The American legal system is considered among the best in the world. The strength and power of the legal system can be rightfully said to be a prime driver for the rise of United States of America as the hyperpower of our times, holding the world’s reserve currency, the choice destination of most immigrants, the strong economy and almost any other characteristic of the country. It has been copied extensively elsewhere and for due reason. But there are some issues which are cropping up which need to be looked at, otherwise the foundations of this great society will be threatened. As somebody once said, too much of a good thing is bad and that neatly encapsulates the overall situation about the American legal system. Let us tease these issues out.
As is with most of my rather strange ideas, this essay idea emerged while I was watching a march in London protesting against the extradition of three British bankers to USA to face charges about the Enron disaster. It was unique; a protest march on the street by people in suits is something which is rare. To see doyens of industry, titans of banking and gods of insurance all walking side by side on the street, suited and booted. They were all objecting to the fact that because of the singularly lopsided and frankly stupid extradition treaty signed between UK and USA, any British citizen can be extradited to the USA without any prima facie evidence being presented to a British Court. More importantly, this can be done despite the fact the British citizen has not broken any laws in the UK. Any odd sod prosecutor in the USA can thus get a British Citizen across and prosecute him. Mind you, the stupidity comes from the fact that the reverse cannot happen. Can you imagine the fury of the British people to know that Tony Blair’s government signed this treaty? I think people are going to present a poodle to Mr. Blair as his leaving present. That said, this treaty is in danger on the American side as well if it gets ratified, because all the Irish Americans who gave money and supported the Irish terrorists can then be legally extradited to face trial in the UK. Now that’s something which will put the Americans on the horns of a dilemma and I tell you, that position is uncomfortable.
Legal systems are supposed to be blind, that is why the statue of justice holding the scales is blindfolded. In other words, the application of law has to be fair, equitable and just otherwise it is not law. Back in the old days, judgement on crimes used to be based on the whim of a king, an emperor or his designate. Miscarriages of justice still occur, but as long as they are the exception, people trust the legal system to provide justice and protection against the executive, legislature and their fellow humans. Looking back at the history of USA, it is not surprising that a large number of the framers of the US constitution were lawyers. Given the institutional history of the unfair, capricious, unjust European systems of that time, a very strong legal structure was set up, with jury trials and a reputation of fairness and probity. I hold no truck with those who moan about the fact that American justice is only for the rich, as the system of public defenders for example, while having its own issues, is still one the best in the world.
But there have been other issues which caught my eye. I can roughly divide that into three categories. The first is the international reach of the financial legal system, the second is the domestic civil legal system and the final one is the American interpretation and implementation of the international legal system. Let us take these one by one. The first one is the impact of financial and economic financial laws on the American economy and given globalisation, worldwide impact. The American regulatory landscape is fragmented compared to say the British one, where the Financial Services Authority is a single point of contact and control. This leads to rather knee-jerk and disjointed legal steps. One example is the severe and knee-jerk treatment by the Sarbanes Oxley Act, passed after the spate of corporate frauds such as at Enron.
While the intention was good, the implementation and drafting of the law is rather lacking in common sense. The road to hell is paved with good intentions. Some of the repercussions of this act are that many international companies are refusing to do business in the USA or list in the American stock exchanges, the speed of decision making has decreased and cost of implementing the act and generally doing business has increased. Hal Scott, Professor of Law at Harvard Law School said recently that Sarbanes Oxley, the litigious nature of American business landscape and the overzealous plaintiff lawyers are slowly driving American business away from USA and into the arms of Europe. Do not forget we have seen this before with the Eurobond market when American trading business moved into Europe to escape American taxes. Other legal factors which are causes for concern are the laws relating to hedge fund oversight and class action suits (a factor to which we will return). An example of this concern can be seen in the financial pages in Europe, where politicians and executives of all stripes rose like a startled covey of pigeons at the possibility of the American regulatory system being imported into Europe, because of the takeover of Euronext (the combined French, Dutch, Portuguese and other related derivative exchanges in Paris, London, etc.) by New York Stock Exchange.
The second issue which I can see is what I call as the general overall situation relating to class action suits. A perfect example of too much of a good thing becoming bad. Generally speaking, a class action suit happens when people join into a group to launch a case against a corporation, individual or organisation. Looking at the case individually, it may be too difficult or costly, so clubbing people together as defendants makes sense. This avoids redundancy and can address the same crime/issue in one go. While that is all fine and good, over the past few years, the incidents of frivolous lawsuits are ever increasing. Why do I say that? Simple, when one considers some indicators such as unscrupulous lawyers making a beeline for certain jurisdictions considered to be lawyer friendly, the determined opposition to tort reform and significantly lopsided awards which have been witnessed in certain industries such as tobacco, automobile, investment banking, pharmaceuticals, etc. Now the latest industry in the cross-hair is the fast food sector. Again it leads one to wonder whether too much of a good thing is bad.
Within this related issue is the generally and slowly increasing cost of legal action. Which, as an economist, I find strange, given the rapidly increasing number of lawyers. Well, if nothing else, the number of lawyer jokes is rapidly increasing. Also, in my international travel, I find the phenomena of lawyer jokes (associating them with sharks or useless people) a particularly American one. But besides that, the cost of legal action across the board is rising. Again, isolated incidents show that some lawyers are definitely on the wrong side of the law, violating the spirit if not the letter of the law. This is not to say that this does not happen elsewhere, but given the sheer number and proportion of lawyers in the general American population, the relatively high cost of legal action means that many of the less well off are not protected as much. Anybody who has read about or visited the lower criminal courts will notice the poor, immigrants and generally dispossessed are comparatively less well served. Add to this the higher proportion of prisoners and one gets a feeling that perhaps the system has become too big and unwieldy. For the vast majority of cases, it works, but perhaps it works just too well. Is it because of the state-federal structure? Or is it because of a proportionately higher emphasis on individual rights versus the overall group/nation rights? Another indicator is how the republicans moan about the lawyers and tort reform, while the democrats moan about increased criminality and rigorous sentencing. Put the two together and you will see what I mean.
The final issue is how international treaties and nationals are treated by the American legal system / functionaries. This is the international view of USA’s much vaunted legal and moral system. USA which was born out of an intensely moral and legalistic basis (witness the constitution and constitution framer’s legal background) is diminished when international laws, conventions and treaties are not followed. We all know the recent furore about Guantanamo Bay, rendition of prisoners in Europe and elsewhere, torture of prisoners in Abu Ghraib, greater use of exception letters by President Bush on any law that he doesn’t like which Congress has passed, extradition treaties, immigration law, treatment of illegal immigrants (and confusion over), the entire brouhaha over the International Criminal Court, riding rough-shod over all international organisations, use of financial data from SWIFT for tracking terrorist funds etc. Yes, I know that there is a war on terror. Yes, I know current legal systems designed for crime fighting cannot cater for terrorism in an efficient manner. I also know that there is a huge element of anti-Americanism behind many of these accusations, but generally, there is a kernel of truth in some or all of them. (see a related previous essay).
This is a war of ideas as much as a war of bullets. It is not possible for us to claim moral superiority when we indulge in such activities. The reason we are against religious fundamentalism and terrorism is that we believe in the supreme equality of man, of being just and fair. The legal system is the visible personification of our intent for a just and fair society. We cannot move away from our deeply held principles by pointing that these terrorists never care about our legal systems or morals. All the more reason to uphold them. Once we lock them up without charge for years on end, then what is the difference between our legal systems and the kidnappers in Iraq, Lebanon, and Israel etc.? The difference is simply in the intent of the captors, but as an end result that the person is locked up without charge, something that is an anathema for the American legal system. Mind you, this has also happened in the United Kingdom.
But overall, a strong legal system is the cornerstone of the liberal democratic edifice. The American legal system is immensely strong; justice is achieved in the vast majority of cases. The legal system provides security to most Americans (whether personal or commercial), and is a good basis to develop business. The American system of intellectual property rights and protection, by and large, is responsible for inventors preferring to sell and develop their ideas in the USA. The American economic system backed by the legal system means that the financial and capital markets are better protected in the USA. But as we have seen above at a very high level, there are some isolated incidents which need to be addressed. That is the beauty of the liberal democratic system, anything which starts going wrong is addressed sooner or later. Given the beacon of hope that is the American legal system, it is incumbent on all the leaders to keep these issues in the back of their minds so that the words of the Pledge of Allegiance, namely: "I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under God, indivisible, with liberty and justice for all" really again includes ALL.
All this to be taken with a grain of salt!
As is with most of my rather strange ideas, this essay idea emerged while I was watching a march in London protesting against the extradition of three British bankers to USA to face charges about the Enron disaster. It was unique; a protest march on the street by people in suits is something which is rare. To see doyens of industry, titans of banking and gods of insurance all walking side by side on the street, suited and booted. They were all objecting to the fact that because of the singularly lopsided and frankly stupid extradition treaty signed between UK and USA, any British citizen can be extradited to the USA without any prima facie evidence being presented to a British Court. More importantly, this can be done despite the fact the British citizen has not broken any laws in the UK. Any odd sod prosecutor in the USA can thus get a British Citizen across and prosecute him. Mind you, the stupidity comes from the fact that the reverse cannot happen. Can you imagine the fury of the British people to know that Tony Blair’s government signed this treaty? I think people are going to present a poodle to Mr. Blair as his leaving present. That said, this treaty is in danger on the American side as well if it gets ratified, because all the Irish Americans who gave money and supported the Irish terrorists can then be legally extradited to face trial in the UK. Now that’s something which will put the Americans on the horns of a dilemma and I tell you, that position is uncomfortable.
Legal systems are supposed to be blind, that is why the statue of justice holding the scales is blindfolded. In other words, the application of law has to be fair, equitable and just otherwise it is not law. Back in the old days, judgement on crimes used to be based on the whim of a king, an emperor or his designate. Miscarriages of justice still occur, but as long as they are the exception, people trust the legal system to provide justice and protection against the executive, legislature and their fellow humans. Looking back at the history of USA, it is not surprising that a large number of the framers of the US constitution were lawyers. Given the institutional history of the unfair, capricious, unjust European systems of that time, a very strong legal structure was set up, with jury trials and a reputation of fairness and probity. I hold no truck with those who moan about the fact that American justice is only for the rich, as the system of public defenders for example, while having its own issues, is still one the best in the world.
But there have been other issues which caught my eye. I can roughly divide that into three categories. The first is the international reach of the financial legal system, the second is the domestic civil legal system and the final one is the American interpretation and implementation of the international legal system. Let us take these one by one. The first one is the impact of financial and economic financial laws on the American economy and given globalisation, worldwide impact. The American regulatory landscape is fragmented compared to say the British one, where the Financial Services Authority is a single point of contact and control. This leads to rather knee-jerk and disjointed legal steps. One example is the severe and knee-jerk treatment by the Sarbanes Oxley Act, passed after the spate of corporate frauds such as at Enron.
While the intention was good, the implementation and drafting of the law is rather lacking in common sense. The road to hell is paved with good intentions. Some of the repercussions of this act are that many international companies are refusing to do business in the USA or list in the American stock exchanges, the speed of decision making has decreased and cost of implementing the act and generally doing business has increased. Hal Scott, Professor of Law at Harvard Law School said recently that Sarbanes Oxley, the litigious nature of American business landscape and the overzealous plaintiff lawyers are slowly driving American business away from USA and into the arms of Europe. Do not forget we have seen this before with the Eurobond market when American trading business moved into Europe to escape American taxes. Other legal factors which are causes for concern are the laws relating to hedge fund oversight and class action suits (a factor to which we will return). An example of this concern can be seen in the financial pages in Europe, where politicians and executives of all stripes rose like a startled covey of pigeons at the possibility of the American regulatory system being imported into Europe, because of the takeover of Euronext (the combined French, Dutch, Portuguese and other related derivative exchanges in Paris, London, etc.) by New York Stock Exchange.
The second issue which I can see is what I call as the general overall situation relating to class action suits. A perfect example of too much of a good thing becoming bad. Generally speaking, a class action suit happens when people join into a group to launch a case against a corporation, individual or organisation. Looking at the case individually, it may be too difficult or costly, so clubbing people together as defendants makes sense. This avoids redundancy and can address the same crime/issue in one go. While that is all fine and good, over the past few years, the incidents of frivolous lawsuits are ever increasing. Why do I say that? Simple, when one considers some indicators such as unscrupulous lawyers making a beeline for certain jurisdictions considered to be lawyer friendly, the determined opposition to tort reform and significantly lopsided awards which have been witnessed in certain industries such as tobacco, automobile, investment banking, pharmaceuticals, etc. Now the latest industry in the cross-hair is the fast food sector. Again it leads one to wonder whether too much of a good thing is bad.
Within this related issue is the generally and slowly increasing cost of legal action. Which, as an economist, I find strange, given the rapidly increasing number of lawyers. Well, if nothing else, the number of lawyer jokes is rapidly increasing. Also, in my international travel, I find the phenomena of lawyer jokes (associating them with sharks or useless people) a particularly American one. But besides that, the cost of legal action across the board is rising. Again, isolated incidents show that some lawyers are definitely on the wrong side of the law, violating the spirit if not the letter of the law. This is not to say that this does not happen elsewhere, but given the sheer number and proportion of lawyers in the general American population, the relatively high cost of legal action means that many of the less well off are not protected as much. Anybody who has read about or visited the lower criminal courts will notice the poor, immigrants and generally dispossessed are comparatively less well served. Add to this the higher proportion of prisoners and one gets a feeling that perhaps the system has become too big and unwieldy. For the vast majority of cases, it works, but perhaps it works just too well. Is it because of the state-federal structure? Or is it because of a proportionately higher emphasis on individual rights versus the overall group/nation rights? Another indicator is how the republicans moan about the lawyers and tort reform, while the democrats moan about increased criminality and rigorous sentencing. Put the two together and you will see what I mean.
The final issue is how international treaties and nationals are treated by the American legal system / functionaries. This is the international view of USA’s much vaunted legal and moral system. USA which was born out of an intensely moral and legalistic basis (witness the constitution and constitution framer’s legal background) is diminished when international laws, conventions and treaties are not followed. We all know the recent furore about Guantanamo Bay, rendition of prisoners in Europe and elsewhere, torture of prisoners in Abu Ghraib, greater use of exception letters by President Bush on any law that he doesn’t like which Congress has passed, extradition treaties, immigration law, treatment of illegal immigrants (and confusion over), the entire brouhaha over the International Criminal Court, riding rough-shod over all international organisations, use of financial data from SWIFT for tracking terrorist funds etc. Yes, I know that there is a war on terror. Yes, I know current legal systems designed for crime fighting cannot cater for terrorism in an efficient manner. I also know that there is a huge element of anti-Americanism behind many of these accusations, but generally, there is a kernel of truth in some or all of them. (see a related previous essay).
This is a war of ideas as much as a war of bullets. It is not possible for us to claim moral superiority when we indulge in such activities. The reason we are against religious fundamentalism and terrorism is that we believe in the supreme equality of man, of being just and fair. The legal system is the visible personification of our intent for a just and fair society. We cannot move away from our deeply held principles by pointing that these terrorists never care about our legal systems or morals. All the more reason to uphold them. Once we lock them up without charge for years on end, then what is the difference between our legal systems and the kidnappers in Iraq, Lebanon, and Israel etc.? The difference is simply in the intent of the captors, but as an end result that the person is locked up without charge, something that is an anathema for the American legal system. Mind you, this has also happened in the United Kingdom.
But overall, a strong legal system is the cornerstone of the liberal democratic edifice. The American legal system is immensely strong; justice is achieved in the vast majority of cases. The legal system provides security to most Americans (whether personal or commercial), and is a good basis to develop business. The American system of intellectual property rights and protection, by and large, is responsible for inventors preferring to sell and develop their ideas in the USA. The American economic system backed by the legal system means that the financial and capital markets are better protected in the USA. But as we have seen above at a very high level, there are some isolated incidents which need to be addressed. That is the beauty of the liberal democratic system, anything which starts going wrong is addressed sooner or later. Given the beacon of hope that is the American legal system, it is incumbent on all the leaders to keep these issues in the back of their minds so that the words of the Pledge of Allegiance, namely: "I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under God, indivisible, with liberty and justice for all" really again includes ALL.
All this to be taken with a grain of salt!
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