I have been mulling over for some time the thought that the tranistion from a single superpower world to a multilateral one coupled with the increasing proportion of commerce which is electronic will require an unprecedented level of international harmonization of law.

I chose the annual Oxford Analytica conference at Christ Church Oxford as the venue to develop these thoughts. I entitled the speech "The Death of Domesticity." The room where I delivered the talk was none other than the main hall of Hogwarts School of Harry Potter fame (see accompanying photo).

Oxford Analytics is an excellent provider of analysis on a broad array of subjects drawn largely from the Oxford faculty. I salute in particular OA’s brilliant and indefatiguable founder Dr. David Young.

I reproduce below the full text of my talk.

Tom Glocer speech to Oxford Analytica Conference

The Death of Domesticity

I’d first like to thank Oxford Analytica and especially Dr. David Young for asking me to speak here today. David is a very persuasive scholar and statesman and he once made me promise I would not leave England before speaking at this conference. Well it’s been two years since my family and I moved back to the States but as I used to tell my university professors in the day “I hope my interest in the subject of this paper excuses its lateness.”

What I want to talk about today could be called “The Death of Domesticity” or how we can fashion a system of international regulation and multi-lateral recognition for the digital age; but first let me provide some friendly travel advice.

Imagine you are a successful entrepreneur and you have invested substantial amounts of your own time and money to establish a new on-line enterprise. After years of hard effort you fly off on holiday only to find yourself arrested in a foreign country because the enterprise you are running has been breaching laws of which you were unaware.

Or imagine you are a journalist reporting on court proceedings involving one of the most high-profile terrorism cases your country has ever seen. You file your report only to find that it cannot be published because of legal restraints imposed by another country many thousands of miles away.

These are real examples of how globalization digitalization and regulation are impacting business. In the first a UK chief executive of a gambling website was arrested when he changed flights in the US because it did not (and probably could not) bar US citizens from participating. The journalist example comes from my own company Thomson Reuters and relates to the strict trial reporting rules under English law.

And these are not isolated cases – I could cite many others. For example the restrictive defamation rules in the UK have spurred the new enterprise of “libel tourism” which in turn led the US to enact specific legislation to protect US citizens from such lawsuits. The common feature of all of the examples I have cited is that they have occurred due to an outdated regulatory framework that has not caught up with the technological and commercial reality of an increasingly global world.

The current legal framework for global business was established in the aftermath of World War II largely under the leadership of the United States. For the second half of the last century when the US enjoyed a position of economic superiority it extended its laws in critical areas of international commerce including antitrust tax and securities laws well beyond its borders.

So for example US tax law is one of the only systems that tax citizens on their world-wide income and US securities laws can easily cover purely international transactions unless burdensome Eurodollar procedures are followed.

Another area of US extra-territorial regulation are the US anti-trust laws which are framed so broadly as to capture nearly any sizable international transaction that might affect the US market. The US asserts antitrust jurisdiction over actions that take place outside its borders if they have “intended or actual” “substantial or foreseeable” effects within the US.

The period in which the US was nearly alone in asserting its unique hegemony appears to be coming to an end however. The rise of the Internet the acceleration of globalization and in particular the growth of nations such as India China and Brazil have irrevocably changed the landscape. In 2008 for example China adopted its own pre-merger anti-trust clearance rules and has invoked them subsequently to review Pfizer’s acquisition of Wyeth and InBev’s acquisition of Anheuser Busch.

In adopting this law China became the latest in a growing list of countries to extend its influence over global M&A activities. This means that a typical merger between two large international corporations now ordinarily requires approval not just in the United States and the European Union but also in jurisdictions like Canada Brazil South Africa Russia Korea and now China as well.

In the tax arena you may have seen last week’s headlines about Vodafone’s potential tax liabilities in India. The Mumbai High Court ruled that Vodafone owes Indian tax authorities $2.6 billion in capital gains taxes on its $11.1 billion acquisition of a majority stake in Hutchison Essar three years ago. Vodafone is arguing that the transaction was between two foreign companies so that Indian tax authorities don’t have jurisdiction – and if they do they should pursue Hutchison the seller. The case could affect other disputed foreign transactions – and could change how foreign companies invest in India.

Or consider the area of privacy. Thomson Reuters businesses rely on the collection storage and analysis of information generated by users in a variety of countries. Every day we are confronted by the lack of consistency in the content of privacy laws across jurisdictions. Since there is no international standard to be compliant a multinational must review its specific obligations under each local law. This is even the case within the EU despite the fact that data laws in each of the member states emanate from the same source – the EU Data Protection Directive. The result is that a global company seeking to develop a consistent approach across all of its operations is usually required to adopt what might be called a “highest” or “strictest” common denominator approach.

In every facet of digital commerce a critical question arises: Whose law applies?

At the same time as conflicting regimes in areas such as privacy and antitrust are becoming more intrusive the number of truly multinational corporations has risen dramatically. Many of these new companies are sprouting up outside the US and EU – a trend which will only accelerate in years to come. Over the next fifteen years for example 2200 Indian companies are expected to set up operations outside India according to a recent study by PWC. Moreover the Internet has given the majority of businesses the potential to go global in far less time than the last generation of a similar size.

Many rapidly growing countries have understandably sought to protect their own economic positions and those of their home companies through the promotion of their own sets of regulations. As their economic power rises relative to that of the US and EU there is an increasing potential for these regulatory and legal principles to clash with one another. That can only serve to increase the cost of doing business and slow global growth.

So to put it simply more businesses are operating in more countries and those countries are promulgating more laws which don’t all say and require the same things.

We feel this keenly within our own industry. Thomson Reuters operates in more than 150 countries. In our regulated businesses such as operating securities trading systems this often means we must seek approval for the same service from many different regulators.

With few national regulators willing to accept the principle of “equivalence” for Thomson Reuters as for other global companies this means additional costs delays in bringing new services to market and a brake on economic growth.

In practice companies operating globally are often forced to work to the most restrictive and burdensome regulations since the implications of adapting to local variations can be economically operationally or technically infeasible.

For example in the US automotive industry car makers have long designed their vehicles to comply with the State of California’s tough emissions standards rather than attempt to design manufacture and market different cars in different states.

Sometimes this “highest common denominator” approach can have a less welcome effect. Some internet publishers that lack a historical commitment to press freedoms may find it commercially expedient to provide a single global product designed to meet the demands of the most restrictive state rather than tailor its offerings for each market.

Thus we are witnessing what might be termed the “Death of Domesticity.” Companies can no longer afford to concern themselves solely with domestic regulations. However we have not yet seen the birth of a new regime to tackle this issue.

There are of course well-established internationally recognized Conflict of Laws principles governing which jurisdictions take precedence in cases where laws clash. Indeed Oxford’s very own Professor A.V. Dicey of Balliol College – a leading English jurist of the late 19^th and early 20^th centuries – wrote a seminal treatise on the subject which remains today in its 14^th edition as Dicey Morris and Collins and is published (not co-incidentally) by Sweet & Maxwell a Thomson Reuters company.

These principles were largely drawn up to settle disputes in the arenas of maritime and aviation laws where a particular vessel may fly under one flag but operate in many different sets of territorial waters or airspace.

Essentially these principles were drawn up to govern things that moved. Now of course everything moves – capital people and especially data. As such the current conflict of laws regime is an increasingly outdated and inadequate one.

I believe the time has come to begin addressing the patchwork of conflicting laws governing global business because failing to do so will hinder already sluggish growth rates in the West. It will not be easy but unless we face up to the challenge we risk what my friend Dan Esty of Yale has called “a world of noncooperation free-riding and inadequate provision of global public goods.”

So what is the solution to this problem? There is as with most complex problems no one single answer. A variety of mechanisms will be necessary to bring about a workable solution. Broadly speaking there are three general approaches – each of which can play a role in creating a more robust and harmonious body of international law.

The first is the establishment of global rules or “supranational” laws. The second is the harmonization of national legal rules. And the third is the mutual recognition of laws by differing countries as is illustrated by the EU passporting mechanism.

Supranational laws are in some ways optimal. They provide clarity consistency and a comprehensive judicial and enforcement mechanism. But for businesses there are often many drawbacks. Supranational laws are slow to adopt slow to adapt to change and by definition not well tailored to local needs.

However one promising example of a supranational legal initiative is an effort to establish a global privacy regime led by the Spanish Data Protection Authority (AEPD). In an initiative approved in Madrid by data authorities from 50 countries regulators are attempting to integrate legislation from all five continents and propose international minimums including a set of principles and rights.

Having these principles and rights would achieve a greater degree of international consensus and would serve as a reference for those countries that do not have a legal or institutional structure for privacy. Notably the initiative recognizes that the current approaches in reality provide less protection for individuals and more complexity for businesses.

Given the complexity and time it takes to adopt supranational regulations internationally-minded statesmen are often attracted to the process of harmonization. This process is probably best seen in action through the work of international organizations such as the IMF the International Organization of Securites Commissions (IOSCO) the WTO (and its predecessor the GATT) and the G20. And these groups can point to some real achievements.

So intergovernmental organizations can be a net positive in achieving harmonization of laws and regulations. But they also have limitations. To start a state belonging to them can be selective in which rules it chooses to follow. Timeframes can often be lenient and states will often stall in adopting regulations that may not be politically popular at home.

Furthermore such systems can also be slow to make progress – just think of the failure of the Doha round of trade talks to achieve its objectives. And importantly as with supranational legislation they can lead to a democratic deficit as they increase the distance between a citizen and the laws and regulations with which they must comply.

Finally the concept of one-size-fits-all has shown in many cases to be problematic as it sets standards which cannot adjust to local needs and diminishes the element of regulatory innovation that in turn can spur economic growth.

An alternative to this approach may be found in the extension of the principles of mutual recognition. The best examples of this can perhaps again be found in the European Union where goods and services which are lawfully produced in one member state cannot usually be banned from sale in another member state.

The main advantage of mutual recognition is that it removes the need to harmonize all national technical rules. In the case of goods this means companies no longer have to worry about conflicting national regulations relating to weight size composition labelling and packaging which can prove a serious hurdle to companies operating internationally as I discussed earlier.

Such mutual recognition can also be applied to professional qualifications so that a lawyer or doctor trained in one country may have her qualifications – and by extension the regulatory body that determines those standards – recognized as competent by other nations. And there are a number of additional areas in which such a doctrine of “equivalence” could and should be applied especially in international finance.

Ultimately it is likely that we will need a combination of all three approaches to solve the problem; either on a one-off basis or as part of a natural evolution that starts with mutual recognition leads to harmonization and finally supranational law.

What is clear to me is that our challenge will only grow more acute. The shift from a single superpower to a multilateral world coupled with the digitalization of an increasing proportion of commerce will demand an unparalleled level of regulatory cooperation if we are to tackle the economic energy environmental health and other challenges of our young century.

Our hosts Oxford Analytica have already foreseen this challenge and the required openness to new ideas to rise to it. In fact the founding principles of Oxford Analytica state and I quote “that the frontiers of enterprise and progress are only pushed further out by accepting the challenge of change be it political economic social or technological and that this is best done by understanding change and harnessing it.”

I couldn’t agree more and hope that we as an international community can begin to adopt concrete mechanisms and not just vague expressions of intent to harmonize international laws and regulation.

We should accept no lesser challenge as descendents of such great free-trade economists and legal philosophers as Adam Smith John Locke and Alfred Marshall each of whom studied at this grand institution.

Our children expect – and deserve – no less of us.