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Volume II
Issue 1(3)
Summer 2011
ISSN 2068-696X
Summer 2011 Volume II Issue 1(3) Summer 2011
Volume II, Issue 1(3)
Editor in Chief
Madalina Constantinescu
Spiru Haret University, Romania
Co-Editors
Contents:
Russell Pittman
International Technical Assistance
Economic Analysis Group Antitrust Macroeconomic Analysis of Rule of Law, Legal Development and
Division, USA Corruption among developing Economic Growth:
Countries Perspectives for Pakistan
Eric Langlais
EconomiX CNRS and Universit 1 James P. Gander
4 Hasan Lubna
Paris Ouest-Nanterre, France Economics Department, University of Pakistan Institute of Development
Utah, Salt Lake City, USA 4 Economics, Islamabad, Pakistan 48
Editorial Advisory Board
Huseyin Arasli Accomplishing Human Rights
Eastern Mediterranean University, Rethinking of Rights and Procedural
Justice in the Context of Assets
North Cyprus Complexity in Transfer of Share: a
Confiscation: an Evaluation of the
Review under Company Law in
United Kingdom Drug Laws
Jean-Paul Gaertner Bangladesh
Ecole de Management de 2 Enforcement 5
Strasbourg, France Zahid Rafique
Kato Gogo Kingston
Department of Law, Prime University,
Shankar Gargh School of Law, University of East
Bangladesh 60
London, United Kingdom 9
Editor in Chief of Advanced in
Management, India Ex-Post Assessment of Merger
Effects: the Case of Pfizer and
Arvi Kuura Pharmacia (2003)
Prnu College, University of Tartu, The Relationship between common
Estonia Nina Leheyda Management and Ecotourism
ZEW Centre for European Economic Regulation: Tragedy or Triumph of the
Piotr Misztal Research, Germany Commons?
Technical University of Radom,
Economic Department, Poland 3 Patrick Beschorner 6 A Law and Economics Answer
Journal of ZEW Centre for European Economic

Danilo Sam
Peter Sturm Advanced Research, Germany
LUISS Guido Carli University of Rome,
Universit deResearch
Grenoble 1inJoseph
Law Italy 78
Fourier, France Kai Hschelrath
and Economics is ZEW Centre for European Economic
designed to provide
Rajesh K. Pillania Research and WHU Otto Beisheim
Managementan outlet
Developement for School of Management, Germany 18
theoretical
Institute, India and
empirical research
Rachel Price-Kreitz
on the interface
Ecole de Management de
between economics
Strasbourg, France
and law. The
Andy StefanescuJournal explores
the
University of Craiova, various
Romania
understandings that
Laura Ungureanueconomic
Hans-Jrgen Weibach, University
of Applied Sciences - Frankfurt am
Main, Germany
ASERS Publishing 2
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ISSN 2068-696X
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Journal of Advanced Research in Law andWinter_Issue
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3
Volume II Issue 1(3) Summer 2011
MACROECONOMIC ANALYSIS OF CORRUPTION AMONG

DEVELOPING COUNTRIES
James P. GANDER
University of Utah, Economics Department, Salt Lake City, USA
gander@economics.utah.edu
Abstract
Based on empirical data, a two-equation game-type corruption reaction function model was developed. A
data to model approach was used rather than the usual a priori approach. The general hypothesis tested was
the monkey see, monkey do principle. The latest data on corruption among developing countries was obtained
from the Enterprise Surveys done by the World Bank Group in 2010. The key variables were the percent of
domestic firms expecting to make informal payment to public officials to get things done, and the percent of
foreign firms doing like wise. The time span is from 2002-2010. A variety of econometric methods were used.
The statistical results were quite good and supported the hypothesis. Both reaction equations were positively
sloped. Time had a reducing effect on the frequency of domestic corruption, yet it had an increasing effect on
foreign corruption. Variations in the frequency of corruption across regions of countries were generally not
significant.
Keywords: firm, corruption, Game Model, developing countries
JEL Classification: C51, D81, E60, K49, M29
1. Introduction
In the true spirit of positive economics, I examine the most recent data on corruption in developing
countries, using a few and very simple assumptions (not always made explicit). My intention is to use what data
are available and to see essentially what the data is telling us about corruption. I do not ignore altogether the
need and usefulness of an a priori modeling approach as a basis for forming the hypotheses of the positive
(posterior) empirical approach. But, the modeling exercise is strictly idealistic in the sense that it serves more to
orient the empirical work rather than to capture exactly any real world corruption behavior.
The literature on the economics of corruption is extensive. I only give a brief survey here, which
admittedly does not do justice to it. Nevertheless, my main concerns are with what data is available and what
does it tell us about corruption. I very much let the facts (so called) speak for themselves or more precisely let
the selected facts speak for themselves, where the selection is not based on a priori reasoning but is based on
posterior reasoning (from the data to the model, rather than the reverse). The literature very much goes from the
model to the data.
To summarize briefly, the classical economic approach to the microeconomics of corruption (or bribery)
as simplified by Menezes (2000, and the literature cited therein) and before him by Becker (1968), Becker and
Stigler (1968), and Rose-Ackerman (1975, 1978), takes a buyer (government official)-seller (firm) approach
involving specific types of information (like prices, quantities, quality, bribes, probability, profit gains, and
penalties if caught). Closer to the a priori approach is the study by Ades and Di Tella (1999) which first focuses
on the individual firm and the role of its market structure (competition) in affecting the amount of corruption
engaged in and then turns to the macro data. Another interesting study from the supply side of corruption is
Rose-Ackerman (1978 and 1999)s studies, which examine competition among government officials. A very
recent macro study by Mon and Weill (2010) examines the effect of corruption on country productivity based on
the quality of government institutions. Although not a regression study as is the present paper, Hellman, et al.
(2000) questioned some 3,000 firms in 20 developing countries to obtain responses for several descriptive-type
profiles of corruption across countries. Their corruption-type questions are similar to those used for the data of
the present paper.
In what follows, a simple game theory-type model based on positive posterior reasoning is developed in
the next section. Then, the econometric models are presented and the data are explained in the following
section. The empirical (statistical) results are then presented in the next section. The final section contains a
summary and conclusions.
4
SUR(1) SUR(2) OLS RE(1) RE(2) XTPCSE

FOR on DOM 1.02
(23.86)
YR 1.02 -3.46
(1.98) (-4.58)
DVA -5.51 2.62
(-1.98) (0.61)*
DVL -2.34 -14.89
(0.63)* (-2.60)
DVO -0.25 6.00
(-0.08)* (1.28)*
CON -2052 6981
(-1.98) (4.60)
Rsq .63 .17
Notes: All results have robust standard errors. Log forms of the models produced similar results and are not
reported. GLS for the SURs runs produced singular error matrices. A 2-step approach was used. Sample size is 155 for all
runs. RE(1) has 4 regional panels. RE(2) has 102 country panels. GLS regression was used. FE results were less satisfying
and not reported. All coefficients for main variables are significant at p <.05 and in most cases p =.000. The * indicates a p
> .05. The (.) has the t values or the z values. All Rsqs are significant. The XTPSCE run is cross section/time series
analysis with panel corrected standard errors for heteroscedasticity using linear regression. Blank dummy variables were
purposely dropped due to insignificance.
In general, the results in Table 1 are virtually the same and significant as far as goodness of fit goes.
There are positive and significant signs for the DOM and FOR coefficients regardless of the model run (see the
notes in Table 1 for model details). Similarly, the sign for the year coefficients is always negative and significant
regardless of the run (with one positive exception). The dummy variables coefficients were usually not significant
except for DVA (Africa region) in a few runs. All standard errors were adjusted for heteroscedasticity. For the first
SUR(1) model, the Breusch-Pagan independence test was rejected. For the second SUR(2) model (where DOM
is dropped from the FOR equation), the test was accepted as expected.
Referring to the first full SUR(1) model, the domestic reaction equation is positively sloped (1/b1 = 1.09)
and steeper than the foreign reaction equation (B1 = 1.02), as expected for stability (although a Chi-sq test of the
equality of the coefficients was not rejected, p = .176). The domestic equation shifts inward overtime whereas the
foreign equation shifts up over time (see, Figure 1). So, over time, the percent of domestic firms practicing
corruption is falling for a given foreign value, while it is rising for foreign firms, for a given domestic value. Both
equations follow the monkey see, monkey do principle, but over time domestic firms relative to foreign firms are
becoming less corrupt.
This result is born out by the single-equation runs (OLS, RE(1), RE(2), and XTPCSE) where DOM
increases as FOR increases but decreases over time. Since the negative time coefficient is considerably larger
(and significant with a Chi-sq = 21.05 and p = .000) than the positive monkey see, monkey do coefficient for the
SUR(1) run, the dynamic picture is one of a contracting domestic corruption regime. In other words, there are
forces not in the models operating over time which have a negative effect on domestic corruption. The data set
used in this paper does not identify these forces, but we can surmise that they exist (for example, laws and
regulations against bribery, a better court system, and improvement in the way government administration
operates to facilitate domestic businesslicenses, permits, contracts, delays, and the like).
5. Summary and Conclusions

Based on empirical data, a two-equation game-type corruption reaction function model was developed. A
data to model approach was used rather than the usual a priori approach. The general hypothesis tested was
7
the monkey see, monkey do principle. The latest data on corruption among developing countries was obtained
from the Enterprise Surveys done by the World Bank Group in 2010. The key variables were the percent of
domestic firms expecting to make informal payment to public officials to get things done, and the percent of
foreign firms doing like wise. The time span is from 2002-2010. A variety of econometric methods were used.
In general, the statistical results were quite good and supported the hypothesis. Both reaction equations
were positively sloped. Time had a reducing effect on the frequency of domestic corruption, yet it had an
increasing effect on foreign corruption. Variations in the frequency of corruption across regions of countries were
generally not significant.
The interesting policy implication of the results is that over time developing countries are bring under
control the practice of corruption to get things done, at least among domestic firms. On the other hand, foreign
firms have been increasing their frequency of corruption over time. It is possible that foreign firms surmise that
they are at a competitive disadvantage with respect to domestic firms when dealing with public officials
(understandably so, considering the problems of doing business in a foreign country), so bribery is an effective
and profitable (presumably) way to get things done.
As domestic markets and relevant institutions develop and become more transparent, many of the
business services formerly realized by practicing corruption will now be supplied at a price by other firms (for
example, brokers and lobbyists). The cost to get things done will become more institutionalized and transparent,
so, for example, the firms cost of obtaining a speedy utility connection (electric, water, and telephone) will be
internalized into the price of the connection and subject to competitive market forces. Such market developments
over time should also benefit foreign owned firms and reduce the practice of corruption among them. Only time
will tell.
References
[1] Ades, A., and Di Tella, R. 1995. Rents, Competition, and Corruption, American Economic Review,
September, 89(4): 982-993.
[2] Becker, G. S. 1968. Crime and Punishment: An Economic Approach, Journal of Political Economy,
March/April, 76(2): 169-217.
[3] Becker, G., and Stigler, G. 1974. Law Enforcement, Malfeasance and the Compensation of Enforcers,
Journal of Legal Studies, January, 3(1): 1-19.
[4] Hellman, J. S., Jones, G., Kaufmann D., and Schankerman, M. 2000. Measuring Governance, Corruption,
and State Capture, Policy Research Working Paper, 2312, The World Bank, World Bank Institute,
Government, Regulation and Finance and European Bank for Reconstruction and Development, Chief
Economists Office, April, i-v, and 1-53.
[5] Mon, P.-G., and Weill, L. 2010. Is Corruption an Efficient Grease?. World Development. March, 38(3): 244-
259.
[6] Menezes, F. 2000. The Microeconomics of Corruption: The Classical Approach, Economics Working Papers,
No. 405, Graduate School of Economics, Getulio Vargas Foundation (Brazil), November: 1-13.
[7] Rose-Ackerman, S. 1975. The Economics of Corruption, Journal of Public Economics, February, 4(2): 187-
203.
[8] Rose-Ackerman, S. 1978. Corruption: A Study of Political Economy. New York, Academic Press.
[9] Rose-Ackerman, S. 1999. Corruption and Government: Causes, Consequences, and Reform. Cambridge,
UK, Cambridge University Press.
[10] World Bank. Enterprise Surveys, The World Bank Group. Washington DC, USA, 2010. Also,
www.enterprisesurveys.org/Portal/unprotected/RegisterExternal.aspx?LibId- 14 (accessed December 27,
2010).
8
ACCOMPLISHING HUMAN RIGHTS JUSTICE IN THE CONTEXT OF

ASSETS CONFISCATION: AN EVALUATION OF THE UNITED
KINGDOM DRUG LAWS ENFORCEMENT
Kato Gogo KINGSTON
University of East London, School of Law, United Kingdom
gkingstonlaw@yahoo.com
Abstract
It is estimated that crude oil, tourism and illicit drug trade are among the top five most financially inducing
business in the world. Drug cartels conducts sophisticated and well organised activities including money
laundering and monitoring of large networks of their couriers. In past the decade, the United Kingdom has
incurred large expenditure on the treatment of drug related illnesses and, on the enforcement of drug control
laws. Several drug laws are enacted to dealing with the waves of illicit drugs in the country. There is controversy
over the ways by which the properties of the drug traffickers and suspected drug dealer, are seized by the State;
in order to seize anyones private property prior to commencement of legal proceedings to effect permanent
forfeiture, the law enforcement agencies are only required to show probable cause that the property being
seized is acquired with the profit of drug crime alternatively, that the property facilitates drug criminal activities.
Using data from academic materials and United Kingdom case laws, the paper argues that the United Kingdom
drug trafficking laws particularly the enforcement of civil asset recovery under the Proceeds of Crime Act 2002
and, the Criminal confiscation under the Drug trafficking Act 1994 violates the International Human Rights Laws.
Keywords: drugs, Human Rights, UK laws, criminal property
JEL Classification: K10, K14, K29
1. Introduction
Drug trafficking is currently one of the worlds fastest growing industry with multi-billion dollars value and,
touching every country. According to the International Monetary Fund (IMF) estimation, between 2 and 5 percent
of the worlds Gross Domestic Product are from money laundering (Annan 1998).
In recent years, there has been a growing concern over the manner in which properties of drug
traffickers are confiscated or forfeited pursuant to the provisions of the Customs and Excise Management Act
1979, the Police and Criminal Evidence Act 1984 (Codes of Practice; Modified Code C and Code D) Order 2002,
and Drug Trafficking Act 1994. The only requirement for the law enforcement agencies to be able to confiscate a
persons property and initiate court actions for permanent forfeiture is, if they can show probable cause which is
the least standard of civil proof, that the property was used to facilitate drug related offences or that the property
is a benefit of drug related offences. In civil proceedings, probable cause can be established by mere hearsay
evidence.
The acceptance of probable cause as yardstick to measuring guilt violates the persons right to fair
hearing enshrined in various human rights laws, treaties and conventions such as Article 6 of the European
Convention on Human Rights. It defeats the objects of the requirements for the presumption of innocence which
is the cornerstone of legal proceedings in both criminal and civil charges. In the United Kingdom, in some cases,
the accused persons are denied the right to question their accusers as to circumvent the burden of proof that
their properties are not benefits of crime and are not aid to the crime of drug trafficking.
In the circumstances where individual properties can be confiscated based on flimsy evidence such as
the words of informants, who themselves are in some instances, accused criminals, ex-convicts and profit-
seekers that benefits from their testimonies, by infringing the due process of law and assisting in the violation of
the human rights of the of the accused.
In the making of drug policy and in the enactment of drug trafficking legislation worldwide, the policy/law
makers are typically faced with two issues namely - supply reduction and demand reduction. The former involves
making laws and policies tailored towards the reduction of narcotic supply and, the later is about the treatment of
the treatment of drug related illnesses. The main objective of this paper is to critically evaluate the supply
reduction efforts of the United Kingdom government.
9
The compelling of suspects to give evidence is a dent on the long standing legal principle of the rights to
silence for example, in Brown v HM Advocate [1966] SLT 105 it was held that the express right contained in a
human rights instrument is largely non-negotiable and in Teixera de Castro v Portugal 28 EHRR 101, paragraph
36; the European Court of Human Rights held that no policy no matter how commendable is fit to pass the test of
legal scrutiny if its ultimate effect is to dilute fair trial rights and, in Matthews v UK [1999] ECHR 24833/94 the
European Court of human Rights court ruled that, international treaties that are passed in the aftermath of the
ECHR cannot be interpreted so as to limit convention rights (Kingston 2006). The convention rights it seems can
only be infringed where the test for proportionality is passed. In de Freitas v Ministry of Agriculture [1998] 3 WLR
675, 684 the court outlined threefold test for proportionality inter alia:
(i) Whether the legislative objective is sufficiently important to justify limiting a fundamental right;
(ii) Whether the measures designed to meet the legislative objectives are rationally connected to it; and
(iii) Whether the means used to impair the right or freedom are no more than is necessary to accomplish
the objective (Kingston, 2006).
In view of the tests in de Freitas, I argue that the UK asset confiscation system is irrational and devoid of
proportional reasoning (Kingston, 2006) for example in R v Michael Tivnan [1998] EWCA Crim 1370 the Court of
Appeal said that, the Drug Trafficking Act 1994 is draconian because (i) there is no time limit for the prosecution
to apply for variation of confiscation orders and, (ii) drug trafficking forfeiture orders are not restricted by any
requirement that the defendant's realisable assets must be proved to be directly derived from drug dealing or
over the period of drug dealing but only by the amount of the total value of the benefits the defendant has
derived from drug dealing and the realisable value of his assets at the time of the order or any further order
(Kingston 2006).
The UK drug trafficking laws including the new assets recovery regime enable the State to manipulate the
trial processes in contravention of the laid down standards of various international human rights instruments, for
example, the new principle of reasonable grounds of belief; and the mere suspicion which is inferred as
probable cause gives the law enforcement agencies enough powers to seize an individuals personal assets with
the support of the judiciary; as in R v Montila and others [2003] EWCA Crim 3082 where the court ruled that, on
the true construction of s 49(2) of the 1994 Act it was not necessary, in order to prove an offence under the
subsection, that the property concealed or disguised, converted, transferred or removed from the jurisdiction was
the proceeds of drug trafficking or crime. The target of the subsection was as much the state of mind of the
defendant as his conduct (Kingston, 2006).
The United Kingdom legal system is fast becoming totalitarian as the will of the State is superseding the
well establish human rights. For instance, Liberty (2001) submitted that the current system of criminal
confiscation system not only destroys the essence of the presumption of innocence and also that, with regards
to civil confiscation, it is improper for the laws to authorise the state a power to opt for extensive confiscation of
defendants assets in circumstances where it does not have sufficient evidence to prosecute them in the criminal
courts and that assuming that there is sufficient evidence to prosecute them, it would be wrong to allow the
state to opt for an easier path of pursuing someone in the civil courts.
The very contentious assets recovery regime is traceable to the ancient system of feudal forfeiture in
rem- a legal procedure which focused on the criminal nature of property rather than the criminal conduct of the
owner of the property for example in a very ancient case of United States v. La Vengeance 3 Dallas 297 (1796)
the United States Supreme Court ruled that the seizure of the French ship carrying illegal arms was case of
admiralty law which the cause was civil and that the matter was rested in rem and excluding the person of the
defendant.
4. Conclusion
The implications of the drift towards retribution and deterrence in the sentencing policy for drug traffickers
are all too apparent. The increased numbers imprisoned will contribute to an already grossly overcrowded and
deteriorating prison situation and drug related crime will increase (Henham 1994).
This study has assessed aspects of drug policy enforcement within the context of United Kingdom legal
framework, International Human Rights and international drug conventions. Although the study demonstrates
that the United Kingdom is heavy handed in the control of drug trafficking, nevertheless the UK has been able to
formulate and implement domestic drug control policy in a way that furthers harm minimization in relation to the
availability of illicit drugs. The United Kingdom has also retained rooms to manoeuvre within the UN conventions
(Dorn 2004).
15
This study has drawn attention to the intersection between domestic drug policies and international drug
policies, particularly in relation to implementation policies. Whilst there is no apparent mismatch between the
United Kingdom domestic drug policy and international policy goals, the latter face strong challenges. On one
hand, there is at least some potential for reasonable progress to be made at home. On the other hand there is
the possibility of being completely overwhelmed by abject failures internationally. At the heart of this conundrum
is the still evolving relationship between supply reduction and drug policies (Dorn 2004).
Supply reduction will tend to be short-lived unless effective action is also taken to address the demand-
side (for example, through drug treatment or effective prevention programmes). This is a matter of basic
economic laws. If levels of demand are constant, a reduction in the supply of a drug will drive up the street price
and make it more profitable for drug traffickers. If people with serious dependency problems are not being
treated, they are unlikely to give up using illicit drugs. A similar point applies to the United Kingdom international
initiatives towards reducing the production of drugs in Afghanistan, so long as demand for opiates subsist,
successful initiatives to cut opium cultivation in one area will always lead to an increase in production elsewhere.
References
[1] Annan, K. 1998. Excerpt of statement at the UN Secretary General at the opening of the Twentieth Session
of the General Assembly, Devoted towards countering drug Problem, 8-10 June
[2] Burgess, R. 2003. Disrupting crack markets: A practice Guide; Drug Strategy Directorate (DSD), Home
Office, London.
[3] Dorn, N. (ed). 1999. Regulating European Drug Problems: Administrative Measures and Civil Law in the
Control of Drug Trafficking, Nuisance and Use, Netherlands: Kluwer Law International.
[4] Dorn, N. 2004. UK Policing Of Drug Traffickers And Users: Policy Implementation In The Contexts Of
National Law, European Traditions, International Drug Coventions, And Security After 2001; Journal of Drug
Issues, Summer.
[5] Guardian Newspaper. 2005. Revealed: How Drugs War Failed, July 5.
[6] Green, P. (ed). 1996. Drug Couriers A New Perspective, The Howard League Handbooks. Quartet Books.
[7] Green, P., Mills, C., and Read, T. 1994. The Characteristics and sentencing of illegal drug importers; Britt. J.
Criminal. 34 (4): 479-486.
[8] Hammond, N.1994. The Value of Pre-sentence Reports on Foreign Nationals, Middlesex Probation Service:
Cropwood Fellowship, University of Cambridge.
[9] Hammond, N. 1995. PSRs on Foreign Drugs Traffickers: Present and Future, Probation Journal: 17-23,
March.
[10] Hammond, N. 1996. Turning the Clock Back: The implication for Pre-Sentence Reports of the criminal
Justice and Public Order Act 1994, in Green P (ed). Drug Couriers: A New Perspective, The Howard League
Handbooks. Quartet Books.
[11] Henham, R. 1994. Criminal Justice and Sentencing Policy for Drug Offenders; 22, International Journal of
the Sociology of Law 223: 225.
[12] Home Office. 1989. Drug Trafficking and Serious Crime, Volume 1, House of Commons, Home Affairs
Committee, Seventh Report, 8 November.
[13] Home Office. 2004. The Drug Treatment and Testing Order: Early lessons, A Report by the Comptroller and
Auditor General, HC 366 Session 2003-2004: 26 March.
[14] Kingston, K. 2006. (Unpub) An Analytical Assessment of the United Kingdom Drug Trafficking Laws, A
dissertation submitted in partial fulfilment of the requirements of the Master of Laws (LLM) degree at the
School of Law, University of East London, England, September.
[15] Lea, J. 2004. Hitting Criminals Where It Hurts: Organised crime and the erosion of due process, Cambrian
Law Review (30): 81-96.
[16] Liberty. 2001. (National Council for Civil Liberties), Proceeds of Crime: Consultation on Draft Legislation;
May.
16
[17] Roe, S. 2005. Drug Misuse Declared: Findings from the 2004/05 British Crime Survey England and Wales,
Home Office Statistical Bulletin, October.
[18] Runciman, Viscountess .1999. Drugs and The Law, Report of the Independent Inquiry Into The Misuse of
Drugs Act 1971, the Police Foundation document, Home Office, London.
[19] Tarzi A, and Hedges J. 1990. A study of Foreign Nationals: A prison within a prison, Inner London Probation
Service.
[20] Tiggey, M., Harocopos, A., Turnbull, P. J., and Hough, M. 2000. Serving Up: The impacts of low-level Police
Enforcement on Drugs Market, Police Research Series Paper 133, November. Online at
http://rds.homeoffice.gov.uk/rds/prgpdfs/prs133.pdf [accessed 1/7/06 and 9/11/2010].
[21] Willoughby, D. 1988. Cocaine, Opium, Marijuana: Global Problems, Global Response, New York: USIS, (1):
1-17.
Cases
Allenet de Ribemont v France A 308 (1995) 20 EHRR 557.
Brown v HM Advocate [1966] SLT 105.
de Freitas v Ministry of Agriculture [1998] 3 WLR 675.
Matthews v UK [1999] ECHR 24833/94.
R v Aramah [1982] 4 Cr. App R (S) 407.
R v Belinski (1987) 9 Cr App R (S) 360.
R v Dickens (1990) 12 Cr App R (S) 191.
R v Winters [2008] WLR (D) 387.
R v Oakes [1986] 1 SCR 103.
R v Briggs-Price [2009] UKHL 19.
R v Aroyewuni [1994] Crim. LR 695.
R v Gallagher (1990) 12 Cr App R (S) 224.
R v Jones (1981) 3 Cr App R (S) 51.
R v Lambert and others [2001] 2 WLR 211.
R v Michael Tivnan [1998] EWCA Crim 1370.
R v Montila and others [2003] EWCA Crim 3082.
Teixera de Castro v Portugal 28 EHRR 101.
United States v. La Vengeance 3 Dallas 297 (1796).
Van Mechelen v Netherlands 25 EHRR 647.
Woolmington v DPP [1935] AC 462, 48.
17
EX-POST ASSESSMENT OF MERGER EFFECTS:

THE CASE OF PFIZER AND PHARMACIA (2003)
Nina LEHEYDA
ZEW Centre for European Economic Research, Germany
leheyda@zew.de
Patrick BESCHORNER
ZEW Centre for European Economic Research, Germany
Kai HSCHELRATH
ZEW Centre for European Economic Research and WHU Otto Beisheim School of Management, Germany
hueschelrath@zew.de
Abstract
The paper studies the effects of the Pfizer and Pharmacia (2003) merger on competition in the Swiss
pharmaceutical market and compares the assessment of the Swiss Competition Commission (COMCO) with the
post-merger market developments. We find that the merger has had a miniscule impact on the Swiss
pharmaceutical market. This has primarily to do with the fact that the product portfolios of both companies have
shown no or only slight overlaps. In both cases of potential anticompetitive effects, the companies successfully
proposed to divest some of their assets in order to prevent a further strengthening of their dominant position. The
remedies included products in the development phase which were not available on the market at the time of the
decision.
Keywords: mergers, ex-post evaluation, pharmaceutical markets
JEL Classification: K21, L42, L62
1. Introduction
An assessment of the competitive effects of a merger is an integral part of an overall ex-post evaluation of
competition policy. Reflecting upon this key role, the number of internal and external studies conducted by
competition authorities and outside experts, respectively that focus on an evaluation of merger enforcement
has increased significantly during the last couple of years.1 Generally, an ex-post assessment of merger
decisions aims to evaluate whether the predictions of the competition authorities at the time of the merger
decisions coincide with the actual effects of the mergers. In particular, it allows one to investigate the question
whether the economic arguments applied by the antitrust authorities to evaluate the competitive effects of
mergers have performed well in predicting the price and market share effects of the mergers. Furthermore, an
ex-post assessment may shed light on the question whether the merger decision was the best possible in the
sense that no alternative decision of the competition authority would have led to a better performance in terms of
total or consumer welfare, respectively.
The pharmaceutical industry has recently experienced numerous mergers and acquisitions. Control of
pharmaceutical mergers involves, on the one hand, the standard analysis focusing on actual and potential price
competition as well as market share effects of the merger. On the other hand, however, price competition in
pharmaceutical markets may be rather restricted as drugs prices in most countries are subject to regulation.
Competition may possibly take place along other dimensions such as innovation or advertising which are often
much more difficult to assess in practice. Furthermore, market shares may also bear little information in such

The authors would like to thank Joseph Clougherty, Sven Michal, Samuel Rutz, Frank Stssi, Spyros Arvanitis,
Martin Wrter, David Beil for helpful comments on drafts of the study and Dace Lauberte for excellent research assistance.
This paper is based on a larger project on the evaluation of the economic effects of the Swiss Cartel Act commissioned by
the Swiss State Secretariat for Economic Affairs SECO (see Hschelrath et al., 2008). The complete project report Studien
zu den Auswirkungen des Kartellgesetzes can be downloaded from the ZEW website (www.zew.de) or the website of the
Swiss Competition Commission (www.weko.admin.ch). Please note that the report is available in German language only.
1 See especially Pautler (2003) and LEAR (2006) for academic literature overviews and, for example, Competition
Commission (2003), PricewaterhouseCoopers (2005), CRA International (2007), Competition Commission (2008a) and
Deloitte (2009) for studies with a focus on practice. A general overview of ex-post evaluations of merger enforcement and
merger remedies performed by competition authorities can be found in OECD (2005).
18
whether such a partner has been found or what major obstacles have been encountered during the search
process. Furthermore, there has been no publicly available information on the further development of this
product since 2004. However, generally, the market for products for the treatment of ED has two strong new
competitors Eli Lilly and Bayer Schering and as a result, Pfizer has considerably lost market share in the last
couple of years. In this respect, one might raise doubts whether the divestiture of Apomorphine was really
necessary to solve the competition concerns.
Since both remedies were proposed by the merging parties, an investigation as to whether the same
effect could have been achieved with weaker interventions is not necessary. Only Pfizers efforts to introduce a
competitive product for the sold product Darifenacin to the market could be seen critically. A temporary non-
competition clause which would have given the buyer of the rights for Darifenacin a sufficiently long period of
time to bring a competitive product into the market would have been worth consideration. In retrospect, it was
revealed that with Novartis, a competent buyer for Darifenacin was found. Thus, Pfizers efforts concerning
Fesoterodine could be viewed as harmless. In the event that Darifenacin would not have developed into a
competitive product that quickly, a deployment of the COMCO decision could have pronounced a temporary non-
compete clause. This assessment holds under the provision that an equivalent regulation is not contained in the
EU decision within the scope of the censored fall-back remedy.
The general extent to which the COMCO may or can adopt the decision of the European Commission
systematically should be considered from a legal point of view. In the present case, the chosen approach was
reasonable. However, risks might still be contained in case this practice is thoughtlessly applied to future merger
cases. The EU merger decision could be more detailed than the Swiss merger decision and pronounced
undertakings could be withdrawn or weakened after the deployment of the COMCO has already been
pronounced. In order to forestall such a case it is necessary to determine the minimum requirements for
undertakings related to the Swiss market. In doing so, it could be ensured that the effective EU remedies meet
the requirements in the Swiss market. It can be anticipated that globally active firms such as Pfizer rather meet
the stricter commitments by the European Commission in order to be allowed to stay active in the European
market than renounce the European market to meet possibly less strict Swiss commitments and focus solely on
the Swiss market.
Conversely, a stricter commitment in Switzerland involves the danger that a firm completely retreats from
the Swiss market since it would potentially invoke a loss to a lesser degree than to renounce the European
market a possibility which must also be taken into consideration. In the present case, the pronounced
commitments are based on suggestions by the applicants. Thus, it can be assumed that the merging parties are
unlikely to take any actions to abuse those commitments. The COMCO was also not exposed to the danger that
its remedies were stricter than in the decision of the European Commission. However, what generally needs to
be taken into account is that the merging parties typically have substantial information advantages with respect
to the likely effect and consequences of merger remedies.
6. Conclusion
The ex-post assessment of merger effects is a hot topic in antitrust law and economics. On the one
hand, such analyses allow the identification of structural problems in the assessments of competition authorities
and therefore contribute to the continuous improvement of practical antitrust policy. On the other hand, ex-post
assessments of merger effects allow the estimation of the welfare contributions of antitrust policy through
comparisons of the actual development after decisions and the counterfactual scenarios of no investigations and
decisions.
Against this background, the paper studies the effects of one particular merger, namely the merger of
Pfizer and Pharmacia (2003) on competition in the Swiss pharmaceutical market and compares the assessment
of the Swiss Competition Commission (COMCO) with the post-merger market developments. We basically find
that the merger did not have a huge influence on the overall competitive landscape of the Swiss pharmaceutical
market. This key finding is driven by the fact that the product portfolios of both companies show only two cases
of critical overlaps and subsequent potential anticompetitive effects. In both cases, remedies were implemented
which prevented the companies from strengthening their dominant market position.
In particular, the imposed divestiture in the ED drugs market prevented that patent rights alone could
have hindered market entry of new products. The patent issue was not subject to any assessment of competitive
effects and as a consequence, the competition authority would not have been able to intervene for a possible
case of market foreclosure. In case of the market for drugs for the treatment of urinary incontinence, a
strengthening of the dominant market position of Pharmacia with its product Detrusitol could have been avoided
43
by the divestiture. With Novartis, a competent buyer was located which has already introduced the product to the
market.
In the other markets which showed significant overlaps in the business fields of both firms or in which
one of the firms had a dominant market position, no effects of the merger can be expected either due to the
existing price regulation in the Swiss pharmaceutical market or due to changes in Pfizers product portfolio.
Furthermore, it is important to note that some potential effects of the merger on market parameters such as
innovation behaviour, R&D efforts or employment can be at best analyzed on the global company level. A
conclusion on the effect of the merger on these parameters cannot be isolated with the data at hand.
In sum, it can be said that the COMCO was correct in its assessment of the overall impact of the merger
on competition in the Swiss pharmaceutical market. Generally, the case study raises the question how mergers
should be assessed from the competition authorities point of view when the merging firms are headquartered
abroad and these firms have a strong global presence. Many effects take place on the global level such as the
development of innovation and marketing strategies. Therefore, the undertakings must often be viewed as active
on an international or world-wide market. Within this context, the question of an appropriate organization of
international cooperation between competition authorities arises. Specifically, overlapping areas in merger
control investigations should be detected to avoid the duplication of efforts and to make efficient use of the
existing resources and expertise of the competition authorities - and also to minimize the administrative burden
imposed on the merging parties.
Although this paper has focused on an ex-post evaluation of a single merger decision, it nicely illustrates
the fundamental problems of ex-post studies. In order to fully evaluate the work of the competition authority in a
particular case, detailed data (and complementary information) is necessary to allow the use of more
sophisticated econometric techniques. However, such information is typically difficult to acquire, largely due to
data confidentiality issues. Furthermore, it should be reminded that this paper focused on an assessment of a
single merger and therefore does not allow any conclusion on a more general level. An evaluation of the overall
merger enforcement policy in Switzerland or another country is forced to use a much larger sample of mergers in
order to allow the derivation of broader conclusions about the state of merger control and possible reform needs.
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47
RULE OF LAW, LEGAL DEVELOPMENT AND ECONOMIC GROWTH:

PERSPECTIVES FOR PAKISTAN
Hasan LUBNA
Pakistan Institute of Development Economics, Islamabad, Pakistan
lubna@pide.org.pk
Abstract
Rule of Law and strong legal systems are considered a pre-condition for sustained development. Their
relative weakness in the under-developed world is considered as the main obstacle to growth. Strengthening
Rule of Law and legal systems has, therefore, become a standard advice from the developing community.
Pakistan, too, has witnessed a surge in demand for Rule of Law in recent years. Capitalizing on this domestically
garnered mandate, this paper reviews the legal obstacles to economic growth in Pakistan. It finds significant
impediments for growth and market development due to legal shortcomings in the case of Pakistan.
Keywords: Rule of Law, legal development, economic growth
JEL Classification: K10, O43
1. Introduction
the reformer has enemies in all these who profit by the old order and only
lukewarm defenders in all those who would profit by the new.
Machiavelli, The Prince, Ch. VI
Recent times have witnessed an increased demand for Rule of Law in Pakistan. The movement for
restoration of judiciary, which basically emerged and was sustained by the urban centers of Pakistan and later
evolved into a broader consensus for strengthening Rule of Law, has been considered elitist by its critics. Their
arguments connote Rule of Law as a luxury that is demanded by the urban elites only, while the poor in both
urban and rural areas are concerned more about their livelihoods. This debate rages on in Pakistan at a time
when the development community is unanimous in its prescription about Rule of Law as a solution to the ills of
under-development19. This paper argues that Rule of Law and a strong legal system are necessary conditions for
economically progressing and socially just societies both essential for improving the living conditions of
masses in Pakistan.
Since, economic growth and improvement in the welfare of its citizen is a prime concern for the
Government of Pakistan, and realizing that economic development does not take place in a vacuum, the
Government vows to develop an orderly framework for carrying out its economic reforms. It has undertaken an
extensive reform of the laws relating to the banking and financial sector, commerce and industry, energy,
information technology, social as well as administrative and judicial system20. The area, however, begs scholarly
attention. The paper tries to fill this gap. The next section lays out how Rule of Law and legal development effect
economic growth. The third section examines the Pakistans case in the light of this discussion. Section four
concludes the paper.
2. Rule of Law, Legal Development and Economic Growth

Rule of law as a concept seeks to ensure that government power is limited and that individual rights are
protected. The essence of the rule of law is the sovereignty or supremacy of law over people and
governments. The rule insists that every person, regardless of position or status in society, will be
subject to the law and will be dealt with equally. The rule of law is more than your regulation by law but
a guarantee of freedoms, human rights and equal treatment before the law (Watson 2003, 4).
19
Major international development and donor agencies place Legal Reforms Law and Development and Rule of
Law on their to-do list for developing countries. The World Bank has Law and Development as a topic of development.
Also see ADB (2004), APEC (2007). Carothers (1998) writes, one cannot get through a foreign policy debate these days
without someone proposing the rule of law as a solution to the worlds troubles.
20 See Hassan (2000) for details.
48
Berg 2008). There are a number of laws (inheritance laws, rent laws, tenancy laws, preemption, oral gifts) that
produce litigation. Courts are choked because of these litigations [ibid]. Long delays in the judicial process are
yet another problem. Loopholes in the system promote litigation and cause delays. There are no meaningful cost
sanctions (culture of not appearing before courts). As a result huge assets are stuck in the legal systems, with
serious implications for market transactions (Hasan 2006). Procedural reforms like daily reporting of cases and
automation can have a positive impact on court efficiency and have been an integral part of the Access to
Justice Program of the Asian Development Bank (Armytage 2003). The quality of legal education has also
degraded overtime due to mushroom growth of law colleges, which often disregard the rules that have been set
by the Pakistan Bar Council (Government of Pakistan 2006). These declining standards of legal profession are a
major factor in the weak judicial system in Pakistan. There is a perception that recourse to the legal system
appears as an unfavorable and unattractive option for the underprivileged. The National Judicial Policy 2009
aims to tackle issues of backlog and delays, as well as the menace of corruption. It is still early to judge the
impact of the policy in resolving perennial issues confronting the justice system in Pakistan (Government of
Pakistan 2009).
4. Conclusion
There is overwhelming evidence from around the world that economic growth is conditioned by the legal
setting. Markets thrive in an environment where property and contractual rights are protected and enforced, and
disputes are resolved efficiently by the judicial system. An independent, impartial and efficient judiciary, which
protects the fundamental rights of the citizens and limits the discretionary powers of the state, is imperative for
Rule of Law and a peaceful, ordered society.
In Pakistan, legal system poses substantial impediments for the growth process as well for the
development of markets. Our land, equity, and credit markets face several inefficiencies on account of weak laws
and legal infrastructure. Removing these obstacles can unleash the growth potential of the economy. Reforming
our judicial system is even more important for guaranteeing fundamental rights of the ordinary Pakistani citizen.
Law and Economics is still an underdeveloped and little researched discipline in Pakistan. Scattered research
exists that looks at various dimensions of legal development and growth, but there is a need to bring it under the
umbrella of a larger research initiative on Law and Economics. This paper has sought to pioneer this effort. It
was not the purpose of this paper to do an exhaustive research, but to set a research agenda for understanding
the linkages between legal system and economic growth in Pakistan. Policy input from carefully investigated
issues would be a welcome respite.
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59
RETHINKING OF RIGHTS AND PROCEDURAL COMPLEXITY IN

TRANSFER OF SHARE: A REVIEW
UNDER COMPANY LAW IN BANGLADESH
Zahid RAFIQUE
Department of Law, Prime University, Bangladesh
zrlegal@yahoo.com
Abstract
This paper unveils the pen-picture of rights in transfer of share and the pitfalls in that regard. In order to
find out the pitfalls, the Companies Act 1994 in Bangladesh has been taken as the bedrock for analysis. Also, the
Listing Regulation of Dhaka Stock Exchange Limited 1996 in Bangladesh has been applied to streamline the
analytical issues. Various forms in transfer of share create a problem for transferor in Bangladesh. Indeed, the
provisions of the Act are manufactured in such way that it throttles the rights of transferor. The confusion over
rights in joint shareholding seems to put shareholders at stake owing to the inadequate legal support. Refusal in
transfer of share is lamentably more emphasized in the Act than rights and the process of transfer in provision
appears favoring the refusal rather than protecting the rights. All these have been critically extrapolated with the
study over the relevant English, Indian and Pakistani laws to redress the balance in transfer of share in
Bangladesh.
Keywords: transfer of share, Companies Act 1994, pre-emption, refusal, director
JEL Classification: D23, K11, K22
1. Initial Phase
Share is generally one kind of interests and of rights owned by a shareholder holding a share in company.
When a person invests his money into company through purchasing share of that company, a bundle of rights
and interests in relation to that company is attached with him.In N.W. Transportation v. Beatty 37 it is decided that
a share is a kind of property which is to be enjoyed and exercised for the owners personal advantage and use.
On the other hand, it is found that shares in a company are taken as personal estate.38 Also share can be said
as intangibles like chose in action and those are generally available in the company in which the register of
members is kept.39
From the above scholarly passage, it is felt that share is a personal property which is used for the
shareholders personal utility.
Davies says that though a shareholder holds share in a company through a contract with the company
and thus, he may possesses rights in personam, a share is something more than that (Davies 2008). On the
other hand, John Birds and others say that the idea of share bears a dual nature as both contract and property
(Birds et al. 2007, 259).
In legislative assertions, section 2(1)(v) of the Companies Act, 19994 in Bangladesh provides that share
means a share in the capital of the company and includes stock when a distinction between stock and shares is
expressed or implied.
In England, section 540 of the newly passed Companies Act, 2006 provides that share means in the
companys share capital and that it may no longer be converted into stock; that section also includes that
references to shares include stock except where a distinction between share and stock is express or implied. On
the other hand, section 541 of that Act, the shares or other interests of a member in a company are personal
property, not in the nature of real estate.
From the above, the views on share of the two Acts Bangladeshi Companies Act 1994 and English
Companies Act 2006, are firstly the same but the English Company Law goes further that the share is personal
property, not in the nature of real estate at all.
37 (1887) 12 App. Cas. 589 (P.C.) cited in Geoffrey Morse, Charlesworth & Morse Company Law, (London: Sweet &
Maxwell, 1995) . 391

38 Mores, Company Law, 234
39 International Credit and Investment Co.(overseas) Ltd. v. Adham [1994] 1 BCLC 66 cited in Morse. Company
Law, 234
60
Upon the pattern of negative expressions reflecting mandatory force in section 38(7) of the Companies
Act, 1994, if the negative aspects is manufactured into the other pattern of expressions changing negative words
or expression, mandatory provisions may be turned into directory provisions or the flexible expressions and the
right of parties to transfer of share may prevail over the harsh refusal facts of transfer in all in the negative view.
The view about anything contrary to equity, justice and good conscience bonafide works, giving birth to
fraud and bad faith in manufacturing articles should be removed. Insertion of the reasonable provisions in articles
should be firmed up through the operating of specific directives by insertion of guideline in the provisions of
transfer of share of the Act in Bangladesh. So in section 38 of the Act specific guideline to remove the scope of
the harmful idea into articles for dealing with transfer of share should exist.
In the Act, there should be a specific guideline about the dividend when transfer of share is pending for
finalization transfer of share legally.
On the view transfer of share reflecting a contract, unless the term of returning consideration in breach of
contract is provided expressly beforehand, it may be hard to follow up and this may invade the force of rights of
shareholders. Without giving a carte blanche (full freedom) to the transferor, it may be provided that the provision
for transfer of share should exist perfectly even also at the point of breach of transfer contract for taking back
consideration at refusal of transfer at large in the Companies Act, 1994 in Bangladesh.
3. Concluding Remarks
Where a shareholder holds a property like share, transfer of share is one of the great advantageous rights
of the shareholder and it is expected to run freely without any reasonable pitfalls. Procedure of transfer, refusal
to register the new shareholders name in the register, sending information of refusal within the mandated time,
excess of application of power by the company to refuse the transfer-all these matters come under the ambit of
legal provisions centrally under section 32, 38, 39 and 43 of Companies Act, 1994. Though sections 32, 38, 39
and 43 of the Act become relevant, section 38 of the Act plays a pivotal role to regulate the transfer process at
large. In Bangladeshi Companies Act 1994, instead of different types of form for transfer of share, one form
under Companies Act, 1994 should be provided so that confusion could not arise any longer. Fairly enough, the
wrong procedure and omission of one element of procedure of transfer can make the scope for the refusal but
those provision become clogged up when it is found that only the ground for refusal is provided but after refusal,
the restorative measures by the parties to transfer are not clearly found. These matters are succinctly mentioned
in Indian and Pakistan law on the issue. In those laws after refusal, the reactivating provisions have been
provided with the insertion of the terms re-lodgment of the corrected transfer instrument to the company in full
view. This confusion becomes a concern. So in Bangladeshi Companies Act 1994 in transfer provisions e.g.
section 38, the restorative provisions in clear expression after refusal of transfer for making the scope of the
parties to transfer or the transferee should be incorporated.
Pre-emption is a discerning issue in transfer of share. This matter is expressed in articles of company. But
as per the pre- emption rules, once the transferor offers the existing member of the company and the latter
agrees with the terms and conditions but the latter one, he denies, then the condition of the transferor seem to
become fatal. This invokes the provisions for the rule of estoppel and this rule of estoppel has been discussed
above with case references. However, in fact of denial, the rule of estoppel can prevent it and thus the transferor
can get the proper protection of law. And this type of legal provisions of estoppel in view of the hypothetical facts
may be followed up in transfer provisions, e.g. section 38 of the Companies Act, 1994 in Bangladesh. However,
in transfer of share, the valuation of share is a vital issue. Regarding it, the proper guideline should exist in
transfer of share e.g. section 38 of the Companies Act1994. Even stronger, the valuer and the auditor
responsible for valuing the share concerned may be held liable and provisions to that effect needs to be made in
the Companies Act, 1994 to get the proper value for the transferor.
As far as transfer of share is fairly dependent on articles, the unfettered power for companies to insert
provision in articles is not a healthy support of the protection for transfer of share of the parties. So there should
obtain a guideline to remove the area of harm in articles in companies The Companies Act 1994 should contain
a prudent guideline in that regard.
Quite fairly, the regulating provisions for refusal in section 38(7) of the Act are provided in mandatory
provisions since those are expressed in negative words. These mandatory provisions have put emphasis on
refusal rather on the protection of rights of the parties to transfer. Many case-based discussions have been
presented above. Procedural provisions are for proper regulation securing the protection of all the parties
concerned. Here, again in section 38(7) of the Act, the language for refusal couched in negative words reflecting
as mandatory language has made the protection of rights in transfer of the parties subservient to the
75
commanding refusal by the company. Therefore, it should be that the language in section 38(7) of the Act,
should give priority to the right of parties to transfer of share necessarily over the refusal altogether because
rights to transfer of share should be more of attention than other factors.
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76
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77
THE RELATIONSHIP BETWEEN COMMON MANAGEMENT

AND ECOTOURISM REGULATION: TRAGEDY OR TRIUMPH OF THE
COMMONS? A LAW AND ECONOMICS ANSWER
Danilo SAM
Faculty of Economics, LUISS Guido Carli University of Rome, Italy
dsama@luiss.it.
Abstract
Since its origin, ecotourism development has been at the centre of controversial and heated debates
within the environmental and scientific society. On one hand, it has been considered as a model of responsible
and sustainable tourism with the capacity to guarantee the conservation of the current biodiversity level and
cultural identity, to educate the tourists about preservation and to improve the economic activity and the standard
of living of the populations affected. On the other hand, it has been criticized for actually being a mere instrument
in the hands of capitalist and western firms to commercially exploit the natural resources available in the less
developed countries. Thus, are the ecotourism projects more likely to be profitable and successful in territories
where the common resources are controlled by the state or managed by private firms? Considered the most
frequent and spontaneous solution noticed in the ordinary daily life of the emerging countries, meaning natural
resources owned communally by local institutions, does ecotourism impede or reinforce this management
function of coordinating and controlling? The empirical researches conducted in literature tried to answer to
some of the above-mentioned questions and offered the opportunity for a Law and Economics assessment of the
problem related to the common-pool resources.
Keywords: Common-Pool Resources, Commons Management, development, ecology, environment,

governance, property rights, regulation, sustainability, tragedy of the Commons
JEL Classification: K11; K32; Q57
A managed commons, though it may have other defects,

is not automatically subject to the tragic fate of the unmanaged commons
Garrett Hardin, Who Benefits? Who pays?, from Filters Against Folly (1985)
Stronza, A. L. (2010), Commons Management and Ecotourism: Ethnographic Evidence from the Amazon,
International Journal of the Commons, Volume 4, No. 1, Igitur, Utrecht Publishing & Archiving Services
1. Introduction: Common Management and Ecotourism Development

In the article reviewed, the author attempts to evaluate the impact of the ecotourism development on the
collective management of the common-pool resources, type of administration which has historically
characterized the local communities increasingly involved in the form of green tourism at issue. Since its origin,
as it is well-known, ecotourism itself has been at the center of controversial and heated debates within the
environmental and scientific society. On one hand, it has been considered as a model of responsible and
sustainable tourism with the capacity to guarantee the conservation of the current biodiversity level and cultural
identity; to educate the tourists about preservation; and to improve the economic activity and the standard of
living of the populations affected. On the other hand, it has been criticized for actually being a mere instrument in
the hands of capitalist and western firms to commercially exploit the natural resources available in the less
developed countries. Therefore, even though in the last years exploitive human activities have diminished and
attracted with considerable success visitors to eco-friendly destinations, at the same time the unfriendly effect of
tourism on nature has been often neglected.
Although nowadays the matter still remains particularly complex, it is undeniable that common
management and ecotourism business have each been extensively analyzed during the past decades from a
cultural, environmental and social standpoint. Nevertheless, it is necessary to give credit the author for having
endeavored to fill a gap existing until now in this research field that is to comprehend and recognize what are the
main effects of the growth of ecotourism on the management of the resources of the developing countries. Are
78
be judged inefficient per se. In fact, land management has been historically organized as a mix between
households and common property: the latter has not degenerated into any tragedy in several cases. Bishop and
Ciriacy-Wantrup (1975) first, and Garrett Hardin himself then, acknowledged that the expression commons was
often erroneously applied by the economists, even though it must be recognized that the term itself might easily
appear inappropriate and misleading. Therefore, the mentioned tragedy only takes place whenever is not
present a decision maker entitled to control the level of utilization of the resources available and to impose the
level of investments necessary. Thus, a strict distinction must be made between common property (res
communes), meaning that a group of persons has exclusive property on certain resources and the power to
regulate the relative use, and common resources (res nullius), meaning free access goods and un-owned
resources given the absence of a well-defined property regime.
3. Conclusions: Towards a Model of Sustainable Ecotourism

As mentioned, common-pool resources can be owned and managed by governmental institutions as
public goods, by firms or individuals as private goods or can be left free as open access resources.
Nevertheless, the best solution to allow and realize a sustainable ecotourism in the course of time seems to be
to support the local institutions towards a collective form of common-pool management, with the main purpose to
control and prevent the two problems of exclusion and subtraction above pointed out. To be successful, the
monitoring action of the subsistence communities must be associated with conservation and utilization rules
established to govern the commons, as well as with sanctions set against the rule-breakers. If not properly
managed, an unrestrained ecotourism risks to bring to unequal economic benefits not only to advantage of
foreign firms but also of only few members of the community, altering cultural traditions and values and triggering
potential conflicts and corruptions.
In this context, the Nobel Prize Elinor Ostrom (1990) has called into question the black or white vision
according to which common-pool management necessarily requires a centralized administration or a
privatization process of the resource concerned. Starting from the study of different and numerous empirical
cases around the world, the American Professor shows how local communities are not irreparably condemned to
overexploitation problems in case of collective action and utilization of common resources. On the contrary, in
several cases the communities seem to have avoided unproductive clashes through an endogenous formation of
institutions capable to govern the common resource in a sustainable way. Therefore, a situation characterized by
a common property regime in connection with core resources self-managed by a rural community has resulted in
various circumstances not only feasible but also desirable. In the same manner, the author of the paper has
collected data and realized interviews at Posada Amazonas, an ecotourism lodge born from a joint venture
between a local community and a private company and built on a land communally owned by 150 families, over
a period of 12 years (1996-2008). According to the partnership, the profits are shared 60-40 respectively for the
community and the company, while the lodge management is equally shared. The ecotourism offers rooms for
60 guests at 95 US dollars and hosts yearly around 7000 visitors from Europe and United States. In 2007 it
generated a profit of 225,000 US dollars. Given its success in making real the ecotourism philosophy, the lodge
has been in the spotlight of the international media and has won numerous awards over time.
Nevertheless, the analysis conducted by the author reaches the conclusion that some factors of
ecotourism have strengthened the collective management of the common-pool resources, while at the same time
others have damaged the social cohesion of the community, hindering the possibility of a cooperative
administration in the long-run. Its a matter of fact that whenever natural resources, as forests, landscapes, rivers
or wildlife, are opened to ecotourism and commercially commoditized, the co-management of these resources,
no longer local but global, becomes more complex and requires the participation of several actors
(environmental agencies, environmentalist movements, local, regional and national administrations, non-
governmental organizations, tourism operators).
Thus, learning from the experience offered by the author in the paper and from our Law and Economics
assessment of the problem related to the common-pool resources, there are three fundamental principles which
the policy-makers of the emerging countries should keep in mind for a better and sustainable development of the
ecotourism industry.
1. The ecotourism projects should be realized by local communities in cooperation with non-governmental
organizations or tourism operators for two main reasons. The first is the possibility for resident populations to be
trained as regard to the conservation measures necessary for the environmental protection and the
entrepreneurial skills useful for capitalizing the ecotourism revenues in ancillary projects (like, for instance,
handicraft production). The second is the possibility to better exploit the ecology and traditional knowledge
80
thanks to foreign capital and worldwide clients. Statistically, in fact, financial returns from ecotourism, both in
form of employment and income, are much lower in lodges totally managed by local communities.
2. The redistribution of financial revenues deriving from ecotourism create economic incentives to strictly
control and manage the common-pool resources for the local communities, which are the only entities that can
guarantee an environmental protection in the long period. The community members will discuss and regulate
which cultural traditions and natural resources should be protected and used, who should be entitled to access
the common-pool and under what conditions, what should be the sanctions for the rule-breakers. In this way, it is
possible to solve the problem of exclusion related to the commons through the gradual construction of a self-
management structure and through the progressive opening of the communitys network to international
organizations which can support it with aids and grants.
3. Although financial returns could provide economic incentives for the local communities to protect the
common-pool resources, at the same time, the financial returns could drive the members to reinvest the
revenues in more profitable private initiatives, which could increase the level of resource consumption and thus
could worsen the problem of subtraction. As far as this problem is concerned, it would be necessary to simply set
rules about how to share and re-invest the tourism profits (for instance, the national government could also
intervene offering tax reliefs).
Therefore, even though the community-based ecotourism does not always allow to guarantee both
economic growth and environmental protection without incurring in any contraindications, if correctly structured
(it is crucial the role of economic and tax incentives) it seems to be the model that the emerging countries should
follow in the future.
References
[12] Bishop, R.C., Ciriacy-Wantrup, S.V. 1975. Common Property as a Concept in Natural Resources Policy,
Natural Resources Journal, Volume 15, University of New Mexico, School of Law, Stanford, United States,
pp. 713-727.
[13] Hardin, G. 1968. The Tragedy of the Commons, Science, Volume 162, No. 3859, American Association for
the Advancement of Science, Washington D.C., United States, pp. 1243-1248.
[14] Ostrom, E. 1990. Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge
University Press, Cambridge, United Kingdom.
81
Programs and Publications

Upcoming Events
Journals
Conferences Proceedings
Books Collections .
82
Upcoming Events
Global Trends in Finance

Online Conference, 25th October, 2011
The annual conference of ASERS dedicated to finances intends to become an important forum for the
exchange of research findings and ideas. Our international Conference is a platform where Financial Sciences
and research can integrate with industry and policy. The conference welcomes papers that discuss the latest
developments in global finance research and application.
The conference provides a forum for disseminating new research findings, practices and techniques in
the field of finances, in general, and in global finance, in special.
This conference would encourage the young generation to pursue research interests in the all the areas
of finance to be considered for presentation at the Fist On line International Conference on Global Trends in
Finance. Academicians and researchers are invited to share their unpublished research findings in all areas
mentioned below, but are not limited to:
Monetary Economics, Fiscal Policies and Behavior of Economic Agents,
Money and Interest Rates, Currency Issues/ Manipulations/ Single World
Monetary Policy, Central Banking, and the Supply Currency,
of Money and Credit, Entrepreneurship/Venture Capital,
Banking and Financial Services /Investment Emerging Markets and Privatization,
Banking, Financial Accounting, Regulation and Taxation,
Country Risk/Debt Issues, Financial Crises: Causes, Impacts, Solutions,
Insurance/Reinsurance, Financial Engineering/ Derivatives/ Structured
Macroeconomic Aspects of Public Finance, Finance,
International Finance, Financial Information Technology and Systems,
Macroeconomic aspects of Finance, Multinational Financial Management,
Volatility Determination, Transmission and Risk Working Capital and Treasury Management,
Management, Market Integration and Interest Rates,
General Financial Markets, Valuation/Pricing,
Financial Institutions and Services, Public Finance,
Corporate Finance and Governance, Behavioral Finance.
Taxation, Subsidies, and Revenue,
All the papers will be reviewed and published in the Conference e-Proceeding under an ISBN reference
on CD. The Proceeding will be indexed and listed in various reference search engines. The best papers selected
by the International Scientific Committee will be published in Journal of Advanced Studies in Finance
http://www.asers.eu/journals/jasf.html after a double-blind peer-reviewing and the payment of 150 as
submission fee charged by the journal. Journal of Advanced Studies in Finance, currently indexed in CEEOL,
RePEc, EBSCO, ProQuest and IndexCopernicus.
Important Dates:
25th September, 2011 Abstract submission deadline;
5th October, 2011 Notification of acceptance/rejection;
10th October, 2011 Deadline for payments (100 for attendance at the Conference);
15th October, 2011 Full paper submission in MS Word and PowerPoint format;
25th October, 2011 Online International Conference.
General Chair: PhD Rajmund Mirdala,Technical University of Koice, Faculty of Economics
83
Sustainable Tourism Development

Online Conference, 25 November, 2011
Association for Sustainable Education, Research and Science has the honour to invite you to invite you to
participate at the 2th Online International Conference on The challenges of sustainable tourism development
in time of climate change in 25th November, 2011.
The conference provides a forum for disseminating new research findings, practices and techniques in
sustainable tourism, tourism management, and tourism marketing. This on-line conference brings together
people who can propose a vision of a greener tourism, a more sustainable tourism, to help more in keeping a
clean and durable planet.
Academicians and researchers are invited to share their unpublished research findings in all areas
mentioned below, but are not limited to:
The sustainable tourism; Pollution Reduction at Source and Waste
The tourism management; Minimization;
Green tourism; Simulation and Optimization for Environmental
Environmental Taxes and Subsidies; Protection;
Environmental, Health, and Safety Law; Environment and Development;
Natural Resources; Energy and Environment; Environment and Trade;
Environment and Economic Growth; Sustainability;
Environmental and Ecological Economics; Environmental Accounts and Accounting;
Sustainable Development; Environmental Equity; Population Growth;
Renewable Resources and Conservation; Ecological Economics: Ecosystem Services;
Nonrenewable Resources and Conservation; Biodiversity Conservation; Bio-economics;
Valuation of Environmental Effects; Industrial Ecology;
Pollution Control Adoption Costs; Distributional Mathematics Models of Environmental
Effects; Employment Effects; Processes;
Air Pollution; Water Pollution; Noise; Hazardous Risk Management;
Waste; Solid Waste; Recycling; Environmental Economics;
Climate; Natural Disasters; Global Warming; Environmental Management and Health;
Technological Innovation; Environmental Education and Sustainable
Environmental Protection Technologies (water, Development;
air, and soil); Environmental Strategies and Policies,
Government Policy.
We invite to submission original research contributions describing new results, original ideas and
applications related to the topics of the conference. Papers should be submitted electronically at this e-mail
address conferences@asers.eu in MS Word and also in PowerPoint (see Instructions for Authors).
All the papers will be reviewed and published in the Conference Proceeding under an ISBN reference on
CD. The Proceeding will be indexed and listed in various reference search engines. The best papers selected by
the Program Committee will be published in Journal of Environmental Management and Tourism
(http://www.asers.eu/journals/jemt.html) after a double-blind peer-reviewing and the payment of 150 as
submission fee charged by the journal.
Important Dates:
25 October, 2011 - Abstract submission deadline;
5 November, 2011 - Notification of acceptance/rejection;
10 November, 2011 - Deadline for payments (100 for attendance at the Conference);
84
15 November, 2011 - Full paper submission in MS Word and PowerPoint format;

25 November, 2011 Online International Conference.
General Chair:
PhD Cristina BARBU
Co-Chair:
Marin CRUCERU
85
Journals
Biannually
Editor in Chief: PhD Mdlina Constantinescu
Co-Editors: PhD Russell Pittman and PhD Eric Langlais
Journal of Advanced Research in Law and Economics provides
readers with high quality and empirical research in law and
economics. The Journal publishes analytical studies on the impact
of legal interventions into economic processes by legislators, courts
and regulatory agencies. Finally, important developments and topics
in law and economics analysis will be documented and examined in
special issues dedicated to that subject. The journal is edited for
readability; lawyers and economists, scholars and specialized
practitioners count among its readers.
Journal of Advanced Research in Law and Economics, starting
with its first issue, is indexed in RePEC, IndexCopernicus, CEEOL
and EBSCO databases.
Web: http://www.asers.eu/journals/jarle.html
email: jarle@asers.eu
Journal of Advanced Research in Management Biannually
Editor in Chief: PhD Andy tefnescu
Co-Editor: PhD Rajesh K. Pillania
The Journal aims to serve researchers, scholars through prompt
publications of significant advances in any branch of management
science, and to provide a forum for the reporting and discussion of
news and issues concerning management science.
Journal of Advanced Research in Management starting with its
first issue is indexed in RePEC, IndexCopernicus, and EBSCO
databases.
Web: http://www.asers.eu/journals/jarm.html
email: jarm@asers.eu
Journal of Advanced Studies in Finance Biannually
Editor in Chief: PhD. Laura tefnescu

Co-Editor: PhD Rajmund Mirdala
The Journal aims to publish empirical or theoretical articles which
make significant contributions in all areas of finance, such as: asset
pricing, corporate finance, banking and market microstructure, but
also newly developing fields such as law and finance, behavioural
finance, and experimental finance. The Journal will serves as a
focal point of communication and debates for its contributors for
better dissemination of information and knowledge on a global
scale.
Journal of Advanced Studies in Finance, starting with its first
issue is indexed in IndexCopernicus, RePEC, CEEOL and EBSCO
databases.
Web: http://www.asers.eu/journals/jasf.html
email: jasf@asers.eu
86
Journal of Environmental Management and Tourism

Biannually
Editor in Chief: PhD Cristina Barbu
Journal of Environmental Management and Tourism will publish
original research and seeks to cover a wide range of topics
regarding environmental management and engineering,
environmental management and health, environmental chemistry,
environmental protection technologies (water, air, soil), pollution
reduction at source and waste minimization, energy and
environment, modelling, simulation and optimization
foenvironmental protection; environmental biotechnology,
environmental education and sustainable development,
environmental strategies and policies, etc.
Journal of Environmental Management and Tourism starting
with its first issue is indexed in RePEC, IndexCopernicus and
EBSCO databases.
Web: http://www.asers.eu/journals/jemt.html
email: jemt@asers.eu
Journal of Research in Educational Sciences Biannually
Editor in Chief: PhD Laura Ungureanu
The Journal is design to promote scholary thought in the field of
education with the clary mission to provide an interdisciplinary
forum for discussion and debate about educations most vital
issues. We intend to publish papers that contribute to the
expanding boundries of knowledge in education and are focusing
on research, theory, current issues and applied practice in this
area.
Journal of Research in Educational Sciences starting with its
first issue is indexed in RePEC, IndexCopernicus and EBSCO
databases.
Web: http://www.asers.eu/journals/jres.html
email: jres@asers.eu
Theoretical and Practical Research in Economic Fields

Biannually
Editor in Chief: PhD Laura Ungureanu

Co-Editor: PhD Ivan Kitov
Theoretical and Practical Research in Economic Fields
publishes original articles in all branches of economics - theoretical
and empirical, abstract and applied, providing wide-ranging
coverage across the subject area. Journal promotes research that
aim at the unification of the theoretical-quantitative and the
empirical-quantitative approach to economic problems and that are
penetrated by constructive and rigorous thinking.
The Journal starting with its first issue will be indexed in RePEC,
IndexCopernicus and EBSCO databases.
Web: http://www.asers.eu/journals/tpref.html
email: tpref@asers.eu
87
Conferences Proceedings
Proceedings of the ASERS First on-line Conference on

Worlds Economies in and after Crisis: Challenges, Threats and
Opportunities
Coordinator: Laura TEFNESCU
Format: 17cm x 24cm

ISBN: 978-606-92386-0-8

The Real Environmental Crisis
Effects in Tourism Development, Conflicts and Sustainability
Coordinator: Cristina BARBU
Format: 17cm x 24cm

ISBN: 978-606-92386-3-9

Competitiveness and Economic Development:
Challenges, Goals and Means in a Knowledge based Society
Coordinator: Andy TEFNESCU
Format: 17cm x 24cm

ISBN: 978-606-92386-4-6
88
Books Collections
Management and Environmental Protection
A book edited by PhD Cristina Barbu
European Research Centre for Managerial Studies in Business
Administration, Spiru Haret University, Romania
cristina.barbu@spiruharet.ro
http://www.asers.eu/asers-publishing/books
To be published by ASERS Publishing in CD-ROM format with ISBN.
Submission: Open
Download Call for Book Chapters at:
http://asers.eu/asers_files/books/Call%20MEP.pdf
Beyond Creativity and Innovation in the

Times of Knowledge Economy
A book edited by PhD Madalina Constantinescu

European Research Centre for Managerial Studies in Business
Administration, Spiru Haret University, Romania
constantinescu_madalina2002@yahoo.co.uk

Submission: Open

http://www.asers.eu/asers_files/books/Call%20BCI_KE.pdf
Mathematical Models in Economics

A book edited by PhD Laura Ungureanu
European Research Centre for Managerial Studies in Business Administration,

laura.ungureanu@spiruharet.ro

Submission: Open
http://www.asers.eu/asers_files/books/Call%20ASERS_Book%20MME_extended.pdf
89
ASERS Publishing ASERS Publishing

Web: www.asers.eu
URL: http://www.asers.eu/asers-publishing
ISSN 2068-696X
90

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ASERS

Journal of ZEW Centre for European Economic

Journal of Advanced Research in Law and Economics

Deadline for submission of proposals: 15th November 2011

MACROECONOMIC ANALYSIS OF CORRUPTION AMONG

Keywords: firm, corruption, Game Model, developing countries

JEL Classification: C51, D81, E60, K49, M29

SUR(1) SUR(2) OLS RE(1) RE(2) XTPCSE

5. Summary and Conclusions

ACCOMPLISHING HUMAN RIGHTS JUSTICE IN THE CONTEXT OF

Keywords: drugs, Human Rights, UK laws, criminal property

JEL Classification: K10, K14, K29

EX-POST ASSESSMENT OF MERGER EFFECTS:

Keywords: mergers, ex-post evaluation, pharmaceutical markets

JEL Classification: K21, L42, L62

RULE OF LAW, LEGAL DEVELOPMENT AND ECONOMIC GROWTH:

Keywords: Rule of Law, legal development, economic growth

JEL Classification: K10, O43

2. Rule of Law, Legal Development and Economic Growth

RETHINKING OF RIGHTS AND PROCEDURAL COMPLEXITY IN

Keywords: transfer of share, Companies Act 1994, pre-emption, refusal, director

JEL Classification: D23, K11, K22

Maxwell, 1995) . 391

THE RELATIONSHIP BETWEEN COMMON MANAGEMENT

Keywords: Common-Pool Resources, Commons Management, development, ecology, environment,

JEL Classification: K11; K32; Q57

A managed commons, though it may have other defects,

1. Introduction: Common Management and Ecotourism Development

3. Conclusions: Towards a Model of Sustainable Ecotourism

Programs and Publications

Global Trends in Finance

Sustainable Tourism Development

15 November, 2011 - Full paper submission in MS Word and PowerPoint format;

Journal of Advanced Studies in Finance Biannually

Editor in Chief: PhD. Laura tefnescu

Journal of Environmental Management and Tourism

Theoretical and Practical Research in Economic Fields

Editor in Chief: PhD Laura Ungureanu

Proceedings of the ASERS First on-line Conference on

Coordinator: Laura TEFNESCU

Format: 17cm x 24cm

Proceedings of the ASERS First on-line Conference on

Coordinator: Cristina BARBU

Format: 17cm x 24cm

Proceedings of the ASERS First on-line Conference on

Coordinator: Andy TEFNESCU

Format: 17cm x 24cm

To be published by ASERS Publishing in CD-ROM format with ISBN.

Beyond Creativity and Innovation in the

A book edited by PhD Madalina Constantinescu

To be published by ASERS Publishing in CD-ROM format with ISBN.

Download Call for Book Chapters at:

Mathematical Models in Economics

European Research Centre for Managerial Studies in Business Administration,

To be published by ASERS Publishing in CD-ROM format with ISBN.

ASERS Publishing ASERS Publishing

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