Issuer Choice in the EU and its Impact on the Market for Corporate Law

Abstract

Current conflict of laws rules contained in European Community securities laws mainly bundle the choice of applicable securities laws with the issuer's registered office, while leaving some regulatory aspects to the law of the market where the issuer's securities are admitted to trading. Our previous research has scrutinized the potentials for issuer choice in Europe under the regulatory framework implementing the Financial Services Action Plan (FSAP) and the policy implications it entails. We considered the bundling of securities laws with the issuer's law of incorporation for conflict of laws purposes overall detrimental if corporate law arbitrage is unavailable. On the other hand, we argued that the impact of such bundling is beneficial if companies can easily engage in company law arbitrage.

In this paper we extend our previous work and qualify our latter optimistic assessment by showing that bundling securities regulation and corporate law for conflict of laws purposes may have a negative impact on the dynamics of the market for corporate charters by further strengthening the UK's dominant position therein.

Moreover, we turn to the regulatory aspects that are governed by the law of the affected market (and specifically for securities law aspects of takeover regulation). Here we argue that already today issuer choice offers a broad variety of options, that the "cherry picking" of important aspects of takeover law is possible and that a separating equilibrium represents the likely outcome.

Keywords: securities laws, securities regulation, harmonization, conflict of laws, corporate law, takeovers, corporate governance, regulatory competition, legal arbitrage, issuer choice, Financial Services Action Plan

JEL Classification: G3, G14, G15