A World of Clubs and Fences: White & Case Redefines Globalization in First of Its Kind Research Report

Global law firm White & Case LLP has published a comprehensive report today about the future of globalization and the emerging world of "clubs and fences," which has replaced the relatively open cross-border flows that characterized globalization for the last 40 years. This report provides a new conceptual model to understand cross-border interconnectedness, based on the collective impact of shifts across seven legal and regulatory areas: trade; investment screening; tax; competition; data privacy; sanctions; and financial regulation.

"Global business leaders are trying to determine where the world is headed, and this report is our contribution to this important conversation," said White & Case Chair Hugh Verrier. "We must remember that almost all aspects of globalization first begin with law and regulation. By understanding the originating factors that set these developments in motion, we hope to assist both businesses and sovereign states better navigate the changing nature of globalization."

The research throughout the report identifies a global trend of legal and regulatory "clubs" and "fences." "Clubs" are groups of countries that have broadly similar regulatory regimes in a particular area. "Fences" are regulatory barriers that slow or block business activity, often between countries that compete strategically or ideologically.

The 225-page report – a culmination of legal insight from across the Firm, including partners from 20 different countries and 10 separate practice and global industry groups – examines developments in seven areas and quantifies the degree to which clubs and fences have emerged in each. It also provides an indication of the anticipated future trajectory of regulation within each area.

"As governmental regulations increase globally, businesses will seek to reduce the barriers to and costs associated with cross-border transactions," said Donald Baker, a member of the Firm's Global Executive Committee. "In addition, cross-border business transactions among countries with distinct or incompatible regulations face growing costs, delays and even outright barriers. These regulatory fences generally increase costs and can hinder cross-border business activity, limiting global interconnectedness."

The report concludes with five high-level observations about the implications of the trend toward regulatory clubs and fences for the future of globalization:

1. Navigating sovereign state interests and interventions will become more complex over the next ten years as states intervene more regularly and aggressively in private business transactions.
2. Operating within clubs or crossing fences can bring both risks and rewards, but multinational businesses can develop strategies to maximize the benefits of operating within clubs and minimize the risks and costs of crossing fences.
3. Fences will be costly, for governments, businesses and the global economy, as they become even more prominent. Sovereign states and businesses will both need to assess their permeability and permanence.
4. The degree of applicability of regulation will likely give rise to new battlegrounds, with increased question over the nationality of businesses and the potential extraterritorial reach of countries' regulations.
5. Businesses may have opportunities to help shape the emerging regulatory environment. This includes engaging in efforts to test, refine and implement voluntary policies and practices that often inform domestic regulatory processes.

About White & Case

White & Case is a leading global law firm with lawyers in 44 offices across 30 countries. Among the first US-based law firms to establish a truly global presence, we provide counsel and representation in virtually every area of law that affects cross-border business. Our clients value both the breadth of our global network and the depth of our US, English and local law capabilities in each of our regions and rely on us for their complex cross-border transactions, as well as their representation in arbitration and litigation proceedings. To learn more about the Firm, our work on behalf of clients, and points of view from around the world, visit our website.

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