2006/30 | LEM Working Paper Series | |
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Regulatory Competition Puzzle: the European Design |
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Vahagn Movsesyan |
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Keywords | ||
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Freedom of establishment, Regulatory arbitrage, Regulatory competition, Company law, (Re)incorporations, EU, EEA
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JEL Classifications | ||
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G34, G38, K22, L22, L51, M14
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Abstract | ||
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In this paper, we examine the
inconclusive debate on regulatory competition in the Europe. We demonstrate
that the recent expansion in the EU company law has created archetypal
underpinning for formation of regulatory competition: the ground-breaking
“triptych” of the ECJ on Centros,
Überseering, and Inspire Art, on the top of
previously infamous cases, has paved a way to a
regulatory arbitrage throughout the EU, and a petite migration of
companies abroad is already an evidence. We elucidate that few European states
are putting into practice some facilitation in company registration procedure,
including a significant cut in the minimum capital requirements, aiming to keep
up with foreign options. This is the very process called regulatory
competition, though it is not for charters and not for re-incorporations, but
for capital requirements and for start-ups. Our idea is that these actions are
only some, but promising, first steps en route to expansion towards
regulatory competition in Europe also for large companies and for their
reincorporation options. Hitherto, we reject the existence of an “EU Delaware”,
though we demonstrate that few EU and EEA Member States have potential to take
the lead in forthcoming chartermongering activities and are preparing for that:
we claim for the appearance of more then one “European Delawares” in Europe at
least for the time being. The then competition result will largely depend on the further advancements
in the EC programs on this field, and/or on another “spectacular crusade” of
the ECJ in particular, be it a reality. Thus, it is still soon to conclude the
competition and prize the winner, but considerable network externality effects
that drive a path dependent evolution suggests that it is likely to see a state
that will become the “basin of attraction” for most of the companies later on. As a focal point, in the EU it is implausible to see a regulatory competition without
Brussels meddling down from the top, which affects such developments
negatively, unfortunately.
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