Modernizing Colombian Corporate Law: The Judicial Transplant of the Business Judgment Rule

Abstract

The business judgment rule (“Rule”) is one of the most widely discussed legal doctrines on US Corporate Governance Law. Various jurisdictions outside of the US have adopted some version of the Rule. Recently, a specialized corporate law court in Colombia transplanted the Rule to such jurisdiction. The adoption process constitutes an example of functional convergence of corporate law, an instance of the development of Colombian law, and a case study on the possibility of bridging the perceived differences between the Common Law and the Civil Law traditions. Notwithstanding, such transplant has not been without controversy. On the one hand, some local commentators and members of the judiciary utterly reject the application of the Rule in Colombia. Under this view, positive law is altogether contrary to the adoption of the Rule by means of judicial action. On the other hand, proponents of the Rule have fashioned an ingenious interpretation whereby the Rule may be effectively extracted from existing legislation. Consequently, the debate over the Rule’s local application is essentially a matter of legal interpretation. This controversy provides an interesting case study on the development of local corporate law, and constitutes a prime example of the use of comparative law for the development of legal systems. Indeed, there is a noticeable shift in local legal culture; from abstract “legal” reasoning, typical of Napoleonic style jurisdictions, towards more concrete and practical use of legal materials, based primarily on an efficiency criterion. A similar evolution process may be seen in other jurisdictions from both the Common Law and the Civil Law traditions. This article posits that the judicial transplant has been successful, in view of the limitations imposed by the local institutional and political arrangements. Notwithstanding the growing body of case law, proponents of the Rule have repeatedly attempted to codify it, arguably seeking greater certainty by converting it into legislated law.