Only that a lawful character does not really have to obey the specific laws of a given area, but more a certain set of rules / code established by his superiors / god or even created by himself.
The problem is that few of the lawful options match a character that is not evil or neutral. This is especially irritating in the case of paladins who should lose their powers immediately with many of these options. However, if they do not choose them, they will end up neutral good, which will cause them to lose their powers.
The system could work if, instead of a wheel, split the alignment into two axes lawful / chaotic and good / evil.