Article

Assessing Comity as a Form of Market Deference [ Volume 1-2011 ]

1 June 2011

FILED UNDER INTERNATIONAL COMITY, MARKET DEFERENCE, PUBLIC-PRIVATE

( Matthew Canini ) PDF download

The Transformation of International Comity by Professor Paul recounts the evolution of the comity doctrine from seventeenth century Europe through the United States (U.S.) Supreme Court interpretations in the eighteenth century to its current conception.[i] As the concern of the U.S. has changed so too has the notion of comity.[ii] Originating as a doctrine of deference to foreign sovereigns, it evolved into a doctrine of deference to private autonomy.[iii] Paul opines that the next incarnation of comity will be deference to the market.[iv] Not, however, in exactly the same sense as is currently owed to private parties but to the market as an independent entity with its own “autonomous will.” [v]

Paul does not believe the market is in any way autonomous.[vi] Instead, countries will rely on the market to “formulate and implement regulation.”[vii] The market thus operates within “the penumbra of state power.”[viii] He argues this explicitly in an earlier paper in order to abate concerns that E.U. internal market trade liberalization will lead to an environmental regulatory race-to-the-bottom.[ix] Paul considers comity which shows deference to the market as an opt-out which likely threatens this state-market regulatory interaction, raises the risk of regulatory arbitrage, and increases democratic deficit.[x] His concerns are not hypothetical; law and economics scholars have discussed regulatory opt-out or opt-in as a viable conflict of laws option.[xi] This paper will explore a few of these law and economics debates in relation to Paul’s concerns. I hope to show that Paul’s preference for a mandatory legal regime is really just another formulation of a social welfare maximizing system that can be achieved through market deference in a sector by sector approach.

Market deference seems to work better where the distinction between public and private law is stark. Paul believes the public-private market divide to be a fallacy in and of itself[xii], but assuming he is correct even if the public and private divide cannot be parsed out in its entirety, the threat that an individual contract will impugn the public-private regulatory relationship is minimal. Consistent with this U.S. courts have shown a clear preference for choice of law provisions and more broadly forum selection clauses.[xiii] Even where a contract creates externalities, contracting parties should theoretically bargain to a socially optimal outcome via the internalization of those costs.[xiv] From a conflict of laws perspective an efficient outcome may be obtained by opting-in or -out of one state’s mandatory law versus another’s.[xv] Comity performs the same function by allowing an opt-in or -out of certain mandatory rules in the international context.[xvi] While contracts seem like an easy case in support of private ordering, or more broadly market deference, the calculus appears to change when the notion of social welfare grows beyond the parties to the contract.[xvii]

U.S. corporate law in this respect is interesting. Although some scholars have characterized Delaware as a race-to-the-bottom, others see it as a reflection of the efficient market for law.[xviii] In either case, contract law in the form of a corporate charter is determinative of the governing law.[xix] In this way, it is an opt-in to mandatory rules or, from another perspective, an opt-out of the mandatory rules of the places where the corporation operates.[xx] This is the classic example of an opt-in -out market and, in terms of social welfare maximization, it is hard to see how Delaware’s efforts to get corporate charting is a less valid regulatory method than the public-private market intertwine which Paul describes in the case of E.U. internal market trade liberalization. In both examples legislatures respond to market concerns by implementing policies through markets.[xxi] Paul does not discuss corporate law, but if he believes the public market interaction in the E.U. will maintain social welfare[xxii] the implicitly the same principle should hold for Delaware. To this he may try to draw a distinction between the E.U. regulations and Delaware by noting that E.U. regulations were implemented on the consumer level and not the production level, so producers in any given market could not opt-out.[xxiii] There are two responses. First, the inability to opt-out is irrelevant if, as Paul claims, these programs are creating economic benefits for the market participants.[xxiv] Under such conditions parties may be operating in an efficient regulatory framework where opting-out would hurt their business.[xxv] In the alternative, even if the jurisdiction is less efficient, transaction costs associated with changing the regulatory regime may be too high.[xxvi] Second, although implemented at the consumer level producers could still limit their sales to certain markets where they have an existing advantage. Because they have preexisting experience, theses firms can operate at lower cost than competitors. So in reality, although also producing positive benefits, this kind of regulation could be an example of raising rivals costs.[xxvii]

In sum, the lack of an opt-out may be irrelevant, or at worst it may act as a trade restriction. This concern likely prompted the implementation of the E.U. Directive on Packaging and Packaging Waste, which provided minimum harmonized standards.[xxviii] Whether these same effects could have been remedied by an opt-out is beyond the scope of this paper. Important, however, is that what Paul categorizes as state-market interaction – the type of thing he believes comity and more generally opt-out provisions derogate – is summarily a type of social welfare maximization. The proponents of regulatory competition (what Paul would call deference to the “autonomous will” of the market) make the same claim.[xxix] Social welfare maximization for any regulatory system should thus be determinative of the worth of the system.[xxx]

An illustrative debate is found in the arguments which surrounded the movement for investor choice of securities regulation.[xxxi] Like the corporate law and E.U. waste management examples, the U.S. public securities regulator is densely intertwined with private firms and persons.[xxxii] The movement for investor choice, which ultimately failed, highlights the consideration that proponents of opt-in and mandatory systems considered during the debate to reform U.S. securities laws to look more like U.S. corporate law.[xxxiii] Ultimately, the debate turned on whether market competition for securities laws would produce the same amount or greater social benefit as mandatory regulation.[xxxiv]

The regulatory competition method, or what was called “competitive federalism”, would have increased individual state authority to formulate securities disclosure rules and abandon, or make optional, the current federal system.[xxxv] With respect to choice of law, the system would have worked in a manner similar to corporate law where the issuer could choose the regulatory regime through contract.[xxxvi] Also, similar to corporate law proponents cited reduced cost of capital as a major justification for investor choice.[xxxvii]

Opponents, however, came up with compelling arguments as to why the corporate law experience is not analogous to the securities law field. One such argument had to do explicitly with social welfare maximization. Namely, those individual securities issuers would always have incentive to disclose less than was socially optimal because the benefits to the issuer from higher disclosure do not necessarily align with those of the managers. [xxxviii] This problem is compounded by the fact that regulatory choice in the way proponents conceptualized it may not arise, rather jurisdictions may generate substantially similar regulations. [xxxix] Taking these arguments together in a worst case scenario, all significant choices could require a level of disclosure less than the socially optimal level.[xl] The issuer choice debate thus shows that a regulatory opt-in scheme needs a close accounting of social welfare in relation to the goals of the regulation in order to access its potential efficiency.

Notably, both opt-in and mandatory systems derive much of their benefit from being closed. Exceptions to the rules either derogate the will of the legislature as Paul claims in the case of comity, or affect the economic calculus in the case of market dereference.[xli] Comity at one point was used by courts in antitrust cases to cabin extraterritoriality within what they viewed as reasonable boundaries.[xlii] The move to a more narrow usage of comity as a tool in antitrust may reflect not only respect to the U.S. legislature, which specifically provides for extraterritorial jurisdiction, but also concern for the special economic nature of antitrust.[xliii] This kind of discretionary opt-out with the potential to undermine particular aspects of a regulatory system may be more threatening than an opt-in or -out of a total-package regulatory system.[xliv]

In conclusion, the contract and corporate law areas show that opt-in systems can be efficient. Moreover, as the consideration of corporate law shows, opt-in regimes are a form of a regulator backed market system of the kind Paul thinks will avoid a race-to-the-bottom and thus will not necessarily facilitate a diminution of social welfare. However, as was the case with issuer choice, close attention to social welfare maximization is necessary. From this I think it is a fair extrapolation to say that, sector by sector, a market approach to regulation can provide adequate or optimal social welfare. Consequently, the market deference which the U.S. Supreme Court shows in the form of comity is not as contrived as Paul implicates. That said, special attention needs to be paid to what kind of opt-out comity or another mechanism is offering. The consequences to social welfare are greater if such a mechanism allows derogations from a system of benefits and burdens designed for a specific outcome. Derogations in this sense could tip the welfare calculus away from a socially maximizing position.

[i] See generally Joel R. Paul, The Transformation of International Comity, 71 Law & Contemp. Probs. 19 (summer 2008).

[ii] See id.

[iii] See id. at 29, 35-37 (explaining comity as deference to private authority is manifestation of principles of reasonableness and quoting Restatement (Third) of Foreign Relations Law § 403, comment (a) as evidence for this proposition). The Restatement (Third) Foreign Relations says in relevant parts “(1) Even when one of the bases for jurisdiction … is present a state may not exercise jurisdiction to prescribe law with respect to a person or activity having connections with another state when the exercise of such jurisdiction is unreasonable. (2)… unreasonable[ness] is determined by evaluating all relevant factors…” Restatement (Third) of Foreign Relations Law of the United States § 403. Comment (a) notes that some States of the United States apply the reasonableness standard to comity. See id. at cmt. a. This standard is different from traditional comity in that it is not a discretionary doctrine but an obligation between different states. See id. In this respect, states following this doctrine must apply a comity analysis and withhold jurisdiction when facts demand they do so. See id. The notion of reasonableness implicates private ordering because the Supreme Court has come to consider both private and public interests in its analysis. See Paul, supra note 1, at 29 (quoting M/S Breman v. Zapata Off-Shore Co., 407 U.S. 1, 9, 13-14 (1971)). In this way “respect for foreign law [became] a metaphor for the idea that courts respected the wishes of private parties.” Id. at 30. “[c]oncerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system … in the resolution of disputes require that we enforce the parties’ agreement even assuming that a contrary result would be forthcoming in a domestic context.” Id. (quoting Mitsubishi Motors Corp. v. Soler Chrystler-Plymonth Inc., 473 U.S. 614, 629 (1985))

[iv] See Paul, surpa note 1, at 37.

[v] Id. at 36 (citing F. Hoffman-La Roche, Ltd. v. Empagran, S.A., 542 U.S. 155, 164-65 (2004) (denying extraterritorial reach of Sherman Antitrust Act enforcement of global price fixing cartel for vitamins due to considerations of comity and noting Supreme Court’s policy preferences to show deference to “today’s highly interdependent commercial world”). The Supreme Court arrived at this result by considering comity a part of public international law so that it could overcome the explicit extraterritorial reach of the Sherman Act. See id. (explaining the Charming Betsy cannon that assumes Congress intends to “legislate consistent with international law”). Paul notes correctly that comity was never a principle of international law. See id. Nonetheless, this does not seem to concern the Supreme Court. The Supreme Court chooses to favor global market concerns in a way that limits U.S. sovereignty. See id. at 37 (citing Supreme Court cases with language giving deference to global market).

[vi] See Joel R. Paul, Free Trade, Regulatory Competition and the Autonomous Market Fallacy, 1 Colum. J. Eur. L. 29, 30 (1995) [hereinafter Paul on Free Trade]. “[The] global market …[is] the consequence of state power and [the market is]…a primary actor in shaping the policies and behaviors of states.” See id. at 28. In favor of this proposition Paul examines solid waste regulation in the E.U. See id. at 41. The cost of solid waste does not account for the social harms which it causes; in this way it exhibits a kind of market failure. See id. at 43. According to Paul EU states have dealt with this either through incentivizing recycling or disincentivizing waste. See id. at 45.

[vii] Id. at 62.

[viii] Id.

[ix] See id. (concluding “a race to the bottom” is not feasible because political and economic considerations will prompt states to implement regulation through market actors; the principle of autonomy underlying “race to the bottom theory” is thus false).

[x] See Paul, supra note 1, at 38 (“When courts sacrifice the forum’s policy to suit the market, they are substituting their own ideological preference for markets for the policy choices that legislators have exercised. In so doing courts are frustrating policies that are the product of the democratic process”); Joel R. Paul, Comity in International Law, 32 Harv. Int’l L. J. 1, 70-74 (1991) [hereinafter Paul on International Comity] (showing that comity in effect allows corporate parties to opt-out of U.S. regulation).

[xi] See generally Roberta Romano, Empowering Investors: A Market Approach to Securities Regulation, 107 Yale L. J. 2359 (1998) (discussing how securities disclosure regulation in U.S. could be governed on the state level where issuers opt-in to regulations similar to corporate law), reprinted in 2 Erin A. O’Hara, Economics of Conflict of Law, 223 (2007); Erin A. O’Hara & Larry E. Ribstein, From Politics to Efficiency in Choice of Law, 67 U. Chi. L. Rev. 1151 (2000) (describing how efficiency approachs to choice of law would be function of letting people opt-out of inefficient laws and opt-in to efficient laws, and supporting “comparative regulatory advantage” approach as default rule), reprinted in 1 Erin A. O’Hara Economics of Conflict of Law, 212 (2007) . Comparative regulatory advantage would look at which regulator is more efficient based on their ability to regulate not their interest in regulating. See id. at 1190. But see Merritt B. Fox, Retaining Mandatory Securities Disclosure: Why Issuer Choice is not Investor Empowerment, 85 Va. L. Rev. 1335, 1340 (1999) (arguing that proponents of issuer choice for securities disclosure have not sufficiently countered arguments against issuer choice and arguing positively that mandatory disclosure promotes social welfare).

[xii] See Paul, supra note 1, at 25 (discussing separation of public and private law in relation to comity). Paul also notes that growth in large enterprises which underlies this distinction was supported by federal infrastructure programs and beneficial regulatory regimes which mitigated “growing pains.” See id.

[xiii] See City of Austin, Tex. v. Decker Coal Co., 701 F.2d 420, 422 n.4 (5th Cir. 1983) (discussing how Texas choice of law rules allow for stipulation in contract); City of Clinton, Ill. v. Moffitt, 812 F.2d 341, 342 (7th Cir. 1987) (stating parties can agree formally or informally under Illinois law to the substantive law which can be applied to the case); Aluminum Co. of Am. v. Hully, 200 F.2d 257, 261 (8th Cir. 1952) (stating that under Iowa law the parties may stipulate in the contract the law which will govern a dispute). The validity of a choice of law clause is determined under the forums choice of law rules. See Finance One Public Co. v. Lehman Bros. Special Financing, Inc., 414 F.3d 325, 332 (2nd. Cir. 2005) (holding that under New York law validity of choice of law clause between Delaware and Thai corporation must be determined under the forum law). See also Zapata Off-Shore, 407 U.S. at 8-9, 15 (1972) (upholding validity of forum selection clause unless there is strong public policy incentive to disregard it).

[xiv] See Erin Ann O’Hara, Opting Out of Regulation: A Public Choice Analysis of Contractual Choice of Law, 53 Vand. L. Rev. 1551, 1573 (2000), reprinted in 2 Erin A. O’Hara, Economics of Conflict of Laws, 37 (2007). This principle is known as Coase Theorem. See id. Coase Theorem assigns property rights to solve the problem of negative externalities as opposed to taxation. See id. at 1574. Assuming, there is no difference in transaction costs then society does not care which party has control of the right then whoever the right is worth more to will bargain for it and in turn be able to do what they want with the property that the right addresses. See id. Whoever owns the right in a conflict will be entitled to wealth redistribution for the infringement. See id. “Of course, bargaining is never costless, so the Coase Theorm needs restatement to be useful: As long as transactions costs are less than the gain to the parties from bargaining around the initial assignment, the property rights solution induces an efficient resolution.” Id. The owner of the right will internalize the cost of the violation and thus operate at the socially optimal level. See id. at 1573. By implication the state thus does not need to guess at that level through the implementation of regulation or taxes. See id. Nor does it have to determine who is “good” or “bad” by targeting those regulations or taxes at a specific party. See id.

[xv] See id. at 1575 (discussing choice of law as a form of Coase Theorem bargaining).

[xvi] See Paul, supra note 1, at 36; Paul, supra note 10, at 70-74 (showing that comity in effect allows foreign defendants to opt-out of U.S. regulation).

[xvii] See O’Hara, supra note 14, at 1575(noting that certain kinds of restrictions intend to prevent harms to third parties). For example, agreements to commit crimes or agreements which implicate a third party consumer are not necessarily fit for this kind of Coase Theorem Bargaining. See id.

[xviii] See generally William L. Cary, Federalism and Corporate Law: Reflections upon Delaware, 83 Yale L. J. 663, (1974) (arguing Delaware has created “a race to the bottom” in corporate law). But see Ralp K. Winter, Jr., State Law, Shareholder Protection, and the Theory of the Corporation, 6 J. Legal Stud. 252, 256 (1977) (arguing that Delaware through regulatory competition creates more optimal shareholder manager relationships because if management can profit at expense to shareholder wealth then this would reflect in lower share prices for Delaware corporations thereby raising the cost of capital and making them susceptible to hostile takeovers which ultimately would replace management).

[xix] See Larry E. Ribstein, Choosing Law by Contract, 18 J. Corp. L. 245, 267 (1993) (citing Restatement (Second) of Conflict of Laws § 302(2) (1971)). As opposed to other contracts the rules of internal corporate governance are almost always governed by the laws of the incorporating states. See id. This provides certainty where there are multiple parties to this long term contract and the parties are usually spread over multiple states. See id. at 268.

[xx] See id O’Hara & Ribstein, supra note 11, at 1202-03 (explaining how corporations as amalgamations of parties in multiple states benefit from belief that costs associated with applying multiple state rules to corporate governance favor it being viewed as governed under the laws of a single state, this is function of need for “certainty and uniformity”).

[xxi] Although the regulatory scheme looks different both systems show how the intertwine between public regulator and private firms uses economic methodology for social welfare maximization. For example, in Delaware the relationship between charters and revenue is a public-private intertwine which affects regulation. See Roberta Romano, Law as a Product: Some Pieces of the Incorporation Puzzle, 1 J. L. Econ. & Org. 225, 280 (1985) (concluding from empirical data that Delaware’s propensity to adapt its laws is function of state revenues gained from corporate charters). Firms are willing to pay higher taxes for this tailored code and highly sophisticated case law. See id. at 279-80. Delaware regulations reflect jurisdiction expertise and promote foreseeability and certainty. See id. at 281. As the number of charters increases the willingness of the state to tailor it laws grows stronger which partially explains why Delaware garners so many charters. See id. 280. That being said, there are high transaction costs to changing the jurisdiction of incorporation so firms usually do it in response to another major change not simply a preference for laws. See id. at 279. See also Winter, supra note, 18 at 256-57 (arguing “a race to the bottom” would raise firms cost of capital thus it is unlikely to occur); O’Hara & Ribstein, supra note 11, at 1162 (arguing that corporate regulatory competition in U.S. produces efficient results).

In Germany, the design of the private solid waste disposal authority (DSD) saw it become the most influential recycling firm in Europe. See Paul on Free Trade, supra note 6, at 50. The German system required producers of packaging to “take-back” waste from customers even if they didn’t purchase the product. See id. at 47-48. Producers could alternately participate in the private DSD program which provided for periodic waste disposal. See id. at 48. The tight regulatory scheme caused the DSD to have a surplus of waste. See id. at 49. Although suffering from a number of problems the DSD was able to subsidize paper and plastic manufacturers with this surplus in Germany. See id. These policies engendered scorn from other European countries. See id. Paul goes on to describe how these effort lead to harmonization through the E.U. Packaging Directive. See id. at 58 (citing European Parliament and Council Directive on Packaging and Packaging Waste on 20 December, 1994, 94/62/EC).

[xxii] See Paul on Free Trade, supra note 6, at 29, 41, 61-62 (arguing that because markets are not autonomous “a race to the bottom is unlikely”).

[xxiii] See id. at 61.

[xxiv] See id. at 45-58 (describing how early packaging waste regulations in Denmark, Germany, and the Netherlands did not shift production away from these Member States but rather incentivized neighboring states to raise their own environmental standards).

[xxv] See Romano, supra note 21, at 279 (explaining how relationship between tax revenues and willingness to tailor corporate laws binds Delaware and corporations; this effect is compounded as numbers of corporate charters increases). See also OHara & Ribstein, supra note 11, at 1163 (arguing that markets may approach efficiency even without legislature intervention because “incentive to minimize transaction and information costs and the ability to choose legal regimes that accomplish this goal over time may cause the law to move toward efficiency, if only because inefficient regimes end up governing fewer and fewer people and transactions”).

[xxvi] See Romano, supra note 21, at 279.

[xxvii] See Paul on Free Trade, supra note 6, at 49-50 (explaining how DSD market power brought antitrust inquires from German Cartel Office and EU Commission).

[xxviii] See generally European Parliament and Council Directive on Packaging and Packaging Waste on 20 December, 1994, 94/62/EC. My assumption comes from the fact that these packaging programs were already producing benefits for the market, so avoiding a regulatory race to the bottom was likely not a motivation of the E.U. Commissions. C.f. Paul on Free Trade, supra note 6, at 61 (noting that the directive lowered standard for many countries). Compare the U.S. Defense of Marriage Act (DOMA) where avoiding a race to the bottom can be seen clearly. See O’Hara, supra note 14, at 1571 (citing Defense of Marriage Act, Pub. L. No. 104-199 (1996). Anti-gay marriage activist were hostile to the idea that Full Faith and Credit could legalize homosexual marriage. See id. DOMA denies federal benefits to same-sex married couples and allows states to not recognize their marriages if they choose. See id.

[xxix] For a discussion of the benefits of regulatory competition in corporate law see supra notes, 18-21 and accompanying text.

[xxx] Although I will not explore it here, principally if two systems can accomplish the same social welfare maximization then they should choose the system that produces lower transaction costs.

[xxxi] Below I have only highlighted a few representative arguments. For a more detailed analysis of specific arguments see sources listed, supra note 11.

[xxxii] Firms have to make continuous reporting requirements under the Securities Exchange Acts of 1934. See Exchange Act of 1934 §13(a), 15 U.S.C. §§78a-78pp (2010) (authorizing the SEC to set rules requiring public companies to disclose information periodically); Regulation S-K. 17 C.F.R. § 229 (2011) (requiring Form 10-K, for periodic disclosure). See also U.S. Securities Exchange Commission General Rules and Regulations Exchange Act of 1934, 17 C.F.R. §240.10(b)(5) (providing a right of action against fraud).

[xxxiii] See Romano, supra note 11, at 2383-88 (analogizing empirical evidence of market for corporate charters to potential market for securities regulation and asserting “a race to the bottom” is unlikely). But see Fox, supra note 11, at 1392 (claiming that even if Romano is correct about corporate charter competition securities regulations is different because “a higher level of disclosure has positive externalities…” which incentivizes issuers to demand disclosure below socially optimal levels).

[xxxiv] See Fox, supra note 11,at 1334 (illustrating that private optimal level of disclosure is lower than socially optimal level of disclosure). See also Romano, supra note 11, at 2362 (noting disadvantages to U.S. shareholders from expanding U.S. securities regulation internationally). U.S. investors have been “explicitly excluded from takeover offerings.” See id. It would also increase competitiveness of U.S. markets which would no longer implement U.S. specific disclosure and accounting rules. See id. at 2362-63. But see Morrison v. National Australia Bank Ltd, 130 S.Ct. 2869, 2883 (2010) (overturning substantial body of jurisprudence holding that rule 10(b) of Exchange Act of 1934 applies extraterritorially).

[xxxv] See Romano, supra note 11, at 2365 (discussing “Competitive Federalism” as being “A Market Approach to Securities Regulation”).

[xxxvi] See id. at 2362 (describing how federal jurisdiction would only apply to firms who explicitly opt-in).

[xxxvii] See id. at 2366 (“as long as investors are informed of the governing legal regime, if promoters choose a regime that exculpates them from fraud, investors will either not invest in the firm at all or will required a higher return on their investment (that is pay less for the security)…”).

[xxxviii] See Fox, supra note 11, at 1356-57 (explaining that private marginal benefit equaling social marginal benefit rests on two unfounded assumptions of issuer choice, “first is that social benefits of disclosure level chosen will be fully reflected in the issuer’s share price” and “second is that the person making the disclosure – the issuer’s managers – will fully enjoy this share price improvement.”).

An issuer’s increased disclosure will result in three kinds of social benefits that will, at least in some situations, not be fully captured by its managers: (1) the reduction in the portfolio risk for the issuer’s less than fully diversified shareholders; (2) the improvement in quality of real investment projects chosen to be implemented in our economy; and (3) the reduction in the agency costs of management.

Id. at 1357. Many of these benefits will manifest in the form of greater share price accuracy. See id. at 1357-1360. It is also important to note that higher share prices resulting from more disclosure originate from the willingness to disclose as opposed to the actual disclosure. See id. at 1361. “Good news” is thus associated with more disclosure while “lack of good news” is associated with silence. See id. “Silence [however] is not a complete substitute for affirmatively disclosing a lack of good news because the market knows that an issuer could choose a low-disclosure regime for reasons other than lack of good news.” Id.

[xxxix] See id. at 1397 (explaining how jurisdictions may attempt to appeal to greatest number of issuers making disclosure regulations more general; U.S. issuer consequently would have governance less equated to their individual needs because the natural inclination for regulators would be to appeal to issuers globally). “U.S. issuers would likely have requirements further from these issuers’ socially optimal level of disclosure than are the requirements of the current U.S. mandatory regime.” Id.

[xl] See id. at 1395-97.

[xli] See Paul, supra note 1, at 38 (noting derogation to legislatures by comity giving deference to the market); see also Ribestein, supra note 19, at 267 (explaining being subject to only one law as benefit to corporate internal governance); Romano, supra note 1, at 2362 (asserting benefit of “competitive federalism” is being subject to “only one sovereign… over all transactions”)

[xlii] See Spencer Weber Waller, The Twilight of Comity, 38 Colum. J. Transnat’l L. 563, 565 (2000) (describing decreasing importance of comity for antitrust cases). Comity was popular in lower courts until Hartford Fire Ins. Co. v. Cal., 509 U.S. 764 (1993). Id. at 569.

[xliii] See Foreign Trade Antitrust Improvement Act, 15 U.S.C § 6a (1982) (defining the extraterritorial reach of the Sherman Antitrust Act). In Hartford Fire the court adopted the “true conflict” rule whereby a foreign government would have to specifically require what the U.S. forbids in order to invoke a comity analysis. See Spencer, supra note 42, at 569; see also Hartford Fire, 509 U.S. at 788-89.

[xliv] See Paul on International Comity, supra note 10, at 70-74. Paul also asserts alternatives to comity which would promote regulation. See id. at 74 (arguing for “(1) international coordination of regulatory policies, (2) international harmonization of conflicts principles, and (3) judicial deference to domestic legislation and public policy.”).