Download this Paper Open PDF in Browser

A New Approach to Corporate Choice of Law

57 Pages Posted: 24 Sep 2003 Last revised: 31 Mar 2011

Jens Dammann

University of Texas at Austin - School of Law

Date Written: August 20, 2003

Abstract

The state of incorporation doctrine, which now applies both in the United States and in the European Community, allows corporations to choose the state law governing their internal affairs by incorporating in the appropriate state. Most scholars believe that this freedom to choose benefits both shareholders and society as a whole. Against this background, an obvious question is whether the state of incorporation doctrine is really the most efficient way of granting corporations the right to choose. In this Article, the Author argues that while there are sound reasons for retaining the state of incorporation doctrine as one mechanism for allowing corporations to choose the applicable corporate law, it should not be the only such mechanism because the state of incorporation doctrine does not allow corporations to choose the applicable corporate law in isolation, but forces them to accept certain “side effects,” such as exposure to litigation in the state of incorporation. These side effects appear to be largely responsible for the general unwillingness of European firms to incorporate in the United States. Therefore, federal law in both Europe and the United States should ensure that corporations can choose the applicable corporate law in their articles of incorporation.

Keywords: regulatory competition, centros, uberseering, uberseering, ueberseering, charter competition, race to the top, race to the bottom, Delaware effect, charter market, double taxation, extraterritoriality

JEL Classification: G30, H70, H71, K22

Suggested Citation

Dammann, Jens, A New Approach to Corporate Choice of Law (August 20, 2003). Vanderbilt Journal of Transnational Law, Vol. 38, No. 1, p. 51, 2005. Available at SSRN: https://ssrn.com/abstract=437100 or http://dx.doi.org/10.2139/ssrn.437100

Jens Dammann (Contact Author)

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States

Paper statistics

Downloads
546
Rank
41,084
Abstract Views
4,001