Regulatory Competition in Contract Law: Empirical Evidence and Normative Implications

European Review of Contract Law 9 (2013) 61-89

27 Pages Posted: 2 May 2013 Last revised: 29 Jun 2013

See all articles by Giesela Ruhl

Giesela Ruhl

Friedrich-Schiller-University Jena

Date Written: April 30, 2013

Abstract

Regulatory competition has been high on the agenda of lawyers and economists for several years. Initially, the focal point of the debate was corporate law. Only recently the attention has shifted to other areas of law, notably contract law. However, in contrast to corporate law where there is little doubt that states do compete for corporate charters both in the United States and in Europe, it is hotly debated whether there is – or whether there can be – regulatory competition in contract law. In the first part of the following article I argue that this question must be answered in the affirmative: empirical evidence shows that there is regulatory competition in contract law – just like in other areas of law, notably corporate law. Most importantly, empirical evidence shows that businesses and consumers actually choose the applicable contract law based on the quality of the law and that states actually respond to these choices by adjusting their contract laws. With this finding, however, the discussion about regulatory competition in contract law has not yet reached its end. To the contrary: the fact that states actually do compete for application of their contract law raises a number of – normative – questions. Should regulatory competition be promoted because it induces a race to the top? Should it be banned because it induces a race to the bottom? In the second part of the article I argue that regulatory competition in contract law will generally induce a race to the top. It should, therefore, generally be promoted. However, also I argue that regulatory competition may induce a race to the bottom in some cases, namely where a choice of law does not account for the interests of all parties affected by the choice. In these cases, I conclude, regulatory competition should be regulated. More specifically, I argue that it should be regulated on the level of private international law by limiting freedom of choice.

Keywords: Regulatory Competition, Contract Law, European Union, Private International Law, Choice of Law, Consumer, Common European Sales Law, Harmonization

Suggested Citation

Ruhl, Giesela, Regulatory Competition in Contract Law: Empirical Evidence and Normative Implications (April 30, 2013). European Review of Contract Law 9 (2013) 61-89. Available at SSRN: https://ssrn.com/abstract=2258638

Giesela Ruhl (Contact Author)

Friedrich-Schiller-University Jena ( email )

Faculty of Law
Carl-Zeiss-Straße 3
Jena, Thuringa 07743
Germany

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