Law Commons^™

Reaching Out For Green Policies: National Environmental Policies In The Wto Legal Order, Petros C. Mavroidis

Faculty Scholarship

The WTO does not squarely address the issue of jurisdictional ambit of national policies (affecting trade). And yet, absent some agreement as to what trading nations can and cannot do, the WTO loses much of its effectiveness. In the absence of explicit regulation of the issue in the WTO contract, one would reasonably expect WTO Members to behave in line with the postulates governing allocation of jurisdiction embedded in public international law. WTO practice evidences neither an explicit acceptance nor a refusal of these rules.

Lessons From Sec V. Citigroup: The Optimal Scope For Judicial Review Of Agency Consent Decrees, Dorothy S. Lund

Faculty Scholarship

On November 28, 2011, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York in Manhattan declined to approve a consent judgment between the Securities and Exchange Commission (SEC) and Citigroup. Because Citigroup had not admitted or denied the allegations in the consent decree, Judge Rakoff concluded that he was unable to make an informed judgment about the merits of the settlement. Judge Rakoffs decision has garnered serious criticism from legal observers and rekindled discussion about the scope of judicial review of agency consent decrees, which have become a valuable agency enforcement tool. …

The Tax Reform Road Not Taken – Yet, Michael J. Graetz

Faculty Scholarship

The United States has traveled a unique tax policy path, avoiding value added taxes (VATs), which have now been adopted by every OECD country and 160 countries worldwide. Moreover, many U.S. consumption tax advocates have insisted on direct personalized taxes that are unlike taxes used anywhere in the world. This article details a tax reform plan that uses revenues from a VAT to substantially reduce and reform our nation’s tax system. The plan would (1) enact a destination-based VAT; (2) use the revenue produced by this VAT to finance an income tax exemption of $100,000 of family income and to …

How To Improve The Financial Architecture And Its Resilience, Dirk Helbing, Eve Mitleton-Kelly, Jean-Philippe Bouchaud, Fabio Caccioli, J. Doyne Farmer, Steve Keen, Katharina Pistor, Dennis J. Snower, Olsen Richard, Angelo Ranaldo, Norbert Häring, Edward Fullbrook

Faculty Scholarship

This financial resilience survey was circulated on behalf of a working group of the Complexity Council of the World Economic Forum comprised of Prof. Eve Mitleton-Kelly of London School of Economics and Prof. Dirk Helbing at ETH Zurich's Risk Center. It was sent to a few dozens of financial experts with the aim to create an inventory of ideas of how the financial system might be improved and made more resilient. Unconventional ideas were also welcome.

Three Proposals For Regulating The Distribution Of Home Equity, Ian Ayres, Joshua Mitts

Faculty Scholarship

The Consumer Financial Protection Bureau’s recently-released “qualified mortgage” rules effectively discourage predatory lending but miss an equally important source of systemic risk: low-equity clustering. Specific “volatility-inducing” mortgage terms, when present in a substantial cluster of mortgage contracts, exacerbate macroeconomic risk by increasing the chance that the housing and lending markets will have to absorb a wave of simultaneous defaults after a downturn in housing prices. This Article shows that these terms became prevalent in a substantial proportion of residential mortgages in the years leading up to the home mortgage crisis. In contrast, during the earlier “amortization era” (when mortgagors were …

Merger Control Procedures And Institutions: A Comparison Of The Eu And Us Practice, William E. Kovacic, Petros C. Mavroidis, Damien J. Neven

Faculty Scholarship

The objective of this paper is to discuss and compare the role that different constituencies play in US and EU procedures for merger control. We describe the main constituencies (both internal and external) involved in merger control in both jurisdictions and discuss how a typical merger case would be handled under these procedures. At each stage, we consider how the procedure unfolds, which parties are involved, and how they can affect the procedure. Our discussion reveals a very different ecology. EU and US procedures differ in terms of their basic design and in terms of the procedures that are naturally …

A Turquoise Mess: Green Subsidies, Blue Industrial Policy And Renewable Energy: The Case For Redrafting The Subsidies Agreement Of The Wto, Aaron Cosbey, Petros C. Mavroidis

Faculty Scholarship

Canada-Renewable Energy presented the WTO Panel and Appellate Body (AB) with a novel issue: at the heart of the dispute was a measure adopted by the province of Ontario whereby producers of renewable energy would be paid a premium relative to conventional power producers. Some WTO Members complained that the measure was a prohibited subsidy because payments were conditional upon using Canadian equipment for the production of renewable energy. The AB gave them right only in part: it found that a local content requirement had indeed been imposed, but also found that it lacked evidence to determine whether a subsidy …

Protecting Reliance, Victor P. Goldberg

Faculty Scholarship

Reliance plays a central role in contract law and scholarship. One party relies on the other's promised performance, its statements, or its anticipated entry into a formal agreement. Saying that reliance is important, however, says nothing about what we should do about it. The focus of this Essay is on the many ways that parties choose to protect reliance. The relationship between what parties do and what contract doctrine cares about is tenuous at best. Contract performance takes place over time, and the nature of the parties 'future obligations can be deferred to take into account changing circumstances. Reliance matters …

Irredeemably Inefficient Acts: A Threat To Markets, Firms, And The Fisc, Alex Raskolnikov

Faculty Scholarship

This Article defines and explores irredeemably inefficient acts – a conceptually distinct and empirically important category of socially undesirable conduct. Though inefficient behavior is, no doubt, pervasive, the standard view holds that inefficient conduct may be converted into efficient behavior by forcing actors to internalize the external harms of their decisions. For some acts, however such conversion is impossible. These acts are not just inefficient forms of otherwise socially beneficial activities – they are not just contingently inefficient. Rather, they are inefficient at their core; they reduce social welfare no matter what the regulator does. These irredeemably inefficient (or just …

Market Efficiency After The Financial Crisis: It's Still A Matter Of Information Costs, Ronald J. Gilson, Reinier Kraakman

Faculty Scholarship

Contrary to the views of many commentators, the Efficient Capital Market Hypothesis ("ECMH"), as originally framed in financial economics, was not "disproven" by the Subprime Crisis of 2007-2008, nor has it been shown to be irrelevant to the project of regulatory reform of financial markets. To the contrary, the ECMH points to commonsense reforms in the wake of the Crisis, some of which have already been adopted. The Crisis created a lot of losers – from individual investors to pension funds and German Landesbanken – who purchased mortgage-backed securities that they did not, and perhaps could not, understand, and it …

Three Discount Windows, Kathryn Judge

Faculty Scholarship

It is widely assumed that the Federal Reserve is the lender of last resort in the United States and that the Fed's discount window is the primary mechanism through which it fulfills this role. Yet, when banks faced liquidity constraints during the 2007-2009 financial cfisis (the Cisis), the discount window played a relatively small role in providing banks much needed liquidity. This is not because banks forewent government-backed liquidity; rather, they sought it elsewhere. First, they increased their reliance on collateralized loans, known as advances, from the Federal Home Loan Bank System, a little-known government-sponsored enterprise that grew in size …

Coasean Bargaining In Consumer Bankruptcy, Edward R. Morrison

Faculty Scholarship

During my first weeks as a graduate student in economics, a professor described the Coase Theorem as “nearly a tautology:” Assume a world in which bargaining is costless. If there are gains from trade, the Theorem tells us, the parties will trade. The initial assignment of property rights will not affect the final allocation because the parties will bargain (costlessly) to an efficient outcome. “How can that be a theorem?,” I remember thinking at the time.

How International Institutions Evolve, Anu Bradford

Faculty Scholarship

Economic theory suggests that international institutions cannot simultaneously widen and deepen. There is an inevitable trade-off between the benefits of site and the costs of heterogeneity. Consequently, institutions ought to be either small and deep or, alternatively, large and shallow. Yet in reality, we observe that international institutions embrace new members while concurrently pursuing deeper cooperation. This Article seeks to explain how institutions evolve over time in light of this size/heterogeneity trade-off It examines the strategic responses of members of institutions to heterogeneity costs and identifies two distinct yet related strategies that allow states to pursue gains from cooperation while …

Fee-Shifting Bylaw And Charter Provisions: Can They Apply In Federal Court? – The Case For Preemption, John C. Coffee Jr.

Faculty Scholarship

In the first months after a decision of the Delaware Supreme Court upholding a fee-shifting bylaw under which the unsuccessful plaintiff shareholder was required to reimburse all defendants for their legal and other expenses in the litigation, some 24 public companies adopted a similar provision – either by means of a board-adopted bylaw or by placing such a provision in their certificate of incorporation (in the case of companies undergoing an IPO). In effect, private ordering is introducing a one-sided version of the “loser pays” rules. Indeed, as drafted, these provisions typically require a plaintiff who is not completely successful …

The Nordic Model Of Corporate Governance: The Role Of Ownership, Ronald J. Gilson

Faculty Scholarship

It is commonplace to credit the invention of the public corporation as an important engine of economic growth. The creation of a long-lived vehicle that gave investors both tradable shares and limited liability allowed talented managers to raise capital to fund enterprise. Writing in 1926, the Economist magazine heralded this role:

The economic historian of the future may assign to the nameless inventor of the principle of limited liability, as applied to trading corporations, a place of honor with Watt and Stephenson, and other pioneers of the Industrial Revolution. The genius of these men produced the means by which man’s …

The Judiciary And Fiscal Crises: An Institutional Critique, Peter Conti-Brown, Ronald J. Gilson

Faculty Scholarship

Scholars have long debated the role for courts with respect to governmental action that responds to crisis. Most of the crises analyzed, however, are exogenous to the political process; the courts’ role in response to politically endogenous crises has received less attention. We evaluate the role of the judiciary in a subset of those endogenous crises: the judicial treatment of governmental efforts to resolve the crisis facing underfunded public pensions. Assessing institutional competence schematically with reference to an institution’s democratic accountability and fact-finding ability, we argue that, where institutions function properly, judicial intervention in politically endogenous economic crises should be …

The Possible Advantages Of Islamic Financial Jurisprudence: An Empirical Study Of The Dow Jones Islamic Market Index, Russell Powell, Arthur Delong

Faculty Articles

The Islamic financial system experienced a disproportionately smaller economic hardship in 2008 and 2009 because adherence to Shariʿa tends to encourage conservative investment approaches. Islamic mutual funds were prohibited from investing in the non-Islamic financial sector, highly leveraged companies, and various derivative instruments. Ultimately, this conservative investment approach may have been an effective strategy for mitigating downside risk. The article analyzes the fundamental classical legal requirements that pertain to modern Islamic finance, compares the modern view of Islamic equity investing and its secular capitalist counterpart, explores whether adherence to Shariʿa principles, as defined by the Dow Jones Islamic Market Index, …

Measuring Benchmark Damages In Antitrust Litigation, Justin Mccrary, Daniel L. Rubinfeld

Faculty Scholarship

We compare the two dominant approaches to estimation of benchmark damages in antitrust litigation, the forecasting approach and the dummy variable approach. We give conditions under which the two approaches are equivalent and present the results of a small simulation study.