Working Paper No. 03-42:
Adverse Selection and Moral Hazard in Forum Shopping: Conflicts Law as Spontaneous Order

Author(s):

Nita Ghei, Francesco Parisi

Date Posted: 2003

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Abstract:

In a world with multiple, overlapping jurisdictions, any given litigation could be pursued in more than one forum. Different laws can yield different outcomes. This leads to parties selecting a forum perceived as favorable to file suit. This practice, also known as forum shopping, has been much criticized, and various reforms to the law of conflicts of law have been proposed as a way to reduce this practice. The article examines the inefficiencies associated with forum selection, and the alleged shortcomings in conflicts law as it currently exists. We argue that forum selection cannot be eliminated in a world with multiple jurisdictions. Further, we argue that conflicts law has evolved, and continues to evolve, so that it tends toward correcting inefficiencies associated with the system. We draw an analogy between the system of conflicts of law and a market, where, despite the fact that the actors lack perfect information, the outcome is largely efficient. Therefore, conflicts of law might be considered to be an example of spontaneous order.