Abstract
There are two developments the combination of which has led to new challenges to international law: the growth of economic regulations and globalisation. While the modern economies are associated with the proliferation of regulatory laws which are rooted in the national economic and social policies, the loosening of the national borders and globalisation has led to conflicts of economic regulations. Such developments have posed various risks of violations of national economic regulations by the economic actors and could lead to tension among national states which have jurisdiction over multinational enterprises in one way or another. The private parties involved in such a situation could somehow avoid such risks by their own initiatives and contractual arrangements but in most cases such measures do now work and the conflict has to be resolved through the cooperation between the countries involved. The paper investigates the potentials for public international law to come up with rules, principles and norms to resolve such complex disputes which touch up issues such as non-intervention, equality of sovereign states, state immunity, self-determination and other principles of international law. Unlike certain area of international law such as law of sea where a few factors involved and the disputes could be resolved by relying on simple facts and rules, the application of national economic regulations extraterritorially creates tensions among the nation states in respect of the demarcation of national jurisdictions. It is here that public international faces a new challenges and need to come up with new approaches such a balancing of interests of the states involved in the conflicts.
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Notes
For an articulate defence of a liberal international order, see Petersmann (1997, pp. 1–25).
See Bhagwati (1993, pp. 219–234), Bello and Footer (1995, p. 338), Dillon (1995, pp. 350–355). See also Young (1995, pp. 389–409), Agreement between the Government of the United States of America and the Commission of the European Communities Regarding the Application of their Competition Laws (1991), Canada-United States: Memorandum of Understanding as to Notification, Consultation and Co-operation with Respect to the Application of National Antitrust Laws (1984), Canada-United States: Memorandum of Understanding on Administration and Enforcement of Securities Laws (1988), OCED's Council Recommendation Concerning Co-operation Between Member Countries on Restrictive Business Practices Affecting International Trade (1984).
As of 1st of September 2011, a total of 426 disputes have been submitted to WTO Dispute Settlement Body: almost 30 cases per annum on average. See: http://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm.
Jurisdiction in this context is closely connected to the concept of sovereignty but it should not be equated with sovereignty as, in fact, international jurisdiction is an attribute or an ingredient of sovereignty which refers to particular aspects of the general legal competence of States. See Mann (1990, p. 421).
For more discussion as to the role of international law in the development of national law, see Steinhardt (1990, p. 1103).
“Prescriptive” has been preferred to “legislative” in that it include rules and regulations as well as decisions. See Higgins (1984, p. 94).
For detailed rules on adjudicative jurisdiction as incorporated into major international instruments, see: the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (1968), the Lugano Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (1988), the EC Council Regulation No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of Judgments in civil and commercial matters (2001), Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), (2007, pp. 40–49), the Hague Convention on the Law Applicable to Agency (1978), the Hague Convention on Choice of Court Agreement (2005), the Hague Convention on the Law Applicable to Certain Rights in Respect of Security (2006).
This phenomenon is largely a result of the emergence of multinational enterprises which conduct their economic activities across political borders. See generally, Murray (1981); for legal aspects of multinationals activities, see Tindall (1975, chapters: 5) (Legal Structure of Multinational Enterprise), 6 (Ownership and Control), 7 (Antitrust), 8 (Labour), 9 (Taxation), 10 (Disclosure); See also Muchlinski (2007, Ch. 4).
It could be argued that it would be better to disregard the place of incorporation and consider a corporation to be a national of the State with which it has a close and permanent connection. This could be determined through a balancing of connecting factors such as residence, principal place of business and shareholders' ownership and control and would accord with the effective nationality test adopted in the Nottenbohm case. See Nottenbohm case (1955, p. 4), see also Castel (1988, pp. 18–19).
Third Restatement of the Law of the Foreign Relations Law of the United States (1987), § 402 and following comment at p. 239.
For cases and materials in this respect see Lowe (1983, pp. 1–4, 24–28, 30, 33–34, 52–54, 56–60).
International jurisdictional conflicts often do not arise until a State attempts to enforce a determination of its courts. Yet the principles governing prescriptive jurisdiction determine which State may attach legal consequences to a specific conduct. Thus, effectiveness of the prescriptive jurisdiction would ultimately lead to international conflicts.
Akehurst (1972-3, p. 181); F A Mann believed that there is no room for distinguishing between criminal, public and private laws. He argued that this distinction is not tenable as the theory of jurisdiction in international law is pervasive in a very wide sense so that it imposes legal obligations on the States both in private and public law aspects. In the same way that public international law contains principles for resolving jurisdictional conflicts, it also imposes on States the obligation to have a system of private international law based on reasonable contact and minimum justice in applying lex fori laws or foreign laws. See Mann (1990, p. 4); see also Weintraub (1992, p. 1818).
PCIJ Report (1927, pp. 20, 23). In that case, the Turkish court had convicted the officer of the watch on a French ship that had collided with a Turkish ship on the high seas of the charge of involuntary manslaughter, causing the death of Turkish nationals on board of the Turkish ship. The Permanent Court of International Justice held that Turkey was entitled to exercise its criminal jurisdiction on the basis that the effects of the offence were produced on the Turkish vessel. The PCIJ held that the territoriality of criminal law was not an absolute principle of international law and by no means coincided with territorial sovereignty.
The United States v. Aluminium Company of America (1945) 148 F. 2d 416.
In 1982 The Sherman Act and the Federal trade Commission Act were amended by the Foreign Trade Antitrust Improvements Act (15 U.S.C. Sections 6a and 45 (a)(3)) which provides with respect to the Sherman Act that this Act:
“[S]hall not apply to conduct involving trade and commerce (other than import trade and import commerce) with foreign nations unless
(1) such conduct has a direct, substantial, and reasonably foreseeable effect
(A) on trade or export commerce with foreign nations, or import trade or import commerce with foreign nations…”.
See also cases such as Timberlance Lumber Co. v. Bank of America (1977).
Hartford Fire Insurance Co. v. California (1993). In that case the London based reinsures were accused of infringing the Sherman Act, as they had agreed with a number of United States operators in the insurance industry to boycott general liability insurers that used a certain type of insurance coverage forms. Although this arrangement took place outside the United States, the court held that it was meant to produce and it did in fact produce a substantial effect in the United States; Ibid. at 796.
United States v. Nippon Paper (1997, p. 2).
The Court in Nippon Paper found the plea for comity weaker than in Hartford Fire, because in Hartford Fire, the challenged conduct was not unlawful in England. In this case the alleged conduct was unlawful under both Japanese and American law. See United States v. Nippon Paper (1997, p. 8).
Case 48/69, Imperial Chemical Industries Ltd v. Commission of the European Community, (1972) ECR 619.
Re Wood Pulp Cartel: A. Ahlstron v. EC Commission decision(1988) 4 CMLR 901,
An example of such conflict is the Uranium case (rem Uranium Antitrust litigation 1980) where the target States strongly resisted assertion of US jurisdiction. In that case, the US Government closed the US market to foreign uranium producers. The foreign governments responded to this closure of approximately 70 % of the world market by encouraging and/or requiring the formation of a cartel of non-American producers to limit and allocate production and sales outside the United States. The subsequent US Government investigation and private treble damage litigation outraged the foreign governments because the cartel was created as a result of the anti-competitive conduct of the US Government. These American actions were seen as a challenge to the right of the foreign government to determine national policies on the exploitation of natural resource and national defence; see also Laker Airways Co. v. Sabena (1984). The United States expressed similar concerns over the proceeding against IBM by the Commission of The European Community (60/81, [1981] E.C.R. 2639). Another example is the U.S Government’s concern over the European Commission’s objections to the Boeing/McDonnell–Douglas merger, which was made public by the President Clinton. See “Clinton Steps into Boeing Deal Row”, Financial Times, July 18, 1997; Fiebig (1998), Sharma (1995).
This point noted by a special advisor to a Japanese company, cited in Sobel (1997, p. 12).
See Hillman (1992, p. 333). Over the past few years, securities regulators have made substantial progress in developing co-operative relationships to reduce the value of intentional borders as barriers to the detection and prosecution of securities fraud. See Mann et al. (1992). Disclosure of information and greater transparency as to the structure, activities and policies of the enterprises are key elements for the regulations of securities related issues in a global economy. See Multinational Enterprises and Disclosure of Information, Clarification of OECD Guidelines for Multinational Enterprises, Organisation for Economic Co-operation and Development, Paris (1988, p. 9).
http://www.reuters.com/article/2009/02/27/idUS193520+27-Feb-2009+BW20090227. Last visited: 07/12/2011.
Although the G20 action plan for dealing with the Credit Crunch crises contains some reference to action and activities of international regulatory bodies, it still mainly relies on national bodies to review their financial “regulatory system to ensure it is compatible with a modern and increasingly globalized financial system. See Declaration on Strengthening the Financial System—London, 2 April 2009.
For a different view in this respect see Kellan (1991, pp. 420–429).
In Schoenbaum v. Firstbrook (1969), the issue was insider trading carried out in Canada between two Canadian companies to the detriment of one shareholder; an American citizen and resident. The Court of Appeal held that the usual presumption against extraterritorial application of legislation did not apply when extraterritorial application of the regulation was necessary to protect American investors. Another case that relies on the effects test by a US Court is Tamari v. Bache & Co. (Lebanon) SAL (1984) where it was argued that when a transaction, which is initiated abroad, involves trading on the US exchanges, it is just like a domestic transaction and, therefore, the US law should be applied. For the test conduct see Leasco Data Processing Equipment Corps v. Kernan (1972), Alfadda v. Fenn (1991) 935 F. 2d 475; see also Reuveni (2010, p. 1089), Fleischer (1984, pp. 107–112), Johnson (1980–1981, p. 890).
For a full report of these views see Mann (1992, pp. 397–443).
Article VIII Section 2(b) of IMF Agreement: Exchange contracts which involve the currency of any member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement shall be unenforceable in the territories of any member. In addition, members may, by mutual accord, co-operate in measures for the purpose of making the exchange control regulations of either member more effective, provided that such measures and regulations are consistent with this Agreement.” (The IMF Agreement 1944).
See Jackson (1997, p. 74). He indicates that as a result of seven rounds of multilateral trade negotiation, and of other activity, “many tariffs on non-primary goods imported into the industrialized contracting party nations have been so reduced that many economists and businessmen feel that they are no longer a meaningful barrier to imports.” Ibid.
Article 2(4) of the United Nations Charter reads as “4. All members shall refrain in their international relations from the threat of use of force against the territorial integrity or political indigence of any state, or in any other manner inconsistent with Purposes of United Nations”.
As a matter of general customary international law International Court of Justice in the case of Nicaragua v. United States in 1989 held that the US action could not be condemned. “A State is not bound to continue particular trade relations longer that it see fit to do so, in the absence of a treaty commitment or other specific obligation…” Nicaragua v. United States of America, (1986, p. 138, para. 276), see also Neff (1988, p. 115), Lillich (1977).
Lowe (1984, p. 64). The British stand in this respect is that: “… [T]he United Kingdom does not accept that the jurisdiction of the United States can legitimately extend to the control of activities of companies in other countries in respect of their export manufactured in those countries incorporating parts or technology of United States origin, once such goods or technology have been sold from the United States. Goods have no national identity which overrides changes of the ownership of those goods”. British memorandum reprinted in Lowe (1983, p. 214).
See The Cuban Liberty and Democratic Solidarity Act/Helms-Burton Act of 1996 (Cuba) 22 U.S.C. Sections 6093, 6096 and 6092 (1996); Iran-Libya Sanctions Act of 1996, Pub.L. 104-172- August 5 1996, 110 State. 1541, in Leigh (1984, pp. 47–58), see also A Lowenfeld (1996), Lowe (1997), for an analysis addressing the roots and justification of these economic sanctions see Williamson (1999).
Joelson (2006, p. 70).
2271/96 (1996 O.J. (L 309) 39; 36 ILM 125 (1997).
For example under the GATT, member States are allowed to impose certain restrictions on free trade when some national security reasons exists but a broad interpretation of such a discretion can lead to the collapse of GATT/WTO. See Giardina (1998, p. 219).
The more recent cases have been decided in the context of balancing interests. See Timberlane Lumber Co v. Bank of America, N.T & S.A. (1976), Timberlane Lumber Co. v. Bank of America National Trust & Savings ASS'n (1983), and Laker Airways Ltd. v. Sabena, Belgian World Airlines (1984), see also Mannington Mills Inc. v. Congoleum Corp. (1979).
In determining whether State A should exercise jurisdiction over an activity significantly linked to State B, one important question is whether B has a system of values and priorities different from those of State A that would be impaired by the application of the law of A. Therefore, conflict is not just about commands: it is also about interests, values and competing priorities. All of these need to be taken into account in arriving at a rational allocation of jurisdiction in a world of nation-States. See Lowenfeld (1995, p. 51).
In the Wood pulp, the Court maintained a, maybe slightly artificial, link with the territoriality principle by requiring implementation in the European Community.
The frequent references to the comity may indicate that this concept is itself a guiding principle of international law which may be used to resolve disputes. But in practice it has little value in this respect; see Neale and Stephens (1988, p. 15).
See United States v. Vetco, Inc. (1981). This was a case in which the Internal Revenue Service sought documents located in Switzerland pertinent to business activity of two Victo’s Swiss subsidiaries; and the United States v. Bank of Nova Scota, (1982). In that case, the Court of Appeals ordered disclosure because the United States’ interest in disclosure was greater than the Bahamian interest in preventing it.
Laker Airways Co. v. Sabena (1984).
See some similar points regarding the “rule of reason” in jurisdictional conflicts in Alford (1993, p. 213).
For critics on the balancing of interest process see also Mann (1990, pp. 9, 45, 52, 83, 89–90).
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Bagheri, M., Jahromi, M.J.G. Globalization and extraterritorial application of economic regulation: crisis in international law and balancing interests. Eur J Law Econ 41, 393–429 (2016). https://doi.org/10.1007/s10657-012-9351-2
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DOI: https://doi.org/10.1007/s10657-012-9351-2