Law market forces underlying international jurisdictional competition: the case of Taiwan's regulatory evolution on outward investment in mainland China, 1997-2008

Tsai, Chang-Hsien

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Description

Title

Law market forces underlying international jurisdictional competition: the case of Taiwan's regulatory evolution on outward investment in mainland China, 1997-2008

Author(s)

Tsai, Chang-Hsien

Issue Date

2010-06-29T00:59:49Z

Director of Research (if dissertation) or Advisor (if thesis)

Ribstein, Larry E.

Doctoral Committee Chair(s)

Ribstein, Larry E.

Committee Member(s)

• Aviram, Amitai
• Garoupa, Nuno
• Morriss, Andrew P.

Department of Study

Law

Discipline

Law

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

J.S.D.

Degree Level

Dissertation

Keyword(s)

• Jurisdictional Competition
• Law Market
• Taiwan
• China
• Exit Right
• Voice Right

Abstract

This dissertation seeks to explore how basic law market demand and supply forces (or underlying exit and voice rights), interplaying under international jurisdictional competition among global legal centers, shape regulations laid down by such a democratically-constrained onshore jurisdiction as Taiwan. The thesis in this dissertation is that jurisdictional competition brought about by physical mobility would provoke a change in local laws. In general, the case study of Taiwan’s regulatory evolution on outward investment in Mainland China (“China-Investment”) from 1997 to 2008 further examines the extent to which jurisdictional competition fuelled by physical mobility may drive local legal changes. In particular, this case study is to test the process by which constraints on excessive regulation would be imposed by international jurisdictional competition stimulated by business demands and fuelled by physical mobility. To begin with, after incorporating basic theories involving the law market and so forth, I draw lessons from corporate charter competitions in the 19-century U.S. and contemporary Europe as well as the negative effect of the Sarbanes-Oxley Act of 2002 on foreign issuers, that jurisdictional competition constrains regulating jurisdictions from disregarding business demands and from imposing excessive regulation, and that jurisdictional competition brought about by mobility or exit would push for legal flexibility. Subsequently, this case study first displays a stage-by-stage liberalization of the regulation on China-Investment, generally from strictly mandatory to much more flexible legal regimes. This phenomenon could demonstrate the output of market interactions between demand and supply sides of the international law market among global legal centers. Specifically, this dissertation gives a causal interpretation that business demands of Taiwanese firms, via their exit and voice rights, galvanize the relaxation transitions of Taiwan’s Capital Controls, while arriving at a positive conclusion that the usual demand and supply forces operating in this international jurisdictional competition, which was stimulated by Taiwan-invested firms’ business demands and fuelled by concomitant physical mobility, may have the effect of nudging the Taiwanese government in the direction of relaxing the regulation on China-Investment. Although Taiwan’s government struggled to regulate China-Investment as effectively as possible, it failed after all due to the impacts of globalization in general and the denationalization of financial capital in particular. This, on the other hand, suggests that the fact that the international jurisdictional competition provoked by the heightened physical mobility under economic globalization turned the regulation all but ineffective has much to do with the stage-by-stage liberalization. Finally, even though proving a causal relationship is a challenge, this dissertation could, at the very least after ruling out major alternative theories, find a strong correlation between international jurisdictional competition and the stage-by-stage liberalization.

Graduation Semester

2010-5

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Copyright 2010 Chang-hsien Tsai

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