Counterterrorism and Global Trade — Legal Developments — Need a More Effective Congress and International Law.

Posted on September 8, 2012 by Stuart Malawer

In his two books, Jack Goldsmith rationalized the growth of presidential power in the War on Terror, addressing both the Bush and Obama administrations. And of course he tries to justify his actions, with some limited success, while in the Bush Justice Department.
In his 2009 book, The Terror Presidency, Goldsmith notes the string of congressional capitulations during 2001–2008, allowing a more militarized approach to the counterterrorism policies by the Bush administration. However, he notes Supreme Court decisions imposing restrictions on those actions.
In his 2012 book, Power and Constraint, Goldsmith continues his argument that Congress not only failed to restrict the president’s actions but, in fact, generally sanctioned the continuity of Bush-era policies.
Unfortunately, he glosses over the broad rejection by the Obama administration of torture,  waterboarding, and extraordinary rendition  as instruments of U.S. policy. He is dismissive of the very significant role federal courts played in limiting these Bush era-policies while balancing civil liberties with national security.
But most interestingly, Goldsmith extends his argument that it is not only the courts that provide for presidential accountability but the hypergrowth of private organizations, especially by aggressive lawyers.
In a sense, he argues that it is now the courts and these informal groups that functionally provide an accountability mechanism in lieu of an ineffectual Congress.
It is clear that it has been the federal courts that have primarily protected individual rights as enshrined in the Bill of Rights. And this focus on individual rights is what makes America truly exceptional among the countries of the world.
To me it is the balance between the protection of individual rights and the protection of the national security of the United States that is always a work in progress as global events unfurl. We need to get this right and this varies over time. (This applies especially to our developing policies concerning cybersecurity and extensive use of drones.)
It is my sense that the state of counterterrorism policies today is just about right, with the grave exception of the diminished role of federal courts concerning detainees and their legal rights. (I am also concerned about the administration’s continued assertion of the “state secrets privilege.”)
Goldsmith greets the role of courts and private groups with gratifying acceptance but displays an unfounded conservative bias against what these lawyers and organizations advocate: the observance of international law as law of the land. He barely disguises his disgust with the growth of this law that covers many areas once removed from broad rules of conduct.
It is unfortunate that as a law professor he prefers the workings of an ad hoc military commission system in lieu of the well-tested federal court system as to detainees and terrorist trials. Empirical evidence is on the side of the federal courts.
What does this have to do with global trade?
For foreign and military affairs, there is a sharing of power by the president and Congress. However, as to these areas the powers of the president have grown immensely over the years. As for foreign trade, Congress has exclusive authority. While the executive negotiates agreements the Congress has firmly kept control of its authority over accepting these agreements and implementation of them by legislation. This division and differences in powers are basically as the Constitution envisioned them.
For global rules of trade, international law forms the basis—both treaty law and customary international law. For example, the World Trade Organization (WTO) and bilateral trade agreements are supreme law of the land, under Article VI of the U.S. Constitution. Rules concerning expropriations are rules of customary international law. Such laws are the law of the land under Supreme Court precedent, going back to the 1800s.
The problem is that Goldsmith and others resent and reject the notion that customary international law can be expanded and applicable to states without their specific consent—especially the United States—and is often too broadly interpreted.
This they argue represents a challenge to U.S. sovereignty. In fact, this critical issue, which I thought has long been settled precedent, is being reconsidered by the Supreme Court this term.
For example, conservative international lawyers have long-argued the that “Alien Tort Statute” ought to be limited if not disregarded concerning suits against foreign corporations or anyone violating customary international law outside of the U.S. Thus, restricting the application of customary international law within the United States. Many other countries allow such legal actions against foreign corporations. Of course, Congress can explicitly extend the statute to avoid a restrictive reading.
It is interesting to note that the continuity of counterterrorism policies from the Bush to Obama administrations is akin to a similar continuity of aggressive U.S. policies towards China in WTO litigation.
What’s the problem as it relates to trade relations?
This narrow view of customary international law (which I would consider an unjustifiable assault on it) weakens the ability of states to consider a wide range of newer issues; for example, actions by individuals and corporations in collaboration with state sponsors of terrorism and rogue state to gain economic concessions. What about the entire issue of exclusive economic zones in maritime law and the traditional right of states to self-defense and state-sponsored commercial cyber intrusions? A narrow view of customary international law relegates law to a position of inability to meet dynamic changes in the global system.
For example, the European Court of Human Rights now applies international human rights law, under both conventional and customary international law, to corporations. (The court delas with the inter-play of EU law, European Human Rights law, the law of states, and  the impact on corporations individuals.) In a sense giving them protection against state abuse.
This is particularly interesting since the Russian Federation is a member of this regional system and cases against it are numerous. Implicitly that means that corporations are recognized as juridical persons with obligations also.
 Goldsmith’s antagonism with international law generally feeds into a broad reluctance concerning the U.S. involvement with bilateral, regional and international legal arrangements allowing adjudication of newer and growing trade and investment issues with a wide-range of countries. Such involvement is viewed, in part, as a diminishing of U.S. sovereignty.
In conclusion, as to matters of trade, both Congress and international law set the parameters for presidential action. An ineffective Congress and an emaciated view of  international law are unhelpful in today’s world. They are counter-productive to U.S. national interests in meeting the political and economic challenges confronting the U.S. in an interdependent global environment.
Dr. Stuart Malawer is the author of two recent casebooks, U.S. NATIONAL SECURITY LAW (Hein and Company, 2009) and WTO Law, Litigation and Policy (Hein and Company, 2007).

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“That Used to Be Us” — Get Back to Our Values, Job Creation and Today’s Global System.

Posted on September 1, 2012 by Stuart Malawer

Here are many of the major points that are made in the new book by Tom Friedman and Mike Mandelbaum, THAT USED TO BE US (2012). They have been made before but they should be repeated until they sink in.  The world is interdependent and interconnected. Economic competitiveness and jobs are the critical issues confronting the U.S. today. Effective public policies need to be adopted, now. Better education and better political cooperation are needed, immediately.
… The end of the Cold War ushered in four major challenges: globalization; information technology revolution; budget deficits and national debt; energy and climate demands.
… Americans did not fully grasp the implications of globalization. They didn’t recognize the magnitude of the challenges. They failed to see the profound challenge the end of the Cold War posed.
… No country is prepared to step in to replace the United States as the world’s government.
… Regulations and regulatory bodies provide the vital foundation of trust that fosters innovation and risk-taking.
… The financial and energy sectors suffer from too little regulation.
… The merger of globalization and the IT revolution coincides with the transition from the 20th to the 21st century.
… Better education requires the three C’s – critical thinking, effective oral and written communication, and collaboration.
… There is a direct connection between immigration and innovation.
… The more divided a society becomes, the more likely the wealthy will opt out of paying for public goods.
… The losers from globalization – al-Qaeda and Saddam Hussein – did pose significant security problems.
… We cannot meet our four challenges without a vibrant federal government.
… This decline in values has done as much as political hyperpartisanship to undermine our ability to address our great challenges.
… The anxiety about China’s rise if channeled properly is a healthy concern.
… Declaring that America is exceptional doesn’t make it so.
… American society retains the characteristics that made the U.S. exceptional.
… America not only underappreciated the world it invented, but overinterpreted the events of Sept. 11th.
… What we need is to understand our own history. We need to reconnect with our values.
I wonder how many times the above needs to be emphasized before we understand that only by aggressively engaging in the global marketplace can we ensure jobs for Americans. This is one of our top economic, political and national security objectives.
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More U.S. – China WTO Trade Litigation …. Not a Trade War and Not Bad for the System.

Posted on August 10, 2012 by Stuart Malawer

      Two good assessments appeared yesterday concerning U.S. – China trade litigation in the WTO. They discuss the increased litigation by the Obama administration, the generally positive significance of such WTO litigation, and why it does not evidence a trade war.
…. The following is a good review of  U.S. – China litigation in the WTO. It argues such litigation has become the core of U.S. –  China relations (trade or otherwise). It also contends there has been a seminal shift in U.S. trade policy to emphasize continuous actions to contest perceived Chinese restrictions. “At the WTO U.S. Racks Up Wins Against China.” Washington Post (August 9, 2012).
…. This piece claims that while WTO litigation is expanding, especially between the U.S. and China, its importance is really is in restricting future defensive trade remedies (such as antidumping and subsidies.) However, it notes these trade remedy actions really don’t seriously consider the reality of a global supply chain. “Decommissioning the Misfiring Weapons of Trade Warfare.” Financial Times (August 9, 2012).

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Money Laundering, U.S. Financial Sanctions and Foreign Violations — Why It’s Our Business.

Posted on August 7, 2012 by Stuart Malawer

Now it is the New York State’s Department of Financial Services(DFS) that has issued an order threatening the license of Standard Chartered Bank to do business in the state.
It alleges that the British bank schemed with the Iranian government to violate U.S. financial sanctions for nearly a decade.  It contends that the British bank used its New York branch to mask more than 60,000 transactions and thus laundered over $250 billion since 1995. It did this by stripping the true identity of the parties involved in “U-Turn” transactions involving foreign entities utilizing the U.S. clearing system.
What was the British bank’s response? “Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”
And this is from one of our closest allies. I suspect the bank is going to face not only possible loss of its license but massive private litigation and criminal prosecution. I guess they will find out who they are dealing with.
This case raises issues of extraterritoriality of U.S. law. This is something the EU has consistently been concerned about. However, the use of the financial system within the U.S. by an entity within the U.S. to conduct financial transfers within the U.S. is not really an issue of extraterritoriality. It is clearly a domestic issue.
Larger questions remain.
…  Why do global financial institutions (Credit Suisse, Lloyds, Barclays, ING and HSBC) think they can violate U.S. legislation when they act within the United States?
… What is it with the British and foreign banks that they feel that U.S. sanction legislation can be violated? (Think about countries other than Iran such as Mexico, Cuba, Myanmar, North Korea and the Sudan.)
… Is it just the fees in this case or does this instance evidence a systemic issue concerning global finance and U.S. sanctions?
 … Do such corporate actions indicate an ineffective global financial regulatory system based primarily upon national legislation?
… Should the U.S. actually hold individuals criminally responsible or just go after the license to do business of a foreign bank?
Obviously policy needs to catch up with global corporations acting in a multi-jurisdictional world. Global corporate responsibility needs to be reinforced by effective national and international supervision.
There is a blurring of the moral and legal responsibilities of global financial institutions in the pursuit of profit. This is a problem for national and global systems. That’s the challenge we face.
And that’s why this is our business.

                                                New York Times (Aug. 18, 2012)

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ASEAN Trade and Investment with the U.S. — They want it and we need it.

Posted on August 1, 2012 by Stuart Malawer

Dr. Stuart Malawer at Petronas Towers (Jakarta, Indonesia) (July 2012)

      After spending the last two weeks giving presentations and discussing global trade and investment strategies with foreign multinationals and financial institutions in Thailand, Malaysia and Indonesia here are some observations and general conclusions.
… Indonesia is clearly the largest and most dynamic economy in Southeast Asia in terms of investment and trade opportunities for U.S. firms.
… Indonesia has just filed an antidumping dispute against the EU in the WTO concerning the EU’s imposition of antidumping duties on the import of chemical related products. There are significant tensions in EU – Indonesian trade relations.
… Indonesia is set to buy Chinese interbank bonds to help diversify its foreign reserve holdings. Indonesia is increasingly sophisticated in its global financial dealings.
… Foreign direct investment in Indonesia has increased 30% in the second quarter from a year earlier. This further evidences the  growth potential of Indonesia.
… Petronas Bhd., Malaysia’s state-owned energy company, has offered to acquire the large Canadian energy company Progress Energy Resources. Global mergers and acquisitions are increasingly instigated by multinationals from outside of the U.S. They are increasingly raising U.S. national security concerns.
(This is along with the recent offer by China’s CNOOC Ltd. to buy Canada’s oil and gas company Nexen Inc. This proposed acquisition is one of the biggest overseas expansion efforts by a Chinese company to date. But since Nexen has assets in the United States it plans to ask CFIUS to review this transaction for national security concerns.)
… Malaysia’s high Standard and Poor’s rating was recently affirmed. This further indicates the growth potential of Malaysia.
… Thailand among other ASEAN nations, such as Vietnam, are extremely concerned about the failure of the recent ASEAN ministerial meeting in Cambodia to adopt rules  addressing the law of the sea issues relating to China’s claims in the South China Sea and East China Sea. In particular, the issue relating to the Exclusive Economic Zone (EEZ) is fiercely debated.
(Unfortunately, the continued U.S. failure to ratify the Law of the Sea Convention doesn’t help the U.S. in mediating this dispute.)
… Concern among these three nations remains, of course, with China as to trade issues.
(The recent split decision in the WTO case brought by the United States over China’s restrictions on electronic payments markets / credit cards indicates the continued central role of the WTO in addressing the trade issues in the region.)
(Indeed, the EU has recently opened an antidumping investigation into China’s solar panel industry and the U.S. has recently imposed newer duties on import of Chinese wind turbine towers.)
… All these countries, including the U.S. and China, continue to oppose the EU’s carbon tax on airlines. This is a growing and unnecessary extraterritorial application of EU regulations.
(There is also continuing conflict over the U.S. extraterritorial application of our trade sanction legislation, most recently with China over the expansion of U.S. sanctions against Iran impacting Chinese banks.)
… The economies of these countries are growing, unlike the slowdown in Japan, South Korea and Taiwan.
… Thailand, Malaysia and Indonesia are very concerned about domestic corruption and have launched major programs to combat it.
Entry Sign to Indonesia.
The following are some conclusions:
… Thailand, Malaysia and Indonesia are focused on trade and investment opportunities in the United States.
… They are very concerned about trade issues with China but as well as with the EU and the U.S. They continue to oppose U.S. trade restrictions in the WTO  and  are concerned about potentially new restrictions on foreign direct investment into the United States.
… The WTO remains a primary vehicle for resolving trade issues for them. Indeed, the WTO is holding its next ministerial meeting in Indonesia this fall.
… Foreign corporate strategies can be effectively formulated to increase trade and investment in the United States by understanding the U.S. marketplace and often the disconnect between federal and state policies. (Firms from these countries want to trade more with the U.S. and invest more into the U.S. marketplace.)
… To me, the most surprising observation is their focus on outward trade and investment transactions are viewed as a means of greater domestic economic prosperity.
… China remains a great concern to these countries but the role of the U.S. in addressing this is not clearly understood and has not been fully articulated as part of U.S. foreign policy. Indeed, U.S. policies have not been seen to be very successful even after the Obama administration’s “pivoting” towards Asia.
(Global geopolitical and military issues between the United States and China seem to be a lesser concern to these countries, except for China’s territorial claims in the South China Sea. These countries are more interested in their own economic development during this global economic slowdown.)
… From the U.S. perspective, increasing trade and direct investment from these countries, especially as they move forward in creating a more integrated ASEAN community, seem to be perfectly consistent with the American need to create jobs and economic development within the United States.
In conclusion, the international business and investment firms in Thailand, Malaysia and Indonesia are united in focusing on outward global transactions geared to both the EU and the U.S. It is in our interest to help nurture these cross-border transactions. 
Thailand, Malaysia and Indonesia are working within the rules of the game (WTO). Better U.S. trade policies (less tendency to rely on restrictions in the name of national security and new bilateral trade agreements) and more effective U.S. foreign policy, especially toward the regional issues in Southeast Asia, are needed. 
 This would help them, the international political system, the multilateral trade system, and the U.S. with our own economic development and job creation. It is also in the interest of U.S. foreign policy and national security.
Better trade, better ties.
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U.S. Wins New WTO Case Against China — Electronic Payments Case — Good Domestic Politics, but Good Trade Policy?

Posted on July 16, 2012 by Stuart Malawer

A WTO panel has just ruled in favor of the United States in its action against China for violating the WTO services agreement (GATS) concerning China’s restrictions on electronic payment services (EPS) via credit card transactions.
While this was a mixed decision China was found to violate its trade obligations allowing market access to foreign credit card providers. RMB transactions were monopolized by China and foreign providers were not allowed to participate in them. U.S. – China WTO Case Concerning Electronic Payment Services. WTO News (July 16, 2012).
This is an important case for several reasons:
 …. (i) This case is in the context of a long list of cases the Obama administration has aggressively brought against China in the WTO;
 …. (ii) Increasingly regulatory measures (non-tariff measures) are being utilized by China and other countries to restrict trade;
…. (iii) Voters in the United States are increasingly calling for  stronger measures against China.
During this election season it is clear that anxiety over the economy, globalization, China, and outsourcing of jobs will be driving the presidential election.
Actions against China in the WTO makes good sense for domestic politics but unfortunately hold the potential of overshadowing other significant causes of our distress. Those causes need to be seriously confronted in order to be able to fashion effective public policy remedies — impacting both our domestic economy and our global trade relations.
For this presidential election issues of global trade seem to be at the heart of domestic politics. For better or for worse.
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JP Morgan (Trading Losses), Barclays (LIBOR fixing) and now HSBC (Money-Laundering) — Better Enforcement Needed — You Think?

Posted on July 12, 2012 by Stuart Malawer

What is the recent story with multinational banks? First, JP Morgan (unsupervised trading losses). Next, Barclays (LIBOR fixing). And now  HSBC (money-laundering).

HSBC faces about $1 billion in fines for violating U.S. anti-money laundering controls intended to restrict financing of terrorism and other criminal activities. ING recently agreed to pay $619 million to settle claims for violating U.S. trade sanctions with Cuba and Iran.

U.S. financial regulation reaches not only U.S. financial institutions but also foreign banks impacting the U.S. as well as those relying upon the U.S. financial system.

These inexplicable bank transgressions have all occurred after the 2008 financial crisis and during this long and painful road to national and global economic recovery. These actions surely do not inspire much  confidence in the financial institutions and to a lesser extent in the regulatory oversight here and abroad.

 They seem to be hindering the recovery to a significant extent. How many of us, individuals and corporations, are paying higher interest rates for loans because of the LIBOR debacle.

It is about time we get more serious about managing the very large, global financial institutions. It does not seem that corporate leadership has learned  much over the last few years.

 Better national and foreign regulation is needed, for both economic and national security. Sooner the better.

 

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U.S. files yet another case against China in the WTO — Election year politics and U.S. trade policy issue — Litigation or Negotiation?

Posted on July 5, 2012 by Stuart Malawer

The U.S. has filed yet another case against China in the WTO / DSU. This one concerns China’s antidumping and countervailing duties on automobiles from the U.S. Is this election year politics by the administration?

This case raises again the issue of litigation versus negotiation — which is the best means to remove trade restrictions?  This choice has become a major trade policy issue for the United States. And actions against China in the WTO has become a hot topic in presidential politics today. (It’s also a hot topic in the EU, Brazil and elsewhere.)

President Obama’s more aggressive enforcement of trade obligations has become a hallmark of his trade policy along with a renewed emphasis on export promotion and encouragement of greater foreign direct investment into the United States.

 “U.S. Files Dispute against China.” WTO News (July 5, 2012).

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Airbus and Alabama — New Foreign Investment into States — Should this be a top priority for economic development and jobs in the U.S., You think?

Posted on July 5, 2012 by Stuart Malawer

Airbus has just announced the building of a $600 million plant in Alabama for production of the A320. This will generate 1,000 new jobs. This doesn’t counter sub-contractors and vendors rushing to supply the new facility.
Here’s a few interesting points:
…. Airbus finally realized through its litigation against Boeing in the WTO the lucrative nature of state and county incentives in the U.S.
…. Airbus will be in a better position to compete to sell to American carriers and to compete for U.S. government contracts (mainly military).
… The workforce and right-to-work laws throughout the South are huge competitive advantages. (Didn’t Boeing just relocate one of its plants to the region?)
…. New foreign direct investment and expansion of existing foreign operations is a great multiplier for economic development and job creation. It increases employment by the new facility and even newer ones relocate to supply it, without any state incentives. (Of course, all the new workers coming into the state and the newly employed ones buy everything from cars to homes.)
…. New foreign direct investment avoids the counter-argument against state incentives that they only rob one state to the advantage of another. (The “Beggar-thy-Neighbor counter- argument.)
My conclusion, given the globalized world, the slowdown in Europe, the need for European and Asian multinationals and manufacturers to engage in the largest economy in the world (the U.S.), and the ability to avoid any existing or new U.S. trade restrictions, it make good sense for the federal government and state governments to aggressively target foreign investment as a potential silver bullet to get us out of our mess.
Seems like a good argument.
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Global Banking and Gaming LIBOR – Joint Cross-Border Enforcement, Finally.

Posted on June 29, 2012 by Stuart Malawer

Joint cross-border investigations by the U.S. (Commodity Futures Trading Commission , the U.S. Dept. of Justice) and the U.K. (Serious Fraud Office) have resulted in an agreement by Barclays PLC to pay $453 million in fines for illegally manipulating the inter-bank rate, LIBOR.
These agreements may well lead to additional investigations and private litigation that could billions of dollars. It is also likely that the Bank of England and the Financial Services Authority will become much more involved in this entire process of setting inter-bank rates in the future. Other authorities may well begin investigations such as Germany and the European Union. Civil litigation by a host of other entities may well be filed, by cities, states, private institutions and class actions.
What does this say about global banking, corporate responsibility and regulation (national and international)?
To me it says to me five things.
One, global financial institutions need to be aggressively monitored by national regulators.
Two, greater extraterritorial regulation by the U.S. is fully justified as to this type of illegal activity impacting the U.S. firms and economy.
Three, these financial institutions need more effective board supervision.
Four,  management and board members involved in this should resign immediately.  The bank is going to face huge civil and derivative shareholder lawsuits and possible criminal prosecutions. (Has anyone ever heard of price-fixing — the conspiracy to fix the rate the loans are sold for or adjusted, sometimes higher and, yes, sometimes lower?)
Five, greater global and international mechanisms need to be developed to ensure transparency and legality of global financial transactions.
It is amazing to me that these types of unsavory bank actions continue.  They take place even after the financial crisis of 2008 and while the world economy continues to struggle.
Better public policies need to be developed regulating these institutions and more effective corporate governance needs to be effectuated.
Lying about LIBOR is not a good thing.

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