A new Delaware in Europe?

An article in yesterday’s WSJ-Europe discusses corporate competition in Europe and the prospects that a “new Delaware” will emerge. The article notes:

Although it is too early to handicap the race in Europe, Britain, with its relatively simple and flexible system of corporate law, has a head start. That said, relatively smaller states such as the Netherlands, incentivized by the potential dividends of prestige and influence, may be well-positioned to make and sustain the continual investments needed to set themselves apart from the pack. The pace of corporate-law reform in France has also been fast and furious in recent years. Given the dynamism and ambitions of the current administration in Paris, France cannot be ruled out as a contender.

These developments are among those discussed in my and Erin O’Hara’s Corporations and the Market for Law. We note that there are analogies between Europe and the US in the wake of the chartering competition set off by the Centros and other decisions in Europe. However, there are also important differences. In particular, European countries are legally constrained from earning enough revenues from franchise fees to support the kind of corporate law infrastructure that Delaware has developed. Moreover, there are much greater cultural and legal differences among European jurisdictions than within the US, which constrains firm mobility. For whatever reason, the competition in Europe so far has not been for high-quality law and adjudication, as is arguably the case in the US, but for low-cost formation.

As the WSJ article makes clear, all of this is in flux.  It is important for US business people and lawyers to follow these developments in Europe. Among other things, the decline of non-US firms cross-listing in the US is at least as much a function of international competition as of the regulatory and litigation environment in the US. The emergence of a true Delaware in Europe would ratchet up the level of competition.

This is among the topics that I and fellow panelists will be discussing at the AALS Business Associations meeting on January 3 in NYC.

Comments

[M.D. Fatwa]

Ugh! "Incentivized"?? That's what you get when you learn English in B-school.