Business, trade, and foie gras

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

One misconception people have is that the rules of international trade and public international law only have effects at the state-to-state level. While this may be true to a certain extent, considering that state actors are primarily the subjects of international law, nevertheless, what goes on, for example, in other countries or at the World Trade Organization will have repercussions not only for the large multinational but even for small businesses as well.

And this should ram home a particular reality about today’s law and business: that there are multiple norms layered or intertwining at the multilateral, regional, bilateral, and even at the domestic foreign jurisdiction level that all potentially affect Philippine companies or citizens. And this is true whether we acknowledge that fact or not.

Several notable cases illustrate this point. The first is that reported by DevelopTradeLaw.Net: “Small businesses doing business internationally need to understand their legal obligations so that they don’t become another ING, the bank recently levied with $619 million in fines. The fines penalize ING for its failure to abide by US trade laws. [ING, it was alleged] knowingly or unknowingly repeatedly violated US trade sanctions. US trade sanctions prohibit or place restrictions on individuals and companies operating under US law from doing business with embargoed countries. The countries may be embargoed because of US concerns about human rights violations, terrorist or nuclear proliferation activities, or US Government dislike of the government’s policies.”

However, it must be stated that this matter of foreign laws having effect on acts committed outside the territory of a state is not even a new development. This is actually a decades-old thing, the most significant one being that of the Helms-Burton Law that was applied for purposes of sanctioning Fidel Castro’s Cuba. The law has been revised through time but as present regulations stand, “all US citizens and permanent residents wherever they are located, all people and organizations physically in the United states, and all branches and subsidiaries of US organizations throughout the world” are prohibited from bringing in “goods of Cuban origin, other than information or informational materials”.

Then there is the US Foreign Corrupt Practices Act. This law prohibits “issuers, domestic concerns, and any person from making use of interstate commerce corruptly, in furtherance of an offer or payment of anything of value to a foreign official, foreign political party, or candidate for political office, for the purpose of influencing any act of that foreign official in violation of the duty of that official, or to secure any improper advantage in order to obtain or retain business.”

The US, however, is not alone in exercising jurisdiction over acts that occur outside its borders. On corruption, the United Kingdom has its own version of the Foreign Corrupt Practices Act, which has been described as a more muscular version of the FCPA. China, for its part, has also released its own legislation on foreign corruption. A report by the law firm White & Case pointed out two instances illustrative of the reach of the new legislations: Avon Products, Inc.’s troubles last year over allegations of bribery of Chinese officials, which later led to findings of discrepancies in India, Japan, Argentina, Brazil, and Mexico. There was also Citigroup’s problem regarding alleged embezzlements in Indonesia.

The above rules are likely defended under the “effects” doctrine of criminal jurisdiction. The doctrine is to be distinguished from the “protective” doctrine, which the Philippine’s itself has had occasion to employ (the Philippines primarily relies on “territoriality” as the basis for its criminal jurisdiction). However, as can be gleaned from the foregoing, the effects doctrine is particularly distasteful for a number of states, considering its extraterritorial reach and -- most disconcertingly -- the acquisition of jurisdiction over non-nationals.

Having said that, the Philippines may want to explore the use of the “effects” doctrine for purposes of punishing foreigners, either through imprisonment if they travel to the Philippines or confiscation of their local Philippine assets, who have harmed or abused our workers abroad.

A further problem for small businesses is when the export market suddenly decides to ban their product, as California (and before it, Chicago) did in the case of foie gras. The ban was justified with the allegation that the production of foie gras is a cruel practice, what with the enlarging of duck’s livers through force feeding.

One may laugh at this sort of moralizing by the Californians but their logic could very well lead to “balut” or “bagoong” being banned for very arbitrary reasons. So we should welcome any action on the foie gras ban that may be taken by the French, Bulgarian, and Hungarian governments at the WTO for possible violation of trade law.

So the lesson is: while Philippine politics seem to have depreciated to a system of irrationality and the mere sucking up to the powers that be, international law is standing fast with that time-tested dictum -- knowledge is power.