Abstract
In this article, I discuss the rise and fall of regulatory competition in corporate insolvency law in the European Union. The rise is closely associated with the European Insolvency Regulation (EIR, 2002), and it is well documented. The UK has emerged as the ‘market leader’, especially for corporate restructurings. The fall is about to happen, triggered by a combination of factors: the recasting of the EIR (2017), the European Restructuring Directive (ERD, 2019) and Brexit (2019). The UK will lose its dominant market position. I present evidence to support this hypothesis.
This chapter introduces regulatory competition as a conceptual framework and factual phenomenon. It discusses the structural preconditions of a ‘law market’, including state suppliers’ incentives to compete at all. It closes with a glance at a number of areas in which competitive dynamics among legislators can be found to operate. Law markets have emerged in a growing number of fields, most prominently in the ‘charter competition’ between US states for being chosen as a place of incorporation, with Delaware being the market leader. Another example that has been under intense academic scrutiny is tax competition: states compete for tax revenue and try to offer ‘tax products’ that appeal to mobile individuals and corporations. Further examples discussed in this chapter are drawn from contract, labour, and insolvency law, as well as dispute resolution.
The harmonisation of insolvency law in the European Union has proven challenging. Obstacles such as the protection of national sovereignty, the preservation of legal cultures and a preference for regulatory competition have been studied extensively in the literature. This paper takes a novel approach by providing a perspective from the field of social psychology to further our understanding of the challenges of harmonising insolvency law in the EU. Selected psychological biases are identified, explained and applied to the harmonisation process. Solutions to overcome these biases are also discussed, as it is argued that progress in this area can be achieved by targeting strategies that can overcome these biases.
The Rise and Fall of Regulatory Competition in Corporate Insolvency Law in the European Union