The Role of Comparative Law in Shaping Corporate Statutory Reforms

This Essay discusses how comparative law played and plays a role in the statutory development of corporate laws. The influence of laws of other systems on the development of statutory law is common, explicit, and represents a tradition that accompanied legal reforms since the very beginning of the development of legislation. Focusing on modern corporate law, I argue (but the argument could be extended to many other legal fields) that it is necessary to distinguish two basic ways in which comparative law influences legal reforms in one particular jurisdiction. The first one is through regulatory competition among different systems. In order to make one system more competitive and attractive, or to remove disadvantages affecting the economic development of one system, legislatures can respond to foreign threats by changing their laws either borrowing rules and institutions from other systems (legal transplants), or by adopting rules designed to protect their interests vis-à-vis the effects of foreign law. The second “channel” through which comparative law plays a role in shaping local rules is a top-down harmonization process. Different reasons can suggest a harmonized regulation of corporate law: the need to create a common market in which all economic actors can operate in a leveled playing-field, the removal of barriers to commerce among states, the desire to reduce regulatory arbitrage, the goal of ensuring to all constituencies of different jurisdictions a similar level of legal protection, and so on. Typically, international agreements can foster harmonization, and the paradigmatic example of this are corporate law (and securities regulation) directives in the European Union, but examples are also present in the U.S.: consider, for example, the Sarbanes-Oxley Act of 2002 that introduced some common rules in the field of corporate governance at the federal level, or the role played by the Model Business Corporation Act. The rules contained in these legal instruments are rarely developed out of the blue. Generally they take into account regulations already existing in one or more jurisdictions, and through a negotiation process tend to extend them also to other systems. In this Essay I will discuss several examples of how comparative law influenced the development of statutory corporate law either through the mechanism of regulatory competition, or through harmonization; both in the U.S. and in the European Union. I will conclude by considering the role of comparative law in corporate law statutory evolution