Introduction
Any business, whether the auto mechanics that starts his own sole proprietorship or the multi-national technology corporation is considered a member of the community. As a consequence, businesses, like individuals, are not only subject to the laws of the jurisdiction in which they are located in, but also expected to comply with those laws like any other citizen. Accordingly, the primary roles of law in today’s business environment is to establish: what’s right and wrong business behavior is, what are the rules and guidelines that businesses are expected and required to follow in order to validly and effectively participate in or complete business transactions, and to provide a commonly accepted and understood infrastructure and framework of principles, procedures and expectations that facilitate and foster business activity (Shihata, 1996). Similarly, the primary role of a court in today’s business environment is to provide a neutral forum in which disputes, cases, and controversies that occur in business or between business parties can be amicably resolved. In short, without laws and courts, doing business would most likely be a chaotic and risky undertaking where the powerful, as in the non-business world, would oppress the weak. Needless to say, a lawless business environment would most likely scare off all but the most dedicated and powerful parties from starting a business, thereby robbing society of the creative and innovative voices that might want to start a business under better circumstances. The roles of the law and courts in the business environment, therefore, makes it necessary that all businesses have at least a basic understanding of the law and the legal system. Having such knowledge is invaluable in helping a business know what its duties and responsibilities are and how to navigate the requirements of successfully managing an enterprise.
The Court System
No understanding of law in general, and law as is specifically impacts the business environment is possible without first having an understanding of the judicial system. In the United States, the judicial system was developed in accordance to the principle of federalism (Ragsdale, 2011). Under federalism, there are, in essence two court systems, namely a national system and a state system. The national system, which generally hears cases that involve or implicate the Constitution, federal statutes, or where a federal department, agency of official are a party, is composed of three levels. At the top is the U.S. Supreme Court (USSC). The USSC has nine justices that hear cases twice a year at the USSC courthouse in Washington, D.C. The USSC’s primary source of power is achieving through judicial review or the ability to analyze a law or government action to see if it complies with the Constitution. If a law or government action, under judicial review, is found to be in violation of the Constitution, the USSC, and all courts, have the power to invalidate it. The second level of federal courts is known either as the U.S. Court of Appeals or the U.S. Circuit Courts. There are 13 Circuit Courts, one for each of the eleven judicial regions that cover federal cases in specific groups of states, as well as the District of Columbia, and the Federal Circuit with deals with cases involving specific federal courts and government agencies. The lowest level of the federal court system is composed of U.S. District Courts or the trial courts of the federal system. Every state has at least on the District Court. At the state level, most state judicial systems mirror the federal system; with a state supreme court at the top, a state court of appeals below the state supreme court, and a wide range of trial courts at the bottom. State courts can hear cases that implicate the Constitution and/or state law.
Law and Business Regulation
In terms of business, most conflicts and controversies that a company will confront will be heard in and resolved by state courts as the majority of laws that would affect a company are state rather than federal or constitutional law. For example, one of the most fundamental laws affecting business is the rules and guidelines that regulate business entities, such as owner liability or how to form a specific type of business entity. These essential laws are drafted and enacted by state authorities and therefore subject to state courts. Contract law is another commonly encountered legal practice area affecting business in almost every aspect its operation from employees to raw materials to advertisements; that is based on state law. Other areas of state law that significantly influence the regulation and administration of business include real estate law, tort law, labor law, privacy law, and criminal law.
Alternative Dispute Resolution
While the majority of disputes in business is resolved in court or under the court system, more and more companies are making use of alternative dispute resolution (ADR) methods to settle conflicts without the need of going to court or engaging in litigation. One of the most popular forms of ADR, is known as arbitration. In an arbitration, parties to a dispute agree to refer the case to an arbitrator; a private, independent, third party that both parties agree on, to resolve the issues in contention (Sternlight, 2001). Moreover, both parties agree to be bound by the decision of the arbitrator. Arbitration and other forms of ADR are different from court in a number of ways. First, it generally takes less time to come to a resolution in ADR and the costs of bringing and resolution of the case are cheaper. Second, ADR provides more flexibility to the parties which often decreases the hostility between the parties. Third, ADR provides a private and more simplified procedure to parties. This is especially beneficial in cases where the parties do not want publicity.
Conclusion
In conclusion, the law and the courts play a fundamental, necessary, and essential role in today’s business environment. Both effects not only how a business is formed and managed but also how it interacts with is employees, other businesses and the community is general. Accordingly, every business needs to develop some understanding of the influences that both the law and courts have on it.
References
Ragsdale, B.A. (2011). The federal courts in our constitutional democracy: A history of the federal judiciary. Retrieved from http://www.americanbar.org/publications/insights_on_law_andsociety/12/fall/the_federal_courtsinourconstitutionaldemocracy.html
Shihata, I.F.I. (1996). The role of law in business development. Retrieved from http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1800&context=ilj
Sternlight, J.R. (2001). Mandatory binding arbitration and the demise of the Seventh Amendment right to a jury trial. Ohio State Journal on Dispute Resolution, 16 (3), 669-733.
