Delaware's New Competition

Abstract

According to the standard account in American corporate law, states compete to supply corporate law to American corporations, with Delaware dominating the market. This “competition” metaphor in turn informs some of the most important policy debates in American corporate law.

This Article complicates the standard account, introducing foreign nations as emerging lawmakers that compete with American states in the increasingly globalized market for corporate law. In recent decades, entrepreneurial foreign nations in offshore islands have used permissive corporate governance rules and specialized business courts to attract publicly traded American corporations. Aided in part by a select group of private sector lawyers who draft legislation for these lawmakers, foreign nations enable American corporations to opt out of mandatory rules that are axiomatic features of American corporate law.

This Article documents an emerging international market for corporate law that has largely been undetected by legal scholars who presuppose an interstate market. While acknowledging the potential benefits offered by foreign nations competing to attract American corporations, this Article highlights a series of countervailing considerations that render any claims about gains from international jurisdictional competition premature at best.

Keywords: corporate law, jurisdictional competition, tax havens, corporate governance, business organizations, conflict of laws, duty of loyalty, derivative suits, comparative corporate law, offshore magic circle firms, corporate charter competition