A Law and Economics Perspective on Injunctive Relief

Abstract The Law and Economics perspective on injunctive relief has been developed primarily from the Calabresi and Melamed (1972) distinction between property rules and liability rules, two different judicial means of enforcing legal rights. Their analysis is predicated on the assumption that, if the prevention of the unlawful activity by an injunction does not reach the efficient solution between the relevant parties, then the latter can modify the terms of the injunction by means of bilateral negotiation, drawing on Coase’s social basic analysis. The approach is particularly important once it is appreciated that legal entitlements are imperfectly formulated and that, in appropriate circumstances, legal wrongdoing can increase social welfare. For example, in areas where intellectual property rights are particularly difficult to formulate because of the high technology involved, too rigid an enforcement of those imperfectly targeted rights generates welfare losses. The task for economic analysis is then to determine whether injunctive relief or damages is preferable in the particular circumstances governing the parties’ activities. This largely involves comparing on the one hand the welfare losses which arise from imperfect damages award which arise predominantly where the court has high information costs in assessing the plaintiff’s losses (particularly where those losses are subjective and therefore cannot be determined by reference to market evaluation) or include irrecoverable third-party losses with, on the other hand, the transaction costs of negotiating a compromise solution or the welfare losses arising from a holdout (both conditions are likely where more than two parties are involved). One branch of the literature has added a new dimension to this analysis. It is concerned to explore how the choice of remedy ex post affects behaviour ex ante, in particular the propensity to invest. In addition, literature on optimal enforcement provides insights regarding the optimal timing of sanctions, which is relevant for the choice between injunctions (the first possible stage of legal intervention) and damages (the last possible stage)

Introducing, Defining and Balancing 'Autonomy vs. Paternalism'

Autonomy is generally regarded as the fundamental right of individuals to shape their own future through voluntary action. In private law, it is associated with freedom of contract and the concept of casum sentit dominus (the loss lies where it falls). As such, it is opposed to legal paternalism, briefl y defi ned as instances in which legislation or the courts interfere with the individual’s decision-making process on the grounds that otherwise decisions will not be made in the individual’s own best interests. Traditionally, legislation protecting the estate of minors and mentally disabled individuals against the consequences of their actions is considered the prime example of paternalism. However, such protection against the risks of succumbing to weakness and extortionary practices is nowadays ubiquitous in Western society. The level of protection differs from domain to domain. The prohibition of trading in humans as a commodity – ranging from slavery to prostitution and selling organs – seems to have little in common with restrictions on freedom of contract in marital and family issues or with gambling regulation, but the essential commonality is the substitution of voluntary individual decision-making with the decision that the legislator or court finds the most appropriate. Obviously, there is no strict definition of paternalism. Indeed, the definitions used may provide an indication of the author’s own views. If paternalism is defined in terms of governments assuming the power to determine what is best for citizens because the latter cannot be trusted to make decisions in their own best interests, it may be concluded that the author is somewhat sceptical of such state intervention. Some define paternalism as coercive intervention with the behaviour of individuals in order to prevent them from causing harm to themselves. Some authors focus on the grounds of justification for intervention as the defining element in paternalism: state intervention is paternalistic if it purports to increase the individual’s welfare and happiness or to further his or her interests, needs and values. The authority for interfering is thought by some to lie in the mere coercive powers of the state, whereas others take a more sophisticated approach by arguing that paternalism may be founded on a hypothetical contract with the individual