I've been writing some about international financial regulation this year. Here's my take on what IFR tells us about international law, which it isn't, but which in practice it, in some ways, resembles. It's up at SSRN, and I hope you'll give it a look.
In an era riddled with critiques of the relevance of classic international law, some have loudly given up on the subject, while others have placed their hopes in alternative mechanisms of global governance. One alternative is “soft law,” and nowhere is soft law more successful than in international financial regulation (IFR). Today, almost every bank of any size across the world has to keep similar amounts of money in its emergency reserve, cannot stake its future on complex derivatives or other forbidden trades, and faces oversight that, no matter where the bank is located, will be conducted in roughly similar ways, with roughly similar tools. And yet the promulgators of these rules consistently disavow their status as binding law.
These disavowals are disingenuous, and unpacking the reasons why has useful lessons for how international governance works, whether backed by treaty and custom or not. IFR works like traditional international law in three ways. It, like international law, depends on domestic institutions for implementation, although traditional international law has often sought to ignore the importance of any institution below the level of the state. IFR reminds us that the coordination of international interests comes with winners and losers, and therefore that the “mere coordination exercise” that international governance represents should not be dismissed, though traditional international law occasionally has been critiqued for that reason. And IFR emphasizes the necessarily messy way that fundamental legal principles are arrived at in international governance of any stripe -- something I call the contestation principle. These features of both hard and soft law have been overlooked by both the traditionalists and critics of international law, but process-driven insights like them have much to tell us about both hard and soft law, which may not, in some ways, be so different after all.
Should you be so inclined, you can find the paper here.
I've got a post on the increasing efforts to create voluntary, or in some cases mandatory, responsibility for businesses regarding human rights up over at RegBlog. Here's a bit of it:
International businesses must now decide whether to sign on to a lengthy and disparate list of principles and standards that aim to promote human rights. Sometimes associations of regulators promulgate these human rights standards for businesses; other times non-governmental organizations promulgate them and ask businesses to sign them. Regardless of who adopts them, these “voluntary” standards constitute a different form of regulation, and not just because of their subject matter. In promulgation, content, and authority, these efforts do not entail traditional rulemaking or adjudication.
But human rights standards are a growth industry. In fact, it is fair to say that the obligation of businesses to consider human rights is at a turning point. Although business-based standards to improve human rights are all less than a decade old, they are gaining adherents, even among regulators. Even the U.S. Securities and Exchange Commission (SEC) and the European Union have now announced rules that discourage the use of conflict minerals in manufacturing. Other countries are following suit in restricting trafficking in conflict diamonds, a phenomenon which I examine further in this paper.
You can find the rest over here, if it's the sort of thing you like.
I'm co-chairing ASIL's biennial conference on international economic law this year, and I hope that many friends of the Glom will consider attending, and even giving a paper. You can find the call for papers here, and Georgetown's International Law Journal is willing to serve as a publication outlet for those interested in pursuing that, their announcement is here. As we say in the call,
We encourage submissions on all aspects of international economic law, including those that do not focus on cross-cutting issues. The themes listed below are illustrative only and non-exhaustive. If your paper fits within one or more of these themes, please make a note of it in your proposal. Illustrative Themes:
Cross-fertilization opportunities between trade, tax, monetary and finance law: How does monetary law impact trade and finance, and vice-versa?
Soft law in international economic law: Are there lessons to be drawn from financial regulation for trade and investment? How does regionalism shape and challenge international economic law?
Dispute resolution in the face of trade and investment treaty convergence: What are the opportunities and challenges raised by recent innovations? Is a unified system possible or desirable?
International economic law and systemic risk
Public-private partnerships in international economic law
I hope you'll consider joining me in DC in September (it is a great time to be there, inter alia).
I testified yesterday before the House Financial Services Committee on the increasingly internationalized subject of insurance capital requirements, about which Congress and the more modestly sized firms in the insurance industry, have some concerns. If that's the sort of thing that interests you, you can download the testimony here.
Creating a continent wide deposit insurance program is interesting because of its American antecedent. The FDIC is one of two ways that America's entirely state-regulated banking system became, in essence, entirely federalized (the other one emerged through the Fed's oversight of bank holding companies). Once you have an insurer on the hook for making your depositors whole if you disappear, you have an institution that is going to want to inspect your books and interview your executives. And the EU commissioner who proposed it is British, one of the countries least enamored of the emerging EU agencies who are taking over from local banking regulators. It is quite the rejection of federalism.
Not of interest to all of our readers, but I'm hosting a works in progress workshop at Wharton at the end of January. If you've got something on international economic law, I hope you'll consider submitting it.
The ASIL International Economic Law Interest Group will hold a works-in-progress workshop on Friday, January 29, in Philadelphia, at the Wharton School. If you are interested in presenting a paper at the workshop, please submit an abstract by the end of the day on November 31st, 2015 to email@example.com. Please place “IECLIG Works in Progress submission”
in the subject line of your submission. Abstracts can range from a paragraph in length to a page, and should include the author's name and institutional affiliation. Papers should relate to the study of international economic law, broadly construed, be it related to private ordering, trade, investment, finance, or any of the other subjects that constrain the way that business is done across borders. The workshop is designed to offer a resource for those who cannot attend our December Heidelberg workshop done in conjunction with ESIL, to help scholars prepare for the February publication cycle, and to continue to broaden and deepen the interest group's intellectual community.
Papers selected for presentation will need to be submitted on January 15th; they will be circulated to the attendees of the workshop. Attendees will accordingly be able to comment on all of the papers during the workshop, and may also be given responsibility to lead the discussion of one of them in particular. One need not present a paper or comment on a paper to participate. As is the norm for workshops sponsored by ASIL interest groups, participants will need to cover their own travel expenses. Please do not hesitate to contact us should you have any questions about the workshop or paper submissions.
The FIFA case by the US is interesting because:
- It is a RICO case - so the government's using a statute designed to go after the mob to clean up an international organization.
- It is the definition of the extraterritorial application of American laws. To be sure, FIFA has availed itself of the American market, but only one American has been indicted in this case, and he looks like a minor player. It's not clear how much time the defendants (they're all from this hemisphere) spend in America. They are being indicted not because of what they have done to American victims, but rather how they have enriched themselves at the expense of FIFA, which has a relationship with America. Absent diplomatic immunity issues, the same sort of theory could be used to go after officials in a wide array of international organizations.
- Nonetheless, it looks like a typical white collar investigation. They've got an informant - Chuck Blazer - and now they've used him to go after a bunch of functionaries he knew. Surely they will try to get these defendants to turn on Sepp Blatter, the head of FIFA, and those close to him.
- For that reason, I could also see a deal done. If Blatter drops his re-election bid, this investigation could stop with some promised reforms and a few convictions.
- It looks like no government officials were bribed - this is not an FCPA case. It would be surprising, but I guess sometimes RICO alone is enough. The underlying counts are wire fraud - including the controversially expansive honest services wire fraud - and money laundering.
- Here's a somewhat related paper by Christina Parajon Skinner on disciplining international actors through RICO. Her case study is Donziger/Ecuador: Download Skinner on rico and io ethics
Here is an announcement that may interest some of our readers:
The Rutgers Center for Corporate Law and Governance, The University of Washington School of Law, and the Business and Human Rights Journal (Cambridge University Press) announce the first Business and Human Rights Junior Scholars Conference, to be held September 18, 2015 at the Rutgers School of Law – Newark in Newark, New Jersey, just outside of New York City. The Conference will pair approximately ten junior scholars writing at the intersection of business and human rights issues with senior scholars in the field. Junior scholars will have an opportunity to present their papers and receive feedback from senior scholars. Upon request, participants’ papers may be considered for publication in the Business and Human Rights Journal (BHRJ), published by Cambridge University Press.
Invited senior scholars include Anita Ramasastry, Nien-he Hsieh, George Brenkert, Tom Donaldson, Denis Arnold, Pat Werhane, and James Gathii. All junior scholars will be tenure-track professors who are either untenured or have been tenured in the past three years. The Conference is interdisciplinary; scholars from all disciplines are invited to apply, including law, business, human rights, and global affairs. The papers must be unpublished at the time of presentation.
To apply, please submit an abstract of no more than 250 words to firstname.lastname@example.org and email@example.com with the subject line Business & Human Rights Conference Proposal. Please include your name, affiliation, contact information, and curriculum vitae.
The deadline for submission is June 15, 2015. Scholars whose submissions are selected for the symposium will be notified no later than July 15, 2015. We encourage early submissions, as selections will be made on a rolling basis.
About the BHRJ
The BHRJ provides an authoritative platform for scholarly debate on all issues concerning the intersection of business and human rights in an open, critical and interdisciplinary manner. It seeks to advance the academic discussion on business and human rights as well as promote concern for human rights in business practice.
BHRJ strives for the broadest possible scope, authorship and readership. Its scope encompasses interface of any type of business enterprise with human rights, environmental rights, labour rights and the collective rights of vulnerable groups. The Editors welcome theoretical, empirical and policy / reform-oriented perspectives and encourage submissions from academics and practitioners in all global regions and all relevant disciplines.
A dialogue beyond academia is fostered as peer-reviewed articles are published alongside shorter ‘Developments in the Field’ items that include policy, legal and regulatory developments, as well as case studies and insight pieces.
I'm co-organizing a conference in Heidelberg; it's perhaps not something that all of the Glom's readers work on, but for those that do, we'd love to get your proposals:
On 11-12 December 2015, the International Economic Law Interest Groups of the American and European Societies of International Law, together with the Max Planck Institute for Comparative Public Law and International Law, will hold a joint works-in-progress workshop in Heidelberg, Germany. The overarching theme of the workshop is "The Future of Transatlantic Economic Governance in the Age of the BRICS." The deadline for paper proposals is 30 June 2015.
Proposals are encouraged across all areas of international economic law (trade, investment, financial regulation, monetary law, cross-border regulation of MNCs, law and development, etc.) For full details, please consult the Call for Papers in the documents section of the ASIL Interest Group's website:
We look forward to receiving your proposals! The Organizers
I've seen hard lobbying before, but this literal love letter from the Chamber of Commerce to the Trans-Pacific Partnership is pretty next level. The big finish:
I love your trade promotion authority as if she were my own family. I’m ready to adopt her today if that would fast-track me to your heart. I can’t wait to call you my own and make sweet sweet economic progress with you.
Please be mine. I will be yours.
The American Business Community
Over at Opinio Juris, the international law blog, they are marking their tenth anniversary with some ruminations about blogging and the blogosphere. See here, here, here, and here, and others thereabouts. Do go celebrate with them, contemplate law blogs more generally, and observe that they don't look one bit older than they did when they began their epic blogojourney. Congratulations, Opinio Juris!
The Basel committee enforces through peer pressure, rather than through resort to a formal dispute settlement process, and the peer pressure is increasingly institutionalized through IMF-like reviews of the implementation of Basel commitments. The US just had its review, and Basel just released the report.
The big problem with the US embrace of global rules has come through its treatment of securitizations. Perhaps most notably:
a number of divergences were identified that for some US core banks lead to materially lower securitisation RWA [risk-weighted assets, the stuff against which you have to hold capital] outcomes than the Basel standard. These differences are mainly related to the prohibition on the use of ratings in the US rules. Pursuant to the Dodd-Frank Act, the US rules cannot include provisions related to the Basel framework’s Ratings-Based Approach (RBA) for securitisations, so the rules provide alternative treatments.
The US is not Basel compliant because its regulators are explicitly not permitted to use a tool - credit ratings - that Basel requires. It looks like the committee may fix this not by forcing credit ratings down America's throat, but by coming up with some equivalence standard, which tells you that when Congress speaks clearly, global regulatory harmonizers must listen. Another admission of note:
In carrying out this review, the Committee's assessment team held discussions with senior officials and technical staff of the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation. The team also met with a select group of US banks.
This meet with regulated industry thing is one of the features of peer regulatory review, and it presumably gives industry yet another opportunity to make a case for its preferred version of regulation. But then, it is also a feature of international regulation, where the cross-border parties may sometimes also play roles as representatives of the domestically regulated.
In the American Journal of International Law, Dick Stewart has an excellent piece on Remedying Disregard In Global Regulatory Governance: Accountability, Participation, and Responsiveness. I've got a commentary on it over at AJIL Unbound. A taste:
It may also be the case that as these bodies weave increasingly elaborate cross-border regulatory webs, they have no choice but to resort to something that looks quite law-like. In financial regulation, I view global administration as a sort of administration that has increasingly adopted stable bedrock principles that would be familiar to any international economic lawyer; indeed, given the importance of the cross-border work done to oversee financial institutions, it would be surprising if a measure of consistently applied rules, reason-giving, and transparency were not adopted. The banks being supervised would certainly find it arbitrary if done differently.
Do give the rest a look.
I've been on a bit of an international and administrative law kick these days, but as always, the case study is financial regulation. If you're interested in Sovereignty Mismatch And The New Administrative Law, available from the Washington University Law Review and here, you know what to do. Here's the abstract:
In the United States, making international policymaking work with domestic administrative law poses one of the thorniest of modern legal problems — the problem of sovereignty mismatch. Purely domestic regulation, which is a bureaucratic exercise of sovereignty, cannot solve the most challenging issues that regulators now face, and so agencies have started cooperating with their foreign counterparts, which is a negotiated form of sovereignty. But the way they cooperate threatens to undermine all of the values that domestic administrative law, especially its American variant, stands for. International and domestic regulation differ in almost every important way: procedural requirements, substantive remits, method of legitimation, and even in basic policy goals. Even worse, the delegation of power away from the United States is something that our constitutional, international, and administrative law traditions all look upon with great suspicion. The resulting effort to merge international and domestic regulatory styles has been uneven at best. As the globalization of policymaking is the likely future of environmental, business conduct, and consumer protection regulation — and the new paradigm-setting present of financial regulation — the sovereignty mismatch problem must be addressed; this Article shows how Congress can do so.
Comments and concerns welcome.
I want to draw your attention to this, now out in the Cornell Law Review. As regular readers know, I do a great deal of research on the international regulatory networks that increasingly set the standards for financial and securities regulation. This paper is an effort to connect the shaky legitimacy of that sensible impulse to a stronger body of doctrine, and so it touches more on foreign relations and administrative law than on pure financial regulation - and it is co-authored with a foreign relations and international law expert, Jean Galbraith. You should download it. The abstract:
The United States increasingly relies on “soft law” and, in particular, on cooperation with foreign regulators to make domestic policy. The implementation of soft law at home is typically understood to depend on administrative law, as it is American agencies that implement the deals they conclude with their foreign counterparts. But that understanding has led courts and scholars to raise questions about whether soft law made abroad can possibly meet the doctrinal requirements of the domestic discipline. This Article proposes a new doctrinal understanding of soft law implementation. It argues that, properly understood, soft law implementation lies at the intersection of foreign relations law and administrative law. In light of the strong powers accorded to the executive under foreign relations law, this new understanding will strengthen the legitimacy and legality of soft law implementation and make it less subject to judicial challenge. Understanding that soft law is foreign relations law will further the domestic implementation of informal international agreements in areas as different as conflict diamonds, international financial regulation, and climate change.
Please don't hesitate to send along your comments, concerns, etc.....