Update: U.S. Charges Former Siemens Execs

Following  Siemen’s massive $1.6bn settlement related to bribes paid to Argentine officials,the United States has now charged eight former Siemens executives for their part in the massive bribery scheme.  You can read more about this new prosecution at  BBC Report.

Editors Note:  Our 2012 3rd Annual Symposium will deal with this very topic. Navigating Anti-Bribery Legislation: Remaining Compliant and Competitive in the Global Marketplace will take place on Friday, March 30, 2012 in the Law School’s Moot Court Room from 1:30- 4:30 p.m. 2.5 Free CLEs (pending approval) are available. The event will be open to the public.  More information can be found on our homepage.

Would a Big Bad Bank Blow the Real Estate Problems of Spain Down?

By: Christopher J. Stuart, Associate, The Global Business Law Review

On November 20, 2011 Spain elected Mariano Rajoy, of the conservative People’s Party, as prime minister.[1]  During his campaign he claimed that “cleanup and restructuring” of the banking system in Spain was his primary concern.[2]  Rajoy pledged to adopt a program to fund Spain’s recovery by increasing the amount of available credit.[3]  With the current financial troubles in the Eurozone, reviving Spain’s banks could be a daunting task for the newly elected prime minister.  The BBC reports that “Spain is[a] much more indebted or leveraged country than Italy” when aggregating all debts including government, corporate, financial, and institution debts.[4]

To fix the financial issues of Spain, Rajoy must conquer the seemingly insurmountable amount of troubled real estate loans held by the country’s lenders.[5]  The Bank of Spain stated that half of the 308 billion euros of real estate loans are classified as troubled.[6]  These problems seem to stem from the decreasing values of Spanish homes, which have decreased by 28 percent on average since April 2007.[7]  Pablo Cantos, a managing partner of MaC Group who advises Spanish banks on risk, claims that about 30 billion euros of real estate held by Spanish banks are “unsellable.”[8]  The future for Spanish real estate assets remains bleak as Taurus Iberica Asset management–a Spanish mortgage servicer–reports that financial institutions have foreclosed on 200,000 homes and the foreclosures will rise to 600,000 homes due to the increase in unemployment.[9]  Fernando Acuan Ruiz, managing partner of Tauras Iberica, stated that Spain has 1 million new homes that will not be consumed until 2017.[10]

A solution to Spain’s bank problems may lie in facilitating a “bad bank” according to some analysts.[11]  Creating a “bad bank” would relieve banks of their toxic real estate assets and the bad bank would attempt to sell the assets as prices improve.[12]  Fernando Fernandez, IE professor and former International Monetary Fund economist, believes that a bad bank is the only cure to clean up bank balance sheets and revive the flow of credit.[13]  A bad bank worked well in Ireland because it restored confidence to investors.[14]  However, creating a bad bank in Spain with the current financial troubles of the euro zone could be a disaster according to analysts.[15]  One London-based analyst believes that the additional debt that will encumber Spain will be more than it can afford.[16]  Prior to the election, Rajoy did not support a bad bank program, but sources have stated that Rajoy “has asked for at least two papers from academics on how to create” a bad bank.[17]  While which solution Rajoy will ultimately employ to resolve the Spain’s financial issues is uncertain, the current financial outlook remains very grim.

Human Trafficking Right Before Your Eyes: Children Forced Into Panhandling to Appeal to Tourists

By: Lodema M’Poko, Associate, The Global Business Law Review

You’ve just completed a satisfying shopping trip at Sandton City Mall in Johannesburg, South Africa.  After throwing your numerous bags in the car, you begin the trek back to your hotel.  “What an amazing vacation this is,” you think to yourself, as you approach a traffic light.  However, your warm fuzzy feelings dissipate as a young woman, dressed in tattered and dirty clothing, stands tapping at your window at just the appropriate angle to display the small, peaked-looking child strapped to her back.  She smiles, waves, and puts her hand to her mouth, signaling that she is hungry.  Feeling guilty about all of the money you just spent shopping, your heartstrings are officially tugged. You reach into you bag, and hand her a crisp bill.  She thanks you and moves on to the next car.  Your fuzzy feelings return, since you made it possible for a mother and child to finance their next meal.  You feel good about your deed.  The question is, should you?

Probably not.  It’s likely that you’ve been scammed.  Most people think child human trafficking is done for sexual purposes.  However, using children to panhandle unsuspecting tourists is becoming increasingly popular.  Panhandlers know that using children garners sympathy and can be very lucrative.  So much so that children are often rented out, kidnapped, or lured away from their homes.

In South Africa, police investigated a crime syndicate that involved panhandlers renting babies and small children from crèches for about $3 per day.[1]  A crèche is a public daycare for the poor that cares for the children while the mothers are at work.[2] Children are also rented directly from the mothers.  In these cases, older children’s legs are sometimes broken so that the children appear smaller than what they are when tied to the “mother’s” back. Smaller children garner more sympathy. Children may also be drugged so that they appear sickly.[3]  This practice can net up to nearly $70 per day.[4]

Child trafficking for pan handling purposes is not limited to South Africa.  It is increasingly popular in other third-world countries as well.  For instance, in India, gangs are known to kidnap children from their homes, and force them into a life of panhandling.  These children are starved and beaten for several days, and are then maimed or blinded to garner more sympathy.[5]

In Senegal, parents send their young boys to daraas, Quranic schools run by religious leaders to educate the boys in religion and academics.[6]  However, these boys receive a rude awakening when they arrive.  Instead of being taught and nurtured, they are forced onto the streets for long hours to beg for money.[7]  These schools collect up to $60,000 per year from the children.  One would question why parents would be willing to send their children off to these schools if tragic results are inevitable, but in Muslim societies, such as Senegal, sending your children away to daraas is not out of the ordinary.

Knowing these facts puts the compassionate tourist in a tough position.  He is left to decide whether or not he should give money to these poor, begging children.  There is always the chance that the child’s plight may be legitimate, and not forced on him by a con artist.  As difficult as it may be, the answer is no.[8]  To give to these children perpetuates the problem.  The “bleeding” must be stopped at its source.  If tourists continue to “feed” the child trafficking industry by donating to child beggars, kidnappers, scammers and con artists will continue to funnel these poor children into that life.

E.U. Commission Wants the Financial Sector to Pay

By: T. Christina Colosimo, Associate, The Global Business Law Review

After the global economic crisis, the European Union’s (EU) economy has suffered one of the worst recessions since the 1930s.  The financial sector played a major role in the EU’s economic crisis starting in 2007 with a steady increase of failing banks.[1]  EU governments and citizens committed 4.6 billion euros in an effort to support and rescue the financial sector with taxpayer funded bailouts.[2]

The European Commission’s (Commission) response to the recession has been swift and proactive.  On September 28, 2011, the Commission announced a proposal for a financial transaction tax (FTT) for the 27 Member States as a resource for the EU’s budget.[3]  The Commission’s proposal for the FTT is available at http://ec.europa.eu/taxation_customs/resources/documents/taxation/other_taxes/financial_sector/com(2011)594_en.pdf. The proposal requires unanimous support from the 27 Member States, and if approved by all, it would levy a tax on transactions involving financial instruments between institutions if at least one party is located in the EU.[4]  The tax rate for the exchange of shares and bonds is set at 0.1% and a rate of 0.01% on derivative contracts.[5]

The Commission has considered a financial transaction tax since the bailouts.  The financial sector’s contributing role in the financial crisis has piloted the proposal and will ensure that the financial sector contributes at a time of fiscal need. The proposed FTT will raise revenue of €57 billion ($78 billion) in one year, and the tax will strengthen the EU single market.[6]  The FTT is also designed to create a disincentive for transactions that do not enhance the efficiency of the financial markets and will prevent a future crisis.

European governments are split over the merits of the proposed financial transaction tax.  Some fear that the tax may drive business away from the EU, increase the cost of raising capital and damage member states’ economies.[7]  The UK believes that the Commission needs to realign its focus on growth during the recession, rather then implementing a tax that will push the financial sector abroad to New York and Singapore.[8]  Financial Times Newspaper also reported that the proposal could shrink EU’s gross domestic product by 1.76 percent over time.[9]

For the Opening Act: A Greek Tragedy

By: Erik Dickinson, Associate, The Global Business Law Review

On October 27, 2011, after months of uncertainty and growing fears, European leaders reached a three-pronged agreement[1] designed to lower Greece’s debt burden and prevent the crisis from escalating by spreading to other Eurozone states[2] and potentially crippling the European Union and others on the global market. In the few weeks that have followed, many, including the Greeks, have questioned Greece’s place in Europe, a prime minister has resigned, and questions remain.

First, private investors agreed to take a 50% loss on their Greek bonds.[3]  As a result, Greece’s debt will be reduced from the current rate of 160% of its GDP to 120% by 2020.[4]  Second, banks will be required to raise around 106 billion euros in new capital by June 2012.[5]  The goal is that the new capital will protect the banks, as well as larger economies, from any government defaults.[6]  Finally, the Eurozone member states agreed to increase the lending capacity of the European Financial Stability Facility (EFSF)[7] from 440 billion euros to over 1 trillion euros.[8]

The EFSF bailout fund could be leveraged in a handful of ways.  Insurance could be offered to debt purchasers[9] thereby making the bonds more attractive to investors.[10]  Another proposal with support is to create special investment vehicles to allow big investors, including countries like China, to contribute.[11]  Most likely, these and other options would be used simultaneously.

Moving forward from this agreement, EU leaders continued their calls for more stringent financial reform and now square their focus on Italy, the Eurozone’s third largest economy.[12]  Recently, German Chancellor Merkel and French President Sarkozy criticized former Italian Prime Minister Berlusconi for his reluctance to follow through with promised budget cuts and other economic reforms.[13]  EU President Van Rompuy specifically noted that the main concern for Italy is implementation of Berlusconi’s proposals.[14]   Even as this crisis may be averted for now,  the looming question of Italy tempers enthusiasm for this agreement and highlights the balancing act for Europe’s leading economies as they continue charting a path to a more robust unity, continued cooperation, or disappointing abandonment of the EU.

Russia and China Lead the Way in Paying Bribes; U.S. 10th Least Corrupt

In the lead up to our March 30, 2012, Symposium on Anti-Bribery, we will occasionally highlight news focused on the global efforts to combat corruption.  A recent study , as reported by the BBC, conducted by the anti-corruption group Transparency international ranked companies from Russia and China as the most likely to pay bribes to ensure their business dealings go through. “Given the increasing global presence of businesses from the countries, bribery and corruption are likely to have a substantial impact on societies in which they operate and on the ability of companies to compete fairly in these markets.” You may access the BBC’s article and the complete rankings at http://www.bbc.co.uk/news/business-15544841.

Unlike in Iraq and Afghanistan, the U.S. Appears to be Taking a Hands-Off Approach to Libya

By Paul Shugar, Associate, The Global Business Law Review

Since a 27-year-old Muammar Qaddafi seized control in 1969, Libya has known no other leader.[1]  While his relationship with the United States could best be described as neutral in the 1970s, it soured in the 1980s when terrorist attacks in Europe were linked to the dictator.[2]  After U.S. President Ronald Reagan deemed Qaddafi “the mad dog of the Middle East,” U.S. warplanes struck Benghazi and Tripoli in 1986.[3]  Further Qaddafi-sponsored terrorist acts led to Great Britain and France joining the U.S. in imposing United Nations sanctions on Libya.[4]  The U.S.-Libya relationship remained tense until 2003, when Libya renounced its weapons of  mass destruction program after the U.S. invasion of Iraq.[5]  The two countries rekindled diplomatic relations in 2006,[6] but that relationship ended when the U.S. joined the NATO-led operation to overthrow Qaddafi in March of 2011.[7]  Now, the U.S. is left to forge a new relationship with Libya after Qaddafi’s death.

While the U.S. congratulated Libya on its freedom, the U.S. has not clearly defined what its role will be in rebuilding the war-torn country.[8]  After watching Iraq spiral out of control following the ouster of Saddam Hussein, the U.S. appears more than willing to take a back seat to NATO.[9]  Billions of U.S. dollars have been spent rebuilding Iraq and Afghanistan, but the U.S. has sent only $135 million in aid to Libya.[10]  The State Department also announced that it has sought no new congressional funding for aid to Libya.[11]

Whether U.S. companies end up investing in Libya likely will depend on how quickly the country becomes secure again.[12]  Firms that construct or maintain oil fields are currently the only American companies doing business in Libya.[13]  But whom will seize control of Libya’s lucrative oil fields remains to be seen as the country continues to form its new government.[14]  A process that should take time with Libya lacking numerous government organizations,[15] but – unlike in Iraq and Afghanistan – the U.S. appears disinterested in attempting to expedite this process.

Has Justice Finally Arrived for the DRC?

By: Lindsay Raskin, Associate, The Global Business Law Review

The conflict in the Democratic Republic of the Congo (DRC) now ranks as the world’s deadliest conflict since World War II.  Since its outbreak in August 1998, fighting between the factions has led to the deaths of approximately 5.4 million people and created a refugee crisis with more than 1.5 million displaced.[1]  A profound product of this violence, fueled by intrinsic cultural norms in the DRC, is rape.  The international community considers the DRC the rape capital of the world.  Current studies estimate that 1.8 million women in the DRC are raped during their lifetime at a rate of 48 rapes every hour.[2]

On August 12, 2011, the DRC’s parliament finally took action by adopting legislation creating a specialized court to hear cases of war crimes, crimes against humanity and genocide committed in the DRC since 1990.[3]  While many human rights advocates consider the action taken by parliament a triumph, it is unclear whether a specialized tribunal is the most effective forum for victims of these humanitarian crises.  The international community tends to favor specialized tribunals, which have been seen in East Timor and Cambodia, because the country where the conflict occurs bears the burden of providing the majority of funding for the tribunal as well as the majority of the tribunal’s staff.[4]

Despite recent action, rape continues to be one of the most common crimes committed in the DRC, and reporting its commission is still taboo in Congolese society.[5]  Women who are raped are viewed as “dirty” and are often forced to “weigh [their] desire for justice against the social consequences.”[6]  Thus, despite the strides the DRC has made in recent years, the country currently lacks the infrastructure and support programs for the victims of these crimes.  If women are unwilling to come forward, how can they ever receive justice?  Furthermore, not even the ICC is a suitable forum for justice for the victims of rape.  While the Lubanga case is the first case in which the ICC allowed victims to participate, the names of those who participate in trials at the ICC are widely known.[7]  Thus, the victims of rape who testify will face the same social consequences—namely the risk of being ostracized from their community—that they would have faced if they participated in a case in the DRC.  Rather than rushing to appease the international community, the DRC, as well as the international community as a whole, should take the time to create an effective forum, such as an ad hoc tribunal, which can protect the identity of rape victims who testify in court and focus on building a system of support and acceptance to aid these victims.

South Korean Free Trade Agreements: U.S. and E.U.

by Robert Molnar, Associate, The Global Business Law Review

The United States and South Korea are moving closer to establishing a free trade agreement between the two countries.  The full text of the proposed agreement is available at http://www.ustr.gov/trade-agreements/free-trade-agreements/korus-fta/final-text. The two countries originally signed the treaty in 2007, but its approval in the U.S. stalled when the auto industry objected to the level of access it would receive to the South Korean market.[1] Three years later, President Barack Obama re-committed the U.S. to the treaty and reached a new agreement by the end of the year.  The Treaty would be the largest free trade agreement signed by the U.S. since the North American Free Trade Agreement of 1994 (NAFTA), and is the first bilateral agreement between the United States and a major Asian economy.[2]

The European Union signed a free trade agreement with South Korea on October 6, 2010.  The European Parliament ratified the agreement in February of this year and the agreement became law in July.  The agreement is designed to decrease trade barriers between South Korea and the EU by 98% over the next five years.[3] Senator Rob Portman of Ohio has cited the EU-South Korea free trade agreement as already successful at boosting imports from the EU to South Korea, and has urged passage of the U.S.-South Korea agreement.[4] Scott A. Snyder of the Council on Foreign Relations has claimed that the agreement will create new American business opportunities in South Korea.[5]

Sherrod Brown, U.S. Senator also from Ohio, has urged President Obama not to submit any free trade agreements to Congress until Congress approves an extension of Trade Adjustment Assistance (“TAA”), a federal government program that helps American workers whose jobs are sent overseas.  Brown, a critic of past free trade agreements, introduced legislation to extend TAA benefits in the Senate, which passed the bill on September 22, 2011.[6]

Earlier this year, The American Lawyer reported that several large American law firms have expressed an interest in opening offices in South Korea.[7] However, expansion of legal services in South Korea may have more to do with the deregulation of legal training by the South Korean government than the pending trade agreement.[8]

Honoring Shark Week

This comment takes no position on the killing of those cuddly animals we call sharks, but what better time, Discovery Channel’s Annual Shark Week, to highlight a basic tension in international law. One of the more difficult challenges of international law simply comes down to cultural perspectives sometimes.  Trade provides some of the more fascinating struggles between advocacy groups and states but also states versus other states.

The article we highlight this week brings attention to the advocacy group Oceana’s attempt to end the trade in shark products by urging the United States to use its power under the Shark Conservation Act of 2010 to ban imports on shark products from China and Japan among others. You can read more about the dispute by clicking here.

In 2010, Oceana put out a report concerning the international trade in Shark Fins which you may read by clicking here.