HARVARD
JOHN M. OLIN CENTER FOR LAW, ECONOMICS, AND BUSINESS
FELLOWS’ DISCUSSION PAPER SERIES

HOW THE OLD WORLD
ENCOUNTERED THE NEW ONE:
REGULATORY COMPETITION
AND COOPERATION IN EUROPEAN
CORPORATE AND BANKRUPTCY LAW

Luca Enriques
Martin Gelter

Abstract
The European framework for creditor protection has undergone a remarkable transformation
in recent years. While the ECJ’s Centros case and its progeny have given EU businesses free
choice with respect to the state of incorporation, and hence to the substantive corporate law
regime, the European Insolvency Regulation has introduced uniform confl ict of laws rules
for insolvencies. However, this regime has opened up some forum shopping opportunities
for corporate debtors. Both regulatory competition in corporate law and forum shopping
in bankruptcy law have been discussed in the US for years, while they are relatively new
territory in the EU. This article attempts to pull together the two emerging discussions and
analyzes possible consequences for the relationship between shareholders, managers and
creditors in European corporations. We argue that, in the absence of evidence of either a
race to the top or the bottom, we cannot rule out adverse consequences of either regulatory
competition in corporate law or forum shopping in bankruptcy. However, the discussion
so far has largely considered only the consequences of the fi rst type of regulatory arbitrage
while neglecting the second. Hence, the issue of the “insolvencifi cation” of corporate
law rules has been brought up in order to enable national policymakers to impose their
respective ideas about creditor protection on fi rms. We suggest that such attempts may
be futile. First, relabeling is possible only to a rather limited degree, and second, while
restricting the scope for corporate law arbitrage, it increases the incentives for forum
shopping in bankruptcy. Ultimately, it may even backfi re, leading to a higher degree
of bankruptcy forum shopping to avoid the very rules that have been insolvencifi ed.