International Law Archives - Page 5 of 5

Europe Just Cost Women a Bunch of Money on Their Car Insurance By Switching to Gender Equality

In honor of International Women’s Day – we at the National Law Review want to point out that every rainbow also has it’s rain as pointed out today by the Risk Management Monitor :

Males have by and large run this planet since Neanderthals were drawing on walls in caves. So when we talk about improving gender equality, we are generally talking about things that are immediately beneficial to women. A recent ruling by the European Court of Justice, however, is likely going to cost female drivers some money.

The court has found that tying insurance rates to gender goes against Europe’s Fundamental Charter of Rights. So come December 2012, insurers will no longer be able to do it. The actuarial science regarding male and female drivers, particularly those under 25 years old, couldn’t be clearer. Young men get into more and more expensive accidents than your women. Still, while the numbers don’t lie, I have always wondered why that fact makes it OK to discriminate.

Apparently the court agreed.

Claire Wilkinson of III’s Terms + Conditions blog explains the likely fallout.

In the past, insurers relied on a 2004 directive that recognized the strength of the evidence for gender-based rates. The average claim for an 18-year-old male in the U.K. totals £4,400 ($7,160), vs. £2,700 ($4,390) for an 18-year-old female.

The net effect: Women will be subsidizing men for auto insurance. One British insurer estimated that women under 25 years could pay 25% more per year – perhaps £400 ($650).

The ruling affects other types of insurance, too. Women live longer, so they traditionally paid lower rates for life insurance. (The insurer could earn more investment income off the premium while waiting for the woman’s demise.) So women will see life insurance rates rise, perhaps by 20%.

This issue is obviously a thorny one.

On the one hand, equality is good. On the other, the insurance industry just lost a major, effective way to underwrite risks and properly price rates. Claire brings up the notion of credit ratings being used as a rate-setting metric as well, another thing that always struck me as irrelevant to car-driving ability. Again, the numbers there show some pretty definitive trends but, logically, the connection seems like one inappropriate to the policies that drivers are purchasing.

But what do I know?

I take the subway to work and have never even owned a car.

UPDATE: Canadian Underwriter ran a good piece on this development that includes the following insights about the marketplace uncertainty the decision has created.

The court’s decision will create some uncertainty in the market during the transitional period, says Noleen John, a legal consultant for international legal practice Norton Rose LLP.

“Insurers will from December 2012 need to apply unisex rates,” said John. “This transitional period is less than that recommended by the Advocate General and means that insurers will need to review their policies and practices as soon as possible.

“It also seems likely, in view of the length of the transitional period, that insurers may need to use uncertainty premiums until they have sufficient data in relation to the carrying on of business on this new basis. This could result in higher premiums or lower benefits for certain policyholders (female motorists and male annuitants).”

The decision also may create some uncertainty about the future of other established actuarial factors used to establish insurance premiums.

“There is going to be uncertainty in the insurance market for some time as a result of this decision,” says Ashley Prebble, insurance partner atNorton Rose LLP. “It is likely that the decision will require the European Commission to clarify the position with regards to other potential areas of discrimination, particularly age and disability.”

We shall see.

ANALYSIS — U.S. Interests at Risk in Six Mideast Nations

Very comprehensive article about the U.S.’ Middle East interests posted yesterday at the National Law Review by Barbara Slavin writing for the Center for Public Integrity:

Political unrest and violence in the Mideast are unsettling to American interests in the region in the short term. Credit: Kevin Frayer/The Associated Press

For decades, politics in most of the Middle East has been frozen like a fossil in amber. Monarchies and pseudo-republics denied their people meaningful participation and representation. Aging presidents-for-life clung to power, grooming sons to replace them. Well-connected elites amassed wealth while burgeoning young populations struggled to find jobs.

The amber has shattered. Mideast dictators have fallen to people power, not U.S.-led regime change. Now the critical question is who will replace these leaders?

The end of this era could be a net-positive for the United States if more democratic governments take hold. In the short term, though, these developments bring with them potential threats to U.S. interests: safeguarding oil supplies, protecting Israel, fighting terrorism and containing the current Iranian regime. The biggest impact may be regional dynamics that curb Israel from attacking foes in Gaza, Lebanon and Iran.

With the proviso that this fateful year in the Middle East is just beginning, what follows are snapshots of six pivotal nations whose post-revolution politics and policies will impact U.S. national security:

Egypt

The most populous Arab nation, Egypt has vied with Saudi Arabia as the premier Arab ally of the United States. Once the trend-setter in Arab politics, culture and diplomacy, Egypt stagnated during Hosni Mubarak’s 30-year reign. With Mubarak’s resignation Feb. 11, a “supreme defense council” led by Defense Minister Mohamed Hussein Tantawi is leading the transition. The military has promised to submit a new constitution to a referendum and then hold elections for a new parliament and president.

Mubarak’s successor is likely to maintain the 1979 peace treaty with Israel—even if the Muslim Brotherhood, the oldest Islamic political group in the modern Middle East, gains a major share in the next government. As a nation that relies on tourism, Egypt cannot afford to renounce peace with Israel or to impose Islamic law. The Egyptian military will not want to jeopardize its supply of U.S. military hardware. However, a more democratic Egypt will not be silent if Israel attacks Gaza again as it did in 2008-2009, or Lebanon in 2006. Egypt is likely to lift a blockade on Gaza imposed after Hamas seized the enclave in 2007, making it easier for Hamas to smuggle weapons via the Sinai desert. Egypt may also restore diplomatic relations with Iran, which the U.S. will see as a blow to its containment strategy. Already, the interim government permitted an aging Iranian warship and supply vessel to transit the Suez Canal and enter the Mediterranean—the first such crossing since the Iranian revolution.

On counterterrorism, the Egyptian government is less likely to make mass arrests or to accept, via rendition, terror suspects caught elsewhere by the United States. Bruce Riedel, a former senior National Security Council official and CIA officer dealing with the Middle East, said that a less repressive Egyptian government will benefit U.S. interests in the long term by diminishing the pool of recruits for al-Qaida. Still, the transition may be dicey. “While we may lose on the tactical level, we may gain on the strategic level,” he said.

Saudi Arabia

Saudi Arabia is the region’s great economic prize, sitting on top of one fifth of the world’s known oil reserves. King Abdullah, who has ruled officially since 2005 and de facto since 1995, is progressive in Saudi terms and has introduced a few modest reforms. Still, the upheaval nearby was sufficient for the king to rush home from Morocco, where he had been recuperating after back surgery. Reaching into his government’s deep pockets, he promised $37 billion in new government handouts to civil servants and students.

Gregory Gause, a Saudi expert at the University of Vermont, noted that major flooding in Jeddah in January which killed 10 people and caused severe property damage did not provoke mass protests. “If there was ever a time when people would take to the streets, this would have been it,” Gause said. The monarchy benefits, he said, from the fact that its opposition is divided between liberals and religious conservatives and so far remains a largely online phenomena However, last month a group of more than 100 Saudi intellectuals signed a petition for additional reforms, including an elected advisory council. Thousands of Saudis have signed onto Facebook and Twitter accounts calling for mass protests on March 11, the ninth anniversary of a fire in Mecca that killed 15 girls who were prevented from leaving a burning school without their Islamic cloaks.

Saudi security forces appear to have suppressed the main recent threat to the regime from al-Qaida, whose founder was Saudi-born. U.S. concerns focus on Saudi succession and preventing disruptions to Saudi oil production. Abdullah is 87 and in poor health; his half brother and crown prince, Sultan, is also an octogenarian and ailing. Third in line is the slightly younger Prince Nayef, the interior minister, who is not popular. The kingdom’s youth resent the stipends doled out to 7,000 Saudi princes and the foreign workers who take both high-paying and menial jobs. Saudi Arabia’s minority Shiite population, which predominates in the Eastern Province where most Saudi oil is produced, faces discrimination and has protested in the past. The Saudi leadership fears contagion from Bahrain, the scene of unprecedented political tumult in recent weeks. The two countries are connected by a 16-mile causeway.

Bahrain

Bahrain is a major concern for U.S. policymakers because of its sectarian divide and location. Not only is it linked to Saudi Arabia’s Eastern Province, but it is home to the U.S. Fifth Fleet, which guards the Persian Gulf and its precious oil traffic. The fleet also is a buffer between Iran and the region’s fragile sheikhdoms and emirates. From that base, some 3,000 U.S. military officers oversee 30 ships and 30,000 sailors.

Bahrain’s ruling al-Khalifa family badly mishandled protests that broke out Feb. 14, allowing masses of demonstrators to assemble in a roundabout called Pearl Square and then sending in troops to fire on sleeping protesters. The show of force drew worldwide condemnation and the regime has since made a series of concessions, freeing political prisoners, calling for dialogue, dismissing a few cabinet ministers, allowing a once-banned opposition leader to return from exile and permitting demonstrators to refill Pearl Square.

These gestures have not appeased the protesters. Shiite Muslims make up about 70 percent of the island state’s half million citizens and are demanding parliamentary reforms and an end to discrimination in employment, education and housing. Calls to overturn the Sunni Khalifas—or at least restore a more democratic, single-chamber parliament, which briefly existed in the 1970s—are growing. Saudi analyst Gregory Gause said King Hamad is “caught between his population and his family” which holds virtually all key government offices, including that of prime minister; Hamad’s uncle has been in that position since Bahrain’s independence from Britain 40 years ago. Given Bahrain’s sectarian divide and Iran’s proximity, Saudi Arabia and the U.S. worry about Iranian encroachment although so far Bahraini protesters have emphasized their nationalism by wrapping themselves literally in Bahraini flags.

Iran

Iranian officials from Supreme Leader Ali Khamenei to President Mahmoud Ahmadinejad and government-appointed leaders of Friday prayers have been crowing that Arab demonstrators are following a script written 32 years ago in Iran. Certainly, Tehran has enjoyed seeing the toppling of secular, U.S.-backed dictators but there is no indication that the protesters were motivated by a desire for Iranian-style theocracy. In fact, the uprisings have been marked by the absence of slogans such as “Islam is the Solution” and that old Iranian favorite, “Death to America.” On Feb. 14 and Feb. 20, protests boomeranged back to Iran as the Green Movement that erupted following disputed June 2009 presidential elections returned to the streets of major Iranian cities. Tehran in recent days has resembled an armed camp as more demonstrations erupt.

Mehdi Khalaji, an Iran analyst at The Washington Institute for Near East Policy, said that if the Arab revolts had taken place before Iran’s post-election crisis, “Iran could have used it in the framework of its propaganda.” Now, Khalaji said, such claims look hypocritical, even laughable. In the short term, Iran may benefit from the distraction of Western policymakers. Since Jan.1, the regime has executed 120 prisoners, according to the International Campaign for Human Rights in Iran, giving Iran the dubious distinction of executing more people per capita than any other nation. While global media attention was focused on Libya, Iranian authorities on Feb. 24 arrested two opposition leaders and their wives.

Disruption of oil production in Libya and general uncertainty in the region have boosted oil prices and Iran’s revenues. Prospects for an attack on Iran’s nuclear program by either Israel or the United States have decreased as those countries focus on the instability among once-trusted Arab allies.

However, in the longer term, the Iranian regime faces major challenges. New heroes are emerging in the Arab world, supplanting Ahmadinejad, Khamenei and Lebanese protégé Hassan Nasrallah, the leader of Hezbollah. A more democratic Egypt may earn it a bigger diplomatic role, diminishing Iranian influence in Iraq, Lebanon and the Persian Gulf. In the interim, Turkey—a prosperous democratic state with diplomatic ties to all its neighbors—is a far more attractive regional model than Iran. The Iranian government must also content with a young, Internet-savvy generation, international economic sanctions, and cyber-warfare attacks on its nuclear program.

Israel

Israel can take comfort in the fact that for once, protests in the Arab world have had nothing to do with Israel, the Palestinians or Lebanon. Nevertheless, Israelis worry that successor governments in Egypt and elsewhere may be less accommodating to their actions against Arabs. A future Egyptian president will not “sit on the sidelines” if Israel decides to attack Gaza or Lebanon again, Riedel said. “The Egyptians are not going to be as passive. This is going to be the major source of friction between Cairo and Washington.”

There is also the question of what impact the unrest will have on Palestinian governments in both the West Bank and Gaza. Palestinian President Mahmoud Abbas has promised new elections and efforts to reunify with Hamas, which seized control of Gaza in 2007. Successors to Abbas and to Palestinian Prime Minister Salam Fayyad may be less willing and capable of reaching a bargain with Israel.

The Obama administration said it remains determined to push for an Israeli-Palestinian settlement. Dennis Ross, the top White House official in charge of Middle East policy, recently said that the lesson Israel should draw from the fall of Mubarak is “the danger of getting stuck in an unsustainable status quo.” The Palestinians’ higher birth rate, the need to give new Arab leaders a stake in peace, and the increasingly sophisticated arsenals of Hamas and Hezbollah all argue for reaching a settlement with the Palestinians sooner rather than later, Ross said. However, Israeli Prime Minister Benjamin Netanyahu, already risk averse when it comes to making concessions for peace, is likely to become even more so as he waits to see what kind of government emerges in Egypt and whether any other pro-Western Arab dominos—such as Jordan—will fall. U.S. domestic politics may make it less likely that President Obama will pressure Netanyahu to give up more land for peace. One possibility is that Netanyahu might instead explore a settlement with Syria that could undercut Iranian influence and the possibility of a new Israeli confrontation with Hezbollah.

Libya

Libya is important to the United States because it is a major oil supplier to Europe, and like Egypt and Saudi Arabia, has both spawned and confronted numerous members of al-Qaida. A major U.S. concern is that Islamic fundamentalists will fill the vacuum left by Moammar Gadhafi’s brutal regime.

During his 41-year rule, Gadhafi prevented the creation of political parties. He staged phony “people’s congresses” while dictating policy behind the scenes and parceling out plum positions and business opportunities to members of his family and tribe. Whenever he sensed a threat, he reshuffled officials, leading one Libyan a decade ago to compare his countrymen to “mice in a bag” that Gadhafi would shake periodically to pre-empt opposition from organizing. Despite their lack of experience in politics or civil society institutions, Libyans in the eastern part of the country first liberated from Gadhafi’s rule are already putting together provisional governments. A pool of talented Libyans including returning exiles should be able to form a credible new administration. However, the transition is Libya has already been bloodier than in neighboring countries and there is a prospect of civil warfare between tribes and regions. Al-Qaida would likely take advantage of such chaos. Still, it is hard to imagine that Gadhafi’s successors will be worse stewards of Libyan interests or more menacing to the world at large than he has been.

Barbara Slavin has reported on the Middle East for more than three decades, and is the author of the 2007 book Bitter Friends, Bosom Enemies: Iran, the US and the Twisted Path to Confrontation.

IRS Announces Second Special Voluntary Disclosure Initiative for Taxpayers With Undisclosed Offshore Accounts

Posted this week at the National Law Review by Keith R. Gercken of Sheppard Mullin – updated information on 2011’s tax amnesty program for off shore accounts:

The Internal Revenue Service announced on February 8, 2011 the creation of a second special voluntary disclosure initiative for U.S. taxpayers with undisclosed foreign bank and other financial accounts. This new program is a follow-on to the IRS’ original voluntary disclosure initiative that closed on October 15, 2009. The 2009 program reportedly attracted some 15,000 voluntary disclosures by taxpayers with previously undisclosed offshore accounts, and has been viewed within the government as a success in getting taxpayers “back into the U.S. tax system” by offering them the ability to avoid or significantly mitigate various the criminal and civil penalties that would otherwise have potentially applied had their failure to disclose been discovered by the IRS on audit.

As background, U.S. persons are generally required to file an annual information statement with the IRS disclosing any beneficial interest in, or signatory authority over, bank or other financial accounts located outside the U.S. This information statement is filed on Form TD F 90-22.1, and is generally referred to as an “FBAR” (Foreign Bank Account Report). From an accountholder perspective the failure to file FBARs as required can potentially lead to a large array of both civil and criminal penalties – including monetary penalties of up to 50% of the unreported account balance (per year) and criminal penalties if the failure to file was willful.

The new 2011 program represents a second chance for taxpayers who did not take advantage of the original 2009 voluntary disclosure program. While the penalty structure offered by the IRS this time around is slightly less favorable than under the original 2009 program, it still offers taxpayers an opportunity to significantly reduce their penalty exposure. Highlights of the new 2011 program include the following:

The program covers the years 2003 through 2010.
There is an August 31, 2011 deadline to submit all required information to the IRS, including delinquent or corrected FBARs and amended income tax returns reporting any previously unreported income.
In lieu of the normal 50% per year penalty, a participating taxpayer must pay a 25% penalty on the highest aggregate account balance in the undisclosed offshore account during the period covered by the voluntary disclosure. In limited cases, this 25% penalty may be reduced to 12.5% or 5%.
Participating taxpayers must pay all delinquent taxes relating to any unreported offshore income, together with applicable interest and a 20% accuracy-related penalty.
Participating taxpayers must pay any other applicable civil penalties associated with a failure to file returns or failure to pay taxes during the period covered by the voluntary disclosure.
The program includes a generally favorable alternative resolution procedure to enable participating taxpayers to calculate their tax liability associated with investments that may have been made in “passive foreign investment companies” (e.g., foreign mutual funds) through their undisclosed offshore accounts.
Participating taxpayers must fully cooperate with the IRS in providing information on offshore financial accounts, institutions and facilitators.
The IRS will not initiate criminal prosecution of taxpayers who fully comply with the terms of the program.

The IRS remains focused on the potential evasion of U.S. income tax that is facilitated by hiding funds in offshore accounts, and has been increasingly aggressive in pursuing U.S. taxpayers who have failed to properly file FBARs and pay taxes on offshore income. As offshore financial secrecy continues to erode, the IRS has become increasingly able to obtain information relating to U.S. taxpayers directly from foreign banks. As a result, taxpayers with undisclosed offshore accounts that did not previously take advantage of the 2009 voluntary disclosure program may wish to consider the potential advantages of participating in this new 2011 program.

Mexico’s Unified Secured Transactions Registry Offers New Opportunities for Secured Lending

A big thank you to recent featured bloggers at the National Law Review from Strasburger & Price LLP. John E. Rogers wrote a helpful post about commercial lending changes in Mexico.

Mexican companies have historically encountered difficulties in attracting secured lending from U.S. and other foreign banks, mainly because of concerns as to the reliability of Mexican laws governing secured transactions and of its systems for filing and perfecting security interests (garantías reales) in personal (movable) property or goods (bienes muebles). Mexican banks have shared these concerns and have tended to rely on real property collateral in most of their secured lending. As a result, many Mexican companies whose primary assets are inventory, receivables and equipment have lacked access to adequate financing on competitive terms.

In order to encourage lenders to finance the operations of Mexican borrowers, Mexico has enacted significant reforms of its secured transactions laws. Most recently, dramatic steps have been taken to improve its public registry system to make it easier to search for existing liens on a debtor’s property and to perfect new security interests.

Mexican Bankruptcy Considerations

The importance to creditors of taking collateral security from Mexican debtors has arguably been increased by certain difficulties in the application of the Mexican Bankruptcy Law (the Ley de Concursos Mercantiles or LCM) enacted in 2000 and subsequently amended.¹ As a practical matter, the LCM does not ensure the “cram down” of secured creditors to the extent possible under the U.S. Bankruptcy Code, which allows a debtor, under a reorganization plan, to pay a secured creditor less than its full claim if it is under-collateralized. The secured claim can be “crammed down” to the value of the collateral by paying under the plan, over time, the value of the collateral, with the remainder of the claim being treated as unsecured.²

The LCM provides that a secured creditor may proceed with the enforcement of its collateral security if the reorganization plan does not provide for full payment of the secured debt, or the payment of the value of the collateral.³ On the surface, the latter option suggests the possibility of a cram down, but the absence of clear valuation procedures and criteria in the LCM, combined with the fact that bankruptcy judges often have limited experience with the LCM and few precedents to rely upon, means that it is more difficult than it would be under the U.S. Bankruptcy Code to prevent the secured creditor from proceeding (or threatening to proceed) with an action to enforce its collateral. Depending on the importance of the collateral to the future operation of the debtor, any such enforcement action could in effect jeopardize the success of the reorganization plan.

This gives the secured creditor significant negotiating leverage in a restructuring under the LCM, and has implications not only for secured bank lending but also for Mexican corporate bond financings, as to which bond investors may have a strong argument based on the LCM to insist on collateral security when the bonds are issued. If an issuer must provide such collateral, for example to support a high-yield bond offering, it may be less costly for the issuer to provide collateral consisting of personal property than to mortgage its real property, partly because of high mortgage recording costs and the related notarial fees. In order to obtain the advantages of treatment as a secured creditor under the LCM, having personal property collateral is as effective as having real property collateral of comparable value.

Like the U.S. Before the UCC

Mexico has a bewildering variety of personal property security interests, including among others the pledge (prenda), the industrial mortgage (hipoteca industrial) and the specialized security interests tied to the crédito refaccionario and the crédito de habilitación y avío, that brings to mind the personal property collateral devices (chattel mortgages, trust receipts etc.) that were commonly used in the U.S. prior to the adoption of the Uniform Commercial Code. Although Mexico has had the advantage of a single Commercial Code (and other federal secured transactions laws) that apply to the entire country, rather than a system of separate State laws as in the U.S., each of the 32 States and the Federal District has its own Civil Code establishing a Public Registry system for real property deeds and mortgages (each such registry is a Registro Público de la Propiedad) and, although personal property security filings are governed by the federal Commercial Code, they have previously been required to be made in the commercial registry (Registro Público de Comercio or “RPC”), which is normally managed by a unit of the related State or municipal government, in the place of the debtor’s domicile. Some of these locally managed commercial registries are less reliable than others, and significant delays are common in searching for existing liens and filing new security interests on collateral of companies domiciled in remote locations.

The Nonpossessory Pledge and the Guaranty Trust

On the substantive side, Mexico has made significant progress since 2000 by amending the Mexican Commercial Code and the General Law of Credit Instruments and Transactions (the Ley General de Títulos y Operaciones de Crédito or LGTOC) to permit personal property security interests to be created more easily on a “floating lien” basis. A new type of nonpossessory pledge called theprenda sin transmisión de posesión allows a debtor to pledge all of its inventory and receivables, for example, generically described (rather than described by reference to specific items), to a secured party without requiring that possession of the collateral be transferred to the secured party. This pledge can permit the debtor to sell the pledged collateral in the ordinary course of business without obtaining a case-by-case release from the secured party, and can automatically subject newly acquired property to the pledge without any further filing, which effectively results in a floating lien. A similar effect can be achieved through a guaranty trust (fideicomiso de garantía) with respect to the same or similar types of property, whereby title to the collateral is transferred to a Mexican trustee (typically a Mexican bank).⁴ Although these new devices resemble a security interest created in the U.S. under Article 9 of the UCC, lenders have remained reluctant to significantly expand their secured lending activities in Mexico because of ongoing concerns about their ability to perfect these security interests against third parties through the public registry system.

UNCITRAL and the OAS Encourage Registry Reforms

Recently, in an attempt to provide guidance for emerging market countries like Mexico that wish to improve access by borrowers to secured lending, the United Nations Commission on International Trade Law (UNCITRAL) has promoted reforms of the bankruptcy laws and secured transactions laws in such countries. Its 2008 Legislative Guide on Secured Transactions indicated the importance of a country having a “registry in which information about the potential existence of security rights in movable assets may be made public.”⁵ In 2010, UNCITRAL decided to expand its work in this field by preparing a “model registry regulation,” which is still in the process of preparation.

The previous efforts of the Organization of American States (OAS) to adopt a Model Inter-American Law on Secured Transactions (the “Model Law”)⁶ appear to have influenced Mexico in its adoption of the nonpossessory pledge concept. The OAS has also been tackling the registry issue; in October 2009, it held its Seventh Inter-American Conference on Private International Law, which approved Model Registry Regulations to “provide the legal foundation for implementing and operating the registry regime contemplated by the Model Law.”⁷ Among other things, the Model Registry Regulations contemplate the adoption of electronic filing systems and acknowledge that most of their features were recommended in UNCITRAL’s 2008 Guide and included in the registry systems recently developed in some Latin American countries, including Mexico, as well as in the U.S. (the UCC), Canada (the Personal Property Security Act) and some European countries.

Mexico’s 2009 Commercial Code Amendments and Creation of the RUG

Mexico has been receptive to the objectives reflected by the UNCITRAL and OAS efforts. Not only did Mexico enact secured transactions law reforms in 2000 and subsequent years to reflect many of the changes contemplated by the OAS’ Model Law, but Mexico’s initiatives with respect to public registry reforms have actually preceded the formal adoption of model rules by UNCITRAL and the OAS. In August 2009, a few months prior to the adoption of the OAS Model Registry Regulations, the Mexican Congress approved amendments to the federal Commercial Code that provide for the establishment of a Unified (or Sole) Registry of Movable Property Collateral (the Registro Único de Garantías Mobiliarias or “RUG”).⁸ The new Article 32 bis of the Code provides for the RUG (pronounced “roog”) to be a centralized registry for all types of security interests granted in favor of any creditor that carries out commercial activities (a comerciante) in personal property. The RUG will be a section of the PRC under the supervision of the Ministry of Economy (Secretaría de Economía), in which all filings are to be carried out electronically, through the RUG website, www.rug.gob.mx.

The stated Congressional purpose of the RUG is to strengthen the system for personal property secured transactions “as an effective tool for access to credit.” Its main functions are to create a mechanism that allows public disclosure of security interests created on personal property and to establish priority rules for secured creditors. Filings through the RUG have immediate effect, without requiring any approval by any authority. Such filings can be made by financial institutions, public officials, public notaries (notarios públicos) or brokers (corredores públicos) and others authorized by the Ministry of Economy. Under Article 32 bis 4 of the amended Commercial Code, a debtor is generally deemed to have authorized any secured party creditor that is acomerciante to file evidence of the applicable security interest in the RUG. Article 32 bis 7 allows “any interested party” to request the issuance of a certification as to the filings that have been made in the RUG with respect to any debtor.

New Registry Regulations

On September 23, 2010, an executive decree was issued by Mexican President Felipe Calderón implementing the 2009 Commercial Code amendments by amending the Regulations governing the PRC to provide specifically for the inclusion of the RUG as a section of the overall PRC.⁹ The amendments clarify how the RUG will operate through the electronic system called the Integrated System of Registry Procedures (Sistema Integral de Gestión Registral or SIGER) and the procedures to be followed for the use of the RUG by those who wish to (i) search it for the existence of existing security interests and (ii) perfect their own security interests as against third parties by filing notices. Anyone who registers with the RUG can initiate a search, but filings of security interests directly by an institutional creditor can only be done if the creditor entity has arranged to utilize an electronic signature for this purpose which satisfies the technical requirements contemplated by the Commercial Code¹⁰. Otherwise the security interest must by filed on the creditor’s behalf by someone else authorized under the RUG to do so.

The provisions of the amended Regulations (the “Amended Registry Regulations”) impose certain formalities which do not seem to be contemplated by the new Article 32 bis of the Commercial Code and may contravene the policy guidelines recommended by the OAS and UNCITRAL. For example, Article 10 of the Amended Registry Regulations provides for the RUG registrar or officer to verify that a filing has been properly made “in accordance with applicable legal and regulatory provisions,” which would seem to prevent the filing from becoming immediate and automatic, as provided in Article 32 bis 4 of the amended Commercial Code. Also, Article 10 bis of the Amended Registry Regulations specify that filings can only occur through a public authenticating officer (fedatario), i.e. a public notary (notario público) or broker (corredor público), although Article 30 bis seems to permit others, including financial entities, to make filings without using a fedatario. As a practical matter, until changes are made in Article 10 bis to allow filings to be made otherwise, it seems advisable to use a fedatario to carry out the filing. A number of law firms in Mexico employ fedatarios, so this should not be a significant impediment to the filing process or impose a significant additional cost. The use of a fedatario has the advantage of avoiding the requirement under Article 10 that the RUG registrar or officer verify the propriety of the filing; under Article 10 bis a filing by a fedatario has immediate effect.

Preventive Filings

Prior to the closing of a secured lending transaction, the proposed lender may wish to have the comfort that there will be no last-minute filings by other lenders of security interests that would have priority (based on time of filing) over any security interest to be filed to secure the transaction in favor of the proposed lender. To obtain such comfort, Articles 32 bis 5 of the Commercial Code amendments and 33 bis of the Amended Registry Regulations permit the proposed lender to make a filing prior to the scheduled closing, which will have the effect of preventing any other lender from making a filing that would have priority over the later definitive filing by the proposed lender of its own security interest. If the closing does not take place, the debtor need not seek removal of the preventive filing from the records of the RUG, because such filing would automatically cease to be effective after the passage of a specified period, normally two weeks.

Information to be Provided in Filings through the RUG

Article 33 Bis 2 of the Amended Registry Regulations provides that the information that must be provided in the filing of the security interest will be (i) the name of the debtor or debtors granting the security interest, (ii) the name of the creditor or secured party, (iii) the type of security device utilized to create the security interest, (iv) the personal property securing the relevant obligations, (v) the secured obligations, (vi) the term or time frame during which the filing will be effective, and (vii) anything else contemplated by Article 33 of such regulations, i.e. anything else that may be required by the forms to be used in order to effect such filings, which are to be specified in a publication in the official Gazette (Diario Oficial) of the Republic.

Using the RUG

As contemplated by the Amended Registry Regulations, to provide further guidance on using the RUG, the Ministry of Economy published a User’s Guide (Guía de Usuario) in Spanish providing additional guidance as to how the search and filing processes will operate.¹¹ The User’s Guide shows how (i) a user can become registered with the RUG, (ii) searches can be performed, (iii) search certificates can be obtained, (iv) secured party creditors (whether organized or resident within or outside of Mexico) can be registered and (v) the creditor’s representatives can be registered in order to be entitled to submit filings on behalf of the creditor.

Mexican creditors can be registered online by including their Mexican tax ID numbers in the creditor information they provide. In the case of foreign creditors not having such numbers, the registration may be carried out at one of the designated offices of the Ministry or through a fedatario. Foreign creditors that wish to avoid delays at the closing of a secured loan may wish to become pre-registered before the closing. For cases involving multiple creditors, such as a syndicated loan, there is a separate procedure for entering the names of the additional creditors. As for the debtor, the filing form contemplated by the User’s Guide mandates that it be filed electronically in such a way that the debtor’s name is accompanied by an indication of whether the debtor is an individual or an entity and his or its nationality, registration file (folio) number and taxpayer ID or CURP number. A debtor that is an individual may be registered by a fedatario at the time of the filing of the security interest, but a debtor that is a company or other entity will have to have been registered in the PRC prior to the time of filing.

According to the User’s Guide, the filing of a security interest is to be effected by making entries in the electronic equivalent of a document akin to a UCC financing statement, which should specify

(i) the name and address of the person requesting the registration of the security interest,
(ii) a description of the type of property subject to the security interest, such as “machinery and equipment” (the applicable type is to be selected from alternatives that appear on the screen),
(iii) the type of security document under which the security interest was created, i.e. whether it was a nonpossessory pledge, guaranty trust etc. (again, the selection is from the types indicated on the screen),
(iv) the date of the relevant security agreement,
(v) the maximum amount secured, specifying the applicable currency,
(vi) a more detailed description of the property subject to the security interest,
(vii) a description of the public deed issued before the fedatario which formalized the security agreement,
(viii) a description of the agreement under which the secured obligation arose,
(ix) optionally, any terms and conditions established by the documents, and
(x) the period of time for which the filing is to remain effective.

The User’s Guide provides examples of entries that are to be made in the online “financing statement,” and indicates how the electronic signature is to be applied to the document in order to affect its filing.

The User’s Guide includes similar instructions for related procedures, such as amendments, assignments, renewals or reductions of the effective term of the filing, corrections of errors, cancellations and “annotations” (anotaciones). The annotations might include information on any enforcement action with respect to the security interest, and would be made pursuant to instructions from a court or other authority. An annotation might result from a debtor challenging the propriety of the filing.

Effect of the Reforms: Better than the UCC?

The RUG is now the exclusive method in Mexico for perfecting security interests in inventory, receivables, equipment and many other types of personal property, whether created through a possessory or nonpossessory pledge, guaranty trust or other device, superseding all of the local public registries. However, security interests previously filed in the local registries will continue to be effective, so lenders must undertake searches as to any debtor in the locally-managed public registry responsible for such debtor’s domicile until such time as the previously filed security interests are no longer effective (for example, because they have been released or the related debt has been repaid), or otherwise satisfy themselves that no such filings have occurred (for example, by obtaining representations and warranties from the debtor to this effect). Similar transition issues were encountered in the U.S. during the implementation of the UCC and its associated filing systems.

Two features are present in the Mexican situation which did not exist in the case of the adoption of the UCC. First, the RUG will be the sole registry in Mexico for filing security interests in personal property, unlike the separate filing systems in the 50 States of the U.S. and in the District of Columbia, and many local filing places such as the offices of County Clerks. Thus, the sometimes thorny question in the U.S. of where to file will not apply in Mexico. Secondly, the RUG is exclusively electronic, as opposed to the recordation systems in the U.S., which initially relied entirely on paper filings and have only recently began to transition to electronic systems, gradually, on a State by State basis.

It will still be necessary to comply with the relevant requirements for creating security interests, which in Mexico often requires that the security agreement or pledge agreement be formalized by the preparation by afedatario of a formal deed (escritura). Instead of being recorded in the locally managed public registry, such deed should now be recorded in the RUG. Filings as to some types of collateral, such as vessels and aircraft, will continue to be made in specialized registries. Also, some of the enforcement remedies available under the UCC are not available under Mexican law, and the enforcement process in Mexico is likely to be more time-consuming than it is in the U.S.

But with those exceptions, and despite some uncertainty created by the amended Regulations, the establishment of the RUG represents a huge step forward by Mexico in making secured lending an attractive option for borrowers and lenders alike. Even a lender that remains skeptical about the enforcement of security interests in Mexico may be persuaded that it is worth perfecting security interests pursuant to a filing in the RUG in order to obtain the important practical advantages under the Mexican bankruptcy law of being a secured lender.

^*The authors gratefully acknowledge the collaboration of Fernando Barrita of Strasburger & Forastieri and the helpful comments of Steve Roberts and John Dorsey in Austin and of Professor Alejandro Garro of Columbia Law School in New York. The authors are, however, solely responsible for the contents of this article.

¹ Published in the Diario Oficial de la Federación (the “D.O.F.”) on May 12, 2000. Amendments to the LCM were published in the D.O.F. on December 27, 2007.

² 11 U.S.C. § 1129(b)(2)(A).

³ See LCM Articles 158, 160.

⁴ Published in the D.O.F. on May 23, 2000, with amendments published in the D.O.F. on June 13, 2003.

⁵ Legislative Guide on Secured Transactions of the United Nations Commission on International Trade Law, GA Res. 63/121, UN GAOR, 63rd Sess., 17 December 2008.

⁶ Adopted on February 8, 2002, by the Sixth Inter-American Specialized Conference on Private International Law (known as “CIDIP-VI”, for its Spanish acronym) [CIDIP-VI, Final Act 3(f), OEA/Ser.K/XXI.6/ CIDIP-VI/doc.24/02 rev.3 (March 5, 2002)].

⁷ Approved by the Seventh Inter-American Specialized Conference on Private International Law (CIDIP-VII)
at its second plenary session of October 9, 2009); quoted language appears in the Introduction.

⁸ Published in the D.O.F. on August 27, 2009.

⁹ Published in the D.O.F. on September 23, 2010.

¹⁰ Art. 11 of the Amended Registry Regulations.

¹¹ See http://www.rug.gob.mx/Rug/resources/pdf/
guia%20de%20usuario/Manual%20de%20Usuario%20RUG.pdf.

Crisis in Egypt: The Economical Repercussions

Two articles posted yesterday at the National Law Review address two key issues related Egypt to which impact the U.S. – Trade and the amount of foreign aid the U.S. sends to Egypt. The Risk Management Monitor highlights some of the business issues impacted by the turmoil:

The crisis in Egypt can soon turn from a political uprising to an economic catastrophe and humanitarian emergency if things don’t return to normal operation soon.

Shipping

In the port of Alexandria, among others, army tanks stand guard to ensure no one enters the area. Good plan, except that hardly anything is going out, including exports that are crucial to the country’s economy. Though reports claim that some ports are closed, the Suez Canal is apparently open to shipping traffic. Shipping companies, however, are hesitant to enter the area. If the Suez Canal should close, it would not only spell disaster for a country already in serious turmoil, but it would also mean a worldwide shipping disruption.

Production Plants

Nissan: the automaker suspended operations Sunday until February 3rd.
Unilever: the multinational corporation’s offices in Cairo have been closed since January 28th.
General Motors: the car maker’s plant near Cairo has not produced vehicles since January 28th with production estimated to resume Friday, February 4th.
Lafarge SA: the a French building materials company has temporarily stopped operations due to the situation. The company has six production sites in Egypt, six quarries and 62 ready-mix plants and employs 8,172 Egyptian workers.
Heineken NV: the Dutch brewer has halted operations and told its 2,040 employees in Egypt to stay home.

Tourism

The nation’s tourism sector has taken a huge hit that is expected to last for some time.

Foreigners are struggling to flee the country, tour and cruise companies are seeing cancellations and a growing list of Western and Arab nations are sending in flights to evacuate their nationals. The tourism sector is vital for Egypt — and is among one of the four top sources of foreign revenue for the country.

Tourism accounts for 5 to 6% of the country’s GDP, while Cairo International Airport is the second largest airport in Africa, after Johannesburg, handling 15 million tourists per year.

Call Centers and Online Retail

Egypt is home to numerous call centers and IT outsourcing companies. But little can be done when the government cuts internet access throughout the entire nation. Microsoft is just one of the 120 companies in Cairo’s Smart Village, an area built for major multinational and local, high-tech companies.

Asked about the situation in Egypt, Microsoft said in a written response to a query that it “is constantly assessing the impact of the unrest and Internet connection issues on our properties and services. What limited service the company as a whole provides to and through the region, mainly call-center service, has been largely distributed to other locations.”

Hewlett-Packard is another company with operations in the Smart Village. They have asked their employees there to stay home. Though President Obama has urged the Egyptian government to restore internet access, little has changed for fear that protesters will use social networks to organize further riots. For a country that has taken pride in its growing outsourcing and call center business, the suspension of internet access is taking a huge toll.

All of the above have affected financial markets worldwide. And with a “million man march” planned for tomorrow in the Arab world’s most populous nation, little is expected to change in the near future.

The Crackdown on Employment of Illegal Immigrants Spreads to California

Featured Guest Bloggers this week at the National Law Review are from Greenberg Traurig LLP. Mahsa Aliaskari and Matthew B. Hayes have written one of the most comprehensive articles we’ve come accross reagrding E-Verify – especially as it applies in California.

Murrieta and Temecula Join Growing List of Southern California Cities Requiring Employers to Use E-Verify

In 2007, Arizona became the first state to pass legislation requiring employers to use the voluntary E-Verify¹ program to confirm the employment eligibility of new hires. Since then, Arizona has been the focal point for publicity and legal challenges on attempts by states and localities to crack down on the employment of illegal immigrants. However, Arizona is not the only place where we are seeing state and local action.

Behind the scenes, several Southern California cities have quietly followed Arizona’s lead enacting similar laws mandating use of E-Verify. On July 13, 2010, Temecula joined the growing list of Southern California cities requiring employers to use E-Verify as a condition for maintaining a business license, and on December 20, 2010, Murrieta’s city council moved forward with its plans to institute a similar ordinance. While the State of California has not jumped on the bandwagon, many of its localities are taking action and increasing the burden on companies doing business not only across state lines but across city and county lines.

Given the expansion of immigration laws at the state and local level, it is imperative that employers keep abreast of developments in this area and ensure that their hiring practices are legally compliant in each of the locations they employ workers.

The Trend Toward Making Use of E-Verify Mandatory

The growing trend of states and localities enacting their own legislation to police immigration related-activity has its roots in frustration over the federal government’s inability to effectively address illegal immigration and enact comprehensive immigration reform. While the frustration may be justified, the federal government did not make use of E-Verify mandatory for many reasons. A January of 2010 report² conducted by Westat researchers found that E-Verify is not immune from identity theft. According to the report 4.1% of those passing E-Verify are not truly authorized workers. More specifically, 54% of unauthorized workers who were run through E-Verify were inaccurately identified as workauthorized. The findings appear to support claims of various groups that have criticized EVerify as being particularly vulnerable to identity theft and fraud. In addition, while improving, there continues to be false positives — while the rate is low there are still U.S. citizens and workauthorized foreign nationals who are denied employment through E-Verify.

What is more alarming though is the opportunity for intentional or unintentional abuse and misuse of E-Verify by employers who violate program rules. There have been reports of employers restricting work assignments, delaying job training, reducing pay or simply not hiring non-U.S. citizens based on database errors. In March of 2010, USCIS posted a fact sheet outlining its agreement and plans to share information with the Office of Special Council³ (OSC) at the Department of Justice. The fact sheet notes that the purpose of the Memorandum of Agreement (MOA) “is to establish a streamlined process for referring E-Verify matters falling within the other’s jurisdiction. OSC will receive referrals of potential discrimination that come to USCIS; in turn, USCIS will receive from OSC referrals of potential employer misuse of E-Verify that does not fall within DOJ’s enforcement arena.” Potential misuse of the program is cause for concern for all employers and a discrimination suit waiting in the shadows for employers who are not well versed in the proper use of the program. These problems and pitfalls should serve as a warning to states and localities considering and instituting E-Verify mandates.

Regardless of the federal government’s reasons for not mandating the use of the program, many states and localities continue to march forward with their own E-Verify requirements. Employers failing to comply with these E-Verify laws can face substantial penalties, including monetary fines, preclusion from contracting with federal, state and local governments, and suspension or revocation of their business licenses.

While Arizona has been at the forefront of this trend since enacting the Legal Arizona Workers Act, which went into effect on January 1, 2008,⁴ Arizona simply paved the way for others. Several other states have since passed or adopted similar legislation. For instance, in 2008 Mississippi passed legislation requiring that all private employers participate in E-Verify, with a phase-in period beginning in 2008 and full participation by 2011. On March 31, 2010, Utah adopted the Private Employer Verification Act that requires employers with 15 or more employees to use E-Verify or another verification system approved by the Department of Homeland Security to confirm the employment eligibility of hew hires. The South Carolina Illegal Immigration Reform Act, passed in 2008, requires all employers to use E-Verify to confirm the eligibility of new hires, or in the alternative, hire only workers who possess or qualify to obtain a South Carolina driver’s license or identification card. The South Carolina law goes even further by authorizing the state to scrutinize a businesses’ hiring records and cite or fine employers found to have unauthorized workers on their payrolls.

California Localities Join in With Their Own E-Verify Mandates

Currently, California does not have any statewide laws mandating the use of E-Verify. However, in the last few years, several cities in Southern California passed local ordinances requiring the use of E-Verify for some or all businesses. These cities and their respective E-Verify requirements include:

Mission Viejo: Effective July 1, 2007, the city and employers with city contracts must verify the eligibility of new employees through E-Verify.
Palmdale: Effective July 1, 2008, to be eligible for contracts with the city exceeding $50,000, a contractor must be enrolled in E-Verify.
Lancaster: Effective December 31, 2009, all employers in the city must use E-Verify to confirm eligibility of new hires. Failure to comply with this requirement can result in business license suspension.
Temecula: Effective January 1, 2011, all employers in the city must use E-Verify to confirm the eligibility of new hires as a condition of receiving or maintaining a business license.
Murrieta: The City Council is expected to approve an ordinance mandating that all locally operated enterprises use E-Verify. Code enforcement officers would have authority to confirm compliance with EVerify. Enforcement tools will include fines and license revocation.

Constitutional Challenge to State and Local Laws Requiring Use of E-Verify

The constitutionality of state and local governments requiring employers to use E-Verify to confirm employment eligibility is presently unresolved. On December 8, 2010, the United States Supreme Court heard arguments on Chamber of Commerce v. Candelaria, No. 09-115. The Supreme Court’s decision is expected in Spring 2011 and will likely determine the fate of similar laws recently enacted throughout several Southern California cities. The lawsuit challenges the constitutionality of the Legal Arizona Workers Act (LAWA).

Arizona’s law increased the level of state action by taking advantage of an exception to the preemption clause of the Immigration Reform & Control Act of 1986 (IRCA) relating to licensing laws. The law’s bold move in authorizing Arizona state courts to suspend or revoke business licenses provides the state with an enforcement mechanism not used previously. One of the primary issues in that case is whether the preemption clause applies and if state and local governments — as opposed to only the federal government — can require participation in the E-Verify program. Those challenging Arizona’s E-Verify requirement argue that immigration related legislation falls within the purview of the federal government, consequently laws like that enacted in Arizona conflict with, and are therefore preempted by, federal laws. In this instance referring to federal laws which contemplate that, except in limited circumstances, the use of E-Verify by employers would be voluntary. Prior to the Supreme Court granting review of the case, the Ninth Circuit upheld Arizona’s legislation, finding that it was not preempted by federal law. In light of the decision and arguments upholding the LAWA, it will be interesting to see the outcome of the pending Supreme Court case.

What These Developments Mean for California Employers

Pending the Supreme Court’s decision on the Arizona law, the number of state and local governments enacting laws mandating use of E-Verify is expected to continue and increase. In light of the evolving nature of immigration compliance and the intricacies of E-Verify and the Memorandum of Understanding that employers must agree to and sign when enrolling in E-Verify, it is critical that employers remain apprised of relevant developments, understand the E-Verify laws applicable in each state and city where they employ workers, and ensure their hiring practices are legally compliant. If your company has not yet enrolled in E-Verify and it is being considered either because of legal mandate or as a best practice, it is critical that an internal review of the existing workforce and Form I-9s be conducted first and with experienced counsel. The “culture of compliance” is the theme of the Obama administration and it is spreading to cities and states across the nation. A few proactive steps will go a long way in limiting liabilities and exposure.

Resources

Promoting a Culture of Compliance — Best Practices for your Business

Establish a comprehensive immigration compliance policy
Conduct in-house audits of Form I-9 documents and company policies, as well as E-Verify if applicable
Establish policies, protocols and training for employment verification
Diligently verify the identity of job applicants to ensure that they “are who they say they are”
Consider use of E-Verify after consultation with experienced immigration compliance counsel
Establish protocols for addressing Social Security No-Match letters
Establish and maintain safeguards against the use of the I-9 process for unlawful discrimination
Create a protocol for immigration compliance related to contractors and subcontractors

ICE utilizes various tools to target employers, particularly those involved with vital infrastructure and national security, as well as the usual suspects – unofficially “targeted” industries – food service, textile, meat/poultry plants and constructions. Employers must take steps now to ensure full compliance or face serious consequences. Actions taken before a government-initiated audit or investigation generally help mitigate damages, reduce exposure and save the company both time and money in the long-run.

¹E-Verify is an Internet-based system operated by the Department of Homeland Security in partnership with the Social Security Administration. Its purpose is to enable participating employers to electronically verify the employment eligibility of their workforce. Under the system, employers fill out an online form with the information provided by new hires on the Employment Eligibility Verification Form (commonly referred to as the I-9 Form). That information is then cross-referenced with an assortment of government databases to confirm the worker’s employment eligibility.

²The evaluation was conducted by Westat, a Rockville, Maryland-based social science research firm under contract to U.S. Citizenship and Immigration Services (USCIS). The evaluation was managed by the USCIS Office of Policy and Strategy, independent of the E-Verify program office, which is run by the USCIS Verification Division.

³OSC is responsible for enforcing the anti-discrimination provisions of the INA. The antidiscrimination provisions include violations involving: (1) citizenship status discrimination, (2) national origin discrimination, (3) unfair documentary practices during the employment eligibility verification process (document abuse) and (4) retaliation.

⁴That legislation requires all employers in Arizona to use E-Verify to confirm the employment eligibility of new hires. It penalizes employers who knowingly or intentionally hire illegal immigrants by suspending or revoking their business licenses.

European Parliament Adopts Resolution on Corporate Social Responsibility

Update from this week’s guest blogger at the National Law Review from Foley Hoag LLP. Tafadzwa Pasipanodya discusses how a Corporate Responsibility Mandate would actually work.

A resolution adopted by the European Parliament on November 25, 2010 increases the likelihood that the days of CSR as a purely voluntary initiative are numbered. Approved by a margin of 480 votes to 48, the resolution on corporate social responsibility in international trade agreements calls on the European Commission to include a CSR clause in all of the European Union’s trade agreements.

Such a clause would require, inter alia, companies to publish “CSR balance sheets,” report on due diligence, and seek free, prior and informed consultation with local stakeholders. The proposed CSR clause would also provide for monitoring and judicial cooperation in pursuing and punishing breaches of CSR commitments. More generally, the resolution also calls on the Commission to reinforce its promotion of CSR in multilateral trade policies and to conduct sustainability impact assessments before and after trade agreements are signed.

According to its explanatory note, the resolution was drafted in recognition of the reality that for “ordinary people throughout the world, the expansion in international trade is justified only if it contributes to economic development, to job creation and to improved living standards.”

The note provides moral, socio-economic, and political justifications for Europe to address CSR in the context of its trade agreements:

First, European companies enjoying the benefits of trade must be asked to conduct themselves in a socially and environmentally responsible manner in developing countries and elsewhere.
Second, “non-compliance with CSR principles constitutes a form of social and environmental dumping” in developing countries to the detriment of companies and workers in Europe, who are required to meet more stringent social and environmental standards.
Third, the EU’s trade policy must be consistent with and complimentary of its other foreign policy priorities on matters such as environmental protection and development aid.

Many of the EU’s international trade agreements already address social and environmental concerns. The significance of the proposed CSR clause is that it would place an onus on companies – not just the State parties to the trade agreements – to act in a socially and environmentally responsible manner. Also, while recent trade agreements concluded by the EU with South Korea, Colombia and Peru vaguely mention the State parties’ intent to promote CSR, the proposed CSR clause would require specific actions by companies. Among the proposed requirements for the CSR clause are the following:

Companies would be required to publish CSR balance sheets in two or three year intervals in order to reinforce transparency and reporting and encourage visible and credible CSR practices;
Companies would be required to conduct due diligence in order to identify and prevent “violations of human and environmental rights, corruption or tax evasion, including in their subsidiaries and supply chains”;
Companies would be required to commit to “free, open and informed prior consultation” with local and independent stakeholders prior to commencing a project that impacts a local community.

The resolution envisions that other provisions enforcing implementation of CSR would accompany the CSR clause. It recommends, for example, that in addition to establishing appropriate investigatory mechanisms, State parties should be willing to “name and shame” companies in serious breach of their CSR commitments. The resolution also foresees judicial cooperation and training as a means of facilitating judicial redress for victims of inappropriate corporate conduct.

The European Parliament’s resolution is a non-legislative act and thus not enforceable. It is now up to the European Commission to decide whether to incorporate the Parliament’s proposals into binding legislation. Although some companies will balk at any attempts to limit the voluntary nature of CSR, others, especially those that already seek to operate in a socially and environmentally responsible manner, may welcome the prospect of all companies being required to operate by the same rules in the context of particular trade agreements

Alternatives to International Criminal Justice – Restorative Justice and Peace Through Peaceful Means

The National Law Review would like to congratulate Heejung Park of Washington University in St. Louis as one of our Fall 2010 Law Student Legal Writing Contest Winners!

“Out of timber so crooked as that from which man is made nothing entirely straight can be carved.” -Immanuel Kant-

Individuals live their own lives, and have their own goals. An entity may be an individual, a group, or a nation. The purposes of two parties may be in harmony with each other and without conflict, or may not. Such purposes may be good, or evil. Essentially, problems occur when the purposes of two or more parties do not coincide. The basic position of the traditional criminal justice system is to address problems simply by punishing the perpetrators. However, over the last several decades, there have been new studies in the area of peace and human rights, and in this environment, new institutions may be welcome. This is inspiring changes from the perspective of human integrity and the right to peace, which pursues harmonious coexistence.

If the criminal justice system, which aims to punish perpetrators, takes an interest in the perpetrators as well as the victims by enabling the perpetrators to truly repent for their offenses and voluntarily make restitution to their victims, while allowing the victims to accept the restitution based on a principle of forgiveness and tolerance, a foundation for peace and respect of others in the community will be formed. As such, it is very significant to prepare for a system wherein the pepetrator and the victim can remediatetheir hurt,and recover. If we are working from a principle that values life above all, and values human rights to the extent that they carry more weight than the earth itself, such an approach must be inspiring. It is not that easy to buildasociety that is better and more peaceful, in which everyone can live together harmoniously. When criminals are punished, this does not mean that everything has been resolved. Often,the root causesof a crime can be foundin the community, or even in the victim himself or herself. On this basis, victims and communities also have a responsibility to take an interest in the perpetrators of crimes. The intent must be to identify the fundamental causes of crimes, and by addressing these causes, to create a better society and a better country, byseeking an alternative to the international criminal justice system based on peaceful means.

To achieve this, one or more of the following three approaches may be effective. The first is to constitute a truth commission to pursue truth and reconciliation. This approach has been successful in South Africa, as well as in some Latin American and Asian countries. Truth will be identified, and reconciliation will be made based on investigations into violations of human rights and provisions concerning ethical and legal responsibilities and duties. The Report of the Truth and Reconciliation Commission that was prepared by the government of South Africa in 2003 also addressed this issue. Through the Truth and Reconciliation Commission, violations of human rights relating to apartheid have been addressed.[i] The second is to hold public inquiries. This is closely related to post-conflict management. “Bloody Sunday[ii]” in the UK is a representative sample. In this event, 13 people were shot to death and several were injured on January 30, 1972, a Sunday. A high-profile public inquiry, it was led by English Supreme Court Justice Mark Saville together with a judge from New Zealand and a judge from Canada, and was established on April 3, 1998. The last is “Community-based Restorative Justice”, which is the most important and is addressed intensively herein. This is a mechanism that focuses on the post-conflict environment, and is deeply related to the peaceful coexistence of a community. In this area, new justice systems have emerged, called “gacaca” and restorative justice.[iii] Gacaca is a new court system that was launched by the Rwandese government on June 18, 2002. This new court system follows the customary system for community hearings, which have been used whenever a conflict occurs in the community. Begun at a Canadian church in the 1970s, restorative justice is a crime-fighting approach for victim-sensitive victim-offender mediation.

Criminal prosecution is not always the right solution. It is a good method only when it can benefit society and nation. If we acknowledge that unexpected pitfalls exist for everyone, then people should be given one more chance, even if they have committed a crime. The proposition of the “restoration of offenders” is not suitable for all conflicts. Nonetheless, it is a new approach to consensus, and aims at facilitating mutual understanding. The Bible features an approach similar to this restorative justice.[iv] It also refers to accountability for healing that goes through discipline to move toward a peaceful environment, which is different from the existing criminal justice system.[v] The Bible considers every individual a sinner. It says that an individual can receive forgiveness when he/she sincerely repents, surrenders to God, and produces the fruit of repentance.[vi] It further says that reconciliation will take place when one makes restitution and reparation for the harm, and this action bears fruit.[vii] When this is done, the offender is able to commit himself/herself to the community and the nation by producing the fruit of the Spirit[viii], through his/her indebtedness and freedom from being forgiven. Curing offenders, allowing them to repent for their wrongdoings and to voluntarily make restitution and reparation, a win-win situation for perpetrator and victim, is possible in the love of God through the remediation of hurt, restoration, forgiveness, and tolerance. Through this, the community can seek peace through social justice and tolerance. Both perpetrators and victims have fundamental rights as human beings. In this area, the roles of national reconciliation/mediation agencies, protection agencies, and NGOs are important.

These approaches may equally be applied to international criminal justice. As demonstrated above, post-conflict management should be approached peacefully. Disputes occur when the purposes of parties do not coincide with each other. This discord emerges in the form of conflict. A conflict is a polarization of opinions or powers. Ultimately, such polarization may reach the level of violence, which leaves residual trauma. This process repeats itself, continuously. The ring of this vicious circle should be peacefully severed. Such an approach to peaceful means advocates solving problems through mediation (this is directed toward the future, and it is better than “victory”) at the stage of conflict; through the positive involvement of peace-building at the stage of polarization; and through nonviolence rather than violence, and reconciliation and conciliation (which is against the past, and requires healing) instead of trauma.

[i]Mark Freeman, Truth Commissions and Procedural Fairness, Part 1:‘Introduction’ 3 (Cambridge University Press, 2007).

[ii]Angela Hegarty, “Truth, Law and Official Denial: The Case of Bloody Sunday”15Criminal Law Forum 199 (2004).

[iii]Phil Clark, “Hybridity, Holism and ‘Traditional’ Justice: The Case of the Gacaca Community Courts in Post- Genocide Rwanda”, 39 Geroge Washinton International Law Review 4 20 (2007).

[iv]Tony F. Marshall, Restorative Justice An Overview 6 (Research Development and Statistics, 1998).

[v]Edward Bouverie Pusey, The Confessions Of Saint Augustine 5-6 (Kessinger Publishing, 2004).

[vi]Matthew, New International Version Bible,The New Testament: Matthew 2 (Word Of Life Press, 2009).

[vii]Jeremiah, New International Version Bible, The Old Testament: Jeremiah 706 (Word Of Life Press, 2009).

[viii]Paul, New International Version Bible, The New Testament: Galatians 185 (Word Of Life Press, 2009).

Tag: International Law

Europe Just Cost Women a Bunch of Money on Their Car Insurance By Switching to Gender Equality

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