Corporate Law as Decolonization
EXCERPT
Martin W. Sybblis
ABSTRACT
After centuries of colonial subordination, Black and Brown former colonies are still fighting to achieve the fruits of decolonization. The traditional theory is that former colonies will emerge from the colonial period with the legal mandate and international recognition needed to chart their own futures. But, for those Black and Brown British colonies that achieved political independence, it became clear that, without economic strength to care for their societies, legal separation could not deliver on its promise of freedom from subordination. This Article argues that investments in corporate law innovations by some jurisdictions, such as Bermuda, the British Virgin Islands, and the Cayman Islands, have provided a pathway to postcolonial self-determination. These communities have generated immense wealth and autonomy for their populations in the postcolonial era by using strategies akin to those deployed by the State of Delaware. While former colonizers denigrate Bermuda, the Cayman Islands, and the British Virgin Islands as tax havens and corporate law imperialists, which must be aggressively governed to protect the tax base and financial sectors of “non-tax haven” countries, there is another side to this narrative: Offshore corporate law is freedom-promoting for some communities. This Article complicates the dominant perspective of corporate law imperialism and introduces a conceptualization of corporate law as decolonization to the legal and policy discourse on offshore financial centers.
INTRODUCTION
Achieving legal and political independence is a significant moment in the history and development of a colony. This is especially the case if the formerly enslaved peoples were able to jettison an exploitative colonial controller. Sovereignty, however, is not always the path chosen when subordinated communities have the opportunity for greater self- determination—but rather an enhanced ability to pursue their national interests. Indeed, throughout the globe, there remain at least forty nonsovereign jurisdictions.
The choice of nonsovereignty by some jurisdictions, such as the corporate law “market dominant small jurisdictions” (MDSJs) of Bermuda, the British Virgin Islands, and the Cayman Islands should not automatically be interpreted as a failure to achieve the fruits of decolonization. On the contrary, their choice of sub-sovereign status to the United Kingdom (UK) has led to greater autonomy and self-determination than achieved by neighboring sovereign states in the Caribbean. This view of self- determination has less to do with constitutional rights as traditionally understood and more to do with economic success. For some nonsovereign jurisdictions, a keen awareness of neocolonialism has motivated a hyperfocus on economic self-reliance as a vehicle for true self-determination. For these jurisdictions, political independence without economic strength would provide only the illusion of decolonization. It would lead to persistent subordination to powerful nations and international organizations.
This Article argues that investments in corporate law provide one pathway to achieving the economic success required for self-determination in the postcolonial era. Conventional conceptualizations of constitutional law—with prescribed state authority and individual rights—as the vehicle for postcolonial freedom overlook how subordinated communities find alternative ways to conceptualize decolonization. In an environment with an imbalance of power, the weaker community will seek to “mak[e] do with what a situation offers.” Thus, it aggressively pursues openings within the prevailing power structure to strengthen its position.
Similarly, a set of majority Black and Brown postcolonial offshore financial centers (OFCs) have effectively demonstrated that corporate law provides a viable path to significant postcolonial autonomy—even in the context of nonsovereignty. These are the MDSJs. They are a subset of United Kingdom Overseas Territories (UKOTs) that are nonsovereign jurisdictions in the UK’s “undivided realm.” While each of their constitutions gives the UK ultimate veto power over UKOT created legislation, the constitutions also provide these communities with the authority to create corporate governance rules for foreign corporations. Significantly, MDSJs are known for their ease of incorporation, skillful deployment of corporate governance rules in service of foreign corporations, and expert use of specialized commercial courts to adjudicate business disputes. These and other investments in corporate law have made MDSJs significant competitors to the longtime leader in corporate law—the U.S. State of Delaware.
MDSJs rely on innovative corporate laws and legal institutions to encourage incorporations and related financial services, which in turn generate revenues for the jurisdictions. Fees and taxes collected from foreign corporations have significantly helped these jurisdictions become economically self-sufficient, which allows them more practical autonomy with respect to the UK. By one estimate, “about a quarter of firms incorporated in foreign nations are accounted for by [MDSJs].” As a result of the income generated from incorporations and offshore financial services, MDSJs are less reliant on the UK for budget assistance and other forms of major financial assistance. This minimizes the UK’s day-to-day political and legal intervention into their affairs because the UK has less financial risk. And, while the UK has the constitutional right to intervene in governance and lawmaking, it rarely does so—leaving MDSJs virtually free to chart their own destinies. The wealth generated from the offshore sectors in MDSJs also provides public goods and services for their local communities.
This Article’s corporate-law-as-decolonization-thesis highlights the role of economic strength as being more important than formal constitutional authority in achieving community self-determination. While political power, such as the political authority made possible through sovereignty, is a significant milestone in any community’s development, it alone is an insufficient vehicle to self-determination. Consider, for example, the history of race relations in urban America. In the 1980s and 1990s, after decades of purposeful urban segregation, cities across America celebrated the rise of Black leadership in the form of mayors. But the fact that some cities had Black mayors did not mean the end of racial discrimination or the beginning of economic progress for Black residents. Indeed, a change in leadership did not portend escape from oppression. According to one scholar, in the 1990s the “Black population in these cities [relied] on other racial and ethnic groups for their economic survival.” Moreover, the election of Black mayors in “Black majority cities” was considered a “hollow prize” because of the structural “challenges in acquiring resources.” In other words, political power without economic strength is sorely limited.
Akin to the case of Black political rule in urban America, I argue that postcolonial MDSJs likely consider formal political independence a potentially vacuous achievement because of the structural inequalities built into the international economic and political arrangements. The experience of some now-sovereign countries in the Caribbean region suggests as much. For example, many sovereign nations in the region have struggled with sovereign debt issues, political violence, and even political coups, highlighting the effect of structural inequalities.
The leading scholarly and public policy narrative ignores the role of economic growth in the postcolonial wellbeing of some OFCs. Instead, it denigrates the success of OFCs, including MDSJs, as being the direct result of a race to the bottom. From this perspective, low-to-zero taxes and lax corporate governance rules are what make these jurisdictions attractive to corporations. But this account tragically oversimplifies the variety of OFCs throughout the world and their range of offerings. Importantly, it underappreciates their diverse and complex social histories. The prevailing account also disregards the postcolonial autonomy and self- determination interests that drive some OFCs, such as MDSJs, to strategically invest in their corporate governance laws as one vehicle for meaningful self- determination. This Article seeks to supplement the dominant discourse regarding OFCs and thereby provide a more complete picture of their social, legal, and economic impact on various communities.
This Article is the first in legal scholarship to make the connection between corporate governance laws and the decolonization experience of certain colonies. It contributes to the important scholarly and policy discourse on international tax, the competition for corporate charters, race and global inequality, the legacies of colonialism, the postcolonial pursuit of self-determination, law and development, law and political economy, and comparative law. It also provides much needed nuance to the current debate over corporate profit shifting and the related erosion of the tax bases in non-offshore jurisdictions by including the lives, histories, and aspirations of Black and Brown communities in former colonies. These communities are too frequently overlooked and disregarded in international law and policy circles. And, while this Article does not seek to make a claim for reparations for Black and Brown postcolonial OFCs, it suggests that wealthy countries in the Global North consider solutions to the tax evasion and “financial opacity” that minimize the harm to vulnerable postcolonial jurisdictions that facilitate offshore business law and offshore finance. In short, this Article complicates the dominant corporate law imperialism perspective and introduces a corporate law as decolonization perspective to the legal and policy discourse on OFCs.
The remainder of this Article is organized in five parts. Part I discusses the ways commentators have conceptualized the process and goals of decolonization. This Part reveals that some commentators have understood decolonization to mean more than the attainment of legal sovereignty, and to also include economic security. Part II argues that, along with migration and a radical new vision for a supportive international economic order for postcolonial nations, corporate law should be considered a viable pathway to decolonization. Part III demonstrates how MDSJs have utilized corporate governance rules to achieve a form of decolonization that has escaped other postcolonial nations, including their sovereign former colony neighbors. Part IV discusses the traits of nonsovereign and sovereign former colonies that are generally less equipped to use corporate law as a vehicle for decolonization. This Part argues that corporate law is not a suitable path to self-determination for all former colonies. It uses the cases of the UKOTs of Anguilla, Montserrat, and Turks and Caicos Islands as examples of jurisdictions that have pursued offshore financial services but have not gained sufficient success to achieve the economic independence required for meaningful postcolonial self-determination. Part V outlines the implications of decolonization through corporate law. Part 0 concludes the Article by summarizing its central thesis.
—from Corporate Law as Decolonization, 71 UCLA Law Review 798 (2024)