Global Capital Markets Center
|
Choice of Law Rules for International Securities Transactions James D. Cox 66 U. Cin. L. Rev. 1179 (1998) Eleventh Annual Corporate Law Symposium: International Aspects of Mergers and Acquisitions |
ABSTRACT:
Because global securities offerings, international takeovers, and the cross listing of securities are today common events, conflict of laws considerations have prominently invaded the arcane field of securities regulations. Differences among countries in their respective regulation of insider trading exist, as is the case with takeovers, because of different substantive and procedural considerations. International bidders must consider issues such as class actions, contingency fee arrangements, and liberal approaches to such substantive issues as materiality, recklessness, and causation, etc.. It is not an uncommon practice for bidders to avoid unwanted takeover regulations and their accompanying liability regimes, most notably those of the United States, by excluding U.S.-based investors from its bid. Significant substantive and procedural differences also exist among countries in their treatment of sales of securities and misrepresentations that occur in such transactions. International takeovers, cross border insider trading, and transnational sales of securities each invoke its own set of policy issues relevant to its regulation. The author argues that those securities transactions, although quite different from one another, do each share a common consideration relevant to the present investigation of how conflicting regulatory demands are best addressed when a securities transaction invokes the jurisdiction of more than one country. In this respect, the article examines the movement from public to private law through the discussion of importance judicial decisions regarding the territorial reach of the U.S. securities laws, the conduct test, the arbitrate and forum selection clauses among private parties, and their underlying social interests and public policy considerations. This article next addresses the characterization of the issue under review in the context of choice of law problems and finds that within each of the characterizations of the protective provisions one finds in takeover laws, there is a good deal of freedom that one can achieve through self-help. The author argues that a wiser strategy than to embrace a simplifying choice of law rule that the law of the corporation's domicile should govern questions such as insider trading or takeover practices is to recognize that securities law is very much public law. Similarly, it is bad public policy to empower parties in their private securities transactions to choose the law of the country that will regulate their dealings. The article postulates that it is wiser to encourage an environment of regulatory competition with a healthy respect for the costs to local investors, securities issuers, and the national gross domestic product when regulations stray far from the practices that prevail in rival markets, as well as the freedom of businessmen to artfully structure transactions to avoid regulations they believe impose costs in excess of their benefits.
Email the author to request a copy of the article
Return to the Securities Law Index
Return to the Research Index