Slide 20 of 26
If it is the case that all of the products and services that the Jurisdiction Project covers share, in very large measure, the multiple commonalities I have described, it is not a sensible solution to have substantially different jurisdictional rules for financial services and other services, or for different legal aspects of the same transaction. A world in which the incidents of tax jurisdiction are substantially different from the incidents of contract formation, which are different from the incidents of consumer protection, which are different from the incidents of payment and financing, etc., is a world in which the transactional costs will have a substantially negative effect on the volume and pricing of the commerce.
I submit that the answer in virtually all cases is both, not either/or. In this sense, the banking and payment system area is an excellent example. Speaking solely from the vantage point of the U.S., it is inconceivable that, with respect to its financial services institutions, the United States would cede to other nation states elements of prescriptive and enforcement jurisdiction which it regarded as essential to its sovereignty. The existence of the U.S. International Banking Act administered by the Federal Reserve Board is evidence of that fact (see 12 CFR Ch. 40). At the same time, it is inconceivable that the rest of the world (i.e., the destination countries) would permit U.S. financial institutions to act within their borders solely in accordance with U.S. law. The same conclusion can be drawn with respect to virtually every area of law. No nation state will give up the ability to protect its citizens against fraud and serious consumer abuse.
Nevertheless, in the banking area, it is common for “safety and soundness” regulation in US jargon (“prudential supervision” in Continental jargon) to be conducted on a country of origin basis (by the chartering jurisdiction) and for “compliance” regulation to be conducted using a country of destination approach (where the financial services were received.)