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	Murdoch University Electronic Journal of Law

Frames Version

Wormes in the entrayles: the corporate citizen in law?
 

Author:	Neil Andrews Lecturer in Law, University of Canberra
Issue:	Volume 5, Number 2 (June 1998)

Contents

• Introduction
• Paradise Lost?
• Certainty? Company law?
• Paradise regained?
• Theorised prejudice: indeterminacy in theories of company law
• Porcine Positivism
• Speluncean darkness? Natural law
• Theories waiting for a fact, or a fire? Law and economics
• Reified abstractions, omnibus concepts and metaphors masquerading as facts? Realism
• A long strange trip? Critical legal studies
• The Frankfurt school
• American critical legal studies
• European critical legal studies
• Conceptual inflation and disorder? Teubner and autopoiesis
• Muggletonian Marxism: EP Thompson and the loss of the commons
• The profitability of considering indeterminacy in corporate legal theory
• Appendix
• The billiard player's guide to indeterminacy in company law
• An indeterminate taxonomy of legal indeterminacy
• The failure of language
• The failure of reasoning
• The absence of the syllogism
• Dialectical reasoning
• Paradox
• Antinomy
• The death of law
• Unpredictable events and inexplicable chains of causation
• An absolutely unpredictable event
• Interference produced by two or more causal chains
• Complexity, non-linear or chaos theory
• Modelling indeterminacy in company law
• Notes

Introduction

This, then, is the essence of commercial law - the accommodation of principles, rules, practices and documents fashioned by the world of business: the facilitation, rather than the obstruction, of commercial development. It is part of the genius of the common law that despite the ritual and formalism of its earlier life it has proved able to respond to the challenges of industrial growth. Goode RM, Commercial Law (Harmondsworth: Penguin Books, 1982) 984.

1. Good citizens obey the law. The best have integrity and are truthful and honest. They do not ask how far they can go. If the law is uncertain and there are rewards for the controllers of corporate capital viewing the law as Holme's 'bad man' what are the consequences for these 'great and enduring values' particularly if the corporate form 'makes' its own law? In spite of claims to certainty company law has many symptoms of indeterminacy. This is widely ignored. Yet indeterminacy has significant consequences for the role of law in regulating capital in companies. Responsiveness to changes in commercial practices may be desirable. The reproduction and transfer of capital in previously disapproved of ways, empowerment of the legal profession and lack of control by the state may be questionable. Indeterminacy has been considered in legal theory but has a bad name and is an often avoided issue. In this context writers in neo-classical economics and law, such as Posner, are considered as well as the American realists, such as Karl Llewellyn, who preceded them. Their views are contrasted with those of the Frankfurt school, such as Neumann, and contemporary theorists, such as Teubner. In spite of the varying positions these legal theorists start from there are common features in their description of company law including a focus on explaining change in legal doctrine which, implicitly or explicitly, suggests that company law is indeterminate. There is also wide agreement that changes in the reproduction and exchange of corporate capital drive changes in legal doctrine and, consequently, regulation by law rather than the reverse. They disagree with what the forces driving change are, how law responds to them, what are the consequences for the use of law to regulate companies and whether the changes are good or bad. An Appendix suggests a typology of indeterminacy is proposed based partly on language, ways of reasoning and partly on scientific analogies to construct the shape of indeterminacy in company law.

 
Paradise Lost?
 
2. Oliver Wendell Holmes, like Satan in Paradise Lost, remains the most memorable character in the story of Anglo-American law. One hundred years ago, on the 8th of last month, as an Associate Justice of the Supreme Judicial Court of the State of Massachussets, Holmes introduced another serpent into the garden of American law. It was released amongst the lawyers of Massachusetts, law students and their parents at the inauguration of a new hall at Boston University Law School. In his speech, 'The Path of the Law,' he invited his listeners, interested to know where the limits of the law are, to consider the law from the point of view of a 'bad man'. This will clarify for them the difference between law and morality and ethics.

 
You can see very plainly that a bad man has as much reason as a good one for wishing to avoid an encounter with the public force, and therefore you can see the practical importance of the distinction between morality and law. A man who cares nothing for an ethical rule which is believed and practised by his neighbors is likely nevertheless to care a good deal to avoid being made to pay money, and will want to keep out of jail if he can. ...
 
If you want to know the law and nothing else, you must look at it as a bad man, who cares only for the material consequences which such knowledge enables him to predict, not as a good one, who finds his reasons for conduct, whether inside the law or out-side of it, in the vaguer sanctions of conscience. ...
 
What constitutes the law? You will find some text writers telling you that it is something different from what is decided by the courts of Massachusetts or England, that it is a system of reason, that it is a deduction from principles of ethics or admitted axioms or what not which may or may not coincide with the decisions. But if we take the view of our friend the bad man we shall find that he does not care two straws for the axioms or deductions, but that he does want to know what the Massachusetts or English courts are likely to do in fact. I am much of his mind. The prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law.[1]
 
3. Onara O'Neill has recently provided a catalogue of virtues in her argument that there is a link across what is generally seen as the dichotomy between abstract principles of justice and the 'particularities of virtuous lives' making both just institutions and virtuous lives interelated. These virtues can be found in institutions, such as companies. They are the best form of citizen and act differently from Holme's bad man.

 
the virtues of justice include justice itself, as well as varied forms of fairness, of toleration and respect for others, of fidelity and probity, and of truthfulness and honesty.[2]
 
4. Holmes went on to speculate that that it might be desirable if 'every word of moral significance could be banished from the law altogether.' This would be 'a law with no duties, rights, or wrongs; no conception of good or bad faith, of reasonable or unreasonable conduct; and no notion of justice or injustice.'[3]

 
5. Unlike the Critical Legal Scholars of almost a century later Holmes was not advised to leave the academy for inducing cynicism and despondency amongst law students. He was not attacked by a number of judges for introducing students to concepts which would make them unfit for legal practice. Four years later he was appointed as an associate justice of the Supreme Court of the United States where he sat for the next three decades. On his ninety-second birthday President Franklin Roosevelt called at his house. The same President stood in the rain by his graveside when he was buried at Arlington National Cemetery. Hollywood held him up to American youth as an exemplar in the film, the 'Magnificent Yankee'.[4]

 
6. In 1880 Holmes had introduced his first snake into the Eden of formalist law in the lectures he gave on the common law at the most-Bostonian Lowell Institute. This was most appropriate. The Lowells, like Adam and Eve, talked only to God. From these addresses developed his book The Common Law. It opened with the words:

 
The life of the law has not been logic: it has been experience. The felt necessities of the time, the prevalent moral and political theories, intuitions of public policy, avowed or unconscious, even the prejudices which judges share with their fellow-men, have had a good deal more to do than the syllogism in determining the rules by which men should be governed. The law embodies the story of a nation's development through many centuries, and it cannot be dealt with as if it contained only the axioms and corollaries of a book of mathematics. In order to know what it is, we must know what it has been, and what it tends to become. We must alternately consult history and existing theories of legislation. But the most difficult labor will be to understand the combination of the two into new products at every stage. The substance of the law at any given time pretty nearly corresponds, so far as it goes, with what is then understood to be convenient; but its form and machinery, and the degree to which it is able to work out desired results, depend very much upon its past.[5]
 
7. This was a theme to which he returned in 1898: 'certainty generally is an illusion, and repose is not the destiny of man.'[6]

 
8. This was a criticism of the mechanical approach to law which dominated positivist jurisprudence in the United States, particularly that of Christopher Columbus Langdell.[7] Joseph Beale, who taught conflicts of law at Harvard, represented the most exaggerated form of this reductionist approach to law. He claimed that underpinning both statute and common law were essential and timeless principles which determined the resulting legal system. This meant that the law was 'not a mere collection of arbitrary rules, but a body of scientific principle'. It followed that 'Purity of doctrine may be lost through wrong decisions of courts, thus warping legal principle by bad precedent; but wrong decisions are after all uncommon, and the law is not seriously affected by them.'[8]

Again, instead of being ostracised, in January 1882 Holmes was made Weld Professor of Law, a chair which had been established for him at Harvard Law School. In December 1882 he was appointed to the Massachusetts' Supreme Court.
 
9. The third serpent Holmes introduced into the formalist garden from the bench. He rejected laissez-faire economic canons as basic principles of common and constitutional law. Legal formalism had accepted, as a scientifically based, classical economic statements. It held:

 
any law or artificial obstacle that hinders two persons from trading who would otherwise trade, not only interferes with a sacred right, but destroys an inevitable gain that would otherwise accrue to two persons alike.[9]
 
10. These principles were elevated by Herbert Spencer into an evolutionary principle of social natural selection. The economically fit who successfully used their economic power to negotiate deals to the detriment of the economically weak represented the survival of the fitness.[10] Holmes accepted this conventional wisdom about economic regulation[11] but his dissenting opinion in Lochner v New York[12] reveals the different conclusions he drew for law on the economic revolution wrought by railways, telegraphs, and large manufacturing corporations in American society. He, unlike most other judges, accepted that courts should relax the restrictions which laissez faire economics had induced in the law and permit legislative experiments particularly those restricting the rights of ownership and giving workers protection. He accepted the right of legislatures, representing the popular will, to curb economic forces however misguided that popular will may be.

 
This case is decided upon an economic theory which a large part of the country does not entertain. If it were a question whether I agreed with that theory, I should desire to study it further and long before making up my mind. But I do not conceive that to be my duty, because I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law. It is settled by various decisions of this court that state constitutions and state laws may regulate life in many ways which we as legislators might think as injudicious or if you like as tyrannical as this, and which equally with this interfere with the liberty to contract. Sunday laws and usury laws are ancient examples. A more modern one is the prohibition of lotteries. The liberty of the citizen to do as he likes so long as he does not interfere with the liberty of others to do the same, which has been a shibboleth for some well-known writers, is interfered with by school laws, by the Post Office, by every state or municipal institution which takes his money for purposes thought desirable, whether he likes it or not. The Fourteenth Amendment does not enact Mr. Herbert Spencer's Social Statics. ...
  Some of these laws embody convictions or prejudices which judges are likely to share. Some may not. But a constitution is not intended to embody a particular economic theory, whether of paternalism and the organic relation of the citizen to the State or of laissez faire.[13]
 
11. By the time Holmes died in 1935 the 'nightmare' school of American jurisprudence was well established in the increasing influence of Realists.[14] They had already dragged American law within the penumbra of the shadow of the valley of indeterminacy. The decade before his death marked the beginning of the 'Age of Anxiety' or 'the jurisprudence of despair'.[15] This, of course, was not apparent at the time. It was a perspective which developed with the reinterpretation of Holme's work as representing ethical relativism in the 1940s.[16] It later became clearer to some that in 1920 Cardozo, who was to join Holmes on the Supreme Court in 1932, had produced 'a legal version of hardcore pornography'[17] in his statements:

 
I own that there is a good deal of a mystery to me how judges, of all persons in the world, should put their faith in dicta ...

I sought for certainty. I was oppressed and disheartened when I found that the quest for it was futile ... As the years have gone by, and as I have reflected more and more on the nature of the judicial process, I have become reconciled to the uncertainty, because I have grown to see it as inevitable.[18]

 
12. Holmes remained more enigmatic than the Realists who later used his name. Like Milton, with his Satan, Holmes encourages us to believe that he is not only the super-villain but the not-so-secret superhero of the story.[19] While he described law in terms of prediction he encouraged the study of legal doctrine.[20] Dismissive of an approach to law based on logic or mathematics he still saw law as a science.[21] And, as noted, while he refused to use the beliefs of classical economics as legal principles he did not reject them as a basis on which a properly informed legislature may choose to frame laws. Holmes was a person of his times and class. His ideas of law are the application to law of the realist and pragmatic philosophy of Peirce and James.[22] They were shared in part by Pound[23] and Dewey.[24] Satan, in Milton's story, shared with humanity his knowledge of good and evil. Holmes introduced lawyers again to doubt and uncertainty which he did not appear to share.

 
13. This paper considers the issues raised by Holmes in the context of company law in regulating actions of corporate controllers. These issues are the indeterminacy of law and that the limits of that indeterminacy found in considering the law as a bad person might, when actions might attract regulatory penalties. To Holme's 'bad man' we could add 'economic person'. Unlike the immoral 'bad man' these amoral controllers of companies are motivated to take actions which maximise their profits and minimise their risks.

 
Certainty? Company law?
 
14. Common lawyers have always ascribed certainty as a requirement for commercial and corporate law. Lord Mansfield observed:

 
Certainty is one great object of all legal determinations, and particularly to be wished for in that branch of the law which concerns corporations, because such questions are often agitated with a heat and spirit not to be satisfied by the best reasons or the soundest discretion, and only to be checked by the authority of rules and precedents, deliberately settled upon former occasions.[25]
 
15. Yet comparing these statements with the actual law frequently reveals inconsistency. The law seems to be indeterminate. To describe law as indeterminate is to suggest that legal rules or principles will not cause a particular result, that there is always 'an element of variation or uncertainty, choice or discretion' present when they are used to 'determine' issues, that their predictive power is not certain[26] or that they will not lead to one answer.[27] The Appendix sets out an indeterminate taxonomy of indeterminacy in company law. Specific examples in company law are not hard to come by. That part of company law dealing with directors, fiduciary duties, has often been described in absolute terms but they are an elusive concept.[28] Sir Anthony Mason observes of the family to which these duties belong that '[t]he fiduciary relationship is a concept in search of a principle'.[29] Perhaps Lord Mansfield was lying in the public interest and did not want directors of companies, looking at the law as bad people, to know how malleable and fragile the law was an instrument protecting shareholders capital.

 
16. Indeterminacy is not a new phenomenon in law. This is supported by those who claim that it is banal to say that the legal system is indeterminate. It may be a common feature in all legal systems. Indigenous Australian legal systems show a 'potential multivocality of meaning'.[30] The maxims of Roman law required its judges to be 'subject to a rule of indeterminacy' and do justice by a process of differentiation.[31] That differentiation apparently involved recognising the form, and ignoring the substance, of a number of dodges and rackets which can be reduced to a few categories, recognisable by contemporary corporate legal advisers.[32] This was overlooked in the medieval reception of Roman law. At first it was thought that legal judgment would now lead to absolute truth. The lawyer would became a mechanical conductor of certainty from the texts to the courtroom.[33] Disillusionment, or enlightenment, quickly set in. 1460 and 1630, in parallel processes in both the civil and common law, the inherent uncertainty of legal interpretation was widely recognised in the fracture and impurity of legal reasoning.[34] There was no ratio or mens to be recovered because the law always spoke, each act of interpretation determined de novo and de jure the source of its authority.[35]

 
17. Indeterminacy has a patchy feel as the taxonomy in the Appendix shows. It seems lesser or greater in different areas and its qualities also vary. It appears to have varying sources. It may flow from the complexities of the corporate form which is stretched over a many forms of business firms.[36] It may arise from general features of legal rules and the ambiguity of language in communicating information, gaps between the substantive rules, in gaps between procedure and substantive rules[37] and frequent failure to invoke them or in between conflicts between different rules.

 
18. The American Realists, inspired by Holmes, renewed interest in indeterminacy. The Critical Legal Studies movement took it up again. Both Realism and the CLS have faded amidst claims that pointing out that law is indeterminate is hackneyed scholarship.[38] It may be but this feature of law is more generally repressed or ignored than accepted as an ever present element. Duxbury has expressed exasperation with indeterminacy as an absurd interest. He claims most cases are easy cases and the application of doctrine is a foregone conclusion. He also believes that it is obvious that everyone, except for the most recalcitrant formalist, will agree that there are hard cases where the law's application will develop discretionary features.[39]

 
19. While indeterminacy seems to be as much avoided in company law as in other areas it appears to be growing rather than abating. It is skated over to dissect the detail of a common law doctrine or statutory provisions.[40] Yet the mysterious complexity of the corporate form is recognised[41] as well as the uncertainty of the application of legal rules. Their compounded effect is rarely mentioned. Concern with indeterminacy is not facile if the financial technology used in corporate structures is outstripping the law's ability to regulate it. It is not facile if legal doctrine has 'deep fault lines' that run through the easy cases as well, if the complexity of the area which law is regulating makes any policy underlying the law incoherent, and, if the subject of regulation is a large part of the community's wealth and considerable economic and political power.

 
20. Indeterminacy in company law has substantial effects. In particular situations it means that the application of rules and their enforcement by the state involves negotiation or mediation. If legal rules do not bind the state cannot regulate the flow of information about, and the change in control of, the corporate leviathans it purportedly governs in the public interest. If they do not bind they require those involved in companies to use other means to protect their interests. It enhances the power of the legal profession.[42] Indeterminacy has one further significant effect. If rules do not make fast they permit the incremental creep of changes in the social, economic and political interests in companies. A corollary of the uncertainty of the legal rules, in the common law system, is that there is a legal answer to every question asking 'what is the law concerning this matter?'. This interaction ultimately produces a change in the application of legal rules if not in the form in which they are stated.[43] It can mask considerable change behind continuity.

 
Paradise regained?
 
21. A number of legal writers reduce law's role in the regulation of companies to almost vanishing point. Economic forces, standing outside the field of law itself, are seen as significantly reducing the role of the state, the law, and the legal profession in corporate regulation. Other writers have sought to depict the state and the legal system as having greater significance in corporate law and regulation. Some explanations of law's part are complementary and some are conflicting.

 
22. Benson argues, on the basis of western European legal experience, that domestic commercial law lags behind commercial practice as commerce has always had an international aspect. In his model the legal regulation of corporate capital is seen as being particularly prone to changes in commercial practices in other jurisdictions.[44]

 
23. There are other ways in which company law in domestic regimes is affected by international practices. The debate in the United States about whether the competition between states for company laws which would attract corporations to incorporate within them was a 'race to the bottom' or 'a race to the top' is unresolved. There is also no conclusion over whether or not it produced more efficient use of corporate capital. It provides a model to see how the increasing deregulation of national economies permits companies to consider the attractions of other jurisdictions. A market model of corporate capital and its regulation might indicate that states and their law are relinquishing control over corporate transactions within them. The deregulation of national economies has created a market environment in which states feel constrained to create arrangements which are attractive to those people who have the power to make the decision to invest.[45] With a multinational company it may not matter what regulatory regime any state has as its economic activities are 'delocalised', that is they do not necessarily take place in any space regulated by any domestic law.[46]

 
24. While this might lead jurisdictions to create different laws other factors encourage a convergence. Lawyers, particularly United States corporate lawyers, are influential in suggesting a need for a particular corporate law regime to business interests. The legal profession is the inventor and manipulator of information about law and its interface with financial technology which manages legal relations in respect of corporate capital. It has accelerated the production of increasingly sophisticated information and sought to develop new markets for it.[47] Dezalay, for example, shows how lawyers promoted the concept of a market for corporate capital in Europe.[48] They then offered their services to government to advise on policies for increasing the competition for, and therefore, the efficiency of, this capital. They then counselled on the drafting of the legislation. In a further twist their status, as experts on the regulation of capital markets, gave them a veto over proposed laws. Without their approval the laws could not be legitimised to the commercial community.[49] Then, for fees, they guided their clients through the maze of rules the 'state' had constructed showing them how to integrate them in their plans to increase the reproduction of capital.[50] Dezalay contends that what these lawyers argued for were not 'growth strategies' which represent actual 'needs'.[51]

 
25. Other explanations which do not rely on international aspects of international commercial practice also exist. Some emphasise economic forces as being more significantly than others in their consideration of change in company law. A number of legal theories which deal with change in law are considered in the next part. They mix the 'felt necessities of the time, the prevalent moral and political theories, intuitions of public policy, avowed or unconscious, [and] the prejudices which judges share with their fellow-men' in varying ways to describe change in law. It is in this change in law that indeterminacy plays a significant role as it required to permit change to occur. And change is important.

 
26. Goode observed.[52]
    This passes as a basic policy of practicing lawyers. Justice Kirby, in 1995, quoted Lord Wilberforce with approval in recognising the complete makeover which companies had undergone and the need for the law to change accordingly:

 
The thought I want to leave you with is that we lawyers need to reorient our thinking in this whole field, in the interest of capitalism surviving as a system combining modernity and obvious justice - through recognition of the completely changed nature of the function of limited companies - recognition, one must admit, of the considerable abuses to which the system, and the superstructure which lawyers have put on it has given rise ... I want the climate of our thinking to change.[53]
 
27. Yet what are the consequences of such advice when capitalism is represented by companies and their controllers who, think of the law as 'bad person' or, at least, 'economic person'? Should there be an 'accommodation of principles, rules, practices and documents fashioned by the world of business' or a 'facilitation, rather than the obstruction, of commercial development'?

 
'Wormes in the entrayles'
 
28. In company law there are many examples of practices being denounced as fraudulent, deceitful, destructive of commercial values and business confidence and then becoming the established practice. This applies to the corporate form itself. The corporation was widely regarded as a danger to the state and an undesirable practice. Hobbes saw companies as a form of intestinal parasite.[54] After the repeal of the Bubble Act there was a considerable debate over whether forming a joint stock company was an offence at common law.[55] Limited liability,[56] managerial control, financial assistance in the acquisition of shares, hostile takeovers and share buybacks are other examples. Institutional investors presently pivot, while we decide whether they are good or bad. Floating charges are a little different. They were denounced by the Loreburn Committee as a device for fraud after they came into frequent use. It felt unable to recommend that they be made illegal as they were so widely used.[57] Company law, from this viewpoint, represents the accumulated imaginings of bad people. It suggests a different ending to that of Milton's 'Paradise Regained.'

 
Theorised prejudice: indeterminacy in theories of company law [58]
 
29. Writing on common law company law frequently assumes the essential positivist view of law that has been the dominate philosophical school in European law for the past two hundred years: the law is presented as conflict-free and built upon relatively uniform foundation of values.[59] This is odd because the writer generally raises a policy or interpretative difficulty in the law but ignores this unifying theme with the other articles in the journal in which it is published. Both in negotiating commercial arrangements and in litigation practitioners are confronted by uncertain legal principles.[60] Legal doctrine is still underwritten by the basic principle that there is only one right answer. So it is impossible to express indeterminacy to this extent in doctrinal argument. It would undermine the dominant legal ideology which is so pervasive that it represents point-of-viewlessness.[61]

 
30. Indeterminacy in law has had a bad name. It challenges the foundations of liberal ideology in the idea of the rule of law rather than the rule of people. This ideology is more consistent with the legal formalism of the nineteenth and early twentieth centuries. Judicial decision making was

 
a scientific, deductive process by which preexisting legal materials subsume particular legal cases under their domain, thus allowing judges to infer the antecedently existing right answer to the case at bar.[62]
 
31. The most recent school to revive it, the Critical Legal Scholars, produced outrage and charges of nihilism and were encouraged to leave law schools to contain the plague they were incubating.[63] This is a widely shared reaction. Goodrich suggests that why such an old issue in western law was so controversial is that 'terminus', the root for indeterminacy, has the sense of boundary and these writers had crossed it.[64] Similar observations in law and economics were subject to less criticism and by different writers.[65]

 
32. Others have welcomed indeterminacy as a beginning to the establishment of a new legal rationality. Teubner observes that Wiethölder has written about a new 'proceduralization' of law, de Sousa Santos sees the chance for legal pluralism and that Preuss has seen the law developing as the 'institution of societal self mediation.'[66] Laduer has sought to establish an 'ecology' of law to describe the change from a society constituted by individuals for one dominated by organizations.[67]

 
33. Looking at the role which various theoretical schools have given to indeterminacy in company law it is apparent that new ways of thinking are co-existing with old ways of thinking. There are 'complex patterns of ideas', 'slow and hesitant' tendencies, and 'a coevolutions and coexistence of competing systems.'[68]

 
34. What is striking about most of the theories is that they focus on the consequences of the uncertainty for judges required to determine disputes. They rarely consider what the consequences are for individuals affected by the uncertainty or the lawyers advising them.[69] In those circumstances it would appear that the legal rules are negotiated between the parties in a contractual form of private law making and that the weaker of the parties in any bargaining is forced to accept a statement of the legal rules less favourable to them.

 
35. The discussion which follows deals only in a limited way with the two most significant recent writers in common law legal theory, Hart and Dworkin. Hart represents a refined and developed form of positivism. Dworkin has generated a renewed form of the common laws' declaratory theory which has a strong resemblance to Hayek's model of the common law. Neither Hart nor Dworkin have written specifically about company law and little about commercial law. There theories are at a high level of generality difficult to apply to the particulars of company law. Both in the course of their development appear to have been more willing to concede that there is uncertainty in the law.

 
Porcine Positivism [70]
 
36. Implicitly or explicitly nineteenth century legal positivists, in emphasising judge made law, recognised the indeterminacy of the law. Bentham was anxious to reveal that judges made law. Austin promoted judges to the role of delegates of the sovereign. In federated states with Constitutions there was no 'sovereign' in the Austinian sense but judges who were arbiters of the Constitution could be seen to take the place of such sovereigns.[71]

 
37. The law, in HLA Hart's description, had 'a wide core of certainty' and a small 'surrounding penumbra of doubt.'[72] Judges used the law to decide whether a case fell within the core or the penumbra.[73] If it fell within the penumbra they had a narrow discretion to use a power similar to the legislature to make law but this discretion is outside his model of the law[74] and its basic concept of the rule.[75] Hart sketched an inadequate account of rule scepticism in order to demolish it as corroding objectivity in legal interpretation the status of legal rules.[76] Fuller, however, showed how uncertain the boundary between the core and the penumbra was.[77] Hart drew on Wittgenstein's observation in respect of the 'family resemblances' of legal rules to demonstrate the choice the judge has. It has been argued that Hart failed to recognise the 'overlapping consensus' to be found in the interpretative community of law over when it is appropriate to interpret rules having regard to both the plain meaning and the purpose of the rule but that the judge will still be left with a choice.[78] The later Hart showed appreciation of this phenomenon as it was taken up in legal theory.[79] He also came to give context greater significance in determining meaning and the application of rules.[80] The indeterminacy of positivism as a theory has increased with George's proclamation that 'the legal positivist is mainly concerned to produce a rich and accurate description of law and legal systems as they function in human societies.'[81]

 
Speluncean darkness? Natural law [82]
 
38. By the 1930s natural law theory enjoyed a revival. Fuller criticised positivism for ignoring law 'in its ethical context.'[83] It was partly the speed of economic change which drove Fuller to abandon positivism for morality and ethics as a sufficiently cohesive social glue.[84] Morality and law are interdependent and a court 'is not an inert mirror reflecting current mores but an active participant in the enterprise of articulating the implications of shared purposes.' In this task judges should not ignore that statutes are also enacted reflecting principles which they should respect in interpretations which respected their purpose.[85]

 
39. Dworkin's theory of law, unlike Fuller's, concentrates on the law making role of the common law judge.[86] He focuses on rights, asserting that a central part of the law's function is to protect individuals from excesses of state power. As in the common law's declaratory theory, and other theories, these rights are based on principles which pre-exist the law.[87] Legislative law is based on policy rather than principle and court's, exercising self-restraint, should avoid using policies.[88] Dworkin's use of principles owes much to models of the law generated as a reaction to Realism.[89] He portrays the popular positivist version of law as a book of rules which underlie the rule of law.[90] He insists that the common law is more accurately moral rights and duties which are vested in citizens and which the state and other citizens must respect. He describes this conception as based on principles rather than rules and 'more ambitious than the rule book conception' as it captures, and enforces, moral rights.[91] He accepts that these principles may be in conflict. This conflict is resolved by the weighing of the competing principles with one then being given priority. By taking moral rights into the law he would appear to be accepting a high degree of indeterminacy but he resists this.[92] He justifies what the judge does in holding people liable for violating the rights of others as it falls within the law already.[93] His statement that even hard cases have only one right answer has been the subject of considerable controversy. It echoes Rawl's contentions about the rational use of ethics.[94] Hart said most lawyers would ignore it and 'settle for a good night's sleep.'[95] Dissent in appellate courts evidences the difficulty of maintaining his position[96] but Dworkin defends it with very eloquent reasoning.[97] He has come to describe it using the metaphor of the chain novel in which the judge must get the best fit the previous chapters. The moral and other issues Hart had covered by discretion are concealed behind this reasoning which masks what others have considered to be indeterminacy. But as Bell reminds us Dworkin's description of legal reasoning points to the essential continuity in judicial methods in both hard and easy cases. The judge has a responsibility to make the system coherent.[98] But in the end is the law a chain novel in which judges are writing successive chapters? DeMott considered this metaphor in the context of the Delaware chancery court's decisions in management buy-outs and preferred the parable: a factual narrative used to illustrate principles to caution and instruct the reader.[99] Parables are also often very short stories.

 
Theories waiting for a fact, or a fire? Law and economics [100]
 
40. Two origins have been suggested for contemporary law and economics. One is Realism.[101] Holmes said in his 1898 address at Boston Law School: 'For the rational study of law the black-letter man may be the man of the present, but the man of the future is the man of statistics and the master of economics.'[102] In the 1920s and 1930s institutionalist economics was most closely associated with the Realist movement in law. Clark used social control as an economic phenomenon to explain the regulation of business.[103] In this model economics fed off legal institutions regulating activities. Llewellyn observed:

 
it may be queried whether any sane public regulation of economic activity in the public interest - whatever that may be - is not largely accidental. The way of growth seems to be along whatever balance results from the pull and prodding of this and the other private interest.[104]
 
41. He also wrote: 'legal institutions fix and guarantee the presuppositions on which the economic order rests.'[105] More radical Realists argued that the role of lawyers in legal institutions was to perform, or resist, the frauds required to support the controllers of corporate fortunes.[106]

 
42. The other origin is the organic view of law promoted by Hayek, although its significance has become more pronounced as law and economics move into the post-Chicago, non-Posnerian mode[107]. Hayek had an elevated view of the common law arguing that it was based on no conscious design but the adjustment of the mutual expectations of individuals which had taken place in an extended evolutionary development.[108] Even if this were true of the common law it need not necessarily apply to statutory interpretation.[109] Hayek was not the first to exaggerate the certainty and restraints which the law imposes on everyone including the judges. Hoyt appreciated the conservatism of the common law under which 'vested rights of property will not be confiscated by the operation of the legal system to any appreciable extent, and the fundamental bases of economic relationships will not be unnecessarily jolted.[110] Hayek does not acknowledge the problem which follows from the abandonment of the logic of the syllogism which was used by Pound and others to criticise the Realist description of the law: it does not provide for equal justice.[111] Hayek also promoted the neo-classical concept of the market which dominated the first generation of law and economics.[112] The lawyers of this first wave were seeking new form of positivist law.[113] From this point of view it could be seen as a reaction to Realism. This is particularly so where the market was seen to be a source of ethical behaviour. So Stigler argued that transactions in the market were voluntary and therefore must benefit one party and not injure the other. As the transactions in the market are repetitive 'deceit and non-fulfilment of promises' are rendered unprofitable.[114] Demetsz argued that the market imposed 'a predetermined moral framework within which to work, for it implies that the good society limits the use of legal sanctions, expands the opportunity for choice by individuals, and, therefore, places the responsibility for behaving ethically on its citizens.'[115]

 
43. The most influential school of law and economics, associated with the University of Chicago, argued that any indeterminacy in law should be resolved by decisions which would promote free markets and efficient use of resources. They treated rights as 'price signals' which would assign scarce resources to the most efficient users: '[i]n the economic approach to law, legal rights are designed, in part to overcome the conditions under which markets will fail..[116] The most highly developed theory was Posner's concept of wealth maximisation. It has earnt Posner the reputation for being the new Holmes:

 
their shared tough-minded antisentimentalism, the bleak Mathusian wisdom that there is no free lunch and that well-intentioned efforts to redistribute wealth are usually self-defeating, the ultimate grounding of law - and indeed all social life - in the brute facts of self-preference, territorial defence, revenge instincts, and the struggle for survival.[117]
 
44. Posner argues that this wealth maximisation made common law more efficient than statute law as it promoted this principle. The judge, and particularly the appellate judge, is unaware of which of the parties is the better person. The rules for judicial compensation and the exclusion of conflicting interest make the judge more impartial. The judge comes to perform the role of the invisible hand in other markets by viewing the parties as representatives of the activities concerned. The requirements for standing make the parties motivated to obtain the best possible rule for themselves as buyers and sellers seek the best price.[118]

 
45. Economic principles do not provide lawyers with a determinate answer to legal questions.[119] There are varying standards of 'efficiency' within economics itself which economists shift between.[120] Economic values do not collapse into the 'rightness reasons' lawyers use in legal reasoning.[121] Law and economics has generally ignored the principles and practices by which judges decide cases and make law[122] including the political dimensions of any adjudication.[123] Posner's theory that the law has as its primary rule wealth maximisation faces difficulties in engendering certainty into the law. The distinction between this standard and the economist's standard of Pareto efficiency is often blurred.[124] More damaging is the criticism of Coase on whose work Posner relied to develop his concept of wealth maximisation. Coase has described Posner's concept as meaningless.[125]

 
46. The idea that judge made law in particular is predictable, a problematical issue, underlay Posner's view of company structure.[126] He described the company as a method of solving problems caused by interest rates and the uncertainties of partnership when raising substantial amounts of capital.[127] It is a standard form of contract which resolves these issues at a very low cost by codifying reasonable expectations and avoiding costly drafting.[128] In viewing the company in contractual terms Posner represented the conventional law and economics view of the company as a nexus of contracts of resource holders which considered participation in corporate governance entirely as an analysis of transaction costs[129] although Berle and Means had noticed the use of contractual arguments to justify managerial appropriation of corporate property.[130] There was no consensus about Posner's model.[131] A perspective which it lost was the concept of the corporate interest as the criterion for resolving disputes among the resource holders.[132] Posner's premises for certainty in the law have changed in the course of his writings from the positivism based on the normative force of economic principles to acceptance of Dworkin's analogy of the chain novel.[133] It now is based on Rorty's neo-pragmatism as economic efficiency can be argued in the 'local' areas of law to produce desirable outcomes.[134]

 
47. Two theoretical articles by Ronald Coase became the basis for claims for normative rules in company law. The first was his 1937 paper on the nature of the firm in which he argued that firms were a way of making complex market transactions more efficient. The minimized, but did not eliminate, 'the costs of exchange transactions on the open market.'[135]

 
48. The other significant article by Coase was his 'The Problem of Social Cost'.[136] It was used as the basis for Manne's argument, important for corporate regulation, that there is an efficient market in the competition for corporate capital.[137] It is based on an economic analysis which places the market for corporate control in a pivotal position in corporate regulation. In an application of Coases' theorem Manne argued that the market in corporate control aligned directors' and shareholders' interests.[138] That theorem states that where transaction costs do not exist resources flow to their highest valued use. With corporate capital it predicts that another company, which can obtain greater value from the same assets, will buy the less efficient company's shareholders out.[139] If directors do not use the capital in the most efficient way the company will be taken over by those who will use that capital more efficiently.[140] Directors must, therefore, promote shareholder welfare by obtaining the best possible return on the capital invested in order to retain control.[141] Adam Smith, himself, appears reluctant to accept that there could be an efficient market in corporate capital.[142] But by the end of 1980s there was a wide-spread acceptance in American legal writing of Manne's efficient capital market hypothesis. Other writers have followed him with other arguments justifying a market analogy for takeovers. Shareholders are the residual rights holders or risk bearers and this motivates them to prevent the directors shirking,[143] that investment is only likely to be forthcoming on terms that the firm will maximise profits for the benefit of the shareholders.[144]

 
49. There was dissent from these propositions in arguments that the sharemarket is a mirror of the corporate economy rather than the corporate economy being a mirror of the sharemarket. In this model 'cause and effect run from the economy to the stock market, never the reverse'. There are others who maintain that the market does not even mirror the economy.[145] Some writers concede that market failure is more widespread than is generally recognised.[146] There has been disagreement over how far free market principles should go. Easterbrook and Fischel have argued that there should be no regulation of takeovers and the incumbent directors should remain passive.[147] If there is any inefficient use of capital the benefit of it should go to the bidder rather than the shareholders of the target as this will promote takeovers.[148] This has led to a 'family quibble' as a number of writers have accepted these views while others have rejected the idea that management must remain passive.[149] Others have adopted an inconsistent compromise that hostile acquisitions should not be discouraged while auction markets should be encouraged.[150] There was scepticism about claims for efficiency and synergy following takeovers.[151]

 
50. This conflict about the market in takeovers and its regulatory effect has not been resolved.[152] Johnson, observing the critical effects of this discussion for legal regulation 1988, called for the re-examination of the basic issue of the overall economic utility of takeovers. He hoped that this would achieve widespread agreement which would end the controversy about the conduct of managers of takeover targets.[153] Eight years later the controversy continues.[154]

 
51. Many have now joined Posner in his jettisoning of a positivism based on neoclassical economic principles for a neo-pragmatism that recognises that the law is indeterminate.[155] There is growing interest again in institutional economics and transactional analysis in which an attempt is made to fill in the black boxes of neoclassical economics.[156] There is greater willingness to admit that law and economics did not bring greater certainty to law and that '[m]ost law and economics questions are still open and likely remain so for a long time.'[157] At the same time the reasoning behind neoclassical law and economics is blamed for the impoverishment of the ethics of contemporary western society as it ignores justice and morality in favour of considering the price.[158]

 
Reified abstractions, omnibus concepts and metaphors masquerading as facts? Realism [159]
 
52. Growing out of the realist and pragmatic philosophy of Peirce and James from the beginning the American movement sought to explain law as a sociological phenomenon.[160] Realism in law came to mean something different from what it did in philosophy and was also not just an American phenomenon.[161] In this they were heavily influenced by Pound[162] and Holmes.[163] As we have seen Holmes saw that there was a need for legislation to reflect the wishes of those who controlled the supreme power in society. In constitutional decisions judges should defer to that power. As he stated in Southern Pacific Co v Jensen[164] the common law is not 'a brooding presence in the sky'. Common law judges make law and policy:

 
Ours is not a closed system of existing precedent. The law is not such a formal system at all. ... Courts must make law. Indeed courts are major policy makers in our system of government. We must be wary of petrifying the common law into a rigid system, utterly behind the times and totally at odds with the progress of science and social change.[165]
 
53. Again the radicalism of this statement is tempered by his observations that change to law should be quick but not too quick and that any power in the judge is exercised 'interstitially.'[166] Cardozo also accepted, perhaps more hesitantly than Holmes, the need for judges to make law in the absence of legislation or precedent. The judge 'must then fashion law for the litigants before them.'[167]

 
54. As a school realism was marked by the belief 'that there was more to the study of law than the study of a system of rules; that for most purposes legal doctrine should be seen in the context of the totality of the social processes.'[168] The Realists parted from Pound in distrusting what courts said. Pound criticised their conception 'of legal principles as incapable of interdependence and logical connection' which emphasised the uncertainty of the law and misrepresented the high degree of certainty in the law. One area of settled principles and fixed certainty was commercial law.[169] They sought to describe what courts do and the role of legal rules in the court's decision making[170] and, as part of this, they produced a vast range of literature on 'legal 'helpful devices'' such as the company.[171] Some focused on power relations in the company and issues of how they could be legitimised.[172] Berle and Means are an example. They argued that the separation of power and control in the company resulted in the question of the property rights of the shareholder not being a legal one: 'An answer to this question cannot be found in the law itself. It must be sought in the economic and social background of the law.'[173] Like other writers from an institutional perspective they found that firms were irresponsible and not serving the interests of the economy.[174]

 
55. We now see Realism through the filter of its reinterpretation which exaggerated it into simplistic statements that neither morality nor legal rules influenced legal policies or decisions producing a highly indeterminate legal system.[175] Hart labelled Realism as 'the nightmare school' of American jurisprudence[176] as it introduced the 'Age of Anxiety' or 'the jurisprudence of despair'.[177] There were a variety of views about indeterminacy.[178] Frank, with Cardozo partly agreeing[179] thought that the psychological processes behind the giving of judgment were important.[180] Frank attributed the myth of legal certainty to a childish fear of indeterminacy. His view of companies was that judges had turned them into metaphysical concepts which had an independent existence apart from the rules which applied to them. That imagined existence was then used to resolve issues in a process of 'transcendental nonsense' without reference to proper policies involving 'political or ethical value judgments'.[181]

 
56. Llewellyn sought to reclaim the certainty for law which his own analysis had undermined.[182] He argued against claims that the judicial process is not predictable.[183] He identified fourteen 'major steadying factors' in appellate courts including 'legal doctrine' and 'known doctrinal techniques'.[184] He makes a number of mixed observations about doctrine. In appellate litigation, where the case has been properly run and is worth appealing there are likely to be more than one doctrinal answer.[185] He observed that a court will need to be persuaded that both justice and decency require the rule, and the result, argued for. This means the manner in which facts are presented is critical.[186] Doctrine is applied using accepted techniques but the leeways for their use are broad.[187] Even when legal doctrine is exhausted legal materials are still used in finding an answer.[188] Finally he observes that it is easier to predict the result then the reasons for it.[189] The other steadying factors he identified[190] point towards what Fish has now developed into a concept of lawyers as interpretative communities.[191]

 
57. Indeterminacy had a purpose for Llewellyn. It was necessary if justice was to be generalised as legal rules and if justice was to be done to individuals. This is a constant tension, but not necessarily a conflict, in the law.[192] He also saw that one of the virtues of law was that it was a brake on commercial changes as it was removed from business. In choosing late, however, law was able to make a better guess about the developments it did take up.[193] In this way change was incremental and improving.[194] Llewellyn's views are revealed in a practical way in his drafting of the Uniform Commercial Code. Two competing schools of thought had emerged in the common law world about the status of equity in commerce: that equitable principles have no place in the world of commerce where people were free to act for their 'own self-advancement and self-protection' or that they had a place as a 'system of commodity exchange ... is possible only on the basis of far-reaching personal confidence in the trust and loyalties of others.'[195] Llewellyn considered that this added to certainty in the law while promoting justice to the individual as a result of his study of the legal processes of the Cheyenne.[196] This recognition of the values of the 'commercial community' in shaping the law suggests that corporate law will come to represent the values of that commercial community. This appears to be the conclusion that Llewellyn reached earlier when he observed that corporate law was largely the outcome of undirected private interests in economic life and that little corporate practice was produced by the law itself.[197]

 
58. The implication for company law from Llewellyn's realism is that there should be general standards in the law which embody, amongst other concepts, ethical principles. The content of them would be established by referring to the standards and practices of the corporate community. But which part of that community is not clear. The concentration on what courts did, as opposed to what they ought do, removes moral content from the law.[198]

 
59. Realism in corporate law also dissolved the company, like law and economics, into a series of legal relationships between individuals. At the same time there was a concern with corporate governance and an attempt to analyse it in terms of power as a private system of government. This was the approach which Berle and Means had suggested.[199] It has provided a richer understanding of power in the company but has flattened the economic aspects of the company into one dimension which ignores the social effects of such economic enterprises.[200] Many prominent Realists participated in the regulation of companies with the creation of administrative agencies in Rooseveldt's New Deal. Berle's and Means' book was influential in the approach to regulating companies.[201] Of all their theoretical baggage it was only their rejection of laissez faire economics, on which this insight into economic power was based, which survived their journeys to Washington.[202] The result described by Hovenkamp, misleadingly, was that 'by the end of the New Deal little was left of the classical corporation ... The invisible hand of the market had been struck down by the very visible hand of the state.'[203]

 
60. Realism's later movements came to focus on legal process in terms of formulation of the law and its administration in a way which sought to remove it from politics and re-emphasis judicial objectivity.[204] Realism can be seen in the recent work of Eisenberg who has drawn on similar concepts to Llewellyn in developing a model of the common law.[205] Realism now has a dated feeling. Any certainty it gave by interdisciplinary studies are shown to be false, which Grant Gilmore had long maintained. His sceptical philosophy was a forerunner of the turn to postmodernism.[206] It tends to concentrate on the physical world and sensory perceptions. Postmodernism and deconstruction have reasserted the force and power of metaphysical concepts and intellectual fictions in legal doctrine.[207]

 
A long strange trip? Critical legal studies [208]
 
The Frankfurt school
 
61. Critical studies in law, as in other fields have derived from Marxism and its idea of the critique of society. Both in common law and European legal theory it is particularly associated with the Frankfurt School which developed a critical theory of Marxism itself. This theory rejected the idea of positivism in the social sciences, particularly the idea that they could be value free. It rejected the immutable materialism of Stalinism and emphasised Marx's use of the Hegelian concept of consciousness as a moulder of the world.[209]

 
62. Neumann, one of the better known members, drew on both Marx and Weber in his analysis of the role of law in what he described as 'the competitive society'.[210] This was entrepreneurial capitalism in which capitalists interacted freely with each other and in which the security, calculability and predictability of the law and the non-intervention of the state in private affairs was of value in its own right. He developed his theory further from his experience of the turmoil of the Weimar republic and the rise of the National Socialists as well as the phenomenon which he described as 'corporate society', the monopolist power of the German corporate cartels.[211] In this new economic arrangement these formerly desirable qualities implicitly favoured the interests of large corporations at the expense of individuals. The rule of law emphasised formal , and not substantive equality. Companies could use their power to bargain with citizens and then resist government intervention in what they would seek to characterise as private transactions.[212] The generalisation of law, which had an equalising effect, in this period

 
has a disguising function. In a class society and in a competitive economic system, a general law conceals the realities. By the postulate that the state may rule only through general laws, the competitive economic system is invested with the dignity of a moral value.[213]
 
63. In this phase there is also a tendency to abandon the idea that 'the legal norms are exactly determined ... that they are as rational and formal as possible, so that the judge has as little discretion as possible.' This leads to 'recourse to legal standards of conduct such as good faith, good morals, reasonableness, or public policy.'[214]

 
64. In his analysis, the common law, with its system of precedent was different from the systematically codified law of Germany. The same processes could be seen in the commercial law in both systems but in respect of the poor and the 'lower bourgeoisie' the common law was, in his view, 'irrational to a large extent.' [215] A view which it is not entirely justified.[216]

 
American critical legal studies
 
65. In the common law world critical legal studies in the United States has been the best known. It borrowed from, and built on, Realism, the Frankfurt School and more recent European Marxist theorists including Sartre and Gramsci.[217] By the late 1980s it had turned towards deconstruction and ethics[218] as well as forms of pragmatism which has also, ironically, attracted Holmes and Posner.[219] In Europe the development of the critique has continued with the French writers associated with postmodernism and also in an autopeosis model of law based on the sociology of Luhmann.

 
66. Kennedy sought to situate legal indeterminacy in a structuralist framework, with resonances of Neumann, that rules support individualism and standards support altruistic views. In all situations the judge can use an individualist or altruistic argument as these are opposed and competing concepts that flow into the deep cultural structure of the law and which will support either outcome. Their elements are defined in the difference between them which means that they are dependent on each other but they also deny each others existence.[220]

 
67. Indeterminacy, for Unger, also has echoes of Neumann. It results from an attempt to maintain the ideal of the rule and the liberal form of individualism and private property and rights from the nineteenth century in a society where there is now an overlay of the welfare state which has been absorbed by the law as policies and goals which are achieved through the exercise of discretion. Ironically, the liberal form he describes is itself a previous compromise in which the state granted the elite greater power over natural resources and labour in exchange for accepting the state's right to tax and make war. The way forward, he claims, is for the expropriated resources and labour to be reappropriated in ways which will transform people and liberty.[221] He envisaged a communitarian form of life, representing the sympathy of people for each other, underlying the ethics and politics of communities.[222] This could rescue individual freedom 'from the demise of the rule of law' and bring it 'into harmony with the reassertion of communitarian concerns.'[223]

 
68. One of the contradictions which Unger noted in contract law is relevant to dealings between shareholders and directors. Contract law seeks to restrain the power of a person to exploit another in terms of requirements of good faith, unconscionability, and in the United States at least, economic duress. He observes, in respect of economic duress, that inequality is endless. The purpose of competition is said to be for the competent and well informed to prevail. The problem for the law is to operate the doctrine without destroying the whole edifice through remaking the market.[224] He points to the dualism of contract law in respect of fiduciary duties.[225] He shows by reference to a long term contract and an informal joint venture agreement how capricious the legal classification can be.[226] Unless these are exposed liberal ideology legitimates the oppression and this state of the law.[227] The paradox for CLS is that any improvement may further legitimise this condition. There has been only limited analysis of company law by CLS writers.[228]

 
69. Some CLS scholars argued that legal rules produced irreconcilable ideological struggles and cannot contain consistent line for judges to interpret.[229] A number of CLS writers seek to place this ideological conflict more firmly in a Marxist framework.[230] CLS divided into two broad positions on the issue of indeterminacy in law: a radical one that legal structure is in the eye of the beholder and that law does not have an objective structure,[231] and, a moderate one that concedes that law does have an objective structure but that structure can be drastically changed over time by lawyers who try to extend the scope of doctrines which are present only at the margins of the law.[232] It has been used to model corporate litigation in Delaware and answer the counter-intuitive statistics that the courts find regularly for shareholders.[233]

 
European critical legal studies
 
70. Critical theory is not restricted to North America and Germany and indeterminacy is seen as not just a feature of the common law. British and Scandinavian writers have also critiqued the law in this way. A number of English lawyers have adopted a critical approach to company law.[234]

 
71. Wilhelmsson, writing in the Scandinavian tradition, has, like Unger, observed that contradictions within legal doctrine and policy can be vertical or horizontal, that is they may exist at different levels of legal regulation or they may exist in legal elements at the same level. Given the number of systems which converge in the area of company law conflict would appear to be inevitable and to occur in the way Wilhelmsson has noted. Also, like Unger's attempt to construct from the suppressed rules a 'deviationist doctrine, he has also sought to recover a more coherent doctrine from existing legal materials.[235]

 
Conceptual inflation and disorder? Teubner and autopoiesis
 
72. The most influential legal theorist with an interest in company law is Teubner who has also been influenced by critical theory. He argues that the problem with the American CLS critique is that it is not radical enough.[236] This, as noted in the Appendix in the context of paradox, is because for law to be law the paradox of self-reference is involved.[237] He does not seek to offer an explanation for the resulting indeterminacy but suggests that we should seek to identify how indeterminacy arises in law in other ways. He uses systems theory based on Luhmann's theory of social autopoiesis to describe these other sources of indeterminacy. This has been described as law's answer to the postmodern crisis in knowledge[238] but it also bears a number of resemblances to Kelsen's pure theory of law.[239]

 
73. Autopoiesis is a form of homoeostasis found in cybernetics.[240] Teubner at first claimed to use it as a metaphor but he appears to now regard it as having a greater explanatory power.[241] Teubner notes that in society conflict occurs between autopoietic social systems including politics, economics, family, religion, science and culture. In law these occur as an internal conflict between these separate legal fields. This is often because legislatures and courts attempt a compromises between competing policies in making law. The conflict is exacerbated by the legal process in that frequently specialised legal experts identify with the corresponding autopoietic social system as much as the law.[242]

 
74. His model can be best explained in the context of change in the law. The autopoietic system in law
     
    transposes the evolutionary functions to within the system itself, to internalize the mechanisms for variation, selection and retention. This process of internalization shifts the dynamic of evolution from the environment into the legal system itself, and subordinates it to the logic of legal autopoiesis.[243]
 
75. Consequently change in law is not the sum total of social evolution which impinges on it and social norms cannot be directly transplanted to law. In this way the evolution of legal values can come to diverge from the evolution of values in society as law determines the preconditions of every change within itself.[244]

 
76. Law, however, continues to regulate social actions through what Teubner describes as 'information' and 'interference'.[245] Law produces knowledge within its systems which produces its 'autonomous reality' without substantial contact with non-legal systems.[246] This has resonances of Hart's secondary rules of recognition.[247] It is, at the same time, connected to these other systems by 'mechanisms of interference', or what Luhmann calls 'structural couplings',[248] which operate between systems. While this sounds paradoxical what Teubner means is that 'law regulates society by regulating itself'[249] or 'the [legal] system can deal only with its internal construct of the environment.'[250] In the area of economics it is not the economic system's construct of itself that law uses but a construct the legal system has made. This is why Teubner rejects as legal concepts a number of concepts developed in economic analysis alone.[251] Luhmann points out that the economic system depends on codes of property and money but that the economic and legal consequences are completely different and depend on the codes of their own separate systems.[252]

 
77. This leads to Teubner's analysis of the issue which Weber and Neumann grappled with, the proliferation of discretion in the law and the weakening of legal doctrine which Neumann associated with corporatist or monopolist capitalism, as the result of 'second-order autopeoisis'. He shows how the system of law, as it is responsive to its changing environment including the systems of company law, reduces its internal consistency. This is to be seen in the one-off approach to decision making and the fragmentation of the territories of legal doctrine which have destroyed the ideal of doctrinal unity throughout law and the increasing interaction between autonomous systems of science, technology, economics and communication.[253] This has led Luhmann to warn against weighing existing systems with problems they cannot solve.[254]

 
78. Teubner, in applying his theory to the company in law, notes that: '[a]utopoietic theory suggests that law plays a modest role in the dynamics of the processes of evolution of industrial organisation.' He sees the process of the development of the company as a blind evolution involving 'the uncoordinated interplay of the mechanisms of variation, selection, and stabilization.' In this process the main role of law has been responsive and to stabilise organisational forms and corporate governance which have grown through these other mechanisms.[255] However, using autopoiesis, to analyse the company itself he claims that it emerges as 'an organized and a spontaneous domain' which insists on the fundamental distinction between contract and organisation in which contract is seen in the context of the environment of the organisation. The company emerges as 'independent, autonomous system of action, reproducing itself not through contractual transactions, but through the recursive linkage of decisions.'[256] In this situation the interests of capital, labour, management and the state are not sovereign in the organisation. There are no rights in ownership of resources or the control of those resources they are all within the power of the 'corporate actor.'[257] Teubner's analysis extends further in the corporate group where he sees the re-entry of the market form within the corporate structure in relations between companies in the group which can be constantly adjusted to get the most efficient mix.[258]

 
79. Autopoiesis enjoys a poor reputation in law which is only partly deserved. Zolo has described it as a 'pathological syndrome' of 'conceptual inflation and disorder' for which he prescribed 'linguistic therapy for the whole autopoietic lexicon'.[259] Like all metaphors it is unverifiable using scientific methodology.[260] Ironically it presents the same problem as law. It is an extended tautology. As autopoiesis is a system it is explicable in terms of itself so that it is true by definition.[261] Autopoiesis, in the end, is an explanation and an extended simile, the generality of which finally reaches particulars which defy it. Luhmann claimed that the simplifications of the general theory may need modification when applied in particular instances such as law.[262] To some extent, in another paradox, it does that with the level of its generality. Like many abstract theories of law it is difficult to apply to particular aspects of doctrine. However, unlike many abstract generalisations it does allow for the detail and the contradictions which arise from the 'static' within systems.

 
Muggletonian Marxism: EP Thompson and the loss of the commons
 
80. Teubner's model resonates at a number of levels with Thompson's detailed description of changes to common property in eighteenth century England. Thompson's saw that in this period 'law ? property'. Law did legitimise the actions of the powerful but it was also used by others to generate competing versions of law to legitimise their opposition to the transformation which was happening to common property. The tools which he used in that analysis are significant because they provide lawyers with metaphors to analyse the competition over the ownership and control of the capital of the company.

 
81. Thompson provides an example of how no single hypothesis can explain the transformation of property rights by capitalism. The details contradict any unifying explanation as the static in Teubner's model predicts that different organisms will respond differently to the same information. It was an erratic process. Some local communities resisted the removal of their rights and acted on the belief that they continued to hold them. Legal decisions sometime went against the trend. Both processes preserved common rights in particular places well into the nineteenth century until they faded as irrational anachronisms as the economic and political system of which they had been part receded even further into the past. The lack of a uniform trend is clearer in the context of Thompson's account if we add to it an account of how lawyers, if not the law, was encouraging the ownership of common property in London through joint stock companies in this same period.[263]

 
'Habitus'
 
82. Thompson noted that all parties to disputes about common property and use rights could seek to assert customs in justification of positions which favoured themselves. Thompson notes that agrarian customs were never facts but 'ambiances'. These customs took place in 'a context of sociological norms and tolerances' and could, Thompson argued, be understood with Bordieu's concept of 'habitus':

 
[A] lived environment comprised of practices, inherited expectations, rules which both determined the limits to usages and disclosed possibilities, norms and sanctions both of law and neighbour pressures.[264]
 
83. In this habitus 'all parties strove to maximise their own advantages'.[265] The community of company 'stakeholders' is far removed from that the village and there are problems of communication and participation in any analogy. Using the concept of 'a lived environment' both as a metaphor for conflict within the company and conflict in the community debating corporate governance more generally may illuminate why conflicts of opinion often appear so difficult to resolve in the sense of deciding which is the 'correct' or 'right' position. Many parties to corporate disputes or the corporate governance debate may be able to put legitimate but conflicting positions through careful choice of arguments.

 
'Custom'
 
84. 'Custom' operates in the community, far removed from the 'habitus' of the English common, which debates corporate governance or a company's affairs. What was called 'custom' in previous centuries is now included in the word 'culture.'[266] The twentieth century is not the first time that there has been a complex interaction between law and popular culture.[267] They did become disconnected in the nineteenth century when collectors of folklore 'separating survivals from their context, lost awareness of custom as ambience and mentalité. Before this time custom was praised as both 'old' and 'good'. He also notes that custom had 'close affinities' with the common law. He recognises that customs were not necessarily old but that in the eighteenth century it 'was the rhetoric of legitimation for almost any usage, practice or demanded right.' It was:

 
So far from having the steady permanence suggested by the word 'tradition', custom was a field of change and of contest, an arena in which opposing interests made conflicting claims.[268]
 
85. Thompson claims that it is a 'clumpish' term which invites being taken apart. It was often a careful selection of things which would defend their present interests.[269] It was also 'common sense' or 'praxis' as Gramsci noted in observing the two consciousnesses of 'a person in the mass'. The 'popular morality' of folklore and the 'official morality':

 
For Gramsci also insisted that this philosophy was not simply the appropriation of an individual but was derived from shared experiences in labour and in social relations, and is 'implicit in his activity and which in reality unites him with all his fellow-workers in the practical transformation of the real world.'[270]
 
86. These two theoretical realities can be seen as deriving from two aspects of the same reality, the necessary conformity with the status quo and the common sense derived from the shared experience with fellow workers which exposes the first to ironic criticism.[271]

 
87. The administration of company law is also imbued with custom although the communities involved have significant differences with Thompson investigated.[272] Again this suggests that the reality of relationships in the company is something apart from law but is based on shared experiences. The shared experiences of shareholders may be few, those of the directors many. As well the shadow of daily practice in the particular company transforms these relationships.

 
88. Thompson's conclusions suggests that the conflict was between rival legal orders or, possibly, conflict between competing interpretations in the one legal order. He concluded that the law 'is an arena of conflict within which alternative social visions contended, bargained and survived.'[273]

 
89. This produced an indeterminacy in the law. In both the inability of Whig grandees and the rural rich to get the decisions they wanted in the courts and the successful resistance of forest residents and country people to what they believed to be a violation of their rights Thompson found that law was imbricated throughout the society. It was in the relations of the ruling class within itself, with the state and with other classes.[274] He claims that the Whigs and the Hanoverian kings based their claim to power on the law and could not retain their legitimacy if they repudiated it.[275] He saw this as applying to the civil law as well as the criminal.[276] He relied on Weber's view, now disputed, that law can create a legitimate social order.[277] Nevertheless confidence in the legal regulatory regime is still a familiar assertion in company law and securities regulation. Thompson argued that the law could be found in the beliefs, practices and relations of the yeomanry and minor gentry.[278] It could also be found in the society of the poor.[279]

 
90. Thompson's achievement, in recovering the forgotten legal history of the rural poor, is a telling illustration of the fragmentation and discontinuity of legal knowledge. Once recovered it contradicts any deterministic view of social and legal change.[280] It also reveals the schizoid character of law. The developments in law in the eighteenth century were not all hostile to collectively owned property. The collective rights destroyed were those based on tradition. New forms based on contract, particularly in companies, were nurtured by the law and grew in this period.

 
91. Thompson argued that what was needed was a 'post-Marxist' analysis.

 
A historical materialism which would view society as an organic whole, overcome academic procedures of division and isolation, and recapture the unitary spirit of human resistance to exploitation and oppression.[281]
 
92. This suggests that in struggles between shareholders and company managers that the law will be found in a number of places in those relationships. As Foucault indicates the law may be constituted by the interplay between information and administration.[282] The company can be a locality in which Rorty suggests that people may still take pragmatic actions with meaning.[283]

 
The profitability of considering indeterminacy in corporate legal theory
 
93. Legal theories are often devised at a level of abstraction that makes it difficult to apply them in any coherent way to particular situations. Theories relating to indeterminacy in company law are no different. Indeterminacy haunts the legal mind. Hart and Dworkin seek to marginalise or eliminate the nightmare from law. Others, such as the writers in law and economics seek to subvert it to their own purposes and use it to extend the empire of wealth maximisation. What could be more consistent with the duties of directors of companies? Some Realists, like their descendants the Critical Legal Scholars, shocked by using it to break the icons of the law. Others, like Llewellyn and Unger, saw that indeterminacy was a not a completely undesirable quality. It permits the plates of justice as an abstraction and justice to the individual to slip against each other without too many jolts to the body politic. It permits people with a vision of justice to construct a different and more 'just' version of the law. Neumann's observations remind that legal rules represent choice and that the abandonment of a general abstraction for the particular may benefit those more able to exploit the opportunity. Teubner's autopoiesis provides a way to conceive of order in what appears to be chaotic periods of change. It gives to law, and those seeking its protection, the dignity of independence. There is no complete isolation of law from other systems. It will interpret the data for itself but where conflict exists between systems outside of itself it is capable of reproducing that conflict within itself. It may, through its own static, create competing principles within itself. It is, as observed by Neumann, capable of generating rules to accommodate the one-off deal. As an organic model it mirrors the concept of 'habitus' used by Thompson to describe the contest about common property and common use rights he witnessed in eighteenth century England.

 
94. Indeterminacy in corporate law can be viewed through the complementary organic models of communities, and the interaction of law with other social structures in those communities, which Teubner and Thompson have created. Both recognise that law has a degree of autonomy. It is influenced by changes in the rest of society but it organises them in accordance with its arrangement of information. The conflicts within the other systems may be imported in this interaction. Their models also reveal the influence of law on other social institutions. Thompson found that law was embedded in all types of relationships and phenomenon. Teubner's claim for law appears to be more modest. It follows from his theory that if law interacts with other systems and is affected by them that interaction takes place in the other direction. However, Teubner observes that law's influence over the corporate form may not be great. Teubner's model is more abstract and generalised than Thompson's. Yet his 'static' plays a similar role to the details which Thompson observed. Thompson shows how the conflict with other systems, or habitus, such as the agrarian economy, invoked principles from law as parties contested the assertions to rights made by others. Thompson's account suggests that law may play a larger role in the shaping of the institutions of capital, such as the company, than Teubner allows. This can be seen in the role of the lawyers in the rise of the joint stock company based on trust and partnership and in potential breach of the Bubble Act.[284]

 
95. Both provide models for dispute and resort to law within the company. Thompson uses habitus and custom and reason in which parties in conflict over the allocation of capital can be seen involved in an arena of conflict. Teubner presents as conflict between autopoietic social systems. Indeterminacy in law can be seen as representing patterns of social relationships under stress in the competition for capital. At the same time law is changed by the conflict generated in itself over what contemporary values it should take up and display. This may explain why the law relating to directors' duties appears to be acutely indeterminate. Thompson shows that the conflict between parties does not end with the same side always winning.

 
96. Conflict between habitus or autopoietic social system are introduced into the habitus or autopoietic system of law. A number of corporate transactions produce conflicts over property of great value in which considerable pressure is placed on parties and their lawyers to push the meaning of language beyond its limits. In this conflict there are no simple syllogisms to supply the right answer. Parties and lawyers are confronted with definitions with reversible meanings through their self-reference and paired arguments for and against particular transactions. Underlying these is the tension between the black letter law and the spirit of the law to which all parties and their lawyers can also resort. In complex transactions with conflict between individuals, and over the law, unexpected events can lead to the transaction taking place, contingencies coinciding in the course of that transaction and events magnified by other incidents can occur in unexpected ways. Corporate transactions often invert relationships, processes and legal rules which add to the possibility of the conflict producing arguments with results manifesting bounded instability and the unexpected and unintended interaction of legal rules producing effects analogous to strange attractors.

 
97. The lacuna revealed in the law by these conflicts can be filled by rules which would represent the most efficient use of capital, although what that use is, and how it is to be measured can also be the subject of dispute between interested parties. Legislatures and judges may seek to make rules which use standards of fairness and reasonableness. They assist in resolving tension within law between justice as an abstract principle and justice in the individual case. They, as Llewellyn observes, enable judges and lawyers to find the law immanent in the corporate community. This move from rules to standards has the potential, in the movements within capitalism, to favour the powerful as Neumann recognised. This is significant if the other insight of the Realists is also remembered that the company is only the cluster of legal rules with no other separate existence. Within fiduciary law the rules applying to trustees restricted the right of directors to deal with company property in a self-interested way. The movement to a standard based on reasonableness and accepted standards of corporate management give directors greater freedom to deal with those assets in ways which are advantageous to themselves and disadvantageous to their shareholders.

 
98. Yet as Thompson, and the Critical Legal Scholars, find if there is resistance within the habitus to the claims made by the more powerful law is capable of generating a different version of doctrine to deny those claims as well as support them. The contradictions between statements of legal rules and the competing policies underlying them present the opportunity for various arguments to be generated to support these varying views. There can be a directors' statement of legal doctrine and a shareholders' statement of legal doctrine. Thompson discovered in eighteenth century England that the powerful were constrained by the law which the courts administered. When the courts did find against the powerful the effect was to further legitimise the law as it was seen to be justifying its own rhetoric of justice and fairness. Branson also concluded from his survey of corporate law in the courts of Delaware two centuries later that the law enables the courts to find for both the shareholders and directors in ways which both legitimises the their role in resolving company disputes and, in another paradox, provide a steady stream of decisions to better guide lawyers in advising directors on what the courts might do.

 
Appendix
 
The billiard player's guide to indeterminacy in company law
 
As capitalism (or 'the market') made over human nature and human need, so political economy and its revolutionary antagonist came to suppose that this economic man was for all time. We stand at the end of a century when this must now be called in doubt. We shall not ever return to pre-capitalist human nature, yet a reminder of its alternative needs, expectations and codes may renew our sense of our nature's range of possibilities. EP Thompson, Customs in Common (Harmondsworth: Penguin, 1993) 15.
 
99. Milton Friedman argues that we will make excellent predictions about billiards if we assume that an expert billiard player plays 'as if' she knew the:

 
complicated mathematical formulas that would give the optimum directions of travel, could estimate accurately by eye the angles, etc, describing the location of the balls, could make lightening calculations from the formulas, and could then make the balls travel in the directions indicated by the formulas. Our confidence in this hypothesis is not based on the belief that billiard players, even expert ones, can or do go through the process described; it derives rather from the belief that, unless in some way or other they were capable of reaching essentially the same result, they would not in fact be expert billiard players.[285]
 
100. He makes this argument to justify the reasonableness of his assumption that firms behave as if they were seeking to maximise their profits.

 
101. Using Friedman for a purpose he never intended this suggests that we make excellent predictions about indeterminacy in corporate law if we assume that the expert corporate lawyer advising, or judging, 'the man who cares nothing for an ethical rule which is believed and practised by his neighbors' but who nevertheless cares 'a good deal to avoid being made to pay money, and ... to keep out of jail ... ' knows the principles of law and where they weaken into indeterminacy.

 
An indeterminate taxonomy of legal indeterminacy
 
102. To know the shape of uncertainty and to trace the outlines of indeterminacy is to begin to understand both its effects and uses. This is significant in corporate law where legal standards often have little impact on corporate governance.[286]

 
103. A non-exhaustive, and overlapping, taxonomy[287] of metaphors for indeterminacy in law could look like:

 
1. The failure of language
2. The failure of reasoning
1. The absence of the syllogism
2. Dialectical reasoning
3. Paradox
4. Antinomy
5. The death of law
3. Unpredictable events and inexplicable chains of causation
1. An absolutely unpredictable event
2. Interference produced by two or more causal chains
3. Complexity, linear or chaos theory
 
The failure of language
 
104. Some lawyers look for certainty in language.[288] Legal rules are stated in words which, to use Hart's metaphor, create a penumbra between situations in which the rule will operate and situations where it will not.[289] There seems to be wide agreement this leads to a partial indeterminacy in legal rules[290] but conflict over whether or not that indeterminacy is radical.[291] Words require interpretation. It is ironic that there is no agreement over the core meaning of hermeneutics, which signifies interpretation.[292] Hart, the most influential of recent legal positivists, observed that the open texture of legal language meant that one interpretation was not compelled.[293]

 
105. Using analytical techniques based on concepts of interpretative communities, deconstruction and semiotics a number of writers have concluded that the language of the law is indeterminate although there are varying equivocations about the consequences of their conclusions.[294] It is claimed, and denied, that meaning depends on context.[295] There are disputes over the consequences of the meaning of words changing over time.[296] There are claims that the law is radically indeterminate and that any metaphor which suggests that there is a core meaning where a rule will apply is incorrect.[297] Schauer, in his criticism of radical indeterminacy, impliedly admits that the proponents of a more moderate indeterminacy have a point. He writes that 'lawyers might be seen as pathologists professionally preoccupied with disease rather than health.' He argues that the weight that language is expected to bear is added to by an expectation that courts will play a significant role in resolving a dispute which has become sufficiently acute to be litigated. The parties focus on the weaknesses in the language and thus focus attention on the failings of words rather than their invisible successes.[298] Endicott's recently examined various claims to radical indeterminacy on the basis of language. He concludes that most turn out to be claims to indeterminacy on the basis that other influences apart from language lead to the words being applied in a manner different to that which might be thought.[299]

 
106. The Privy Council recently acknowledged, unintentionally, the significance of language in company law in observing that the company consists of nothing more than 'the applicable rules.'[300] Language fails at the core of company law in describing the legal person of the company. It can mean the legal fiction which is the body corporate in a parallel concept to the state as a body politic. It can mean the enterprise itself as a pool or resources. It can mean the association between the natural persons involved in it.[301] Both Schauer's and Endicott's defence of determinacy in the law indicates that the language of the law cannot always bear the weight of conflict and that those conflicts may be driven by influences external to the law.

 
The failure of reasoning 


The absence of the syllogism
 
107. There is an assumption in legal reasoning that for a theory or doctrinal statement to be accepted it should reflect sufficient reasons to produce a certain outcome.[302] However there is only one form of reasoning which achieves this outcome and that is deduction from shared premises, which is not a feature of legal reasoning.[303] Law uses other forms of reasoning which must produce uncertain outcomes.[304] Again this marks the core of corporate law. There is no agreement on the premises in company law as there is no agreement on what the company is.[305] It can be, amongst other things: a 'goal orientated social system', a 'relation of bureaucratic domination', a 'governance structure',[306] an 'enterprise'[307] or a 'nexus of contracts'. This determination of the 'essence' determines how the law constructs the company for its present purposes.[308]

 
Dialectical reasoning
 
108. A feature of legal argument is that an argument may be met by a counter-argument which reverses the first argument. A person may argue that a rule should apply. The opponent may argue that a standard should apply. Dialectical logic in the Hegelian sense, and as borrowed by Marx, sees contradictions as fruitful collisions which may yield a higher truth in the synthesis of the two arguments.[309] These conflicting arguments, it is said, merely indicate that the law is dialectic but not that it is indeterminate.[310] Law may be dialectic if the conflict was limited as in the example but conflict over the application of a legal rule is rarely so precise and generally involves a cluster of possible conflicting rules. Often the conflict is between principles generated from different models of the company. Mannolini argues, for example, one reason why the case law on directors' duties is unsatisfactory. He contends that conflict within the company has to be seen as 'a natural and predictable result of disparate economic interests.' The contractual model of the company he uses generates market-based arguments. However the courts frequently apply opposing trust-based concepts. He perceives that this produces what he calls 'procedural dysfunction' in adjudicating 'economically-driven' disputes.[311]

 
Paradox
 
109. Paradox is 'just any conclusion that at first sounds absurd but that has an argument to sustain it'[312] Paradox is a familiar feature of law as it occurs in any definition containing a self-reference. The best known paradox are the self-amendment cases where sovereign parliaments have taken action to limit their sovereignty.[313] Paradox is present in the circular meaning of 'company' in the phrase 'the best interests of the company as a whole.'[314]

 
110. Teubner argues that self-reference is a basic paradox at the heart of law. He sees it as revitalising our understanding of indeterminacy in law. The law can only be determinate if the law says it is, that is if it is based in some super-norm. But this super-norm is the subject of the definition of law itself so the paradox of self-reference enters.[315] The law seeks to suppress this but in doing so it conceals that contradictory statements of doctrine can be both right and wrong. It does this by denying that there is a form of reasoning which invents reasons why one statement in a particular context is right and the other is wrong. Teubner sees the work of law as accepting this paradox. It reflects the reality of a world which is itself paradoxical. The result is that it would be even more paradoxical to seek to locate, construct or explain these paradoxes.[316] He uses the increasing employment of balancing tests in legal doctrine, general clauses in contracts and sociological and economic legal theories to demonstrate that the law recognises its paradoxical nature.[317] He seeks to 'deparadox' the circular reference to the company by showing that the legal person, the enterprise and the association of shareholders are also clearly identified spheres of action which are not identical and which only overlap in the company. He names this centre of collective action the 'collectivity' which can be seen working through the corporate organs. The corporate organs and not the association of members determine the extent of the collectivity.[318] This leads to an assertion that:

 
none of the resource providers, neither the factor of capital, nor that of labor, nor that of management, nor indeed the factor of state control, has any natural claim to 'sovereignty over the association.'[319]
 
Antinomy
 
111. Antinomy is a form of paradox which produces a self-contradiction by accepted ways of reasoning, that is, a contradiction between two assertions for each of which there seem to be adequate grounds.[320] One of the features of the common law are the number of rules which have matched pairs of equal standing which point to opposite results.[321] Karl Llewellyn listed over 70 conflicting paired rules for interpreting statutes[322] and a similar number for interpreting precedents.[323]

 
112. It has also been claimed that law, with its adversarial processes, merely shows the features of competition and that antinomian reasoning is a feature of this.[324] Again any conflict is unlikely to be just about one rule. But the prevalence of the paired rules and arguments shows that it is systematic in law and goes beyond the opportunism of adversarial argument in individual cases. It is deeply entrenched in the legal system and any legal rules for companies need to be made with it in mind.

 
The death of law
 
113. Antinomy has another nuance which derives from John Bunyan and the Muggletonians who developed the antinomian oppositions between Legality and the Gospel of Forgiveness, the Moral Law and the Gospel of Love. A 'very judicious man' Legality, tempted Christian to go to his house where he would have perished except for Evangelist who rescued him. Evangelist explained that 'Legality' was a cheat and that 'by the works of the Law no man living can be rid of his burden.'[325]

 
114. Goodrich takes up this point in dealing with a particular antinomy which is ever present in law:

 
The etymological root of determinacy is terminus, connoting both boundary and conclusion or end. The question becomes what is it that ends in the law? What is it that ends with the law? With this law? A question of the intellectual history of jurisprudence and of doctrine that takes the analyst deep into the unconscious structures of law.
 
115. He argues that the pre-modern view of law recognised that the law had an origin and purpose outside of itself in justice, equity and reason from which it could not be separated as the maxims of Roman law showed.[326] This was imported in a limited way into, but is now suppressed by, the common law with the adoption of ratio from Roman law with all its ambiguities of 'cause', 'purpose', 'rationale', 'process', 'faculty', 'sense' and 'intention.'[327] This separation of the law from its origin and purpose is described by Goodrich, from the meaning of 'terminus' as a 'conclusion', as 'the death of law'. Goodrich argues that this death represents a more profound indeterminacy[328] which occurred in the actions of positivists to rid the law of indeterminacy. In doing so they cut law off from these causes and purposes by seeking to ground it in 'the brute fact of a system of norms' which cut it off from justice and judgment.[329] Lawyers become technicians and law becomes no more than what lawyers do and its origins and purposes are 'crippled' by 'a series of pragmatic, actuarial and disciplinary administrative practices.' These represent 'the hyper-inflation of legal practices and regulation.'[330]

 
116. Goodrich's analyses present the administrators of company law with a considerable problem. Many parts of company law have little to do with morality.[331] This is exacerbated in the revolutionary change in financial capitalism which Mandel has described. Truth, honesty and integrity are great and enduring values[332] but they only have meaning in a context. If contexts are undergoing rapid transformations they will produce varying answers and disagreement about the interpretation of standards. Endicott dismisses indeterminacy where it is the result of deconstructive techniques as merely 'exposing the law to debate but not to argument.'[333] But this is too cursory and quick a rejection. It is arguable that western law and the common law, with its adversarial techniques, in particular, have used deconstructive techniques for centuries if not millenia.[334] Goodrich has re-exposed an ever present tension in the law which is embodied in the concept of justice[335] and which Aristotle observed in his Politics.[336] Justice also requires that like be treated alike. This tension is made worse by the passing of time and changes in social, economic and political structures. Awareness of this can be seen underlying arguments whether rules are better than standards which appeared in Australian corporate law as the 'fuzzy law' debate of the early 1990s particularly in respect of related party transactions.[337]

 
Unpredictable events and inexplicable chains of causation
 
117. Comparison of legal concepts with phenomenon in other forms of knowledge can use likenesses in two ways: as a metaphor for the legal concept which is substituted for it in the same context, and, as metonymy in which the other phenomenon is used to enable us to see the legal concept in a different context.[338] Likening law to science has been influential in legal thought and the borrowed concept of 'the doctrine of certainty' appears to have set the common lawyers in the seventeenth century on their quest for certainty in the law.[339] Gierke's view of the company was based on a nineteenth century understanding of an organism although he was conscious of its limitations.[340] Holmes, Pound and Dewey and many of the Realists sought to use social science to find the predictability which was missing in legal doctrine.[341] Some legal writers still consciously adopt a scientific methodology in studying law as Clark does with his evolutionary model of the four stages of capitalism.[342] Such comparisons are, however, problematic. Evolutionary theory in science is a cultural construct but it is applied to physical organisms. To apply it to metaphysical constructs such as law or the company which have no physical existence conceals assumptions and lacks empirical evidence.[343] Finally lawyers are generally bad at science.[344]

 
An absolutely unpredictable event
 
118. Indeterminacy in physics provides metaphors for modelling law. This first form occurs in quantum physics. There is no chain of events. The quantum jump of a photon 'is supposed to be an absolutely unpredictable event which is controlled neither by causal laws nor by the coincidence of causal laws but by probabilistic laws alone.'[345] The photons show a statistical regularity which permits statistical predictions to be made about their aggregate behaviour but the individual photon is not 'casually determined.' [346]

 
119. No event company law deals with will be causeless in this sense but it may be unpredictable. It provides a metaphor for the new case which throws up an issue which has not previously been determined.[347] In such a case there may be some consistency, compatibility, congruence or even intuition about the 'aggregate behaviour' of the law which gives some sense to the overall trend of the law even if it has no predictive power in particular cases.

 
Interference produced by two or more causal chains
 
120. A second form of indeterminacy in physics occurs when two or more independent 'causal chains ... happen, accidentally, to interfere at the same time and place and combine in bringing about the chance event.' [348] Each of the chains of events may be subject to causal explanation but the coincidental timing of the two events may not be. This analysis assumes that such systems are the sum of their parts, as one or more linear equation for each of which there is one outcome. The result requires the simple addition of each of the outcomes.[349]