LEGL 4900 Exam 1

Indirect expropriation

"regulate a company to death" Instituting laws/regulations that become significant operating barriers - eg - licensing conditions, taxes, new rules/regs/ In many ways more troublesome for investors Can use this to force a company into bankruptcy and then expropriate (b/c less/no compensation will be required)

Grease payments

(facilitation payments) legal payments to speed up or ensure performance of normal government duties. NOT prohibited under FCPA

Why might a country sit out of ICSID?

**most countries are part of ICSID One reason countries sit out of ICSID is if the country is not a capital exporting economy. (Also the country is giving away a little bit of sovereignty when agreeing to ICSID. Some countries think it is worth it to attract investors.) Mexico may not care about ICSID because of NAFTA. NAFTA membership takes care of this. Most of foreign direct investment going into Mexico comes from Canada and United States.

Challenges facing EU

- Open borders create political pressures and stress the system. -Same currency, but no central bank -leverage is not the same and there isn't much of it, and inflation is different too. -Applying uniform concepts to different economies can be difficult. -Tensions between debtor-creditor relationships among EU members. Ex: greek debt crisis

3 Rules of services with NAFTA (describe them)

--> National treatment- can't treat companies from nafta members any worse than you treat your domestic companies -->Most Favored Nation- have to be as nice to us as you are to your most favored nation. (ex: If mexico gives deal to one country it has to give same deal to nafta nations) -->Licensing: allowed to regulate services through licensing requirements, but the requirements have to be objective, transparent, related to professional competence, and not unduly burdensome (sensible).

NAFTA: Tariffs on Goods and Rules of Origin (Tariff Shift)

--When moving tangible goods across NAFTA borders, there are no tariffs. --Don't want other countries free-riding on the free trade zone. --In order for a good to be considered to have origin in an NAFTA member country, that good has to undergo a tariff shift

North American Free Trade Agreement (NAFTA)

-Came into effect in 1994. -enjoy bipartisan support. Less so upon democrats. -Removes tariffs produced within nafta countries -shift from multilateralism to bilateralism.

Why did Britain leave EU?

-Disliked brussels legislating EU -Didn't like bailing out Greece -Brexit voters want immigration restrictions

Foreign direct investment and NAFTA

-Element of control in FDI's that other portfolio style investment don' t have. To have a voice in the company, you have to have an aspect of direct control. -Significant stake = voice in governance = vote

Indirect/creeping expropriation

-Involves regulatory changes (taxes tariffs import controls etc) that make it impossible for a country to do business -Might change licenses and codes- (can't do business until you meet code)

How do VIE's work?

-Let companies sidestep Chinese rules forbidding foreign investment in sensitive industries like the internet. STEPS FOR VARIABLE INTEREST ENTITY: 1) Investors take stakes in an offshore holding company (company A). 2) The offshore holding company sets up a subsidiary in China (Company B). 3) Another company in China (Company C) operates the business. It signs contracts pledging to send profits and other benefits to the subsidiary (Company B).

United States is foundational on intellectual property. Why is this?

-Some of our most important industries are IP- software technology and media/ Hollywood -US wants to spread intellectual property on a global scale.

What's controversial about ISDS?

-Sovereigns cannot win in the system. The best they can do is not lose. - A foreign investor can overturn things like health regulations or environmental regulations that the sovereign had enacted.

European Union (EU)

-Started after WWII -Started with 4 countries as European coal and steel community -Became EU in 1993 -Common currency single market -The EU has 28 members, but 27 if the UK leaves completely. UK still has to formerly exit. -Economic Union (plus customs and common market)

Advantages of EU

-The EU has a lot of power internationally. It has a lot of political and economic clout. You are negotiating from a position of strength that a small country like (Italy or France) would not have on their own. -Stand on different group geopolitically -Tax free trading among members

Future of NAFTA

-Trend away from multilateralism to bilateralism approach -Breaking with the trend of bipartisan american trade policy - with some nationalist undertones (more democrat). -Restrictions on visas and immigration will have real impact for tech companies that rely on skilled foreigners to do their business -Immigrations policy isn't directly related to FTA's in US, but should watch for this. If we exit the stage, who will replace us as the global leader? China?

Consequences of Brexit

-Unpredictable -Trade and pound strength important -Must negotiate trade deals bilaterally -Average bilateral trade deal takes 10 years -Wants to trade with EU once they leave -Brexit voters want immigration restrictions -World Trade Organization In the WTO under the same terms as EU could negotiate with EU or become fully independent Will have to come up with tariffs for every country Rectification- keep EU terms as Britain Many large companies affected by brexit

What are the three components of common law?

1) Case analysis 2) Lawyer/ Jury play key roles 3) Great deal of freedom of contract

What are the two components of civil law?

1) Comprehensive codes 2) Systematic Rules

What are three ways to strengthen practices into a custom?

1) How widely it is accepted 2) Duration of time 3) Consistency

Why would a sovereign agree to investor state arbitration?

1) to attract foreign investment. Signal to foreign investors, we are not jerks. And if we are jerks, you can sue us. 2) when one country is agreeing to trade, other countries are agreeing with you to make those same commitments. You are also gaining protections for your domestic industries to invest abroad.

What are the three predominant barriers to global trade?

1)tariffs 2) import restrictions 3) export controls

Personal Jurisdiction-Minimum contacts test

1. Defendant is a resident of the court's territory 2. Defendant has a physical presence in the court's territory 3. Defendant has purposefully availed itself of business in the court's territory 4. Defendant has committed a crime or a tort in the court's territory

Why NYSE works with dual class share structure

1. Fiduciary duties 2. Deeper pool of investors 3. Class action lawsuits

Shareholder rights

1. Sell 2. Vote 3. Sue

How long does the average bilateral trade deal take?

10 years

Do courts have the discretion to say if DPAs are harsh enough? In other words, can they turn away a DPA for being too lenient?

A US court of appeals said that courts do not have the discretion to decide if the amount of money or if the comply terms are harsh enough. The courts should not reject DPAs for being too lenient. Courts can only reject DPAs if they are unethical.

Why was FCPA applicable to Odebrecht?

A company like Odebrecht or Deutsche Bank. If you are listed on a US exchange, you are subject to FCPA requirements.

Andean community

A customs union in South America that was launched in 1969.

Economic Union

A form of regional economic integration where members of a customs union decide to integrate further by harmonizing taxation, no barriers to internal trade, common monetary/fiscal policy, free movement of LABOR

Monetary union

A high form of economic integration, involving the adoption by a group of countries of a single currency. Example: European Union.

Sovereignty

A principle of international relations that holds that final authority over social, economic, and political matters should rest with the legitimate rulers of independent states. "almost all nations observe almost all principles of int. law and almost all of their obligations almost all the time"

Export control

A restriction on exports of goods, services, or technology to a country or group of countries imposed for reasons of national security or foreign policy

Consent

A sovereign must give its ______ before it is subject to treaty law

Bilateralism

A term referring to discussions, negotiations and decisions made by two states on matters of mutual interest

Treaty-authorized agreements

A treaty that delegates advance authority to the president to conclude supplemental pacts in order to carry out the terms of the original accord

Common market

A type of trading bloc in which countries that have formed a customs union proceed further to eliminate any remaining tariffs in trade between them. Free movement of capital and services, but different national regulations Example: European Economic Community - now absorbed into EU

Free trade area

A type of trading bloc, consisting of a group of countries that agree to eliminate trade barriers between themselves. Example: North American Free Trade Agreement.

Customs union

A type of trading bloc, consisting of a group of countries that fulfill the requirements of a free trade area AND ***adopts a common policy towards all non-member*** (It's higher than a FREE TRADE AREA, but lower than a COMMON MARKET)

Trade promotion authority

AKA fast track. Created in 1975 to to speed up the regular process when Congress considers trade agreements. These special procedures limit debate (and special interest lobbying) and prohibit amendments.

FCPA (Foreign Corrupt Practices Act - 1977)

Act that 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 record keeping, and internal controls

The Uruguay Round

Addressed new issues such as intellectual property rights, market access, and GATT -> WTO.

Prior Congressional Approval

Agreement where Congress (both houses) may pass a statute authorizing the president to bind the country to an international agreements. Traditional route for int. economic policy

Subsequent congressional approval

Agreement where Congress enacts a presidential proposal into law after the negotiations are complete. Not binding until both houses of Congress have confirmed it.

Benefits corporation

Allows managers to pursue a triple bottom line. When making a business decision, the BC must consider the impact on the environment, community, employees, and shareholders.

leaniency

Although DC area federal courts decided DPAs were too lenient in 2013/14, recently they are less likely to reject a DPA based on

WWII

Although current evidence suggests a reversal of the trend, since ___ the world has been on a globalizing trend.

220

Although society can regulate irresponsible corporate behavior via legislation, firms have considerable power of the legislation.. For every $1 spend on lobbying, firms gained $___ in tax benefits

Non-prosecution agreements

An agreement in which U.S. attorneys decline prosecution of a corporation that has taken appropriate steps to report a crime, cooperate and compensate victims.

Foreign official

Any officer or employee of a foreign gov. or any dept., agency, or INSTRUMENTALITY thereof

Profit maximization

Asserts that whenever managers make decisions based on concerns other than profit maximization, society's total wealth will decrease because scarce resources will no longer be utilized in the most efficient manner. Market forces generally compel businesses to behave in a socially responsible manner through the competitive process that governs the marketplace.

Treaty-making

Authority given to the President where he negotiates international agreements, and the Senate must approve it by a two-thirds popular vote before the treaty made by the president can become effective

Give an example of administering funds for restitution to right the wrongdoings of the company.

BP using money for clean up and to help victims.

US

Because UK has distanced itself from EU trading bloc, the __ remains the only opportunistic trading partner

Sovereignty

Because natural resources are tied to notions of _____________________, they tend to be targets of nationalization/expropriation

Broader reach

Because the financial record keeping provision of FCPA applies to any corporation whose shares are publicly traded within the US, it is said to have ___________ _____ than the bribery provision. This is violated if bribes are not properly recorded as such in the corporate books. Suplemented by SOX act

BIT

Bilateral Investment Treaties

Kickbacks

Bribe paid incrementally by the contractor as it is paid.

Of the following countries, which would not have a problem with sovereignty? A. Cuba B. Liberia C. United States D. Pakistan

C. United States. This is because the US has a lot of power. It has been a long time since the US has had an issue with sovereignty. The countries that do need to worry about sovereignty are countries that are poor, small, or relatively new. (because they are influenced by large, powerful countries)

acceptance, codes, values

CSR advocates point to these sources for ethical choice: values that find wide ___________, corporate/industry _______ of conduct, and constituency _______

Foreign Corrupt Practices Act (FCPA)

Came about in 1977. FCPA was not heavily enforced. There were very few cases brought forward. Large portion of cases are in United States. In the past few years, there has been a large rise in FCPA cases. If a company is listed on US exchange, they are subject to FCPA requirements. American practice. SEC responsible for enforcing it. Goes hand and hand with security regulations in some ways

Liability

Carbon taxes impose a clearly identifiable value for the ________ of pollution. This makes it much easier to identify corporate behavior.

Transfer Costs

Certain expenses regularly associated with cross-border trade and may greatly restrict the profitability of international transactions. They may include expenses unique to ocean travel or government imposed restrictions such as import duties, quotas, and export restrictions

Freedom of contract

Common law legal systems are said to have large

Cons of settlement agreements

Cons: -Shareholders pay in settlement agreement. If you are not holding people personally responsible, then they are more likely to repeat history. Is deterrence so weakened by the practice of settlement agreements that they are not effective enough? Many times the executives that commit the acts continue to stay on as an executive at the company. -You want to regulate and prosecute, but do not want to drive the whole company into the ground. If the fee is too high, then many lower level employees could lose their jobs. You want to punish the people that make the wrong decisions, not everyone. -There is a fear that this could be overly coercive on companies. -Settlement agreements instead of trials do not have judicial opinions. Without judicial decision, we do not have precedent. Without precedent, we do not get clarity. (Companies may not see wrong doing because there is no judicial decision on it.) Court decisions help us interpret law better. Case law and precedent are not created in settlement agreements. Uncertainty is toxic for business climate. -Do not want to over regulate and over prosecute so that companies choose not to do business in the United States anymore.

Commercial arbitration is ______ based.

Contract

How does a country make sure to uphold the Rule of Law?

Country needs decent lawyers, stable legal system, good judges that are impartial and cannot be bribed, enough enforceability to make what our judiciary say to be effective.

subject matter jurisdiction

Court has the authority to hear this type of lawsuit

What type of risk is the following situation? China loans money to the US and is concerned about the US's ability to pay back the loan.

Credit Risk- how likely a country is to pay back. Example: if you're loaning money to a sovereign what is their likeliness to default.

Which sovereign would be unwilling and hard to enforce rules against? A. United States B. Canada C. United Kingdom D. Syria

D. Syria

Corporate behavior

DPAs & NPAs afford government attorneys tools to modify, control, and oversee ___________ __________ that they would never achieve by taking the companies to court

What are the two categories of settlement agreements?

DPAs and NPAs

Trans-Pacific Partnership (TPP)

Designed as strategic counter balance to China's control in Asia Would have been the biggest trade agreement ever

Services and NAFTA

Different than tangible goods (ex: medical, insurance). US tries to open and reduce service barriers with NAFTA partners.

WTO disputes

Disputes among sovereigns- must be wto members not companies

Subsidiary

EU institutions should not be making laws and rules that are just domestic in nature. They should concern international issues. Domestic stuff should be left to member states.

Political union

Economic / Political integration whereby countries form a common

Mercosur

Economic union example

Treaty of Westphalia

Ended Thirty Years War in 1648; gave birth to the modern nation-state system based on sovereignty

Dentological

Ethical theory based on duty and obligation. Individualism

European Union nations and sovereignty

European Union nations have given up a lot of sovereignty -Traded border security for economic purposes

free trade, GSP

Exceptions to MFN under WTO include __________ ________ agreements, customs unions, and _____

How is expropriation seen by investors? How is it seen by nationalists?

Expropriation seen as bad by investors, good by nationalists

Confiscations

Expropriations tat discriminate against foreign investors and therefore entitle the property owner to the fullest compensations

government officials

FCPA prohibits only US individuals/companies from offering or making gifts to foreign ____________ ________ for the purpose of influencing a decision.

Paquette Habana

Facts: Two Cuban fishing vessels (owned by a Spaniard & sailing under Spanish flag) leaving Havana were captured by the U.S. They were brought to Key West and auctioned in the district court. The owners made a claim to circuit court that since theirs were fishing vessels, they were exempt from prize capture. At the time, neither vessel knew of the war between Spain and the U.S.

uniform

For new customary principles to rise to law, there must be extensive and virtually ________ state practice, whereas widespread and representative practice is needed for longstanding principles

GATT- General agreement on tariffs and trade

GATT 1947- agreement not organization- only applies to goods 1947-1955 weaknesses -Didn't apply to services or some goods like textiles -No intellectual property protection

Fabulous fab

GS trader who sold sub prime mortgages destined to fail; betting against the market. Lost civil fraud case.

GATT

General Agreement on Tariffs and Trade; international trade organization that encourages free trade by lowering tariffs and other trade restrictions. Now the formal treaty for trade in goods/services within WTO system Weakness: absence of ITP or any institutional body to administer system Encompassed only trade in goods Large exceptions for agricultural subsidies and textile quotas Issues w/dispute settlement procedures because any country could veto resolution

Arbitration and NAFTA

Gives foreign investors from nafta countries a forum to bring claims against NAFTA members.

GSP

Grants graduated trade preferences to developing nations

What does a hard brexit mean? What does a soft brexit mean?

Hard Brexit- completely leave EU- go to WTO status Soft Brexit- don't completely leave

strategic

Harmonization of standards in common markets is important b/c without trade barriers, countries will put excess regulations on strategic goods - indirect barrier to trade

International center for settlement of investment disputes (ICSID)

ICSID is a world bank sponsored forum for Investor State Dispute Resolution. Its an organization that facilitates those arbitrations between investors and states.

Most countries are members of ICSID. If you agree to ICSID, you have agreed that....

ICSID is the forum you want to use for investor state arbitration.

WTO

If NAFTA were scrapped, North Am. trade would revert to _____ rules, the bare minimum of economic integration. This is b/c Mexico & US have no other trade agreements other than NAFTA b/t eachother

Currency restrictions

Imposed by countries to limit the conversion of their domestic currency into a foreign currency and the remittance of those funds to another country

Sarbanes-Oxley Act

Imposes reporting requirements on all US and foreign corporations whose shares are listed on US securities exchanges.

profits, detected

In instances with high potential _________ & low risk of being ________ & low penalties if detected ----> rational actors will cheat/break law

Supremacy

In the case of conflict in member law and EU law, EU law prevails.

efficiency, consumers, society

In the profit maximization view, when firms pursue maximum profits (versus other concerns), they maximize _____________ in using scarce resources --> __________ maximize return on expenditures ----> _________ maximizes total wealth

Procedural interest

Interests that are those concerning how a process is conducted. Negotiators with these interests are not as concerned with the actual details of the outcome as they are with how an outcome is determined.

Customary law

International law that arises from long-standing practices held in common by most cultures. Requires actual practice and Opinio Juris

ISDS

Investor State Dispute Settlement In use since the 1960s, written into thousands of investment contracts & gives rights to private companies to sue governments Associated under w/rules of ICSID though it often takes place through international arbitral tribunals

Investor state disputes

Investor state disputes are sovereign to investor.

Antidumping agreement

Law that makes it illegal for an exporter to sell goods below cost abroad with the intent to raise prices after eliminating local rivals.

What type of risk is the following situation? We are creature comforts and buy aluminum cans to be delivered on a certain day and certain quality. We depend on the other company to deliver them to be able to do our business.

Legal risk- In a business deal, legal risk is the risk that the other party does not perform in part of the deal. Legal risk can be domestic and international.

Who is affected by Brexit?

Many large companies

Free trade has a PR problem. Explain what this means.

Many people do not know what the benefits of free trade are. (We (uga students) do because we have a basic knowledge about it from economics classes and having quality news at our fingertips.) Politically convenient for presidential candidates to say that free trade is not good, when they know this is false. It is electoral politics.

Proportionality

Mitigates the reach of EU law. A requirement that EU rules and regulations are rationally related to a legitimate purpose. Means of these laws and regulations must be rationally related to a legitimate end. (similar to due process in US).

EU

Monetary & economic union example

Licensing

Must be objective transparent related to professional competence and not unduly burdensome

Nondiscriminatory

Nationalization of an industry is considered ___________ & thus the property owner is entitled to little/no compensation

Capital-exporting

Nations that insist a nation may not expropriate foreign investments unless 3 requirements are met (taking is for public purpose, carried out nondiscriminatory - foreign investors must not be treated more harshly than domestic investors, investors given prompt, adequate, and effective compensation)

Capital-importing

Nations that insist government expropriations may be both legitimate and necessary to ensure that economic activities are directed toward the best interest of the host nations

Jus Cogens

Natural law concept holds that there are certain fundamental principles of international law accepted by the international community from which no derogation is permitted. EG - prohibitions on maritime piracy, slavery, genocide, torture, & wars of aggression Can be used to justify the invalidation of treaties that impose unduly harsh duties on one or more of the signatories

What is missing in international law?

No universal legal code among all the countries.

Give brief synopsis about Odebrecht.

Odebrecht was bribing officials in Brazil and other jurisdictions to win projects. When bidding on public works, different contractors submit their bids. The bribe was peanuts compared to the money that Odebrecht would get from doing the infrastructure work. Bad for tax payers, bad for competition, bad for company image, hurts the government that is allowing it, shareholders are harmed in bribery.

peg

One solution to currency risk is to ____ local, soft currency to a sable currency

World Trade Organization (WTO)

Only international organization dealing with the the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.

How do other countries feel about US settlement agreements?

Other countries around the world have looked to the US and seen the settlement agreement practice. They started and began to copy how the US deals with companies that violate laws.

Instrumentalities

Payments of bribes or kickbacks to corporate officials do not violate FCPA unless those corporations are deemed to be _______________________ of the government

standing

Plaintiff has the authority to bring the lawsuit

Negotiated outcome

Pretrial settlement agreements are less risky because they involve managed risk through a ________________ _________ rather than a binary outcome

Two sources of international law are:

Primary- Treaties and custom Secondary- general principles, scholarly works, judicial decisions

Treaty law

Principal source of international law today. Can be bilateral & multilateral

Pros of settlement agreements to prosecute corporations for wrongdoing and ultimately shaping their behavior

Pros: -Settlement agreements are more efficient than trials. They are shorter, there is less risk (outcome of trial is binary), and they cost less to taxpayers. -Companies avoid PR nightmare of going to trial. Discovery is very intrusive on companies. Discovery laws are extremely permissible.

What are the pros and cons of maximizing profits?

Pros: not a lot of rules or laws. Fiduciary duties to shareholders are based in the philosophy - doesn't require a lot of extra rule making. Cons: At what cost do we perceive profits? (ex: wells fargo)

WTO

Provides a negotiating forum within which its member governments can word toward the liberalization of the multilateral trade regime

Who is threatened by Bribery?

Public works and law enforcement

ICJ

Purpose: to resolve disputes and give advisory opinions that arise under Int. Law (courtroom instead of battlefield) Noncompulsory jurisdiction (states must consent) all UN members are automatically parties to the ICJ, members must comply with ICJ decision in which it consents to be a party SC may undertake enforcement measures if a State fails to comply with ICJ decision

Expansion

Refers to adding members to the EU which can cause problems because each country has a specific economy within an economic union - includes aspects of competition w/in union, open borders/immigration.

Direct applicability

Refers to the fact that EU institutional laws are automatically instituted in member states

Sovereignty

Right of a country or state to self govern

Wealth

Rising individualism is more highly correlated to increases in individual ______ than to any social harmony resulting from cross-cultural interaction

What needs to be a prerequisite for complicated business transactions?

Rule of Law

Positive

Rule of law has a __________ impact on economic success

Import restriction

Selective restrictions on the import of raw materials to force foreign industry to purchase more supplies within the host country and thereby create markets for local industry

Right of action

Set of facts sufficient to justify a right to sue to obtain money, property, or the enforcement of a right against another party.

Civil

Settlement agreements are considered ______ prosecution because no person would go to jail - as opposed to criminal prosecution

Opinion

Settlement agreements do not have a _________ - no precedent is set --> more ambiguity over meaning of law and consequences of breaking law/absence of case law

Describe the difference between the foreign and domestic companies the FCPA takes on

Settlements for foreign companies are on average are about 7 times higher than domestic cases. Foreign companies may be less likely to cooperate. U.S. companies are more aware of the laws, and which laws are more important to regulators. There may be potential for bias. It might just be because of selection. U.S. may try to go after larger companies when choosing.

DPAs & NPAs

Settlements that allow businesses to avoid prosecution for alleged crimes by paying hefty fines and agreeing to changes in business practices. Although it is Constitutionally permissible, these agreements generally lack judicial review - with the exception of a few cases where the agreement was deemed too lenient.

Multilateral

Since WWIII (until Trump) the US has promoted a _____________ approach to free trade agreements - every country must agree to trade rules. This is contrasted with bilateral agreements b/t two countries & plurilateral agreements - like most WTO agreements, where countries agree to new rules on a voluntary basis

Who tends to be targets for FDI?

Smaller/developing countries tend to be targets for FDI rather than sources for FDI

What is an important part of the rule of law?

Stability

Trade Promotion Authority (TPA) steps

Step 1: President consults with congress when drafting the proposal. Step 2: Bill must be reported on floor of each house within short timeframe. Step 3: Congressional debate is subjected to strict time limits Step 4: Congress must approve or reject the proposal through a straight up-or-down vote (no amendments) within 90 days after it was drafted.

Steps of EU's single market

Step one -> Free Movement of Goods Step two-> Free Movement of People Step three-> Single Currency Step Four -> Harmonized Product Standards

2 concepts that ease the reach of EU

Subsidiary and Proportionality

ICSID (International center for the Settlement of Investment Disputes)

Supported by World Bank, Promotes the peaceful and smooth settlement of disputes between companies and states (investor/state disputes)

Prior congressional approval

That would be if congress authorized the president to do a deal before negotiations. o Ratification before negotiations

Generally speaking, who brings criminal charges?

The Department of Justice (DOJ)

goods, people, currency, product

The EU formed a single market via free movement of _____, then ______, then adopting a single __________, then harmonizing __________ standards

accounting

The FCPA internal controls provision establishes that corporations whose shares are publicly traded in the US must also maintain internal __________ controls designed to ensure that unauthorized practices are promptly discovered and addressed.

broad

The OECD has observed that most corporate codes speak in ______ terms rather than providing clear guidance on how to balance competing interests and make responsible decisions

Who is responsible for bringing civil charges?

The Securities and Exchange Commission (SEC)

executive, legislative, judicial

The UN security council acts as its ________ branch, general assembly as its ___________ branch, and its ICJ as its _______ branch

Compliance

The admission of guilt in a DPA is a strong incentive for ___________ because gov. can easily bring criminal charges against firm for breaching DPA.

Opinio Juris

The belief that an action was carried out because it was a legal obligation - that if they did not participate in this practice they are breaking international law. Second requirement for Customary Law.

Proportionality

The concept that EU laws/regulations need to be rationally related to legitimate ends

Subsidiary

The concept that limits EU reach b/c although EU reigns supreme, if it is not an international issue, not up to the EU

personal juristiction

The court has the authority to decide a case involving this defendant Defendant is resident of territory, physical presence in territory, committed crime in territory, or has business in territory Can be general or specific depending on nature of defendant's relationship with the territory

Forum Non conveniens

The court refuses to accept a case it otherwise could decide

GATT

The formal treaty for trade in goods within the WTO system

Arbitration

The hearing and determination of a dispute or the settling of differences between parties by a person or persons chosen or agreed to by them. Agreements to arbitrate can be contract-based or treaty-based

Risky shift

The idea that group decision makers often accept a much higher level of risk than would be tolerated by an individual

Legal risk

The likelihood that a trading partner will opportunistically break a contract or expropriate intellectual property rights

Treaties, custom

The primary sources of international law are: _________ ___________

DPA (Deferred prosecution agreements)

The prosecutor agrees not to prosecute if the corporation meets particular conditions during a probationary period. Often have stricter terms: involve admission of guilt, damages, might have to restructure.

Country risk

The risk of political and economic uncertainty in a foreign country that affects the value of loans or investments in that country

sovereign risk

The risk that a host government may unilaterally repudiate its foreign obligations or may prevent local firms from honoring their foreign obligations. Subset of political risk.

Credit risk

The risk that an issuer of debt securities or a borrower may default on its obligations, or that the payment may not be made on a negotiable instrument. Also called default risk.

Principles, decisions, scholarly

The secondary principles of int. law are: general ________, judicial _______, & _______ works

Currency risk

The uncertainty of change rates between different currencies that fluctuate over time

SOX

This act supplements FCPA in that it imposes codes of ethics stressing the importance of adequate financial reporting and increases the penalties when such standards are not met

PEMEX

This gov. nationalization of a natural resource in the late 1920's started the trend towards nationalization of oil industries

Customary law

This involves two components: state practice (referring to general conduct of the states) & Opinio Juris (acceptance of that conduct as law)

Substantive interest

This type of interests have to do with things such as schedules, prices, salaries, etc. These make up the bulk of most negotiations.

What's the main purpose of companies?

To maximize profits

What was Trans- Pacific Partnership negotiated under?

Trade Promotion Authority. The beginning of TPP got rolling under president George bush. Complex trade agreements take a very long time to negotiate.

TIP

Treaties with Investment Provisions - NAFTA

-A lot of times sovereign assets are immune from attachment by judgment creditors.

True

True or False: Corporate prosecution began before the great recession.

True

True or false: FCPA prohibits bribes to government officials

True

True or False: Grease payments are okay under FCPA.

True. Grease Payment- It's a payment to edict a routine behavior. Ex: a fee is paid to get something out of customs.

non-binding

UN resolutions are __________

How is US Rule of Law compared to other countries?

US Rule of Law is pretty good compared to other countries. US has luxury of taking this for granted.

OPIC (Overseas Private Investment Corporation)

US gov. corp. that encourages US private investment in developing countries through offering low-cost expropriation insurance for certain kinds of investment in designated countries

Under what two presidents have most corporate prosecutions taken place?

Under George Bush and Barack Obama

Purchasing decisions

Under profit maximization, the market self regulates because market forces or _______________ ____________ compel businesses to behave in a socially responsible manner

NO

Under the FCPA, can private individuals or corporations sue for damages?

TRIPS (Trade-Related Aspects of IP Rights)

WTO agreement governing intellectual property rights Protects nonregistered/registered copyrights for 50 years. Trademarks/etc. indefinetly. Patents/licencing rights for 20

WTO disputes

WTO disputes are sovereign to sovereign.

Escape clause

WTO permits country to impose temporary raise in tariffs or quotas if imports are causing unexpected harm or are threatening a domestic industry

What do GATT and WTO have to do with each other?

WTO- builds on and around GATT to include more than GATT

domestic

When transfer costs are high, international trade is NOT likely to occur unless there is no _________ source for essential goods/services.

Tariff, MFN, National, reciprocity, sustainable

With some exceptions, WTO rules dictate: Import restrictions should be _________ based ___ treatment ___________ treatment ____________ _____________ development

Does WTO work better for small countries or larger countries?

Works better for larger countries. WTO doesn't work as well for small countries

Explain how the world bank works

World bank is multi lateral lender to countries. It makes loans with development aims. World is better when growth is spread throughout world. It lends money to countries at very reasonable rate of interest. It has a ranking for how easy countries are to do business with.

Why might export control exist?

You might not want to ship weapons to a country that you do not get along with; may exist because of sanctions; could be due to scare resources- an example of this would be the crude oil export bin

MFN

a WTO principle dictating that a country must treat the imports of one country the same as similar imports of another country

Import restriction

a limit of how much of a product you are allowed to import. This puts a lid on the market being flooded by one product

Performance Requirements and NAFTA

a way to restrict FDI's by saying the requirements need to be fulfilled. However, Nafta reduced these requirements b/c they are in favor of FDI's.

State Practice

actual conduct of states

Direct expropriation

actual public seizure + announcement

Enabling Clause

allows WTO members to treat developing countries more favorably if not unduly burdensome to developed nations

Financial Record Keeping

applies to any corporation whose shares are publicly traded within the US. Violated if bribes are not properly recorded as such in the corporate books.

Bilateral Investment Treaties

are a category within treaties. Super minimal. Do not even deal with trade obligations or tariff and tariff barriers to trade. Essentially, BITs are a very simple bilateral promise. United States and Vietnam sign a bit. Both are promising to treat other companies in a fair and equitable measure.

Treaty authorized agreements

authority that the executive has to enter in an agreement is based within the treaty. o We enter into nafta. There is a provision that states the executive branches of the member countries have an agreement of labor policies. o Getting through a treaty is hard to negotiate more than one country that are agreeing on. o Enables executives of the member states to deal with it later.

Why is customary law important for foundation of international law?

b/c a lot of int'l treaties acted to codify or organize by being more certain about what exactly the custom is and the process.

World Trade Organization (WTO)

bare minimum of trade relations Purpose is to facilitate international trade

Opinio Juris

belief that conduct is actually required. Necessary to establish a legally binding custom.

repatriation

bringing capital back to your home country from another country in which you have invested. There are some countries that want to be in control of how much currency leaves their borders. (because countries are worried about hyperinflation). This is something we don't think a lot about in the US because don't need to worry about hyperinflation.

Treaty of westphalia 1648 - what's the relevance of this?

brought an end to the Eighty Years' War b/w Spain and the Dutch and the German phase of the Thirty Years' War....so what? It created the basis for national self-determination (i.e. solidified the concept of sovereignty)

Safeguards

can have temporary tariffs and quotas to protect an industry that is threatened

National treatment

can't treat companies from nafta members any worse than you treat domestic companies

Jus Cogens

certain principles are beyond derogation (ex: genocide is illegal)

Allocated efficiency

consumers will attain a max return on their expenditures and society's total wealth will increase.

Currency restrictions

conversion of currency has to do with currency risk. We also might see restrictions on repatriation.

Forum non conveniens

court refuses to accept a case it could otherwise decide

International monetary fund

created for the purpose of standardizing global financial relations and exchange rates. Monitors global economy.

How much control does government have over state-owned enterprise?

depends on government involvement, function, and where profit goes.

Non-Prosecution Agreements (NPA)

do not have to admit guilt. Less serious situations. NPAs do not have to be approved by federal courts.

Fixed assets are _______ to expropriate

easier

-BITs are very ________ to negotiate compared to free trade agreements.

easy

The more liquid an asset is the harder it is to

expropriate

Treaties with Investment Provisions (TIPs)

free trade agreements

How much power does the president have when it comes to treaty making?

generally, foreign policy is one of the very few decisions that the president doesn't have to depend as much on congress to get things done.

ISDS- Investor State Dispute Settlement

gives foreign investors insurances against political risks

The purpose of investor state arbitration

gives private investors a pathway to make claims against sovereigns outside of the court system.

Rules of Origin in NAFTA

goods must actually be from member countries, can't import then trade (tariff shift) Can make rubber into tire then sell etc

Expropriation, give examples

government taking over private company. -Venezuelan oil companies. Hugo Chavez- used expropriation for political gain -Argentinian government took stocks using expropriation

Customs union

have common tariffs on certain things entering the union immigration rights as well

Most Favored Nation

have to be as nice to us as you are to your most favored nation If Mexico gives deal to one country it has to give same deal to nafta nations

What makes the Fabulous Fab different?

he wrote a lot of stuff in email. He used his work email to send correspondents. He expressed in really colorful ways how bad these mortgage back securities were that they were selling to investors.

A state that signs up for ISDS,

hopes to more attractive for foreign investment.

Retaliation

how law is imposed

Harmonization of Standards

important to integrate in true single market. It is one thing to remove tariff barriers for people, goods, services, capital but there are other regulations that can impose hidden barriers to trade. This concept is about harmonizing health and safety regulations among states. On one hand, you create a level playing field for health and safety. On the other, you're trying to impose hidden barriers.

Extraterritoriality

is the legal ability of a government to exercise authority beyond its normal boundaries.

Dual Class Structure

is when a core of insiders or founders in a company has governance rights that are disproportionate to their equity ownership. You will be in control of the company despite only having 10 percent of the company. It is very controversial. Hong Kong exchange said governance was too shady to take on IPO. Exchange turned down biggest exchange in the whole world.

Is expropriation legal?

it isn't necessarily legal or illegal. Sovereigns can take property in territory.

What does liberalism on an international scale mean?

it means free trade and focuses on capitalism

Rule of Law

law is applied equally to everyone in a fair and efficient way

Under customary international law expropriation is _________

legal as long as the sovereign pays the foreign company fair, adequate, and prompt compensation

Variable Interest Entity

legal work around of foreign ownership in this sector

Privatization

make a public company private

If you do expropriate but don't compensate

makes you a rogue in international community and countries with investors will seek punishment

Explain the following quote: "....Almost all nations observe almost all principles of international law and almost all of their obligations almost all the time." -Louis Henkin

many countries really do observe international laws, but most nations actually observe international law in obligations.

Direct Effects

member courts have to enforce EU rules.

Transparency

members must publish their tariffs and trade info

China does not have __________

multilateral free trade agreements

Go into detail about Deferred Prosecution Agreement (DPA)

must admit guilt. Typically used for stronger cases, better evidence, stronger allegations. An admission of guilt means continued violations or breach in agreement. Companies must pay a lot of money and agree to comply to terms. DPAs have to be approved by federal courts

Scope of BITS is _________ than free trade agreements.

narrower

Colonialism

national resources remained in control of colonial powers through foreign companies

Sovereignty and Treaties

nations give up rights in order to get things

Most countries expropriate the

natural resources in their country

Private international law

obligations of private parties across borders

International court of justice

part of UN. role is to settle, in accordance with international law, legal disputes submitted to it by States and to give advisory opinions on legal questions referred to it by authorized United Nations organs and specialized agencies.

United Nations

promote international cooperation

Liberalization

remove or loosening restrictions on private companies

Internal Controls

responsibility of company official to regularly audit the expenditures of its employees and oversee agents.

Direct applicability

rules and regulations enacted by EU institutions automatically become laws of the internal states.

Expropriated Hilton Hotel

says government was already minority shareholder, people were having problems with the hotel Removes the people who work there

Public International law

sphere of public obligations. Things like united nations and treaties that deal with code and war time and peace time. etc

Common market

still have full sovereignty but free movement of capital and services different national regulations

Organization for Economic Co-operation and Development (OECD)

stimulate economic progress and world trade. Club of industrialized nations. Criticized for being rich man's club

US and Canada only countries that give

subsurface rights to owners of land

standing

the authority to bring a lawsuit

Treaty Law

the body of treaties that states have entered into. Some treaties have 2 parties and some have many.

Personal jurisdiction

the court has the authority to decide a case involving this defendant

Subject matter jurisdiction

the court has the authority to hear this type of lawsuit

Subsequent Congressional Approval Agreements

the executive goes out and negotiates to bring it back for approval. Includes the Trade Promotion Authority -Negotiates then Ratifies

Tariff Shift

transformation that takes a good from one tariff category into a completely different category.

Investor state arbitration is _________ based.

treaty

Customary Law

what states do over time and the belief that these actual practices are like a law. Dominant source of international law in past, but treaty law has replaced customary law

When you're a big capital country, investor state arbitration....

will more likely play in your favor. Investor state arbitration generally works for the United States. Smaller countries have more disadvantages in investor state arbitration.

Are employees of a state-owned company considered gov't officials?

yes