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What is jurisdictional arbitrage?

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.).

Find out more about jurisdictional arbitrage.

Understand jurisdictional arbitrage further by reading our definition of arbitrage.

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