Lawmaking in Small Jurisdictions

Abstract

It is often argued that business laws in developing countries should generally be formulated as simple, bright-line rules. This argument is typically premised on the idea that the most significant difference between developing and developed countries lies in the competence of their lawmakers. This paper focuses on another difference: For the purposes of business law many (though not all) developing countries are relatively small, meaning that they witness a relatively small number of business disputes. Using an analytical framework originally developed in the legal literature concerning rules and standards it is shown that small jurisdictions should generally favour standards over rules and that those standards should not necessarily be particularly simple. Small jurisdictions should also find it relatively useful to transplant laws from other jurisdictions, especially large ones. These factors ought to be considered in the design and evaluation of legal institutions in many developing (and some developed) countries.