In prior posts, I've plugged a couple of legal history articles, essentially offering different accounts of how the corporation, with its distinctive features, came to be.  In particular, I highlighted Margaret Blair's piece on how corporate law is inextricably tied to state recognition, and Taisu Zhang's and John Morley's paper on how modern corporate features are tied to a developed state capable of adjudicating the rights of far flung investors with consistency.

Into this mix I'll introduce Robert Anderson's new paper, The Sea Corporation, forthcoming in the Cornell Law Review, demonstrating that the features we think of as defining the corporate form – limited liability, tradeable shares, entity shielding, separate personality, and centralized management selected by the equity owners – were all associated with admiralty law for centuries before the development of the modern corporation, embodied in the form of the ship's personality.  Anderson points out that, to some extent, these were necessary given the realities of maritime commerce: when a ship docked in a foreign port, identifying and litigating against its distant owners was nearly impossible.  Therefore, creditors necessarily could only bring an in rem action against the ship itself; if the claims were less than the ship's value, the owners could be relied upon to appear in court to collect the residual.  Otherwise, creditors would be left only to collect against the ship's assets.  Anderson also highlights that maritime law addresses a problem that has vexed corporate scholars, namely, how to deal with limited liability and involuntary creditors (like tort victims).  Some have suggested these creditors should receive priority of payment over voluntary ones; he points out that maritime law operates in just this manner and may provide guidance in the corporate sphere.

Anyway, here's the abstract:

Over the two centuries the corporation has become the dominant form of business organization, accounting for more productive assets than all other business forms combined. Yet the corporation is relatively young for a legal institution of such economic importance. As late as the middle of the nineteenth century, most business was still conducted through partnerships, with corporations active only in a few industries. Only in the ensuing decades did restrictions ease allowing the corporation to secure its economic dominance.

Commentators widely attribute the corporation’s success to a set of features thought to be unique to the corporation, including limited liability, transferable shares, centralized management, and entity shielding. Indeed, the consensus among economic and legal historians is that these essential corporate features created a unique economic entity that rapidly displaced the obsolete partnership.

This Article argues that these economic features were not unique to the corporation, nor did they first develop in the business corporation. Over many centuries, the maritime law developed a sophisticated system of business organization around the entity of the merchant ship, creating a framework of legal principles that operated as a proto-corporate law. Like modern corporate law, this maritime organizational law gave legal personality to the ship, limited liability, transferable shares, centralized management, and entity shielding. The resulting “sea corporations” were the closest to a modern corporation that was available continuously throughout the 17th through early 19th centuries in Europe and the United States.

The fact that maritime law developed all the most important features of corporate law offers important lessons for business organizational law itself. The parallel development of the same characteristics, with different and independent mechanisms, is strong evidence of the economic importance of the features of the modern corporation. The maritime law employed a unique device—the maritime lien—to achieve the same economic results as the nascent corporation. The key turn was the use of a property mechanism, rather than the contract mechanisms of partnership law, to implement in rem attributes. The vessel is property come to life in the eyes of the law, developing a form of legal personhood. Viewed in this broader context, the corporation is not a unique institutional solution to recurrent economic problems; it was a convenient vehicle for expanding and generalizing a set of economic solutions.

This new organizational theory of maritime law provides potentially important lessons for both maritime law and business organizations law. First, the theory provides a guiding principle for otherwise disorganized features of maritime law. It suggests that courts should explicitly interpret maritime law as a form of business entity law, keeping maritime law’s distinctive purposes, but drawing from the rich theoretical insights of law of other business associations to inform its unique institutions. At the same time, the long history of maritime law as business organization law provides hints for enduring challenges in corporate law, such as externalities of limited liability on involuntary creditors, such as tort creditors. Here, maritime law provides time-tested solutions, providing a system that provides priority for such creditors over contract creditors, solving one of corporate law’s most vexing problems.