Jurisdictional arbitrage

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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]

The lower the

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

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

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

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

entrepreneurs without US work visas legally to work for and create companies close to Silicon Valley.[10]

Advocates

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

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. S2CID 44984081
    .
  7. 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. 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

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