tags: #publish links: [[Business Strategy and Competition]], [[Law]] created: 2021-11-20 Sat --- # Regulatory Arbitrage Sort of the inverse of [[Competitive Compliance]]. See also [[PEST or PESTLE Analysis]]. When regulation in one geopolitical location is causing your business costs or restrictions, simply set up in a different location where it doesn't apply - a form of location-based arbitrage. This is only available to two categories of business: - Those large enough to support corporate or legal presence in multiple jurisdictions. - Those unethical enough - or with enough marketing clout - to respond to regulation intended to protect consumers by simply avoiding it. Some related classic moves: - Registering your US corporation in the state of Delaware, where corporate law is more favourable. - Initiating your US intellectual property lawsuit in Texas, which has some notoriously favourable courts and judges. - Avoiding one location's data protection legislation by moving your customers' data - or your corporate registration - to a different jurisdiction where the legislation does not apply. - Setting up a complicated multi-national structure in order to move profits and losses around and arbitrage details of multiple national tax systems to minimise overall tax. Regulators have had a go at preventing some of this nonsense: - Newer EU consumer data regulations apply based on the location or citizenship of the person, rather than the location of the data or the company. So if you do business with people in or from that jurisdiction, you can't simply avoid it by moving the data, or by switching the customers' legal relationship with you to a corporate entity in a different country. - Some countries are trying to impose an international minimum corporate tax rate, theoretically designed to avoid tax arbitrage. Due to [[Regulatory Capture]] and lobbying, this seems relatively unlikely to succeed fully - or, is likely to produce a dilute form suiting [[Competitive Compliance]] by the largest companies.