Published online by Cambridge University Press: aN Invalid Date NaN
This chapter explores how multinational corporate groups use jurisdictional arbitrage not only to minimize taxation but also to evade liability. Drawing on the concept of CCMCEs, it outlines how corporate planners exploit legal fragmentation to construct liability-resistant structures through techniques such as the Texas two-step, fuse entities, and passive investor emulation. These structures shield parent companies from exposure to tort, regulatory, or criminal liability by disaggregating ownership and control, manipulating corporate registration across jurisdictions, and creating specialized entities designed to absorb legal shocks. The chapter distinguishes between reactive liability strategies, such as dissolving subsidiaries post-litigation, and anticipatory approaches that embed risk insulation directly into the corporate form. Using case studies of Cape Industries, Johnson & Johnson, and the Trump Organization, and data from the CORPLINK project, it illustrates how fuse-like arrangements are deployed to shift liability risk down corporate chains while maintaining control. It argues that liability arbitrage, like tax arbitrage, relies on regulatory gaps between jurisdictions and is often mistaken for mere tax avoidance. Ultimately, such practices erode legal accountability and contribute to a structural ‘race to the bottom’ in corporate regulation.
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