Business for the Rule of Law, par Ian McDougall


Ian McDougall, Executive Vice President & General Counsel, LexisNexis

More info about him


Rule of Law is probably one of the most important of legal philosophical concepts in the world today. Not only a highly academic topic with little relevance to real world issues, it is a fundamental platform upon which all other legal notions depend for effect. It is the “right thing to do”, in an academic or moral way, but it is also an imperative for economic development and growth of our companies.

I will start with a bold statement; I think the law is one of the most fantastic, wondrous achievements in the history of human civilization! Even lawyers often don’t recognize this. Sometimes lawyers can be ground down by the day-to-day minutiae of a particular matter. But stop and think about it for a moment. Our civilization has evolved to a point where it is possible to follow a purely abstract philosophical concept by which all our lives can be governed. That system is based on reason (in the logical sense of that word), reasonableness (in the utilitarian sense of that word), and a broad based consent (in any sense of that word you like). It is truly amazing.


To that I would add that we are discussing a subject that delivers peace, prosperity and advancement wherever it is strongly felt. I hope, that after reading this, you will feel the urge to get your company involved in advancing the Rule of Law around the world.


Before delving into the subject I want to make a brief comment on the notion of Justice (as distinct from the “Rule of Law”). There are so many aspects of the notion of Justice I can’t possibly cover them here. But that is not my subject of today. Justice is a notion that can depend on the type of law passed. This article will presume that a law, whatever it is, is a just one for the purposes of discussing the “Rule of Law”. I will summarize the areas to be covered by this piece.


I will cover:

  • What the phrase means – in other words, to define the “Rule of law”
  • The beneficial economic impact and impact to society;
  • What business can do about it (the “Business for the Rule of Law” project);
  • And, as it is the 800th Anniversary of Magna Carta (and for those of you of an academic mind, interested in the subject and still with me by that point!), I will briefly recap on the origins of the Rule of Law as a topic in its own right;


I have been made aware that the expression “Rule of Law” can leave many people scratching their heads thinking “but it’s obvious! We have laws. What’s the issue?” I will answer that question in two ways; first, by going through the points I’ve listed above. Second, by discussing a point I will come to a little later which is to explain the difference between the “Rule of Law” and “Rule by Law”.


Definition of the Rule of Law. There are, in fact, many definitions of the Rule of Law.  At the United Nations, the Rule of Law appeared in the Preamble to the Universal Declaration of Human Rights (1948). Then 2 subsequent reports on the subject issued by the UN in 2002 & 2004 discuss the point.


However, both of those reports demonstrate the difficulty in defining the subject. The first report refers to

  • an independent judiciary,
  • independent human rights institutions,
  • defined and limited powers of government and fair and open elections, (I will return to the subject of democracy a little later).


Whereas the second report focuses on elements of

  • quality of legislation,
  • supremacy of law,
  • equality before the law,
  • accountability to the law,
  • legal certainty,
  • procedural and legal transparency,
  • avoidance of arbitrariness,
  • separation of powers. 


Further to this, a 2005 Resolution of the UN Human Rights Commission focused on separation of powers, the supremacy of law and equal protection under the law.


So I will try to break all of that down to some very simple concepts. The Rule of Law, in the definition that we work with at LexisNexis in the “Business for the Rule of Law” project, basically means “everyone is equal under the law”. It means that the law applies to everyone in the same way no matter who you are. This is sometimes also referred to as “The Absence of Arbitrary Power, or Supremacy of Law.”


The law should be above everyone and everything. However, that is only part of it. To have a system where the Rule of Law functions effectively a number of additional things are required.


The law must;

•          Be administered by an impartial judiciary – that means judges who have no interest in which side wins as long as it is according to the law. They have nothing personally to gain by the outcome and are not compelled, as a result of external pressure by any outside party, to come to a specific decision. A subset of this might be the fight against corruption or political interference;

•          Be properly published and accessible – Without knowing what the law is, you can’t enforce it. Without knowing what the law is, you can’t demand its protection. It can be argued that access to legal advice, which remains privileged as between clients and legal advisor, is an important part of this element.

•          Provide Remedy - That seems to me simple logic; not having a remedy for your grievance means the law can be ignored. If there are no consequences to ignoring the law, you don’t really have any law. This also means having a remedy against the government, or any other people, whoever they are - connected to the principle of equality under the law.


Different words can, and very often are, used to describe it, but I think they all mean roughly what I’ve just said. In the interests of being provocative, I will address a couple of points that you may find surprising to see left out of the definition;

* Human Rights; and

* Democracy


First, I will address Human Rights and explain why they don’t appear in the definition. In part, I think it is implicit in the establishment of the rule that everyone is treated the same under the law. I also think that “Human Rights” is a fascinating subject all on its own that could take up a whole book. So all I can do here is give you some issues as high-level explanation and for further thought.


There may be a small element of “Human Rights” that can be universally agreed in all cultures and systems. The right not to be killed. The right not to be imprisoned without fair trial (or “due process”). The right not to have your property seized without process of law. But what about other things beyond that? Abortion? The right to a home? I note, for example, that Article 47 of the Spanish Constitution states: "All Spaniards have the right to enjoy decent and adequate housing”. 


What about the right to education? Is that a human right? If so, Human Rights are things that develop and change like the wind through time. They are not absolutes. If you had asked someone if the right to education was a Human Right in the 1500’s the answer would almost certainly have been no. But now? Will the right to access to the Internet become a Human Right in future? President Obama said something that goes perilously close to that when talking about “net-neutrality”!


Now let me turn to the second of my controversial exclusions - democracy. I suggest that democracy is not a crucial, or necessary element, of the Rule of Law. In Plato’s Republic, for example, he envisages a system of government where enlightened people rule for the benefit of all and there is no need for democracy. Is it possible to imagine a hereditary ruler (or some kind of unelected sole ruler) who rules in accordance with the Rule of Law? I think it is possible to imagine it.


We might not have actually seen it in modern times, and it may be that democracy is the only practical, ultimate, well tested environment for the most effective Rule of Law we can have, but you can certainly imagine the contrary. So I will follow a rule of philosophy known as Occam’s Razor[2]; anything that isn’t strictly necessary to support a proposition, or axiom, can be discarded. I discard democracy as not being a strictly necessary element of the Rule of Law.


Let me be clear, I am not arguing that democracy is a bad thing. That would be a different point completely. I’m just making the point that democracy is not strictly philosophically necessary for the Rule of Law. In this respect, I will quote from “Corruption, Good Governance & Economic Growth” by Kranjska Gora who said “Democratization and political stability are clearly not enough to allow for development, therefore democracy as such does not represent a guarantee for the development of a particular society, as is shown by some of the Latin-American countries, and as it probably will be shown by some, or most, of the Central and Eastern European societies…”


Economics and the Rule of Law. I propose that there are three reasons why the Rule of Law is crucial. Crucial to our understanding of the subject of law and crucial to the advancement of people everywhere.


The first reason is that it is a logically sound and fair basis upon which a society and system of government should be based. In other words, “it’s the right thing to do!”


The second reason is a foundational reason; the Rule of Law is the foundation of all other rights. Many organizations have Corporate Social Responsibility programs; Anti-Human Trafficking policies, Environment Policies, anti-corruption policies etc. etc. But without the elements of the Rule of Law I have outlined, those policies are just words on a piece of paper, without any real effect or power. You can’t actually achieve anything in all those other areas without having the foundation of the Rule of Law in place. Or, at the very least, progress in those other areas is delayed or obstructed.


No Rule of Law - no contract system. No Rule of Law - no land law process. No Rule of Law - no protection against personal injury. No Rule of Law - no environmental protection, and so on.


The third reason is one I will turn to now; the economic argument. I have to make a quick point here. I am not looking at the “economics of laws”, which is an entirely different subject. I’m looking at the economic effect of the Rule of Law.


Douglass North, winner of the Nobel Prize in economics in 1993, wrote about the importance of the Rule of Law in his book "Institutions, Institutional Change and Economic Performance." He wrote that a major consequence of the absence of the Rule of Law is the inability of societies to develop low-cost effective institutions that are able to reduce transaction costs. High transaction costs causes economic stagnation. An excellent documentary by Hernando de Soto called “Unlikely Heroes of the Arab Spring” shows how the breakdown of such institutions by reason of corruption was a cause of the “Arab Spring” uprisings and how high cost institutions force people out of legal commercial activity and therefore out of investment opportunities.


Economists Daniel Kaufmann and Aart Kray wrote a paper called "Growth without Governance", published by the World Bank Institute. They showed a 300 percent dividend returned by a strong Rule of Law environment. Over the medium term they showed a country's income per capita rises by about 300 percent more if its governance is improved only by one standard deviation point (which is defined in the paper).


There is a logical point to consider as well. Where instability of a legal system reaches high or endemic levels, investment is reduced or disappears because the investment is incapable of being protected. Low investment results in low economic growth. Another way of saying this is that if you can’t get your contract enforced, why would you contract? If you can’t protect your investment, why would you invest? Of course, we should acknowledge that short-term gain is possible by the corrupt few. But over the medium term, the risk is high that the reward will be removed or the gain taken away and overall economic performance is lower. There is always someone who can bribe higher!


Whenever I connect low growth to low Rule of Law I already know the first question that springs to mind! If the Rule of Law is so good for the economy, why is one of the fastest growing world economies, China, growing so fast? Why does economic growth soar in some places seemingly lacking the Rule of Law and quality governance institutions?



Publié le 02/12/2015