12 October 2018

Legal opportunism

"Creative accounting" is the exploitation of loopholes in accountancy rules to achieve objectives that deviate significantly from acceptable practice.

There is an analogous type of behaviour in matters of law, sometimes called legal opportunism. This involves exploiting areas where the law is vague or ambiguous, or where it has unintentionally left gaps. Imperfections in the law are used to facilitate actions that were not intended to be sanctioned.

It is not only private individuals and corporations who can indulge in legal opportunism. Government may in theory do so, by applying the law in unexpected ways. For example, a national government may occasionally resuscitate an ancient statute not used for centuries, or apply a loosely worded law in an innovative way to target some unenvisaged menace.

By and large, however, Western governments do not engage in this kind of action. One reason is that, since they have the power to create statute, they do not need to resort to opportunism. There is always the risk that a senior court may rule an opportunistic application of a law to be invalid. A new law does not carry that risk.

Another reason is that Western states generally try to maintain a reputation for neutrality vis-à-vis the law. A government with a cavalier attitude to the law as it stands tends to be one that is not held in high regard by world opinion.

For purposes of illustration, take the case of a corporate merger being considered by a national competition authority. The authority typically invites interested parties to submit their comments on the case. In reaching its conclusions, the authority is likely to make an effort to interpret prevailing laws and principles impartially — or at least to be seen to do so.

On the other hand, parties who submit opinions about the merger, whether for or against, are not expected to be neutral. Their arguments may involve mainstream economic analysis, but if the approach is slanted in the interests of one side or the other, no one is going to be very surprised, or necessarily think less of them.

By contrast, a government body that gets openly creative or partisan in its interpretation of the law, in order to further its own agenda, loses its claim to neutrality and ceases to be trustworthy.

The above is an extract from the forthcoming article 'EC v Apple' (part 3), scheduled for publication in October.