16 International Ethics and Law McGraw-Hill/Irwin ©2007 by the McGraw-Hill Companies, Inc. All rights reserved. Chapter 16 International Ethics and Law Key Points • Pervasiveness of globalization and its contributions and challenges • Social responsibility in a global context • International law foundations, illustrations and dispute resolution mechanisms WTO Basics 149 member nations, from every continent, from communist to socialist to capitalist Saudi Arabia became the newest WTO country on December 11, 2005 Fundamental principle subscribed to by all members nations: “[T]he substantial reduction of tariffs and other barriers to trade” will contribute to the objectives of “raising standards of living, ensuring full employment and a large and steadily growing volume of real income. Source: Preamble, Agreement Establishing the World Trade Organizations Global Capitalism: Can It Be Made To Work Better? • “The overwhelming conclusion … is that there are many examples of where reckless investment has done harm—but there is no case where the hazards can’t be addressed with better government and corporate policy.” • “The downside of global capitalism is the disruption of whole societies.” • “A more realistic view is now gaining hold. It begins with a similar premise: that trade and inflows of private capital are still essential to achieving strong sustainable growth and to reducing poverty. But it acknowledges the multinationals—which account f or the bulk of direct responsibilities in nations where the rule of law is weak.” • “According to the new pragmatism, governments first must deliver political stability, sound economic management, and educated worker if they are to gain from wide-open markets.” Source: Business Week, November 6, 2002, pp. 72-75. Islamic Law: Myths And Realities—Part I • “In order to protect the five important indispensables in Islam (religion, life, intellect, offspring and property), Islamic Law has provided a worldly punishment in addition to that in the hereafter. Islam has, in fact, adopted two courses for the preservation of these five indispensables: the first is through cultivating religious consciousness in the human soul and the awakening of human awareness through moral education; the second is by inflicting deterrent punishment, which is the basis of the Islamic criminal system. • “[T]he Quran teaches tolerance and moderation in all things.” Islamic Law: Myths And Realities—Part II • “The meaning of the word Islam is ‘submission or surrender to Allah’s (God’s) will.’” • “The most difficult part of Islamic Law for most westerners to grasp is that there is no separation of church and state. The religion of Islam and the government are one. Islamic law is controlled, ruled and regulated by the Islamic religion. The theocracy controls all public and private matters. Government, law and religion are one.” How different are the values identified in these excerpts from values held by many Americans? Social Responsibility to Humanity? Are we evolving toward identification of common international ethical standards—standards that can be supported and implemented globally? Can we agree on fundamentals, but still appreciate diversity, rather like a garden is enriched by the presence of a wide selection of grasses, flowers, bushes, trees and birds? Consider the evidence: • The International Standards Organization has created standards such as ISO14001 for environmental auditing • The Council on Economic Priorities Accreditation Agency has developed SA8000 to assure an equitable and safe workplace • The United Nations has adopted declarations establishing principles for worldwide adoption, such as the right of all women “to be free from all forms of discrimination” and “to just and favorable conditions at work” • Voluntary standards adopted by business segments, such as Caux Round Table Principles and the chocolate industry’s concern over labor practices on cocoa farms Foundations of International Law Private Law: Agreements (contracts) formed by private parties; binding to the extent the rule of law is upheld and the judicial system functions Public Law: Created by agreement among countries through treaties, conventions and international custom or generally accepted principles of law Comity: Concept that countries should abide by international custom, treaties, etc., because that is the civil way to engage in relationships International Contracts Some governed by CISG (UN Convention), which contains rules regarding interpretation of contracts for the sale of goods Contract’s validity determined under national law: Concepts of capacity, meeting of the minds and legality are widely accepted for determining validity; common law, but not civil law, countries generally also require consideration for a valid contract Example: Transatlantic Financing Corporation v. United States (D.C. Cir. 1966) International Trade in Services • International principles covering trade in services were only recently adopted (GATS 1995) • Generally accepted are most favored nation (MFN) status and the principle of national treatment • Countries with significant export of services include the U.S. and India Intellectual Property Regulations—Part I Trademarks: • In U.S., protected under the Tariff Act of 1930 • Paris Convention provides some international protection including national treatment • Madrid Agreement establishes an international trademark system, but relatively few nations have adopted it Patents: • Paris Conventions also covers, especially by establishing the right of priority • Public health exception established in light of AIDS/HIV pandemic Intellectual Property Regulations—Part II Copyrights: • The Berne Convention of 1886 and the Universal Copyright Convention (UCC) of 1952 both provide a measure of international protection • Example: Piaggio & C.S.p.A v. Scooterworks USA, Inc. (N.D. I 1999) WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS): • Established minimum protection levels • Requires member states to adopt effective enforcement measures Regulation of MNEs • There are no effective international regulatory schemes regulating MNEs • The primary regulator of securities is the U.S. SEC, which has jurisdiction over any MNE with securities listed on a U.S. exchange • The International Accounting Standards Board has offered accounting standards for international use • Microsoft is an example of multiple nations regulating an MNE for abuse of monopoly power • Mergers of MNEs may be subject to regulation in as many as 70 countries Regulation of Imports WTO General Agreement on Tariffs and Trade (GATT): • Requires most favored nation (MFN) and national treatment principles upheld • Prohibits dumping and unfair subsidies • Authorities countervailing duties for breaches • Has authorized $4 billion in punitive duties by the EU against the U.S., based on a finding of unfair subsidy in U.S. corporate tax law International Dispute Resolution—Part I UN International Court of Justice: • Has advisory jurisdiction where United Nations asks for an opinion on a matter of international law • Has contentious jurisdiction where two or more nations (not individual parties) have consented to its jurisdiction and have requested a binding opinion European Court of Justice: • Hears cases involving European Community law • In an age of MNEs, its decisions can be very important International Dispute Resolution—Part II WTO Dispute Settlement Body: • Not a true court, but a significant forum for the resolution of international trade disputes between WTO members • Made up of all member governments, usually represented by ambassadors • This body authorized the $4 billion in punitive duties against the U.S. by EU Specialized treaty dispute resolution bodies, e.g. under NAFTA National Courts Government Defenses Act of State Doctrine: The principle that a judge in one country does not have the authority to examine or challenge the acts of another country within that country’s borders Doctrine of Sovereign Immunity: The principle that the jurisdiction of a nation within its own territory is necessarily exclusive and absolute Example: Butters v. Vance International, Inc. (4th Cir. 2000) Arbitration United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards: • Provides that the successful party obtain possession of property of losing party located in any signatory country for the purpose of satisfying the debt • Signed by 135 countries as of 2005 Example: In the Matter of the Arbitration between Seven Seas Shipping (UK) Ltd v. Tondo Limitada, on Behalf of the Republic of Angola (S.D.N.Y. 1999)