Regulatory Competition: A Private International Law Approach

This article analyzes the regulatory competition model (RCM) from a private international law perspective. This perspective helps us identify and resolve two gaps in the standard explanation of the RCM. According to the standard explanation, two conditions must be fulfilled for the market of legal products to function well: (1) free movement of resources (persons, capital, and goods); (2) the absences of cross-border externalities. In relation to this second condition, the standard model argues that a uniform material rule is necessary to overcome cross-border externalities. The main thesis of this article is that a private international law approach can complete this model by adding two ideas. First, a smooth functioning of the market-of-legal products requires, not only the free movement of resources, but also a uniform private international law system which guarantees the autonomy of the parties (free choice of law) and the procedural implementation of this autonomy (free choice of forum and free movement of judgments). And second, a uniform material law, which wipes out the regulatory market, is not essential to deal with the externality problem; rather a uniform conflict-of-laws rule, which leads to the internalization of cross-border externalities by states, can correct at least some of the externalities problem and also maintains the regulatory market.