TY - JOUR
AU - Sanchez Lasaballett,, Eliezer
AB - Abstract Legal harmonization is a fundamental notion of comparative contract law that has been on the international and national agendas for at least six decades. There have been a number of endeavours seeking for similarity between legal rules from different jurisdictions; however, their achievements remain contested since there is no comprehensive understanding of the nature and extent of harmonization. This article examines different facets of harmonization by looking at it as a legal phenomenon instead of a distinct process of drafting similar rules. This article discusses that, conceptually, harmonization is better understood as encompassing the meanings given, and the goals pursued, by the various agents promoting its implementation. Four cases of harmonization show that the different meanings of harmonization converge on the same multifaceted referent irrespective of operating at the supranational, international, or federal level. This article brings together at least four explanatory models responding to different approaches to the same phenomenon as they focus on inputs and outcomes, the greater or lesser diversity between rules, the sources of the law, and the processes of harmonization themselves. Adopting a comprehensive understanding of harmonization as a legal phenomenon may help to better assess the strengths and weaknesses of the implementation processes as well as to formulate adequately new endeavours. I. Introduction Harmonization is a very broad concept that refers to bringing things together in accordance with a pre-established order. Harmonization in the legal sense entails bringing together legal rules from two or more legal systems to minimize the effect of differences between them. Differences between legal systems are problematic since they give rise to transaction costs,1 in particular, when two parties to a legal transaction are subject to different legal systems or jurisdictions. These parties may agree on choosing the contract law from one of their jurisdictions to regulate the transaction; alternatively, they may choose the contract law of a third jurisdiction. It could also be that parties are not free to choose a particular law since a mandatory rule of conflict of laws imposes one party’s jurisdiction to regulate the transaction. In any case, at least one of these parties will incur costs associated with becoming familiar with the nature and scope of their rights and duties under an unfamiliar legal system.2 In this context, harmonization of legal systems seeks to avoid or minimize transaction costs by reducing differences between legal systems. The more legal systems resemble each other, the lower the costs of getting familiar with a new legal system. This article examines the phenomenon of legal harmonization by considering its different facets in the agendas of transnational, national, and non-State institutions. This article argues that legal harmonization is an elusive concept that is better understood as a legal phenomenon rather than a discrete solution to the problem of transaction costs. Regardless of the governance level (supranational, international, or intranational) or the implementation stage (legislative, adjudicative, administrative, or transactional) in which harmonization is undertaken, its conceptualization and systematization is an unavoidable task that awaits completion. A better understanding of harmonization as a legal phenomenon will enable academics, decision-makers, legislators, and practitioners to understand both the intended and the unintended consequences of its implementation or spontaneous occurrence together with its potentialities and limitations. This article has three sections. The first section explores the various meanings of harmonization. It considers harmonization as a problematic idea, a legal phenomenon, a regulatory technique, a public policy, an economic policy, and an interference. The second section places legal harmonization in relevant contexts—such as the European Union (EU), the USA, Australia, and Latin America—in order to understand how this concept refers to different processes in the quest for similarity of rules. The third section of this article outlines different models of harmonization as described in the literature of comparative law, and the law and economics literature. It does so by looking at concepts such as common principles versus best solutions, unification versus harmonization, legal diversity, federalism, legal transplants, regulatory competition, and conflict and choice of laws. In sum, this article subscribes to a definition of harmonization as a legal phenomenon that pursues legal integration in the form of similar but not identical rules. II. The various meanings of legal harmonization The most significant example of harmonization of legal systems has taken place in the EU since the inception of the Treaty on the Functioning of the European Union (TFEU) in 1957.3 Harmonization in the EU bears some particular traits that are worth considering when formulating a concept of harmonization—despite these traits being unique to the EU and political in nature. On the one hand, the EU possesses a transnational, legislative body that drives the process of legal integration by passing harmonizing law. On the other hand, the EU harmonization pursues a political goal that is the functioning of the common market; this goal also guides the production of laws in other areas, as with the environmental regulation. Thus, in the context of the EU, harmonization is the integration of legal systems with the aim of establishing a common market by means of transnational legislation. 1. Harmonization as a problematic idea Even though harmonization is a concept that has been around for more than six decades, it remains under-theorized.4 It has been said that harmonization lacks a precise definition5 and methodology6 and even a general conceptual framework,7 not to mention a comprehensive jurisprudential theory8 allowing us to study its various facets.9 A case in point is the book edited by Andenas and Baasch Andersen entitled Theory and Practice of Harmonisation, published in 2011.10 This book compiles a series of disparate papers presented at the 2008 W.G. Hart Workshop on Theory and Practice of Harmonisation. This book takes its name from the workshops series,11 which is a good reason why it falls short of presenting a full-blown theory on harmonization, despite its title. A theory is a general, but precise, explanation based on systematic definitions and descriptions of a phenomenon in the form of concepts, principles, and exceptions; theories are heuristic models for teaching and researching. A theory holds true when tested in different settings and it can be woven into complex sets of theories; theories remain true until proven false by a new account of the phenomenon in question.12 While Andenas and Baasch Andersen’s book is not a theoretical systematization of the phenomenon of harmonization, it does provide us with disparate accounts of harmonization. The task of theorizing on harmonization, if deemed necessary, remains to be done. One of the problems with defining legal harmonization is the polysemy it entails. Taking the above example, Andenas and colleagues state that harmonization refers to the notion of bringing together legal ideas so that they can function ‘in unison’.13 They seem to understand harmonization as a means to an end: rules operating ‘in unison’. Contradiction in terms within this statement speaks volumes since harmony and unison are opposites. Harmony is a concept highly theorized in sciences such as music, mathematics, and physics,14 while the theory of harmony in music is consistent with both mathematics and physics. In music, the concept of harmony is the opposite of unison since harmony entails performing different sounds that are at times consonant, at times dissonant, with each other by virtue of an organizing sound or root note.15 Unison, on the contrary, refers to different voices or instruments performing only one melody with identical sounds even in different ranges. Mutatis mutandis, legal harmonization entails the existence of different bodies of rules working in consonance and solving their dissonance by virtue of a common rule, principle, concept, or doctrine. Whereas, legal unison would imply that different jurisdictions use a single unified set of rules that, ultimately, might bear different applications or interpretations in each jurisdiction.16 Thus, it is a contradiction in terms to describe harmonization by referring to the functioning in unison of legal concepts as Andenas and colleagues do. Andenas and colleagues’s statement, rather, relates to the idea of uniformity or unification that is a competing concept to harmonization.17 As a result, lack of definition and under-theorization in, for instance, EU harmonization may lead to confusion between the nature and the effects of its legislative and judicial instruments as well as deflecting necessary criticisms of the objectives of, and alternatives to, harmonization.18 Harmonization is, likewise, a contested concept given the intense debate as to its desirability or convenience.19 Arguments in favour of harmonization take the EU and the USA as cases in point, suggesting that harmonization has become an essential condition for modern legal systems20 since its benefits are evident to those who control law-making powers.21 At the level of international law, harmonization is one stage in a longer process of increasing the stability in world legal systems through uniformity of laws; for instance, the World Trade Organization operates as one of the international adjudicating bodies that bring stability to world and regional legal orders.22 Furthermore, harmonization of laws is the preferred alternative to unification of laws because harmonization preserves a degree of diversity in legal traditions; for example, harmonization is more likely to gain currency in a diverse Europe comprising not only common law and civil law legal systems but also former socialist legal systems.23 At the level of national legal systems, advocates of harmonization argue that it also enhances the stability of legal systems insofar as foreseeability and predictability of the law are concerned.24 They also believe that harmonization reduces the costs arising from differences between jurisdictions, and increases efficiency in regulatory compliance with the requirements of more than one jurisdiction.25 Lack of harmonization in substantive law hinders the effective enforcement of the rights and obligations of legal and natural persons in any jurisdiction.26 That is, harmonization reduces transaction costs, facilitates access to courts and justice, and makes available a broader range of remedies appropriate to the modern demands of society. This holds true in different fields of the law including corporate, trade, criminal, and environmental law. In contract law, harmonization becomes an effective instrument for removing barriers to the cross-border exchange of goods and services27 by reducing the transaction costs borne by firms and individuals, thereby improving economic welfare.28 Critics of harmonization maintain that, first, there is no need to harmonize since the transaction costs arising from the diversity and fragmentation of legal systems are negligible; some economic agents manage to internalize these costs by transferring them to the many final consumers. Second, another line of criticism holds that choice-of-law rules can alleviate or overcome the obstacles to transnational trade arising from the disparity of rules between legal systems. Third, harmonization is charged with suppressing competition between legal systems, reducing incentives to achieve more efficient legal outcomes. It is also claimed that harmonization overlooks the existence of heterogeneous preferences of parties to a contract, making the harmonization enterprise impracticable.29 Thus, even if harmonization were to take place through the spontaneous convergence of legal systems, such a process would lead to a sub-optimal set of rules. On the one hand, legal systems might engage in blind competition for the satisfaction of heterogeneous demand-side preferences; on the other hand, legal systems might emulate successful jurisdictions without conscious examination of legal idiosyncrasies. As a result, harmonization through spontaneous convergence may not translate into market efficiencies for society as a whole or provide room for policy considerations to overcome potential shortcomings. Fourth, another thread of this argument contends that harmonization stifles the learning and experimentation by which lawmakers may arrive at efficient legal solutions. Finally, the latter argument also holds that the cost of changing rules by introducing harmonized rules is high, thereby offsetting the benefits of the learning process.30 In response to the above criticisms, first, there is empirical evidence showing that transaction costs are significant due to heightened legal diversity in cross-border transactions. Second, it is also known that choice-of-law rules are limited by mandatory rules such as consumer protection rules subjecting some transactions to the consumer’s domicile jurisdiction. Third, the arguments about competition and heterogeneity of parties’ preferences are weak since they are based on a small number of theoretical assumptions and on empirical evidence that is mainly focused on efficiency. These assumptions take for granted unrealistic and narrow variables concerning lawmakers’ goals, informational requirements, policy instruments, and distribution of costs and benefits, among others. Furthermore, the empirical evidence is ambiguous in regard to whether competition between legal systems leads to a race to the bottom, thereby impairing social welfare. Fourth, the criticism based on learning and experimentation presupposes that legal reforms will cease once all legal systems and areas of law become harmonized. On the contrary, not only will there always be legal systems other than those adopting harmonized rules to learn from and to experiment on, but there will also be interest in experimenting with the outcomes of the implementation of harmonization itself. Finally, the costs incurred by changing rules depend on the constitutional and political aspects of the law-making;31 hence, the adaptability of legal systems vis-à-vis legal change is more contingent on diverse modes of law-making than on the harmonized rules themselves.32 2. Harmonization as a legal phenomenon Harmonization is a legal phenomenon since it tries to capture the manifestation of a complexity of legal acts, such as written rules at the national, regional, or international level as well as judicial decisions, administrative acts, and contracts between private parties. In the context of harmonization, these legal acts seek to minimize the problems or obstacles threatening everyday transactions in different jurisdictions while responding to a series of institutional causes.33 The causes of harmonization as a phenomenon can be explained by the theory of legal evolution,34 according to which legal rules evolve when a demand for solutions is imposed on suppliers of legal rules and they are willing and able to satisfy that demand (see Figure 1). However, explanatory models35 view harmonization as a set of clear-cut processes and mechanisms, not as a complex phenomenon responding to diverse causes producing various outcomes.36 Figure 1. View largeDownload slide Legal evolution Figure 1. View largeDownload slide Legal evolution Harmonization is better defined as a legal phenomenon organized on the basis of four different causes or ‘drivers’: market driven harmonization, public policy driven harmonization, expert-academic driven harmonization, and legal profession driven harmonization. These causes or drivers may overlap each other, while tensions may arise between, for instance, market and public policy harmonization, on the one hand, and between expert-academic and legal profession harmonization, on the other (see Figure 2). Figure 2. View largeDownload slide Drivers of legal harmonization Figure 2. View largeDownload slide Drivers of legal harmonization Market driven harmonization is based on the idea that diversity amongst national legal systems is desirable since freedom of contract allows parties to choose the law applicable to their contracts and the forum where they will settle their potential disputes. In this view, parties can choose the law that better suits their needs and reject those legal systems that hinder the smooth exchange of goods and services. Once a critical mass of parties chooses the best law for their transactions, lawmakers from different jurisdictions will respond to that by engaging in legal reform to adapt their laws in order to attract users and keep their economies competitive. This line of thought takes for granted that this dynamic encourages a race to the top where laws will resemble those that best favour transactions. Public policy driven harmonization is epitomized by the EU where harmonization is key to the functioning of the common market fostered by freedom of movement of persons, goods, services, and capital. This type of harmonization is identified with the top-down formulation of policies furthered by directives of no-direct application; directives establish a maximum or minimum standard and it is for national legislators to transpose these directives into local law. Public policy harmonization is also identified with the bottom-up process of transposition37 itself because it, in turn, will give rise to the adoption of new directives or even interpretative decision-making from the European Parliament, European Commission (EC), or Court of Justice of the European Union (CJEU).38 Beyond the EU, public policy harmonization takes place by the production of model laws at the transnational governance levels, as is the case with laws made by the United Nations Commission on International Trade Law (UNCITRAL), the United Nations Conference on Trade and Development, and the International Institute for the Unification of Private Law (Unidroit). Expert-academic driven harmonization is another route taken by the EU when the EC funds study groups with the aim of drafting comprehensive model codes on private law. An example is the publication in 2009 of the Draft Common Frame of Reference (DCFR) by the Study Group on a European Civil Code and the Research Group on the Existing EC Private Law. Expert-academic driven harmonization also takes place beyond the EU, as is the case with the publication in 2016 of the fourth edition of the Unidroit Principles of International Commercial Contracts (PICC).39 Another activity generating expert-academic harmonization is self-regulation by a particular industry, profession, or market in industrialized economies.40 Experts’ rules or principles may serve two purposes: as model rules to trigger regulatory competition between jurisdictions or as optional instruments for parties to a contract to choose from. On the one hand, optional instruments may be chosen by contracting parties as non-State law applicable to their transactions in international arbitration proceedings. These optional instruments face problems such as users’ lack of familiarity with them, lack of development through judicial interpretation, and divergent doctrinal development, which undermine the very goal of harmonization. On the other hand, experts’ model rules or principles may be used to promote ‘vertical regulatory competition’ as opposed to ‘horizontal regulatory competition’. While horizontal competition involves competition between State jurisdictions prompted by parties’ choice of another national law, vertical competition involves national legislators responding to parties’ choice of transnational optional instruments through legal reform that emulates, or transplants, successful expert-drafted models. Parties’ choices of optional instruments seem to indicate their preference for the (perceived) most efficient set of legal standards; these standards, in turn, are adopted by national legislators who want to retain office. Professional-driven harmonization takes place when practitioners in national or transnational law firms follow proven models of contracts promoted through practitioner manuals,41 transnational governance institutions, international financial institutions, or private transnational financiers.42 Boilerplate clauses and standard term contracts also serve this purpose. However, contracts do not work in a vacuum; they operate within the legal framework provided by the applicable or chosen law. This law fills gaps in the contract, shapes the terms circumventing default rules, and excludes terms that are contrary to mandatory rules. Professional-driven harmonization becomes relevant when factoring agent–principal problems into parties’ choice of law, since lawyers frequently advise parties to choose the law of a particular legal system.43 In this case, legal advice is based not only on the law that better meets the needs of the transacting parties but also on the law with which a lawyer is more familiar. In fact, in parties’ choice of law, the lawyers’ familiarity with the law prevails over the quality of the law because lawyers tend to follow considerations related to economies of scale and specialization—that is, lawyers choose the laws they know the most due to repeated use.44 Furthermore, contract drafting may lead to legal reform in the long term if contracts include, or circumvent, facilitative (default) or mandatory (public policy) rules, which in turn begin to be repeatedly used as required by investors or financiers, for instance.45 Lawyers’ or financiers’ model contracts may be subject to litigation and, in turn, regulated via case law and later by legislation, or they may be subject early on to legislation if they are deemed crucial for the development of a particular industry or protection of a particular market. Thus, despite contracts being law between parties and, therefore, a law source of the lowest level,46 this does not prevent contracts from prompting legal reform at higher levels of legal sources such as case law and statutes. Either judges or parliamentarians may respond to practitioner written contracts by bringing about a greater or lesser degree of harmonization in contract law rules. Tensions between market and public policy driven harmonization may also arise as a result of choice of law being limited by conflict of law rules, for instance. Even if a certain set of rules is perceived as more efficient than others, it will become redundant if parties are incapable of having their transaction governed by it due to mandatory rules that prescribe a different jurisdiction’s rules as the law applicable to their transaction. The opposite is also true if particular parties, a transaction, or an industry are subject to protection or promotion by means of regulation that is, in turn, circumvented by unconstrained rules on choice of law and forum. Tensions between expert-academic driven harmonization and professional harmonization are likely to arise if legal practitioners believe that harmonization threatens their natural monopoly or economies of scale and specialization. This is likely to happen when legal research devises and promotes harmonized model rules with the aim of reducing transaction costs arising from heightened legal diversity. That is, if an optional instrument is transparent and accessible to lawyers trained in any legal tradition so that they advise parties to choose it, legal fees accruing to lawyers in a particularly unfamiliar and inaccessible jurisdiction will decrease. Expert-academic driven harmonization may also become irrelevant if their models do not respond to the changing commercial needs posed by clients to lawyers who draft the contracts.47 Likewise, if expert-academic models are unfamiliar or inaccessible to professionals, these models are unlikely to be utilized or to serve the purpose of facilitating cross-border transactions or reducing transaction costs. 3. Harmonization as a regulatory technique Harmonization as a legal phenomenon comprises the legal process by which differences between rules from various legal systems are minimized with the aim of facilitating legal relationships.48 In this sense, harmonization is also a regulatory technique consistent with law reform;49 hence, harmonization takes the form of three different types of law-making—namely, restatements of law, principles of law, and model laws.50 First, restatements of law consist of black-letter rules that embody the rules as presently standing or expressed in judicial decisions. Second, principles of law provide general guidance as to how legal rules ought to work by contrast with current rules in need of legal reform. Finally, model laws propose specific rules in the form they should take if they were to be enacted by legislative action. These stances of law-making adopt a structure that is contingent upon their function. For instance, the structure of a restatement emphasizes its facilitative role as a finding aid; hence, it collates rules with explanatory comments and notes containing comparative information about foreign cases and statutes.51 These comments and notes also concern policy considerations typical of government legislative proposals, which provide authoritative support for the interpretation and application of the restatements themselves.52 However, the legal authority of the restatements depends less on the intentions of their authors than on the sceptical perception of their intended audiences.53 An example of EU harmonization as a legislative technique is the development of the Principles of the Existing EC Contract Law (Acquis Principles), which was drafted on the basis of EU directives and CJEU decisions interpreting, classifying, and expanding these directives. This four-fold process of development consisted of: first, an examination of what was in common between EU legislation and case law in order to transform their specific character into a rule of broad application; second, rules alluding to general principles that gave way to the general principle itself; third, rules concealing an implied general principle that allowed the principle to be made explicit; and, finally, lacunae in the rules were filled by invoking the CJEU doctrine of the principle of effectiveness, thereby avoiding gaps in the legislative Acquis.54 Later on, the Acquis Principles became part of the DCFR despite some shortcomings. These included, first, that the Acquis should have been surveyed with the aim of identifying general principles of contract law, aspects of contract law already regulated and their commonalities, and lacunae in the Acquis. Second, the different national laws should have been examined in order to see how lacunae were filled in. Finally, values and policy considerations should have been taken into account when creating a given principle and developing alternatives for the legislator to choose from. For instance, provisions could have been developed that were both protective of consumers as the weaker party and less interventionist, upholding freedom of contract.55 Likewise, EU harmonization has witnessed a range of methods of law-making that stem from the new approach to harmonization via directives, as contemplated in 1985 by the European Commission’s White Paper on the Completion of the European Internal Market. Such methods include total, optional, partial, minimum, and alternative harmonization. Total harmonization prevents States derogating from the directive save for a few exceptions. Optional harmonization allows lawmakers to prescribe the application of national or EU law and States to opt out of certain directives. Partial harmonization regulates only certain aspects of a specific area of the law. Minimum harmonization provides room to adopt rules that are more demanding. Alternative harmonization allows States to choose from a set of given methods. Furthermore, States’ mutual recognition of controls becomes a substitute for substantive rules of harmonization.56 More specifically, EU harmonization follows a quality criterion that guides the processes of implementation and transposition of EU rules at the national level. Quality encompasses a subset of criteria that relate to the applicability of the rule to judicial proceedings, the creation of rights for EU citizens, and the regulation of enterprises operating in the EU economy. Quality also encompasses the form taken by the national measure implementing and transposing57 the EU rule and the drafting techniques used. Drafting techniques deal with the substance of the legislative texts so that they achieve the purpose contemplated by the EU law while taking into account users’ needs, together with multilingual and multi-legal-system environments. Second, the principle of subsidiarity shapes the legislative process insofar as the level of institutional action chosen for transposition is acceptable only if lower-level regulatory actions prove inefficient in achieving the goal of the EU rule. In addition, the legislative process must be open, transparent, and accessible—as far as information and consultation are concerned—as well as planned, monitored, and followed up. Ultimately, drafting techniques require that legal texts be clear, unambiguous, and simple, each of which is particularly important when texts will undergo translation and transposition.58 Finally, there are implicit costs in the process of law-making associated with the diagnosis of situations to regulate the consideration of alternative solutions, impact assessments of alternatives, and legal drafting as well as political capital to persuade supporters and overcome opposition. Some of these fixed costs—monetary or otherwise—are the same irrespective of the size of the population affected by the legal reform. Therefore, if a legal reform is not cost-effective for each national legal system individually, it may be so if undertaken jointly by several legal systems, such as within a common market. As a result, the increased social welfare gained through joint harmonization would come on top of the reduced costs of joint law-making. On this view, undertaking harmonization in a comprehensive area such as contract law may yield substantial gains, even though the breadth and complexity of the area to reform may increase the cost of law-making due to lack of political capital, for instance.59 4. Harmonization as a public policy In the EU, harmonization is a transnational policy to reform legal rules for the better functioning of the common market where differences between legal orders hinder the free movement of persons, goods, services, and capital. Furthermore, EU harmonization has evolved to cover key areas that promote equal conditions and common solutions for the functioning of the common market, as is the case with environmental protection and fundamental rights. Therefore, harmonization comprises not only those measures pursuing common policies but also those measures establishing common standards for the realization of the objectives of the EU.60 This is not without problems since EU harmonization entails a compromise between the EU and the Member States in the process of creating an EU private law. This process might lead to sub-optimal results since decisions regarding the direction of such a process follow a political rationality as opposed to an academic one. For instance, in the case of product liability, there is a need for a compromise that reconciles opposing interests such as protecting producers, supporting innovation, and protecting consumers.61 Nevertheless, it is also believed that an EU private law plays a significant role in bringing political stability to the process of regulating private law in Member States. This is so because an EU private law will contribute to increased levels of trust, certainty, and reliability in the law at both the national and the supranational levels. This is possible when axiological goals of Member States are clearly established vis-à-vis competing social values, such as autonomy and freedom of contract, equality of bargaining power, and the weaker party’s protection, among others.62 Another case in point is the Central and Eastern European countries, which became in need of a new private law after the demise of the Soviet Union. These countries needed to adopt a new market-driven economy in preparation for joining the EU; thus, harmonization takes place where there exists the right combination of interests and political will together with international, drafted model laws. Harmonization as legal integration, therefore, is a requirement for further social and economic integration.63 5. Harmonization as a solution to transaction costs One of the benefits of harmonizing legal rules is a reduction of the transaction costs arising from heightened diversity64 in laws—costs that are likely to affect individuals and firms engaging in cross-border commercial activity. Furthermore, legal harmonization benefits not only consumers and businesses but also the economy and society in general.65 The EU has reiterated that harmonization is necessary since transaction costs arising from diversity between legal systems are significant.66 In 2001, the Communication from the EU Commission on Contract Law67 stated that differences between legal rules at the national level may increase transaction costs for both businesses and consumers.68 These transaction costs may result from obtaining information or conducting litigation. In the case of obtaining information, parties to a contract may need to understand and utilize foreign law with which they are unfamiliar. In order to do so, these parties will need to incur additional costs when hiring legal advice to this end. These transaction costs constitute a competitive disadvantage between suppliers to a local buyer when one of the suppliers is a foreign firm and the other is local.69 In the 2003 Communication from the EU Commission to the EU Parliament and the Council, entitled A More Coherent European Contract Law: An Action Plan,70 the Commission highlighted issues with the theoretical difference between mandatory and default rules and the latter as a source of transaction costs. The difference between mandatory and default rules becomes blurred when parties do not exclude the application of all default rules by expressly providing for a negotiated clause. It is unlikely that parties to most contracts would be able to foresee all circumstances arising from performing their contractual obligations therefore arriving at a negotiated solution to any potential contingencies and excluding related default rules. This would entail a compromise between the accuracy of the negotiated clause, on the one hand, and the attendant transaction costs, on the other. In this situation, a party may decide that the cost of negotiating such a clause outweighs the potential economic benefit, or that it poses a risk of losing her counterparty, so that the party is left to hope that the contingency in question does not arise. As a result, the non-mandatory—default—rule effectively becomes mandatory, due to the transaction costs associated with its exclusion—opportunity cost.71 Other sources of transaction costs are the diversity of rules concerning the representation of a party to a contract, as well as the validity and recognition of instruments of representation. These costs arise from hiring a foreign lawyer to avoid the day-to-day problems that arise when contracting under foreign laws. Similar problems result from, among others things: diversity of formality requirements for contract validity; inclusion of standard terms and initialling for contract validity; inconsistency in the validity of some standard terms in different jurisdictions (therefore requiring as many contracts as jurisdictions involved); clauses excluding or limiting contractual liability (e.g. for hidden vices); requirements for serving a default notice; transference of property and securities; and reservation of title.72 Diverse actors supported the findings in the Communication of the EU Commission. National governments supported the claim that contract law harmonization leads to reduced transaction costs for businesses. The Agreement on the European Economic Area (EEA) – European Free Trade Association (EFTA) States argued that diverse contract laws result in greater transaction costs, obstructing the appropriate functioning of the internal market.73 Businesses from the manufacturing sector highlighted the existence of high transaction costs impairing competition, while other business organizations stressed the presence of significant transaction costs arising from the divergence of rules governing the formation of contracts and standard contracts. Consumer organizations became vocal in regard to the transaction costs arising from disparities between national contract laws, which increase uncertainty due to lack of information about the applicable law, and lead to higher interest rates on loans in certain countries. Academic lawyers held that the multiplicity of national laws, rather than the differences between them, gives rise to problems that increase transaction costs, discourage transactions, distort competition, and reduce legal certainty.74 In the 2004 Communication from the EU Commission to the EU Parliament and the Council, entitled European Contract Law and the Revision of the Acquis: The Way Forward,75 the Commission noted that transaction costs increase due to the application of mandatory national rules. These mandatory national rules are applicable by virtue of Articles 5 and 7 of the Convention on the Law Applicable to Contractual Obligations (Rome Convention) (now Articles 6 and 9 under the Rome I Regulation) on conflicts of law that apply irrespective of the law chosen by the parties to govern their contractual relation.76 In the 2010 Green Paper from the EU Commission on Policy Options for Progress towards a European Contract Law for Consumers and Businesses,77 the Commission opens by stating that transaction costs on businesses are greater because of differences between national laws governing contracts in the European internal market. Transaction costs, together with legal uncertainty, undermine consumer confidence in the internal market. Differences between laws require both businesses to adapt contract terms to each case and market players to take advice from lawyers knowledgeable about each legal system. In this Green Paper, the Commission reiterates the need for facilitating and reducing costs for businesses and consumers when entering into contracts with counterparts in the rest of the EU, in particular, by harmonizing legal solutions for consumer contracts and taking further steps towards an EU contract law. Businesses face high legal costs in cross-border transactions due to differences between rules in force in consumers’ countries; these laws are applicable, according to the choice-of-law rules in the Rome I Regulation, even when another law has been chosen. Another source of legal costs for businesses is ensuring compliance with different systems of contract law including obtaining information about the applicable law of another State that may require translation.78 Transaction costs are much more significant for firms doing business across borders than for firms confined to one jurisdiction. Transaction costs for firms operating in more than one jurisdiction arise from the need to comply with different sets of rules in force in these jurisdictions.79 In the particular case of the EU, a firm may have to face at least 28 different Member State jurisdictions, which, in the case of contract law, impose different rules on freedom of contract, party autonomy, form, duress, unconscionability, and standard terms, among others.80 For example, different limitation periods amplify problems with claims management and debt collection across different jurisdictions. Furthermore, diverse legal environments require different contracts to be drafted for each jurisdiction, implying the adoption of different business models for each market. Such a state of affairs puts firms engaged in cross-border transactions in a disadvantageous position vis-à-vis firms doing business in only one jurisdiction. For firms doing business in more than one jurisdiction, legal diversity amplifies through: the costs of obtaining the relevant information for drafting tailored contracts in each jurisdiction; the costs of conducting litigation under different substantive rules in each jurisdiction; and the costs of following up and adapting to the diverse dynamics of legal reform in each jurisdiction. As a result, harmonization of legal systems seeks to address these sources of transaction costs by reducing the legal diversity that ultimately translates into higher costs of producing goods and services.81 From the point of view of the European legislator, the harmonization of the existing bodies of consumer law and contract law is necessary for the internal market to work efficiently. Legal and regulatory diversity, together with legal uncertainty, increases the costs of doing business for firms in different national markets. There will be significant savings from lower costs of legal compliance with foreign market conditions in cross-border trade, even if procedural rules, judicial institutions, and legal culture remain nationally diverse after harmonization. Thus, harmonized legal rules can reduce, to a greater or lesser degree, transaction costs arising from cross-border trade; this benefits the economy and society as a whole, irrespective of market structure and demand elasticity.82 Transaction costs arising from diversity and uncertainty also impair competition by creating a barrier to foreign firms entering national markets. Furthermore, foreign laws are difficult to understand for business people and their local lawyers, preventing them from engaging in business in foreign markets.83 Hence, a heightened variety of contract laws amounts to a non-tariff barrier to trade.84 Harmonization helps to remove this entry barrier by making it easier to calculate the risks associated with entering into, and performing, contracts in the target national markets. This benefits national economies by increasing competition for the delivery of goods and services.85 Nonetheless, it is arguable that multinational corporations (MNCs) can overcome legal diversity barriers by setting up subsidiaries in each country where they want to operate and by hiring local legal firms to overcome informational shortcomings.86 However, such a business model multiplies costs for each country and legal system where MNCs are to operate—costs that otherwise could be reduced through economies of scale if the MNCs could operate in several countries under a harmonized body of legal rules administered by an in-house legal counsel. However, by looking at transaction costs from a different angle, there are externalities worth considering. It is relevant to revenue offices87 in countries where subsidiaries are to operate that the MNC model increases risks of price transfer from subsidiaries to parent companies via inflated liabilities, yet, the model provides rents to local lawyers that are taxable in many cases.88 This is not to say that harmonization is justified because of price transfer as well as insolvency risks, environmental problems, or unemployment potentially caused by subsidiaries in the target country. However, MNCs avoiding transaction costs could place an additional burden on host countries promoting foreign investment policies, which in the end might encourage local legislators to engage in harmonization projects. By contrast, small and medium enterprises (SMEs) face barriers to entry in foreign markets89 with unfamiliar legal systems, due to diverse safety standards for mass consumer goods and services. Furthermore, there are different liability thresholds for defective goods and low-quality services. All this variance in standards and liabilities increases transaction costs since it reduces economies of scale in the SME’s chosen business model when trying to satisfy disparate compliance requirements. From the point of view of the consumer, they experience informational problems as to the enforcement of warranties for defective goods or low-quality services and the extent of supplier’s obligations vis-à-vis value for money.90 Even if it is argued that harmonization is of little use for EU consumers, for example, since they prefer local goods and services to those imported—imported goods and services being homogeneous but highly unlikely to be defective—it is also true that heightened legal diversity could undermine consumers’ confidence in a common market.91 From the point of view of society as a whole, there are significant losses in terms of lack of competition,92 not only horizontally (between MNCs or between SMEs) but also vertically (between foreign and local MNCs or SMEs). So harmonization is beneficial for the internal market since it might result in savings from the costs incurred by importing significant components for goods and services produced locally or paying for intellectual property rights held abroad. Likewise, there are significant costs associated with running a legal system, in particular, for the functioning of courts and legal services, if disputes involve more than one set of rules that are not local.93 All in all, the case for harmonization is warranted on the supply side by the costs arising from heightened legal diversity and on the demand side by the need to boost consumer confidence in a common market. Likewise, society as a whole benefits from fair competition between local and foreign producers playing on a level field of harmonized rules. In any case, the benefits of harmonization by reducing transaction costs must be evident to parties to a transaction as well as to businesses and national legislators.94 For instance, parties to a transaction need to see that the benefits of familiarizing themselves with harmonized law outweigh the costs of using multiple disparate national laws.95 In other words, the perception of benefits from harmonization in terms of transaction costs is a function of the opportunity cost of continuing to do business with divergent sets of rules vis-à-vis the cost of becoming familiar with a single set of harmonized rules. 6. Harmonization as harmful interference National legal diversity seems to be one loser in the process of harmonization;96 on this view, legal diversity is the seed of regulatory competition between jurisdictions, whereas harmonization is likely to create a monopoly in rule making.97 By displacing national identities and disregarding national comparative advantages, harmonization prevents the regulatory competition deemed likely to produce an optimal set of rules.98 This objection can be addressed by the law and economics argument that harmonization of legal rules facilitates market integration, which outweighs the loss of diversity. This objection can also be addressed by the political argument that harmonization may guarantee equal standing to the legal systems, citizens, and legal professions in the EU. Furthermore, if harmonization is attained beyond EU borders, lawyers, for instance, will not need to resort to foreign law but can use harmonized law.99 Harmonization also entails surrendering sovereignty—in particular, law-making powers—as with the case of the EU. In the EU, legal integration features a political and legal dualism because there is a supranational law for a supranational community and a national law for a number of nation States.100 Member States have surrendered part of their sovereignty to the EU level by bringing about the coexistence of two levels of law-making, working in accordance with the powers and competences established by the TFEU. The counter-argument revolves around the idea that, first, renouncing law-making powers in favour of a transnational level is good for the attainment of economic integration and, second, policy-making and law-making at the transnational level are free from capture by local vested interests. There is also a social policy objection that EU law—in particular, EU consumer law—will be skewed towards supporting strong economic interests rather than protecting the weakest of individuals. In response to this argument, it is worth keeping in mind that the balance between economic and social interests is rather a question of upholding fundamental rights in individuals’ relationships. Similarly, there is an objection that harmonization jeopardizes the protection standards established in national laws. In this regard, harmonization of legal texts is only part of a complex legal phenomenon and shortcomings in the process of making supranational rules can be remedied later on at the interpretation and application stages.101 Another loser from harmonization is the legal profession because lawyers and other legal experts obtain quasi-rents102 from assessing, managing, and minimizing costs borne by firms and consumers due to legal diversity.103 Harmonization threatens natural monopolies around the choice of certain foreign legal systems due to economies of scale and speciality104 accruing to lawyers in international legal firms who happen to be familiar with the chosen law. Often, these few, but sophisticated, lawyers are familiar not only with the chosen law but also with the foreign language in which the law operates. This is also true of academics who have accumulated a great deal of human capital in mastering the intricacies of their local legal systems, such that harmonization may threaten their informational stock.105 Thus, it is worth bearing in mind that implementing a new harmonized law might be costly when compared to transaction costs arising from legal advice and expertise on foreign—chosen or mandatory—applicable law.106 III. Cases of harmonization 1. Harmonization in Europe: the functioning of a common market The EU epitomizes a case of heightened plurality of sources of law due to the existence of a multi-level structure of law-making.107 On the one hand, EU private law is a collection of unsystematic legal acts governing several particular situations, in this way resembling the sectorial and problem-based approach of the common law tradition.108 On the other hand, it is a set of national codes cut across and fragmented by EU law.109 Overall, EU private law is a process in the making despite the existence of a body of rules and principles at the EU level common to nearly all legal systems. In fact, there are certain areas where there is no such body of rules and principles but, instead, several national laws with different degrees of similarity.110 Harmonization in the context of the EU differs from harmonization on the basis of international instruments. A reason for this difference is the unique institutional framework of the EU, with legislative bodies in charge of producing unifying law independently of EU Member States. This unifying law may be binding on Member States without transposition or agreement. Therefore, EU law may create rights for citizens by way of directly applicable treaty provisions, regulations, or immediately effective directives. States are under an obligation to adopt all harmonizing measures, even if they are inconsistent with national policy.111 Harmonization has passed through three stages in the EU context. First, it was driven by the ideal of producing a uniform law for Europe by means of total harmonization measures. However, difference and competition between legal systems were required. Second, a turn to minimum harmonization was taken by resorting to community legislation on the one hand, and treaty provisions on the other. In the first case, a floor was established, whereas, in the second, a ceiling was established; this left room for Member States to legislate above or below these parameters, respectively. Finally, an interdependent mechanism was set in place to eliminate differences between legal orders that might hinder freedom of movement of goods, persons, services, and capital (the four freedoms) as per the TFEU. This is attained through the combination of positive secondary legislation and negative prohibitive provisions regarding freedom of movement.112 Nevertheless, this latter. interdependent mechanism is not without tensions. Even when the four freedoms prohibit national legislation hindering internal market functioning, Member States may raise non-economic justifications to avoid that prohibitive effect; nonetheless, these justifications will not work if regulations or directives are subsequently enacted. Likewise, there is no need for harmonization when States require mutual recognition of national regulation concerning, for instance, minimum product standards for health or security reasons instead of market reasons. In other words, principles of mutual recognition and minimum standards concern technical standards so that harmonization is only useful for non-technical barriers in international trade.113 A. Harmonization versus approximation in the TFEU: genus and species or synonyms? Since its inception in 1957, the EU has looked at legal harmonization as a means to fulfil an economic end.114 The ultimate goal of harmonization is to facilitate the functioning of the common market by means of the free movement of goods, persons, services, and capital.115 The harmonization process consists of the adoption of measures in the form of regulations and directives116 for the approximation of national laws, regulations, and administrative actions.117 A regulation is a legislative act of general application upon all Member States that is binding as a whole; regulations do not require further legislative development to be applicable.118 A directive is a legislative act of particular application upon one or more Member States that is binding as to its end result; directives require further legislative development since their form and method of application are chosen by the Member State concerned.119 Some scholars theorize about harmonization by contrasting it with similar legal terms and by holding that harmonization and approximation are synonyms for each other.120 This section discusses this idea in the context of the TFEU by exploring whether harmonization and approximation are in a relation of genus to species with each other or are synonymous with each other. In order to do so, three hypotheses are tested by using the systematic interpretation of legal texts and considering procedural questions (see Figure 3). Figure 3. View largeDownload slide Three hypotheses Figure 3. View largeDownload slide Three hypotheses The first hypothesis assumes that approximation is in a relation of genus to species with harmonization; the second hypothesis is the reverse of the first hypothesis: harmonization is in a relation of genus to species with approximation; and the third hypothesis proposes that harmonization and approximation are synonyms for each other. The first hypothesis deals with the systematic interpretation of legal texts, whereas the second and the third hypotheses are supported by procedural considerations. In any case, it seems that the second hypothesis prevails over the other two; harmonization is neither a species of approximation nor synonymous with approximation. Rather, EU harmonization is the genus including approximation as a species of it. The first hypothesis proposes that harmonization is a species of the genus approximation because Part Three, Title VII, Chapter 3 of the TFEU, entitled ‘Approximation of Laws’,121 and the chapeau of Article 114(1) of the TFEU, regulating approximation measures,122 both contain and precede Article 114(4), (5), (7), (8), and (10) concerning harmonization measures.123 Furthermore, Article 115 of the TFEU on approximation directives124 follows these paragraphs on harmonization measures. As a result, the fact that paragraphs regulating harmonization measures are contained in, headed by, and followed by instances of approximation of laws, measures, and directives, seems to indicate subordination of harmonization to approximation (see Figure 4). This hypothesis based on systematic interpretation seems defeated by the second hypothesis based on procedural considerations. Figure 4. View largeDownload slide Hypothesis 1 Figure 4. View largeDownload slide Hypothesis 1 The second hypothesis is the reverse of the first and states that harmonization is the genus comprising the species approximation. This hypothesis concerns the EU legal acts and their procedures as established by the TFEU. First, paragraphs 114(4) and (5) of the TFEU regulate harmonization measures as adopted jointly by the Parliament and the Council under the ordinary legislative procedure as described in Articles 289(1) and 294 of the TFEU.125 Second, paragraphs 114(4) and (5) also regulate harmonization measures as adopted by either the Council or the Commission,126 but, in the case of the Council, harmonization measures are adopted under the special legislative procedure as per Article 289(2) of the TFEU.127 In the case of the Commission’s harmonization measures, paragraphs 114(4) and (5) refer to either non-legislative acts of general application under delegated powers as per Article 290(1) of the TFEU, or implementing measures of the Union’s legally binding acts under implementing powers as per Article 291(2), or recommendations under Article 292 of the TFEU. It is worth noting that implementing powers conferred on the Commission are justified when legally Union binding acts or measures require uniform conditions of implementation as per Article 291(2) of the TFEU.128 Third, Article 114(1) of the TFEU129 regulates approximation measures as adopted by the Parliament and the Council under the ordinary legislative procedure. Fourth, Article 115 of the TFEU regulates approximation directives as adopted by the Council under the special legislative procedure.130 Harmonization measures develop not only through both ordinary and special procedures but also through implementing powers conferred upon the Commission when there is need for uniform conditions of implementation. By contrast, approximation measures develop through the ordinary legislative procedure and approximation directives develop through the special legislative procedure (see Figure 5). Figure 5. View largeDownload slide Hypothesis 2 Figure 5. View largeDownload slide Hypothesis 2 Thus, the term ‘harmonization’ encompasses measures responding to different types of legal acts through the ordinary and special procedures as well as the use of special powers such as implementing powers. Conversely, the term ‘approximation’ distinguishes between measures and directives, where measures refer indistinctively to a handful of legal acts (regulations and directives amongst others) and directives refer to a specific type of legal act. The fact that harmonization is more comprehensive than approximation, whereas approximation allows for a fundamental distinction (measures and directives), seems to indicate that harmonization is a more generic term than approximation. The second hypothesis is further confirmed by Article 83(2) of the TFEU concerning approximation of the criminal legislation of Member States in areas previously regulated by means of harmonization measures. This case of approximation should be carried out by means of directives using the same legislative procedure, ordinary or special, followed by the adoption of the previous harmonization measure.131 Again, approximation develops using a special type of legal act: the directives. Another example confirming this second hypothesis is the case described in Article 151 of the TFEU where harmonization refers broadly to conditions of life and work as well as social systems, whereas approximation refers specifically to laws, regulation, and administrative acts.132 A possible explanation of the second hypothesis is that Articles 114 and 115 of the TFEU used to sit in the inverse order. Article 114 of the TFEU was enumerated 95, while Article 115 was 94 in a previous treaty to the TFEU—the Treaty of the European Community.133 This being the case, Article 115 of the TFEU used to precede Article 114, where Article 115 prescribes the special legislative procedure for the issuance of approximation directives, and Article 114(1) prescribes the ordinary legislative procedure for the adoption of approximation measures. In that previous order, these articles were logically followed by a series of exceptions that are the current Articles 114(4) and (5) of the TFEU (see Figure 6). These paragraphs are not only exceptions to measures adopted according to the ordinary procedure established in Article 114(1), initiated by the Parliament together with the Council, but are also exceptions to directives through the special procedure under Article 115 by the Council. These exceptions apply when Member States need to circumvent or derogate from harmonization measures so that they are allowed to maintain (Article 114(4)) or introduce (Article 114(5)), national legislation under certain circumstances and procedures. As a result, harmonization measures seem to admit exceptions regardless of the fact that they are referred to as harmonization measures, Article 114(4) and (5) of the TFEU, approximation measures, Article 114(1), or approximation directives, Article 115—not to mention those exceptions to legislative acts emanating from the Commission acting under implementing powers, Article 114(4) and (5). Figure 6. View largeDownload slide Previous order of Articles 114 and 115 of the TFEU Figure 6. View largeDownload slide Previous order of Articles 114 and 115 of the TFEU In this sense, the language of exceptions is cast more broadly than the language of the enabling powers to legislate, which is consistent with the idea of positive freedom and the principle of legality in administrative law. This is also consistent with legislative techniques in constitutional law where the allocation of powers to regulate is cast more broadly for residual powers than for exclusive powers. The third hypothesis holds that harmonization and approximation are synonyms. This could be so because Article 114(1) of the TFEU begins by expressly embracing each of the following provisions in the pursuit of a particular economic purpose.134 Subsequently, it follows a set of references to both approximation135 and harmonization136 measures addressing law, regulation, or administrative rules at the State level. However, an inconsistency arises within the third hypothesis that becomes apparent when mention is made of two different procedures, as explained above. On the one hand, paragraphs 114(1), (4), and (5) of the TFEU deal with the adoption of measures by the Parliament in conjunction with the Council under the ordinary legislative procedure,137 as per Articles 289(1) and 294 of the TFEU. On the other hand, paragraphs 114(4) and (5) refer not only to these measures jointly adopted by the Parliament and the Council but also to measures adopted individually either by the Council or the Commission.138 At this point, this hypothesis on synonymy seems defeated by the difference in procedures for approximation and harmonization measures; they are not the same thing if they develop through different types of procedures. Harmonization measures, in the case of harmonization in paragraphs 114(4) and (5) of the TFEU, cover measures adopted through both the ordinary and special procedures by the Parliament and Council jointly, the Council on its own, and by the Commission on its own. Approximation measures refer in Article 114(1) particularly to measures adopted by the Parliament, together with the Council following the ordinary legislative procedure. This is confirmed by the particular use of approximation in Article 115 of the TFEU referring especially to the issuance of approximation ‘directives’ by the Council following the special legislative procedure, as mentioned above. Thus, it becomes clear that harmonization and approximation are not synonyms. Harmonization covers measures broadly encompassing regulations, directives, or decisions under the ordinary and special procedures. Approximation refers specifically to two sets of measures defined by virtue of two different procedures. These two sets of measures are, on the one hand, regulations, directives, or decisions adopted under the ordinary procedure, and, on the other, distinctive directives adopted under the special procedure (see Figure 7). Figure 7. View largeDownload slide Hypothesis 3 Figure 7. View largeDownload slide Hypothesis 3 Summing up, the first hypothesis deals with the systematic interpretation of legal texts, whereas the second and the third hypotheses are supported by procedural considerations. In any case, it seems that the second hypothesis prevails over the other two; harmonization is neither a species of approximation nor synonymous with approximation. Rather, EU harmonization is the genus including approximation as a species of it.139 Case law from the CJEU seems to support the above findings. In Case C-270/12, the court interpreted the meaning of approximation as per Article 114 of the TFEU.140 Measures for the approximation of State provisions entail a discretional power to choose the most appropriate method of harmonization. It can be inferred that, on the one hand, the power to issue measures—including directives—for the approximation of State provisions is a regulated power; approximation measures must be issued by particular legislative organs following specific legislative procedures as per Articles 114(1) and 115 of the TFEU. On the other hand, the power to choose the method of harmonization to achieve the common market goal is a discretional power, which in this—Case C-270/12—consisted of delegating powers to a Union body, office, or agency to implement the harmonization measure.141 In another decision, C-66/04,142 the court held that such discretion may also consist of choosing the most appropriate harmonization technique—the establishment of a procedure for authorizing the use of products throughout the EU143—in order to achieve the desired result.144 If approximation consists of a qualified, legislative power to choose from several harmonization methods, it follows that approximation is a species of the genus harmonization. In the TFEU, harmonization comprises the many ways of achieving approximation of laws. 2. Harmonization in the USA Another case of harmonization is the federal harmonization in the USA led by the American Law Institute (ALI) and the Uniform Law Commission (ULC). The ALI is an initiative of the legal profession aimed at the production of restatements of the law. The first meeting of the ALI in 1923 recorded the situation that motivated the restatements as consisting of: an unsatisfactory state of the law; an increasing rate of reported cases overwhelming practitioners’ capacity; badly drawn up statutory and administrative provisions causing uncertainty and complexity; a disagreement in the legal profession regarding the fundamental principles of the common law; and imprecision of legal terms in use.145 At that time, the US private law consisted essentially of State law, not federal law. Since the law originated in 50 different state jurisdictions, a central problem was that the many thousands of precedents had made the law more, rather than less, opaque and uncertain. Hence, restating the law was thought to be the only way to restore its original clarity. Currently, the US restatements consist of black-letter rules together with commentaries on each rule, examples, and reporter notes on relevant cases and statutes allowing the black-letter rules to work as a gateway to these cases and statues.146 A restatement possesses no more authority than a legal treatise; it is an opinion of what the law is or ought to be. For this reason, its use requires a critical and responsible stance when courts apply and find the law applicable to judicial decisions. However, restatements enjoy a degree of practical authority when courts resort to them as if they were an actual source of the law since they reflect the current law or contain rules that should be the law.147 Actually, the ALI was deemed a quasi-legislator and not a mere scholarly organization so that its restatements, despite not being legislative acts at all, have acquired the authority of a primary reference to future law. Such authority matches that enjoyed by prior decisions emanating from the highest court, thereby contributing to legal certainty and predictability as an instrument of rule making.148 Restatements in the USA have covered contract law in two restatements in 1932 and 1981, respectively; torts law in three restatements in 1934–9, 1965–79, and 1998–2012, respectively; and, property law in three restatements in 1936–44, 1977, and 1997–2011, respectively. Other restatements have covered agency, conflict of laws, employment law, restitution and unjust enrichment, security, suretyship and guaranty, and trusts, amongst others.149 Another example of US harmonization is the work of the ULC. The ULC is a coordinate effort for unification since 1892 by the federal states acting through delegated commissioners. It has produced approximately 200 uniform laws as blueprints, which have no binding force while they are sent to the federal states for adoption. The most significant legislative production is the Uniform Commercial Code adopted by all states (with some partial exceptions by Louisiana) and unifying the law throughout the country. However, in some cases, states have followed the uniform laws without adopting them, and more than 40 out of 50 states have adopted only 10 percent of the uniform acts, not to mention their divergent interpretation by the courts. In general, the ULC’s impact on unifying statutory law is significant but confined to crucial areas of the law.150 3. Harmonization in Australia In regard to legal harmonization in general, Australia has been characterized in Halberstam and Reinmann’s study of 20 different jurisdictions on federalism and legal unification151 as the most unified common law jurisdiction amongst the United Kingdom, Canada, India, and the USA, yet less unified than the civil law systems.152 In Australia, as far as top-down harmonization is concerned, central constitutional rights are a weak unifying force, whereas central legislation plays a moderate role. Central legislation harmonization operates through regulatory incentives to the States for the adoption of centrally determined rules. More importantly, central court power to authoritatively interpret State law brings about a great deal of uniformity and convergence. Similarly, the law reform commissions act as quasi-governmental institutions coordinating legal reform and delivering a unifying effect.153 As far as coordinate harmonization is concerned, legislative cooperation among States operates by delegating legislation to the centre, or by adopting Commonwealth law in the context of an intergovernmental agreement.154 Another cooperative mechanism is the consideration by some States of other States’ laws, in some cases followed and enacted by them. State judiciaries also engage in considering other States’ judicial decisions with a unifying effect not only in case law but also in statutory interpretation. Exceptionally, the Standing Committee of Attorneys General plays a role in developing uniform law.155 Another driver is legal education, through the national-scale recruitment of law students and the inclusion of national law in a curriculum still dominated by State law. Legal practice may also play a role in unification by affording mobility to practitioners between jurisdictions since they enjoy generous rules of mutual recognition of bar exams and membership. International law’s influence on judicial interpretation of domestic law has a limited impact on unification. Membership in international projects of international unification has a focused impact such as those advanced by Unidroit, UNCITRAL, and the Organisation for Economic Co-operation and Development; one of them is the adoption of the UNCITRAL Model Law on International Commercial Arbitration.156 In particular, Australia’s contract law is law at the domestic level; it diverges between States due to legislative reforms and case law, resulting in considerable compliance and information costs. Differences originate from the diversity of sources of law, which are notable for: the amount of legislation; inconsistency in the legislation; and diversity in rules of privity of contract, parties’ capacity, and proportionate liability.157 Despite the state of divergence in Australian contract law, its harmonization mainly by codification has been criticized on the ground of the loss of informational value represented by judicial precedent and case law. Another criticism of Australian contract law harmonization points to the risk of error in formulating an efficient set of default or mandatory rules. Wrong default rules lead to costs in circumventing these rules, while mandatory rules impose opportunity costs to welfare-enhancing trade because some mandatory rules clash with lex mercatoria [merchant law] even when the latter is not always efficient.158 These arguments tend to overlook the fact that harmonization—for example, via codification—does not invalidate the correcting and interpretative role of high courts. For instance, in codified legal systems, a high court sits on the top of the legal system and produces valuable knowledge when deciding cases by means of correcting contradictions (antinomies), filling gaps (lacunae), and interpreting codes. This informational stock also accumulates over time; in the civil law tradition, it is called ‘jurisprudence’ and is considered a source of law after the codes, statutes, regulation, analogy, custom secundum legem, and scholarly doctrine. ‘Jurisprudence’ in the civil law sense fleshes out the content of rules that have also been systematized by scholarly doctrine; once it diverges significantly from the current code, it warrants reform of the code by the incorporation of up-to-date jurisprudence into new codified rules.159 Arguments in favour of Australian contract law harmonization refer to the enhancement of certainty, together with the reduction in costs of drafting contracts, civil litigation, and international arbitration. This line of argument advocates for an idea of organic harmonization while adopting good faith as an overarching and unifying concept. Recommendations as to the form of a harmonization process concern the adoption not of detailed rules but, rather, of principle-based rules, taking the form of general provisions and avoiding technical and detailed prescriptive solutions.160 Attempts to reform Australian contract law have sought its simplification. In 1992, the Victorian Law Reform Commission presented its Australian Contract Code consisting of 27 general provisions informed by the notion of unconscionability.161 Authors of this project, Ellinghaus and Wright, contended that under the guise of certainty provided by current detailed rules, courts were interpreting, applying, and modifying the rules by drawing on particular notions of fairness, reasonableness, justness, equity, good faith, or conscience in the case at hand. By resorting to an overarching notion, such as unconscionability, these authors sought to simplify the application of the contract law with the aim of increasing certainty. However, a pragmatic view of the problem prevailed because, actually, contractual relations are based on trust, reputation, pressing needs, cost, or convenience, which, in the end, lessens the role of the law in planning and drafting contracts.162 An initiative for reforming Australian contract law was presented in 2011 with a focus on codification due to an increasing engagement with the global economy, which necessitates facilitating doing business with Australia and Australian businesses.163 In 2012, another initiative was introduced, but it did not focus on codification; rather, it tried to explore how to reform the current contract law by addressing the costs, difficulties, inefficiencies, and loss of opportunities it has created.164 4. Harmonization in Latin America The last case on harmonization165 relates to Latin American countries,166 which, despite sharing a common legal heritage, do not enjoy a high degree of legal harmonization.167 The common denominator between these countries is their Latin-based language; Spanish is spoken in all of these countries except Brazil, where Portuguese—very similar to Spanish—is spoken. Some scholars locate Latin American legal tradition in the Romano–Germanic legal family under the influence of the French tradition,168 while other scholars locate it in the Romanistic legal family adopting the French Civil Code as a model.169 However, the uniqueness of Latin America ascribes it as a legal subsystem or a legal family in its own right170 as well as an instance of comparative law, since it mixes sources from civil law with a strong influence of the common law via US law.171 Spontaneous harmonization characterized the Latin American process during the 19th century due to the pervasive use of sources, such as the Code Civil [Civil Code] (France) and Roman law, in their codes together with the mutual influence of the codes themselves. However, in the 20th century, this process was reversed by legal reforms inspired by other sources beyond Latin American boundaries, such as the Italian Civil Code and the Bürgerliches Gesetzbuch [Civil Code] (Germany). There has also been the influence of US legislation on commercial law, particularly in the banking, financing, and corporate sectors. This is not to say that Latin American legal systems engaged in blind legal transplantation of US law; rather, they adjusted it to work with their European background. Besides this forward-and-backward spontaneous development, harmonization in the region has also been driven, on the one hand, by the adoption of private international law instruments and, on the other hand, by coordinated initiatives of legal integration.172 Private international law (PIL) harmonization—based on conflict of law rules—was furthered through common codification and specialized international conventions.173 First, codification pursued the unification of PIL rules when a common set of rules was adopted by all Latin American countries following the Congress of Jurists of Lima in 1877–78; that meeting produced a set of conflict of law rules signed by seven Latin American countries. The second Congress of Jurists, meeting at Montevideo in 1888–89, produced eight treaties on private and procedural international law. This process led finally to the adoption in 1928 of the Bustamante Code by the Sixth International Conference of American States in Cuba;174 the Code was ratified with significant reserves by 15 States out of 20 signatories.175 In 1994, the Inter-American Convention on the Law Applicable to International Contracts was adopted; however, since it is in force only between two out of five signatory countries, it is hard to claim that harmonization in Latin America via codification of PIL has been successful. Second, specialized international conventions for PIL harmonization were advanced through the Inter-American Specialized Conferences for Private International Law176 established by the Organisation of American States (OAS). The OAS juridical committee adopted a specialized (sectorial) approach throughout their seven conferences divided into three categories: international commercial law, international procedural law, and international civil law. As a result, 26 instruments have been drafted: 20 conventions, three protocols, two uniform documents, and one model law. Among them, the more significant instruments are the Inter-American Convention on Conflict of Laws Concerning Bills of Exchange, Promissory Notes and Invoices (1975); the Inter-American Convention on Extraterritorial Validity of Foreign Judgements and Arbitral Awards (1979); and the Inter-American Convention on Conflict of Laws Concerning the Adoption of Minors (1984).177 Coordinated initiatives of legal integration for Latin America have served the economic purpose of promoting cross-boundary trade introduced by organizations such as the Andean Community, established in 1969; the Southern Common Market, in 1991;178 the Latin American Integration Association, in 1980;179 the Bolivarian Alliance for the Americas, in 2004;180 and the Union of South American Nations,181 in 2008.182 More recently, academic initiatives have been launched following European projects. One of them was established in 2008 as a South American Group for the Harmonisation of Latin American Private Law with the idea of devising a Latin American juridical model and laying the foundations for a Code on the Law of Obligations. In 2010, another group organized a Latin American congress of private law with the aim of exploring the foundations for a Latin American code of contract law. In 2011, the 32nd Conference of Private Law was held in Argentina to pursue the creation of a network for the normative integration of private law in Ibero-America. Likewise, in 2010, a project was initiated under the name of Principles of Latin American Contract Law (PLACL)183 with the support of the French Fondation pour le droit continental [Civil Law Initiative] and the Chilean Fernando Fueyo Foundation at Diego Portales University. This latter project involves lawyers from Argentina, Brazil, Colombia, Chile, Paraguay, Uruguay, and Venezuela.184 The PLACL seeks to inspire legal reform as well as to assist courts and arbitral tribunals in the interpretation of domestic law in the way of a Latin American lex mercatoria (merchant law) or non-State law such as the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the PICC—these latter being invoked by Latin American courts and arbitral tribunals. The PLACL is based on a series of national reports as a means to ascertain the Latin American legal identity as contained in the doctrinal literature and case law of each jurisdiction.185 The outcome of these reports, published in 2012,186 will emulate the Principles of European Contract Law (PECL) by consisting of black-letter rules together with comparative notes and comments.187 The PLACL was presented under the auspices of the Institute of European and Comparative Law at Oxford University in June 2015. It consists of 111 articles grouped into chapters and sections including general principles, formation, nullity, simulation, third parties, interpretation, performance, and non-performance. In particular, the PLACL faces a great challenge regarding its role as either a restatement or an innovative set of solutions in the face of differences between jurisdictions. Some jurisdictions are conservative whereas others are progressive in regard to the furtherance of the freedom of contract principle, weaker party protection, judicial revision of contracts, termination, the social function of contract, and the essentiality of the contractual cause. As a result, there is a need for normative and political choices that will consequently shape the market or the social orientation of any given set of principles. Other challenges to the PLACL are questions regarding the inclusion of as many jurisdictions as possible, nature of the initiative, and degree of independence vis-à-vis political support amongst others.188 IV. Approaches to models of harmonization Harmonization has been on the agenda of international organizations and countries since the TFEU in 1957, and it has been referred to variously as approximation, coordination, and harmonization. These terms point towards the specific economic goal of facilitating the working of a common market through the free movement of persons, goods, services, and capital. Similarly, the literature of comparative law refers to unification as another method of legal integration prior to harmonization. Unification is a method of legal integration that seeks complete identity of legal rules, whereas harmonization pursues the greatest degree of similarity possible while preserving necessary diversity.189 The recent literature of law and economics has pointed out that the antithesis between harmonization and unification is the result of a narrow focus on the greater or lesser degree of similarity of outcomes. As a result, the literature of law and economics expands the focus to include the mechanisms responsible for reducing differences as the variants of harmonization.190 These mechanisms presuppose that there are differences between legal systems at the level of rules while suggesting that such differences can be turned into similarities. These various approaches to harmonization are represented below in the form of four models. 1. From inputs towards outcomes: common principles or best solutions and the unification or harmonization of rules The comparative law literature focuses on inputs to and outcomes of the harmonization or unification agendas. In regard to inputs, the process of EU harmonization is a case in point as described by comparative studies on the national and supranational law. From the inputs perspective, the EU process is based on two approaches: the research on common principles or core rules (the ‘common principles approach’) and the search for the best solutions (the ‘best solutions approach’).191 The first approach assumes that common principles exist across the laws of Member States and that they can be used as a guideline to develop the EU law. The second approach does not presuppose agreement between national laws but looks for a normative standard regarding the quality of a concept, principle, or rule at the national level.192 By way of example, the PICC and the PECL correspond to the common principles approach, whereas the DCFR represents the best solutions approach.193 The common principles and best solutions approaches are not without limitations and tensions. On the one hand, the breadth and level of abstraction limit the research on common principles since they may accommodate a greater or lesser degree of commonalities between national laws. On the other hand, the argument about quality causes the search for the best solution to drift away from common principles of national laws; the best rules take the form of a normative proposition that is not conditioned by commonalities. In defence of this approach, it is argued that the solutions themselves are legitimate insofar as they represent an alternative to existing common principles; that is, their legitimacy is contingent on their merits and the disadvantages of common rules. Tensions between these two approaches are evident in the EU when the best solution seems to align with supranational rather than national goals. For instance, a rule appropriate for promoting the common market at the EU level may be at odds with the national level requirement for rules promoting transactions on a smaller scale. In Reiner Schulze’s words, comparing common principles and/or best solutions at the supranational level with those at the national level may amount to comparing apples and oranges.194 Notwithstanding, a combination of the common principles and the best solutions approaches is sometimes necessary, which leads to four categories: common and best rules; common but bad rules; uncommon but best rules; and uncommon and bad rules.195 For example, the production of rules reflecting the current state of affairs requires a significant degree of commonality between jurisdictions so that the restatement of the law becomes feasible. Some PICC and DCFR rules seek to reflect what is actually common between the legal systems, rather than replacing the current rules with rules subjectively determined to be better law, which is the case with rules that follow policy considerations. Other PICC and DCFR rules reflect the best rules approach by making a choice between various national laws, or completely new rules, or even by making a compromise between them; the best rules approach was adopted when there were no significant commonalities between jurisdictions.196 The rationale for the uncommon-but-best-rules combination is that these rules will act as the reference point for the development of future rules.197 Despite tensions between the common principles and the best rules approaches, it is worth taking into account that legal harmonization considers not only the input of black-letter rules but also their similarities of outcomes, regardless of there being either common or best rules.198 As far as outcomes are concerned, comparative law focuses on the greater or lesser degree of similarity between the current and the proposed rules. Unification refers to the prescription of identical rules for divergent jurisdictions, whereas harmonization prescribes similar but not identical rules, leaving a certain degree of latitude to local legislators.199 On the one hand, it could be argued that rules that have become identical through unification may still produce disparate results as a consequence of divergent judicial application and interpretation—for instance, between jurisdictions having civil law and common law legal traditions.200 On the other hand, under the functionalist perspective, it is believed that roughly similar rules could lead to convergent outcomes in terms of greater economic integration and commutative justice.201 Another stance of the outcomes approach argues that harmonization takes different forms—namely, restatements, principles, codification, re-codification, and model laws—depending on the function of the set of rules to be proposed. Restatements systematize case law together with comments, whereas principles distil general rules from case law and statutes in the common law tradition and from codes and special laws in the civil law tradition. An example of restatements is the ALI’s Restatement (Second) of Contracts in the USA and equivalent examples of principles are the the PICC and PECL. While restatements and principles confine themselves to a particular area of the law, codifications comprise the rules from not just a particular area of the law but also from broader areas of the law. An example of codification is the DCFR in Europe that comprises, besides the law of contracts, the law of obligations, non-contractual liability (torts), unjustified enrichment, sale of goods, property, and trust. A distinctive feature of codification is the abstractness and generality of its rules; however, this feature does not prevent codification from focusing on a particular field of the law, such as contracts. A code is also characterized by the subsidiarity of its rules against special rules, as in the principle of lex specialis derogat legi generalis (special law repeals general laws).203 The reason for that subsidiarity is that special rules are a less comprehensive set of rules that focus on a particular area of the law defined by specific policy goals, such as the protection of a particular economic activity or group of individuals. An example of these special rules is the CISG, which focuses on a particular economic activity by using rules of contracts and property, amongst others. Special rules such as the CISG take the form of a model law, which is treaty law for the adoption by Member States of the convention as the national law applicable to international transactions. Finally, harmonization in the EU may take the form of re-codification as the process of restating what is currently contained in the civil codes of countries with a civil law tradition. However, it is argued that re-codification would lead to the dogmatization of the legal status quo, thereby preventing innovative legal solutions that could be more efficient and conducive to economic integration and social welfare.204 2. Dealing with diversity Other explanatory and normative models of harmonization focus on legal diversity. As a case in point, the EU comprises not only civil and common law legal families but also former socialist families that are in the process of development, therefore bringing more diversity.205 As a result, harmonization consists of two courses of action to cope with legal diversity in the face of the plurality of sources and multi-level governance—namely, elimination and accommodation.206 The former eliminates diversity by the imposition of a model law and the territoriality criterion, while the latter encourages diversity by coordination between States as well as competition. Elimination consists of harmonization via the imposition of a model law. The DCFR, for instance, aims at eradicating the plurality of sources such as the 28 EU jurisdictions, EU Parliament rules, CJEU case law, and private order regulation. Another elimination strategy consists of the adoption of a criterion of territoriality to solve the problem of several rules being applicable to the one situation. Elimination by territoriality allows conflicting rules to exist and to compete for the user’s choice. However, territoriality runs against the EU policy of free movement of people, goods, services, and capital as well as against private order regulation. This proved to be the case with the adoption of the Rome I Regulation on conflict (choice) of law, which reduces the ambit of parties’ autonomy.207 While elimination by territoriality concerns citizens’ choices, accommodation is focused on States’ choices. Accommodation concerns coordination, as in the case of the EU open method of coordination, according to the 2000 Lisbon European Council. Accommodation works on the basis of Member States’ mutual acknowledgement of policy goals but leaves to each State the question of whether and how to coordinate diversity. Accommodation involves the EU Commission, the Council, and the States so that the former two establish guidelines and set benchmarks, while the States produce national plans and reports to the Commission and the Council. The Commission and the Council can make recommendations and even identify best practices; this dynamic allows States to learn from each other and to experiment with law-making. Nonetheless, this method of coordination is limited in terms of the suitability and rationale of an EU solution for the national level.208 Accommodation also concerns competition in that it jettisons demands for coherent, unitary, and State-centred models of regulation; indeed, it upholds plurality as a constituent of legal systems and demand-led competition. In other words, citizens should be completely free to choose the legal system that best suits their needs while being able to recognize the limits imposed by mandatory rules at the national level. Furthermore, diversity in the EU requires consideration of arguments in favour of and against legal solutions, instead of focusing on legal rules, principles, and concepts. In doing so, parties should be able to take full advantage of their choice of legal system beyond demands for equality before the law but, of course, within clear-cut national mandatory rules.209 3. The sources of the law By looking at the sources of the law in federal systems, it is possible to discern two models of unification that achieve a higher degree of rules identity than harmonization—namely, top-down and bottom-up unification. Top-down unification is the result of factors such as central legislation, constitutional norms, and judicial decision-making, which relate to the degree of structural centralisation of the federal system. Bottom-up unification depends on factors such as coordination by State actors, projects undertaken by non-State actors drafting principles or rules, the impact of legal education and legal practice, and the adoption of international legal norms.210 The main driver in the top-down model is central legislation consisting of federal legislation in the form of codes of statutes. This is usually the way in which uniformity is achieved in many federal systems, as is the case with directives in EU law. Second, constitutional norms contained in federal constitutions have a unifying effect since they are of immediate application throughout the system, displacing State-level norms. These norms relate to fundamental rights and, in the EU case, may take the form of treaty law applied directly. Third, central adjudication or judicial decision-making may have a bearing on legal uniformity through central or federal courts via the preservation of uniform interpretation of federal law. Alternatively, central or federal courts create uniformity through the provision of authoritative interpretation of State-level laws. In the case of the EU, the CJEU has jurisdiction over EU law only, thus preserving uniformity by providing binding interpretations of secondary EU law—namely, regulations and directives. Indirectly, the CJEU contributes to uniformity since EU secondary laws prevail over Member States’ laws, forcing these latter to bring their domestic law into conformity with CJEU interpretation. Along with these three drivers of top-down unification, structural centralization plays an influential role to the extent to which governmental power resides with the central or federal level rather than the State level. As a result, federations conceived as single entities tend to show greater uniformity than federations conceived as the congregation of different Member States.211 As for the bottom-up model of legal unification, coordination amongst State actors may lead to unification in two ways—namely, through State legislatures and State courts. One example of State legislative coordination is the ULC in the USA, with its Uniform Commercial Code. In the case of judicial coordination, examples are very rare because the adoption of similar judicial rules requires that similar cases reach an important number of courts following similar criteria concerning only one particular question in a legal area. Second, projects led by non-State actors occurring in the USA, Mexico, and the EU have a moderate impact on legal uniformity. An example in the USA is the ALI and its restatements of the law, which have either influenced court’s decisions or been adopted by them, reflecting consensus on legal rules rather than themselves informing the production of rules. The example of projects on principles of European contract law demonstrates that this kind of process may contribute to legal unification in an incremental and piecemeal fashion. Third, the influence of legal education and legal practice are not self-evident since they focus on the national level instead of the local or international level. This could be counterintuitive since national consciousness may seem more conducive to uniformity, yet the US case shows a high degree of diversity while the European case exhibits a negligible amount of teaching and practice of EU law. The EU case tells us that legal, cultural, and linguistic barriers remain unsurmountable. Fourthly and finally, international norms may have a limited influence on federal or EU law since they take the form of treaties that are of no immediate application. The case of the CISG, which is unusually of immediate application, creates mixed results where domestic law has been brought into conformity with the CISG since not only does it unify the law in those legal systems, it also fragments the law when another domestic law is applicable.212 Thus, in terms of the impacts of these two models, Mathias Reimann and Daniel Halberstam’s study of 20 different federal jurisdictions suggests that top-down models of legal unification are more successful than bottom-up models, especially top-down models based on central legislation. This is particularly true of commercial and market regulation laws, while bottom-up efforts have proven of limited efficacy in classic, core areas of private law such as contract, tort, property, family, and succession laws in the EU. With respect to other drivers of the top-down models, constitutional norms may have an impact when they have a bearing on private laws, which is not the case in the EU, whereas courts may have also an impact when they can modify State law. As for bottom-up models, coordinate State action, even if led by courts, could contribute to legal unification, which is not the case in the EU. The impact of non-State actor projects has been somewhat confined to scholarly circles. Legal education and practice together with international norms have shown the least degree of impact of other bottom-up drivers.213 Nonetheless, it can be argued that, even though Reimann and Halberstam’s findings look quite intuitive, since forces of integration and centralism are more conducive to unification, it should not be forgotten that top-down approaches with central legislation and adjudication do not benefit from consensus and competition. Hence, it could be inferred that top-down approaches might lead to rules of sub-optimal quality similarly to bottom-up approaches solely orientated to the best rule even if benefiting from consensus and competition. Thus, it seems that the greater or lesser degree of similarity as a function of harmonization is independent of the quality of the rules, even when factoring in consensus and competition. Likewise, it becomes clear that the area of private law dealing with commercial and market regulation is more amenable to unification since the main interest is the protection of society as a legitimate duty of legislatures rather than a private sector goal, unless the latter captures the law-making power. Society possesses a less heterogeneous set of interests than do private parties to market transactions; protection of weaker parties and fairness and good faith are less heterogeneous than lower or higher thresholds of civil liability and varied monopolistic practices. That is to say, the role of the central government is more likely to be controlling, supervisory, and constitutive of commercial and market structures than to be facilitative or promotive of private, exchange relationships. 4. Focusing on the process instead The law and economics literature views the processes leading to harmonization as a variety of mechanisms that assume a high degree of legal fragmentation and result in the similarity between the doctrinal content of legal rules. These processes are spontaneous convergence, coordination game, and political fiat.214 A. Spontaneous convergence One process leading to harmonization is spontaneous convergence, whereby a legal system adopts rules successfully applied in other jurisdiction. Three mechanisms are likely to drive legal systems towards the process of spontaneous convergence: rational herding and informational cascades, competition amongst jurisdictions, and knowledge transfer and diffusion. First, rational herding215 and information cascades216 occur when legal systems need to adopt a legal solution to a given problem and they possess limited information about which is the best solution. At this stage, legal systems resort to adopting legal rules already adopted by other legal systems; this choice proves to be wrong if the source legal system has already made a wrong choice. This occurs not only in the legislative branch of a legal system but also in the judiciary.217 Second, competition between jurisdictions presupposes that each legal system will adopt an optimal set of rules in order to provide the maximum benefits to prospective customers: individuals and firms. So long as demand for optimal rules is homogeneous enough across legal systems, these legal solutions will become similar and harmonization will take place via competition between legal systems.218 This point has been considered at length above as harmonization through regulatory competition. Third, knowledge transfer and diffusion refer to the adoption of foreign legal techniques for achieving certain outcomes—that is, legal solutions for an existing social problem. Lawyers and lawmakers learn these techniques of rule design from other jurisdictions and then import them. This process of importation of legal rules, doctrines, and ideas is also known as legal transplants.219 However, lawyers and lawmakers not only import these legal techniques, they also use them to assess existing legal solutions in their own jurisdiction and to avoid failures observed elsewhere. Knowledge transfer and diffusion enhance law-making by legislators, judges, and the public administration, particularly in the design of legal rules, which could eventually lead to convergence of legal systems.220 Ultimately, these three mechanisms lead to spontaneous convergence or harmonization, which differs from other phenomena such as harmonization through coordinated action and political fiat. B. Coordination game Coordinated action towards harmonization results from the cooperative actions of a number of States without the assistance of an external agent.221 For instance, States negotiate an international agreement concerning a piece of legislation and, subsequently, implement it in their legal systems. Implementation may take place either through direct transposition of the agreement into the domestic legal system or adoption of the content of the agreement via legislation. Likewise, an international, semi-public, or private organization may propose a model law based on existing legislation, but its implementation may not be compulsory. Irrespective of the degree of harmonization achieved through coordinated action, spanning the range from full harmonization to complete failure to harmonize, it is the coordination action that characterizes this process.222 This coordination action may, in turn, trigger spontaneous mechanisms leading to convergence or harmonization. For instance, preparatory work for a model law may lead to knowledge transfer and diffusion; a model law may generate regulatory competition between jurisdictions; and an institutional initiative may produce an informational cascade with one jurisdiction following another in the adoption of rules.223 C. Political fiat Finally, harmonization through political fiat results from a political decision produced at a higher level of government. For instance, it may occur at the top level of a federal system or a transnational organisation; an example is the adoption of regulations and directives in the EU. Its aim is to achieve a greater or lesser degree of similarity in substantive rules applied at lower levels of the legal systems by subordinated governmental entities.224 In the EU, the approximation—or, better said, harmonization225—of legal systems occurs as established in the relevant treaty (the TFEU) and develops through instruments such as regulations and directives enacted by transnational, legislative bodies—that is, the EU Parliament, Council, and Commission. This process of ‘approximation’ warrants national governments a certain discretion at the level of implementation so long as they observe the goals and requirements established in the harmonizing instruments. Given such a degree of latitude allowing certain diversity, the EU’s ‘approximation’ of legal systems should not be characterised on the basis of similarity of end results—that is, as either harmonization or unification as per the comparative law literature. The reason is that EU ‘approximation’ is more consistent with harmonization than unification despite the fact that the two latter are usually led by political fiat; yet, harmonization pursues a lesser degree of similarity than unification. Thus, in the context of this taxonomy, it is pointless to characterize the EU ‘approximation’ as harmonization or unification; the focus of this taxonomy is the process itself as led by political fiat, rather than the lesser or greater degree of similarity achieved.226 In the law and economics literature, what attracts criticism is the mechanism underpinning the harmonization processes rather than the greater or lesser degree of similarity achieved at the content level of the legal rules.227 Criticisms hold that it is difficult to establish an abstract benchmark of optimality against which to assess the lesser or greater degree of similarity achieved.228 Furthermore, another line holds that similarity of legal rules does not bring about homogeneous behaviour among economic agents; actually, there are other factors responsible for the heterogeneity of agents’ behaviours that could provide a standard to measure optimal harmonization.229 V. Conclusion Harmonization is a complex legal phenomenon that involves not only top-down processes of legal integration but also bottom-up initiatives of legal development. Harmonization goes beyond mere unification of legal rules so that it focuses on similar solutions for legal transactions with the aim of reducing transaction costs arising from heightened legal diversity. Harmonization of legal rules competes with conflict-of-laws and choice-of-law solutions to legal diversity while seeking to promote competition between legal orders such as private, State, and international sources of law.230 In the process of competition between legal orders, harmonization faces challenges posed by heterogeneous demands for quality and limited supply choices.231 Harmonization threatens the current state of affairs and imposes switching costs on the adoption of new concepts, rules, and paradigms. Familiarity with the current, fragmented set of rules constitutes one of the major obstacles for harmonization since it is actually confounded with the quality of legal rules.232 Language and legal traditions are other barriers to harmonization since rules are made of concepts embedded in national and local theoretical models that require a functional approach to discover the legal equivalents.233 This is counter-intuitive because international commerce has relied on contracts as regulated by codified rules for more than two millennia, a regulatory framework built upon customary rules distilled by practices and dispute resolution mechanisms. International commerce presupposes a global order based on parties’ consent as the justification for enforceability and public policy as the limit of parties’ consent; this is so despite being fraught with contradictions and gaps resulting from divergent national and local legal orders. Thus, harmonization is better understood as a legal phenomenon seeking legal integration within the global legal order234 and is superior to private international law solutions such as conflict and choice-of-law rules. Harmonization as a method of legal integration also benefits from regulatory competition despite the fact that regulatory competition replaces transaction costs with opportunity costs where the choice of a more efficient legal order is not possible. That is, the cost of familiarity with a new legal order—costs of hiring specialized legal advice—transforms into the cost of becoming subject to the application of the most efficient legal order—for instance, having to register a legal person or company in a particular jurisdiction, transacting over the Internet, or establishing a new domicile. Therefore, opportunity costs translate into a barrier for reducing transaction costs that only the fittest can internalize by competing in, and adapting to, more than one legal order either private, State, or international. As demonstrated in this brief discussion on the concept of harmonization, there is no shared opinion as to what is harmonization, its aims, scope, focus of intervention, subject matter, or outcomes. Nonetheless, it is submitted that harmonization is a complex phenomenon explained through different processes of law-making arising from private, State, and international sources or drivers. Its aim is to provide a functionally similar set of rules that facilitate the exchange of goods and services amongst economic agents across jurisdictions in an efficient manner. There is still research to be done regarding normative models for harmonization considering questions such as: what is quality in the rules; how can we best manage heterogeneity on the demand side and self-serving practices on the supply side; which is the most versatile form to adopt for different contexts; and how do we achieve greater transparency between diverse but functionally similar rules? Footnotes 1See generally R Coase, The Nature of the Firm, 4 Economica, N.S., 386 (1937); Oliver E Williamson, The Economics of Organization: The Transaction Cost Approach, 87 Am. J. Soc., 548 (1981); Oliver E Williamson, The Theory of the Firm as Governance Structure: From Choice to Contract, 16 J. Econ. Persp., 171 (2002). However, in this article the term ‘transaction cost’ takes its widest possible sense to designate the costs resulting from disparity between contract laws in cross-border transactions as compared to costs incurred when transacting in a jurisdiction governed by one contract law. For this reason, this article assumes that the former is costlier than the latter; hence, this article does not attempt to test the validity of that assumption. 2 Ingeborg Schwenzer, Who Needs a Uniform Contract Law, and Why?, 58 Vill. L. Rev., 723, 725 (2013) (giving an example where parties to a contract from different countries, whose bargaining power is not such so as to impose their choice of law on their counterpart, might incur unforeseen legal experts’ fees to produce evidence in court proceedings of the content of the law governing the contract). But see David Campbell and Roger Halson, Harmonisation and Its Discontents: The Transaction Cost Argument for the European Contract Code, in The Transformation of European Private Law: Harmonisation, Consolidation, Codification or Chaos? (James Devenney and Mel Kenny eds, 2013) (challenging the justification for harmonization on the basis of transaction costs). 3Treaty on the Functioning of the European Union, opened for signature 13 December 2007, 2012 O.J. (C 326/1), at 47–390 (entered into force 1 December 2009). 4 Eva J Lohse, The Meaning of Harmonization in the Context of European Union Law: A Process in Need of Definition, in Theory and Practice of Harmonisation 282, 282 (Mads Andenas and Camilla Baasch Andersen eds, 2011); Martin Boodman, The Myth of Harmonization of Laws, 39 Am. J. Comp. L., 699, 707 (1991). Cf Roger Brownsword, Editorial Introduction, in The Foundations of European Private Law 3, 9 (R Brownsword et al, eds, 2011) (referring to harmonization of EU law via the DCFR and puts forward the need for a better understanding of the theoretical foundation of private law). 5 Lohse, supra note 4, at 283. 6 Marek Safjan and Aneta Wiewiorowska-Domagalska, Political Foundations of European Private Law: Rethinking the East-West Division Lines, in The Foundations of European Private Law 265, 271, 284 (R Brownsword et al, eds, 2011). 7 Mads Andenas, et al, Towards a Theory of Harmonisation, in Theory and Practice of Harmonisation 572, 574–5 (Mads Andenas and Camilla Baasch Andersen eds., 2011); Reiner Schulze, European Private Law: Politlical Foundations and Current Challenges, in The Foundations of European Private Law 293, 297–78, 306 (R Brownsword et al, eds, 2011); Mattias Storme, The Foundations of Private Law in a Multi-level Structure: Balancing, Distribution of Law-making Power and Other Constitutional Issues, see id. at 379, 388. 8 Camilla Baasch Andersen, Applied Uniformity of a Uniform Commercial Law: Ensuring Functional Harmonisation of Uniform Texts through a Global Jurisconsultorium of the CISG, see id. at 30. 9 On language, concepts, and rationalities see, respectively, Guido Alpa, New Paths of Private Law, see id. at 249, 250 (bringing to our attention the fact that the use of a given language for legal texts is not neutral since it either facilitates or hinders subsequent translations into languages of other legal systems participating in the process of harmonization); Stefan Grundmann, The Architecture of European Codes and Contract Law: A Survey of Structures and Contents, in The Architecture of European Codes and Contract Law 5, 7 (Stefan Grundmann and Martin Schauer eds, 2006) (identifying three foundational concepts that define the structure of European contract law, namely, obligation, juristic act, and contract; they are ingrained into the structure of the civil codes of France, Germany, Austria, and some other Central European countries); Ralf Michaels, Of Islands and the Ocean: The Two Rationalities of European Private Law, in The Foundations of Private Law 141–3 (R Brownsword et al, eds, 2011) (distinguishing between an instrumental and a juridical rationality in the process of unifying European private law; the instrumental rationality dictates that the law is a means to an end whose goals are established in the TFEU and developed by the Court of Justice of the European Union (CJEU); the juridical rationality prescribes that the law is an end in itself and its internal questions are answered by legal texts and legal precedent; this dichotomy takes place at the structural level so that these rationalities may entertain disparate ideological substance such as interventionism and progressive thinking as well as pro-market and liberalist stances). 10 Mads Andenas and Camilla Baasch Andersen, eds, Theory and Practice of Harmonisation (Edward Elgar Publishing 2011). 11 Mads Andenas and Camilla Baasch Andersen, Preface: Theory and Practice of Harmonisation, in Theory and Practice of Harmonisation, at xi, xiii (Mads Andenas and Camilla Baasch Andersen eds, 2011); Mads Andenas et al, Towards a Theory of Harmonisation, supra note 7 at 574. 12 Oxford University Press, Theory <http://www.oxfordreference.com.ezproxy.newcastle.edu.au/view/10.1093/acref/9780195123715.001.0001/acref-9780195123715-e-1673> 30 March 2019. 13 Andenas et al., Towards a Theory of Harmonisation, supra note 7 at 576. 14 Maren Heidemann, International Commercial Harmonisation and National Resistance: The Development and Reform of Transnational Commercial Law and Its Application within National Legal Culture, 21 Eur. Bus. L. Rev., 180, 181 (2010). 15 This is not to say that conflict of laws may be that organizing mechanism, thereby equating conflict of laws with harmonization. Conflict of laws is another competing concept such as unification, regulatory competition, and choice of law and forum. 16 Schulze, supra note 7 at 297. 17 The difference between harmonization and unification is explained below. 18 Lohse, supra note 4 at 283–4. 19 Mads Andenas et al, Towards a Theory of Harmonisation, supra note 7 at 587–90 (Mads Andenas and Camilla Baasch Andersen eds). See Fernando Gomez Pomar, The Harmonization of Contract Law through European Rules: A Law and Economics Perspective, 4 Eur. Rev. Cont. L. (2008) (expounding the balance of costs and benefits of harmonization); Gerhard Wagner, The Economics of Harmonisation: The Case of Contract Law, 3 ERA F, 77, 78 (2002). 20 Andenas and Baasch Andersen, Preface: Theory and Practice of Harmonisation, at xi (2011). 21 Mads Andenas et al, Towards a Theory of Harmonisation, supra note 7 at 572–3, 588 (quoting Merryman); Gomez Pomar, Eur. Rev. Cont. L., 7 (2008). 22 Andenas et al, Towards a Theory of Harmonisation, supra note 7 at 588. 23 Dagmar Schiek, Comparative Law and European Harmonisation: A Match Made in Heaven or Uneasy Bedfellows?, 21 Eur. Bus. L. Rev., 425, 446 (2010). 24 Grundmann, supra note 9, at 3. 25 Andenas et al, Towards a Theory of Harmonisation, supra note 7 at 588. 26 Id. at 598. 27 Safjan & Wiewiorowska-Domagalska, supra note 6, at 266; Gomez Pomar, Eur. Rev. Cont. L., 7–8 (2008); Ole Lando, Optional or Mandatory Europeanisation of Contract Law, 8 Eur. Rev. Priv. L., 59, 61 (2000), quoted by Jan M Smits, Economic Arguments in the Harmonization Debate: The Practical Importance of Harmonization of Commercial Contract Law (Modern Law for Global Commerce Proceedings of the Congress of the United Nations Commission on International Trade Law held on the Occasion of the Fortieth Session of the Commission, 2011, Vienna, July 9–12, 2007). 28 Fernando Gomez and Juan Jose Ganuza, The Economics of Private Law Harmonised Law-making: Mechanisms, Modes and Standards, in The Foundations of European Private Law 115, 133 (R Brownsword et al, eds, 2011); Gomez Pomar, Eur. Rev. Cont. L., 8–9 (2008). 29 Gomez Pomar, Eur. Rev. Cont. L., 12–13 (2008). 30 Gomez and Ganuza, supra note 28, at 123–6. 31See, eg, Aditi Bagchi, The Political Economy of Regulating Contract, 62 Am. J. Comp. L. (2014). 32 Gomez and Ganuza, supra note 28 at 124–8. 33 Harmonization is a legal phenomenon due to (i) the multifarious nature of the legal acts it tries to capture, (ii) the difficulty of unequivocally representing these legal acts at the various levels and jurisdictions involved, and (iii) the difficulty of considering it as a cause or consequence of underlying processes. At the same time, harmonization is the manifestation of another contested phenomenon that is the convergence of jurisdictions in regard to (i) the use of the sources of law, (ii) the development and flexibility of legal concepts and institutions, and (iii) their utilization by the legal actors involved. Ultimately, looking at harmonization as a phenomenon has methodological implications for trying to better understand it. See Mark Van Hoecke, Legal Doctrine: Which Method(s) for What Kind of Discipline?, in Methodologies of Legal Research: Which Kind of Method for What Kind of Discipline? 1 (Mark Van Hoecke ed 2011). 34See, eg, Anthony Scott, The Evolution of Resource Property Rights 3, 4 (Oxford University Press. 2008); Andrei Shleifer, The Failure of Judges and the Rise of Regulators 15–16 (2012). 35 Gomez and Ganuza, supra note 28; Daniel Halberstam and Mathias Reimann, Federalism and Legal Unification: Comparing Methods, Results, and Explanations across 20 Systems (University of Michigan Public Law, Working Paper No 186, 2010), <https://ssrn.com/abstract=1557690> 30 March 2019. 36Cf Rodolfo Sacco, Legal Formants: A Dynamic Approach to Comparative Law (Installment I of II), 39 Am. J. Comp. L., 1 (1991); Gomez and Ganuza, supra note 28. 37 Transposition is a technique of legal reform at the level of EU’s Member States whereby legislation is passed in the latter in order to make EU directives enforceable. 38 Walter Van Gerven, Harmonization of Private Law: Do We Need It?, 41 Common Market L. Rev., 505, 512 (2004); Jan M Smits, Plurality of Sources in European Private Law, or: How to Live with Legal Diversity?, in The Foundations of European Private Law 323, 332 (R Brownsword et al, eds, 2011); Walter Van Gerven, Private Law in a Federal Perspective, see id. at 337, 343 (providing examples of the open method of coordination (OMC) in areas where harmonization is not permitted by TFEU arts 165(4), 166(4), 167(5) and 168(5); Schiek, Eur. Bus. L. Rev. (2010), supra note 23 at 441; Schulze, supra note 7 at 301. 39 See below the case of the American Law Institute and the Uniform Law Commission. 40See, eg, Anthony Ogus, Rethinking Self-Regulation, 15 Oxford J. Legal Stud., 97 (1995). 41 Lisa Spagnolo, Law Wars: Australian Contract Law Reform vs CISG vs CESL, 58 Vill. L. Rev., 623 (2013). 42 This can be linked to Fauvarque-Cosson’s argument on the unsuitability of commercial practice as a driver of harmonization in Benedicte Fauvarque-Cosson, The Need for Codified Guiding Principles and Model Rules in European Contract Law, in The Foundations of European Private Law 73, 78 (R Brownsword et al, eds, 2011). 43 Stefan Voigt, Are International Merchants Stupid? Their Choice of Law Sheds Doubt on the Legal Origin Theory, 5 J. Empirical Legal Stud., 1, 10–12 (2008). 44 Frank H Stephen, Lawyers, Markets and Regulation 36 (Edward Elgar Publishing. 2013). 45 Stefan Vogenauer, Regulatory Competition through Choice of Contract Law and Choice of Forum in Europe: Theory and Evidence, 21 Eur. Rev. Priv. L., 13, 60 (2013). 46 Hans Kelsen, Pure Theory of Law 247, 267, 351 (Univ of California Press. 1978) at 256. 47 Catherine E Mitchell, Contract Law and Contract Practice: Bridging the Gap between Legal Reasoning and Commercial Expectation (Hart Publishing 2013). 48 Lohse, supra note 4 at 282. 49 Boodman, Am. J. Comp. L., 703 (1991). 50 Hans Schulte-Nolke, Restatements in Europe and the US: Some Comparative Lessons, in The Foundations of European Private Law 11, 26–8 (R Brownsword et al, eds, 2011). 51 Id. at 18–19. 52 Nils Jansen, Dogmatising Non-Legislative Codifications: Non-Legislative Reference Texts in European Legal Discourse, see id. at 31, 33–4. 53 Hans Schulte-Nolke, Restatements in Europe and the US: Some Comparative Lessons, see id. at 29–30. 54 Christian Twigg-Flesner, The Acquis Principles: An Insider’s Critical Reflections on the Drafting Process, in Theory and Practice of Harmonisation 474, 481, 483–5 (Mads Andenas and Camilla Baasch Andersen eds, 2011). 55 Id. at 489–91. 56 Van Gerven, Common Market L. Rev., 507–8 (2004). 57 A series of EU principles guide the choice of national measures for implementing and transposing EU law—namely, subsidiarity, proportionality, adequacy, synergy, and adaptability. 58 Helen Xanthaki, Technical Considerations in Harmonisation and Approximation: Legislative Drafting Techniques for Full Transposition, in Theory and Practice of Harmonisation 536, 537–41, 545 (Mads Andenas and Camilla Baasch Andersen eds, 2011). 59 Gomez Pomar, Eur. Rev. Cont. L., 9–10 (2008). 60 Lohse, supra note 4, at 289. 61 Safjan and Wiewiorowska-Domagalska, supra note 6, at 272. 62 Id. at 267–8; Duncan Kennedy, A Transnational Genealogy of Proportionality in Private Law, see id. at 185, 185–6; Jan M Smits, Plurality of Sources in European Private Law, or: How to Live with Legal Diversity?, see id. at 328, 335. 63 Paul Varul, The Impact of Harmonisation of Private Law on the Reform of Civil Law in the New Member States, see id. at 285, 286, 290, 292. 64 Legal harmonization seeks to reduce transaction costs while preserving legal diversity by focusing on commonalities between laws. 65 Gomez and Ganuza, supra note 28, at 133; Gomez Pomar, Eur. Rev. Cont. L., 8–9 (2008). 66See Gomez and Ganuza, supra note 28, quoting Stefan Vogenauer and Stephen Weatherill, The Harmonisation of European Contract Law: Implications for European Private Laws, Business and Legal Practice (Hart Publishing 2006); Kevin M Clermont and Theodore Eisenberg, Xenophilia in American Courts, 109 Harv. L. Rev., 1120 (1996); Frank AG Den Butter and Robert HJ Mosch, Trade, Trust and Transaction Costs (Tinberg Institute, Working Paper No 2003-082/3, 2003); Alessandro Turrini and Tanguy Van Ypersele, Legal Costs as Barriers to Trade, at 20 (Centre for Economic Policy Research, Discussion Paper Series No 5751, 2006). See also European Contract Law in Business-to-Business Transactions: Analytical Report 2011, European Commission Flash Eurobarometer No 320, at 24–5 (European Commission, 2011), <http://ec.europa.eu/public_opinion/flash/fl_320_en.pdf> 30 March 2019 (reporting that ‘traders who are dissuaded from cross-border transactions due to contract law obstacles forgo at least €26 billion in intra-EU trade every year’; quoted in the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: A Common European Sales Law to Facilitate Cross-Border Transactions in the Single Market, at 3, COM (2011) 636 final (Oct. 11, 2011), <https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52011DC0636> 30 March 2019. See also Vogenauer, Eur. Rev. Priv. L., (2013); Voigt, J. Empirical Legal Stud., (2008); Spagnolo, Vill. L. Rev., (2013) (concerning opportunity costs of opting out of the CISG). 67Communication from the Commission to the Council and the European Parliament on European Contract Law: A More Coherent European Contract Law: An Action Plan, 2001 O.J. (C 255/1). 68 Wagner, supra note 20, 78 (2002); Gerhard Wagner, The Economics of Harmonization: The Case of Contract Law, 39 Common Market L. Rev. (2002). 69Communication from the Commission to the Council and the European Parliament on European Contract Law: A More Coherent European Contract Law: An Action Plan, 2001 O.J. (C 255/1), at ¶¶ 31–2. 70Communication from the Commission to the European Parliament and the Council: A More Coherent European Contract Law: An Action Plan, COM (2003) 68 final, 2003 O.J. (C 63/1). 71 Id. ¶ 32. 72 Id. ¶¶ 34–5 and ff. 73 The European Free Trade Association (EFTA) encompasses Iceland, Liechtenstein, Norway, and Switzerland. The Agreement on the European Economic Area (EEA) encompasses the EU Member States and the three EEA EFTA States: Iceland, Liechtenstein, and Norway. 74Communication from the Commission to the European Parliament and the Council: A More Coherent European Contract Law: An Action Plan, at ¶¶ 30–2, COM (2003) 68 final, 2003 O.J. (C 63/1). 75Communication from the Commission to the European Parliament and the Council: European Contract Law and the Revision of the Acquis: The Way Forward, COM (2004) 651 final (Oct. 11, 2004), <http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52004DC0651&from=en> 30 March 2019. 76 Id. ¶ 20. 77Green Paper from the Commission on Policy Options for Progress Towards a European Contract Law for Consumers and Businesses, COM (2010) 348 final, <http://ec.europa.eu/transparency/regdoc/rep/1/2010/EN/1-2010-348-EN-F1-1.Pdf> 30 March 2019. 78 Id. at ¶¶ 2–7. 79 Gerhard Wagner, Transaction Costs, Choice of Law and Uniform Contract Law 39 (Modern Law for Global Commerce: Proceedings of the Congress of the United Nations Commission on International Trade Law held on the Occasion of the Fortieth Session of the Commission, 2011, Vienna, July 9–12, 2007). 80 Wagner, supra note 20, 83 (2002). 81 Id. at 84. 82 Gomez Pomar, supra note 19, at 7–8. 83 Christopher Hodges et al, The Oxford Study on Costs and Funding of Civil Litigation, in The Costs and Funding of Civil Litigation: A Comparative Perspective 7 (Christopher Hodges et al, eds, 2010) (showing that—according to the 2008 Oxford Civil Justice Survey—businesses perceive the costs of civil litigation as a significant factor when choosing the applicable contract law and the litigation forum for cross-border transactions); Schwenzer, Vill. L. Rev., 725 (2013) (stating that parties to a contract from different countries, whose lack of bargaining power prevents them from imposing a choice of law on their counterparts, will be required to incur legal experts’ fees in order to produce evidence of the content of the law chosen to govern the contract in question). 84 Lando, Eur. Rev. Priv. L., (2000), quoted by Smits, Economic Arguments in the Harmonization Debate: The Practical Importance of Harmonization of Commercial Contract Law. Cf Michaels, supra note 9, at 155 (referring to the CJEU Case C-339/89 Alsthom Atlantic SA v Compagnie de construction mécanique Sulzer SA [1991] E.C.R. I-107, where it is argued that default rules cannot pose a barrier to trade since they can be opted out of). But see the discussion above on default rules becoming mandatory rules due to parties’ inability to foresee all contingencies, which is prompted by the Communication from the Commission to the European Parliament and the Council: A More Coherent European Contract Law: An Action Plan, COM (2003) 68 final, 2003 O.J. (C 63/1). 85 Gomez Pomar, Eur. Rev. Cont. L., 8 (2008). 86 Wagner, supra note 20, 84 (2002). 87See Communication from the Commission to the European Parliament and the Council: A More Coherent European Contract Law: An Action Plan, at 29, COM (2003) 68 final, 2003 O.J. (C 63/1) (‘[t]he Belgian Ministry of Finance suggests that contract law harmonisation would allow the uniform classification of contracts for tax purposes and thereby avoid distortions of competition in the internal market caused by the application of different tax regimes’). 88 Wagner, supra note 20, 83 (2002). 89 Id. at 85. 90 Id. at 84. 91 Gomez Pomar, Eur. Rev. Cont. L., 7–9 (2008). 92 The argument for perfect market competition requires a nuanced interpretation: market competition is neither a panacea nor a standalone policy. Market competition in the production side requires considering potential negative consequences for the labour market, such as unemployment due to relocation of jobs abroad. In the end, negative consequences could compromise other gains from competition such as lower prices and higher quality. 93 Wagner, supra note 20, 85 (2002). 94 Gomez Pomar, Eur. Rev. Cont. L., 9 (2008). 95 Wagner, supra note 20, 83 (2002). 96 Schulze, supra note 7 at 300; Cf Mattias Storme, supra note 7 at 389. 97 Wagner, supra note 20, 83 (2002). 98 Gomez Pomar, Eur. Rev. Cont. L., 10 (2008); Fauvarque-Cosson, supra note 42, at 75. 99 Guido Alpa, New Paths of Private Law, see id. at 252–3. 100 Reiner Schulze, European Private Law: Politlical Foundations and Current Challenges, see id. at 294. 101 Guido Alpa, New Paths of Private Law, see id. at 253–4. 102 Hodges et al, supra note 83, at 69, 72, 102 (reflecting that, according to this comparative study on the costs and methods of funding civil litigation in 36 jurisdictions around the world in 2009, in nearly all cases, lawyers’ fees represent the major element in total costs, which is also the case when the jurisdiction in question imposes tariffs for lawyers’ fees). See id. at 89–90 (showing that where the lawyer’s obtain the highest fees due to market capture, consumers of legal services lack expertise, commercial leverage, or sophistication to recognise quality and negotiate costs with suppliers. However, they also point out that, where clients are sophisticated and repeat players, negotiation with suppliers of legal services tends to occur under market forces). 103 Gomez Pomar, Eur. Rev. Cont. L., 8 (2008); Wagner, supra note 20, 83 (2002). 104 Stephen, supra note 44, at 36. 105 Wagner, supra note 20, 82–3 (2002). 106Communication from the Commission to the European Parliament and the Council: A more coherent European contract law: An action plan, at 32, COM (2003) 68 final, 2003 O.J. (C 63/1). 107 Smits, Plurality of Sources in European Private Law, or: How to Live with Legal Diversity? 323 (2011). 108 Frydryk Zoll, A Need for a New Structure for European Private Law, see id. at 555, 557. 109 Mattias Storme, supra note 7 at 389. 110 Mathias Reimann and Daniel Halberstam, Top-down or Bottom-up? A Look at the Unification of Private Law in Federal Systems, see id. at 363, 363. 111 Lohse, supra note 4 at 286. 112 Id. at 287. 113 Ibid. 114 Hans-Wolfgang Micklitz, Administrative Enforcement of European Private Law, in The Foundations of European Private Law 563, 564 (R Brownsword et al, eds, 2011). TFEU art 26(1): ‘The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market …’ (emphasis added). 115 TFEU art 26(2): ‘The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured …’ (emphasis added). 116 TFEU art 288: ‘To exercise the Union's competences, the institutions shall adopt regulations, directives, decisions, recommendations and opinions.’ (emphasis added). TFEU art 114: ‘(1) The European Parliament and the Council shall … adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States …’ (emphasis added). TFEU art 115: ‘[T]he Council shall … issue directives for the approximation of such laws, regulations or administrative provisions of the Member States as directly affect the establishment or functioning of the internal market.’ (emphasis added). 117 TFEU art 114(1): ‘The European Parliament and the Council shall … adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market …’ (emphasis added). 118 TFEU art 288: ‘A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States …’ (emphasis added). 119 TFEU art. 288: ‘A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods …’ (emphasis added). 120 Lohse, supra note 4 at 282, 285; Kare Lilleholt, European Private Law: Unification, Harmonisation or Coordination?, in The Foundations of European Private Law 353, 353 (R. Brownsword, et al. eds., 2011); Van Gerven, Common Market L. Rev., 506 (2004); Andenas et al., Towards a Theory of Harmonisation, supra note 7 at 576–7. 121 TFEU Part Three: union policies and internal actions … Title VII: Common rules on competition, taxation and approximation of laws … Chapter 3: Approximation of laws (emphasis added). 122 TFEU art 114(1): ‘The European Parliament and the Council shall … adopt the measures for the approximation of the provisions … in Member States …’ (emphasis added). 123 TFEU art 114(4): ‘If, after the adoption of a harmonisation measure … a Member State deems it necessary to maintain national provisions …’ (emphasis added). TFEU art 114(5): ‘[I]f, after the adoption of a harmonisation measure … a Member State deems it necessary to introduce national provisions … on grounds of a problem … arising after the adoption of the harmonisation measure …’ (emphasis added). TFEU art 114(7): ‘a Member State is authorised to maintain or introduce national provisions derogating from a harmonisation measure …’ (emphasis added). TFEU art.114(8): ‘When a Member State raises a specific problem … which has been the subject of prior harmonisation measures …’ (emphasis added). TFEU art 114(10): ‘The harmonisation measures … shall … include a safeguard clause …’ (emphasis added). 124 TFEU art 115: ‘[T]he Council shall … issue directives for the approximation of … laws, regulations or administrative provisions of the Member States …’ (emphasis added). 125 TFEU art 289(1): ‘The ordinary legislative procedure shall consist in the joint adoption by the European Parliament and the Council of a regulation, directive or decision on a proposal from the Commission. This procedure is defined in Article 294.’ (emphasis added). 126 TFEU art. 114(4): ‘If, after the adoption of a harmonisation measure … by the Council or by the Commission …’ (emphasis added). TFEU art. 114(5): ‘[I]f, after the adoption of a harmonisation measure … by the Council or by the Commission …’ (emphasis added). 127 TFEU art 289(2): ‘[T]he adoption of a regulation, directive or decision … by the [Council] … shall constitute a special legislative procedure.’ (emphasis added). 128 TFEU art 291(2): ‘Where uniform conditions for implementing legally binding Union acts are needed, those acts shall confer implementing powers on the Commission …’ (emphasis added). 129 TFEU art 114(4): ‘If, after the adoption of a harmonisation measure by the European Parliament and the Council …’ (emphasis added). TFEU art 114(5): ‘[I]f, after the adoption of a harmonisation measure by the European Parliament and the Council …’ (emphasis added). TFEU art 114(1): ‘The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure … adopt the measures for the approximation of the provisions … in Member States …’ (emphasis added). 130 TFEU art 115: ‘[T]he Council shall … in accordance with a special legislative procedure … issue directives for the approximation of such laws, regulations or administrative provisions of the Member States …’ (emphasis added). 131 TFEU art.83(2): ‘If the approximation of criminal laws and regulations of the Member States proves essential … in an area which has been subject to harmonisation measures … directives shall be adopted by the same ordinary or special legislative procedure as was followed for the adoption of the harmonisation measures …’ (emphasis added). 132 TFEU art 151: ‘The Union and the Member States … shall have as their objectives the promotion of … improved living and working conditions, so as to make possible their harmonisation … [S]uch a development will ensue not only from the functioning of the internal market, which will favour the harmonisation of social systems, but also from the procedures provided for in the Treaties and from the approximation of provisions laid down by law, regulation or administrative action.’ (emphasis added). 133See Van Gerven, Common Market L. Rev., 505–6 (2004) (warning that article numbers have changed due to reforms and consolidations). 134 TFEU art 114(1): ‘[T]he following provisions shall apply for the achievement of the objectives set out in Article 26 …’ (emphasis added). 135 TFEU art 114(1): ‘The European Parliament and the Council shall … adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States …’ (emphasis added). 136 TFEU art 114(4): ‘If, after the adoption of a harmonisation measure by the European Parliament and the Council, by the Council or by the Commission, a Member State deems it necessary to maintain national provisions …’ (emphasis added). TFEU art 114(5): ‘[I]f, after the adoption of a harmonisation measure by the European Parliament and the Council, by the Council or by the Commission, a Member State deems it necessary to introduce national provisions … on grounds of a problem specific to that Member State arising after the adoption of the harmonisation measure …’ (emphasis added). TFEU art 114(7): ‘a Member State is authorised to maintain or introduce national provisions derogating from a harmonisation measure …’ (emphasis added). TFEU art 114(8): ‘When a Member State raises a specific problem on public health in a field which has been the subject of prior harmonisation measures …’ (emphasis added). TFEU art 114(10): ‘The harmonisation measures referred to above shall … include a safeguard clause … to take … provisional measures …’ (emphasis added). 137 TFEU art 114(1): ‘The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, adopt the measures for the approximation of the provisions …’ (emphasis added). 138 TFEU art 114(4) and (5): ‘[I]f after the adoption of a harmonisation measure … by the Council or by the Commission, a Member State deems it necessary to …’ (emphasis added). 139See Roman Petrov and Peter Van Elsuwege, Legislative Approximation and Application of EU Law in the Eastern Neighbourhood of the European Union: Towards a Common Regulatory Space? (Taylor & Francis. 2014). 140 Case C-270/12, United Kingdom of Great Britain and Northern Ireland v European Parliament and Council of the European Union, 2014 ECLI:EU:C:2014:18, at ¶102. 141See id. at ¶ 104-05. 142 Case C-66/04, United Kingdom of Great Britain and Northern Ireland v European Parliament and Council, 2005 ECLI:EU:C:2005:743. 143 Id. at ¶ 63. 144 Id. at ¶ 45–6. 145 Schulte-Nolke, supra note 50, 15. 146 Id. at 16, 19. 147 Id. at 20. 148 Nils Jansen, Dogmatising Non-Legislative Codifications: Non-Legislative Reference Texts in European Legal Discourse, see id. at 34. 149 The American Law Institute, Restatements of the Law and Principles of the Law Publications Checklist, <https://www.ali.org/media/filer_public/5e/3e/5e3e2820-cfac-424f-9917-625597351875/publications-restatement-principles-checklist.pdf> 30 March 2019. 150 Halberstam and Reimann, supra note 35, at 15. 151 Id. 152 Id. at 44. 153 Id. at 9, 11–13. 154 Andrew Stewart, What’s Wrong with the Australian Law of Contract?, 29 J. Cont. L., 88 (2012) (proposing a contract law reform led by the Council of Australian Governments that may consist of a set of uniform laws on transaction subject to the adoption of or regulation by States and Territories). 155 Halberstam and Reimann, supra note 35, at 16–18. 156 Id. at 22–3, 25, n 51, 27–8. 157 Spagnolo, Vill. L. Rev., (2013). 158 Donald Robertson, The International Harmonisation of Australian Contract Law, 29 J. Cont. L., 1, 3 (2012). 159See Xinqiang Sun, et al., Contract Law of the People's Republic of China with the Judicial Interpretations of the Supreme People's Court (Bilingual Version) 151, 163, 177, 193 (Tsinghua University Press 2012). 160 Robertson, J. Cont. L., 2, 7–8, 10–13 (2012). 161 Manfred Paul Ellinghaus et al, An Australian Contract Code, at 10 [27] (Law Reform Commission of Victoria, Discussion Paper No 27, 1992). 162 Stewart, J. Cont. L., 75–6 (2012). 163 Samantha Bowers, ‘National Contract Law “Well Received”’, The Australian Financial Review, 10 June 2011 <http://www.afr.com/business/legal/national-contract-law-well-received-20110609-icqul> 30 March 2019. 164 Attorney-Generals’ Department (Cth), ‘Improving Australia’s Law and Justice Framework: A Discussion Paper to Explore the Scope for Reforming Australian Contract Law’ (2012). See M P Ellinghaus et al, A Draft Australian Law of Contract (Newcastle Law School Working Paper, 2014), <http://ssrn.com/abstract=2403603> 30 March 2019, cited in Therese Wilson and Mary Keyes, Codifying Contract Law: International and Consumer Law Perspectives 3, n 3, 164, n 158 (Ashgate Publishing Limited 2014); Ralf Michaels, The Unidroit Principles as Global Background Law, 19 Uniform L. Rev., 643, 654 n 52 (2014); Hector L MacQueen, Reply to Shawn J Bayern, ‘The Nature and Timing of Contract Formation’, in Comparative Contract Law: British and American Perspectives 112, n 29 (Larry A DiMatteo and Martin Hogg eds, 2016); Martin Vranken, Western Legal Traditions: A Comparison of Civil Law and Common Law 110 (Federation Press 2015). 165 The author acknowledges the existence of other cases of harmonization worth mentioning such as those advanced by the Organisation for the Harmonisation of Business Law in Africa (OHADA), and the Principles of Asian Contract Law (PACL). These cases are not considered here for reasons of brevity. See, eg, Mancuso, Tul. Eur. & Civ. L.F., (2014). 166 Latin America consists of 26 States grouped in three blocs: first, Central America: Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, and Panama (Belize is not included since non-Latin language is spoken there); second, the Caribbean: Cuba, Dominican Republic, Guadeloupe, Haiti, Martinique, Puerto Rico, Saint Barthelemy, Saint Martin (only Latin language countries); and, third, South America: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, French Guiana, Paraguay, Peru, Uruguay, Venezuela (Guyana and Surinam are not included since non-Latin language is spoken there). 167 Alejandro M Garro, Unification and Harmonization of Private Law in Latin America, 40 Am. J. Comp. L., 587, 587 (1992). 168 Rene David and John EC Brierley, Major Legal Systems in the World Today: An Introduction to the Comparative Study of Law 31–2 (Free Press 1978). 169 Konrad Zweigert and Hein Kotz, An Introduction to Comparative Law 113–14 (Tony Weir trans, 3rd edn, Oxford University Press 1998). 170 Diego Lopez-Medina, The Latin American and Caribbean Legal Traditions: Repositioning Latin America and the Caribbean on the Contemporary Maps of Comparative Law, in The Cambridge Companion to Comparative Law 347, 356–7, 358–9, 360–1 (Mauro Bussani and Ugo Mattei eds, 2012); John Henry Merryman and Rogelio Pérez-Perdomo, The Civil Law Tradition: An Introduction to the Legal Systems of Europe and Latin America 3-5 (3rd edn, Stanford University Press 2007); Jan Kleinheisterkamp, Development of Comparative Law in Latin America, in The Oxford Handbook of Comparative Law 261, 262, 268–70, 285-58 <please correct page range> (Mathias Reimann and Reinhard Zimmermann eds, 2008) (referring to the influence of the US Constitution on Mexico, Brazil, and Argentina, as well as the influence of habeas corpus and writs of injunction, error, mandamus, and certiorari on the writ of Amparo in Argentina, Chile, Peru, Central America, and Brazil). See generally Thomas Kadner Graziano, Comparative Contract Law: Cases, Materials and Exercises 13–14 (Eleanor Grant trans, Palgrave Macmillan 2009). 171 Rodrigo Momberg, Harmonization of Contract Law in Latin America: Past and Present Initiatives, 19 Uniform L. Rev., 412–13 (2014). 172 Id. at 415–16. See Gomez and Ganuza, supra note 28, who qualify this process as political fiat and coordinated action. 173 Elsewhere dubbed conglobamiento and sectorialismo, respectively. 174 E Buscaglia and W Ratliff, Law and Economics in Developing Countries 38–9 (Hoover Press 2000). 175 <http://www.oas.org/juridico/english/sigs/a-31.html> 30 March 2019. 176 Conferencias Interamericanas para el Derecho Internacional Privado. 177 Momberg, Uniform L. Rev., 416–19 (2014). 178 Mercado Común del Sur. 179 Asociación Latinoamericana de Integración. 180 Alianza Bolivariana para los Pueblos de América. 181 Unión de Naciones Suramericanas. 182 Momberg, Uniform L. Rev., 420–2 (2014). 183 Principios Latinoamericanos de Derecho de los Contratos. See Rodrigo Momberg and Stefan Vogenauer, The Principles of Latin American Contract Law: text, translation, and introduction, 23 Uniform L. Rev., 144–70 (2018). 184 Momberg, Uniform L. Rev., 423–4 (2014). 185 Reports inquire into general principles such as good faith, freedom of contract, pacta sunt servanda [agreements must be kept], and privity, pre-contractual liability and formation validity, effects of contracts, interpretation, performance, non-performance, and remedies, among others. 186 Carlos Pizarro Wilson, El Derecho de los Contratos en Latinoamérica: Bases para unos Principios de Derecho de los Contratos (Universidad del Rosario, Universidad del Externado, Bogotá, 2012). 187 Momberg, Uniform L. Rev., 424–6 (2014). 188 Id. at 426–7. 189 UNCITRAL, Modern Law for Global Commerce: Proceedings of the Congress of the United Nations Commission on International Trade Law held on the Occasion of the Fortieth Session of the Commission, 2011 (Vienna, July 9–12, 2007), <https://www.uncitral.org/pdf/english/congress/09-83930_Ebook.pdf> 30 March 2019, 61; Andenas et al, Towards a Theory of Harmonisation, supra note 7 at 577 quoting Bruno Zeller, CISG and the Unification of International Trade Law (Routledge. 2007); Loukas Mistelis, Is Harmonisation a Necessary Evil? The Future of Harmonisation and New Sources of International Trade Law, in Foundations and Perspectives of International Trade Law (Loukas Mistelis et al, eds, 2001); Lohse, supra note 4, at 283, 309–11; Schiek, Eur. Bus. L. Rev., 446 (2010). 190 Gomez and Ganuza, supra note 28, 121–2. 191 Reiner Schulze, European Private Law: Politlical Foundations and Current Challenges, see id. at 302; Schiek, Eur. Bus. L. Rev., 446 (2010); Schulte-Nolke, supra note 50, 23–5. This mirrors the public international law difference between lege lata or data [the law as it is] and lege ferenda [the law as it should be]. 192 Reiner Schulze, European Private Law: Politlical Foundations and Current Challenges, see id. at 303; Xanthaki, supra note 58, at 542–4. 193But see below where the PICC and the DCFR exemplify both the common principles and best rule approaches. 194 Schulze, supra note 7 at 303–4. 195 Hans Schulte-Nolke, Restatements in Europe and the US: Some Comparative Lessons, see id. at 22–4. 196 In regard to the PICC see Michaels, supra note 164 at 655; Stefan Vogenauer, The Unidroit Principles of International Commercial Contracts at Twenty: Experiences to Date, the 1010 edition, and Future Prospects’ 19 Uniform L. Rev., 479, 485 (2014). 197De lege ferenda [concerning the law as it should be] as opposed to de lege lata/data [concerning the law as it is]. 198 René Franz Henschel, Methodological Challenges of Codifying or Consolidating National and International Sales Law based on CISG Article 35, in Theory and Practice of Harmonisation 198, 199–200 (Mads Andenas and Camilla Baasch Andersen, eds, 2011) (referring to Clive M Schmitthoff, The Unification or Harmonisation of Law by Means of Standard Contracts and General Conditions, 17 Int’l & Comp. L.Q., 551 (1968). 199 This has been discussed above. 200 Safjan and Wiewiorowska-Domagalska, supra note 6 at 270; Hans Schulte-Nolke, Restatements in Europe and the US: Some Comparative Lessons, see id. at 25. 201 Lohse, supra note 4 at 309–11. 203 Michaels, Of Islands and the Ocean: The Two Rationalities of European Private Law 153 (2011). Codes and statues are interdependent since, on the one hand, statutes trump codes on grounds of the principle that lex specialis [special law] trumps lex generalis [general law] while, on the other hand, statutes should be interpreted systematically in the light of the codes. 204 Gomez and Ganuza, supra note 28 at 129–30. 205 Schiek, Eur. Bus. L. Rev., 446 (2010). 206 Smits, Plurality of Sources in European Private Law, or: How to Live with Legal Diversity? 330 (2011). Stelios Andreadakis, Regulatory Competition or Harmonisation: The Dilemma, the Alternatives and the Prospect of Reflexive Harmonisation, in Theory and Practice of Harmonisation 52, 58 (Mads Andenas and Camilla Baasch Andersen eds, 2011). 207See Storme, supra note 7 at 385. 208 Jan M Smits, Plurality of Sources in European Private Law, or: How to Live with Legal Diversity?, see id. at 331, 332–3. See Van Gerven, Common Market L. Rev., 512 (2004); Van Gerven, Private Law in a Federal Perspective 343. 2011 (providing examples of the open method of communication (OMC) in areas where harmonization is not permitted by TFEU arts 165(4), 166(4), 167(5) and 168(5)); Schiek, Eur. Bus. L. Rev., 441 and ff (2010). 209 Smits, Plurality of Sources in European Private Law, or: How to Live with Legal Diversity? 334, 335. 2011. 210 Mathias Reimann and Daniel Halberstam, Top-down or Bottom-up? A Look at the Unification of Private Law in Federal Systems, see id. at 363, 365, 369, 376. 211 Id. at 365–9. Examples of the former are Venezuela and Brazil, and of the latter are Australia and the USA. 212 Id. at 369–73. 213 Id. at 375–6. 214 Fernando Gomez and Juan Jose Ganuza, The Economics of Private Law Harmonised Law-making: Mechanisms, Modes and Standards, see id. at 115–16, 121–22. 215 Rob Van Gestel et al, Methodology in the New Legal World, at 23 (EUI Working Papers LAW no 2012/13, 2012), <https://ssrn.com/abstract=2069872> 30 March 2019 (describing herd behaviour as how individuals in a group can act together without planned direction. The term pertains to the behaviour of animals in herds, flocks, schools, demonstrations, riots and general strikes, sporting events, religious gatherings, episodes of mob violence and everyday decision-making, judgment and opinion-forming. 216 Sushil Bikhchandani et al, Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades, 12 J. Econ. Persp., 151, 154 (1998) (explaining that an information (or informational) cascade occurs when a person observes the actions of others and then—despite possible contradictions in his or her own private information signals—engages in the same acts). 217 Gomez and Ganuza, supra note 28 at 117–18. See the literature on cross-fertilization in judicial adjudication. 218 Id. at 118–19. 219 This has been widely discussed by the comparative law literature. See TT Arvind, The Transplant Effect in Harmonization, 59 Int’l & Comp. L.Q., 65 (2010) (referring to the Watson and Legrand debate on legal transplants). See also Gunther Teubner, Legal Irritants: Good Faith in British Law or How Unifying Law Ends up in New Divergencies, 61 Mod. L. Rev., 11 (1998). 220 Gomez and Ganuza, supra note 28, at 119–20. 221 Robertson describes it as organic harmonization while Schulze describes it as voluntary, organic, and reciprocal harmonization. See Robertson, J. Cont. L., 7, 8, 10, 13 (2012); Schulze, supra note 7 at 301. See, on the OMC, Van Gerven, Common Market L. Rev., 512 (2004); Schiek, Eur. Bus. L. Rev., 441 (2010); Smits, Plurality of Sources in European Private Law, or: How to Live with Legal Diversity? 332. 2011; Walter Van Gerven, Private Law in a Federal Perspective, see id. at 343 (providing examples of the OMC in areas where harmonisation is not permitted by TFEU arts 165(4), 166(4), 167(5), and 168(5)). 222 Andreadakis, supra note 205 at 57–8. 223 Gomez and Ganuza, supra note 28 at 120–1. 224 Id. at 121. 225 See above B.1(a) ‘Harmonisation versus Approximation in the TFEU’. 226 Gomez and Ganuza, supra note 28 at 121–2 (stating that ‘… what we take as essential is the engine behind the harmonisation process, more than the end stage of harmonisation that is actually produced…’). 227 See the criticism regarding the lack of legitimacy of legislative process and the stifling effect on regulatory competition, similar but sub-optimal quality of rules as the result of a race to the bottom and second-best choice, choice of law and conflict of law as masking political choices, among others. 228 Gomez and Ganuza, supra note 28 at 122. 229 Id. at 133; see also Stewart, J. Cont. L., 77 (2012); Brownsword, The Theoretical Foundations of European Private Law: A Time to Stand and Stare 159, 168. 230 Andreadakis, supra note 205 at 57, 58. 231 Gomez and Ganuza, supra note 28; Vogenauer, Eur. Rev. Priv. L. (2013). 232 Voigt, J. Empirical Legal Stud. (2008). 233 James Gordley, The Functional Method, in Methods of Comparative Law 107 (Pier Giuseppe Monateri, ed 2012). 234 Michaels, supra note 164 at 658–9. © The Author(s) (2019). Published by Oxford University Press on behalf of Unidroit. All rights reserved. For permissions, please email journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
TI - Conceptualizing harmonization: the case for contract law
JF - Uniform Law Review/Revue De Droit Uniforme
DO - 10.1093/ulr/unz007
DA - 2019-03-01
UR - https://www.deepdyve.com/lp/oxford-university-press/conceptualizing-harmonization-the-case-for-contract-law-RyZrtQzIq0
SP - 73
VL - 24
IS - 1
DP - DeepDyve
ER -