Choice of Law: New Foundations

This Article develops a new approach to choice of law. Founded on economic principles rather than the notions of sovereignty that are typically used by choice of law scholars, it seeks to build new foundations for choice of law scholarship. The analysis in the Article makes it possible to discuss alternative choice of law rules in terms of their impact on the well-being of individuals. In other words, it makes it possible to consider questions of efficiency within a choice of law discussion. The Article traces how the self-interested behavior of nations is at odds with globally efficient rules, and shows how choice of law rules can impact the incentives of countries. The analysis yields eight “choice of law lessons” that help explain the impact of choice of law rules. From these lessons emerge several policies that provide countries with an incentive to regulate more efficiently. The Article then applies its analysis to several specific substantive law topics – bankruptcy, securities, and antitrust – demonstrating how the framework of the Article can be applied in particular cases. The role of international institutions is also examined. It is shown that they represent an effective tool to facilitate negotiations over choice of law issues in certain cases, but not in others. This discussion informs a variety of current issues. For example, it explains why negotiations over international competition policy and environmental policy should be carried out within the WTO rather than in a separate forum.