Regulatory Competition in Partnership Law

Abstract

Regulatory competition in company law has been extensively debated in the last few decades, but it has rarely been discussed whether there could also be regulatory competition in partnership law. This article fills this gap. It addresses the partnership law of the US, the UK, Germany, and France, and presents empirical data on the different types of partnerships and companies established in these jurisdictions. The first main part finds that in the US there is both vertical and horizontal competition in partnership law. In most states businesses and professionals can freely choose between a number of entity forms, such as LLPs, LLCs and different types of corporations. Moreover, states themselves care about the attractiveness of their partnership law. This is most noticeable for Delaware's law on limited partnerships but one can also identify some regulatory competition for the best LLP law. The second main part turns to the situation in the European Union. Here the legal landscape is more diverse because only the UK law knows the LLP, whereas in Germany and France there are other forms of partnership and company law which, for instance, may be used by law firms (e.g. PartG, Anwalts-GmbH, SCP, SEP, SELARL). However, these legal forms can only provide a partial substitute for the UK LLP. Since the freedom of establishment of the EC Treaty allows continental firms to choose the UK LLP, it is therefore likely that regulatory competition will also develop in partnership law in the EU.