International Law Final
merger agreements
3 Common Elements (merger agreements, mortgages, wills): Basic language and structure are based on what similar documents looked like over a century ago Every time a problem arises (for wills, think a secret illegitimate child and, for mortgages, think the fauxclosure scandal) lawyers will want to address these contingencies with additional provisions Over time there are more laws and regulations, adding still more provisions in response
specific performance
A buyer can force a seller to deliver conforming goods and a seller can require the buyer to pay the contract price CISG allows specific performance in cases only where there was a fundamental breach It holds further that a court is not bound to award specific performance unless that would be an appropriate remedy under its domestic law Common law courts are likely to order specific performance only sparingly
CH 11 criticism
A major criticism of the private investor arbitration process has been the secrecy surrounding the early decisions CH 11 does not require the member states to publicize an investor's notice to seek arbitration Further, public participation in the hearing process remains at the discretion of the panel Nor is the public entitled to access the hearing itself, highlighting the lack of transparency However, in recent years the member nations have begun responding to these secrecy concerns At present, all three NAFTA members are, at least, publishing the arbitral decisions
Compliance
After the hearing panel issues its ruling, or after the decision is made the Appellate Body in the case of an appeal, there must be adoption of the report Once the DSB has adopted the hearing panel or Appellate Body report, the breaching party must come into compliance with the recommendations
UNCITRAL Arbitration Rules
Although the UNCITRAL Arbitration Rules were initially intended for ad hoc arbitration, each of the formal arbitration institutions abides by them if the parties call for those procedures in their agreement The rules provide: -No time limit for issuing a decision -That the arbitrators must consider custom and trade usage -Considerable discretion to the arbitrators in determining the admissibility of evidence and the participation of witnesses and; -That the losing party bear all of the costs of the proceedings unless the arbitrator believes they should be shared
Organization for Economic Cooperation and Development
Assists the global economy by offering recommendations and international promoting harmonized rules in areas where multilateral cooperation is necessary Its secretariat, located in Paris, conducts research and analysis for its member countries Its work is carried out by more than 200 committees and working groups Maintains cooperative relationships with approximately 70 nonmember countries, with the express purpose of furthering economic integration
enforcing US judgements abroad
At present there is no worldwide system for the international enforcement of judgments from US courts Most countries have reciprocity rules for court decisions--sovereigns are free to facilitate the enforcement of other sovereigns in their territories This is something the U.S. does not do a lot (we do not engage in reciprocity as nearly as much as other countries might do) Fairly uncertain; it's hit or miss Depends on where judgement came from and where you're trying to enforce it
Safeguards against Expropriation
Avoid a physical presence in high-risk havens -confine operations to exporting and importing -use licensing/franchising Seek out safe havens -avoid unstable countries -seek countries that are parties to investment treaties -lobby for creation of investment treaties Reduce asset exposure -enter through joint ventures -minimize inventories and retained earnings -have parent corporation own IP Be cautious -maintain business records in home country -purchase investment insurance
Rules of Origin
Because the free trade agreement removes all tariffs on goods originating in Canada, US, and Mexico, manufacturers in the US were deeply concerned that goods produced outside of NAFTA might be transhipped through Mexico or Canada in order to enter the US market under the preferential tariff treatment NAFTA does not preclude a member from imposing country of origin marking requirements on imports that originated in the other member countries these labeling requirements are designated to fully inform ultimate purchases of the national origin of foreign goods, although they are widely condemned as unfair barriers to free trade The treaty does not attempt to harmonize these restraints and minimize unnecessary costs on the flow of goods
GATT
Bretton Woods; IMF, WB, ITO (1994) -products following WWII, ITO failed to materialize GATT: -General Agreement on Tariffs and Trade--> only an agreement/mechanism -only applied to goods -did not create an institution, was not an organization like the WTO
No-shop/Fiduciary Out
Buyers insist that once a target signs an agreement, it immediately cease soliciting competing bids--buyers go further requiring the agreement to say that the target should not have any further discussions with any other party or provide any confidential info to other parties who might be interested in making a competing bid
NAFTA: National Treatment
Carries forward the obligation of national treatment that has long stood as a hallmark to trade in goods under the GATT and other international trade agreements Under this provision, each NAFTA member must treat the service providers of the other member countries no less favorably than it treats its own Within each nation, the state and provincial governments must likewise accord no less favorable treatment to service provides of other countries than they do to those of their own nation
CISG Scope
Commercial Contracts -covers merchant to merchant sales Sales of Goods -covers goods, NOT service or real estate International Contracts
FCPA: Internal Controls
Corporations who are publicly traded in the US also must maintain internal accounting controls reasonably designed to ensure that unauthorized practices are promptly discovered and addressed
International Monetary Fund
Created to promote economic and financial cooperation among nations of the world (ST financing) Provides SHORT-TERM financing to more than 188 member countries and oversees their economic and monetary policies with the goal of maintaining a stable international monetary system To support its operations, -The IMF receives contributions from its members, with each nation's quota based on factors such as national income, gold and dollar balances, and average annual trade balances
Currency Risks & Currency Restrictions
Currency value fluctuations Currency in crises often restrict currency transfers Expatriation of capital--bringing $ back to home country Currency volatility--amount of $ can change in the international market
settlement agreements
Deferred Prosecution Agreements (DPAs) Non-Prosecution Agreements (NPAs)
what law governs?
For tort claims, the majority of US courts discover the jurisdiction with the most significant contacts by examining four factors: (1) the domicile, place of incorporation, and place of business of the parties; (2) the place where the tortious conduct occurred; (3) the place where the relationship of the parties is centered; and (4) the place where the injury occurred
treaty law
E.g.: Geneva Conventions, GATT, WTO Agmt, NAFTA Constitute a one-time legally binding, written declaration between two or more states or international organizations that are governed by int'l law MOST IMPORTANT SOURCE OF INT'L LAW--FOUND IN BIT AND MULTILATERAL TREATIES
reps and warranties
Enormous amounts of time goes into negotiating the reps (ironically, these qualifications make little or no difference at all) Reps only have to be true "in all material respects" to require the other party to close regardless of individual qualifications The reps function as conditions and the reps need to be true at closing, a buyer can give the seller knowledge by whispering in his ear at closing. No one likes to give a flat statement and be wrong--even if it has no contractual consequences--so lawyers spend a lot of time helping their clients hedge the language
What is Int'l Law
Essential Characteristics -public international law -private international law The int'l legal system versus domestic legal systems Themes: evolution of sovereignty, limits of enforceability, no central authority, important gaps, etc.
The New York Convention
Establishes a presumption in favor of enforcing arbitration clauses contained in an international commercial contract Step One: there must be a written agreement to arbitrate Step Two: the arbitration agreement must provide for arbitration in the territory of a country that has adopted the New York Convention. (the reciprocity requirement is followed by the US and at least 30 other nations. The remaining signatories enforce the agreement to arbitrate even if it is to take place in a country that has failed to adopt the convention Step Three: the arbitration agreement must arise out of a legal relationship. (many countries, including the US, apply the New York Convention only to commercial [business versus business] disputes). Step Four: the disputing parties must be from different countries or their legal relationship must have some reasonable relation with a different nation
Public International Law
deals with rights and obligations of sovereign states; traditional notion of international law
go-shop
Ex on price: if you think you can get more; take 30 days after you sign the merger agreement and make a public announcement and look for a better deal. If you do, take it and some of our deal protection package won't apply. We will accept a lower break up fee. If you don't, we get to buy for $X and we will then be entitled to a full package of deal protections after that 30 day period
Enabling Clause
Extending preferential status to developing countries to encourage development This provision applies to tariff preferences that the developed nations extend to developing countries under the GSP scheme This makes explicit that any differential and more favorable treatment that is permits must be designed to facilitate and promote the trade of the developing countries and not create undue difficulties for the trade of other contracting parties
covenants
Extensive covenants restricting how the business of the target is operated between signing and closing To some extent this is the mirror image of the reps and warranties--reps and warranties discuss what has happened and covenants discuss what will happen A breach of a covenant could produce a lawsuit, but once again the primary remedy for a material breach is usually a right to walk away
Chapter 11: 5 major obligations on NAFTA countries
First, it requires the member nations to receive national treatment Second, investors from each of the member states should be given equal treatment (entitled to MFN treatment) Third, CH 11 prohibits the imposition of performance requirements on foreign investors -This objective liberalizes trade and promotes economic efficiency by freeing investors from certain types of host government interference Fourth, NAFTA insists that member nations meet minimum international standards in their treatment of foreign investments -While the precise meaning of this is not clear, it certainly includes obligation to treat foreign investments fairly and to provide a secure business environment Fifth, Chapter 11 insists that any expropriation of a foreign investment be for a public purpose, nondiscriminatory, and fully compensated
where to litigate
Frequently, more than one court will have jurisdiction over the parties and the subject matter of their dispute--then necessary to determine which court is the proper place for the lawsuit to be brought This concept is known as venue When contracts cross national borders, venue often will be proper in both the country of the seller and the country of the buyer If the contract is formed in a 3rd country and will be performed in a 4th, it is conceivable that courts in at least 4 nations will have proper venue
GATT: 1947-1995
GATT was supposed to be governed by the ITO, a permanent trade body with the power to eliminate non-tariff barriers to trade and to reduce worldwide tariffs Over the years the GATT's basic composition changed radically The decentralized nature of the GATT, coupled with frequent outbursts of protectionist trade sentiments throughout the world, triggered numerous trade conflicts
Secondary Sources of Int'l Law:
General Principles Judicial Decisions and Scholarly Work
Actual Practice requirements
Generality: -behavior is shared by broad spectrum of the world Uniformity: -a single standard must be in evidence Continuity: -behavior occurs for a significant period of time -uniform and widely followed behavior must continue for a period of time sufficient to identify the conduct as legally required
substantial transformation
Goods containing non-NAFTA components are classified as North American only if they are transformed within a member state to the extent that they undergo a change in tariff classification That is, an article imported from a NAFTA country is considered to have undergone a substantial transformation only if processing or manufacturing steps in this country are sufficient to change the article's tariff classification; CALLED THE Tariff Shift METHOD
economic uncertainty versus political uncertainty
ISDS in general Supposed to mitigate political uncertainty, NOT economic uncertainty
break up fees
If the initial buyer is outbid and the target terminates the agreement to accept the higher offer, the initial buyer gets a break up fee Based on limited case law, it is generally believed that 3% or even 4% of the purchase price is reasonable
NAFTA certificate of Origin
Import goods are not eligible for NAFTA's preferential treatment unless the importing nation determines the products originated in one of three NAFTA countries This requires documentation that the goods qualify The primary means of establishing this fact is with a NAFTA Cert of Origin This document contains a sworn statement from the product's manufacturer or exporter that the goods qualify for eligibility under the applicable NAFTA rules
topping rights
Initial buyers insist on being told exactly what is going on in negotiations with a competing bidder. Usually, before a target is permitted to exercise its termination rights it must give the initial buyer several days advance notice so that the initial buyer has an opportunity to renegotiate Very controversial in the legal community
ICSID
International Centre for Settlement of Investment Disputes an international arbitration institution established in 1965 for legal dispute resolution and conciliation between international investors. The ICSID is part of and funded by the World Bank Group, headquartered in Washington, D.C., in the United States. It is an autonomous, multilateral specialized institution to encourage international flow of investment and mitigate non-commercial risks by a treaty drafted by the International Bank for Reconstruction and Development's executive directors and signed by member countries. The center performs advisory activities and maintains several publications.
Expropriation
International law has traditionally offered little protection to businesses whose overseas investments are taken by a host government 2 fundamental reasons for this state of affairs: 1.) No international mechanism exists that is capable of legally requiring nations to settle their investment disputes 2.)The world community has failed to develop a generally accepted theory on the legality of governmental takings
customary law
International rules derived from customs and usages preceded the emergence of treaty law much of the content of treaty law today is merely a codification, or restatement, of the practices that have long been shared by nations 2 components: -State Practice -Opinio Juris
ISDS
Investor-State Dispute Settlement
reverse termination fee
It is the prospective buyers who fork over money when an acquisition doesn't close, if it's not the target company's fault
NAFTA
Jan. 1st, 1994 The program rests on three pillars: 1.) Stimulation of market-oriented investment reforms throughout the area 2.) Reduction of the debt obligations of the Latin American and Caribbean nations, and 3.) Elimination of trade barriers This third pillar--reducing obstacles to free trade in the Western Hemisphere--that is the centerpiece of the initiative In general, NAFTA eliminates barriers to the flow of goods, services, and investment within the free trade area over a 15-year period Because of political pressures within each nation, the treaty envisions a phased removal of these obstacles with the length of the transition period varying from industry to industry
Judicial Decisions and Scholarly Work
Judgements of the International Court of Justice, United Nations General Assembly Resolutions, and the awards of international arbitral panels Writings of highly-qualified scholars given similar effect--provide evidence of the actual legal content of various treaties and customary practices However, do not create international law→ only used as subsidiary means of determining meaning of the primary sources of law
NAFTA Chapter 11
NAFTA protects the rights of investors from each member to freely invest in the other member countries Chapter 11 of NAFTA promotes such investment in two important ways: 1.) It reduces each member's restrictions against foreign investment, and 2.) It gives aggrieved foreign investors legal recourse against host countries that violate their investment rights
NAFTA Versus Common Market
NAFTA: free trade agreement EU: common market A free trade agreement confines itself to the regulation and harmonization of trade and investment among its members -Accordingly, each of the NAFTA partners maintains its own tariff rates for countries that do not belong to the free trade agreement As a common market, the EU establishes a common economic policy for trade and investment within the community, as well as a common external tariff -Further, the EU has created a common monetary policy (the euro) and is considering a common foreign policy and even a fiscal union
NAFTA Trade in Services
National Treatment Carries forward the obligation of national treatment that has long stood as a hallmark to trade in goods under the GATT and other international trade agreements Under this provision, each NAFTA member must treat the service providers of the other member countries no less favorably than it treats its own Within each nation, the state and provincial governments must likewise accord no less favorable treatment to service provides of other countries than they do to those of their own nation MFN Treatment Also accorded MFN treatment Under this, each NAFTA country is required to treat the service providers of the other NAFTA countries no less favorably than it treats providers from any other country
NAFTA and FDI
National Treatment, MFN, Performance Requirements, Minimum International Standards, Expropriation Chapter 11
"Fabulous Fab" Trial
One of the only court cases to come out of the great recession marketing and packaging MBC as grade A when they were ultimately shit Fabrice Tourre loose with email practices -Said damning things in emails -Not a big fish in the pond he was prosecuted by the SEC Brought civil charges against the Fabulous Fab Why civil and not criminal? -Burden of proof too high in criminal cases; gov't didn't think they'd win
WTO: Reciprocity
Original principle underlying the GATT process was the notion of reciprocity Specifically, GATT envisioned that negotiations for the reduction of tariffs would occur on a reciprocal and mutually advantageous basis Within each round, GATT members were to negotiate reductions in tariffs on a reciprocal basis Reciprocity, combined with MFN treatment, was designed to ensure a balanced and worldwide reduction in tariffs The preamble to the WTO agreement expressly recognizes the importance of accounting for the different levels of economic development among countries It further cites the need to take affirmative steps to assist the developed and, particularly, the least developed nations of the world Thus, it provides various exceptions to the reciprocity and MFN principles for lesser developed nations
International Center for the Settlement of Investment Disputes (ICSID)
Promote mutual confidence between private foreign investors & gov'ts of developing nations ICSID was created by the World Bank to promote mutual confidence between private foreign investors and the governments of the developing nations of the world Provides administrative support for the conciliation and arbitration of investment disputes
prosecution via settlement agreements
Pros: Time and efficiency, manage risk, most effective tool for promoting compliance Cons: Lack of clarity in case law; without trial process, not precedent is created and no opinions made, can be self defeating to countries if they promote adverse corporate environments, shareholders pay ultimately
federal arbitration act
Provides that arbitration clauses in commercial contracts generally are valid and enforceable Courts should enforce them unless there are legal or equitable reasons that would support refusal to enforce any type of contract When a plaintiff's legal claim falls within the scope of an arbitration clause, a court must stay the proceedings until the arbitration process is complete Before compelling arbitration, the court must conduct a hearing to make certain that there is an enforceable arbitration agreement b/c decisions to arbitrate are contractual in nature, a court may invalidate an arbitration agreement if it was secured by fraud, duress, or unconscionability
Civil Legal System
REDUCTION OF LAW TO CODIFIED SET OF RULES Europe, Asia, & Latin America Tends to offer businesses clear rules that allow private parties a great deal of flexibility in the negotiation and performance of contracts Courts likely to be highly protective of consumers who are contracting with commercial entities Variations within this broad classification of law Considered statute-based
Appellate Body
The DSB also has an Appellate Body composed of 7 members who serve a 4-year term Parties dissatisfied with a hearing panel's decision may request a review by the Appellate Body When this occurs, three members of the Appellate Body hear the challenge and have the authority to uphold, reverse, or modify the hearing panel (to date, no decision by a hearing panel has been reversed; although several have been modified)
sovereignty
Right to govern itself (or authority) "...almost all national observe almost all principles of international law and almost all of their obligations almost all the time" -Louis Henkin, How Nations Behave (1968)
Automatic Application of CISG
Sale of goods? Yes Merchant to merchant--commercial transaction? Yes both ratified CISG? Yes Opt-out of CISG? No. CISG APPLIES
Forum Non Conveniens Test
Sometimes a court will meet jurisdictional and venue requirements but the trial would be more convenient and just if it were conducted in another forum Under these circumstances a judge is permitted to dismiss the case under the doctrine of forum non conveniens (Latin for "forum not agreeing") This defense has assumed great importance in the US due to the tremendous growth of international business transactions Not widely found outside the common law legal systems
Trade Promotion Authority
Step One: President consults with congress when drafting the proposal Step Two: Bill must be reported on floor of each house within short timeframe Step Three: Congressional debate is subjected to strict time limits Step Four: Congress must approve or reject the proposal through a straight up-or-down vote (no amendments) within 90 days after it was drafted
Steps to Forum Non Conveniens
Step One: The court looks to see if there are any alternative forums with subject matter jurisdiction over the dispute and personal jurisdiction over the defendant. If there are none the court will not dismiss the suit. In some instances, a court will not dismiss on these grounds, unless the defendant first agrees to submit to the jurisdiction of another forum acceptable to the plaintiff Step Two: In this part, the court weighs various private factors in order to evaluate the private advantages and obstacles to a fair trial. Included among the private interests are: 1. The ease of access to evidence, 2. The costs of summoning witnesses, 3. The need to actually view any premises, and 4. The enforceability of the court's judgment Step Three: Finally, in deciding if the lawsuit should be removed to another forum the court considers certain public factors. These include: 1. The amount of congestion the court is experiencing, 2. The desire to avoid burdening jurors with issues that have little relevance to the community, 3. The importance of having the trial in a community with strong interest in the outcome, and 4. The desire to have the case decided in a forum that is familiar with the law governing the dispute
Hearing Panels
The Secretariat first recommends the name of three of these individuals to serve on the hearing panel (the panel may be composed of 5 panelists if both disputants agree that it should)
US Enforcement of Foreign Judgements
The US Constitution requires that each state fully recognize and enforce the judgments of the courts of the other 49 states. While this full faith and credit clause does not extend to foreign nation's judgments, state courts have the discretion to enforce them if they choose. Most of the state and federal courts in the US do recognize and enforce the judgments of foreign tribunals
WTO: National Treatment + Transparency
The WTO rules insist that each member country's trade rules are transparent Thus, each country must disclose its trade policies, either publicly within that country or through disclosure to the WTO The organization also has a Trade Policy Review Mechanism through which both domestic and multilateral trade policies are scrutinized
GATT Weaknesses
The absence of the ITO or any equivalent institutional body to administer the system Its operations as a result, were loosely conducted by the GATT Council, which was composed of any member country that requested representation (generally, about 70% of the membership served on the Council in any given year) The decentralized character of the GATT was poorly suited to deal with the radical changes in the goals and aspirations of the GATT"s membership over time In 1947, its 23 founding members were predominantly developed nations with common economic interests--however by the 1990s the membership had swollen to more than 100 countries, 3/4ths of whom were developing nations The GATT rules encompassed only trade in goods Yet as globalization increased, international trade in services became more and more important Even within the goods sector, broad exceptions had been carved out for sensitive areas, like agriculture and textiles There was general dissatisfaction with the GATT's dispute settlement procedures While trade disputes could be brought before hearing panels, the losing party could veto any adverse ruling because GATT decisions were effective only when unanimously approved by the entire membership
2 prerequisites to use ICSID dispute resolution mechanisms
The host nation must become a contracting state by signing and ratifying the ICSID Convention (156 nations have done so, as has Kosovo) The parties must give mutually binding consent to submit the dispute to ICSID -Consent must be in writing, but it can take many forms, including an arbitration clause in their investment contract
NAFTA: Licensing
The negotiators realized that licensing and certification requirements often raise unnecessary barriers to trade Accordingly, the treaty calls on each of the members to ensure that its licensing and certification procedures are based on objective and transparent criteria Further, they must be based on professional competence and may be no more burdensome than is necessary to ensure quality service
Why do country's sovereignty differ?
The smaller and less powerful countries have less sovereignty -Lack of resources, enforcement, improvement, etc. Governments that rely on oil are typically more autocratic -More authoritarian
Forum Selection Clause
These provisions may be either exclusive or nonexclusive While some national courts do not honor forum selection clauses, most enforce the parties' choice if it is not unreasonable Generally, there is no enforcement problem if the parties select the courts of either of their countries of those of a third country that has some relationship to the contract The courts of the US generally uphold a freely negotiated forum selection clause unless doing so would be grossly unfair
compensatory damages
They are measured as the difference between the value of the performance the nonbreaching party actually received and the value of the performance he or she had the right to receive
Termination
This article contains the right to terminate the deal if a better offer comes along--the so-called "fiduciary out" The buyer always gets reps on the accuracy of the public filings and the presentation of financial statements
WTO Agreements
This legal text is divided into 6 major parts: The agreement establishing the WTO The agreements covering trade in goods (GATT) The agreements covering trade in services (GATS) The agreements covering intellectual property (TRIPS) The general rules governing dispute settlement And reviews of the member countries' trade policies
WTO: MFN Treatment
This requires that any privilege, advantage, or benefit granted to imports from one WTO member be extended to imports of similar products from all other WTO members the WTO permits member countries to engage in bilateral negotiations while bringing about uniform, multilateral reductions in tariffs Exceptions: 1. free trade agreements 2. generalized system of preferences
standing
This standing test has three basic elements: First, the plaintiff must have suffered an injury in fact -This is an interference with one of the plaintiff's legally protected rights. Courts do not entertain a lawsuit if the plaintiff's claims are merely hypothetical -There must be an actual or imminent, concrete, particular harm to the plaintiff Second, there must be a casual connection between the plaintiff's injury and the conduct of the defendant Third, it must be clear that the injury will be redressed by a favorable decision to grant a remedy to ameliorate the plaintiff's injury
Dispute Resolution under WTO
To better manage the growing number of trade disputes that would inevitably accompany the increasingly broad and complex international trade system, the WTO created a permanent Dispute Settlement Body (DSB) The DSB was charged with the responsibility of overseeing the entire dispute resolution process Nullification and Impairment Consultation Hearing Panels Appellate Body Compliance
Ad Hoc Arbitration
Under this approach, the parties themselves must furnish all of the administrative services normally supplied by the arbitral institutions, agree on the procedural rules that govern the hearing, and formulate a mechanism for choosing the arbitrators This path may be chosen in order to minimize the expense and delay that frequently are associated with the institutional forums Ad Hoc also tends to be more private than institutional proceedings In selecting the governing procedures, the parties are free to designate the rules of any of the formal arbitration institutions
Foreign Corrupt Practices Act
U.S. statute, the FCPA, places legal and ethical constraints on companies and their managers doing business around the world It regulates 3 specific types of activities: Bribery, Improper Financial Keeping, And Internal Controls
CISG
UN Convention on Contracts for the International Sale of Goods (CISG) designed to assist buyers and sellers in creating, performing, and enforcing their contracts steered clear of favoring any single set of domestic laws, opting instead to compromise among the world's predominant legal systems
Discovery
US puts great deal on discovery (the pretrial gathering of evidence); in order to avoid unfair surprises and to encourage private settlement of lawsuits In other countries, particularly the civil law systems, the courts rely less on the discovery efforts of the litigants
Common Law System
US, India, Australia Heavy reliance on specific cases decided over time by judges Vests a great deal of power in its courts Reliance on lawyers Considered Judge-Based
WTO: Generalized System of Preferences
Under the GSP program, countries are permitted to extend preferential tariff rates to developing nations
NAFTA: MFN Treatment
Under this, each NAFTA country is required to treat the service providers of the other NAFTA countries no less favorably than it treats providers from any other country
Separability Doctrine
Under this, unless a defense related specifically to the arbitration clause, it must be submitted to the arbitrator as part of the underlying dispute However, when challenging the very existence of a contract, rather than a defense to an existing contract that a party seeks to have declared void or voidable, it is for the courts, and not an arbitrator, to decide whether the parties have agreed to arbitrate
UNCITRAL
United Nations Commission on International Trade-Law (UNCITRAL) Global body formed to promote the harmonization and unification of international trade law--membership designed to remove barriers and promote the development of trade represent the various regions of the world,UNCITRAL was better able to create a truly international body of contract law
Tariff-Based Restrictions
WTO puts heavy emphasis as tariffs being barrier to trade Tariffs very transparent two fundamental goals: 1.) WTO members are to engage in regular negotiations (Trade Rounds) designed to systematically reduce import duties 2.) Tariffs are expected to be the only form of import protection -Specifically the use of non-tariff barriers, such as quotas and quantitative restrictions to trade, are to be eliminated--numerous exceptions to this policy
Nullification and Impairment
When a country fails to honor its WTO obligations and that violation deprives another member of the WTO benefits, the breach is referred to as a nullification and impairment Only WTO members have standing to use the DSB to redress these wrongs Private complaints only are heard if a member country files a claim on behalf of its nationals As a part of their WTO obligations, all members pledge to avoid unilateral retaliation and instead to rely exclusively on the WTO dispute resolution procedures
termination rights
When a target company usually gets in the deal protection provisions is the right to terminate the original merger agreement if a "superior proposal" is made that the board of the target wants to accept not made easy or cheap for target
General Principles
When treaties and customs do not offer clear guidance, general principles of law recognized by civilized nations may be applied No consensus exists on how these principles are formed Status remains controversial due to the fact no international/national dispute resolution panel has carefully explained the nature of this source of law
CISG: Force Majeure
a promisor is not liable for the promisor's control that the promisor could not reasonably have been expected to consider when the contract was formed is an unforeseeable and irresistible event that renders an obligation impossible to perform
UNIDROIT
attempts to develop a uniform international contract law began as far back as early 1930 efforts suspended during WWII--resumed after it ended
State Practice
actual conduct of states
Escape Clause
allows temporary protection to threatened industry Imposes temporary tariffs and even quotas as a way to protect industry BUT.. has to be an unforeseen development causing significant increase that changes the market in order to qualify for this type of safeguard
Bilateral Investment Treaty
an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state established through trade pacts Problem is BITs have a really small scope -Primarily address how foreign investment is treated domestically Treaties are really easy to negotiate because the obligations are not that daunting
FCPA: Financial Records/Accounting
applies to any corporation whose shares are publicly traded within the US designed to provide shareholders with an accurate picture of the corp's financial status--provision is violated if bribers are not properly recorded as such in the corporate books
Grease Payments
are allowed if they merely accelerate processing time rather than actually shape a governmental decision Payment to a government official to facilitate routine governmental services does not violate the FCPA
Opino Juris
belief that conduct is actually required General Acceptance: -nations behave as if practices are legally required Consensus: -customary rules are not enforceable against nations that reject their legitimacy
Jus Cogens
certain principles are beyond derogation Natural law concept, holds that there are certain fundamental principles of international law accepted by the international community from which no derogation is permitted Examples include prohibitions on maritime piracy, slavery, genocide, torture, and wars of aggression
trends in corporate prosecution
cleaning up and doing deals: antitrust, fraud, bank secrecy act, environmental, bribery, import/export sanctions, pharma, securities fraud fairly new trend (2000s-present) ] foreign versus domestic: foreign companies paying 7x more than domestic companies
why settlement agreements
criminal prosecution very difficult, not always clear cut example of violation of law time and efficiency risk of going to trial and losing; can manage this risk in settlement agreements through negotiations
Treaty of Westphalia
ended 30 year war, gave birth to modern nation-state system based on sovereignty every nation is an island, and that states could not interfere with the inner-workings of other powers
what does the WTO do?
forum for negotiating trade agreements, reduction of tariffs mediate disputes between countries
international law is incomplete
gaps exist patchy no overarching regulator no international government
regulating trade
import barriers versus export barriers regulating imports: revenue, protectionism, retaliation, foreign policy, economic policy, defense, environmental protection, public health and safety, cultural values tariff versus non-tariff barriers
DPAs
involve more damages, require an admission of guilt to be included, involve more serious of offenses, has to be approved by court, and also tend to have harsher terms--> strong incentive for compliance
choosing a forum for litigation
jurisdiction: subject matter and personal venue: will the court hear the case? (FNC) logistics: does the court have means of discovery? enforceability: where is the money?
fair & equitable treatment
key obligation under BIT--subject matter of arbitration claims
Contract
legally enforceable promise or set of promises elevates private agreements between two or more persons or business entities into legally binding obligations created by private parties and enforced by public institutions
credit risk
loan $, might not get paid back
legal risk
mitigation, ADR, who deals with breach of contracts
conditions
need to be true in all material respects both at signing and closing; most importantly there cannot have been a "material adverse change" in the business The "MAC" clauses are heavily negotiated: Buyers are concerned by recent court cases making it relatively difficult to invoke these clauses Sellers try to carve out certain events from the MAC clauses--for ex the circumstances under which general industry or economic developments would not give the buyer a right to walk Conditions specific to a deal
Private International Law
regulation of the activities of individuals and corporations
nonexclusive clause
permits litigation to be brought in the designated court, but does not preclude a party from suing in another forum. Thus, in a nonexclusive clause the parties voluntarily consent to the jurisdiction of the designated forum without waiving their right to litigate in any other court
CISG: Freedom of Contract
permits parties to opt out of its coverage the contracting parties will make their selection by including in their contract a choice of law buyers and sellers also may expressly opt in to the CISG in instances where it might not otherwise apply
FCPA: Bribery
prohibits US individuals or companies from offering, promising, or making gifts to foreign governmental officials for the purpose of influencing a governmental decision One limits of the effectiveness of the FCPA is the fact that it does not give a private right of action to individuals or corporations who lose business as a result of a competitor's bribing activities The provision only applies to US individuals and companies; it does not reach bribery by foreign persons
WTO: National Treatment
prohibits members from treating imports from other members--once they have been dutied and cleared customs--less favorably than domestic products
general rule for treaties
provide source of law only for their contracting states nations that have not ratified treaty are not obligated to its terms, unless those principles were already a part of customary law
Dumping
refers to the selling of products in an export market for less than fair value (less than the price in the home market or less than Canada) Although international trade rules do not prohibit dumping, the WTO's Antidumping Agreement permits WTO members to impose special tariffs when dumped imports cause or threaten to cause material injury to competing industries in the important market
exclusive clause
requires that lawsuits be filed only in the designated location. When enforced, such a provision would prevent either party from suing anywhere else, even though another court might also have jurisdiction
Conflict of Laws
rules part of the domestic legal systems of the individual nations
Problems with Litigation
should be the option of last resort rather than a favored dispute resolution strategy For one thing, the costs (both in time and money) associated with litigation tend to be extremely high Further, lawsuits frequently place irreparable strains on business relationships, destroying the likelihood of future cooperation can be extremely cumbersome and oftentimes ineffective since there is no international court system available for resolving commercial disputes between private parties delay--crowded court dockets make for long delays in civil trials expense--exorbitant attorney's fees and court costs enforceability--no global treaty ensuring recognition or enforcement of judgments adversarial--severe strains or destruction of business relationships publicity--competitors may gain access to proprietary information
WTO Basics
tariff-based restrictions MFN treatment national treatment transparency sustainable development
choice of law clause
the courts in most of the world's major trading nations will enforce such a provision when there is some connection between the chosen legal system and the contract US courts specifically require that the chosen law bear a reasonable relation to the transaction Generally, the parties will meet this test if they select the law of either of their home countries OR that of third country where the contract was negotiated or might be performed
WTO
trade relations among members (161, approx.) negotiating forum, repository for agreement, trade dispute resolution goods, services, IP, textiles and clothing, agricultural products decision making
NAFTA trade in goods
treaty carries out these objectives in two important ways: 1.) agrees to discriminate against goods from the other member countries -national treatment -MFN treatment 2.) designed to secure greater market access for each member state within the borders of the other two Elimination on Tariffs Elimination of Import Restrictions Country of Origin Marking Requirements
sources of law
treaty law customary law contracts jus cogens
International Trade
treaty-making authority paths to treaty-making -treaty-authorized agreements -prior congressional approval agreements -subsequent congressional approval agreements -trade promotion authority (1975)
Doctrine of Incorporation
under this, most countries recognize international law as part of their domestic legal systems to some degree The Paquette Habana case, is an example of this phenomenon--although the US no longer subscribes to this view
rule of law
well defined and established laws and legal procedures; "great legal system"; governance performance
Consultation
when a dispute arises, the disputing countries are urged to voluntarily negotiate a settlement to the conflict If informal negotiations break down, the complaining member may initiate the WTO's formal consultation process In the past, GATT violators were able to undermine this conciliation stage by unfairly prolonging the discussion Now, strict time limits have been imposed If consultations do not achieve a settlement within 60 days, the complaining party may insist on the formation of a hearing panel
