Elon Musk is on the warpath against Delaware and its powerful business court, moving his SpaceX company out of the eastern US state after a judge struck down his $56 billion compensation package at Tesla.

For more than a century, the Delaware Chancery Court has been a pillar of US capitalism, the jurisdiction where roughly two thirds of American Fortune 500 companies register their company.

And according to state data, nearly 80 percent of initial public offerings in 2022 were registered in Delaware, seeking the reliability and stability of its court and the expertise of its judges.

But Musk is furious at the court, seeing it has a haven for over-litigious lawyers and meddlesome judges that are getting in the way of his business decisions and vision.

"SpaceX has moved its state of incorporation from Delaware to Texas!" Musk said on X on Wednesday.

"If your company is still incorporated in Delaware, I recommend moving to another state as soon as possible," he added.

The move came just weeks after Judge Kathaleen McCormick voided his eye-watering compensation package at Tesla, taking sides with a shareholder who claimed the entrepreneur was overpaid.

'Good job'

The very first state to join the union, Delaware and its courts have long played an integral role in American industry.

The Chancery court "is almost like a de facto government agency in its own right" that sets the rules for corporate America, said Omari Scott Simmons, a law professor at George Washington University

A pillar of business, it is the agreed upon institution that guides the internal running of US corporate behemoths and that is not, crucially, the federal government.

"It's a very curious situation in the United States, where if you form a company, you can decide what laws will apply to it, and what courts will hear those laws," said Simon Lorne, Vice Chairman and Chief Legal Officer at Millennium Management LLC.

"The only alternative could be federal law, which I think would be a big mistake for the system. Delaware has done a very good job for over 100 years," added, Lorne, who also teaches law at the University of Texas.

On matters like conflict resolution and governance, US big business abides by the decisions of the court and its decades of jurisprudence.

Also a selling point, Delaware judges are not nominated by elections or direct political appointment, but get picked by a non-partisan commission that values expertise above all else, said Simmons.

And unlike a federal agency, Delaware courts are shielded from the whims of interest group pressure or shifting political winds and the judges are left to give their decisions impartially.

Moreover, unlike many US states, there is no chance of facing a runaway jury in Delaware: decisions are reasoned and handed down by the judges alone.

© 2024 AFP