MILLS.DOC 1/13/2011 6:46 PM FEDERALISM IN THE EUROPEAN UNION AND THE UNITED STATES: SUBSIDIARITY, PRIVATE LAW, AND THE CONFLICT OF LAWS ALEX MILLS* ABSTRACT The United States has long been a source of influence and inspiration to the developing federal system in the European Union. As E.U. federalism matures, increasingly both systems may have the opportunity to profit from each other’s experience in federal regulatory theory and practice. This article analyzes aspects of the federal ordering in each system, comparing both historical approaches and current developments. It focuses on three legal topics, and the relationship between them: (1) the federal regulation of matters of private law; (2) rules of the conflict of laws, which play a critical role in regulating cross-border litigation in an era of global communications, travel and trade; and (3) “subsidiarity,” which is a key constitutional principle in the European Union, and arguably also plays an implicit and under- analyzed role in U.S. federalism. The central contention of this Article is that the treatment of each of these areas of law is related —that they should be understood collectively as part of the range of competing regulatory strategies and techniques of each federal * Slaughter and May Lecturer in Law, Selwyn College, University of Cambridge ([email protected]). An early version of this Article was presented at the Journal of Private International Law Biennial Conference, New York University, April 2009, and I would like to thank the participants in that conference for their comments, particularly Professor Ralf Michaels. I am also grateful for further helpful comments provided by Professor Geert de Baere, Professor Donald Earl Childress III, Mr. Angus Johnston, Professor Laura E. Little, and Dr Kimberley N. Trapp. This Article also benefited from an Early Career Fellowship at the Centre for Research in the Arts, Social Sciences, and Humanities at the University of Cambridge in October-December 2009, and the warm hospitality and generous support of an International Visiting Research Fellowship at the University of Sydney in January and February 2010. A condensed version of part of this article was awarded the American Society of International Law’s inaugural Private International Law Prize in March 2010. 369 Published by Penn Law: Legal Scholarship Repository, 2014 MILLS.DOC 1/13/2011 6:46 PM 370 U. Pa. J. Int’l L. [Vol. 32:2 system. It is not suggested that “solutions” from one system can be simply transplanted to the other, but rather that the experiences of each federal order demonstrate the interconnectedness of regulation in these three subject areas, offering important insights from which each system might benefit. TABLE OF CONTENTS 1. INTRODUCTION ............................................................................371 2. DEFINING AND DISTINGUISHING SUBSIDIARITY .......................374 2.1. Subsidiarity in Constitutional Settlement and Practice .......378 2.1.1. Constitutional Settlement ...................................378 2.1.2. Constitutional Practice ........................................381 2.1.3. The Interaction of Constitutional Settlement and Practice .........................................................384 2.2. Proportionality and Constitutional Interpretation ...............384 3. SUBSIDIARITY, PRIVATE LAW, AND THE CONFLICT OF LAWS IN THE EUROPEAN UNION ..........................................................387 3.1. Private Law and the Emergence of Subsidiarity ...................388 3.1.1. Toward European Private Law? ..........................388 3.1.2. The Emergence of Subsidiarity ............................392 3.1.3. Subsidiarity and European Private Law .............397 3.2. Subsidiarity and the Conflict of Laws ...................................400 3.3. The Horizontal Effect of Subsidiarity on Choice of Law ........................................................................................406 4. SUBSIDIARITY, PRIVATE LAW, AND THE CONFLICT OF LAWS IN THE UNITED STATES................................................................408 4.1. Private Law and the Emergence of Subsidiarity ...................408 4.1.1. Swift v. Tyson ......................................................409 4.1.2. Erie Railroad Co. v. Tompkins.............................413 4.1.3. Clearfield Trust Co. v. United States ..................421 4.1.4. Subsidiarity as a Principle of U.S. Federalism? ..........................................................431 4.2. Subsidiarity and the Conflict of Laws ...................................436 4.3. Too Little Subsidiarity, Too Late? .........................................449 5. CONCLUSIONS .............................................................................452 https://scholarship.law.upenn.edu/jil/vol32/iss2/1 MILLS.DOC 1/13/2011 6:46 PM 2010] FEDERALISM IN THE E.U. AND THE U.S. 371 1. INTRODUCTION It has long been recognized that the maturing federal system of the European Union1 has much to learn from what is commonly considered the oldest enduring federal system in the world—the United States. As the European Union develops its own regulatory theories and practices, increasingly both systems may have the opportunity to profit from each other’s experience. The fields of federal private law2 and conflict of laws,3 which have been areas of intensive and controversial regulatory and academic activity in the history of the development of E.U. and U.S. law, are particularly apposite subjects for comparative study. The central contention of this Article is that the treatment of these two areas of law is related, and that this can be highlighted through analysis of a third, the principle of “subsidiarity,” which has a key constitutional role in the European Union, and a largely latent but potentially important role in the United States. This Article thus explores the interrelation of subsidiarity, federal private law, and the conflict of laws, comparing approaches and developments in E.U. and U.S. federalism.4 1 For ease of reference, the institutions of European governance, present and past, will be referred to generally as the European Union, which is the term used for the reformed structure established in the Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the European Community, Dec. 17, 2007, 2007 O.J. (C 306) 1 (entered into force Dec. 1, 2009) [hereinafter Lisbon Treaty (2009)]. 2 The distinction between public and private law, while long recognized as problematic in theory, still plays an important (if increasingly challenged) role in delimiting the sphere of operation of the conflict of laws. See, e.g., William S. Dodge, The Public-Private Distinction in the Conflict of Laws, 18 DUKE J. COMP. & INT’L L. 371, 372–94 (2008) (concluding that “[t]here is no good reason to maintain the public-private distinction in the conflict of laws”). This Article does not adopt a definition of “private law,” but its focus is on developments in contract law and tort, where conflict of laws rules clearly apply. 3 The term “conflict of laws” is sometimes (particularly in the United States) used narrowly to focus on choice of law rules, and sometimes (particularly in the European Union, where it is used interchangeably with “private international law”) considered to encompass rules on jurisdiction, choice of law, and the recognition and enforcement of foreign judgments. The focus in this Article is on questions of choice of law, although, particularly in the European Union, related developments in other areas of the conflict of laws (broadly conceived) will also be noted. 4 In the European Union, references to ‘federalism’ are often associated with centralizing movements toward greater concentration of power in E.U. institutions. By contrast, in the United States, references to ‘federalism’ are usually associated with decentralizing movements, which emphasize state rather than federal powers. In this Article, references to ‘federalism’ are intended to be Published by Penn Law: Legal Scholarship Repository, 2014 MILLS.DOC 1/13/2011 6:46 PM 372 U. Pa. J. Int’l L. [Vol. 32:2 Any private dispute with an interstate or international cross- border element5 raises potential conflict of laws issues, particularly concerning questions of jurisdiction and the determination of the applicable law. In an era of globalization, it is thus a subject of intense and growing practical importance. It has, however, too often and too easily been dismissed as a dry and technical aspect of civil procedure, whose days of academic interest are long past. Nothing could be further from the truth. In the United States, there are clear signs of a reawakening of theoretical interest in conflict of laws through new interdisciplinary approaches.6 In the European Union the subject is in the midst of a full-blooded revolution, very different from but every bit as radical as the U.S. “conflict of laws revolution” of the mid-twentieth century.7 As will be examined further, the U.S. revolution overthrew not only traditional conflict of laws techniques, but also (at least partially) a long established “federal” perspective on choice of law when dealing with disputes internal to the United States. By contrast, without a substantial change in traditional techniques, the conflict of laws in the European Union is losing its old identity as a technical part of “local” private or procedural law, and emerging neutral on these questions—the term ‘federal’ is used merely to indicate a polycentric