ISSN 1062-7421
Vol. 12 No. 4 (April 2002) pp. 164-168.


REGULATORY ENCOUNTERS: MULTINATIONAL CORPORATIONS AND AMERICAN ADVERSARIAL LEGALISM by Robert A. Kagan and Lee Axelrad (Editors). Berkeley: University of California Press, 2000. 438 pp. Cloth $60.00. ISBN: 0-520-22287-3. Paper $24.95. ISBN: 0-520-22288-1.

Reviewed by Roger E. Hartley, School of Public Administration and Policy, University of Arizona.

In REGULATORY ENCOUNTERS, Kagan and Axelrad edit a collection of original case studies designed to provide an exploration of the impact and consequences of American adversarial legalism as encountered by multinational corporations. There are two broad questions that are addressed by the authors. First, how does American adversarial legalism hold up in the global economy where multinational corporations face different legal institutions? Second, what is the impact of differing legal-regulatory systems on the costs of doing business and on regulatory protection?

The authors use field methods to examine the experiences of multinational corporations that encounter both American adversarial legalism and other bureaucratic or informal legal structures. The result is a book that builds an interesting theory through exploration and provides an initial test of the consequences and impact of legal regulatory structures around the world. Because of the exploratory nature of this book, the conclusions must remain tentative at this point in the overall project. However, the findings are still very persuasive and any limitations are honestly addressed by the authors. In my opinion, the book is destined to have an impact on future scholarship and policy debate about regulatory law. I highly recommend this book and note that it has a very wide audience including scholars of law and
society, regulation, public administration/policy and comparative politics. It is most appropriate for graduate courses. However, because of the shear volume of material it may only be appropriate for upper-level undergraduate courses.

Kagan's theory of adversarial legalism is rooted in American legal and regulatory culture. It can be explained as consisting of "formal legal governance and contestation" that is triggered by parties or "litigant activism" (p. 9). This is in contrast to other legal styles found around the world that adopt more informal procedures of implementation and dispute resolution and that may be more hierarchical or bureaucratic in nature. The roots of the theory are not all that new to scholars of public law. American adversarial legalism is hypothesized to be complex, costly, imposing delay on parties, and involving a great deal of uncertainty because of the malleable nature of legal norms and decisions (p. 9). Although Kagan elaborates on American adversarial legalism in his more recent book, ADVERSARIAL LEGALISM (2001), this collection of ten case studies provides an impressive assessment of the impact and consequences of adversarial legalism in a uniquely comparative context. By focusing on multinational corporations as a "research

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site," the authors of each case examine the regulatory encounters of companies that do business in the United States and at least one other country.

In chapter one, Kagan introduces the concept of adversarial legalism and discusses the questions and methods employed by each of the case studies in the book. Kagan puts forth the argument that adversarial legalism imposes costs and delays on multinational corporations and "more tentatively" that it does not generate higher levels of public protection than less legalistic regimes (p. 1). The case studies were developed after initial interviews with individuals (executives, attorneys, etc) from multinational companies that did "parallel" business in the United States and at least one other economically advanced democracy. From these interviews, they identified nine companies that were willing to provide more information and a final group of chemical companies that served as the last case. The actual name of the
company was kept anonymous in all but one of the cases because many of the issues that were discussed were legally or competitively sensitive.

Chapters two through eleven present the case research upon which the conclusions of this book are based. The cases are all very well written and are well designed to provide an exploratory examination of the theory that Kagan sets out. Each also provides a nice summary and comparison of the relevant regulatory law in each state or nation. Most of the cases support the hypotheses that Kagan raises about adversarial legalism, but there are exceptions. The cases are divided into three areas. The cases in chapters two through six focus on environmental regulation, chapters seven through nine on legal rights and litigation, and chapters 10 and 11 on the regulation of product safety. The cases are written by a diverse group of scholars from political science, business, economics, law, economic geography, and regional planning.

The first two cases compare the legal regulatory systems of the United States and Japan in two environmental settings. In Chapter 2 Aoki and Coiffi discuss the regulation of industrial waste in the United States and Japan. From one company's comparative perspective, they find support for Kagan's theory. The adversarial nature of the American regulatory system led to significant management and compliance measures, but imposed costs on the company including "adversarial relations with regulators, more negative attitudes among company personnel toward regulatory norms, and more frequent and costly legal disputation" (p. 35). In contrast, Japan's regulatory system was more informal, cooperative, and imposed fewer regulatory costs on the company. Thus, Japan's system promoted more respect for the law and its implementation.

Chapter 3, by Aoki, Axelrad, and Kagan, unearthed similar results in the realm of industrial effluent control in the United States and Japan. By examining "Q Corp", the authors find that Japan's regulatory system provides managers more flexibility and discretion in choosing how to meet water standards than the American system, which was "more prescriptive, legalistic, and confusing" (p. 66). In addition, the company viewed America's system to include more delay, conflict, and attention to legal rules, but the authors also found evidence that "Q USA" did not lead to better environmental protection than "Q Japan."

In chapter 4, Axelrad focuses on the regulation of contaminated manufacturing sites in the United States, the United


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Kingdom, and in the Netherlands. Overall, he found striking contrasts among the regulatory settings from the perspective of "B Corp." The general finding also mirrored the predictions of Kagan's theory. Namely that U. S. regulation was more prescriptive, more costly, and caused delay. In addition, he argues that these added costs and delay did not come with added benefits to the public in the form of regulatory protection when compared with other regulatory settings. Because of the costs and delays in approval of remediation, there is also postponement "of the protections that the cleanup is meant to achieve" (p. 104).

Welles and Engel (Chapter 5) examine the permit process for the siting of solid waste landfills in California, Pennsylvania, the United Kingdom, and the Netherlands. In comparison to the U. K. and the Netherlands, California permitting was the most complex and strictest. However, they argue that such restrictions might result in great public protection, education, and public participation. On the other hand, Pennsylvania was less adversarial than California by relying on an administrative system for appeals that was much less complex and more routine. Although Pennsylvania legal costs were lower than in California, they were still higher than in the other countries. The key point here is their argument that regulatory costs increased with the degree of decentralization and increased opportunities for legal challenges.

The chapter by Dwyer, Brooks, and Marco (Chapter 6) examines four cases from the U. S. and Germany to study regulatory procedures for handling air pollution permits in auto manufacturing sites. Despite that Germany and the United States have a similar federal system, very large differences in the regulatory process made the U. S. process more prescriptive, more detailed, and more stringent. In regulating volatile organic compounds, the U. S. system provided greater public participation, but was slower, had more conflict, and delayed the installation of new pollution controls.

Chapter 7 begins the section of cases on legal rights and litigation. Laura Beth Nielsen examines employment termination practices in the United States and Canada. Her findings are consistent with the adversarial legalism hypotheses in that Canada's employment protection is broader than in the U. S. and that there are fewer legal disputes. Although there is more mobilization of law in the United States, Nielsen argues that Canada spends more money on severance packages and probation rather than termination. These costs go to the employee rather than to costs for legal efforts.

Ruhlin examines credit card debt collection regulation in the United States and Germany (Chapter 8). In this area of regulation, he finds that the U. S. system has higher costs and uncertainty, more access to bankruptcy protection, and longer delay in the formal collection of debts that in Germany. Germany's system was found to be less formal, more uniform, and that it was easier for banks to press their claims before bankruptcy. The norms in Germany were much more associated with responsibility over debts than in the United States with its protection of bankruptcy.

Somaya puts forth a case study of patent protection in the United States, Europe, and Japan (Chapter 9). Unlike the previous case studies, Somaya asserts that the U. S. system provides more protection of patent law to companies and that less consistent practices abroad delayed products getting to market. The U. S. system

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encouraged cooperation, not contestation, but led to court enforcement later on in some cases. Most interesting was that there was strong pressure for international convergence of patent law because of the lobbying of multinational corporations. Kagan, in chapter 12, discusses these findings and argues that the U. S. system may have worked better because the patent regulatory system is more centralized than other regulatory schemes in the United States.

Chapters 10 and 11 present the last cases of the book by focusing on product safety regulations. Chapter 10, by Kraus, argues that in the licensing of biologic products the European system is much more complex, legalistic, and stringent than in the United States. The European process was also slower and more costly due to the requiring of more tests and tighter tolerances. However, Kraus notes that there has been a movement toward convergence of regulation in Europe and the United States that may overtime bring Europe in line with the United States. Although the findings of this case are contrary to those of other cases, Kagan again notes that the sort of system discussed here is concentrated in the U. S. into a single Washington office. Thus, it mirrors more of bureaucratic enforcement than
the decentralized legalistic system found throughout America.

Chapter 11 also provides some contrary evidence to that of the book. Johnson, Fujie, and Aalders examine chemical notification laws in the United States, Japan, and the European Union. Unlike the other cases in this book, this study is based on interviews of more than one chemical company rather than a single multinational case. They find that the U. S. system is more legalistic and adversarial in design, but is more flexible and efficient than the other systems. In general, the U. S. system was viewed as less costly and faster, but more apt to impose legalistic fines. In Europe and Japan, they found weaker enforcement provisions. Again, Kagan notes these findings as contrary to his thesis, but argues that the regulatory task is different in the U. S. system and that the system in this area is much more concentrated in a single regulatory bureau in Washington, D.C.


Kagan ends the book in chapter 12, with a fine summary of the cases and how that they fit into the overall picture of his theory of adversarial legalism. He argues that "governance in the United States is pervaded by adversarial legalism" and the cases, for the most part, demonstrate this conclusion (p. 406). The book is clear in its presentation and is honest in its flaws. Many of the issues that I raise below are addressed by the authors, but merit some consideration and discussion. One weakness is that there is no real quantitative data presented to assess whether the differences in legal systems provided more regulatory benefits. Some of the
cases argued this from the information obtained from interviews and the case study of the companies, but this still fell short of a study that may be designed to demonstrate this impact. Indeed, the jury is still out as to whether American legalism leads to the deterrence of potential polluters or whether American tort law leads to better safety provisions than in other legal regulatory systems. In addition, future studies might quantitatively assess the legal costs of regulation to multinational companies in two or more regulatory settings. Although it's focus is not legal costs to multinational corporations, Charles Epp's (2000) study on administrative
legal costs to cities is a nice example of examining legal costs. Beyond this, studies might examine how much delay is found in

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different legal institutions and for what reasons such delay exists.

Kagan also acknowledges that the cases are not a representative sample of industry types and that most of the industries lean toward environmental regulation issues. In addition, multinational corporations are larger and not like most other businesses and companies. They may prefer some regulatory schemes to others because the regimes may be beneficial in excluding other companies from the market. Although this is not a crucial point, it is worth exploring other industries to assess views of business toward regulation in the global economy. For example, telecom, computer, and information technology regulation may be interesting given that many
companies in these areas are global in reach.

Finally, some cases found that American adversarial legalism could provide more avenues of public participation in comparison to more bureaucratic legal systems. As Kagan notes, this is culturally rooted in American law and in the notion of American pluralism and capitalism. On this point, Jerold Auerbach's (1983) book, JUSTICE WITHOUT LAW?, enlightens us some on why American's turn to the adversarial legal system and not so much other forms of dispute resolution. It is rooted in our competitive culture and in the individualistic roots of American society. Such "roots" lead American's to challenge systems that promote homogenous cultural norms, to distrust power and bureaucracy, and to allow individuals to have the opportunity to openly challenge norms and rules that violate rights and
liberties. These benefits certainly enlarge costs of regulation, but may be worth it when considering the costs of movement towards bureaucratic structures that promote cooperation within norms and less ability to openly challenge them. On the other hand, there has been a movement towards the use of ADR in the regulatory environments of the U. S. For example, the U. S. Institute for Environmental Conflict Resolution, negotiated rulemaking, and the use of ombudsmen and mediation may all be examples of a movement toward less adversarial regulatory law in America. Future research should explore this movement more and whether or not this is a convergence of sorts of American regulatory style with other countries.

To conclude, the book was most impressive in its clear presentation of the arguments and the forthright and honest application of the results to the theory. Kagan's emphasis on the exploratory nature of the results, the weaknesses of the case method, and his upfront presentation of the exceptions to the theory, promote a "trust" with the reader that only adds to the quality of the argument. This book, in a good way, raises more questions than it answers and gives the reader much to chew on as she ponders future research in this area. That, in my mind, is the mark of a successful book.

REFERENCES:

Auerbach, Jerold S. 1983. JUSTICE WITHOUT LAW? RESOLVING DISPUTES WITHOUT LAWYERS. New York: Oxford University Press.

Epp, Charles R. 2000. "Exploring the Costs of Administrative Legalization: City Expenditures on Legal Services, 1960-1995." LAW AND SOCIETY REVIEW 34:
407-430.

Kagan, Robert A. 2001. ADVERSARIAL LEGALISM: THE AMERICAN WAY OF LAW. Cambridge: Harvard University Press.

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Copyright 2002 by the author, Roger E. Hartley.