DOUGLAS W. ARNER, The University of Hong Kong - Faculty of Law, University of Hong Kong
Email: douglas.arner@hku.hk
ROSS P. BUCKLEY, University of New South Wales (UNSW) - Faculty of Law
Email: ross.buckley@unsw.edu.au
DIRK A. ZETZSCHE, Universite du Luxembourg - Faculty of Law, Economics and Finance, Heinrich Heine University Dusseldorf - Center for Business & Corporate Law (CBC), European Banking Institute
Email: dirk.zetzsche@uni.lu

Europe’s path to ‘open banking’, ‘open data’ and ‘open finance’ rests upon four apparently unrelated pillars: (1) the facilitation of open banking to enhance competition in banking and particularly payments; (2) strict data protection rules reflecting European cultural concerns about dominant actors in the data processing field; (3) extensive reporting requirements imposed after the Global Financial Crisis to control systemic risk and change financial sector behaviour; and (4) a legislative framework for digital identification imposed to further the European Single Market.

This chapter analyses these four pillars and suggests that together they will underpin the future of digital finance in Europe and that together they effectively establish the framework for not only ‘open banking’ and ‘open data’ but ‘open finance’. These European experiences provide profound insights for other societies facing choices as to the role of data in their future. In some, data will be controlled by a small number of massive firms and governments which use it for profit and suppression. In others, data will be under the control of individuals – democratized data – which should support a more open and innovative economy and society. In the evolution of these futures, legal and regulatory systems will play a key role.

JENNIFER ARLEN, New York University School of Law, European Corporate Governance Institute (ECGI)
Email: Jennifer.Arlen@nyu.edu

Governments cannot effectively deter corporate crime unless individual wrongdoers and corporations are liable for corporate misconduct. Yet leading scholars claim corporation need not be criminally liable because corporate civil liability is sufficient. Civil and criminal liability are equally effective, they argue, because they can impose the same sanctions: monetary penalties and collateral sanctions. Yet enforcement effectiveness does not turn on sanctioning ability alone. It also depends on enforcement officials’ willingness and ability to enforce. This Article shows that eliminating federal corporate criminal liability would undermine deterrence because large corporations would be better able to leverage their political influence over Congress and the White House to reduce corporate enforcement absent corporate criminal liability. Civil enforcement is more vulnerable to political influence channeled through Congress and the White House than criminal enforcement. In addition, civil enforcement would be less effective because eliminating corporate criminal enforcement would leave civil enforcement more vulnerable to companies’ political influence, less effective, and less likely to pursue individual wrongdoers.

MATTEO GATTI, Rutgers, The State University of New Jersey - Rutgers Law School
Email: mgatti@kinoy.rutgers.edu

Despite the ever-growing influence of shareholders in corporate governance, interested voting is a topic that has not been fully explored. While the law is attentive to transactions with a controlling shareholder, such transactions hardly cover all instances in which an interested shareholder may harm the corporation by casting a pivotal vote determining the outcome of a resolution. This Paper is the first to offer a systematic mapping of interested voting based on type of shareholder resolution and type of shareholder. It describes existing approaches on interested voting, by categorizing them as bright-line rules, open-ended standards or “anything goes.” Aside from policing controlling shareholders and, to a lesser extent, acquirers in M&A transactions, the law does not offer any remedies in several other areas in which interested voting might occur, thus de facto establishing “anything goes” as the default regime.

This Paper makes several contributions to the literature. First, it reckons that in some fields “anything goes” has its merits: whenever policies to tackle interested voting are difficult to implement and adjudicate, “anything goes” limits transaction and enforcement costs, as well as litigation rents. However, in some other fields, such as M&A and other financial transactions that one way or another are subject to a shareholder vote, tailored approaches come at a premium because “anything goes” would otherwise leave investors unprotected. Regulating interested voting can curb certain market failures if voting outcomes could systematically be swayed by votes at odds with common interests of shareholders—in the long run, this would result in a reduction of wealth, if certain interest groups could organize and take advantage of such a lax approach. Moreover, if “anything goes” is really the default law of the land, we must confront with some troublesome realities: (i) nearly half of close-vote transactions pass thanks to interested voting; (ii) insiders and other repeat players like index funds and hedge funds (especially arbitrageurs) are more likely to cyclically be pivotal, undetected interested voters and take advantage of a lax regime (this is particularly problematic in our age of reconcentration of corporate ownership); and (iii) the corporate law system would have less basis to justify certain pillar doctrines (Unocal, Blasius, C & J Energy, and Corwin) on shareholders’ ability to vote for their preferred solution if in fact votes might be easily tainted by interested voting.

HILARY J. ALLEN, American University - Washington College of Law, American University - Washington College of Law
Email: hjallen@wcl.american.edu

The rise of crypto poses very real risks for financial stability, which I have explored at length in research that I would be happy to share with the Committee. In considering its response to crypto, I submit that Congress’s most important goal should be to ensure that crypto does not cause a financial crisis. Proponents of crypto often cite the industry’s potential to create jobs and improve financial inclusion, but financial crises destroy jobs and exacerbate inequality – including for people who never invested in crypto in the first place.

A “stablecoin” is a relatively new form of crypto asset. Stablecoins try to avoid the volatility associated with cryptocurrencies like Bitcoin by pegging their value to the US Dollar (or some other fiat currency). In November of this year, the President’s Working Group on Financial Markets released a report on stablecoins (the “PWG Report”) that identified a number of risks associated with stablecoins, and made three recommendations for addressing those risks. The PWG Report’s first recommendation reads as follows:

To address risks to stablecoin users and guard against stablecoin runs, legislation should require stablecoin issuers to be insured depository institutions, which are subject to appropriate supervision and regulation, at the depository institution and the holding company level.

In this statement, I will set out why I share the PWG’s general concerns about crypto and financial stability, but disagree with this specific recommendation. In short, stablecoins are not really being used to make payments for real-world goods and services. Instead, the primary use of stablecoins is to support the DeFi ecosystem. DeFi is a type of shadow banking system with fragilities that could – if DeFi reaches significant scale – disrupt our real economy. If lawmakers and regulators treat stablecoins as regulated banking products, that will lend legitimacy to and inspire confidence in stablecoins in a way that is likely to turbocharge the growth of DeFi. While stablecoins do have structural fragilities that may make them vulnerable to runs, the incidence and costs of stablecoin runs can be addressed by other policies that are less likely to encourage the growth of DeFi.

At the conclusion of this statement, I will summarize some of the policy options available to Congress in responding to stablecoins. These policy options range from an outright ban on stablecoins, through a licensing regime for stablecoins, to a multifaceted approach that uses aspects of securities law, antitrust, financial stability regulation, and banking law to respond to stablecoins’ risks. While any regulation will inevitably create some barriers to innovation, this is a necessary trade-off when dealing with money and finance. Use cases for stablecoins and DeFi are often explained with analogies to other digital services – “send money as easily as sending a photograph”, or “send money just like sending an email” – but these analogies underestimate the stakes involved. Because money and finance are the lifeblood of our economy, finance has always been highly regulated in a way that Kodak’s provision of photographs, and FedEx’s delivery of couriered letters, never were.

ASAF RAZ, University of Pennsylvania Law School
Email: asafraz@pennlaw.upenn.edu

Corporate law is again taking center stage in practice, policymaking, and scholarship. Despite this, commentators have yet to adequately answer a very preliminary question: is corporate law part of private law, or is it public law? This distinction has far-reaching implications for ongoing policy discussions, including the debate between shareholder and stakeholder conceptions of the firm, epitomized by a series of recent high-profile legislative proposals and scholarly works.

As this Article demonstrates, corporate law is indeed private law. Relying on broader legal and economic theory, together with insights from the new private law (NPL) literature, this Article responds to the four main types of arguments raised by public theorists of corporate law: that the corporation's affairs are dictated by its state-issued charter; that the requirement of registration with a state agency makes the corporation a "creature of the state"; that the mandatory, structural features of corporate law make it public law; and that corporations are required to take into account the interests of a broad array of stakeholders. Each claim is based on real-world observations, but as this Article illustrates, in every case, those facts actually point to corporate law being part and parcel of private law—just as much as contract, property, or tort law.

At the same time, this Article also explains how corporate law advances broader rule of law considerations. Corporate law is far from being the contractarian regime envisioned by some scholars since the 1980s. Instead, corporate law—like contract, property, and tort, albeit even more systemically—requires strict compliance with positive law (both public and private), and strongly upholds values of interpersonal justice and fairness. This Article expands on these points in a highly nuanced manner, not previously recognized in scholarship, or in the wider public debate about corporations in society.

GARRY JENKINS, University of Minnesota - Twin Cities - School of Law
Email: gjenkins@umn.edu