Wal-Mart and Foreign Corruption — Where is the Corporate Responsibility; Where is the Federal Prosecution?

Posted on April 22, 2012 by

Wal-Mart is the latest multinational corporation now facing allegations of  illegal payments to foreign government officials.

 This case involves questionable corporate payments under both U.S. and Mexican law by Wal-Mart to help expand its stores in Mexico.

 “Wal-Mart Covered Up Bribery, Report Says.” Washington Post (April 22, 2012);  ”Vast Mexico Bribery Case Hushed Up by Wal-Mart.” New York Times (April 22, 2012); “Wal-Mart Corruption in Mexico.” (CNBC video April 23, 2012).

Justice Department prosecutions under the Foreign Corrupt Practices Act(FCPA) have grown greatly under both the Bush the Obama administrations, justifiably so. The U.S. Chamber of Commerce has been aggressive in trying to change the foreign corruption law.

Many others have argued that nothing should be done to make the U.S. less than a leader, as it is now, in the ethical conduct of international business. In fact, they argue that the law should be broadened. ”Bribing Foreign Officials.” Washington Post (2.27.12).

So the question is will there be a federal investigation and prosecution of these latest allegations of bribery and corruption by a U.S. multinational abroad? And what about U.S. firms in China and elsewhere?

For a good review of FCPA cases (2007-2011), countries and companies involved see my recent collection of charts and excerpts for the USDOJ document (“Lay Person Guide“). Malawer, “Corrupt Practices Prosecutions.” (April 2012). These  documents indicate the absolute aggressive prosecutions by the USDOJ, the extensive extraterritorial application of FCPA, the huge fines and countries involved.

At the bottom of all this is the broader question of the responsibility of corporations in both the U.S. and the global system. It’s really about values and who we are.

 The fact is that most people and governments around the world understand the insidious and dysfunctional nature of bribery at all levels and its terrible impact on economics development.

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New Model Bilateral Investment Treaty — Upholding International Law and Good for U.S. Firms.

Posted on April 22, 2012 by

The USTR released the revised 2012 model of the “Bilateral Investment Treaty.” This is the first revision since 2004 during the Bush administration. It builds on the traditional position of the U.S. toward investment treaties and builds upon it.

 It contains important policy changes and policy positions.  ”U.S. Concludes Review of Model Bilateral Investment Treaty.” USTR News (April 20, 2012). “Text of Model BIT Agreement.” (USTR 2012).

For example, it includes new provisions concerning the environment (Article 12) and labor (Article 13). Most importantly, it reaffirms the primacy of customary international law concerning minimum standards for treatment of foreign corporations and expropriations (Annex A and Annex B).

 In particular, it confirms that customary international law “results from a general and consistent practice of States that they follow from a sense of legal obligation … (and that the customary international law minimum standard of treatment of aliens refers to all customary international law principles that protect the economic rights and interests of aliens.”

This reaffirmation is particularly noteworthy in describing the U.S. adherence to customary international law and its methodology. This revised model is particularly important to encouraging a more open and liberalized global investment environment.  This is a great benefit for U.S. firms.

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The Supreme Court and International Law — An Unclear Future …..

Posted on April 19, 2012 by

The Supreme Court ruled yesterday that the “Torture Victim Protection Act of 1991” only applies to individuals and not corporations. (Mohamad v. Palestinian Authority). This was based on the interpretation of the term “individuals.” This was a technical but a correct decision by Justice Sotomayor. This leaves corporations and other foreign actors off the hook for acts of foreign torture.

The Supreme Court previously asked for additional briefs in Kiobel v. Royal Dutch Petroleum. It wants to consider  whether under the Alien Tort Statute anyone at all can be sued for violating international law when the actions occur outside of the United States.  This is even though the “Supremacy Clause” declares treaty law as the supreme law of the land and prior Supreme Court decisions have held the customary international law to be part of our law.

This latest case has the potential of being the most troublesome. It could finally provide an opportunity for the conservative justices to aggressively apply their well-know antagonism toward all things international law.

In the long run one saving grace is that the Congress can amend the two above existing statutes to allow the application of international law to foreign acts of terrorism and human rights violations.

But given the deadlock in the Congress I wouldn’t count on this anytime too soon. That’s why there is a big murky cloud over the role of the U.S. in promoting international law.

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Promoting Services and Protecting Intellecual Property Rights — Three Important Developments (TPP, Notorious Markets and ACTA).

Posted on April 18, 2012 by

The USTR Ron Kirk argues in the Wall Street Journal today that the Obama administration believes the service sector can do more business abroad. He argues that’s why the Trans-Pacific Partnership negotiations focuses on services and investment as its cornerstones. “Rethinking ‘Made in America’.” Wall Street Journal (April 18, 2012).

This is also why the USTR started to publish, in 2010, “Notorious Markets” separate from the annual Special 301 reports. This report focuses on identifying physical and Internet marketplaces where infringing goods and services are sold. The most recent report was released in December 20, 2011. “Results of Special 301 Review of Notorious Markets.” USTR News (December 20, 2011) and “Review of Notorious Markets.” USTR Release (December 20, 2011).

The plurilateral agreement, the Anti-Counterfeiting Trade Agreement (ACTA) was signed in October 2011.  Its aim is to further enforcement of intellectual property rights. ”ACTA attempts to deepen international cooperation. This agreement will come into force when additional diplomatic steps are taken. ACTA (USTR website).

 

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U.S. Extraterritoriality and Corporate Governance and Global Transactions — More Aggressive U.S. Action.

Posted on April 12, 2012 by

Here’s a presentation and a PowerPoint I gave recently concerning the extraterritorial application of U.S. international economic legislation and regulation impacting a wide variety of  U.S. international transactions.

Areas concern, foreign corruption, reexport controls, trade sanctions, foreign tax and banking disclosures, antitrust price-fixing, foreign boycotts, and corporate governance (Sarbanes-Oxley and Dodd-Frank).

The importance of this is often illustrated by the failure of many of our multinational firms, especially high-tech ones relying upon intangible transactions involving patent and licensing fees, from paying corporate taxes due to their global transactions being routed through multiple tax havens.

The list grows as does aggressive U.S. enforcement actions. These are parallel to stronger enforcement actions in the world of import remedies and market access by the Obama administration.

Malawer, “Extraterritorial Rules of the Road.” (2012).

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Unilateral Action and Changing International Rules — Reagan and Obama — An Untold Story.

Posted on April 5, 2012 by

Recently gave a short presentation on Eric Holder’s legal defense of the Obama administration’s policies concerning military commissions and targeted killings. But my main point was how unilateral actions by the U.S. can help change outdated international law rules. In fact, there is an untold story here that links President Reagan’s foreign policies challenging international law with those of President Obama’s.

But this is somewhat at odds with President Obama’s focus generally on legal rights and responsibilities of states, preference for developing institutional linkages globally, and support of multilateral institutions.

The above seems to be core aspects of President Obama’s underlying approach for his evolving architecture for global  governance and foreign policy-making. This approach stems from his law school teaching and realpolitik as a politician and national executive in charge of foreign policy, military affairs, and national security

President Obama’s emphasis on developing domestic and international law in light of the national interests of the U.S. in the post-Cold War and post-9/11 eras is a continuing story — with more interesting developments to occur, most likely. Law always needs to develop to take account of a wide-range of newer realities and in context of our underlying values.

 Malawer, “Changing International Law to Conform to Newer Global Realities & National Interests – From Reagan to Obama — The Untold Story.”  (April 4, 2012).

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Brazil — Currency Wars, Trade Disputes and Great Opportunity for U.S. Trade and Investment.

Posted on April 3, 2012 by

 

 

I’ve  recently returned from Brazil.

Brazil has various trade disputes and currency issues with a number of countries. For Brazil the “currency wars” continue with the high valuation of its currency. Brazil continues to have issues with the United States concerning export of Brazilian aircraft, U.S. agricultural subsidies, and import restrictions.

Brazil has recently become more focused on its trade relations with China. In particular, it’s concerned about China’s cheap imports into Brazil and China’s huge purchases of its raw materials and commodities. However, Brazil remains a very attractive destination for foreign capital. Sovereign wealth funds from the Middle East have bought into Brazilian conglomerates and holding companies. Foreign oil companies are actively pursuing opportunities in the oil fields off Brazil.

It is interesting that to a significant extent U.S. firms and U.S. trade policy have somewhat ignored Brazil’s gigantic growth. This needs to change.

“The New Trade Routes: Brazil and China.” Financial Times (Special Report 2011).

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