Jean Monnet Center at NYU School of Law


VI. Choice of Law in an Internal Market

A. Introduction

We shall now examine if, and if so how, the internal market changes, or reinforces, choice-of-law in a federal system as developed above.

1. No Discrimination Against Interstate Commerce

The non-discrimination requirement of internal market, as embodied in the Dormant Commerce Clause and the Freedoms, may add to the general non-discrimination requirement in the US and the EU insofar as it prohibits discrimination against interstate commerce (!), rather than (or in addition to) against foreign citizens. This can be relevant when a choice-of-law provision is neutral as to the nationality or residence of the parties involved, but leads to results unfavorable to interstate commerce (even in theory, i.e., we are not referring to hidden discriminations). A nice example is Art. 40 para. 1 of the German Introductory Law to the Civil Code [EGBGB], which gives the victim the option to choose between the law of the place where the act was committed, and the law of the place of injury. In areas like products liability, this leads to an importer being systematically being put in a worse position than a domestic producer. Art. 40 para 1 is incompatible with the Freedoms within their scope of application.163 For the most part, though, openly discriminatory measures have been weeded out in choice of law at least in the EU.164

2. Tension between Federalistic Legislative Diversity and the Internal Market

The clearest way, although not the object of this paper, how the internal market alters the choice-of-law questions is of course by eliminating federalistic legislative diversity - without such diversity, there is no need for choice-of-law. I take from last section's brief discussion of the internal market that it is at tension with legislative diversity. Positive integration carves out areas of state action for the federal government, thus eliminating legislative diversity on these points. Even where the federal government limits itself to harmonizing measures, or where the states are constrained by a more or less severe interpretation of the Freedoms or the Dormant Commerce Clause, the legislative freedom of the states, and thus legislative diversity, is more or less severely limited, although the states nominally retain their legislative competence. In view of this tension between legislative diversity and the internal market, there is, e.g., nothing unusual about considering costs arising from legislative diversity, or rather the way this diversity is administered by a choice-of-law rule, as a burden subject to scrutiny under the Freedoms or the Dormant Commerce Clause. The categorical objection that legislative diversity, being the essence of federalism, cannot constitute, or give rise to, unwanted burdens165, forgets the internal market. As a matter of fact, generally leaving legislative diversity intact, but making it palatable to the internal market by adjusting the choice-of-law rules, might sometimes be a sensible compromise between the benefits of legislative diversity, and the requirements of an internal market. Such might be the working of the burden-test, or auxiliary doctrines.

3. Content of this Section

This section VI will review the different ideas that have been developed on the working of the burden-test and auxiliary doctrines with respect to choice-of-law. I will narrow in on the genuine choice-of-law questions with some reflections on Bibb v. Navajo Freight Lines166, a case frequently discussed in the context of choice-of-law, but really just standard invalidation of a substantive law provision (B.). Next, I will discuss some auxiliary doctrines that the US Supreme Court has toyed with, enriching Dormant Commerce Clause analysis with respect to choice of law, mostly in its Edgar and CTS decisions (C.). Finally, I will complete the circle and come back to the problem this paper started off with, the application of the standard burden-test to choice-of-law issues. As mentioned, European scholars have in the last decade engaged in an elaborate doctrinal-dogmatic exploration of this previously uncharted territory. These contributions will be discussed and developed (D.).

4. Relevance of the following Discussion

There are several highly important caveats to the following discussion.
First, the scrutiny of choice-of-law rules under the burden-test (infra D.) is of course not an issue if one limits the Freedoms and the Dormant Commerce Clause to a non-discrimination requirement. If one thinks that only discriminatory measures and product specifications come under Freedoms and Dormant Commerce Clause, the impact of the scrutiny on choice-of-law is still marginal.167 If, on the other hand, one sees the burden-test as applying to all measures which factually weigh heavier on interstate commerce than internal commerce, than at least all (what I will call) choice-of-law burdens come under burden-test scrutiny. Naturally, those who support the broad burden-test as a general tool for deregulation and trade liberalization will tend to draw the most far-reaching conclusions for choice-of-law, too.168 When reading the following pages, one should constantly ask oneself if the analysis is one that could be undertaken by the courts in their everyday workings. I am almost convinced it could not.

Most importantly, if the general recommendations for choice-of-law in a federal system developed above were put into place, choice-of-law rules would be made on the federal level. Presumably then, the Dormant Commerce Clause would be irrelevant as a control on these federal choice-of-law rules. The Freedoms might still be applied to European choice-of-law rules, but it appears the scrutiny would be limited to market-closing or other discriminatory measures.169 It would not follow that the following discussion would be entirely irrelevant - the considerations for choice-of-law that will be discussed would still be relevant for the law-making process. But the Freedom and Dormant Commerce Clause scrutiny as such would be moot.

B. The Tension Between Federalistic Diversity and the Requirements of an Internal Market Revisited - Bibb v. Navajo Freight Lines

Although Bibb has frequently been discussed in the context of choice-of-law170, the case really just illustrates the usual working of the Dormant Commerce Clause of invalidating substantive state laws. Bibb does not administer legislative diversity, it eliminates it.

1. The Argument: Conflicting State Regulations

The US Supreme Court had to decide whether Illinois could require trucks using its roads to be equipped with contoured mudguards, while the other states had no such requirements, and Arkansas required straight mudguards. The Court ruled that the contoured mudguard requirement put an excessive burden on interstate commerce in the form of interstate trucking, and thus violated the Commerce Clause. The reason was that it required trucks with conventional mudguards to either change mudguards at the state border, or refrain from driving through Illinois, while offering no redeeming benefit (as seen by the Court).171

But in other cases implicating the (police) power of states to regulate the use of its highways, where one state just adopted a stricter law than others, "[t]he matter of safety was said to be one essentially for the legislative judgment; and the burden of redesigning or replacing equipment was said to be a proper price to exact from interstate and intrastate motor carriers alike." 172 The interesting part of the decision is the way it distinguishes these other cases. The Court argues that Bibb is different because the Illinois standards "conflict with the standards of another State".173 In fact, since Arkansas required flat mudguards, the design of a truck could not comply with all the states' laws simultaneously, thus preventing it from operating nationwide. The Court emphasized this conflict, and one might therefore want to call the decision a decision on "conflict of laws". But was the outcome an outcome usually associated with conflict of laws?

2. The Consequence: Invalidation of the Law

In conflict of laws in the habitual sense of the term, one law is set aside in a given case in favor of another. As a general matter, however, both laws continue to coexist. Bibb, on the other hand, seems simply to invalidate one of the laws in question in so far as it applies to trucks operating in interstate commerce. Of the Arkansas and Illinois laws, only the Arkansas law survives - not just for the case under consideration, but in general.174

Admittedly, the Court does not explicate the precise content of its ruling, and it is possible that all it required from Illinois was to limit the application of its statute to trucks registered in Illinois - a choice-of-law rule which would nominally leave diversity in this area of the law intact (if diversity would remain as a factual matter is a different question - motor carriers might simply choose to register their trucks outside of Illinois). But the decision does not even mention where the trucks are registered. The only information is that the appellees are "motor carriers holding certificates from the Interstate Commerce Commission."175 A choice-of-law interpretation of the decision therefore does not seem to be faithful to the intention of the Court. In fact, it seems the Court was keen on preserving legislative uniformity (absent a specific reason for diversity), as can be gathered from the following argument used by the Court. Justice Douglas writes that "[t]he conflict between the Arkansas regulation and the Illinois regulation also suggests that this regulation of mudguards is not one of those matters 'admitting of diversity of treatment according to the special requirements of local conditions' ... A State which insists on a design out of line with the requirements of almost all the other States may sometimes place a great burden of delay and inconvenience on those interstate motor carriers entering or crossing its territory."176

3. Making Sense of Bibb

If Bibb does not establish a choice-of-law solution to a Dormant Commerce Clause problem caused by legislative diversity, why does it put so much weight on the fact that the laws of two states conflict ? One possibility is, of course, that the Court, under the impression of increasing interstate motor traffic, was just looking for any possibility to get away from its earlier line of cases, which had largely deferred to the states for highway regulation. The "conflict" in Bibb was a way of distinguishing the old cases.

But perhaps what the Court was after was something akin to the interpretation offered for the ECJ's limiting its scrutiny to "products lawfully produced or marketed in another Member State" - making sure that it controls only interstate commerce, not commerce as such under the Dormant Commerce Clause.177 A "conflict" of state laws would then be a threshold, the crossing of which triggers substantive burden-test scrutiny of the measure at issue. That the "conflict" requirement in the Court's opinion is to be understood as a threshold for substantive analysis of the measure, rather than an element in an overall assessment, weighing in, most of all, the benefits of diversity, is shown by the fact that the Court after exposing the "conflict" centers on a substantive analysis of the measure. In any event, the Court does not seem to have taken up this issue again in any subsequent cases.178

C. Auxiliary Dormant Commerce Clause Doctrines in Edgar v. MITE and CTS v. Dynamics

1. Preliminary Remarks on the Holdings and the Consistency of the two Decisions

In contrast to Bibb, Edgar v. MITE and CTS v. Dynamics clearly contain reasoning pertaining to choice-of-law. In fact, they have widely been understood as endorsing the internal affairs doctrine on Dormant Commerce Clause grounds.179 The internal affairs doctrine holds that the internal affairs of a corporation are to be governed by the law of its state of incorporation (lex incorporationes).

The Supreme Court undoubtedly shows sympathy for the internal affairs doctrine in CTS: "No principle of corporation law and practice is more firmly established than a State's authority to regulate domestic corporations."180 The Court clearly recognizes the general claim of a State to regulate the internal affairs of the corporations it charters. Whereas the Court "agree[s] that Indiana has no interest in protecting nonresident shareholders of nonresident corporations", it notes that the statute at issue "applies only to corporations incorporated in Indiana."181 Generally, the Court in CTS "reject[s] the contention that [a State] has no interest in providing [protection] for the shareholders of its corporations".182 And in Edgar, the Court argued that the statute at issue concerned the external affairs of corporations, and that it also applied to foreign corporations, but the Court did not dismiss out of hand the contention that a State "has an interest in regulating the internal affairs of a corporation incorporated under its laws."183 Beyond the language, there is the fact that the state law struck down in Edgar also applied to some out-of-state corporations, whereas the state law upheld in CTS applied exclusively to domestic corporations.

But whereas it thus seems that the Court accepts the regulatory authority of the state of incorporation, it is far from clear that this is the only state which has the right to regulate the internal affairs of a corporation. The CTS Court writes that a state "indisputably has an interest in protecting [its residents]"184, meaning its residents in the capacity of shareholders. This statement is unqualified, and read together with a preceding phrase that a state "has no interest in protecting non-resident shareholders of nonresident corporations"185, it seems to indicate that a state may still regulate out-of-state corporations' internal affairs to protect its resident shareholders.

In general, ascertaining the precise holding of Edgar and CTS is complicated by the fact that the two decisions are not necessarily on the same line of thought. Only one justice (O'Connor) was unqualifiedly part of both the Edgar and the CTS majority.186 Justice White, who wrote the Opinion of the Court in Edgar, dissented in CTS.187 True, Justice Powell, who wrote the Opinion of the Court in CTS, joined White's opinion in Edgar. But Powell stated in his Edgar concurrence that he joined the majority "because [White's] Commerce Clause reasoning leaves some room for state regulation of tender offers," regulation which Powell apparently thought necessary to avoid "certain adverse consequences in terms of general public interest when corporate headquarters are moved away from a city and State"188 - this is the very reasoning that, when stated as a legislative purpose, White found sufficient for invalidating the state law on grounds of protectionism in his dissent in CTS189. On the facts, whereas it is true that the state statute in Edgar could have applied to out-of-state corporations, in the case at issue the take-over target was a domestic corporation, just like in CTS.

In light of these apparent inconsistencies and unclarities, there does not seem to be much use, at least for present purposes, to engage in a deeper analysis of the Edgar and CTS decisions as they stand. Instead, the following paragraphs and subsection will try to develop the ideas expressed with regard to choice-of-law in Edgar and CTS.

2. No Direct State Regulation of Interstate Commerce

The first such idea comes from a prong of Dormant Commerce Clause doctrine (without a parallel in Freedoms doctrine), which holds that direct regulation of interstate commerce by the states is prohibited190. The most natural question to ask would seem to be if choice-of-law rules pertaining to commercial activity are a direct regulation of interstate commerce - after all, choice-of-law rules have only one purpose, which is to determine the applicable law in interstate cases. The choice-of-law element of the state anti-takeover statutes, however, is not the flank that Justice White attacked with the named prong of Dormant Commerce Clause doctrine.191 Instead, White argued that virtually all takeovers of public corporations involve shareholders from different states and are therefore a part of interstate commerce, such that the substantive state rules would directly aim at an interstate transaction.

If White's reasoning is sound, and if the prohibition of "direct" regulation of interstate commerce makes sense in general, is not of concern here, since these questions only affect the vertical distribution of rule-making power, not the horizontal distribution. With respect to choice-of-law rules in particular, only one point deserves to be added. I have tried to show in the preceding sections that choice-of-law rules in a federal structure should be made on the federal level (and that the states should be precluded in this field), and that both the U.S. Constitution and the EC Treaty give such powers to the federal government and, in the U.S., to the federal courts. And it seems that differing state choice-of-law rules will have a particular detrimental effect on interstate commerce, by creating uncertainty as to the law which would be applied in a trial and thereby making business-planning more burdensome. So White would be right if he wanted to take choice-of-law rules out of the hands of the states. However, he would not need the Dormant Commerce Clause for that purpose (Full Faith & Credit will do), and he would not be able to invalidate all state choice-of-law rules without creating his own federal choice-of-law rules.

3. State Laws Subjecting Activities to Inconsistent Regulations of Different States

The U.S. Supreme Court recognized the problem of differing state choice-of-law rules in Edgar and CTS. Quoting White's (on this point) plurality opinion in Edgar, Powell wrote for the CTS majority that the "Court's recent Commerce Clause cases also have invalidated statues that may adversely affect interstate commerce by subjecting activities to inconsistent regulations. ... [But t]he Act [in question] poses no such problem. So long as each State regulates ... only ... the corporations it has created, each corporation will be subject to the law of only one State. ... Accordingly, we conclude that the ... Act [in question] does not create an impermissible right of inconsistent regulation by different States."192 Indeed, inconsistent regulation can only result where choice-of-law rules differ, or where choice-of-law rules are not neutral. But saying that there should be only one, neutral choice-of-law rule for all states does not tell us which rule this is supposed to be. The Supreme Court faced a convenient situation where a almost uniform (and neutral) choice-of-law rule already existed across the U.S. (the internal affairs doctrine), such that the Supreme Court could reprimand deviations. Even there, however, things are more difficult than they seem. The different written opinions in Edgar and CTS discussed at some length which kind of takeover regulation concerned the internal affairs of a corporation, and which the external. The justices did not always agree. What does this mean for those areas of corporate law which are peripheral to the internal affairs of the corporation, and, more generally, for areas of law for which no clear choice-of-law rule exists ? Should all state regulation be disallowed where there is no clear and uniform choice-of-law rule across all states ? This seems hardly what the Court could have wanted, and it would be an unnecessary measure, since the Court could rather devise a uniform choice-of-law rule itself, thus eliminating the problem. The question remains what criteria should guide the Court in devising such a rule.

D. The Burden-Test as Applied to Choice-of-Law

The most interesting part of the Supreme Court's decisions in Edgar, CTS, and others lies in its handling of the main part of the Dormant Commerce Clause analysis, the burden test, once a measure has cleared the auxiliary hurdles discussed above (no direct regulation of interstate commerce; no inconsistent regulation). As early as in 1971, Horowitz applied the burden-test to choice-of-law, and suggested that "where more than one state has an interest in having its law prevail, the court should choose the governing law that would best facilitate multistate commercial transactions. In applying this principle, the court would be giving effect to the federal constitutional policy of keeping interstate commerce free of unreasonable burdens."193 But simply choosing the "law that would best facilitate multistate commercial transactions" would seem to go way beyond "keeping interstate commerce free of unreasonable burdens." In fact, taken literally, Horowitz' proposal would rule out the possibility that a stricter law be justified by legitimate interests of the imposing state - interests which the other state might have chosen not to protect, or to protect less stringently. Horowitz, taken literally, would thus keep not only unreasonable burdens, but any burden away from interstate commerce, as long as one interested state does not impose such a burden on commerce. This lowest-common-denominator, without the possibility for a state to justify a stricter measure with legitimate interests, is not what the Dormant Commerce Clause (and the Freedoms) are about.194 A more intricate analysis is needed, and the following sub-sections are an attempt to summarize and complete the work done so far in this regard.

1. Burdens on the Level of Substantive Rules

The classical application of the burden-test concerns substantive rules (as opposed to choice-of-law rules), like the mudguard-requirement in Bibb. If a substantive rule of a state is found to impose a burden on inter-state commerce, and if this burden is not justified by legitimate state interests, the substantive rule may not be applied to transactions in inter-state commerce. This leads to two possible choice-of-law rules.

First, there is the distinction between transactions in inter-state commerce, and transactions in internal commerce. Recall that the burden-test applies only to the former. So if the burden-test invalidates a certain rule for interstate commerce, this does not affect the rule as it applies to internal transactions. Consequently, the legal regime is then split in two. Different rules apply to transactions in interstate commerce on the one hand, and transactions in internal commerce on the other hand. This means that in any given case, a decision would have to be made between the two regimes - a "choice of law", so to say, although not between the laws of different states, but the laws, or different versions of the same law, of one and the same state. This of course creates the familiar problem of reverse discrimination (against internal commerce, which means, in general, against the state's own citizens), and usually the bifurcation of the state's legal regime collapses very soon under the economic pressure it creates (higher costs for internal commerce weaken its competitive position vis-à-vis interstate, i.e., usually foreign, commerce). These are very interesting and complex problems in themselves, with high relevance for the discussion of the general policy underlying the Freedoms / Dormant Commerce Clause. For the present purpose of discussing choice-of-law between the rules of different states, however, it is appropriate to turn immediately to another conception of the legal regime resulting from the burden-test.

Whereas the first conception just discussed assumes a bifurcation of the law of one state (hereinafter: internal bifurcation), the second conception we turn to now assumes that the alternative is between the laws of different states, where there is only one law in any one state (hereinafter: origin principle).
The second, genuine choice-of-law solution is dubbed the origin principle, and it originates in the already discussed idea that the burden-test applies only to products "lawfully produced and marketed in one of the Member States," or, more generally speaking, only to rules more stringent than in other states.195 More precisely, the burden-test is supposed to apply only to rules more stringent not just than in any other state, but than in the state of origin of the product, service, and so on. On this understanding, always applying the rule of the state of origin assures compliance with the burden test. If the rule of the state of origin is stricter, the burden-test does not apply in the first place. If the rule of the state of origin is less stringent, applying it avoids the stricter rule of the state of destination. This does not mean that the choice-of-law solution assumes that a state may never apply its own (and more stringent) law to interstate commerce. But if it does, it has to be able to justify this by showing that it has legitimate interests for doing so, and that applying its own law is not an excessive means to pursue these interests. Of course, the state of origin is free to apply its less stringent rule also to interstate commerce. So in the choice-of-law solution, it is not the substantive rule itself which is scrutinized, but the decision to apply it to interstate commerce instead of the rule of the state of origin.196

For example, some authors have reinterpreted the whole jurisprudence of the ECJ concerning rules of unfair competition in this way. The ECJ, it is argued, does not invalidate substantive rules of a state when applying the burden-test. Instead, the ECJ simply states a choice-of-law rule which says that the substantive rules of the state under scrutiny cannot be applied to interstate commerce, and that such interstate commerce is instead subject to the rules of its country of origin.197

It seems rather dubious if this choice-of-law interpretation of the ECJ's jurisprudence is correct.198 For the conceptual analysis of this paper, however, this is secondary. What concerns us here is whether such a choice-of-law solution would make sense from a policy standpoint, given the goals of the internal market. The case where the rule of the state of origin is less strict seems unproblematic. It does not seem to make a practical difference whether the less strict rule comes in the guise of a foreign rule, or in the guise of an attenuated domestic rule. The problematic case is where the rule of another state is stricter, and nevertheless applied to interstate commerce originating in that state. From a doctrinal point of view, this seems to be a forbidden discrimination against interstate commerce, and the ECJ has actually invalidated a German statute incorporating the choice-of-law solution on the grounds that it was discriminatory where the foreign law was stricter.199 From a policy perspective, the proponents of the origin principle seem to see the main function of the internal market in allowing economies of scale, including economies derived from being able to run a uniform marketing scheme throughout the internal market. If the law of the state of origin is stricter for internal commerce in that state, then, one could argue, a market participant from that state could not have a uniform marketing scheme across the internal market anyway.200 But this reasoning is faulty in two respects. First, if in an internal market of 15 states 1 to 13 allow a certain marketing scheme, it is still advantageous in terms of scale-economies for a market participant from state 15 to be able to implement this marketing scheme in state 14, even if she cannot implement it in her home-state 15. Second, the internal market is not only, not even primarily, about economies of scale. It is also about using comparative advantages, and about increasing general competitiveness. For these purposes, it hardly makes a difference how a product is treated in its state of origin. What is important is equal, undistorted competition in each state.201 Discrimination against interstate commerce runs contrary to this goal, and the fact that the discrimination results from the application of a stricter rule of the state of origin does not change anything to this analysis.202 Many scholars have, of course, seen this problem, and they have suggested that the general rule should instead be to apply the more favorable (to commerce) rule of the state of origin or the state of destination.203 This would indeed solve the problem as between market participants from these two states. However, it would engender a distortion of competition with commerce coming from other states of the union. This is because if a third state has a less strict rule, that third state's rule will apply to commerce originating in the third state (barring justification by legitimate interests of the state of destination), thus favoring commerce originating in that third state over commerce coming from the first two.204 The only way out is a rule which calls for the application of the most favorable rule (to commerce) of all the states of the union (at least of those where commerce arriving in one state is originating from). This would at first sight look like an extreme version of Horowitz' proposal, but it would allow for stricter rules to be applied if legitimate interests to do so can be shown. So far, so good. But would this really be a choice-of-law rule? After all, no state would be obliged to apply the rule of the least strict state as such - each state would be free to recreate its own rule for interstate commerce (and, if it so desires, for internal matter too), which could be even less strict than that of all the other states, or more strict but justified by legitimate interests. The whole "choice-of-law solution" would be nothing more than the general condition for the application of the burden-test that there be a divergence among interested states' rules, a condition which, as I have hinted above, may or may not be part of the positive law of the US and the EU, and may or may not make sense205. In any event, the repackaging as (some strange kind of) a choice-of-law rule does not add to the analysis; if anything, it makes things look more complicated than they are.206 Lastly, if one does not accept that legality in at least one of the states is a condition for the application of the burden-test to the other states' laws in the first place, even a choice-of-law rule in favor of the laxest law does not assure compliance with the Freedoms. In this view, corrections will have to be made on the level of substantive rules; that is, choice-of-law rules might not be able to solve the problems arising from substantive rules' incompatibility with the Freedoms.207 This alone does not mean, though, that choice-of-law rules are unaffected by the Freedoms. There might be specific burdens on interstate commerce on the level of choice-of-law which might call into action the Freedoms (or the Dormant Commerce Clause, for that matter). We will turn to this question in the next subsection.

2. Burdens on the Level of Choice-of-Law

Burdens on the level of choice-of-law are burdens resulting from the very fact that the internal market is split into different legal systems. In other words, the burdens on the level of choice-of-law are burdens resulting from (federalistic) legislative diversity. More concretely, for any given question concerning a transaction in interstate commerce, the choice between the different legal systems can be more or less (dis-)favorable to such transactions, in ways to be examined shortly. Burdens arising from legislative diversity are, by definition, peculiar to interstate commerce. If the Union were a single monolithic legal system, no such burdens would occur (except in international commerce). Likewise, no such burdens befall commerce which is purely internal to one state. The case for scrutinizing such burdens under the Freedoms and the Dormant Commerce Clause might therefore be considered stronger than for burdens arising on the level of substantive law.208 The burdens on the level of choice-of-law are of course linked to the content of the substantive rules that would be applicable as the result of choosing one law or the other, but they are not the same as burdens caused by substantive rules as such. We shall first attempt to clarify this distinction, and to identify the burdens on the level of choice-of-law (a). After a methodological intermezzo (b), we then we turn to possible remedies, an the costs associated with them (c).

a) Which are the Burdens on the Level of Choice-of-Law ?

A substantive rule may impose a burden on commerce, even specifically on interstate commerce, even though it is uniform within the whole internal market. Advertising rules are such an example. By restricting certain forms of advertising, the legislator may impede the development of businesses. At least in the developing stage of the internal market, this may hit interstate commerce harder than internal commerce, if and in so far as out-of-state suppliers are not yet established players in the market of a given state. This impediment is not linked to legislative diversity. It is entirely due to the substantive content of the rule.

(1) Diversity of Choice-of-Law Rules

By way of contrast, consider the uncertainty as to the applicable substantive law resulting from differing state choice-of-law rules in different states (this assumes that choice-of-law is not federalized, such that every forum applies its own choice-of-law rules).209 This is a burden entirely and exclusively due to legislative diversity - legislative diversity not even of substantive rules, but of choice-of-law rules. Of course, a participant in interstate commerce would not need to worry about the applicable law if she were sure that none of the laws in question contained any substantive rule adversely affecting her affairs. And the burden gets extreme where the substantive rules of different states demand incompatible actions (i.e., where the law of one state does not simply require something more than another state, but something different, which the other state in turn forbids). In this way, substantive rules do matter. But the specific burden resulting from uncertainty, which requires researching all laws in question, gambling as to where the question might be litigated, or both, is independent of the content of the substantive rules in an individual case.

(2) Diversity of Substantive Rules

But legislative diversity imposes burdens on interstate commerce even where choice-of-law rules are uniform, and where there is thus no uncertainty as to the applicable law. This starts with the obvious fact that legislative diversity necessitates a choice-of-law in the first place - an additional step in any legal analysis, and therefore an additional cost, negligible or substantial depending on the complexity and ambiguity of the choice-of-law rules. But this is an unavoidable consequence of legislative diversity.210 Other burdens may not be.211

(a) Splintering of the Legal Regime

Choice-of-law can impose a burden on interstate commerce by splintering the legal regime applicable to a single commercial enterprise. A single commercial enterprise may involve multiple (interstate) transactions which are similar or identical except for some of the territorial elements (in which state the transaction is executed, in which state the parties to the transaction reside, and so on). A choice-of-law rule may attach relevance to those territorial elements that differ, and call for the application of the laws of different states for different transactions.212

If the different laws in question demand different actions that can only be uniform for the whole enterprise and that are incompatible with each other, the effect of such splintering is fatal for the commercial enterprise as a multi-state enterprise. An example would be differing, and incompatible, requirements as to the control structure of a mutual-benefit association, where a choice-of-law rule calls for the application of the law of the state of residence of a member.213 The choice-of-law rule would in effect preclude mutual-benefit associations to form with members from different states. If the different laws in question demanded merely different, but not incompatible actions, the mutual-benefit associations could take in members from different states, but it would have to fulfill the different states' requirements simultaneously and cumulatively. Similar situations could arise with differing requirements as to shareholder protection in general and take-over laws in particular, if the law of the residence of the shareholder is applied to these questions. Securities laws that require or forbid certain disclosures are another example, if their application depends, as usual, on the market where the securities are traded, and the issuer issues securities in different markets.

Where the different states' laws demand different actions only for distinguishable parts of the enterprise, e.g., only for the individual transaction, the effect of the splintering of the legal regime is less dramatic. Still, the effect will be to make the administration of the enterprise more difficult and costly.214 One example would be different statutes of limitations for claims of residents of different states. The different statutes for different claims would not make operations impossible. But it would require the enterprise to familiarize itself with not only one statute of limitations, but with as many as the number of states across which its client-base is spread. Where the delays differ, the enterprise would have to administer its clients separately to a certain extent, possibly charging different prices to residents of different states. The enterprise would therefore incur higher information costs, and lose some of its otherwise possible economies of scale. The same would hold true, for example, for a company launching a TV-advertising campaign, where the applicable law of unfair competition (and so on) depends on the state where the TV-program is received.

Again, where the requirements of the different rules are compatible, although different, a company may unify its operations by conforming with all standards simultaneously and cumulatively. Often, the rules will not be qualitatively different, but rather more or less strict along the same dimension. Then applying all the standards collapses into applying the strictest of the different applicable standards. We would expect a participant in interstate commerce to choose the easier, and cheaper, of the two options either to follow the steps just described and run uniform operations, or to run split operations under the different applicable laws. The burden resulting from the splintering of the legal regime is upwardly bounded then. This upward bound is the extra cost of following the stricter law for the whole operation, or of following the extra requirement of the other law.215 This extra cost will be smaller the smaller the differences in the substantive laws in question. An exception is the case of incompatible laws, where running a uniform operation is per definition impossible.

(b) Familiarity with a Legal Order - Information Cost

People generally prefer the application of their own home state's law over any other law, as long as they do not know that another state's law would be more favorable to them on the substantive level in a given case. This is neither just an emotional attachment to "one's own" law, nor only due to a (probably warranted) assumption that the law of one's home state will on average (!) be closer to one's conception of justice than that of other states, such that one would be more willing to submit to the home state's law than to others. A major, and very much an "economic", reason why people prefer their "own" law seems to be information cost. One, people should be much better able to guess the content of their home state's law even without legal education and research, because coming from that state they are more likely to share the values pursued by that state's laws, and, most importantly, they are much more likely to have acquired a layman's knowledge of the rules applicable in that state. Two, specialized legal advise on a particular state's law is easier to obtain within that state. Especially the second point holds for corporate players, too. The mere fact of being faced with a legal order different than that of one's home state will therefore often present a difficulty (and a cost !) for a participant in interstate commerce, making participation in interstate commerce harder. This is a burden on interstate commerce.216

Familiarity with a legal order, and ease of access to qualified information on that legal order, are not necessarily confined to one's home state law. In particular, certain legal orders have become standard for certain operations, such as English law for insurance contracts. Also, the parties preferring to work under "their" legal order do not necessarily have to be direct parties to the interstate commerce transaction in question. For example, a financing operation can be entirely internal to one state, but the refinancing will often involve out-of-state parties who prefer their home state's law, or a legal order which is standard for such transactions. For example, the financing of a German firm by a German bank might be refinanced through a French and an English bank, both of which prefer English law to German law, the English because it is their home state's law, and the French because it is a standard law for finance transactions. Again, forcing the application of another legal order then constitutes a burden on interstate commerce.217

b) Intermezzo: A Note on the Structure of the Burden-Test

It seems to be standard practice to treat a cost to a commercial operator as a burden, and avoiding a cost to a consumer as a possible justification for imposing the burden, in applying the burden-test. The Freedoms and the Dormant Commerce Clause do not protect just one party, the supplier, though. The protected object is the interstate transaction (!). Strictly speaking, then, costs to both sides of transaction would have to be taken into account, and it would seem that a rule imposes a burden on interstate commerce only if the rule increases the overall cost of the transaction, i.e., if the rule is not efficient. This is important to keep in mind when analyzing choice-of-law rules under the burden test, since a certain cost from legal diversity seems inevitable. The question can only be to find the rule which minimizes this cost - the efficient choice-of-law rule, so to say (where efficiency is calculated only as between the partners to the interstate commerce transaction in question). Technically, therefore, I would argue that one cannot speak of a burden imposed by a choice-of-law rule until one has looked at the alternative rules, and the respective costs for other parties to the transaction.

However, it seems that ECJ and Supreme Court generally take costs of alternative rules to other parties, e.g., to the consumer, into account only at the justification stage.218 The results seem to be the same, but the difference in terminology might make a psychological difference. In any event, the point has been raised here since the complex considerations of the next subsection would be even more complicated if we had to distinguish between the different costs and benefits depending on whether they form part of a burden, eliminate the burden, or provide a justification, or eliminate a justification. I beg the reader for indulgence that for the sake of simplicity, the next subsection will just undertake a general cost-benefit analysis without paying attention to these subtleties.

c) Can We Do Anything About These Burdens on the Level of Choice-of-Law, or Are They Inevitable ?

Conscious of these structural ambiguities, let us now turn to choice-of-law solutions which could reduce the choice-of-law "burdens" listed above. The question is if we can find, and perhaps enforce through the Freedoms/Dormant Commerce Clause, a choice-of-law design which reduces or eliminates the specific possible "burdens" listed above. At this point, the question is not yet whether we can eliminate the specific choice-of-law burdens without imposing a cost in other areas. The question is merely whether it is possible to reduce the specific choice-of-law burdens (or, more generally, costs) in the first place.

(1) Uniform Choice-of-Law Rules

There is an obvious remedy for costs caused by diversity of choice-of-law rules: uniform choice-of-law rules. I have tried to show above that, in contrast to substantive rules, there is nothing to be gained from diversity of choice-of-law rules, and that as general desiderata of choice-of-law in a federal system, choice-of-law rules should be uniform, i.e., federal, anyway.219 Also, both the US Constitution and the EC provide federal legislative powers to that effect.220 But as long as these federal powers have not been used, can the courts do anything about the detrimental diversity of choice-of-law rules under the Freedoms/Dormant Commerce Clause ?221 The problem is that to achieve uniformity, somebody has to decree a uniform rule, or all states concerned have to agree on a uniform rule. As long as there is no uniform rule that can serve as a benchmark for states' choice-of-law rules, the latter cannot be censored for not conforming with that (nonexistent) uniform benchmark. This problem is similar to that faced by the US Supreme Court's criterion that forbids state legislation that might lead to inconsistent regulation by different states.222

Some authors have argued that as a general rule, the Freedoms demand the possibility for the parties to a transaction in inter-Community trade to choose the applicable law by contractual stipulation.223 Others have argued that as a general rule, the origin state law has to be applied.224 Even conceding that the Freedoms would take this as a default rule (choice by the parties, or origin state law), would we achieve much towards what we are concerned with here, that is towards reducing the diversity of choice-of-law rules ? The default rule is obviously much too broad and rough to come even close to stating a workable choice-of-law system. Its proponents thus allow for very numerous deviations from the default rule for the protection of legitimate interests of the rule-setting state. States need not protect the same interests, or choose the same way to do it. Some interests may be protected otherwise in one state, making a further choice-of-law adjustment unnecessary and therefore illegal under the Freedoms. The result would be a great diversity of choice-of-law rules between the states - the very situation the whole line of argument is designed to prevent. To be sure, the resulting diversity may be less marked than it would otherwise be. But would that make a significant difference to the actors in inter-Community trade, i.e., would it make transactions in inter-Community trade more than negligibly easier? It would seem that as long as significant diversity in choice-of-law rules exist, the precise extent of such diversity does not change much in the burden imposed by such diversity. The courts under the Freedoms/Dormant Commerce Clause can thus not do anything about this problem as such. We will have to wait for the federal legislator to step in - or, where possible, the courts to make their own (uniform, and more sophisticated) choice-of-law rules.

(2) What Can We Do About Diversity of Substantive Rules ?

Irrespective of whether choice-of-law rules are uniformized or not, it might be possible to design choice-of-law rules such as to reduce the inevitable burdens resulting from diversity of substantive rules. In section a), we had identified two such burdens. Those arising from information cost (where parties are more familiar with one law than the other), and those arising from the "splintering" of the applicable law. We will deal with possible cures for each of them in turn.

(a) Information Cost

The problem with the information cost argument is that a law that is familiar to one party may be unfamiliar to another. And transactions in interstate commerce typically involve parties from different states, and therefore with presumed familiarity with different laws, either as direct parties to the transaction (in which case it is already hard to say the application of which law would impose a burden on interstate commerce), or as indirectly affected third parties (in which case the burden might be justified by protecting the interests of those third parties). In fact, it is hard to think of cases where a state has applied, yet applies on a regular basis, a law which none of the directly or indirectly involved parties would have claimed as "their" law. Exceptions might be found in economic regulation like in antitrust laws, but these exceptions would quite easily be justified by the interest of the state where the impact of the violation is felt to pursue that violation (and even then, one might want to say that the law applied is, after all, the law of the institution applying it, i.e., the court or government agency). Incidentally, even under its present lax control standard for state choice-of-law, the Supreme Court censored the (extremely rare) application of a law entirely foreign to the underlying case and the parties thereto in Phillips Petroleum225 and Sun Oil226 under the Due Process Clause/Full Faith & Credit Clause anyway.

To get a more systematic view of the matter, let us start with transactions in interstate commerce directly involving two parties from different states A and B, typically a contract between such parties. Legal questions that might arise under such a contract, and that could be subject to either the law of state A or of state B, include all questions of contract law, such as permissible clauses (especially in standard-forms), or products liability as between the seller and the buyer, for example. Now if the, say, buyer resides in B, and the seller in A, there seems to be no a priori reason to prefer either the law of A, or the law of B. Some European scholars have argued, though, that in a first approach (before considering the justification side of the burden-test) the position of the supplier should count. If a reason is given, it is that the supplier side is supposedly more important for economic integration than the consumers.227 It is true, of course, and economically natural, that suppliers have taken the more visible steps towards integrating the European market (and the US market, for that matter). But the suppliers could only do this because the consumers were buying. Consumers might be less willing to buy foreign products if they had to expect the application of foreign law (more details below). So if there were a "right" for suppliers to operate under their home state's law, there also would have to be a "right" for consumers to consume under their home state's law - the two rights would cancel each other out in a supplier-consumer transaction.228 Recall that both the Freedoms and the Dormant Commerce Clause protect interstate commerce as such, i.e., transactions in interstate commerce, not only businesses engaged in interstate commerce. The point of reference (a deviation from which would have to be justified) would therefore seem to be the choice-of-law rule which minimizes the overall information costs of both parties. The overall information cost is certainly dependent on the type and size of the transaction and business, the number of consumers involved, and many other circumstances of the individual case. On average, it would seem that it would be cheaper to apply the consumer's law and shift the task of learning about a foreign law to the supplier. This is because the supplier usually enters into many transactions of the same kind, and can therefore realize economies of scale.

A counter-argument might be, and it seems many European scholars think, that the consumer (rationally) does not take the time to inform herself of the precise extent of her rights when she enters into the transaction anyway, so that applying a law foreign to the consumer does not burden interstate commerce. One might think that, by contrast, the supplier has to plan everything carefully, and this is made easier by applying the supplier's law. But the consumer will eventually need to inform herself of her precise rights after entering into the transaction if and when something goes wrong. This might be made easier by lawyers or consumer-protection agencies and associations, but presumably even these experienced players do not have as much routine in dealing with exactly the relevant legal aspects of the foreign law as the supplier (assuming, realistically, that the consumer will have to consult lawyers or consumer-protection agencies at her place of residence). The consumer will rationally expect that, or learn to expect that after the first negative experience, and take it into account when entering into the transaction in the first place. The counter-argument is therefore not valid.

To repeat, the question which choice-of-law rule minimizes information cost is dependent on the facts of the case. It is an empirical question. But I think one can make a very plausible argument that on average, information cost will be minimized by applying the consumer's law. I would propose, therefore, that proving the contrary should be up to whoever challenges the application of the consumer's law.

So far we have dealt only with transactions directly involving two parties from different states. Cases involving parties not directly transacting with each other are similar from the point of view of information cost.229 An example would be the law of unfair competition - the out-of-state competitor could save information-cost if the law of his home state were applied, but the instate competitors, consumers, consumer associations, or government agencies, enforcing the law of unfair competition, would have to pay the bill. Another example would be all secured transactions, where the secured creditor comes from one state, the debtor and some other creditors from another. Even if they all agreed that the security interest be granted under the secured creditor's law, new creditors (tort claimants, or whatever) might be hurt in terms of information cost.230 Again, we have no clear-cut case for favoring either the one law or the other.

In sum, if one does not make unwarranted simplifying assumptions, it is difficult to ascertain which choice-of-law rules minimizes information cost with respect to the applicable law.

(b) Splintering of the Legal Regime

There seems to be an easy solution to reducing the cost resulting from splintering the choice-of-law regime (as described supra) - applying only one single state's law to the whole enterprise in question. Which one ? It could be the law of the enterprise's headquarters, but any other law would do. The question is whether this would only shift the problem and the cost of a splintered legal regime from the enterprise involved to other players. The answer to that question is, of course, empirical. But it would seem that generally, the only party who can reap economies of scale from a uniform organization of its affairs, and who would suffer from inconsistent demands of different laws, is the active party handling multiple and uniform transactions, which is, generally, the supplier / offeror in interstate commerce.

One also has to take into account, however, that players like lawyers, consumer associations, or governments pursue claims of similar sort on a regular basis, and they may face similar behavior in different cases, such that handling these cases under different laws makes things more difficult for them, too. Granted, this impediment may be less frequent and less severe for the reacting party than for the acting party (the supplier / offeror), but it must nevertheless not be forgotten.231

(3) A Contractual Solution ?

The best solution to intricate problems of the sort just described is, of course, to let those who are directly concerned figure out the solution themselves trough contractual arrangements. Thus, where only the parties to a contract are affected by the choice of the applicable law, an easy way of solving the problem of determining which choice-of-law minimizes information cost is to allow contractual choice-of-law stipulations. Let those decide who know the circumstances best - let the parties themselves choose the applicable law by contractual choice-of-law clause.232 Contractual choice-of-law clauses are indeed the standard solution for choice-of-law in contractual matters. However, there are two major caveats.
First, contractual choice-of-law clauses are no solution in all those cases where the parties affected by the choice-of-law are not in a contractual relationship. Contractual choice-of-law clauses work only for contracts, and only for those problems of the contract that affect only the parties themselves.233

Second, contractual choice-of-law clauses are no ready solution where, under whatever theory, we do not have faith in the two parties reaching the optimal result, such as consumer contracts. Thus, contractual choices of the applicable law are limited under present choice-of-law rules for certain areas, mainly for consumer contracts. These are mostly areas in which also the substantive law of almost all states provides for some special limitations on freedom of contract. So if considerations of consumer (or other) protection justify these limitations on substantive freedom of contract, then would it not seem that limitations on the freedom of contractual choice-of-law clauses should also be justified ? After all, what difference does it make whether a consumer loses her rights through a direct contractual stipulation, or through reference to some other law ? But this precise reasoning would assume that the same thing is at stake in the choice-of-law context as in the substantive context. This is not necessarily the case, however. We can assume for the time being that the contract's choice-of-law clause provides for the application of a law which's content is as or even more protective of the consumer than the law of the state of the consumer's residence. Then the contractual choice of the applicable law is only about an allocation of the informational advantage, and possibly about sustaining a uniform marketing system or not. That is, under the assumption of equal substantive protection, the contractual choice-of-law is only about, and the consumer's risk is limited to, the two specific choice-of-law interests discussed in the two previous paragraphs (1) and (2). A contractual choice-of-law provision thus poses a different risk and, be it submitted, should ring a different warning bell for the consumer than a substantive provision. It is not possible, therefore, to infer from the legitimate existence of substantively protective limitations on contractual freedom that barring contractual choice-of-law provisions would automatically be justified. All of this is only valid, of course, under the extremely strong assumption that the level of substantive protection is not influenced by the choice of the applicable law, i.e., that only the means to achieve this protection change. Dropping this assumption, i.e., accounting for substantive differences, leads to very difficult problems which we will talk about in the next and especially the second-next sub-section.

d) Do Private Interests Change in Foreign Lands ?

In the preceding sections, we have surveyed the different costs arising specifically on the choice-of-law level, i.e., costs arising from legislative diversity as such. To complete the analysis, we have to combine the findings of this survey with the substantive issues involved in any choice-of-law. But before we can do that, we have to deal with an argument frequently made by European scholars, and which would eliminate certain elements or costs ("interests") from the outset, or at least devalue them, for any overall cost-benefit analysis under the burden-test.

In the choice-of-law literature, and in particular in the European literature discussing the influence of the Freedoms on choice-of-law, it is a common-place argument that a party's "interest" in having her law applied, and in enjoying the substantive protection that "her" law provides, diminishes, the more that protected party steps out of her home state environment. Commonplace as the argument is, I find it nevertheless unconvincing. As a purely factual matter, why would, for example, a consumer desire the application of her own law less, just because she travels to another state? Perhaps she is a sophisticated consumer who knows that the other state's law is more advantageous to her, or that she can strike a better deal under that law. But then she would want to be able to transact under that other state's law even at home. And if one were able to identify such sophisticated consumers, one could and would allow her to do that.

The standard argument why a consumer would need less protection if she steps out of her home state is that she has to expect the application of another state's law in another state, that there is, in other words, sufficient warning.234 But why then is it not enough to put the choice-of-law clause in big, red letters into the contract if the consumer does not leave her state? As always, the argument of expectations is somewhat circular, since a sophisticated market participant expects what the law tells her to expect, and for an unsophisticated market participant the argument would lose its force if that participant either has no expectations in the first place, or is put on notice that she has to expect something else.

In the end, it seems that what the argument of the diminishing "interest" in protection is about is two quite different legitimate concerns, supporting the underlying intuition:

One concern comes from the specific costs from legislative diversity. The cost for the supplier of having to inform herself about the consumer's law gets proportionally bigger where she does not actively solicit a large client base in another state, and only serves foreigners as part of her routine instate operations, perhaps not even knowing that she is dealing with foreigners. Also, the cost of adjusting her business to these different laws become proportionally much more important in such a case.235

The other concern goes directly to the interest of a party in having the substantive rule of her state applied. I would agree with most American choice-of-law scholars that this is not a private interest at all, or at least that these particular private interests cancel out.236 If we are looking only at substantive rules, i.e., when the potentially applicable substantive rules are known, each party to a dispute will want to have the law applied that is favorable to her position. In this view, it is dubious if one can even speak of the interest of a party to have her law applied as specifically "her" law, if (and only if !) that law happens to be favorable to her in a given case. Factually, such an interest is presumably inexistent once the content of the potentially applicable substantive rules is known. As a normative matter, why should any party's interest in having "her" law applied trump the symmetrical interest of the other party ? Shouldn't the two cancel out ? One can answer this question in the negative only if one holds the parties' interest in the application of "their" law to be dependent on the geographical circumstances of the case. But even if the case seems geographically more connected with one state or the other - each one of those states would be (or rather, would have been) free to change its substantive rules. This is the fundamental objection against the notion of a private interest in the application of one substantive rule rather than of the other. The only player who is hurt specifically by the non-application of the law of one state, independent of the content of the law of the other state that has been applied, and independent of the outcome of the case, is the state whose law has not been applied. More specifically, it is the regulatory interests of that state which are hurt. The interests in the application of the law of one state are government interests, not private interests. This can also be seen in the fact already mentioned that a party does not insist on the application of "her" law if that law is not favorable to her in the case at hand - the state, however, should, since and if its regulatory plan is implicated. The following section is an attempt to integrate these government interests with the other considerations for choice-of-law in a single market that we discussed so far.

e) Evaluating the Different Interests - A Task for A Court ?

After this long survey of burdens on the level of choice-of-law, it is time to recapitulate, summarize, and evaluate the findings.

(1) Summary of the Prior Results

First, we found that burdens arise from the fact that different states follow different choice-of-law rules. But we also found that the only solution to this would be a uniform choice-of-law system imposed by some central authority without the possibility for the states to deviate, and that this is not feasible with the tool of the burden-test (but see infra 3.). This point can therefore be put aside for the rest of this section's discussion.

Second, we tried to identify the burdens, or, more generally speaking, the costs, that relate specifically to choice-of-law even where choice-of-law rules are uniform.

One of these costs is information cost. We speculated that information costs would on average be minimized if the party that enters into many transactions of the same kind, and that can therefore reap economies of scale, be made to bear that cost, i.e., if the other party's law is applied. In consumer transactions, for example, this would point towards applying the consumer's law.

The second cost is related to the splintering of the legal regime. The extreme case is a situation where, as a result of the choice-of-law rule, incompatible substantive rules are applied to a necessarily uniform action or structure, such as a corporation's internal affairs. In this case, the cost is that a business cannot exist with pertinent (as defined by the choice-of-law rule) points of attachment to different states, e.g., shareholders or insurance-policy holders in different states, and thus would have to be divided in sister-companies. If the substantive rules are incompatible, but applicable only to distinguishable parts or transactions of the enterprise, the cost is the lost economies of scale from not being able to run the business uniformly. In the much more common case of different, but compatible rules, the afore-mentioned costs of splintering are upwardly bounded by the extra-cost of complying with the stricter law for the whole operation - since the latter would eliminate the other problems of splintering. In general, it seems that such cost would be minimized by applying a uniform law for the whole operations of the active party, for example of the supplier rather than the consumer.

In sum, we have two costs associated directly with choice-of-law, i.e., without even filtering in considerations of substantive law. If we can make any general assumptions as to what choice-of-law rule would generally minimize these costs, the assumptions for the two costs point in opposite directions. Clear-cut solutions are unavailable. Where clear-cut solutions have been proposed, they were based on unwarranted simplifications, such as a preference for the supplier, or the assertion that the interests of a party in the application of "her" law get weaker with a growing distance from her home state. That leaves us with complicated empirical problems just to determine which choice-of-law rules minimizes the costs specific to choice-of-law, i.e., without even taking into account the issues of substantive law involved.

(2) Adding the Level of Substantive Law

To see what the issues of substantive law are, consider the only ready solution to the complicated problem of finding the choice-of-law rule optimal from the point of view of the choice-of-law costs just described - contract. To repeat, the contractual solution is available only where the choice-of-law exclusively affects the parties to a contract. We had seen that since under the assumption of equal substantive protection the issues at stake in choice-of-law are different from those at stake in contracting on substantive issues, the limitations on contractual choice-of-law provisions, or the justifications for such limitations, need not be congruent with those on substantive issues.

Now it is time to lift this assumption of equal substantive protection. This assumption is unrealistic for two reasons. First, it would be quite a rare case that two laws provide for exactly the same level of substantive protection, least of all if the means they use are different. Second, even if we conclude that they are, then the consequence should be the invalidation of the narrow substantive requirements of both states' laws for being not necessary to reach their goal, if we are serious about the burden-test.237 Consequently, if there are differences between the laws of different states, these differences will always have an impact on the level of protection of the laws of different states, and these differences have to be taken into account in the choice-of-law decision.238 That is, every choice-of-law decision will not only influence the specific choice-of-law costs that we identified, but also make a difference as to the substantive protection of one or the other party, or, more generally, one or the other social interest.

Coming back to our example of the consumer contract, the consumer's substantive protection is at stake in a contractual choice-of-law provision. The "substantive stakes" are lower if the differences between the laws in question are fewer - but then the potential cost from splintering of the legal regime will most likely also be lower, as we have seen above. In the absence of rules-of-thumb, ascertaining the risk for the consumer and the potential for both parties of allowing contractual choice-of-law clauses, and weighing the two against one another, becomes difficult and complicated. At least the latter task (weighing) with its value judgment component is the proper task of the legislator, or more precisely or of the two implicated state legislators together (or of the federal legislator), since both states' policies and usually citizens are involved.239

Generally speaking, and to repeat, each choice-of-law is drawing the line between the legislative policies of the implicated states. In a federal system, this process should be guided by the principles laid out above in section III.B, and the application of these principles is in itself quite difficult. The specific costs of choice-of-law that we have been discussing over the last 20 pages are but an additional element to be taken into account. As we have seen, this additional element does not have a general direction, i.e., the direction in which it would push choice-of-law is dependent on the question we are dealing with, and will often be hard to discern because of opposing elements even within the group of these choice-of-law costs. Lastly, whereas the line-drawing according to the federalism principles might get less important as the substantive policies of the states get closer, the specific choice-of-law cost of splintering the legal regime does so, too.

(3) Role of the Courts

Altogether, evaluating and weighing the different elements to be taken into account for choice-of-law in an internal market and a federal system seems extremely complicated - and we had not even yet taken into account the need for choice-of-law rules and the additional weighing when striking a balance between precision and clearness of the rule.240 One should therefore ask if a court, be it the ECJ or the US Supreme Court, is in a position to intervene. In other words, even if one generally supports a broad interpretation of the Freedoms and the Dormant Commerce Clause, in particular the application of the burden-test for any hindrance of interstate commerce, one might want to exclude choice-of-law questions from the burden-test.

The very costs which may constitute a burden under the burden-test, choice-of-law costs, are not only hard to ascertain, but do not point in any fixed direction. In addition, they have to be weighed against the federalism considerations which are at the basis of choice-of-law analysis in a federal system. For the courts to engage in such a complicated analysis, at least there would have to be strong reason in the form of significant burdens on interstate commerce. But it seems that once we have legislative diversity, which the courts can do nothing against, the extra-costs generated by a suboptimal241 choice-of-law rule, namely unnecessary information cost or splintering cost, are rather negligible. Cases where a choice-of-law rule calls for the application of incompatible laws to a necessarily uniform action or structure may be an exception, such as in banking or insurance regulation. In such cases, however, the federal legislator usually intervenes with federal legislation. Such legislation can entirely federalize the area, so that legislative diversity and thus the need for choice-of-law rules is eliminated in that area. An example would be federal banking regulation in the US. The federal legislator can also just strongly harmonize the laws of the different states, and then adopt a choice-of-law rule that subjects the entire enterprise to only one law, if this does not cause high information costs to customers or third parties. Examples are the EC banking and insurance regulation directives. The important element here is, though, that the federal legislator can change, i.e., unify or harmonize, the substantive law before it changes the choice-of-law rule - courts cannot do that. Bibb is an example of a court simply unifying substantive law - decreeing a choice-of-law rule while finding no fault with the substantive rule would have been too problematic.

To repeat, one generally has to keep in mind what limited improvements a court can achieve under the burden-test analysis with respect to choice-of-law burdens. Above, we proposed that the US federal courts should craft uniform choice-of-law rules for the US under the Full Faith & Credit Clause. So, one might argue, if we think the federal courts capable of crafting a whole set of new choice-of-law rules, why should they not be capable of the adjustment of old rules through the burden-test ? The answer is that the federal courts should take the considerations that we discussed under the burden-test into account when crafting their own choice-of-law rules. They will go wrong, they will not get everything right, but the benefit from having uniform and neutral choice-of-law rules will be big enough that the errors do not invalidate the whole endeavor. If the federal courts, for whatever reason, decide not to craft their own rules under the Full Faith & Credit Clause, then scrutinizing choice-of-law rules under the burden-test could not bring the big improvement of uniform choice-of-law rules. The federal courts would merely be tinkering with diverse state rules, and the margin of error of the federal courts in so doing can be expected to be so high as to make the whole activity useless.

In view of the overly demanding complexity of the task, and low corresponding benefits, the ECJ and the US Supreme Court would thus be well advised to abstain from analyzing choice-of-law rules under the burden-test, except perhaps in extreme cases. Evaluating the different elements in choice-of-law analysis discussed in this paper, and crafting choice-of-law rules based on such analysis, would be left to the (preferably federal, otherwise) state legislator (or, in the US, the state courts).

The risks from judicial restraint in this regard are to some limited extent kept in check by another element of the Freedoms and the Dormant Commerce Clause - the non-discrimination requirement, which the ECJ and the US Supreme Court should of course continue to apply to all choice-of-law rules. As outlined above, the non-discrimination requirement calls for neutral choice-of-law rules.242 If a state wants to give an unfair advantage to its consumers vis-à-vis out-of-state sellers, it is obliged under the non-discrimination requirement to give the same advantage to out-of-state consumers vis-à-vis its own sellers. This should be an incentive for states to make an honest effort of finding the best choice-of-law solutions. As was alluded to above, this incentive is far from perfect. But, once again, the costs from suboptimal choice-of-law rules that might be actionable under the burden-test should in the vast majority of cases be negligible anyway. For the ECJ and the US Supreme Court then, there should be no role in scrutinizing choice-of-law rules under the burden test. If they engage in shaping choice-of-law rules, they should go all the way and craft (uniform) federal choice-of-law rules - a way open to the US federal courts under the Full Faith & Credit Clause.243

3. Localization of Redeeming Legitimate Interests ("Extraterritoriality")

Perhaps the power to craft federal choice-of-law rule is hiddenly vested in the ECJ, too - the burden-test might presuppose a choice-of-law understanding, which the courts would have to develop themselves if need be.

a) The Concept

One might think of territorially limiting the interests a state may rely on to justify a burden on interstate commerce.244 Recall that under the burden test, a state regulation which burdens interstate commerce has to be justified by the regulating state's pursuing a legitimate interest, and the measure's not being excessive in relation to these interests. Edgar stresses a small, but for our purposes highly important detail in the Pike formula, the word "local": "[T]he burden imposed on that commerce must not be excessive in relation to the local interests served by the statute."245 The decision goes on to invalidate a state statute on the grounds that "[w]hile protecting local investors is plainly a legitimate state objective, the State has no legitimate interest in protecting nonresident shareholders. ... [The State] has no interest in regulating the internal affairs of foreign corporations [either]." CTS clarifies that a state "has no interest in protecting nonresident shareholders of nonresident corporations", but it has an interest in protecting all shareholders of corporations incorporated in that state, and, of course, in protecting resident shareholders.246

On the basis of territorial criteria, Edgar and CTS thus assign certain (local) interests to the state to protect, while keeping others (foreign interests) off-limit. If this were done stringently, this could result in a full-scale choice-of-law system, determining the applicable law for each question. This were the case if the Court went so far as assigning each protective interest to only one state. For example, the Court might want to assign shareholder protection to the state of incorporation only. However, as we have seen, it seems that the Court would not disallow per se a state's intervention in corporate affairs in order to protect its resident shareholders. Still, territorially limiting the interests a state can legitimately rely on to justify a burden on interstate commerce narrows down the possible discrepancies in state's choice-of-law rules. The Court, while not making conflict rules, would still be making rules of scope; i.e., while the Court would not tell us what to do when two states' laws seem to be prima facie applicably, it limits the cases in which more than one state can claim to interfere in the first place by territorially limiting the interests states are allowed to protect. Three important remarks are in order.

First, it has to be clear that the question of whether a state can legitimately claim to protect a certain interest is external and a priori to the Dormant Commerce Clause complex.247 There seems to be no indication in the Dormant Commerce Clause doctrine, or the policies sustaining it, which interests a state can legitimately protect (see below). The Dormant Commerce Clause can only tell us what happens if the state cannot claim to be legitimately protecting an interest, and how to weigh an interest if and after we have decided that the state can legitimately protect it. The same holds true for the Freedoms. This is because the Dormant Commerce Clause and the Freedoms deal with the vertical relationship between commerce transactions (or participants) and state (or societal) regulatory interest, whereas the allocation of interests that a state can legitimately protect concerns the horizontal relationship between the states (or, if you will, the different states' societies).

Second, limiting territorially the interests a state may legitimately protect is reminiscent of the Supreme Court's Due Process Clause analysis in choice-of-law outlined above, and one would think that the limits would have to be the same, or almost. Unlike under the Due Process Clause though, the state's (territorially and otherwise) legitimate interests only matter under the Dormant Commerce Clause if the state's measure imposes a burden on interstate commerce (although under the broad view of the burden-test, such a burden might be present almost anywhere). However, if such a burden exists, the state's (territorially and otherwise) legitimate interests are weighed against that burden under the Dormant Commerce Clause, not against the individual litigant's interests as under the Due Process Clause. The Dormant Commerce Clause test might thus add to the Due Process Clause test, and does not just replicate it. At the same time, the Court's extremely tolerant view on state's interests under the Due Process Clause should caution against expecting any practical impact of the outlined territorial reasoning under the Dormant Commerce Clause.

Third, on a theoretical level, it is very ambiguous how one can go about territorially limiting legitimate state interests, and what impact the criterion of territorially limited legitimate state interest might have on burden-test analysis. On the one hand, the criterion might just ask if the regulatory sphere of the regulating state is touched. In this paper, we have given short shrift to the question what legitimate interests in this sense state actually have. Rare will be the case where the regulating state does not at least have some interest in intervening, i.e., where the state's regulatory sphere is not touched at all. Coming back to the Edgar and CTS cases of anti-takeover regulation, it seems plausible to argue, as the Court does, that a state has no interest in protecting out-of-state shareholders of an out-of-state corporation. But does this mean that a state can never have an interest in regulating takeovers of out-of-state targets with no instate shareholders ? If takeovers generally lead to labor turmoil, why should not a state where the target has a major establishment have an interests to regulate the takeover ?248 What the Supreme Court really seems to be doing is to give preference to some other state's regulatory interests. This, however, seems to presuppose at least a beginning of a prior choice-of-law conception. The question is then where this conception comes from, and where, if at all, a court should stop short of imposing a full-scale choice-of-law system by means of the burden-test's justification side.

Fourth, and lastly, it has been argued that the territorial limitation of a state's regulatory interests derives from the requirement that a measure be necessary (and, perhaps, proportional) to protect the (substantive) legitimate interest in order for the burden on interstate commerce to be justified.249 This would mean that, after all, the territorial limitation of states' regulatory interests does derive from the burden-test itself, contrary to what we have argued before. However, the arguments based on the necessity (and proportionality) component of the burden-test's justification side are faulty or weak. First, some have argued that a measure is not necessary if another state can intervene instead.250 But this would assume that the other state has some kind of priority right to regulate the situation - where does this priority come from ? Also, and relatedly, even if the other state does have priority, it would still leave open the possibility for the first state to intervene if the other state does not. Second, one might think that regulation of a rather distant event is usually less efficient, i.e., the burden imposed on interstate commerce heavier than if the state closer to the event had intervened.251 But again, if the latter state does not intervene, the more distant state's intervention remains necessary. All one could conclude is that regulation of distant events will more often than usual bump up against the proportionality criterion (provided the latter is indeed part of the burden-test).252 Overall, the argument based on the necessity/proportionality criterion seems to give little leverage.

b) Practical Relevance, and (again) the Role of the Courts

The idea of territorially limiting the interests states may legitimately advance as a justification under the burden-test could certainly be explored further. For the purposes of choice-of-law, however, we should ask whether this would have any practical relevance, though, before we do so. At most, the line of thought outlined in the preceding paragraphs could enable a court to impose a full-blown choice-of-law system through the burden-test. For the US federal courts, that would be no advance at all - they already have such powers, with less need of justification, under the Full Faith & Credit Clause. For the ECJ, the power would be new - but would the ECJ be in any position to use its new power ? Unlike the US Supreme Court, the ECJ does not have the support of a full court system of federal district and appeals courts for mastering the task of creating a new, or at least unifying the, choice-of-law system. The ECJ has only the help of the Court of First Instance. As a matter of fact, there is already rising concerns about the capacity of the European courts to handle even their present tasks once new Eastern European Member States join the Union. Given that the EU is starting to legislate actively in choice-of-law under its new powers in Art. 65 EC, the European courts would seem to be carelessly wasting their resources if they engaged on a project to craft a new choice-of-law system through the burden-test of the Freedoms. However, the ECJ might want to seize on the proportionality argument in extreme (!) cases of overreaching legislation.

163 E.g., Wulf-Henning Roth, Die Grundfreiheiten und das IPR - das Beispiel der Produkthaftung, in Gedächtnisschrift fue Alexander Lüderitz 635 (Haimo Schack ed. 2000).

164 Cf. for the area of conflict of laws supra, note 108, and accompanying text. Two of the three ECJ decisions cited there were based on the non-discrimination requirement of the Freedoms, rather than on the general non-discrimination requirement of Art. 12 EC.

165 Cf. Regan, supra note 34, 1880-1884.

166 359 U.S. 520 (1959).

167 Cf., e.g., Armbrüster, supra note 5, 75; Gärtner, supra note 5, 116; Remien, supra note 156, 353; Roth, supra note 7, 27-28; Radicati di Brozolo, supra note 3, 412-413 (assuming that for insurance contracts, most mandatory legal rules amount to excluding a product from the market), 418 (rules prohibiting certain financial transactions, e.g., swaps, are keeping out a product), 420 (bankruptcy law, secured transactions law, and so on, only "legal environment", not product defining).

168 See von Wilmowsky, supra note 4, 19-20.

169 Cf. generally on the Freedoms as applied to Community measures Leible, supra note 131, note 44 on Art. 28 EC; Kapteyn/VerLoren van Themaat, supra note 122, 577.

170 See, e.g., Brilmayer, supra note 13, § 3.2.3; Richman & Reynolds, supra note 12, § 96(a).

171 The written opinion of the Court did not put the Arkansas regulation to the burden test. Presumably this was because the Court thought the conformity of the Arkansas regulation with the burden test to be obvious.

172 Id., at 526.

173 Id.

174 It is ironic that the Arkansas law was actually enacted after the enactment of the Illinois law, see id., notes 1 and 4.

175 Id., at 523.

176 Id., at 529-530. Of course, this argument, and the invalidation of the law, is limited to interstate carriers - but that is basic application of the doctrine.

177 Cf. supra V.B.2, at 25.

178 Although at first sight similar, cases such as Kassel v. Consolidated Freightways Corp., 450 U.S. 662 (1981) and Healy v. Beer Institute, Inc., 491 U.S. 324 (1989) presented different problems, cf. Tribe, supra note 94, § 6-7 and 6-12.

179 See supra note 12.

180 481 U.S. 69, at 89.

181 481 U.S. 69, at 93.

182 Id.

183 457 U.S. 624, at 645.

184 481 U.S. 69, at 93.

185 Id.

186 Justice Powell joined the Edgar majority, but filed a concurrence which embodies a remarkably different thought, see below.

187 In which he was joined by, among others, Justice Stevens, also a member of the majority in Edgar.

188 457 U.S. 624, at 646.

189 481 U.S. 69, at 100-101.

190 Shafers v. Farmers Grain Co., 268 U.S. 189, 199 (1925); Edgar v. MITE Corp., 457 U.S. 624, 640 (opinion of White, J.).

191 In fact, yielding the Dormant Commerce Clause sword would have been unnecessary if the dragon to be slain had been a choice-of-law rule, since the Full Faith & Credit Clause could have done the job, as we have seen above.

192 481 U.S. 69, 88-89.

193 Harold W. Horowitz, The Commerce Clause as a Limitation on State Choice-of-Law Doctrine, 84 Harv. L. Rev. 806, 814 (1971). Cf. Kozyris, supra note 12, 506-507; Martin, supra note 36, 210-211, 227-229.

194 Cf. supra V.B, p. 24 and following pages.

195 Cf. supra V.B.2, p. 25.

196 Basedow, supra note 3, 12-18; Peter Bernhard, Cassis de Dijon und Kollisionsrecht - am Beispiel des unlauteren Wettbewerbs, EuZW 1992, 437, 437-439; Drasch, supra note 3; Kieninger, supra note 145; cf. Radicati di Brozolo, supra note 3.

197 Drasch, supra note 3.

198 Bernhard, supra note 196, 440, and Book Review of Drasch (supra note 3), RabelsZ 63 (1999) 175; Eckart Brödermann & Holger Iversen, Europäisches Gemeinschaftsrecht und Internationales Privatrecht s. 409 (1994); Martin Gebauer, Internationales Privatrecht und Warenverkehrsfreiheit in Europa, IPRax 1995, 152, 154-156; Rolf Sack, EG-Vertrag und das internationale Wettbewerbsrecht, Wettbewerb in Recht und Praxis [WRP] 1994, 281, 285-; Sonnenberger, supra note 156, 10-11, 23, 26.

199 Case 59/82, Schutzverband gegen Unwesen in der Wirtschaft v. Weinvertriebs-GmbH, (1983) E.C.R. 1217, recital 6-9. The proponents of the origin principle argue that in this case, we are not dealing with a measure of the importing state, though, but a measure of the exporting state, which is subject only to the (in the jurisprudence of the ECJ) laxer standard of Art. 30, such that applying the home state rule does not violate the Freedoms; see, e.g., Basedow, supra note 3, 17. If this were true, it might only prove the frequently made point that applying different standards under Art. 28 and Art. 30 is inconsistent.

200 See, e.g., Basedow, supra note 3, 8; Kieninger, supra note 145, 131-147.

201 Cf., e.g., Bernhard, supra note 196, 441-443, and supra note 198, 176.

202 For the doctrinal counterpart of this policy argument, cf. supra note 199, and accompanying text.

203 Peter Mülbert, Privatrecht, die EG-Grundfreiheiten, und der Binnenmarkt, Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht [ZHR] 159 (1995) 2, 19-20.

204 Cf. Taupitz, Zeitschrift für Europarechtliche Studien [ZEuS] 1998, 17, 33-.

205 Cf. supra V.B.2, p. 25.

206 Cf. Kohler, supra note 5.

207 von Wilmowsky, supra note 4, 39-41.

208 Cf. id., 51-52.

209 Cf. von Wilmowsky, supra note 4, 44-45.

210 Well, only partially. Choice-of-law is necessary, but the rules can be more or less complex, cf. generally supra, p. 6.

211 These burdens seem to correspond to what choice-of-law scholars have called "multistate interests" or "choice-of-law interests", cf., e.g., Kropholler, supra note 16, § 5 II.

212 Cf. Kieninger, supra note 145, 153-155; Ulrike Seif, Das Spannungsverhältnis zwischen Kollisionsrecht und Europarecht, Jahrbuch Junger Zivilrechtswissenschaftler [JJZ] 1997, 225, 248; von Wilmowsky, supra note 4, 46.

213 In the case of fraternal benefit associations, the US Supreme Court has invalidated the application of a law other than that under which the association is organized even for less dramatic reasons, cf., e.g., Supreme Council of the Royal Arcanum v. Green, 237 U.S. 531 (1914); Order of United Commercial Travelers of America v. Wolfe, 331 U.S. 586 (1947). However, these decisions antedate the more recent, laxer, jurisprudence of the Supreme Court with regard to choice-of-law.

214 This is the standard claim, although clothed in substantive law considerations, in the European literature on choice-of-law and the Freedoms, cf. supra note 200.

215 This assumes that there is no extra social benefit from complying with the strictest law or the extra requirement for the whole operation, or that the participant in interstate commerce cannot internalize this benefit. If and in so far as this assumption is not true, the upward boundary is even lower.

216 Cf. von Wilmowsky, supra note 4, 62; and Roth, supra note 110, 654 (protection against information cost as justification element). In view of the legal education system, differing legal traditions, and almost trite, but important details like the lack of a common European legal database like Westlaw or Lexis, the burden is presumably much higher in the EU than in the US. The Commission has embarked on a plan to improve the situation, see (last visited 05/01/2001).

217 von Wilmowsky, supra note 4, 45-46; cf. Grundmann, supra note 145, pt. 1 note 101- (for the lex mercatoria); Seif, supra note 212, 247-248 (unwillingness of banks to take a claim subject to foreign law as collateral).

218 The ECJ is of course in a somewhat special situation when applying the Dassonville / Cassis de Dijon test. Formally, the ECJ is only applying Art. 28, so that the whole Dassonville / Cassis de Dijon test is formally only about whether there is a MEEQR or not. Formally, then, the Dassonville / Cassis de Dijon test is not about justification at all. But for all practical purposes, the ECJ applies a two-pronged test consisting of finding a burden, and then looking for a justification. See Weiler, supra note 141, 366.

219 Supra III.A.3, p. 11.

220 Supra IV.A.2.c), p. 21 for the US; and for the EU IV.B.2, p. 23.

221 The US federal courts are empowered to create federal choice-of-law rules under the Full Faith & Credit Clause, see supra IV.A.2.c), p. 21.

222 See supra VI.C.3, p. 35.

223 See above all von Wilmowsky, supra note 4, § 2 II; cf. infra VI.D.2.c)(3), p. 45.

224 Supra note 196.

225 Phillips Petroleum Co. v. Shutts et al., 472 U.S. 797 (1984).

226 Sun Oil Co. v. Wortman et al., 486 U.S. 717 (1987).

227 Basedow, supra note 3, 18.

228 Drasch, supra note 3, 303-; von Wilmowsky, supra note 4, 58-60.

229 This point is almost always overlooked, see, e.g., Drasch, supra note 3, 316-317.

230 Perhaps this would be a more convincing description of the concerns that Kieninger, supra note 145, 165-174, seeks to protect.

231 As it usually is, see, e.g., Drasch, supra note 3, 316-317.

232 Everybody seems to agree that the conflict with the Freedoms could be avoided this way, e.g., Basedow, supra note 3, 27-28; Basedow, Common Contract Law, supra note 115, 1174; Drasch, supra note 3, 301-; Grundmann, supra note 145, pt. 1 notes 64-69; see also ECJ Case C-339/89, Alsthom Atlantique v. Sulzer, 1991 E.C.R. I-107. But see von Wilmowsky, supra note 4, 40 (default choice-of-law rules have to be adopted, too); cf. also Steindorff, supra note 156, 78-79.

233 See von Wilmowsky, supra note 4, 40-41.

234 E.g., Peter von Wilmowsky, Der internationale Verbrauchervertrag im EG-Binnenmarkt: Europarechtlicher Gestaltungsspielraum für kollisionsrechtlichen Verbraucherschutz, ZEuP 1995, 735, 741-744.

235 Cf. von Wilmowsky, id.

236 E.g., Baxter, supra note 15, 22.

237 To illustrate, imagine state A which requires corporations to take measure A, and state B which requires corporations to take measure B. Both these requirements are imposed with the same goal, and they are equally well suited to reach that goal. Then on a substantive level, the burden-test would seem to forbid state A to require measure A from a corporation which adopts measure B - state A's insisting on measure A would be unnecessary to reach the defined goal. Of course, there might be reasons why insisting on measure A could be justified, such as a registration system which can only support one of the two systems, A or B, not both simultaneously. But then these reasons would also warrant insisting on the law of state A over the law of state B. To come back to our example of contracts, one can imagine a similar example with two sets of mandatory protective clauses in a consumer contract.

238 If there are no differences between the laws of different states, there is no cost from the splintering of the legal regime, and only the information cost persists in so far as the parties do not know that the laws are the same.

239 Cf. supra III.A.3.c), p. 11.

240 See supra II.C, p. 6.

241 From the point of view of the specific choice-of-law costs.

242 Supra III.A.1, p. 8, and IV.A.2.b), p. 20.

243 Cf. supra III.A.1, p. 8, and III.A.3, p. 11.

244 See generally von Wilmowsky, supra note 4, 15-19, with further references; and cf. generally Regan, supra note 34, 1873-1880, 1884-1913. Cf. Nat Stern, Circumventing Lax Fiduciary Standards: The Possibility of Shareholder Multistate Class Actions for Directors' Breach of the Duty of Due Care, 72 Neb. L. Rev. 1, 51 (1993). Cf. also Francois Rigaux, New Problems of Private International Law in the Single Market, 4 King's College L. J. 23, 38-39 (1993); Kreuzer, supra note 116, 420-421 (Freedoms on the demand side require possibility to go abroad and transact under laws of the foreign state). Lastly, cf. ECJ Case C-169/89, Van den Burg, (1990) E.C.R. I-2413; and Western Union Telegraph Company v. Brown, 234 U.S. 542 (1913) (per Holmes, J.): "[W]hen a State attempts in this manner to affect conduct outside its jurisdiction or the consequences of such conduct, ..., it must fail."

245 457 U.S. 624, 643 (emphasis added).

246 481 U.S. 69, 93.

247 Cf. Regan, supra note 34, 1885.

248 Cf. Powell's concurrence (in fact more like a dissent) in Edgar: 457 U.S. 624, 646.

249 von Wilmowsky, supra note 4, 16-19, 63-66.

250 Id.

251 Cf. id., at 16.

252 Cf. id. at 19.




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