Riles on Regulatory Arbitrage
Annelise Riles (Cornell Law School) has posted Managing Regulatory Arbitrage: A Conflict of Laws Approach on SSRN.
Many of the core challenges facing national financial regulators stem from a classical puzzle of international law: how to manage conduct that is beyond national jurisdiction, or conduct that is potentially subject to multiple regulatory authorities, in a context in which markets are transnational and market participants arbitrage the differences between regulatory regimes to their own advantage. The dominant approach of the G20 to this challenge has been a model borrowed from public international law and institutions. After reviewing some of the limitations of this approach, the paper considers how tools in the private international lawyer’s toolkit that might offer a very different, yet potentially more effective approach.
A very interesting article and thanks very much, Anne-Lise, for the cite. I think you are absolutely right to put regulatory arbitrage at the centre of the diagnosis and possible approach to the global financial crisis and capital market regulation – on this point, Katarina Pistor’s pioneering Legal Theory of Finance is indeed exemplary in that it is suggests a specifically private law approach. This is also something we have been trying to work on in our Pilagg (private international law as global governance) series over here, with additional emphasis on the significance of conflict of laws in this context. More generally, the idea of the conflicts of laws as containing legal tools which can be fine-tuned to deal with the perverse effects of international regulatory arbitrage is important (in short, see RCADI vol 307); without forgetting of course that the same tools can actually generate those effects, particularly through the indiscriminate use of party autonomy in a global setting! Thank you Gilles, for the flow of interesting information!