Delaware's Global Threat
Journal of Corporation Law (Forthcoming)
48 Pages Posted: 29 Mar 2015 Last revised: 16 Nov 2015
Date Written: November 11, 2015
This article theorizes the under-examined long-term threat to Delaware’s dominance: global competition. In a competitive global business environment, multinational firms and investors have more alternatives when considering where to entrust their investments, raise capital, and adjudicate their disputes. Delaware’s dominance as a site of incorporation and corporate litigation is one of the most debated topics among corporate law scholars. Traditional accounts of Delaware’s dominance overwhelmingly focus on, and at times overstate, potential domestic threats such as interstate competition and federal preemption. A common theme in this literature is the tension between the respective roles of the federal government and the state of Delaware in the regulation of internal corporate affairs. From a global perspective, this approach is too narrow because the destinies of Delaware and the nation are intertwined. The nascent global threat to Delaware and the nation is a confluence of factors including capital migration toward foreign markets, the growing appeal of foreign stock exchanges, multi-jurisdictional litigation, business firms eschewing courts for alternative dispute resolution, and corporate tax-inversion strategies. The new global narrative illuminates key issues such as the importance of Delaware’s courts for resolving complex global business disputes and the contribution of Delaware’s global brand to the strength of United States’ corporate governance. This article posits that Delaware’s key contribution to United States’ corporate governance is the production of substantially judge-made corporate law — a public good providing dynamic guidance to multinational firms and practitioners as well as a deterrent for wayward business behavior.
Keywords: globalization, corporate law, corporations, Delaware, litigation, arbitration, alternative dispute resolution, securities, governance, capital, court of chancery, courts, regulatory competition, reputation, shareholder, international arbitration
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