Over the past two centuries the corporation has emerged from obscurity to become the dominant form of business organization in the United States, 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 handful of industries. Only in the ensuing decades did the corporation eclipse the partnership and secure its economic dominance.
Commentators widely attribute the corporation’s success to a set of features thought to be unique to the corporation, including legal personality, 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, 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 from the seventeenth through early nineteenth century first in Europe and then in 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 property law, rather than the contract mechanisms of partnership law, to implement the in‐rem attributes associated with the corporation. 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 novel or unique institutional solution to recurrent economic problems; it was a convenient vehicle for expanding and generalizing a set of existing economic solutions.
This entity 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, particularly the externalities of limited liability on involuntary creditors, such as tort creditors. Here, maritime law provides time‐tested solutions, offering a system that provides priority for such creditors over contract creditors, solving one of corporate law’s most difficult problems.
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