Volume 5-8 Abstract


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	Contract and Enforceability in International Business: What works? by Thomas W. Waelde Comment on Manfred Perlitz, Territorialitaet des Rechts als Problem des internationalen Managements (for: Special issue of Constitutional Economics, 1999, based on a conference in Saarbruecken October 1998) Perlitz has raised in his contribution the importance of contract enforceability in host states from a management perspective. The first observation to be made is that transnational commercial contracts are very difficult to enforce. High transaction cost (national and foreign legal and specialised litigation and arbitral counsel, high costs of producing and submitting evidence; additional costs for recognition and enforcement of judicial or arbitral awards) , even higher opportunity cost in terms of management attention (in home and host state), and reputation costs (unfavourable image as a litigation-prone business partner; unwanted negative publicity which can be mobilised for politicised bashing of foreign companies) are added on the cost side over and above what domestic litigation would entail; higher risk in view of the domestic defendant bias of most courts and of the home advantage of the foreign defendant increase the risk. As a result, a corporate cost-benefit analysis will in almost all cases make enforcement by court or arbitral litigation undesirable. In fact, transnational litigation should in most cases be seen as a pathological evidence of management failure.