International Business Law Prof M E Storme 2020

International Business Law Prof. M. E. Storme 2020 -2021

OVERVIEW CH. 1. n Sources of law n Players: States as rule-makers / trade partners / strategic actors / immunities International organisations NGO’s Business as actors, rule-makers, …. -

SOURCES international law v. international sources n n Distinction: Rules of international origin Rules of international public law (ius gentium) International public law distinguished from: - (national) public law (constitutional, administrative, criminal, tax, . . . ) - private law including « international private law »

SOURCES the international legal order (ius gentium) - Classic view: international legal order as legal order between states and/or international organisations / dualism - Nuance 1: private organisations as players; access of private parties to international organisations (incl. courts) - - Nuance 2: direct effect of rules of international law in the internal (national) legal order (if accepted by national constitutional law)

SOURCES sources of international public law n - (Formal) sources of international public law (ius gentium): Treaties Customary law, general principles of law Decisions of international organisations Soft law

SOURCES Treaties (categories) parties: bilateral, multilateral - domain: commerce, war & peace, diplomatic relations, foreigners. . . - legal form: traité-convention (mutual obligations) / traité-loi (introducing legal rules). Some important types: * FNC (friendship navigation commerce); free trade zone or economic union, customs, GATT and other WTO treaties. . . * founding international organisations * investment treaties, state loans * judicial cooperation (e. g. extradition, evidence) * « demarcation » e. g. double taxation avoidance treaties; jurisdiction and enforcement; conflict of law rules * unification of law; minimum standards (esp. human rights) -

SOURCES Treaties: unification of law Domain: - either limited to transnational relationships (international sales, international transport, . . . ) - or also applicable to domestic ones (e. g. bills of exchange) n Sometimes different versions (creating confusion) n How to interpret: - General rules in the Vienna Convention in the Law of Treaties - In many conventions a clause demanding autonomous interpretation (eg art. 7 CISG, see Ch. 4) - usually no institution with the authority to give a uniform interpretation - exceptions: Benelux Court, Court of Justice EU, OHADA Common Court (Abidjan), Caribbean Court of Justice (Caricom), etc. - exchange of information (Lugano Treaty, CLOUT and CISG Digest, …) n

SOURCES Some substantive concepts Standards of treatment of foreign goods/services/persons: - minimum standard or equitable treatment - equivalent ( « national » ) treatment - MFN (most favoured nation) clause – with the possible exception of « preferential treatment » n

Treaties: effects/sanctions n - - Effects in the international legal order: international liability of states international jurisdiction, i. a. : International Court of Justice (established by the UN Charter; jurisdiction in principle only based on consent) Permanent Court of Arbitration (established by the Hague Convention for the Pacific Settlement of International Disputes 1899/1907, 119 members) Possible sanctions: determined by treaty provisions customary law: prohibition of boycott (unless an obligation to boycott is imposed) (in practice business parties may be caught between conflicting policies imposing boycot c. q. prohibiting to take part in it) (rarely) binding dispute settlement, eg DSU in WTO

Treaties: effects n Effects in the domestic / national legal order, before the domestic courts (so-called « direct effect » ). Conditions determined by national constitutional law, usually the following: - either implemented or directly applicable by virtue of another rule (adde: doctrine of (vertical) « direct effect » of EU-Directives) - content of the rule must be sufficiently precise and unconditional to be applied without further measures of implementation (selfexecuting) (NB. This is a question which also arises within a legal order, whether a rule is self-executing or not) - Examples in EU (member states legal order): many rules in EUTreaties; obligations from the OHADA Treaty. Not: GATT ( C-149/96, Portugal v. Council; C-377/02 Van Parys)

SOURCES International customary law Conditions - objective element: (widespread) general practice - opinio iuris: accepted as law Often disputed ! (see e. g. Chapter Investment law) Sometimes extended to « general principles of law » as a new kind of natural law n n - Importance limited in the field of international economic law more important in other fields (rights & immunities of states; war & peace; human rights (aspects of), …)

SOURCES Decisions of internat. organis. Sometimes binding: - Decisions concerning the internal operation of an IO - Binding force provided by treaty (see supra on the conditions of direct effect) - e. g. resolutions under Ch. VII UN Charter (Security council). According to art. 103 UN Charter priority over any other rule (thus even ECHR). - e. g. decisions of EU institutions within their competence (as to direct effect, instruments differ – regulations, directives, decisions, . . . ) n n If not binding: = soft law

SOURCES - « Soft law » n - n Types: non-binding decisions of International Organisations non-binding treaties (gentleman’s agreements) codes of conduct; recommendations; ‘principles’ Still softer: legislative guides, … The ILC (international law commission – expert group of the UN) has prepared many drafts (treaties, articles, principles) – some have been enacted as treaties (Possible) effects: not legally binding; but used for interpretation of binding instruments; political consequences; moral effects; commercial pressure; de lege ferenda (model for future rules), chosen as rules by the parties

SOURCES The national legal order n National law includes international public law (and other international sources) as far as « received » (conditions for reception and possible « direct effect » are determined by national constitutional law) n National public law and private law may have sources of international origin (eg human rights, uniform laws, . . . ) Application of foreign national law in transnational relationships ? Distinction between public law and private law < next slides n

SOURCES Effects of national / foreign public law Public law includes: administrative law, tax law, criminal law, competition law and other economic public law (e. g. import & export regulation, valuta exchange regulation; supervision of financial institutions and markets, expropriation, . . . ) n Starting point: each country applies only its own public law according to its own criteria of applicability - application is usually territorial, sometimes extraterritorial (e. g. taxes, competition, …). In how far accepted by international law ? - demarcation by treaties (e. g. double tax avoiding treaties; criminal jurisdiction, etc. ) n Exceptions (states applying foreign public law): cooperation treaties in matters of public law, e. g. assistance in enforcing criminal sanctions, collecting taxes, extradition, … n

SOURCES The (national) ’international private law’ n Private law = property, contract (incl. labour), tort, restitution, company law, trust, intellectual property, …. n Application of private law in transnational relationships is determined by rules of « IPL » . Basically 2 types of rules of IPL: - conflict rules (national or uniform) - substantive rules of IPL (mostly uniform rules) (often applied only after the conflict rule) See topic 2.

PLAYERS States as rule-makers n - n State as legislator / rulemaker (government): direct (national sources of national law) creating international sources: concluding treaties, etc. ratifying and implementing international sources (incl. uniform law) founding of, and taking part in international organisations State as contracting party to conventions of international public law engaging itself in obligations (e. g. commodity agreements, bilateral or multilateral trade agreements, . . . )

States as trade partners n n n Purpose: contracts to obtain or sell goods an services for use by the government of by its citizens Methods: directly as contracting partner or through state companies or mixed enterprises / joint venture (many gradations) Regulation of the international trade (see WTO law, e. g. public procurement opened to foreign business) State as contracting party: corruption risk; international rules to fight corruption esp. on the active side. I. a. UNCAC (UN Convention against corruption, in force 2005) (since 2017 also Japan ratified), next slide State as contracting party: determine the applicable law(s)

n States as trade partners UNCAC (UN Convention against corruption, in force 2005

States as trade partners - UNCAC Anti-Corruption Policy: UNCAC (UN Convention against corruption, in force 2005) n Ch. 2: preventive measures (i. a. anti-corruption bodies, recruitment principles, codes of conduct for public officials, appropriate system of public procurement, money-laundering prevention, n Ch. 3: criminalization (bribery of officials, diversion of property by public official, trading in influence, abuse of functions, bribery in private sector, laundering of proceeds of crime, obstruction of justice, etc. n Ch. 3: law enforcement: prosecution; freezing seizure and confiscation, compensation for damage, protection of witnesses etc. , overcoming bank secrecy, . . . ) n Ch. 4 international cooperation (extradition, legal assistance, etc. ) n Ch. 5 Asset recovery; . . . n

States as trade partners n - - Application of the UNCAC: i. a. the EU Transparency Directive and Accounting Directive impose disclosure of payments to authorities; 2003 Framework Decision on Combating corruption in the private sector in the US: Foreign Corrupt Practices Act (FCPA) (with a resource Guide issued by the US Dept. Of Justice) with extensive extraterritorial effects in the UK: UK Bribery Act (UKBA) with extensive extraterritorial effects Companies are expected to take their responsibility when doing business with partners that may engage in corrupt behaviour: There is a OECD Convention on Combating Bribery of Foreign Public Officials in International Business 2 Council of Europe Conventions (Civil Law, Criminal Law) The ICC (international chamber of commerce) has a code of “ Rules on Combating Corruption” and proposes a model anti-corruption clause to be inserted in contracts The ISO has adopted ISO 37001 Anti-Bribery Management System Standard (October 2016)

States as trade partners n Anti-Corruption Policy: n Sector-specific initiatives, e. g. EITI (Extractive Industries Transparency Initiative) for oil, gas and mineral resources; n 31 countries are ‘compliant’ with the EITI Standard 2011, 18 more have promised to comply n Assessment of compliance with 2016 standard n New 2019 standard

States as strategic actors: geoeconomcis n Economic instruments such as investment abroad, export finance, and inversely screening and possibly restricting foreign investment, restricting outward flow of data, are used for strategic reasons, such as access to resources, technological advantage, national security in a wide sense …. n Pure market and profit considerations (partially) set aside in favor if such strategic interests

States - sovereignty Starting point of the international public law: - sovereignty also regarding the economic order; - equality of rights under international law, also in relation to (participation in) international trade n Many international treaties provide benefits for « developing countries » (further benefits for LLDC’s, least developed countries) n Disputed « right » to development and « duty » of solidarity (soft law ? ) n n Infra: immunities

States – immunity of jurisdiction n - - Immunity from jurisdiction foreign states before national courts Starting point: immunity, unless waived Many restrictions (national law, treaties). In Europe: European Convention (Co. E) on State Immunities Basel 1972 (only 8 ratifications, incl. Belgium, NL, D, UK) In the UK : British State Immunities Act (SIA) 1976/1978 In the US: FSIA (Foreign Sovereign Immunities Act 1976, am. 2008, now 28 US Code ch. 97) Attempt at harmonisation: UN Convention on Jurisdictional immunities of states and their property 2004 (not in force yet, 22 ratifications, but 30 required). But cited by the ECt. HR (23 March 2010, Kudak/Lithuania (labour case) and 29 June 2011 Sabeh El Leil) as customary law and recognised as customary law in eg Belgian case law) In general not contrary to art. 6 ECHR if there is no immunity before their own domestic courts (see ECt. HR in Mc. Elhinney 21 Nov 2011, in Fogarty, in Al-Adsani, in Jones/UK 2 June 2014) (courts of canon law within the Roman -catholic church also considered as domestic courts) or if there is another reasonable way to protect one’s interests, which is normally the case if there is an arbitration clause (Belgian cass. 27 Sep 2018 i. c. NATO)

States - immunity of jurisdiction Immunity from jurisdiction foreign states n Rule and exceptions - In the USA - FSIA: with exceptions in § 1605 ff, mainly: claims based upon commercial activity in the US, tort committed in the US, expropriation in violation of international law, terrorism (§ 1605 B added in 2016) - UN Convention has exceptions for i. a. Commercial contracts (art. 10), Labour contracts (but not for members of diplomatic missions, etc. . ) (art. 11), IP rights art. 14) etc. - Overall Result: distinguish acta iure imperii / acta iure gestionis (doctrine originally developed by Italian and Belgian courts, already Belgian Cass. 11 June 1903); not every ’act of state’ is immune. - Jurisdictional immunity also covers foreign torts (ICJ 3 feb 2012 Germany v. Italy on acts committed by German soldiers in Italy in WW II: no jurisdiction of Italian courts*), unless the tort is unrelated to the political order (Cass. 11 June 1903) (comp. Art. 12 UN Convention: no immunity for personal injury or damage to property by author acting in a foreign country) - Immunity covers also the « Holy See » (as a sovereign) n * But the Italian Constitutional Court refuses to abide and gives absolute priority to jurisdictional protection over state immunity: Corte Costituzionale 238/2014.

States - immunity of jurisdiction Immunity from jurisdiction foreign states n Separate immunity for diplomatic missions (Vienna Diplomacy Convention art. 22 and 25 + general principle ne impediatur legatio) n - Waiver, i. e. acceptance of jurisdiction, mostly not before domestic courts of foreign state, but only for: international courts arbitration , see Ch. 8 and 12. - Form & Effect of waiver: art. 7 UN Convention n -

States - enforcement immunity n Immunity from enforcement foreign states n Starting point: immunity n Waiver of immunity of jurisdiction is not yet a waiver of immunity of enforcement against state property - Result: immunity for assets used by the public service (s. eg art. 55 New York Arbitration Convention) Cass. B. set immunity of international organisations aside in 3 cases because of lack of effective remedy (art. 13 ECHR). Idem Cass. Fr. - - Argentina debt cases, see next slides

States – sovereign debt - - - When issuing sovereign debt, often waiver of jurisdictional immunity; sometimes counterbalanced by collective action clauses Enforcement remains complex In the Argentina debt cases, a US Court allowed post-judgment discovery of Argentinian assets in the US held by third parties (banks). Compare the ‘ alter ego’ doctrine assimilating certain entities to the state itself (eg possibly a central bank) Belgian Court of Cass. (22 Nov. 2012) did not set aside immunity of the Argentinian embassy accounts; idem French Court of Cass. 28 Sep 2011 (but reasoning changed in a more recent case Cass. 13 May 2015 Commisimpex/Congo and then changed again in Cass. (F) 10 Jan 2018, Commisimpex following a new statute requiring a ‘specific’ waiver) States are not subject to insolvency proceedings. But there may be a need for Sovereign debt restructuring processes (see UN Resolution 15 Sep 2015)

International organisations n n Universal organisations (in principle open for all states) GATT, now WTO (1994), with a General Council and separate Councils for GATT, GATS, TRIPS and a Dispute Settlement Body UNO, with General Assembly, Security council, Eco. Soc Uncitral (international trade law): treaties and model laws Unctad (trade & development): granting developing countries access to the world economy ILO: labour standards Unidroit: create uniform law (mostly private law) Hague conference: unification of IPL Restricted organisations, i. a. OECD, OPEC, G 10+>G 20 (with Basel Committee) etc.

International organisations n n n - Free trade organisations Types: free trade zone / customs union / common market / monetary union Examples: EU EFTA, EEA NAFTA, CAFTA (Central America), Mercosur, Caricom ASEAN / SAARC (SAFTA) Possibly CETA (Canada - Europe) COMESA (East & Southern Africa), …

PLAYERS - NGO’s n Private organisations: not subjects of international public law, but governed by national law (although sometimes involved in the activities of I. O. ’s) Some influential NGO’s relevant for international business law: - ICC: for standard contracts and uniform rules; Court of arbitration (organising arbitral tribunals) - International Accounting Standards Board (IASB), setting the IFRS (International Financial Reporting Standards) - World economic forum Davos - Comité maritime international: maritime transport conventions - Institut de droit international: tries to « codify » international public law, …. . - ICANN = California corporation (internet corporation for assigned names and numbers), with a Governmental advisory committee (111 countries) - SSO’s = Standard Setting Organisations (or SDO, Standard Development Organisations), creating technical standards; see Ch. 7 n

PLAYERS - BUSINESS n - n Legal forms: depends on national law natural persons / different forms of legal personality / unincorporated organisations Rights and obligations of business: Will mostly be determined by the applicable national law (see Ch. 2 for the determination of the applicable law) sometimes directly protected by international law, see esp. Investment protection in Ch. 8. Sometimes able to create their own rules and make them nearly selfexecuting. Next slide International soft law: UN Human Rights Council Guiding Principles on Business and Human Rights 2011 Subject to insolvency proceedings (see Ch. 11)

PLAYERS - BUSINESS n - Business ars rule-makers (making private law rules) within a single relationship, business designs contractual rules on the basis of freedom of contract business customs as source of private law (but different conceptions of customs and usages in different legal systems; see also Ch. 4 and 5) Further reaching influence: ‘private governance’ in supply chains, not merely regulating rights and obligations but organising ‘governance’ of the supply chain - Another development in a digitalised economy is the influence of algorithms creating decisions, either precontractually (determining price, other conditions, etc… in an automated way) or for the enforcement of a contract (”smart contracts”, often using blockchain technology) - See e. g. certain private payments systems in Ch. 9 n States try to get grip over supply chains, either by regulating behaviour directly or by introducing « governance » rules (e. g. obliging to negotiate collectively with stahkeholders)

PLAYERS - BUSINESS Business organisations have many general obligations, incl. - - prohibition of unfair commercial practices (some of them are discussed in Ch. 4 /5); rules on advertising and marketing (see also ICC Code of Advertising and Marketing Communication) prohibition of agreements and practices restricting competition prohibition of corruption; in some countries even an obligation to prevent bribery (UK Bribery Act art. 7) obligation of financial information (accounts, …) obligation of non-financial information (big enterprises): EU Directive 2013/34 (as amended Dir 2014/95) related transparency obligations eg in UK duty for big companies to report on payment practices (since 2017) obligations to pay taxes etc. . . and provide relevant information obligations from the applicable labour law environmental protection obligations, public safety obligations (eg EU Reg. 2001/95 on Product Safety), … respect IP rights data protection obligations (respect privacy) now in the EU Reg. 2016/679 liability for unsafe products put on the market (product liability) universal service obligations for operators of telecom, electricity, postal services, etc.

PLAYERS - BUSINESS n Liabilities related to the supply chain: n Contractual liability: Business may be contractually liable for acts of their suppliers See chapters on contract law (4. sales, 5. general contract law) n Collective agreements between downstream business and trade unions or similar groups, under which business engages in obligations of inspection and control in relation to their upstream suppliers. – E. g. 2018 ‘Accord on Fire and Building Safety in Bangladesh’, between garment E. g. companies sourcing in Bangladesh and trade unions (with choice of Dutch law and arbitration in The Hague according to the Uncitral rules under supervision of the Permanent Court of Arbitration) – S. also the development of « social audits » : auditors engaged to certify the conformity of working conditions etc. with the code of conduct (but such auditors can also be negligent: see the audit of Rana Plaza by Bureau Veritas and of Ali Enterprises by RINA).

PLAYERS - BUSINESS n Liabilities related to the supply chain: Extracontractual liability: - Tendency to impose upon business duties of care in relation to earlier chains in the supply chain (what happens upstream) (environmental and human rights concerns), e. g. : - EU Reg. 995/2010 on obligations of operators who place timber and timber products on the market - OECD Due diligence Guidelines for Responsible Supply Chain of Minerals, on EU level EU Reg. 2017/821 laying down supply chain due diligence obligations for level EU Reg. 2017/821 responsible sourcing of minerals originating in conflict-affected and high-risk areas, in the US S. 1522 of the Dodd-Frank Act 2010 - OECD Due Diligence Guide for responsible supply chains in the garment and footwear sector 2017. But liability was not accepted by US & canadian courts in Rana Plaza litigation. In Germany in KIK textilien, judgment in 1 st instance has judged the claim anyway prescribed. - OECD-FAO Guidance on Responsible Agricultural Supply Chains 2016 - E. g. Efforts to prevent ‘slavery’ and trafficking required by the UK Modern Slavery Act 2015, California Transparency in Supply Chains Act 2010; Dutch child labour duty of care Act 2019; French Duty of Vigilance Act 2017 - E. g. efforts required by Anti-Corruption laws: in some countries even an obligation to prevent bribery (UK Bribery Act art. 7) - IUU Regulation (Reg. 1005/2008 on Illegal, Unreported and Unregulated Fishing)

PLAYERS - BUSINESS n Liabilities related to the supply chain: n Extracontractual liability for downstream activities: Possible duty to control also later chains in the supply chain: - E. g. Lanham Act in the USA (15 US § 1051): trademark owner must supervise the quality of goods and services produced under its trademark by third parties - Otherwise downstream liability has to do with risks that one has created oneself (product liability - products that can be unsafely used by clients, etc. . -, environmental liability, …) - - - Possible setting aside of the corporate veil: making mother companies liable for daughter companies. This also happens when torts are imputed to a mother company, e. g. under Belgian law when they have an intrinsic relationship with the realisation of the purpose of the mother company or its interests, or have in concreto been committed on the account of the mother company (art. 5 Criminal Code). For questions of jurisdiction, see Ch. XI; applicable law Ch. II.