Using proactive law for competitive advantage

American Business Law Journal

Volumn 47, Issue 4, 2010, Pages 641-686

  Siedel, George J ^a   Haapio, Helena ^b  

^a UNIVERSITY OF MICHIGAN   (United States)

^b UNIVERSITY OF TURKU   (Finland)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 78649351875     PISSN: 00027766     EISSN: 17441714     Source Type: Journal    
DOI: 10.1111/j.1744-1714.2010.01106.x     Document Type: Article

References (155)

1. See Robert C. Bird, Law, Strategy and Competitive Advantage 5 (Working Paper Series 2009), available at [hereinafter Bird, Competitive Advantage]
2. see also Robert C. Bird, Pathways of Legal Strategy, 14 Stan. J.L. Bus. & Fin. 1 [hereinafter Bird, Pathways] ("Authors such as Constance Bagley (Harvard, now Yale), George Siedel (Michigan), and James Holloway (East Carolina) have all researched the law-strategy question with some success. All three have served primarily as teachers of law in their respective business schools."), 4 n.19 (2008)
3. George J. Siedel, Using the Law for Competitive Advantage 5 (2002) (citing Michael Porter, Competitive Advantage 3 (1985)).
4. Bird, Pathways, supra note 1, at 25 (citing Jay Barney, Firm Resources and Sustained Competitive Advantage, 17 J. Mgmt. 99, 102 (1991)).
5. Id. at 7. An article in this special issue also addresses several of these elements. Constance E. Bagley, What's Law Got to Do with It: Integrating Law and Strategy, 47 Am. Bus. L.J. 587 (2010).
6. Bird, Competitive Advantage, supra note 1, at 26 (citing Barney, supra note 4, at 106).
7. Charles Gasparino, Merrill Is Paying in Wake of Analysts' Call on Tech Stock, Wall St. J., July 20, 2001, at C1.
8. G. Richard Shell, Make the Rules or Your Rivals Will 3 (2004).
9. Leigh Thompson, The Mind and Heart of the Negotiator 227 (1998).
10. See, for example, Alexandra Harney, The China Price: The True Cost of Chinese Competitive Advantage for a critical analysis of these two sources of China's comparative advantage.(2008)
11. Judas Priest v. Second Judicial Dist. Court, 760 P.2d 137 (Nev. 1988).
12. CISG: Table of Contracting States, (last visited July 9, 2010)
13. see also George J. Siedel, Six Forces and the Legal Environment of Business: The Relative Value of Business Law Among Business School Core Courses, 37 Am. Bus. L.J. 717, 733 n.42 (2000).
14. Australia, China, Japan, and Taiwan are among the Pacific Rim countries that have enacted product liability legislation. George Menzies, Variations in Damages, Int'l. Bus. Law., Feb. 1998, at 75.
15. Eric Thomas Larson, Why Environmental Liability Regimes in the United States, the European Community, and Japan Have Grown Synonymous with the Polluter Pays Principle, 38 Vand. J. Transnat'l L. 541 (2005)
16. see also James O. Pagliaro & Brody L. Green, E.C. Directive: Proposal is Based on CERCLA, Nat'l L.J., Feb. 10, 1992, at 27.
17. See, e.g., Richard S. Biegen et al., Countries Strengthen Insider Trading Laws, Nat'l L.J., Nov. 13, 1995, at C19.
18. See, e.g., China: Former President of Guangfa Securities Sentenced to Four Years in Prison for Insider Trading, Securities Docket (Jan. 11, 2009)
19. Meritor Sav. Bank v. Vinson, 477 U.S. 57 (1986).
20. Lynn Sharp Paine & Lara Adamsons, Note on the Law of Sexual Harassment 5-7 (Harvard Business School Case Study No. 9-308-096, Aug. 1, 2008).
21. Siedel, supra note 18, at 735 n.50.
22. Colin Loveday, Multi-Party Rules: US, Canada, Australia and the UK, Int'l Bus. Law., Feb. 1998, at 77.
23. See, e.g., Martha Middleton, A Changing Landscape: As Congress Struggles to Rewrite the Nation's Tort Laws, the States May Have Already Done the Job, A.B.A. J., Aug. 1995, at 56.
24. See, e.g., William G. Young, Vanishing Trials, Vanishing Juries, Vanishing Constitution, 40 Suffolk U. L. Rev. 67 (2006).
25. Mark Curriden, Putting the Squeeze on Juries, a.b.a. j., Aug. 2000, at 52, 53.
26. Jingzhou Tao, Environmental Liability of Foreign Invested Enterprises in the People's Republic of China, Int'l Bus. Law., July-Aug. 2000, at 314.
27. Bird, Competitive Advantage, supra note 1, at 14.
28. Id. An article in this special issue analyzes elements of both of these variables. David Orozco, Legal Knowledge as an Intellectual Property Managerial Resource, 47 Am. Bus. L.J. 687 (2010).
29. Bird, Competitive Advantage, supra note 1, at 14.
30. Siedel, supra note 18, at 727.
31. See Michael W. Little & William H. Daughtrey, Jr., Survey of Virginia Corporate Executives on the Role of Law in Business Curricula, 13 J. Legal Stud. Educ. 147 (1995).
32. Professor Bagley has emphasized the importance of "legal astuteness" as a possible source of competitive advantage. In an article in this special issue, she develops an integrated model of law and strategy. Bagley, supra note 6, at 623-29.
33. Constance E. Bagley, Winning Legally: How To Use the Law to Create Value, Marshal Resources, and Manage Risk 28 (2005).
34. Bird, Pathways, supra note 1, at 12.
35. Lynn Sharp Paine, Managing for Organizational Integrity, Harv. Bus. Rev., Mar.-Apr. 1994, at 106, 113.
36. Bird, Pathways, supra note 1, at 23.
37. Siedel, supra note 2, at 128.
38. Bird, Pathways, supra note 1, at 31.
39. Siedel, supra note 2, at 20-25.
40. Bagley, supra note 40, at 26-42.
41. Siedel, supra note 2, at 23 (citing Am. Corp. Counsel Ass'n, In-House Counsel for the 21st Century (Sept. 7, 2001)).
42. Catherine Cronin-Harris, Building ADR into the Corporate Law Department 105-07 (1997).
43. Siedel, supra note 2, at 160-63.
44. See supra text accompanying notes 32-35.
45. J. Edward Russo & Paul J.H. Schoemaker, Winning Decisions: Getting It Right the First Time 9 (2001).
46. Siedel, supra note 2, at 47-52.
47. William Ury, Getting Past No 11 (1993).
48. Siedel, supra note 2, at 52-55.
49. Marketing in Progress 199 (Hiram C. Barksdale ed., 1964).
50. See George J. Siedel, The Sixth Strategy: Integrating the Law School and Business School Case Methods, Law Teacher, Fall 2008, at 15, available at.http://lawteaching.org/lawteacher/2008fall/lawteacher2008fall.pdf
51. E-mail from Robert J. Aalberts, Professor, Department of Finance, University of Nevada, Las Vegas (Aug. 25, 2009, 14:12:00 EST) (on file with authors).
52. Bird, Pathways, supra note 1, at 41 (citing Larry Downes, First, Empower All the Lawyers, Harv Bus. Rev., Dec. 2004, at 19, 19).
53. Nordic School of Proactive Law, Welcome to the website of the Nordic School of Proactive Law, (last visited July 1, 2010). This site is maintained under the leadership of one of the pioneers of Proactive Law, Professor Cecilia Magnusson Sjöberg, Director of the Swedish Law & Informatics Research Institute at the University of Stockholm.
54. Helena Haapio & Annika Varjonen, Quality Improvement through Proactive Contracting: Contracts Are Too Important to Be Left to Lawyers!, 52 Proc. Ann. Quality Congress 243 (1998). An abstract is available at (last visited Aug. 10, 2010). This conference paper was also published as Helena Haapio, Preventive Lawyering in International Sales-Using Contract Reviews to Integrate Preventive Law, Risk Management, and Quality, Preventive L. Rep., Winter 1997/1998, at 16.
55. Nordic School of Proactive Law, supra note 79.
56. Nordic School of Proactive Law, Proactive ThinkTank, (last visited July 1, 2010)
57. International Association for Contract and Commercial Management (IACCM), ProActive ThinkTank Home Page, (last visited July 1, 2010)
58. see also Helena Haapio, Introduction to Proactive Law: A Business Lawyer's View, in A Proactive Approach 21, 26 (Scandinavian Studies in Law vol. 49, Peter Wahlgren ed., 2006) [hereinafter A Proactive Approach].
59. See Institutet för Rättsinformatik, Welcome to The Swedish Law & Informatics Research Institute, (last visited July 1, 2010).
60. Helena Haapio & Anita Smith, Safe Sales in Cyberspace, 18 Am. Corp. Couns. Ass'n Docket 24 (2000), reprinted in International Contract Manual-Contract Checklists (Albert Kritzer ed., Supp. 2000), available at.http://www.cisg.law.pace.edu/cisg/biblio/haapiosmith.html
61. Cecilia Magnusson Sjöberg, Introduction, in A Proactive Approach, supra note 82, at 13, 15.
62. See Nordic School of Proactive Law, Contact Us, (last visited July 1, 2010).http://www.juridicum.su.se/proactivelaw/main/planning.html
63. See IACCM, ProActive ThinkTank Home Page, Core Team, (last visited July 1, 2010).http://www.iaccm.com/proactive/index.php?thispage=coreteam
64. Nordic School of Proactive Law, ProActive ThinkTank Mission Statement, (last visited May 1, 2010).http://www.juridicum.su.se/proactivelaw/main/thinktank/missionstatement.pdf
65. A Proactive approach, supra note 82.
66. Corporate Contracting Capabilities, Conference Proceedings And Other Writings (Soili Nystén-Haarala ed., 2008).
67. A Proactive Approach to Contracting and Law (Helena Haapio ed., 2008).
68. E.g., Ennakoiva Sopiminen-Liiketoimien Suunnittelu, Toteuttaminen Ja Riskien Hallinta [Proactive Contracting-Planning, Implementing and Managing Risk in Business Transactions] (Soile Pohjonen ed., 2002); Ex Ante-Ennakoiva Oikeus [Ex Ante-Proactive Law] (Soile Pohjonen ed., 2005).
69. Edward A. Dauer, The Role of Culture in Legal Risk Management, in A Proactive Approach, supra note 82, at 93, 93-94.
70. Id. See generally Louis M. Brown, Lawyering Through Life-The Origin Of Preventive Law (1986)
71. Louis M. Brown & Edward A. Dauer, Planning By Lawyers: Materialson Nonadversarial Legal Process (1978)
72. Louis M. Brown, Preventive Law (1950).
73. Dauer, supra note 93, at 94.
74. Soile Pohjonen, Proactive Law in the Field of Law, in A Proactive Approach, supra note 82, at 53, 54
75. see also Soile Pohjonen, Law and Business-Successful Business Contracting, Corporate Social Responsibility and Legal Thinking, Tidskrift Utgiven Av Juridiska Föreningen I Finland (JFT) 470, 477 (2009), available at [hereinafter Pohjonen, Law and Business].
76. Haapio, supra note 82, at 22.
77. See Higgins Lab, Regulatory Focus, (last visited July 9, 2010).
78. Kyle J. Mayer & Libby Weber, Unpacking Contract Capabilities: Shaping Behavior by Implementing Appropriate Contract Framing 8 (Feb. 22, 2009), available athttp://ssrn.com/abstract=1349247
79. see also Libby Weber, The Right Frame of Mind for M&A: The Post-Merger Impact of Deal Frames on Target Management Behavior (Feb. 25, 2009), available at.http://ssrn.com/abstract=1349209
80. Mayer & Weber, supra note 101, at 9.
81. Cecilia Magnusson Sjöberg, Proactive ICT Law in the Nordic Countries, in A Proactive Approach to Contracting and Law, supra note 91, at 47.
82. EESC, (last visited July 6, 2010).
83. For the roles and functions of the EESC, see Treaty Establishing the European Community, art. 258-262, Dec. 24, 2002, 2002 O.J. (C 325) 137, available at, as amended by the Lisbon Treaty. For the latter and a consolidated version, see Council of the European Union, Treaty of Lisbon, [hereinafter Lisbon Treaty], art. 301-304
84. see also EESC, The EESC in 10 Points, (last visited July 9, 2010) [hereinafter EESC 10 Points].
85. See Lisbon Treaty, supra note 105, art. 304.
86. EESC, Frequently Asked Questions, (last visited June 16, 2010) [hereinafter EESC FAQ].
87. Id.; see also EESC 10 Points, supra note 105.
88. EESC FAQ, supra note 107.
89. Official Journal of the European Union, (last visited June 16, 2010).
90. Lisbon Treaty, supra note 105, art. 304.
91. EESC 10 Points, supra note 105.
92. EESC, Documents, (last visited July 8, 2010).
93. Eur-Lex, Access to European Union Law, (last visited July 8, 2010).
94. See Opinion of the European Economic and Social Committee on 'The proactive law approach: a further step towards better regulation at EU level,' 2009 O.J. (C 175) § 4.2, available at [hereinafter EESC Opinion].
95. EESC, Foreword of Mr. Pegado Liz, Chairman of the Single Market Observatory, (last visited July 8, 2010).
96. See Nordic School of Proactive Law, supra note 79; Pohjonen, Law and Business, supra note 96, at 477.
97. This paper was later published in Helena Haapio, An Ounce of Prevention ... Proactive Legal Care for Corporate Contracting Success, jft Tidskrift Utgiven Av Juridiska Föreningen I Finland (JFT) 39 (2007).
98. This conference was hosted by the PriME Research Project (Private Law in a Multicultural and Multilingual European Society) and the Institute of International Economic Law at the University of Helsinki in August 2006.
99. See generally Jorge Pegado Liz, EESC Opinion on the Proactive Law Approach: A Further Step Towards Better Regulation at EU level, presentation at the 1st European Proactive Law Symposium, ICN Business School, Nancy, France (Oct. 14, 2009).
100. EESC Opinion, supra note 115.
101. see also Press Release, EESC, The Proactive Law Approach: A Novelty (Dec. 16, 2008), available at. http://www.eulib.com/proactive-approach-novelty-long-emphasis-legal-3775
102. EESC Opinion, supra note 115, § 1.10.
103. George J. Siedel & Helena Haapio, Proactive Law for Managers: A Hidden Source of Competitive Advantage (forthcoming 2010).
104. Siedel, supra note 2, at 26.
105. O. Lee Reed et al., The Role of Contracts in the Introductory and Only Law Course That Most Business Students Will Ever Take, 9 J. Legal Stud. Educ. 1, 14 n.23 (1990) (quoting Am. Corporate Counsel Ass'n, Legal Responsibilities of Corporate Managers 45 (1985)).
106. Id. at 14 n.21 (quoting Elliot Klayman & Kathleen Nesser, Eliminating the Disparity Between the Business Person's Needs and What is Taught in the Basic Business Law Course, 22 Am. Bus. L.J. 41, 47 (1984)).
107. Tim Cummins, Best Practices in Commercial Contracting, in A Proactive Approach, supra note 82, at 131, 132.
108. Helena Haapio, Business Success and Problem Prevention Through Proactive Contracting, in A Proactive Approach, supra note 82, at 149, 169.
109. This example is based on a simulation entitled Rapid Printing vs. Scott Computers. SeeGeorge J. Siedel, Interdisciplinary Approaches to Alternative Dispute Resolution, 10 J. Legal Stud. Educ. 141, 152 (1992).See alsoAnne L. Lytle et al., The Strategic Use of Interests, Rights, and Power to Resolve Disputes, 15 Negotiation J. 31 (1999).
110. Siedel, supra note 2, at 6-7.
111. See generally Frank E.A. Sander & Jeffrey Z. Rubin, The Janus Quality of Negotiations: Dealmaking and Dispute Settlement, 4 Negotiation J. 109 (1988).
112. Soile Pohjonen & Kerttuli Visuri, Proactive Approach in Project Management and Contracting, in A Proactive Approach to Contracting and Law, supra note 91, at 75, 82.
113. IACCM, The Top Ten Most Negotiated Terms in 2007, (last visited July 8, 2010).
114. The results have been substantially confirmed annually in corresponding surveys undertaken by the IACCM, the most recent in December 2009-March 2010, to which more than 1000 organizations contributed. See IACCM Contracting Excellence Special Edition 2010, Contract Negotiations As A Source of Value, (last visited July 8 [hereinafter IACCM 2009 Survey Results], 2010).
115. See supra text accompanying notes 62-63.
116. Larry A. DiMatteo, Strategic Contracting: Contract Law as a Source of Competitive Advantage, 47 Am. Bus. L.J. 727 (2010).
117. See Russo & Schoemaker, supra note 67, at 9.
118. In addition to these two dimensions, other dimensions of corporate contracting capabilities may become visible that offer opportunities for improvement both in negotiated and non-negotiated contracts, online and offline. Beyond the contract content dimension, recent research has recognized dimensions related to the contracting process, along with relational and organizational dimensions. See Contracting Capabilities in Industrial Life-Cycle and Service Business, (last visited July 9, 2010)
119. see also Nari Lee, From Tangibles to Intangibles-Contracting Capability for Intangible Innovation, 21 U. Joensuu Publications in L. 33(discussing contracting capability in the context of commercializing intangibles), 35-39 (2008), available at. http://ssrn.com/abstract=1350337
120. Soili Nystén-Haarala, Contract Law and Everyday Contracting, in A Proactive Approach, supra note 82, at 263, 264
121. see also George J. Siedel, Legal Complexity in Cross-Border Subsidiary Management, 36 Tex. Int'l L.J. 611(noting a fundamental difference between the case method in law schools and business schools and stating that business school students "are placed in the role of decision makers, in contrast to law students who focus on the analysis of decisions made by judges."), 614-15 (2001)
122. Northwestern Law School has been a leader in the United States in developing a new model of legal education. Dean David Van Zandt notes:?[W]e are the only law school in the country that attempts to interview everyone who applies in order to assess their interpersonal and communication skills, as well as their fit in our community... You [as a lawyer] must be able to function well on and lead teams as well as successfully manage projects. You must understand your client's strategy and what your client-whether an individual or an organization-is trying to accomplish with your help. Finally, you must be able to communicate both verbally and in written form not only with other lawyers but also with other teammates who bring their own expertise to the problem at hand.Top-Law-Schools.com, Interview with Dean David E. Van Zandt of Northwestern University School of Law, (last visited July 9, 2010).
123. Haapio, supra note 140, at 160-61.
124. Tobias Mahler & Jon Bing, Contractual Risk Management in an ICT Context-Searching for a Possible Interface Between Legal Methods and Risk Analysis, in A Proactive Approach, supra note 82, at 339, 351.
125. See Michael Hammer & James Champy, Reengineering the Corporation: A Manifesto for Business Revolution 218 (1993).
126. Haapio, supra note 140, at 161.
127. Id. at 152-53 (discussing proactive contracting and commenting that, "[f]irst and foremost, it is about the conscious use of contracts and contracting processes as management tools which guide and support the success of the client's business.").
128. See Vaula Haavisto, Contracting in Networks, in A Proactive Approach, supra note 82, at 237, 247.
129. Id. (quoting Robert Axelrod, The Evolution of Cooperation (1984)).
130. Id. at 243-44 (quoting Ian Macneil, Contracts: Adjustment of Long-Term Economic Relations Under Classical, Neoclassical and Relational Contract Law, 72 N.W. L. Rev. 854 (1978)).
131. Haapio, supra note 140, at 177 n.54 (quoting Macneil & Gudel, Contracts: Exchange Transactions and Relations (2001), at vii-viii).
132. Id. at 165 n.32 (quoting Macneil & Gudel, supra note 166, at 2).
133. Steven Weatherley, Pathclearer: A More Commercial Approach to Drafting Commercial Contracts, L. Dep't Q., Oct.-Dec. 2005, at 39.
134. See supra text accompanying note 94.
135. Weatherley, supra note 168, at 43.
136. Cummins, supra note 139, at 138.
137. See supra text accompanying note 148.
138. For the IACCM 2008 survey results, see IACCM, The Top Negotiated Terms: Negotiators Admit They Are On Wrong Agenda, (last visited July 9, 2010) [hereinafter IACCM 2008 Survey Results]. For the IACCM 2009 survey results, see supra note 148.
139. See IACCM 2008 Survey Results, supra note 194.
140. Danny Ertel, Getting Past Yes: Negotiating as if Implementation Mattered, Harv. Bus. Rev., Nov. 2004, at 60, 62.
141. See Max H. Bazerman, Judgment in Managerial Decision Making 150 (3rd ed. 1994) (stating that competitive instincts in negotiation are fueled by the mythical fixed pie assumption, a bias in human judgment that causes them to "assume that their interests necessarily and directly conflict with the other party's interests.").
142. Ertel, supra note 197, at 62.
143. See, e.g., Macneil & Gudel, supra note 166, at 11-25, 177-82.
144. Ertel, supra note 197, at 62.
145. See supra text accompanying note 143.
146. IACCM 2009 Survey Results, supra note 148, at 4.
147. IACCM 2008 Survey Results, supra note 194.
148. Danny Ertel, Turning Negotiation into a Corporate Capability, Harv. Bus. Rev., May-June 1999, at 55, 62.
149. Jason Mark Anderman, The Future of Contracts Seen Through Six Sigma, Ass'n Corp. Couns. Docket, Sept. 2007, at 40, 44-45.
150. eNotes, Closely Held Corporations, (last visited July 10, 2010).
151. Haapio, supra note 82, at 25-26 (citing Edward A. Dauer, Developing Preventive Law: From Lawyering to Quality, Leadership and Management Directions Newsletter (A.B.A./Law Practice Division), Summer 1998).
152. See Timothy L. Fort, How Relationality Shapes Business and Its Ethics, 16 J. Bus. Ethics 171, 177 (1997).
153. Siedel, supra note 2, at 167
154. Siedel & Haapio, supra note 134.
155. See Paine, supra note 50.