Regulatory Arbitrage: What's Law Got To Do With It?
Abstract
This paper explores regulatory arbitrage froma legal point of view. I start from the assumption that legislators will sometimes wish to prevent regulatory arbitrage and examine legal tools available to this end. To back up the underlying assumption, I present two perspectives on the phenomenon of regulatory arbitrage. One perspective stresses its competitive element, the other one focuses on instances of arbitrage as unwanted avoidance of a legal regime. It is suggested that from both perspectives we will find that - at least sometimes - regulatory arbitrage is unwanted. I move on to illustrate how EU and U.S. legislators have dealt with an example of unwantedarbitrage. Themain part of the paper thendealswith legal tools to suppress arbitrage. The main focus is on legislative drafting techniques such as choosing a narrow wording, a broad wording, anti-evasion rules or the concept of abuse. I conclude with a glance at problems of regulatory arbitrage in a corporate setting.
