Liberalism Outsourced: Why Oligarchs and Autocrats Fight in Foreign Courts
Newman, Abraham L
Globalization allows business to arbitrage liberal institutions. Actors from the same emerging market can now adjudicate their domestic disputes abroad: Kazakh banks sue Kazakh billionaires, and Nigerian royals sue Nigerian oligarchs in the courtrooms of London and New York. Foreign courts provide expert, independent judiciaries that most emerging markets lack, but not all plutocracies litigate abroad. The balance of power between the state and the plutocracy explains why. Weak institutions mean that plutocrats are in a constant fight to secure their property. Filing abroad could expose the corrupt, and sometimes criminal, activities that generate their wealth. This would only increase threats to their property if plutocrats own the state or if they are subordinate to the ruler. But when the state and the plutocracy have similar levels of power, they clash. Foreign courts become the last resort for the losers to recoup their economic damages. The winners of the battle then go abroad to seize their opposition’s offshore wealth.Econometric analysis of an original dataset based on judgments from the London courts tests the cross-country expectations. Within-cases analysis of the Russian elite provides evidence for the causal mechanisms. The bulk of the qualitative evidence comes from 60 interviews with lawyers that have worked with Russian plutocrats and firms during their battles in London.The project illustrates that the domestic law and courts of liberal economic powers are becoming tools in the political conflicts of emerging economies. This phenomenon has important consequences as the parties involved in these extraterritorial cases are the actors that we generally expect to bargain for stronger rule of law at home. Due to capital mobility, they can effectively arbitrage institutional settings. This may diminish elite incentives to push for political development in emerging states, highlighting some of the perverse consequences of today’s international legal order. Political economy scholarship tends to focus on the firm or sector, but the dissertation shows how global governance empowers plutocrats and kleptocrats. The findings open up a broader research agenda focused on the International Political Economy of Oligarchy.
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