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Working in a global economy means a lot more than where a business builds or sends its products. Today, a business owner may operate a shipping business in Florida, have the business incorporated in Delaware, maintain the company’s assets in an offshore bank account in the Cayman Islands and specify that any legal disputes be litigated in the United Kingdom. And this is all perfectly legal.
In her new book, The Law Market, Vanderbilt Law School professor Erin O’Hara examines the increasing ability businesses and individuals have to “shop” around for laws that work the best for them. In turn, states and countries end up competing with each other for business by trying to supply the most desirable laws.
“There is a law market out there. Whether we like it or not, mobile assets enable companies and wealthy individuals to choose their governing laws,” said O’Hara.
Even though O’Hara found benefits to a “law market,” including the potential for streamlined laws that could better suit large numbers of people or global businesses, she said a “law market” as it runs now can limit the ability of an individual government to enforce regulations and protect third parties from harmful activities.
O’Hara and co-author Larry Ribstein propose a system of simple, contractual choice-of-law rules designed to maintain a healthy trade-off between solid legal protection and the evolution of laws in a global environment.
“A contractual approach is the simplest, most effective way to maximize the benefits of the law market while tempering its social, economic and political costs,” said O’Hara.
O’Hara adds that the legislature of a state or nation should make the decision, on a case-by-case basis, about whether to block the law market to protect consumers or the environment.
“Legislatures, rather than courts, are the right place to house these questions because it’s much easier to shut down the negative effects of the law market with clear legislative policy than with vague court standards.”
Media Contact: Amy Wolf, (615) 322-NEWS
amy.wolf@vanderbilt.edu