Delaware - Model Courts And A Model Location For Business

Sunday, June 1, 2008 - 00:00

This is the ideal time for a foreign company to seek a business location in the U.S. The housing crisis has reduced land values and produced a surplus of construction workers. The cost of housing for employees has reached new lows. There has not in recent history been so many highly qualified people seeking employment opportunities. Productivity has soared reflecting a slowdown in labor costs per unit of output. Because of the undervalued dollar, the U.S. has both become an ideal location for businesses of all kinds, and particularly those manufacturing products for export abroad and for businesses based here with significant earnings abroad. Foreign-owned companies in the U.S. provide five million workers with jobs. States are competing as never before to attract foreign companies to our shores and offering alluring tax and other incentives.

Foreign businesses considering locating their headquarters and other facilities in the U.S. may have concerns about the litigation environment and whether the upcoming November elections might threaten the balance of power in many currently business-friendly states. Tax revenues are falling in many states which will trigger tax increases and budget reductions. In most states, budget reductions tend to hit state court systems particularly hard since the courts and judges lack an effective lobby. Underfunded court systems lead to increases in legal expense and increase the cost of judgments and settlements.

Many states have not yet connected the dots and realized that offering a dependably business-friendly environment is the key to their future. Delaware is unique in that it has a powerful economic stake in being business-friendly.As Chief Justice Steele points out, 21 percent percent of its State budget comes from its chartering activities and 10 percent or more from legal services. This is reflected in his description of the care which the legislature takes when it considers amendments to the Delaware General Corporation Law. Delaware has a 100 year record as the most business-friendly of all states and offers foreign businesses seeking a location the great advantage of knowing that shifts in the composition of the courts or the legislature will not affect the even-handedness of those institutions. This is clearly reflected in our interviews with its Chief Justice, State Treasurer and the General Counsel of a major corporation that has been located in the State from the dawn of the industrial revolution.

Annual surveys for the past seven years of inside and outside counsel by the U.S. Chamber Institute for Tort Reform have rated Delaware the number one best legal environment for business. The Delaware Economic Development Office (DEDO) is considered one of the best state supported magnets for attracting business to a state.

While organizations like DEDO can arouse interest in locating in a state, it is unlikely that a final decision to select a particular state will be made without consulting the local offices of a law firm. The ability to find a law firm that can provide needed assistance can be critical to reaching a decision. In the survey we did of four law firms with Delaware offices, each mentioned that they counseled clients about locating in Delaware and three said that this was a growing part of their practice. They all agreed that those they helped find locations became permanent clients. Also, the close working relationships between government, business and the legal community is clearly reflected in their answers.

The local offices of law firms work closely with government officials to promote the State. One respondent stated that "One of the significant advantages of Delaware is that, as a relatively small state, its key governmental and business leaders, including Delaware's federal Congressional delegation, when necessary, can quickly assemble and cooperate in facilitating the location of businesses in the State. Another commented that State government officials make a special effort to see that businesses take advantage of the available benefits. One added that governmental agencies such as those responsible for zoning, transportation, environmental issues, etc. are unusually good and normally take a cooperative approach consistent with applicable laws.

Law firms with offices in Delaware are actively involved with government officials in promoting the State. One lawyer mentioned that he had traveled with several of its judges around the world, including to Singapore, Taiwan and Amsterdam. Another mentioned that partners of his firm had joined with the governor and other State officials on trade missions to various countries, including Germany, Italy and China.

Each of the respondents agreed that the activities of State and local bodies are very important in attracting companies to the State. One respondent mentioned that they help to differentiate Delaware from other states that do not give as much personal attention. All the respondents commented favorably on DEDO.

Businesses that invest large sums in a location prefer to invest it where a current business-friendly climate is unlikely to be at the mercy of the next election or an economic downturn. Delaware is a great model for other states because it recognizes the importance to the economy and to the people of the State the importance of attracting new businesses to the State. It is a model that not only should be applauded by corporate counsel throughout the U.S. wherever located, but also one that they can use to demonstrate how beneficial a business-friendly environment can be at a time when every state is striving to attract foreign businesses.

Al Driver