Delaware's Copycat: Can Delaware Corporate Law be Emulated?

Abstract

Delaware’s famous corporate law and its highly respected specialized Court
of Chancery attract entrepreneurs from all over the world, who choose the
small state as their locus of incorporation and litigation forum, and global
investors who choose Delaware law as the law governing their corporate
investments and mergers and acquisitions (M&A). Other jurisdictions vie
with Delaware in regard to these choices. This interjurisdictional competition
makes Delaware a significant global norm exporter in the field of corporate
law because jurisdictions emulate some of its corporate law. Israel leads the
global pack. For two decades, it has been approximating its corporate law to
Delaware’s and emulating its principal institutions, including by establishing
a specialized Chancery-like court whose judges seek guidance in Delaware’s
case law in deciding open corporate law questions.
This Article employs qualitative methods—interviews with M&A
practitioners from the United States, the United Kingdom, and Israel. We
use the interviews to assess whether the project of approximating Delaware
corporate law has succeeded in shifting incorporation decision preferences away
from Delaware to Israel and watering down the natural reluctance of global
investors to accepting an unfamiliar corporate law when engaging in crossborder
corporate M&A transactions involving an Israeli party. Our findings
indicate that the approximation project has countervailing effects, opinions
about its success being polarized and nuanced; that approximation increases
the familiarity of domestic practitioners with the foreign law being emulated,
making the emulated law easier to implement; and that approximation creates
more room for other aspects of interjurisdictional competition to influence
private choices.