1.1 What Is Law?

In any nation, the law can serve a number of functions. It can:

Many legal systems do only some of these functions. A nation ruled by an authoritarian government, for example, may keep the peace and maintain the status quo, but may also oppress minorities or political opponents (e.g., Russia, China, or Syria under Bashar al-Assad). Under colonialism, European nations often imposed peace in countries whose borders were somewhat arbitrarily created by those same European nations. Prior to the twentieth century, Spain, Portugal, Britain, Holland, France, Germany, Belgium, and Italy all extended their rule into Africa, Asia, and Central and South America. In the late nineteenth and early twentieth centuries, the United States assembled an empire, too, at times possessing Puerto Rico, the Panama Canal Zone, U.S. Virgin Islands, American Samoa, the Philippines, and various other Pacific Ocean and Caribbean islands (including Guam and Midway Islands). With regard to the functions of the law, each empire may have kept the peace—largely with force—but also changed the status quo and seldom promoted the native peoples’ rights.

Unfortunately, tribal and ethnic factions can make it difficult for nation-states to adopt enforceable laws and promote justice. In Rwanda, for example, power struggles between Hutus and Tutsis resulted in a genocide of the Tutsi minority. In nations of the former Soviet Union, the withdrawal of a central power structure created power vacuums that were exploited by ethnic leaders. When Yugoslavia broke up, different ethnic groups—Croats, Bosnians, and Serbians—fought bitterly for territorial control rather than share power. A more recent example is Iraq, where Sunni and Shiite sectarian differences have proven to be a major barrier to maintaining a united government.

The law does not and cannot correct every wrong that occurs in society. At a minimum, it aims to curb the worst kinds of wrongs, the kinds of wrongs that violate what might be called the “moral minimums” that a community demands of its members. These include not only violations of criminal law but also uninvited harms (refer to Chapter 6 “Tort Law”) and broken promises (refer to Chapter 7 “Contract Law”). While it may be wrong to refuse to return a text or phone call from a friend, that wrong will not result in a viable lawsuit against you. But if a phone (or the internet) is used to slander or libel someone, a tort has been committed, and the law may allow the defamed person to be compensated.

In a well-ordered society where the law performs most of the functions noted above, there is usually a strong association between what we generally think of as ethical behavior and what the laws require and provide. For example, we may harm others by breaking our promises; contract law upholds society’s sense that in general, promises should be kept. Promise-breaking is generally seen as unethical, except for some situations where a broken promise seems permissible. For example, in breach of contract cases, some excuses are accepted when it would be reasonable to do so, such as when the promisor is intoxicated, feeble-minded, or not yet eighteen years of age.

The connection between law and ethics is also strong for tort Harm caused to others in some way that is not a breach of promise. law (refer to Chapter 6 “Tort Law”); harming others is usually considered unethical. If people are not restrained by law from harming one another, orderly society would be undone, leading to vendettas and vigilantism. Tort law aims to provide orderly, reasoned compensation to victims of serious harms. As for property law issues, most nations where business is stable and prosperous have made private ownership of property a foundation of their legal regimes. Private ownership of property is deemed socially useful and is generally protected by laws, with notable exceptions for the public good. You can paint your house almost any color you choose (unless you live in a designated historic district or unless homeowners’ association rules prescribe certain acceptable hues), but you can’t, without the public’s permission, operate an incinerator on your property to burn heavy metals, as toxic ash may adversely affect the neighbors’ enjoyment of their own property.

In the United States, legislators, governors and presidents, judges, administrative agencies, and—in some states—the people themselves via initiatives or referendums make law, with substantial input from corporations, lobbyists, and a diverse group of nongovernmental organizations (NGOs) such as the American Petroleum Institute, the Sierra Club, and the National Rifle Association. In the states, judges are often appointed by governors or elected by the people. The process of electing state judges has become more and more politicized in the past fifteen years, with growing campaign contributions from those who would seek to seat judges with partisan leanings.

Some businesses have increasingly espoused political positions, such as the Koch Brothers’ sponsorship of the American Legislative Exchange Council (ALEC), with a primarily “libertarian” viewpoint for limited government regulation and an emphasis on state rather than federal power. Other business leaders have intervened politically to oppose unlimited gun sales or state laws that discriminate against LGBTQ+ citizens. Along with over forty years of increased lobbying by business interests in Washington, DC, and in state capitals, the influx of corporate money into state and federal political campaigns—both legislative and judicial—has increased the influence of business in shaping “the rules of the game” for economic activities in the United States.

In some countries—which we will usually refer to as “nation-statesThe basic entities that comprise the international legal system. Countries, states, and nations are all roughly synonymous. The word “state” can also be used to designate the basic units of federally united states, such as in the United States of America, which is a nation-state.,” the legal term for countries in international law—the connection between business influence and politics is so strong that the word “corruption” is often used. In many nation-states, major government policies and contracts can be directly influenced by secret bribes to public officials. For example, Odebrecht is a Brazilian construction company that became an international giant through years of using bribery and corruption to secure around one hundred projects in twelve nation-states, generating ill-gotten gains of about $3.3 billion. Governments in Brazil, Peru, and other nation-states were shaken by the scandal, and the U.S. government is investigating Odebrecht for bribery payments in the United States as well under the Foreign Corrupt Practices Act (1977).

Among nation-states, the United States has been known as a bastion for “judicial independence.” That is, the state and federal courts have a role as part of the “checks and balances” in our constitutional system, and are not under the direct control of the federal legislature or the executive branch (in most nation-states, that means the presidency or its equivalent). Where a nation’s leader can ignore conclusions and orders by the highest court in the land—or fire judges they don’t like—judicial independence is entirely missing (refer to Chapter 3 “Constitutional and Administrative Law”). Yet, the World Economic Forum lists the United States as only twenty-sixth in its ranking of nation-states where the judiciary is largely free of political influence from other parts of the government, from individuals, and from companies.

In most nation-states, knowing who has power to make and enforce the laws is a matter of knowing who has political power; in many places, the people or groups that have military power can also command political power to make and enforce the laws. Revolutions are difficult and contentious, but each year around the world you will read about protests and revolts against existing political-legal authority. Those who hold power are loathe to yield it, despite aspirations for democratic rule, or greater “rights” for citizens. These are recurring theme in politics and law globally, as is the repression of those rights by elites in power, and the resentments that can build toward legal change. While “business” typically prefers stable, democratic governance, companies must also operate in a variety of legal environments, some of which reflect entrenched centers of power and some of which are ethically corrupt. 

In general, businesses are more likely to prosper and contribute positively to society in nations committed to “the rule of law.” A brief explanation of why the rule of law matters to society is presented here from the United States court system.