Corporate Counsel, Legal Loopholes, and the Ethics of Interpretation

This Article examines ethical issues posed by imperfections in legal texts. More particularly, it addresses legal loopholes, carefully defining the term and then exploring whether there is anything wrong with exploiting loopholes for private gain. Focusing on corporate settings, the analysis considers both the obligation of a business leader to support reasonably just social institutions and the professional obligation of corporate counsel advising on such issues. Although the notion of a legal loophole enjoys widespread colloquial use, the term is typically used quite loosely and without critical reflection. Perhaps in an adversarial system, one becomes accustomed to taking full advantage of any and all effective legal recourse, including but not limited to the exploitation of loopholes. Loopholes often generate arguments over interpretation. This Article addresses the ethics of legal interpretation head on. It examines the scope of the social obligation to abide by a good faith interpretation of a legal text, rather than to exploit inevitable imperfections in those texts to advance private interests. The analysis proceeds in three parts followed by a conclusion. Part II portrays a loophole as a style of argument that pits a literal inter- pretation of a text against a more purposeful one. Because literal interpretations sometimes prevail, loopholes have economic value. Part III examines the ethics of a corporate legal strategy to construct strained interpretations of the law as guides to corporate conduct. The discussion embraces both the libertarian insights of Milton Friedman and the democratic liberalism of John Rawls, drawing useful ideas from each. Part IV considers the role of corporate counsel, concluding that in an adversarial setting, corporate counsel must argue for the legal interpretation that best suits the corporation\u27s needs. In a transactional setting, by contrast, where advising rather than advocacy is the norm, ethics require a more balanced interpretation. The Article concludes with a brief summary

The legal framework for private sector development in a transitional economy : the case of Poland

The economies of Central and Eastern Europe are in the midst of a historic transition from central planning and state ownership to development of a market-driven private sector. This transition requires comprehensive changes in"rules of the game"- including the legal framework for economic activity. A market economy presupposes a set of property rights and a system of laws or customs that allow the exchange of those rights. The legal framework in a market economy has at least three basic functions: defining the universe of property rights; setting the rules for entry into and exit from productive activities; and setting the rules of market exchange. These legal tasks are accomplished by areas of law such as: company, foreign investment, bankruptcy, contract and competition law. Poland has a rich legal tradition dating from pre-socialist times, which was suppressed but not eliminated during its forty years of socialism. This tradition is being revised as the country moves toward a private market economy. The current legal framework in Poland closely follows other continental jurisdictions and has a clear and reasonable internal logic. Many of the laws are old, but most are flexible enough to permit a wide range of modern, market-oriented activity. Property law, however, remains a"jungle". The wide discretion and general lack of precedent create tremendous legal uncertainty that is sure to hamper private sector development.Environmental Economics&Policies,Banks&Banking Reform,Municipal Housing and Land,Legal Products,Land and Real Estate Development

The Legal Framework for Private Sector Development in a Transitional Economy: The Case of Poland

The economies of Central and Eastern Europe are in the midst of an historic transition from central planning and state ownership to market driven private sector development. This transition requires comprehensive changes in the rules of the game – i.e. the legal framework for economic activity. Markets presuppose a set of property rights and a system of laws or customs that enable the exchange of those rights. The legal framework in a market economy has at a minimum three basic functions: to define the universe of property rights in the system, to set the rules for the entry and exit of actors into and out of productive activities, and to set the rules of market exchange. Each of these three functions typically involves numerous areas of law. Property rights are defined in practice in most market economies by a wide array of laws regulating the ownership and use of real, personal, and intangible property, as well as shares in going concerns. Company, foreign investment, and bankruptcy laws are among the subset of laws that govern the entry and exit of actors into and out of productive activities. General rules of market exchange govern contract and competition law, while more detailed laws and regulations may govern more specific rules of market exchange in particular sectors. This paper analyzes the evolving legal framework for private sector development in Poland using this general classification. Poland has a rich legal tradition dating from pre-socialist times. This tradition, suppressed but not eliminated during its forty years of socialism, is being revised as the country moves toward a private market economy. The current legal framework in Poland closely follows other continental jurisdictions, particularly the French system, and has a clear and reasonable internal logic. While many of the laws are old, most are flexible enough to permit a wide range of modern market oriented activity. The 1964 Civil Code, modelled closely after the French Napoleonic Code, lays out underlying property and contract rights. Although adopted under the socialist regime, the Civil Code was drafted by law professors and, after being recently purged of socialist rhetoric, the Code is suitable for a market economy. Recent legislation, including the 1990 Antimonopoly Law and the recently adopted Securities and Foreign Investment Laws, appears to be quite well designed for private sector development. Moreover, Parliament (the Sejm ) recently adopted a new personal income tax, and a new value-added tax law is being considered and probably will be adopted in 1992. The most problematic area is property law, which is still, in the words of one Polish legal practitioner, a jungle. Although the legal structure is generally satisfactory in most areas, practice remains uncertain in all areas. The generality of the laws leaves wide discretion for administrators and courts, and a body of cases and practice to further define the rules of the game has not yet developed. Although the courts are generally honest and are used by the population, they have little experience in economic matters. Judges are not well paid, and the best lawyers have a strong incentive to go into private practice. The wide discretion and general lack of experience and competence of judges create legal uncertainty that could hamper private sector development. The answer is not a change in the law, however, but a building of precedent and competence through training and dissemination of information

Corporate Counsel, Legal Loopholes, and the Ethics of Interpretation

This Article examines ethical issues posed by imperfections in legal texts. More particularly, it addresses legal loopholes, carefully defining the term and then exploring whether there is anything wrong with exploiting loopholes for private gain. Focusing on corporate settings, the analysis considers both the obligation of a business leader to support reasonably just social institutions and the professional obligation of corporate counsel advising on such issues. Although the notion of a legal loophole enjoys widespread colloquial use, the term is typically used quite loosely and without critical reflection. Perhaps in an adversarial system, one becomes accustomed to taking full advantage of any and all effective legal recourse, including but not limited to the exploitation of loopholes. Loopholes often generate arguments over interpretation. This Article addresses the ethics of legal interpretation head on. It examines the scope of the social obligation to abide by a good faith interpretation of a legal text, rather than to exploit inevitable imperfections in those texts to advance private interests. The analysis proceeds in three parts followed by a conclusion. Part II portrays a loophole as a style of argument that pits a literal inter- pretation of a text against a more purposeful one. Because literal interpretations sometimes prevail, loopholes have economic value. Part III examines the ethics of a corporate legal strategy to construct strained interpretations of the law as guides to corporate conduct. The discussion embraces both the libertarian insights of Milton Friedman and the democratic liberalism of John Rawls, drawing useful ideas from each. Part IV considers the role of corporate counsel, concluding that in an adversarial setting, corporate counsel must argue for the legal interpretation that best suits the corporation\u27s needs. In a transactional setting, by contrast, where advising rather than advocacy is the norm, ethics require a more balanced interpretation. The Article concludes with a brief summary