'Nuff said

(Taking context-optional note of thought-provoking quotes)

This is an especially important finding of the Tribunal which reinforces the binding nature of international law. Under the cardinal principle of pacta sunt servanda (Article 27 [of the Vienna Convention on the Law of Treaties]), a State is normally prohibited from referring to its internal legislation to justify its failure to perform. In applying this principle, the Tribunal concluded that allowing Russia to 'modulate (or, as the may be, eliminate) the obligation of provisional application, depending on the content of its internal law in relation to the specific provisions found in the Treaty, would undermine the principle that provisional application of the treaty creates binding obligations.'

-- Dr. Chiara Giorgetti (right), attorney at White & Case in Washington, Georgetown Law adjunct, and Co-Chair of the International Courts and Tribunals Interest Group of the American Society of International Law, in an ASIL Insight. Georgetti analyzed the Interim Award on Jurisdiction and Admissibility (2009), issued by an arbitral panel in Yukos Universal Ltd. (UK – Isle of Man) v. Russian Federation, an investment dispute alleged to involve $100 billion in losses as a result of the 2006 bankruptcy of Yukos, once Russia's largest oil company. At issue was the duty of a signing (but not ratifying) state, Russia, to adhere to the terms of a treaty even before it enters into force -- in this case, the multilateral Energy Charter Treaty (logo above left). As Georgetti affirms, the panel's finding of duty, in a situation that in other contexts has prompted "unsigning" -- would seem to have the potential for far reach.

Can Exploitively Low-Pay Jobs Help Haiti?

You might think this a rhetorical question--surely the answer is obvious? Alas, it is not so obvious to the architects of the rebuilding plan for Haiti. Central to the Haitian recovery effort is a plan to revitalize the textiles and apparel sector, which has existed in Haiti since the time of the Duvaliers in the 1950s. UN Secretary General Ki-moon, President Clinton, President Obama and the U.S. Congress have all touted the plan, as has Haitian officials. In principle, it is not a bad idea: Factory owners in South Korea and elsewhere would relocate to Haiti to produce garments; their incentive would be cheap and abundant Haitian labor (unemployment even before the quake was somewhere around 80%), and duty free access to the U.S. market guaranteed through programs like HOPE II. The problem? At $3.09 a day, wages for garment workers are at 1984 levels and are not enough to sustain the worker, let alone her family.

All seem to agree that wages are simply too low. Indeed, the $3.09 was a significant increase brought about when lawmakers raised the minimum wage up from just $1.72 to $5 a day last year in response to protests. But factory owners complained, and President Rene Preval worked out a compromise allowing garment workers to be paid less. "It's not enough to make a decent living, but it's the first step," says the President of Haiti's Association of Industries. It is a refrain Haitian workers have heard for decades.

Relying on jobs that pay so low they cannot meet the basic needs of the worker is not a sustainable recovery plan for Haiti. It is a recipe for disaster.

photo credit

Law and Outbound M&A by Indian Multinationals

Many thanks to IntLawGrrls for inviting me to say a few words about my forthcoming article, Rising Multinationals: Law and the Evolution of Outbound Acquisitions by Indian Companies, in this guest post. I am working on this piece in connection with my participation in the U.C. Davis Law Review’s 2010 Symposium, entitled “The Asian Century?” As many of you know, in the past decade India has become one the fastest growing economies in the world. During this period, not only have Indian companies achieved significant domestic growth, but they also have launched multimillion and multibillion dollar deals to acquire companies around the globe. What often comes as a surprise is that many of the acquisition targets are companies in developed economies, in particular the United States and the United Kingdom. Just last year, Tata Motors, part of the giant Indian conglomerate The Tata Group, bought Jaguar and Land Rover from Ford in a $2.3 billion deal that received world-wide recognition. This acquisition is one of the many outbound acquisitions completed by the various Tata companies in the past few years (including the acquisition of marquee British brand Tetley Tea). While the mega-deals seen in the 2005-2007 period have certainly slowed down during the economic crisis, Indian companies are continuing to acquire companies in developed countries. In fact, just a few weeks ago, Reliance Industries, one of India’s largest companies, announced its intent to acquire a controlling stake in LyondellBasell, one of the world’s largest chemical companies.
Finance and business scholars have begun to explore outbound acquisitions by Indian multinationals, emphasizing the business and economic motivations underlying these transactions. However, there has been little analysis of the significant role of India’s legal norms and rules, including recent shifts in the country’s regulatory and legal regimes, in the rapid expansion of Indian multinationals. I believe that law plays a number of important roles in the emergence of Indian multinationals. First, legal reforms launched during the economic liberalization period spearheaded by Manmohan Singh, India’s current Prime Minister and former Finance Minister, set the stage for outbound acquisitions by Indian multinationals. Second, legal norms and legal history provide Indian multinationals with competitive advantages that are largely distinct from that of firms from other emerging economies. Third, legal constraints on mergers and acquisition activity by Indian firms impose substantial restrictions not only on the methods used by Indian multinationals in pursuing outbound acquisitions, but also on the future potential of Indian multinationals. An analysis of the role of law and legal norms not only presents a more complete picture of the environment that has both facilitated and constrained outbound acquisitions by Indian multinationals, but also explains in part why Indian multinationals have targeted firms in the west. My article presents this analysis, which I hope other scholars, as well as lawmakers, will find helpful.

Global corporate citizens & foreign investment

(My thanks to IntLawGrrls for inviting me, guest blogger, to contribute the foremother dedication below, as well as this post about my forthcoming article forthcoming in the Michigan State Journal of International Law, Toward Global Corporate Citizenship: Reframing Foreign Direct Investment Law)

Globalization in the form of foreign direct investment has not lived up to its promise to promote prosperity around the world. Many of the anticipated benefits to developing countries and their citizens have yet to materialize. True, laws promoting foreign direct investment contribute to technology transfer, increased tax revenues, and other economic benefits. However, existing laws are lax, one-sided, or limited in scope. They allow transnational corporations to cause harms like property damage, personal injury, and significant environmental damage. Insufficient protections and limited avenues for redress encourage transnational corporations to chase profits with limited concern for consequences.
In my forthcoming article, I argue that modern foreign direct investment law is a vestige of the colonial era during which early forms of transnational corporations emerged. Unlike international trade law and despite the dramatic developments of the twentieth century, foreign direct investment law remains largely unchanged. Due to a lack of political will, prior multilateral efforts to implement comprehensive foreign direct investment law reforms have been largely unsuccessful. However, in recent years, growing political will has emerged under the umbrella of Global Corporate Citizenship and related movements. In this article, I posit that Global Corporate Citizenship is an opportunity to reframe and reform foreign direct investment law.
This paper is part of a larger project on law and Global Corporate Citizenship, in which I analyze ways to reform the regulation of transnational corporations. In this series of articles, I identify gaps in the international and domestic regulation of transnational corporations, explore reasons for these gaps, set out a Global Corporate Citizenship framework for more comprehensive regulation, and develop proposals for the implementation of this framework.

The "foreign-cubed" class action & U.S. courts

My thanks to IntLawGrrls for inviting me to provide this guest post about my recent article, Multinational Class Actions Under Federal Securities Law: Managing Jurisdictional Conflict, published in the Columbia Journal of Transnational Law.

The project grew out of some earlier work on the topic of transnational regulatory litigation, which considered the circumstances under which domestic regulatory law might be applied to curb global economic misconduct. This piece focused on a particular kind of transnational regulatory case: the “foreign-cubed” securities class action. These lawsuits involve fraud claims brought by foreign investors against foreign issuers, based on harm arising out of investment transactions on foreign securities exchanges. While such claims appear insufficiently connected to the United States to warrant application of U.S. securities law, courts have in some cases incorporated them into class actions brought by U.S. investors against the same issuer.

This article draws on a study of 45 foreign-cubed claims brought between 1996 and 2005. It looks at the arguments made by foreign investors who seek to justify the application of U.S. law to their claims –- arguments that use the interconnections among the world’s capital markets as the basis of an expansive theory of legislative jurisdiction. It also analyzes judicial disposition of such claims at various stages of litigation (including class certification).

Ultimately, the article concludes that the current jurisdictional framework used in securities cases, which relies on outdated and ambiguous “conduct” and “effects” tests, is not up to the task of managing the sort of regulatory conflicts that foreign-cubed claims present. It therefore supports a jurisdictional limit in such cases based on the location of the relevant investment transaction.

Stability Through Stabilization Clauses?

Last week, the International Finance Corporation (IFC) and John Ruggie, the United Nations Secretary-General's Special Representative on Business and Human Rights, released a draft of a paper they commissioned on the effects stabilization clauses within foreign direct investment contracts have on human rights. More specifically, the report takes an empirical approach to the question of the potential conflict between a foreign direct investment’s interests in “regulatory stability” and the host state’s ability to adopt and implement human rights laws and regulations in areas such as labor, non-discrimination, and environmental protection.
This document offers a rare insight into the typically secretive provisions governing foreign direct investment contracts and will serve the basis of a much more educated and insightful discussion on the conflicts that arise between such investments and larger social and environmental concerns. Among other chief findings, the study demonstrates that "stabilization clauses are sometimes drafted so as to insulate investors from having to implement new environmental and social laws, or to provide investors with an opportunity to be compensated for compliance with such laws.” The report states that this is more likely to occur in contracts from countries outside the Organisation for Economic Co-operation and Development (OECD).
The document is publicly available and will serve as a consultative document that will form the basis for a series of discussions with a variety of groups with interest in the future use of stabilization clauses. This study forms a part of the reports that have started to emerge from Ruggie's team and will surely form part of the more general effort to bring greater transparency to foreign direct investment practices.

(photo credit)

Oil and crimes against humanity in Burma

Members of the opposition to the military junta in Burma have long called for sanctions on foreign investors, most particularly oil and gas companies such as California’s Unocal and France’s Total, partners in the Yadana pipeline (map at right) and subject of suit under the Alien Tort Claims Act claiming these companies were accomplices to murder, rape and forced labor committed by Myanmar (i.e., junta) military personnel assigned to clear terrain and protect the project from opponents. Total was dismissed from the US action, but was the subject of a criminal suit in France based on the same facts. Both cases were settled following the Supreme Court’s 2004 decision in Sosa v. Alvarez-Machain, which indicated that private corporations could perhaps be held liable for human rights abuses committed by the foreign regimes with which they do business (see my case comment here). Despite Total's agreeing to provide significant long-term assistance to the population most affected by the pipeline in the form of infrastructure and health and education services as well as money damages (see William Bourdon in the Revue de Science Criminelle, 2005 no. 4), Belgium has just reopened an investigation into crimes against humanity claimed to have been committed by Total. The rather skimpy information in Le Monde seems to indicate that, except for the crime(s) charged, this is the same case, with the same named defendants and perhaps even the same plaintiffs, as the one settled in France (note that in France, just as victims can request that the prosecutor initiate criminal proceedings, they can settle with the defendant and close the case). The Belgian case was brought in 2002 under the universal jurisdiction statute, but the Cour de cassation (Supreme Court) ruled in 2005 that the plaintiffs lacked standing. Further investigation by the Defense ministry (? interesting twist, n'est-pas?) has resulted in a hearing being set for the end of October to determine whether the case should proceed. Stay tuned.