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University of Michigan Law School

Case studies

2004

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Legal Institutions And International Trade Flows, Daniel Berkowitz, Johannes Moenius, Katharina Pistor Jan 2004

Legal Institutions And International Trade Flows, Daniel Berkowitz, Johannes Moenius, Katharina Pistor

Michigan Journal of International Law

Why do domestic legal institutions matter, and why can trading parties-in particular exporters of complex goods-not easily opt-out of their domestic legal institutions? The authors argue that domestic institutions remain important even in a globalized world, because they are the final option for enforcing a claim against a party in the event of a breach of contract. International contracts take place in the shadow of the parties' home institutions. Unless parties can negotiate a settlement, or the losing party voluntarily complies with a foreign court or arbitration ruling, the winning party must seek enforcement against the assets of the losing ...