What is jurisdictional arbitrage?

Jurisdictional arbitrage refers to the act of taking advantage of the disagreements between competing legal jurisdictions. The act takes its name from arbitrage, referring to when a security is purchased at a lower price in one market and sold at a higher price in another.

Where have you heard about jurisdictional arbitrage?

Jurisdictional arbitrage is a common practice, with examples ranging from a company moving office to come under the jurisdiction of a more lenient regulatory agency, all the way up to somebody seeking asylum to a jurisdiction with improved human residency rights.

What you need to know about jurisdictional arbitrage.

As with financial arbitrage, the appeal of jurisdictional arbitrage depends a lot on financial transaction costs, with lower exit costs making the switch of legal providers more desirable. In the same way, it may be a turn off/inhibitor if the new jurisdiction has high entry costs - for example, Andorra only grants permanent residency rights to immigrants if they meet a certain criteria (applicant needs to live in Andorra for a certain amount of days per year, have a certain amount of funds etc.).