RMIT Vietnam NewsMeasuring the feasibility of an imported law

Measuring the feasibility of an imported law

Thursday, April 16, 2015 - 11:06
RMIT Vietnam Law Lecturer Dr Quach Thuy Quynh.

When one country ‘imports’ a law from another country, how can its feasibility be measured in the context of the receiving country? 

This was the question that drove RMIT Vietnam Law Lecturer Dr Quach Thuy Quynh to research the importation of shareholder protection laws to new countries.

According to Dr Quach, the practice of importing laws often takes place as a short-cut for countries wanting to improve their legal system with a limited budget.

“Developing countries or economies in transition want to strengthen their legal system with cost savings being one of the factors in decision-making,” Dr Quach said.

“Instead of spending the money required to develop new laws, they ‘borrow’ laws from developed countries.

“In the short term, this solution can provide cost savings, so it’s an attractive option,” she said. 

“But in the long term, the costs of correcting unintended consequences of the imported law can outweigh the immediate savings.”

Academia and international donors have attempted to assist developing countries by creating global standards (comprising indexes) to rank and describe ‘good’ laws for shareholder protection.

“These standards are far from being reached,” Dr Quach said. 

“Furthermore, the standards are in the form of indexes developed by economists at the World Bank, and focus solely on describing either the extensiveness of the law or its economic outcomes.

“Importantly, they do not address the most significant question: whether that law is viable in the context of the receiving country.”

At the recent Corporate Law Teachers Association Annual Conference held this year in Melbourne, Australia, Dr Quach presented her research on a suggested approach for countries to anticipate the feasibility of an imported law.

Dr Quach analysed the current methods being applied to measure the quality of laws and concluded that these methods were unsatisfactory in terms of assessing feasibility of shareholder protection with imported laws.

She argued that institutional analysis has emerged as an approach that would help measure the compatibility of foreign laws within a domestic institutional setting.

The research findings have shown three institutional dimensions should be considered: the goal attainment dimension, the interaction dimension and the capacity dimension.

At the conference, Dr Quach presented the institutional analysis around transplanting derivative actions into Vietnam as a case study.

A law lecturer at RMIT Vietnam Hanoi, Dr Quach keeps a close eye on litigation trends and the implementation of imported law in Vietnam.