, its particularities of history, initial conditions, institutional traditions, political economy, and all other factors that may impinge upon the relationship between law and society.Footnote 97 This literature further suggests that the adopted legislation and the context interact with each other through actors that engage with the adoption process most often from within the institutions pre-existing in the adopting country, however, it does not explore the nature of this interaction or its impact in particular depth.
On the other hand, new institutional economics recognises that compatibility may not only be created but also enhanced in the course of adoption of legislation and possibly beyond.Footnote 98 North for instance, argues that compatibility is generated when an economic institution organically evolves from the context of the country, while Rodrik is of the view that an economic institution may be made compatible with the context of the country if it is adapted for context in accordance with the local knowledge and information aggregated through bottom-up, participatory, and inclusive institutions.Footnote 99
1.4.2 The Dimensions of Legitimacy
Legitimacy, as discussed in the diffusion and transfer literature, is both a motivation for and an outcome of the diffusion and transfer process. Scholars argue that countries often adopt foreign ideas, policies, and, by extension laws, in the quest for international and domestic legitimacy. This section explores the concept of legitimacy to understand its significance as well as the processes through which it may be created or enhanced.
1.4.2.1 Understanding Legitimacy
The concept of legitimacy has its roots in political philosophyFootnote 100 and political science and sociology,Footnote 101 where it is defined as a subjective ‘belief that a rule, institution or leader has the right to govern’.Footnote 102 Legitimacy, so defined, is difficult to measure and is, therefore, often understood in terms of its sources (that is as being derived from legality,Footnote 103 authority,Footnote 104 and justiceFootnote 105) or its attributes (such as its ability to create efficiency, expertise and accountability, and fairness or justice).Footnote 106 It may, therefore, be argued that a rule, institution, or government is legitimate if it has been made according to the law (ie it has legality) and if it is recognised as having the force of law in the country (ie it has necessary authority). Equally, it may be argued that a rule, institution, or government has legitimacy if it is procedurally effective (ie if it is efficient and has the necessary expertise for carrying out its purposes), and if it creates or adopts mechanisms for accountability.
Among the various aspects of legitimacy, justice is particularly interesting because it features among the sources as well as the attributes of legitimacy. This suggests that legitimacy is not only the outcome of processes that are recognised as fair and just but must also generate fairness and justice. It is further interesting to note that unlike other sources and attributes of legitimacy, justice whether as a source or as an attribute of legtimacy relates to the substance of the rule or instrument,Footnote 107 rather than its formal (ie its legality and authority) or functional (ie its efficiency, expertise, and accountability) aspects. It may be argued that while it is entirely possible for a rule, institution, or government to display all three aspects of legitimacy (ie substantive, formal, and functional), it is equally likely that the presence of only one or more of these aspects may be sufficient to generate the belief that the rule, institution, or government is legitimate.Footnote 108 It is most appropriate, therefore, to view legitimacy on a scale with formal legitimacy at one end, formal plus functional legitimacy towards the middle, and formal plus functional plus substantive legitimacy, (which may collectively be referred to as perfect legitimacy), at the other.
This discussion further suggests that a country’s desire for international legitimacy which derives from the country aligning itself with policies or laws for their reputational value rather than substantive appropriateness, is a desire for formal, and perhaps functional rather than substantive legitimacy. It may therefore also be argued that international legitimacy gains somewhat of a substantive character when a country leverages it for domestic legitimacy, because the domestic audience is unlikely to be persuaded to endorse a policy or law unless it has the potential to generate justice and fairness in addition to its claims of efficiency, expertise, and accountability. However, the extent or quality of this substantive legitimacy or indeed how it compares with the formal and functional legitimacy of an institution or rule is likely to vary from case to case depending on the legislative maturity of the country in question.
1.4.2.2 Significance of Legitimacy
The clue to understanding the significance of legitimacy lies in Linos’ reference to ‘critical domestic legitimacy’.Footnote 109 It may be argued that legitimacy of a rule is critical for its enforcement because for people to obey a rule, they must view it as legitimate at least to a certain degree. This means that people will obey a rule that is created through a process which is seen as fair, legal, or correct even if these policies or laws do not actually benefit them.Footnote 110 People are also likely to obey a rule if they have trust in the rule-making body, quality of interpersonal treatment, evidence of the body’s neutrality, and the extent of participation that the body allows in the formulation of the rule regardless of whether the rule is substantively just and fair.Footnote 111 It follows, therefore, that while legitimacy of a rule, institution, or government is a necessary pre-condition for its effective enforcement, even partial (ie only formal and functional legitimacy) legitimacy may suffice for this purpose.
In addition to enforcement, legitimacy of a rule, institution, or government is desirable for its reputational effect. For instance, when a country adopts a policy or law for international legitimacy, it sends out a signal that it is a progressive member of the international community and, therefore, fit for future interaction and collaboration. When the same country leverages its international legitimacy for domestic legitimacy it signals to its citizens that it is engaged in internationally recognised reform and is, therefore, an appropriate candidate not only for exercising power and authority but also for delivering progress in the domestic context. Conversely, when a country aims for domestic legitimacy by introducing effective, just, and fair reform, it not only catalyses the reorganisation of its legal, economic, or social context but creates the opportunity for leveraging the soundness of its domestic law reform for recognition and legitimacy abroad.
It is likely that countries adopting laws or polices to gain international legitimacy, also seek effective, fair, and just reform domestically. Such countries may, therefore, simultaneously seek formal international legitimacy that derives from the reputational capital and authority of international precedents and substantive domestic legitimacy that stems from the proposed legislation’s capacity for generating justice and fairness in the country. For instance, a government may recognise that a country needs reorganisation in a particular economic or social sphere and be committed to bringing about appropriate meaningful reform for this purpose. In carrying out this reform, the country may consult international precedents, perhaps to understand the area and perhaps also to garner support for its proposed reform. Such a law, when introduced, would not only enjoy formal, functional, and substantive legitimacy in the domestic context, but will also send a positive signal abroad, and thereby play a positive role in bringing about material change in the country.
1.4.2.3 Generating Legitimacy
The discussion about the sources of legitimacy provides insight into how legitimacy is generated. Weber, for instance, suggests that legitimacy stems from tradition (ie people have faith in a particular political or social order because it has been there for a long time); charisma (because they have faith in the rulers), and legality (because they trust its lawfulness).Footnote 112 Tradition and charisma, so defined, may be understood to be facets of authority,Footnote 113 which together with legality serve as mechanisms for generating legitimacy, albeit of the formal rather than functional or substantive variety.
Locke adds a further dimension to this discussion by highlighting public ‘consent’ as a pre-condition of legitimacy.Footnote 114 He argues that consent is necessary not only for the original institutionalisation of political authority but also for the ongoing evaluation of the performance of a political regime,Footnote 115 albeit while the original institutionalization requires express consent, tacit consent may suffice for subsequent evaluation. Simmons introduces the idea of actual consent. He is of the view that there is no ‘content-independent’ duty to the obey the state, and actual consent may only be given if the rules, institutions, or other commands of the state confer a benefit of the peopleFootnote 116 that is, if they are fair and just in addition to being procedurally effective. Actual consent, therefore, generates substantive legitimacy rather than the purely formal or functional legitimacy created by authority or legality. Despite its desirability, actual consent is not practicable in most modern democracies which operate on the basis of constructive consent – that is, these democracies assume that the public has consented to a rule if their elected representatives give their consent and if the public trusts in the legality and authority of the process through which a rule is made even when it does not delve into the substantive fairness of the rule. Arguably, even constructive consent is better than no consent, and a country in which the adopted law enjoys legitimacy based derived from constructive of consent, not only sends out positive signals abroad but also by enhancing the possibility of the law being obeyed, creates the potential for bringing about material change at home. Given that bottom-up, participatory, and inclusive institutionsFootnote 117 are more capable of garnering actual or constructive consent it may be argued that laws adopted through domestic democratic institutions are likely to enjoy a more perfect legitimacy than those adopted through institutions, that while recognised as legal or having authority do not have the capacity to elicit or aggregate consent from the public.Footnote 118
1.4.3 Compatibility and Legitimacy: Two Sides of the Same Coin?
Juxtaposing the concepts of compatibility and legitimacy reveals commonalities between the two. Compatibility relates to the ability of the adopted law to co-operate and co-exist with institutions pre-existing in the context of the adopting country, while legitimacy relates to the extent to which the law is obeyed and enforced in the country, its ability to send positive signals internationally as well as domestically, and its potential for bringing about meaningful social or economic reform in the country.
Both compatibility and legitimacy are also dynamic rather than static which means that whilst both may be generated as the proposed legislation is considered for adoption in the deliberation phase or even as it is formally enacted they may be enhanced as the adopted legislation is interpreted in the implementation stage. New institutional economics scholars such as Rodrik for instance, argue that compatibility may be generated if the blueprint (of an economic institution) is adapted for the context of the adopting country in light of the tacit local knowledge aggregated by bottom-up and participatory institutions, while diffusion and transfer scholars, such as Linos, argue that adopted policies may be legitimised by public consent garnered through democratic institutions. Arguably, continued engagement with bottom-up and participatory democratic institutions post-adoption is likely to continue to mould the adopted legislation in light of local knowledge and to renew the intial consent given to it, thereby enhancing both its compatibility and legitimacy as it proceeds through the implementation stage.
This discussion suggests that bottom-up and participatory democratic institutions may generate compatibility, as per new institutional economics literature, due to their capacity to aggregate local knowledge, and legitimacy as per diffusion and transfer literature, due to their power to garner public consent whether actual or constructive. Interestingly, Acemoglu and Robinson, in arguing that inclusive economic institutions are created through inclusive political institutions, draw these two seemingly distinct strands together. In defining inclusive political institutions as institutions that distribute power more broadly in society, they give a nod not only to new institutional economics’ reference to bottom-up and participatory institutions but also to diffusion and transfer literature’s reference to democratic institutions and to the idea of justice and fairness as a source of legitimacy. Similarly in defining inclusive economic institutions as institutions that distribute resources more equitably in society, their discussion resonates with the idea of justice and fairness as an attribute of substantive legitimacy. This suggests that adoption through bottom-up, participatory, and inclusive institutions is not only likely to generate greater compatibility but also to enhance the quality and extent of legitimacy that the legislation enjoys in the country.
1.5 The Framework in Action
The integrated analytical framework developed and presented in this chapter hinges on the core concepts of compatibility and legitimacy: the analysis of the pre-conditions of transfer, the institutional context, and the interplay of institutions at the adoption stage aims to establish the extent and nature of compatibility and legitimacy generated at that stage, while that of the independent performance and interaction of the enforcing authorities at the implementation stage helps understand how the compatibility and legitimacy of the adopted legislation shapes its subsequent interpretation and enforcement in the adopting country. Their significance notwithstanding, compatibility and legitimacy are qualitative and relative concepts This makes them difficult to observe and measure directly and objectively and makes it necessary to employ proxies to approximate the extent of compatibility and legitimacy generated at the adoption stage and to evaluate its impact at the implementation stage.
At the adoption stage, the extent of compatibility and legitimacy likely to be generated may be gauged by the design, nature, and range of institutions engaged in the deliberation and enactment of the adopted legislation and their interaction with each other. Additionally, compatibility may be assessed by the extent of local information taken into consideration and applied as the legislation progresses through the deliberation and enactment phases, while the quality and extent of legitimacy may be ascertained by the authority and legality of the institutions engaged in the adoption process and their capacity for aggregating consent: public consent may be deemed to have been given as long as the legislation is adopted through a range of institutions that have the capacity and potential to elicit the actual or constructive consent of a sufficiently broad segment of the public.
At the implementation stage the impact of compatibility and legitimacy on the interpretation and enforcement of the adopted legislation may be observed by analysing the decisions of the enforcement authorities established by adopted legislation as well as the decisions of the general courts in response to the challenges brought before them in respect of the orders of the enforcement authorities. It is expected that legislation adopted through relatively more bottom-up, participatory, and inclusive institutions is not only likely to be better understood, applied, and utilised in their adopted contexts but also to engage more productively with the country’s pre-existing legal system and thereby to gradually and steadily integrate into and become a part of it.
Open access