The political economy of competition on corporate charters in Europe

Diploma Thesis from the year 2010 in the subject Economics - Macro-economics, general, grade: 1,0, University of Heidelberg (Alfred-Weber-Institut), language: English, abstract: In recent decades, rapidly progressing economic integration has increasingly challengedthe traditional distinction between sovereign nation states as monopolisticsuppliers of public goods on the one hand and an international sphere on the otherhand. The aim of economic policy on the national level was to promote thepopulation's welfare, whereas on the international level economists stressed thepositive effects of cross-border division of labour through international trade.However, as a consequence of economic integration individuals and businessesare subject to legislation and regulation from a multitude of governmental bodiesand layers while the sovereign powers of nation state shrunk because individualsand business became more and more mobile. The strict separation between thenational and the international level therefore "no longer seems to grasp the recenteconomic, social, and legal developments in a globalised world" and "multi-levelgovernance [has] been suggested as an alternative approach".Multi-level governance is especially important in the European Union whereeconomic integration increased the mobility of persons, firms, and capital enormouslywhile regulatory competences were only partially harmonized. In the fieldof company law, harmonization has not been successful so far - neither by creatinga single substantive body of law nor by harmonization of conflict-of-law rules. Therefore, companies were bound to their national company law for a longtime. However, several decisions by the ECJ between 1999 and 2003 changed thissituation and companies in the EU now have the possibility to use the corporatestatutes of other Member States and for the first time regulatory competition oncorporate charters seems to be possible.Regulatory competition on corporate charters has been an issue in the US foralmost 100 years. Firms have long been able to freely choose the corporate statuteof any state. On the other hand, states have incentives to provide an attractivecompany law because they can charge an incorporation fee known as franchisetax on companies registered in their state. On the contrary, EU Member States arenot allowed to charge a fee based on incorporation and corporate mobility wasuntil recently limited.[...]