CHAPTER 12; GLOBALIZATION: BACK TO THE FUTURE
Globalization of the Law
- Roman Empire: praetors and governors compiled their annual edicts
and created the ius gentium which they imposed on their colonized
provinces
o Empire stretched from W. Europe, Asia Minor, and Africa
- Teutonic people overran Europe: imposed Leges Barbarorum on the
conquered provincials, even if latter had a more systemic set of laws
than the barbarians
- Roman emperors disappeared from the West: Popes took their place
and issued their own decretals = basis of Canon Law
o Governed W. Europe from the 9th Century – Middle Ages
- Pattern of imposing a common code of conduct by dominant states
on subject states has been followed everywhere from Pax Romana to
Pax Americana
- Pattern is followed in Globalization of the Law because “the viability
of an international economic order presupposes the presence of a
leader nation powerful enough to impose a common code of
conduct upon other nations”
- Modern Times: Great Britain and US stabilize their economic ordser
during their hegemony, using it to dominate states to maintain and
preserve their dominance
o Common code of conduct they imposed as states formed
the core of global law in trade and commerce with its own
ideology and enforcement mechanisms
- 2nd half of the 19th C: Pax Britannica was instrumental in setting ground
rules for commercial transactions and capital formation
- Up to now: same function was taken up by Pax Americana when
British Empire began to end
- Natural that globalization of the law in our time will reflect Pax
Americana
- US is the sole model for shaping world capitalism and globalization
that will lead to new American hegemony (accdg to Paul Bracken)
o “global economy is becoming more capitalistic, as countries
from Asia to Latin America move toward market systems …
this is likely to contribute to a new American hegemony
because no other nation has yet aligned its institutions to
support business in quite the same way”
o model for legal development in era of globalization
- Law becomes an instrument for pragmatic ends and not only for
social/political control
o Theory assumes that law is the outcome of narrow particular
interests exerting pressure on judges and legislators
o Gives law an economic slant only economic interest groups
that have resources and organization to wage their claims on
legislature and other government branches
o Law is considered an instrument to be used to achieve
particularistic economic ends
o Great tradition of Western legal theory, other 2 being
analytical positivism, doctrine of natural law, historical
jurisprudence, and instrumentalism become entrepreuneurial
when law is used by opportunists to pursue economic
objectives
- Present day globalization of law: parallel in rise of ecclesiastic law
during Holy Roman Empire
- Middle ages was dominated with the idea of saving souls
o Ours has a mundane objective: saving mortals / saving
money
 Principal interest: revolves on the here and now
rather than the hereafter
 Expected that globalization concerns itself with
economic matters rather than religious concerns
- Similarity of Canon Law and New Global Order = transcend existing
national sovereignties and supersede existing legal systems
o “trans governmental systems”
- Globalization may reshape and expand law in same way universal
religion molded law during Middles Ages
- Interest of Globalization = establish a legal order free from local
politics, populist and nationalist pressures
o Complement of the market system that’s regulated only by
the “invisible hand” – natural & impartial laws of econ that
operate free from political forces
o Future = world without borders – starting with trade and
commerce, expanding to trade related matters in our
economic life
Legal Ideology of Globalization
What kind of legal system is most conducive and essential to a globalized free
market economy?
- “Our interests are most secure in a world where the rule of law
protects both political rights and free market economies” – James
Steinberg
- Rule of Law: application of known principles of law as opposed to the
influence of arbitrary power (Dicey)
Principles of Law
1. Minimum government
2. Sanctity of private property
3. Liberty of contract
o Must be principles consistent with philo of globalized market
system
o Working principles that reflect the material values of a society
committed to market capitalism and economic development
- Security: assurances given by law of property and the law of
contracts
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Cornerstones of Capitalism
1. Liberty of contract
2. Protection of property rights
- Common law is flexible and expandable than civil law
o Can accommodate surging econ forces clamoring for
recognition
o Predeliction for enforcement of private contracts and
protection of private property
- Doctrines are the basic foundations for building of a free market
o Common law judges handed down decisions consistent with
the goal of maximizing wealth
- Gilded Age of Capitalism: era where business culture evolved with
free market system
- Judicial Sanity = sanity of economic or substantive due process and
freedom of contract by the American SC
o Since most law takes from of private arrangements among
private entities
- Law moves from status to contract (Henry Maine)
- Source of law shifts from political to economic power
o From people as sovereign to private individuals as economic
suits
- Legal system shifts from Imperium to Dominium = political to economic
Courts as Referees Under Globalization
Role of Judges in Globalized Market Econ?
- “not to regulate individuals’ behavior in accordance with the judge’s
own preferences, but rather enforce free choices, private contracts
and reasonable expectations of the parties” (Prof. Manne)
- to the globalist, court’s decisions varying terms of an agreement
which resulted from unequal bargaining power =/= substantially
distinguishable from an administrative agency charged with “dong
good”
o constitutes “judicial overreaching”
o decisions are not “welfare-enhancing”
o lead to undesirable consequences
- these principles come into play when judges are confronted with
public law litigation
o may involve private parties and private rights but revolve
around constitutional or statutory policies
o judges become the creator and manager of complex forms
of relief which have effects on the direct parties but even
persons not in court
- Public Law Litigation: arpse against backdrop of a growing body of
legislation designed to modify and regulate basic social and
economic arrangements
- Economic consequences of judicial review become more urgent
(because of globalization) and it’s fraught with political
consequences
o Accentuated in PH because of our Consti’s expanded
definition of “judicial power”
- Globalization’s big players still need an umpire to enforce the
common code of conduct they crafted
o Transnational corporations look to an umpire to referee the
game after rules are laid down
 Look up to judiciary as the state’s agency that acts
as a formal arbiter in national arena
o retain the state to referee the global game to insure that the
playing rules of the market are observed
- In a globalized regime, municipal or domestic institutions enforce
code of conduct still
- Global economic regime would rather use local manpower to
perform enforcement functions at the local level, although it created
institutions at the international level
- World Trade Org, Int’l Monetary Fund, Paris Club, UN, G8, G20, OECD,
EU = can referee international globalization game
o Domestic level = would rather leave such trivial arbitration to
municipal agencies of each state
Common code of conduct distilled into principles of law that countries have
forged among themselves:
a. Treaties
b. Agreements
c. Arrangements
Principles that tie the common code of conduct:
1. Free trade among nations
2. Deregulation and liberalization
3. Privatization
4. Protectionism of a different sort
- Rules of the game have been in mod of economic and social policies
adopted by developed countries for developing countries to follow
o Led to globalization of economic policy-making and
lawmaking
- Primary thrust of globalization = open the way for international trading
and financial system and allow various countries to compete
effectively in international markets
- Privatization: guarantees that the state and its government owned
enterprises will note compete in the market
o Assures market dominated by transnational corps to
detriment of govt owned corps or local monopolies
- Liberalization will pare down conditions imposed by national
governments on foreign investments so that these can be left to free
play of market forces
- Deregulation: abolition of governmental regulatory measures directed
at economic vested interests
o Should be guided by invisible hand of market
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- Protection: impose import or export duties to ensure terms of trade in
country’s favor
- Assorted countries will have to nurture and translate these into
political decisions and institutions of the home front
o Political decisions in form of domestic laws and executive
regulations binding on citizens
o Translated by political institutions into laws and regulations
o Enforce them among economic interests adversely affected
- Under Rule of Law, what is arbitrary is determined by the common
code of countries playing global games
o Object of the game = get more market share of weaker
competitors
- Rules have been laid down by strong players at expense of weak
o Strong players = developed countries and transnational corps
 Spearhead policies of free competition to dismantle
local monopolies in developing countries
 Want to enable transnational corporations to gain a
foothold and eventually capture markets of domestic
monopolies
- Developing country = forced to pass anti-trust / anti-monopoly
legislation to comply with its obligations under the treaty it signed on a
multilateral basis
o When proposed legislation becomes a law = duty of judiciary
to legitimize and enforce it = opening up what was once a
closed market to transnational corporations
- Erroneous to think globalization only involves deregulation of
marketplace
o Also involves protectionism for strong
o Rules in global game are tilted in favor of strong players who
nurtured them
 Dominant players naturally seek to preserve their
monopoly in science and technology through
intellectual property law and criminalize unauthorized
use of patents and infringement of trademarks
 This is why the PH had to pass legislation to protect
the rights of intellectual property and technology –
needed to protect rights to intellectual and industrial
property of major competitors
- Globalization is a game of winners or losers
o Role of the judiciary to crown winners and console losers
- Judiciary = involved in globalization game because courts have to
enforce terms of a treaty or multilateral arrangements made by
players
o Treaty terms may come in conflict with provisions of
constitution or domestic laws
o If there’s conflict = courts may uphold the sovereignty of state
or may give substance to economic policies that form part of
the rules of the market competition
Rebirth of Laissez Faire
- Handmaiden of globalization is deregulation (the dismantling of
domestic regulatory laws directed at trade and commercial entities
doing business within the state)
o Founded on laissez faire ideology (by Adam Smith and
Herbert Spencer)
- Economic ideology by US SC during Gilded Age of Capitalism
- Ideology that gave rise to jurisprudence with a free market bias,
redefining consti concepts of due process, liberty of contract,
property rights, and just compensation
- 1900’s in US: saw various economic forces striving for power against
populist forces, producing unseen economic urges that shaped the
time’s political thought
- Adam Smith’s economic philo penetrated judicial thought
- Herbert Spencer’s Social Statics began to be encrypted in the
American consti
(Yick Wo v Hopkins)
o US SC declared that the idea that a man may be compelled
to hold his life, or his means of living, or any material essential
enjoyment of life, at the will of another = inconsistent with due
process clause of 14th amendment
o Gave birth to the mutant of due process: substantive due
process
- At about the same time, lawyers for railroad companies used the
same arguments against rate-fixing – court conceded that a railroad
corp was a “person” within the meaning of the 14 th amendment and
is entitled to guarantees of Bill of Rights originally intended for natural
persons
o Railroad corps then were as powerful as transnational corps
now
 Sought judiciary’s protection against unreasonable
regulations and laws by states to control their evil
activities
- Became easy for big corps in US to ward off regulatory laws of states
directed at business
- Court struck down a Louisiana statute which prohibited any person
from signing any insurance policy in any company that hadn’t been
organized within the state
o Gave rise to the “liberty of contract” doctrine: the citizen’s
liberty refers
 Includes right to pursue any livelihood and enter into
contracts which may be proper and necessary to his
livelihood
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 - These legal doctrines paved groundwork for Gilded Age of Capitalism
in US
Back to the future?
- Globalization wants to bring the legal system back to the gilded age
with a difference
- Economic arena = world economy (not national)
- Ideology is still to have law protect market from regulatory incursions
of govt
- Globalization sees to it that economic power of the world’s major
econ competitors prevails over state sovereignty
o Seems inevitable because of increasing role of transnational
corps in the control and production of wealth of nations and
the continuous interweaving of processes of international
trade and commerce
- Invisible hand of free market will decide what goods to produce,
how/where to distribute them, and how the profits will be allocated
(not the politician)
- Limiting SC’s power of judicial review is part of deregulation that forms
core of globalization
- While deregulation is principally directed at dismantling controls and
conditions that may be imposed on players, it’s also aimed at state
interference in making individual and market-driven decisions
o Decisions are made to be part of the market
- Globalization contemplates a world economic system with minimal
state intervention
o Yet global players will ask judiciary to be strong enough to
keep govt off their backs
(Tatad v Secretary)
o SC invalidated the Downstream Oil Deregulation Act of 1996,
RA 8180 for being unconsti and in violation of anti-monopoly
provisions of 1987 Consti
o President and his admin condemned the decision
o One official called for impeachment of justices for “meddling
with economic policy”
o One official wanted to amend consti to curb SC powers
- Global players want to see Congress amend the Consti to delete the
“nationalist” clauses of Consti and replace them with fundamental
ideology of liberalization, deregulation, and free trade
- 1973 consti of Marcos watered down provisions of 1935 consti on
citizenship requirements for exploitation of natural resources
(Tanada v Angara)
o held that the World Trade Org treaty (requiring states to
liberalize their economies) doesn’t conflict with the Consti
which makes it a duty of the state to develop an
independent national economy effectively controlled by
Filipinos
o invoked Sec 10, Art XII of Consti – expresses preference for
qualified Filipinos in grant of rights, privileges, and concessions
covering national economy and patrimony
o court refuted argument: there are enough countervailing
provisions in Consti to allow Senate to ratify PH concurrence
with WTO agreement
 general policy provisions recognizing need for
business exchange with the rest of the world on bases
of equality and reciprocity and limits of protection of
PH enterprises against foreign competition and unfair
trade practices
- under globalization ideology, courts will have to restrain their
predilection to intervene in economic decisions
(BOI v Garcia)
o Court reversed BOI decision allowing Luzon Petrochemical
Corp to relocate its proposed plant from Bataan to Batangas
 Relied on Consti provision mandating state to
regulate and exercise authority over foreign
investments (Sec 10, Art XII) and develop self-relaint
and independent national economy effectively
controlled by Filipinos (Sec 19, Art II)
(Manila Hotel)
o Court reversed GSIS decision to sell Manila Hotel to highest
bidder (Malaysian Corporation) and ordered GSIS to accept
matching bid of losing Filipino bidder
o Court relied on consti injunction that “in the grant of rights,
privileges, and concessions covering national economy and
patrimony, State shall give preference to qualified Filipinos”
(Sec 10(2), Art XII)
o Ruled that Manila Hotel belonged to national patrimony and
GSIS failed to observe the consti injunction
Problems of Globalization
Deficiencies of Global Capitalist System, by George Soros:
1. Uneven distribution of benefits
o Arising from globalization process comes from reality that
globalization involves winners and losers = zero sum game
o Inevitable concentration of wealth on winners
o 1998 UNDP Report – wealth of world’s 3 richest individuals is
more than the total GDP of the poorest 48 countries
 while the industrialized countries are the dominant
consumers of world’s goods and services, it’s the
people in the poorest countries who pay higher for
resulting pollution and degradation of land, forest,
oceans that sustain livelihood of the poor
o 2011 report: global wealth pyramid has a very wide base and
very sharp point
 richest 1% adults control 43% of worlds assets
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  in the PH these disparities are worse since the
distribution of wealth is more lopsided
 IMF expressed concern that 70% of listed
companies here are owned/controlled by
just a few families
o 1996 Word Development Report of World Bank: PH has most
unequal income distribution in Asia
2. Instability of financial system
o Due to the creation of “virtual money” (Peter Drucker)
 Money that has no existence outside global
economy, as it’s created primarily by currency
trading
 Money not created by economy activity like
investment, trade, production, or consumption (unlike
nation’s currency)
 Fits no traditional definition but its power is massive
because it moves in and out of currency with greater
impact than flows of financing, trade or investment
 Enjoys mobility because it serves no economic
function and doesn’t follow economic logic or
rationality
 Highly volatile and is panicked by mere rumors or
unexpected events
 Once “herd instinct” of currency speculation arises,
no stopping it even by government action
3. threat of global monopolies and oligopolies
o has become a reality
o yesterday’s multinational corporations are todays
transnational corps
 multinational corporation – national corporation with
foreign subsidiaries which are clones of the parent
company
 transnational corporations (tnc) – one globalized
economic unit where parts, machines, planning,
research, marketing, finance, pricing and
management are conducted all over the world
depending on the competitive advantages
o globalization concentrates economic power on TNC’s which
win big
4. Ambiguous role of the state
5. Question of values and social cohesion
- With regard to the values of legal order, we’re fortunate that we
inherited tradition from Anglo-Saxon common law (excessive
individualism) and continental civil law (founded on salus populi)
o Common law expresses values of individualism embedded in
precepts of classical contract law and property rights, should
be balanced by public values of civil law system
 Salus populi, imperium, patriae potestas, and suum
cui que tribuere
Redefining the Role of Law in a Globalized Economy
- If the function of law is to render justice, we also have to redefine
justice in economic terms
o “Justice …is a matter of right outcome of the political system:
right distribution of goods, opportunities, and other
resources.” – Dworkin
- Problem: in a globalized market economy, the distribution of goods,
opportunities and resources is always weighted in favor of dominant
players
- In theory, law upholds equality as a value, some are in fact more
equal than others
4 factors why the “haves” always come out ahead of the “have-nots” in the
distribution process:
1. Haves’ strategic position in society
2. Role of lawyers
3. Institutional facilities available to those who can manipulate these
4. Characteristics of legal principles
- Thus, in a globalized market system, there’s no “trickle-down process”
that automatically operates the distribute goods and resources to
“have-nots”
- Certain types of growth may cause social crises and political
upheaval
- Redefine role of law in present system: to realize and give meaning to
the economic rights of the people
o Economic rights – acknowledgement of legitimacy of claims
to income and to participation in resource allocation
o Economic and social rights should acquire institutional
protection in an economic order, in same way civil and
political rights are rooted in political order
- Recently, US SC gave substance to concept of “equal protection” by
affirmative action
- PH SC has upheld restraints on property rights to protect the
economically weaker groups which make up the bulk of PH society
o Upheld agrarian reform legislation even if it’s retroactive
against the challenge that it impairs the obligation of
contracts over property rights (Camacho v Court of Industrial
Relations)
o Recognized the social function of contracts of illiterate
farmers (Gallego v Kapisanan ng mga Manggagawa)
o Recognized labor and tenant unions as one of the effective
means by which laborers may obtain protection of their rights
- Law can start with the recognition of economic realities and give
meaning and substance to the concept of equality
o Legislature in developing countries should be aware of the
dearth of laws and regulations that control monopolies and
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 mergers of big corporations to insure free competition on a o Developing country is bound to lose more in the protection of
level playing field intellectual property in rent and development because law
- In industrialized countries, there are principles to control cartels, acts as a deterrent to transfer of knowledge and tech
mergers, and other forms of abuse of market dominance - Free flow of capital = double edged
o Principles are base don application of monopoly concept of o May move from developing to developed countries
abuse of dominant position, or on its effects on competition, o Law needs to enforce transfer taxation laws strictly to
or on public interest schemes discourage outflow of local capital and inflow of speculative
o In less developed countries (PH), there are hardly any investments from hedge funds
provisions for governmental override of competition-lessening (US v Ling Su Fan)
schemes o Government has complete control of its own currency even if
 Few general provisions in statutes aren’t even what’s sought to be exported is in theory private property
enforced by government - Globalization seeks to engulf all areas of our economic life
- In PH, arguments of inaction overwhelm those for control: that the o Doesn’t involve only trade in goods and services but also
contemplated investment resulting in merger or joint venture will investment measures and free flow of capital
preserve employment opportunities, or that it will enable the local o In immediate future: will include labor standards, migration of
company to compete in the export market, or that it will infuse equity labor, prevention of child labor, and envi protection
In an ailing corp. - Law is bound to play an even more expanded and intensive role in
(Lagman v Torres) economic area
o Free competition should be preserved whatever the - As globalization spreads over economic life, law’s function should
economic costs in the short term focus on the protection of peoples’ economic rights so they won’t be
- Protecting intellectual property = measure that preserves dominant swallowed by big winners of global game – or else we’ll go back to a
position of TNC’s new age of feudalism
- Countries on the low end of research and development (PH) will suffer
in terms of inability to use intellectual property
o Majority of the patent registrations are held by foreign
companies
o PH Companies that don’t tie up with foreign TNC’s suffer from
poverty of finances and intellectual property poverty, most
specially in crucial areas as computer software, integrated
circuits, industrial designs, and synthetic fibers
 Local companies can’t generate intellectual
property on their own cause they don’t even have
the research and development depts. = bound to
lose in globalization process
- Enforcement of laws and conventions on patents and trademarks
and unfair competition involve huge economic costs = drain
resources of law enforcement departments
o Need to upgrade existing judicial intellectual property with
intelligence and understanding
- TNC’s are reaping the rents from patents and trademarks protected
under the recently passed Intellectual Property Act
o Explains the rise in prices of patented products by 25-50% for
pharma and agri chemical products
- Law’s Function: enforce the rent transfer mechanism for use and
generation of intellectual property from developing to industrialized
countries