Jurisdictional arbitrage

Last updated

Jurisdictional arbitrage is the practice of taking advantage of discrepancies between competing legal jurisdictions. It takes its name from arbitrage, the practice in finance of purchasing a good at a lower price in one market and selling it at a higher price in another. Just as in financial arbitrage, the attractiveness of jurisdiction arbitrage depends largely on its transaction costs, here the costs of switching legal service providers from one government to another. [1]

Contents

The lower the exit costs for leaving the jurisdiction (unrestricted emigration, cheap travel, liquidity of assets) the more desirable and feasible it is. Conversely, high entry costs into the more favourable jurisdiction are an inhibitor on jurisdictional arbitrage; certain tax havens such as Andorra grant permanent residency rights to immigrants only if they meet certain criteria. Jurisdictional arbitrage is a significant concept in modern free market anarcho-capitalism.

Applications

The practice of individuals seeking asylum involves appealing to a jurisdiction with favorable individual rights for residency, where the individual's native jurisdiction is seen by them to offer insufficient protection. For example, women have fled West African nations which practice tribal female genital mutilation and/or extremist Islam [2] in favour of European and North American jurisdictions. [3] In July 2019, one of the wives--Princess Haya--of the ruler of Dubai was in a London courtroom to ask the state to provide and enforce a non-molestation order for her and what is known as a forced marriage protection order for their daughters; otherwise the women would be forced to submit to the Sharia law jurisdiction of Sheikh Mohammed. [4]

Outlawry

Jurisdictional arbitrage has also been utilized to hinder attempts at governmental prosecution, by transnational criminals such as terrorists, [5] money launderers, and cyber-attackers. [6] Prior to recent international mobilization against the practice, there existed a long-standing tradition of ousted state leaders such as Erich Honecker, Idi Amin and Augusto Pinochet finding refuge and retirement abroad to avoid prosecution in their native jurisdiction. [7] Pinochet, one-time military leader of Chile sought to evade retributive prosecution in his native jurisdiction by seeking refuge in the United Kingdom. He was later prosecuted by the Spanish court of Baltasar Garzón according to the principle of universal jurisdiction.

To counteract this phenomenon, most countries have signed bilateral extradition treaties with most other countries, and some governments adopted the principle of universal jurisdiction, which has enabled individuals to be prosecuted for offences (particularly alleged human rights violations and war crimes) committed outside the jurisdiction of prosecution – the legal structure of nations such as Belgium and Spain allow for this, as does that of international tribunals operating under the aegis of the United Nations.

Tax policy

A similar attempt at governmental collusion to limit the use of jurisdictional arbitrage for tax avoidance is the policy of tax harmonization. The membership of European governments in the European Union resulted in a collection of nations with a limited set of common legal structures (Four Freedoms) which has resulted in tax competition by the otherwise less-developed nations (such as Ireland in the early 1990s) whereby governments compete for foreign investment by lowering their tax rates significantly below those of their neighbours. This strategy has been adopted in the form of a flat tax by various Eastern European nations, which has resulted in calls for harmonization of tax rates by the traditionally more developed nations such as France, Britain and Germany. [8]

Labour

In the view of one journalist, Microsoft's satellite office in Vancouver was set up because the US Immigration and Naturalization Service was given to restrict the immigration of programmers. [9]

The Blueseed project intended to launch a ship 12 nautical miles from the shore (and thus in international waters) with the goal of allowing entrepreneurs without US work visas legally to work for and create companies close to Silicon Valley. [10]

Advocates

Anarcho-capitalists hope that by subdividing existing governmental jurisdictions into city-states (such as Singapore), competition among jurisdictions for citizens will lead to a diversity of legal climates including more favourable jurisdictions for liberty and self-determination. [11] Cypherpunks and crypto-anarchists also cite low exit costs and fluidity of movement across jurisdictions as a significant means of advancing individual freedom through the free movement of information and capital. [12] [13] The concept of seasteading is an attempt to increase the possibility of jurisdictional arbitrage by decreasing the cost of switching governments.

A notable proponent and practitioner of jurisdictional arbitrage is Canadian businessman and perpetual traveler Calvin Ayre, founder of online gambling consortium Bodog Entertainment Group. [14] Although online gambling is illegal in the United States, a market which accounts for 95% of Bodog's sales, the company pays no corporate taxes there as its activities are distributed across different jurisdictions to minimise tax burden. "We run a business that can't actually be described as gambling in each country we operate in. But when you add it all together, it’s Internet gambling." [15]

See also

Related Research Articles

Universal jurisdiction is a legal principle that allows states or international organizations to claim criminal jurisdiction over an accused person regardless of where the alleged crime was committed, and regardless of the accused's nationality, country of residence, or any other relation to the prosecuting entity. Crimes prosecuted under universal jurisdiction are considered crimes against all, too serious to tolerate jurisdictional arbitrage. The concept of universal jurisdiction is therefore closely linked to the idea that some international norms are erga omnes, or owed to the entire world community, as well as to the concept of jus cogens – that certain international law obligations are binding on all states.

<span class="mw-page-title-main">Paralegal</span> Paraprofessional who assists qualified lawyers in their legal work

A paralegal, also known as a legal assistant, or paralegal specialist is a legal professional who performs tasks that require knowledge of legal concepts but not the full expertise of a lawyer with an admission to practice law. The market for paralegals is broad, including consultancies, companies that have legal departments or that perform legislative and regulatory compliance activities in areas such as environment, labor, intellectual property, zoning, and tax. Legal offices and public bodies also have many paralegals in support activities using other titles outside of the standard titles used in the profession. There is a diverse array of work experiences attainable within the paralegal field, ranging between internship, entry-level, associate, junior, mid-senior, and senior level positions.

A foundation is a type of nonprofit organization or charitable trust that usually provides funding and support to other charitable organizations through grants, while also potentially participating directly in charitable activities. Foundations encompass public charitable foundations, like community foundations, and private foundations, which are often endowed by an individual or family. Nevertheless, the term "foundation" might also be adopted by organizations not primarily engaged in public grantmaking.

International taxation is the study or determination of tax on a person or business subject to the tax laws of different countries, or the international aspects of an individual country's tax laws as the case may be. Governments usually limit the scope of their income taxation in some manner territorially or provide for offsets to taxation relating to extraterritorial income. The manner of limitation generally takes the form of a territorial, residence-based, or exclusionary system. Some governments have attempted to mitigate the differing limitations of each of these three broad systems by enacting a hybrid system with characteristics of two or more.

Immigration law includes the national statutes, regulations, and legal precedents governing immigration into and deportation from a country. Strictly speaking, it is distinct from other matters such as naturalization and citizenship, although they are sometimes conflated. Countries frequently maintain laws that regulate both the rights of entry and exit as well as internal rights, such as the duration of stay, freedom of movement, and the right to participate in commerce or government.

<span class="mw-page-title-main">Immigration to Canada</span> Overview of immigration to Canada

According to the 2021 Canadian census, immigrants in Canada number 8.3 million persons and make up approximately 23 percent of Canada's total population. This represents the eighth-largest immigrant population in the world, while the proportion represents one of the highest ratios for industrialized Western countries.

The Russian Tax Code is the primary tax law for the Russian Federation. The Code was created, adopted and implemented in three stages.

Administrative detention is arrest and detention of individuals by the state without trial. A number of jurisdictions claim that it is done for security reasons. Many countries claim to use administrative detention as a means to combat terrorism or rebellion, to control illegal immigration, or to otherwise protect the ruling regime.

<span class="mw-page-title-main">Indictment and arrest of Augusto Pinochet</span> Arrest of the dictator for crimes against humanity (1990s–2000s)

General Augusto Pinochet was indicted for human rights violations committed in his native Chile by Spanish magistrate Baltasar Garzón in 1998. He was arrested in London six days later and held on house arrest for a year and a half before being released by the British government in 2000. Authorised to return to Chile, Pinochet was subsequently indicted by judge Juan Guzmán Tapia and charged with several crimes. He died in 2006 without having been convicted. His arrest in London made the front pages of newspapers worldwide; not only did it involve the head of the military dictatorship that ruled Chile between 1973 and 1990, it marked the first time judges had applied the principle of universal jurisdiction, declaring themselves competent to judge crimes committed in a country by former heads of state, despite the existence of local amnesty laws.

<span class="mw-page-title-main">Asylum in the United States</span> Overview of the situation of the right for asylum in the United States of America

The United States recognizes the right of asylum for individuals seeking protections from persecution, as specified by international and federal law. People who seek protection while outside the U.S. are termed refugees, while people who seek protection from inside the U.S. are termed asylum seekers. Those who are granted asylum are termed asylees.

<span class="mw-page-title-main">Seasteading</span> Concept of creating permanent dwellings at sea

Seasteading is the concept of creating permanent dwellings at sea, called seasteads, in international waters outside the territory claimed by any government. No one has yet created a structure on the high seas that has been recognized as a sovereign state. Proposed structures have included modified cruise ships, refitted oil platforms, and custom-built floating islands.

The following is a list of terms specific to anarchists. Anarchism is a political and social movement which advocates voluntary association in opposition to authoritarianism and hierarchy.

<span class="mw-page-title-main">Law of Bhutan</span>

The law of Bhutan derives mainly from legislation and treaties. Prior to the enactment of the Constitution, laws were enacted by fiat of the King of Bhutan. The law of Bhutan originates in the semi-theocratic Tsa Yig legal code, and was heavily influenced through the twentieth century by English common law. As Bhutan democratizes, its government has examined many countries' legal systems and modeled its reforms after their laws.

The Center for Justice and Accountability (CJA) is a US non-profit international human rights organization based in San Francisco, California. Founded in 1998, CJA represents survivors of torture and other grave human rights abuses in cases against individual rights violators before U.S. and Spanish courts. CJA has pioneered the use of civil litigation in the United States as a means of redress for survivors from around the world.

Child migration or "children in migration or mobility" is the movement of people ages 3–18 within or across political borders, with or without their parents or a legal guardian, to another country or region. They may travel with or without legal travel documents. They may arrive to the destination country as refugees, asylum seekers, or economic migrants.

<span class="mw-page-title-main">Immigration detention in the United States</span>

The United States government holds tens of thousands of immigrants in detention under the control of Customs and Border Protection and the Immigration and Customs Enforcement (ICE). Immigrants are detained for unlawful entry to the United States, when their claims for asylum are received, and in the process of deportation and removal from the country. During Fiscal Year 2018, 396,448 people were booked into ICE custody: 242,778 of whom were detained by CBP and 153,670 by ICE's own enforcement operations. A daily average of 42,188 immigrants were held by ICE in that year. In addition, over twelve thousand immigrant children are housed by facilities under the supervision of the Office of Refugee Resettlement's program for Unaccompanied Alien Children. Prior to referral to these other agencies, the CBP holds immigrants at processing centers; between mid-May and mid-June 2019, it held between 14,000 and 18,000 immigrants.

Regulatory competition, also called competitive governance or policy competition, is a phenomenon in law, economics and politics concerning the desire of lawmakers to compete with one another in the kinds of law offered in order to attract businesses or other actors to operate in their jurisdiction. Regulatory competition depends upon the ability of actors such as companies, workers or other kinds of people to move between two or more separate legal systems. Once this is possible, then the temptation arises for the people running those different legal systems to compete to offer better terms than their "competitors" to attract investment. Historically, regulatory competition has operated within countries having federal systems of regulation - particularly the United States, but since the mid-20th century and the intensification of economic globalisation, regulatory competition became an important issue internationally.

The Union List, also known as List-I, is a list of 97 numbered items given in Seventh Schedule in the Constitution of India on which Parliament has exclusive power to legislate. The legislative section is divided into three lists: the Union List, State List and Concurrent List. In India, residual powers remain with the Central Government. This makes the government of India similar to the Canadian federal government, and different from the governments of the United States, Switzerland, or Australia.

<span class="mw-page-title-main">Calvin Ayre</span> Canadian-Antiguan entrepreneur

Calvin Edward Ayre is a Canadian-Antiguan entrepreneur based in Antigua and Barbuda. He is the founder of the Ayre Group and Bodog entertainment brand.

<span class="mw-page-title-main">The Seasteading Institute</span> Non-profit organization

The Seasteading Institute(TSI) is a 501(c)(3) non-profit organization formed to facilitate the establishment of autonomous, mobile communities on seaborne platforms operating in international waters (a proposed practice called seasteading). It was founded by Wayne Gramlich and Patri Friedman on April 15, 2008.

References

  1. ↑ Friedman, Patri. "Dynamic Geography: A Blueprint for Efficient Government". Patrifriedman.com. Retrieved 2008-02-29.[ permanent dead link ]
  2. ↑ No interpretation of Islam demands female circumcision, contrary to popular opinion. See Reliance of the Traveller and Tools of the Worshipper (Umdat al-Salik), trans. Nuh Ha Mim Keller
  3. ↑ Branigin, William; Douglas Farah (2000-12-20). "Asylum Seeker Is Impostor, INS Says". The Washington Post . Retrieved 2008-02-29.
    "Not So Harsh on Refugees". The New York Times . 1996-04-22. Retrieved 2008-02-29.
  4. ↑ "Dubai ruler's wife asks UK court for forced marriage protection order". Guardian News & Media Limited. 30 July 2019.
  5. ↑ "Anti-terror measures hit formal finance", Oxford Analytica , 2004-05-25. Retrieved 2008-02-29. "This is especially important given terrorists' ability to exercise jurisdictional arbitrage."
  6. ↑ Kshetri, N. (2005). "Pattern of global cyber war and crime: A conceptual framework" (PDF). Journal of International Management. 11 (4): 541–562. doi:10.1016/j.intman.2005.09.009. S2CID   44984081.
  7. ↑ Stephen Macedo, ed. (February 1, 2006). Universal Jurisdiction: National Courts and the Prosecution of Serious Crimes Under International Law. University of Pennsylvania Press. p. 164. ISBN   0-8122-1950-3.
  8. ↑ Buerkle, Tom (1998-12-10). "Blair and Schroeder Agree on Taxes". International Herald Tribune. Archived from the original on 2011-08-05. Retrieved 2012-03-02.
  9. ↑ "Microsoft pressures U.S. in Vancouver move". National Post. 2007-07-06. Archived from the original on 2016-03-04. Retrieved 2012-03-02.
  10. ↑ McCullagh, Declan (2011-11-08). "Visa problems? 'Seasteading' your startup may be the answer". CNET. Archived from the original on 2011-11-22. Retrieved 2012-03-02. the entire enterprise could be jeopardized by immigration officials irritated by what amounts to jurisdictional arbitrage and a clever legal hack
  11. ↑ Huebert, J.H. (2005). "No Duty To Obey The State: Reply To Barnett". Journal of Libertarian Studies . 19 (4): 79–81. Retrieved 2008-02-29.
  12. ↑ Menthe, D. (1998). "Jurisdiction In Cyberspace: A Theory of International Spaces" (PDF). Telecommunication & Technology Law Review, Michigan. 4: 69. Archived from the original (PDF) on 2008-08-20. Retrieved 2008-02-29.
  13. ↑ Clarke, R. (1997). "Encouraging Cyberculture'". CAUSE in Australasia. 97. Archived from the original on 2008-03-12. Retrieved 2008-02-29.
  14. ↑ Bashir, Martin (2006-07-07). "Online Gambling Mogul Living it Up". ABC News . MSNBC . Retrieved 2008-02-29.
  15. ↑ Miller, Matthew (2006-03-27). "Catch Me If You Can". Forbes . Archived from the original on May 21, 2006. Retrieved 2008-02-29.

Further reading

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.