[6] The original purpose of foreign legal opinion is grounded in the historical doctrine of ultra vires.
The concern was that when doing business with a corporation formed in a foreign country, proper due diligence required that a legal opinion be sought to ensure that the relevant foreign company had the necessary capacity and power to enter into the transaction, and that it would be binding upon it.
During the 1970s and 1980s with the expansions in cross-border lender by financial institutions, banks became increasingly concerned to ensure that foreign companies to whom they lent money provided a foreign legal opinion certifying the legal validity of the loan transaction and the enforceability of the banks' rights (including any security interests).
The opinion is normally issued in the format of an unqualified favourable statement of the effectiveness of the transaction (hedged in by appropriate assumptions of fact and general qualifications of law).
Because a cross border transaction might end up being considered by the courts of any of a number of countries, the addressee(s) of the opinion will wish to be assured that all relevant issues, if determined by that foreign law, would likely be resolved satisfactorily.