Choice of Law and Capital Markets Regulation
56 Pages Posted: 28 Feb 2008
Under the internal affairs doctrine, U.S. state and federal courts almost without exception defer to the laws of the state of incorporation for matters respecting corporate governance. The relative lack of horizontal conflicts in U.S. corporation law can be explained in significant part by the incremental expansion of U.S. federal securities law as well as the potential for constitutional preemption of state outreach statutes and anti-takeover legislation. To the extent that U.S. preemptive federalism in corporate and securities law has marginalized the relevance of choice-of-law jurisprudence for corporate governance, however, there is little guidance for courts and regulators in delimiting the extraterritorial application of U.S. federal securities law. By contrast, the EU's legislative and regulatory bodies have sought to establish uniform capital markets rules that reconcile the competing sovereign interests of its member states; these efforts may provide some insight into how a fully integrated global capital market can be designed. This paper discusses existing approaches to resolving choice-of-law disputes in the global capital markets and proposes an exchange-based model for invoking conflicts-of-law jurisprudence to promote the development of an integrated global market.
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