Corporate law American corporate law scholars have debated on the role of the regulatory competition on corporate law for more than one decade. A Comparative Bibliography In the United States legal academia, corporate law is conventionally said to be the product of a "race" among states to attract incorporations by making their corporate laws attractive to those who choose where to incorporate. Given that it has long been possible to incorporate in one state while doing business primarily in other states, US states have rarely been able or willing to use law tied to where a firm is incorporated to regulate or constrain corporations or those who run them. However, U.S. states have long regulated corporations with other laws (e.g., environmental laws, employment laws) that are not tied to where a firm is incorporated, but are based on where a firm does business. From the "race" to attract incorporations,
Delaware has emerged as the winner, at least among publicly traded corporations. The corporate
franchise tax accounts for between 15% and 20% of the state's budget. In Europe, regulatory competition has long been prevented by the
real seat doctrine prevailing in
private international law of many
EU and
EEA member countries, which essentially required companies to be incorporated in the state where their main office was located. However, in a series of cases between 1999 and 2003 (Centros Ltd. vs. Erhvervs- og Selskabsstyrelsen, Überseering BV v Nordic Construction Company Baumanagement GmbH, Kamer van Koophandel en Fabrieken voor Amsterdam v Inspire Art Ltd.), the
European Court of Justice has forced member states to recognize companies chartered in other member states, which is likely to foster regulatory competition in
European company law. For instance, in 2008, Germany adopted new regulations on the GmbH (Limited Liability Company), allowing the incorporation of Limited Liability Companies [UG (haftungsbeschränkt)] without a minimum capital of EUR 25,000 (though 25% of earnings have to be retained until this threshold is reached).
Labour law Countries may, for instance, seek to attract
foreign direct investment by enacting a lower
minimum wage than other countries, or by making the labor market more flexible. •
International Transport Workers Federation v Viking Line ABP or
The Rosella [2008] IRLR 143 (C-438/05
Taxation •
Tax competition Environmental law Legal scholars often cite environmental law as a field in which regulatory competition is particularly likely to produce a “race to the bottom” due to the externalities produced by changes in any individual state's environmental law. Because a state is unlikely to bear all of the costs associated with any environment damage caused by industries in that state, it has an incentive to lower standards below the level that would be desirable if the state were forced to bear all of the costs. One commonly cited example of this effect is clean air laws, as states may be incentivized to lower their standards to attract business, knowing that the effects of the increased pollution will be spread across a wide area, and not simply localized within the state. Furthermore, a reduction in the standards of one state will incentivize other states to similarly lower their standards so as to not lose business. ==Public services==