Abstract© 2004. K.A.D. Camara. All rights reserved.IntroductionI. Naturalism, Nationalism and Internationalism: Three TheoII. NationalismFidelity to Law: The Institutional ArgumentExternalities of SovereigntyWrong Law SimpliciterInconsistent LawInefficient ScopeCosts of SovereigntyExternalities of Sovereignty as Imposed CostsLegal ImpositionsPolitical ImpositionsIII. Nationalism AppliedScales of SovereigntyDomestic Jurisdiction and Domestic LawInternational Jurisdiction and Domestic LawDomestic Jurisdiction and International LawInternational Jurisdiction and International LawIV. Objections to Nationalism“The Ends Justifying Domestic Law”Second Order InternationalismFirst Order InternationalismV. Connections and ExtensionsPositive Claims, State Structure and the Theory of the FirmSticky Sovereignty and the Technology of SovereigntyCamouflaged SovereigntyPrivate SovereigntyThe Federal PerspectiveVI. Summary, Implications and ConclusionISSN 1045-6333 HARVARD JOHN M. OLIN CENTER FOR LAW, ECONOMICS, AND BUSINESS FELLOWS’ DISCUSSION PAPER SERIES COSTS OF SOVEREIGNTY K.A.D. Camara Discussion Paper No. 2 09/2004 Harvard Law School Cambridge, MA 02138 Contributors to this series are John M. Olin Fellows in Law and Economics at Harvard Law School or other students who have written outstanding papers in law and economics. This paper can be downloaded without charge from: The Harvard John M. Olin Fellow’s Discussion Paper Series: http://www.law.harvard.edu/programs/olin_center/JEL CLASSIFICATIONS: D23, K22, K33, K41 COSTS OF SOVEREIGNTY K.A.D. Camara* ABSTRACT Nationalism holds that states should set private international law to best attain the ends justifying their law as a whole. I situate nationalism against its naturalist and internationalist competitors, tracing the evolution of choice of law theory from naturalism to internationalism and now to nationalism. I then state the nationalist theory, identifying five forms of reciprocally imposed effects of and sanctions for states’ claims to sovereignty: “externalities of sovereignty” and “costs of sovereignty;” and explore four paradigm private international law settings a nationalist state might adopt in different substantive areas. I address objections to nationalism, from skepticism about “the ends justifying domestic law” to skepticism about the moral-political right of states to advance those ends exclusively. I then address the relation of nationalism to modern problems in corporate law and the theory of the firm; the ideas of sticky, camouflaged and private sovereignty; and the application of nationalism to a federal entity regulating internal regulatory conflicts. The Article sets the stage for further elaboration of nationalist theory, and for exploration of nationalism in, and nationalist reforms of, the practice of private international law. * John M. Olin Fellow in Law & Economics, Law School of Harvard University. J.D., Harvard University. Email: [email protected]. Michal Barzuza, Lucian Bebchuk, Terry Fisher, Geron Gadd, Andrew Guzman, Louis Kaplow, Georgia Magno, Colin McRoberts, Dotan Oliar, Steven Shavell, Arthur von Mehren and Filip Wejman provided helpful comments and encouragement. Participants in two workshops at the Berkman Center for Internet & Society, two seminars at Harvard Law School, and the Harvard Law & Economics Lunch Group also provided helpful comments. The John M. Olin Center for Law, Economics & Business at Harvard Law School and the Berkman Center for Internet & Society provided financial support. The librarians of the United States Court of Appeals for the Tenth Circuit provided helpful assistance in obtaining sources.COSTS OF SOVEREIGNTY K.A.D. Camara Abstract...................................................................................................................2 Introduction.............................................................................................................4 I. Naturalism, Nationalism and Internationalism: Three Theories of Private International Law.............................................................................................6 II. Nationalism .......................................................................................................10 A. Fidelity to Law: The Institutional Argument..............................................10 B. Externalities of Sovereignty........................................................................14 1. Wrong Law Simpliciter .....................................................................15 2. Inconsistent Law................................................................................16 3. Inefficient Scope................................................................................18 C. Costs of Sovereignty ...................................................................................20 1. Externalities of Sovereignty as Imposed Costs .................................21 2. Legal Impositions..............................................................................21 3. Political Impositions..........................................................................23 III. Nationalism Applied ........................................................................................24 A. Scales of Sovereignty..................................................................................24 B. Domestic Jurisdiction and Domestic Law...................................................25 C. International Jurisdiction and Domestic Law..............................................28 D. Domestic Jurisdiction and International Law .............................................31 E. International Jurisdiction and International Law.........................................32 IV. Objections to Nationalism ...............................................................................34 A. “The Ends Justifying Domestic Law”.........................................................34 B. Second Order Internationalism....................................................................38 C. First Order Internationalism........................................................................40 V. Connections and Extensions..............................................................................42 A. Positive Claims, State Structure and the Theory of the Firm......................42 B. Sticky Sovereignty and the