Introduction
There is no doubt that the balance between men and women in corporate leadership positions is not at all balanced. “While women make up about 49% of the world’s population, in no country do they represent nearly half of the corporate managers” (Moran, Harris, Moran, 2007, p. 161).
This is not to say that women haven’t made great strides in the last several decades towards corporate diversity. “Over the last 50 years, an increasing number of professional women have entered and remain in the global workforce” (Moran, et. al, 2007, p. 160).
Why is this? According to Sharma and Skeeton (2010),
Changes in the family structure, such as single-parent families and divorce have created situations where women often become the sole source of the family’s income (Cascio, 2010). Research has also suggested that the upward trend in the divorce rate may be related to the increase in women’s earning ability (Becker, Landes, & Michael, 1977; Sander, 1985). Women who make an adequate wage have less need to remain married. Other changes, such as the declining birthrate, contraception, and abortion have also contributed to this increased participation of women in today’s workforce by decreasing the number of years that they now devote to raising children (Ferber & McMahon, 1979; Sprague, 1988).
Summary of Article
So what does today’s top 100 corporate firms look like? According to Sharma and Skeeton (2010), there is still a “lack of gender diversity among the top 100 US corporations” (p. 12). Sharma and Skeeton’s (2010) study revealed that women,
…are grossly underrepresented at the top levels of management among the top 100 firms. Given that women comprise only 13% of the top management, and 57 firms have none or one female officers, there is reason for concern.
So why are women still so underrepresented? According to Moran, Harris, and Moran (2007), “women are still responsible for the ‘softer’ aspects of work.
Sharma and Skeeton (2010) expand on the idea of “why” women are responsible for the “softer” aspects of work.
One factor that is purportedly holding women back are pervasive stereotypes such as women: (a) do not want the top job, (b) are too emotional or soft to lead, (c) cannot or will not work long or unusual hours, (d) do not want to travel, (e) do not want to relocate, (f) do not want to work, (g) cannot make tough decisions, and (h) are less committed to the organization and to their careers (Carr-Ruffino, 2005). Together, these stereotypes have impeded women’s career progress. (Sharma, et. al, 2010, p. 4)
Despite the stereotypes,
Several gender studies have been conducted which challenge these pervasive stereotypes. For example, one such study found that an equal number of men (57%) and women (55%) desire to be CEO, challenging the notion that women do not want the top job (Lublin, 2004). Other studies indicate that women executives outscore their male counterparts on a wide variety of measures including: motivating others, fostering communication, goal-setting, producing high-quality work, mentoring others, listening to others, recognizing trends, and generating new ideas and acting on them (Sharpe, 2000). Other studies looked at the traits in which women excel. Such traits included teamwork and partnering, being more collaborative, seeking less personal recognition, being more stable, being less turf-conscious, and being more motivated by what they can do for the company and less motivated by self-interest (Sharpe, 2000). (Sharma, et. al, 2010, p. 5)
Conclusion
Despite great numbers of women in corporate roles, they are still vastly underrepresented in corporate leadership positions. Research proves that women have many valuable skills to bring into corporate leadership positions, however women will still be met by the challenges of stereotyping. According to Moran, Harris, and Moran (2007),
[t]he key to making concrete changes in organizations is the leadership, who must have a keen interest in recruiting and retaining a diverse workforce while promoting qualified women.
References
Moran, R., Harris, P., Moran, S. (2007) Managing cultural differences: Global leadership strategies for the 21st Century.Burlinton, MA: Butterworth-Heinemann.
Sharma, R., Skeaton, G. (2010). Ranking the top 100 firms according to gender diversity. Advancing Women in Leadership Journal, 30. Retrieved on October 15, 2010 from http://www.advancingwomen.com/awl/2010/RajnesshSharma_SusanGivens-Skeaton.pdf
Friday, October 15, 2010
Wednesday, September 29, 2010
Update: China's Defaulted Debt: Remedies for U.S. Citizens
Update on China’s Defaulted Debt and Remedies for U.S. Bondholders
A complaint was filed last week with the DOJ on behalf of the U.S. Bondholders. Excerpts from the complaint are below, and you may view the full complaint here, (http://www.globalsecuritieswatch.org/DOJ_Antitrust_Complaint).
Excerpt from the Introduction and Prayer for Relief:
I. Introduction
1. This is a Complaint referencing an antitrust injury resulting from third party tortfeasance, including interference with the enforcement of commercial debt contracts and which interference, including the intentional aiding and abetting of the debt obligor’s efforts to evade repayment of the debt, has the effect of the taking of the Complainant’s rights in property, and which have caused the Complainant to be injured in its property.
2. This is also a Complaint alleging a pattern of civil racketeering under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Section 1961 et seq., (“RICO”), and further alleges that the named parties obtained unjust enrichment from their wrongful actions in assisting China in the shedding of its foreign debt obligation owed to the Complainant, and which actions were intentionally designed, constructed, and operated as a continuing enterprise which was specifically and intentionally designed to enrich the named parties at the expense of the Complainant and all other persons similarly situated.
5. The People’s Republic of China (“The People’s Republic of China” or the “Chinese Communist Government” or “Communist China” or “China”), is the internationally recognized Government of China and as such, is the successor government to the predecessor Chinese governments, including the Imperial Chinese Government and the Republic of China.
VI. Prayer for Relief
A. WHEREFORE, Complainant prays for the Antitrust Division of the United States Department of Justice to commence an investigation into the practices of the Three Primary Credit Rating Agencies as described in this Complaint and to bring an antitrust enforcement action against the named parties, including the specific relief stated below.
1. Antitrust Injury
360. Complainant realleges and incorporates herein, as though fully set forth, the allegations of all preceding paragraphs of the Complaint.
361. The Three Primary Credit Rating Agencies collectively control approximately, or in excess of, 95% of the international credit rating industry and so in effect are constituted as the industry.
362. By their actions, the Three Primary Credit Rating Agencies have caused Complainant to suffer economic injury and such injury is of the nature of an antitrust injury.
2. Civil Racketeering
363. Complainant realleges and incorporates herein, as though fully set forth, the allegations of all preceding paragraphs of the Complaint.
364. The Three Primary Credit Rating Agencies, the Debt Underwriters, the Clearing Agents, the Paying Agents, and the Law Firms, collectively constituted as participants in the Capitalist China enterprise, conspired to construct and operate an enterprise, whose operation is dependent upon an artifice, in order to reap windfall profits at the expense of the defaulted creditors.
365. By their actions, the Three Primary Credit Rating Agencies, the Debt Underwriters, the Clearing Agents, the Paying Agents, and the Law Firms, have caused Complainant to suffer economic injury and such injury is of the nature of a civil racketeering injury.
366. On the basis of the factual evidence as stated herein, Complainant prays for a summary administrative adjudication and order of injunction restraining the continuation and furtherance of the injurious actions of the Three Primary Credit Rating Agencies and suspending the publication and distribution of the falsehood, namely the international sovereign credit rating assigned to China, until such time as the Debt is repaid in full, including the loan principal and all interest due thereon; default interest; and penalties.
Following this complaint, the U.S. dollar continues to slide and gold reaches an all time trading high. And so the battle continues.
A complaint was filed last week with the DOJ on behalf of the U.S. Bondholders. Excerpts from the complaint are below, and you may view the full complaint here, (http://www.globalsecuritieswatch.org/DOJ_Antitrust_Complaint).
Excerpt from the Introduction and Prayer for Relief:
I. Introduction
1. This is a Complaint referencing an antitrust injury resulting from third party tortfeasance, including interference with the enforcement of commercial debt contracts and which interference, including the intentional aiding and abetting of the debt obligor’s efforts to evade repayment of the debt, has the effect of the taking of the Complainant’s rights in property, and which have caused the Complainant to be injured in its property.
2. This is also a Complaint alleging a pattern of civil racketeering under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Section 1961 et seq., (“RICO”), and further alleges that the named parties obtained unjust enrichment from their wrongful actions in assisting China in the shedding of its foreign debt obligation owed to the Complainant, and which actions were intentionally designed, constructed, and operated as a continuing enterprise which was specifically and intentionally designed to enrich the named parties at the expense of the Complainant and all other persons similarly situated.
5. The People’s Republic of China (“The People’s Republic of China” or the “Chinese Communist Government” or “Communist China” or “China”), is the internationally recognized Government of China and as such, is the successor government to the predecessor Chinese governments, including the Imperial Chinese Government and the Republic of China.
VI. Prayer for Relief
A. WHEREFORE, Complainant prays for the Antitrust Division of the United States Department of Justice to commence an investigation into the practices of the Three Primary Credit Rating Agencies as described in this Complaint and to bring an antitrust enforcement action against the named parties, including the specific relief stated below.
1. Antitrust Injury
360. Complainant realleges and incorporates herein, as though fully set forth, the allegations of all preceding paragraphs of the Complaint.
361. The Three Primary Credit Rating Agencies collectively control approximately, or in excess of, 95% of the international credit rating industry and so in effect are constituted as the industry.
362. By their actions, the Three Primary Credit Rating Agencies have caused Complainant to suffer economic injury and such injury is of the nature of an antitrust injury.
2. Civil Racketeering
363. Complainant realleges and incorporates herein, as though fully set forth, the allegations of all preceding paragraphs of the Complaint.
364. The Three Primary Credit Rating Agencies, the Debt Underwriters, the Clearing Agents, the Paying Agents, and the Law Firms, collectively constituted as participants in the Capitalist China enterprise, conspired to construct and operate an enterprise, whose operation is dependent upon an artifice, in order to reap windfall profits at the expense of the defaulted creditors.
365. By their actions, the Three Primary Credit Rating Agencies, the Debt Underwriters, the Clearing Agents, the Paying Agents, and the Law Firms, have caused Complainant to suffer economic injury and such injury is of the nature of a civil racketeering injury.
366. On the basis of the factual evidence as stated herein, Complainant prays for a summary administrative adjudication and order of injunction restraining the continuation and furtherance of the injurious actions of the Three Primary Credit Rating Agencies and suspending the publication and distribution of the falsehood, namely the international sovereign credit rating assigned to China, until such time as the Debt is repaid in full, including the loan principal and all interest due thereon; default interest; and penalties.
Following this complaint, the U.S. dollar continues to slide and gold reaches an all time trading high. And so the battle continues.
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Wednesday, September 15, 2010
Multi-cultural Awareness: Lessons Still Learned in the Classroom
Today classrooms are becoming more diverse and present a unique challenge to teachers. Students are coming to class with a greater variance in values, cultural norms, and verbal and non-verbal communication behaviors that may be unfamiliar to some teachers.
According to Nancy Longatan (2009), “[b]y raising awareness of the non-verbal communication strategies familiar to students from other cultures, such as reflectivity, proxemics, volume and eye contact, teachers and students can significantly improve communication in the multicultural classroom”.
Longatan (2009) highlights key elements under each non-verbal communication strategy.
· Reflectivity – Recognize that in most Western culture a “quick response” is often the norm; however this is not the case for all. In some cultures, “reflectivity” or a time to carefully evaluate all of the elements of a question before providing a “detailed answer,” is the norm.
· Proxemics - is the study of how near or far people stand or set to each other when communicating. A student from a culture that values close proximity may be left with a feeling of rejection in a classroom setting where distant proximity is the norm.
· Volume – volume of voice varies greatly among cultures when communicating. This is the case even in “subcultures”. A child who speaks too soft or too loud in comparison to the classroom norm, may be at a disadvantage.
· Eye Contact – in come cultures eye contact is valued as a sign of respect; in others it is disrespectful.
Teachers must be conscious of these differences to be effective multi-cultural communicators. Children will quickly adapt to a new cultural setting, but a teacher can ease the transition by being aware and sensitive to the issues surrounding multi-cultural communication.
A classroom is no different than a multi-cultural workplace. Leaders, managers, and corporations, much like teachers, must be sensitive to cultural differences; including non-verbal differences. According to Moran, Harris, & Moran (2007), the collective image of ones self is projected “through body, bearing, appearance, tone of voice, and choice of words” (p. 44).
Each individual has their own unique perception of reality, influenced by the collective experiences in throughout their life. Therefore, each person, in this case the student, receives the same message and interprets it differently within their own sphere of reality. According to Moran et al. (2007), “[t]he individual working and communicating in a multicultural environment must ‘remember that the message that ultimately counts is the one that the other person gets or creates in their mind, not the one we send’” (p. 46). According to Longatan (2009), the message that is being received by the student includes not only verbal but non-verbal communications that the teacher must be sensitive to.
As good govies we all stand to learn a lesson or two from Longatan's advice. We're constantly working in a world that demands good multi-cultural leadership and communication skills. Being self-aware and conscious of our verbal and non-verbal communication will ultimately increase efficiency within our agency/ organization and the quality of service to those we serve.
References
Longatan, N. (2009). Issues for the multicultural classroom: Non-verbal communication can be a cross-cultural challenge. Retrieved on September 15, 2010 from http://www.suite101.com/content/issues-for-the-multicultural-classroom-a117187.
Moran, R., Harris, P., and Moran, S. (2007). Managing cultural differences: Global leadership strategies for the 21st century. Burlington, MA: Butterworth-Heinemann.
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Thursday, September 9, 2010
Skills in Cross-Cultural Communications: Success Overseas?
A manager skilled in cross-cultural communications is more likely to succeed in an overseas assignment than a manager with stronger functional skills; true or false?
A manager who is skilled in cross-cultural communications, while he may have the proper training, may not have the willingness nor capacity to use the skills. Having cross-cultural communication skills would make this manager no more likely to succeed or fail than the manager with stronger functional skills.
While the manager with stronger functional skills may not have formal cross-cultural communication skills, he/she may have the natural ability to interpret cultural differences in a way that allows him/her to consider many perspectives and respect the culture in which the behaviour was learned. According to Connerley & Pedersen (2005), "[i]t is our contention that the majority of leaders want to treat employees, clients, coworkers, suppliers, and everyone else with respect, but may not have the tools to do so".
Certainly an awareness of multicultural differneces, and the ability to communicate accross those differences will be beneficial for a manager. However, "[d]eveloping multicultural awareness, knowledge, and skills is not an end in itself, but rather a means toward increasing a person's power, energy, and freedom of intentional choice in a multicultural and diverse world" (Connerley, et. al, 2005, p. 7).
Moran, Harris, & Moran (2007) stated,
[e]very individual communicats a unique perspective of the world and reality. Every culture reflects the group view of teh world. From time to time, one must check whether one's view of the world, or that of an organization, synchronizes with the collective reality. (p. 44)
Essentially, the manager's success will rest in his/her ability and willingness to check his/her own personal views or that of their organization, against the collective reality or norm; and to adjust to a changing reality or norm.
References
Connerley, M. & Pedersen, P. (2005). Leadership in a diverse and multicultural environment: Developing awareness, knowledge and skills. London: Sage Publications.
Moran, R., Harris, P., & Moran, S. (2007). Managing cultural differences: Global leadership strategies for the 21st Centrury. Burlington, MA: Butterworth-Heinemann
A manager who is skilled in cross-cultural communications, while he may have the proper training, may not have the willingness nor capacity to use the skills. Having cross-cultural communication skills would make this manager no more likely to succeed or fail than the manager with stronger functional skills.
While the manager with stronger functional skills may not have formal cross-cultural communication skills, he/she may have the natural ability to interpret cultural differences in a way that allows him/her to consider many perspectives and respect the culture in which the behaviour was learned. According to Connerley & Pedersen (2005), "[i]t is our contention that the majority of leaders want to treat employees, clients, coworkers, suppliers, and everyone else with respect, but may not have the tools to do so".
Certainly an awareness of multicultural differneces, and the ability to communicate accross those differences will be beneficial for a manager. However, "[d]eveloping multicultural awareness, knowledge, and skills is not an end in itself, but rather a means toward increasing a person's power, energy, and freedom of intentional choice in a multicultural and diverse world" (Connerley, et. al, 2005, p. 7).
Moran, Harris, & Moran (2007) stated,
[e]very individual communicats a unique perspective of the world and reality. Every culture reflects the group view of teh world. From time to time, one must check whether one's view of the world, or that of an organization, synchronizes with the collective reality. (p. 44)
Essentially, the manager's success will rest in his/her ability and willingness to check his/her own personal views or that of their organization, against the collective reality or norm; and to adjust to a changing reality or norm.
References
Connerley, M. & Pedersen, P. (2005). Leadership in a diverse and multicultural environment: Developing awareness, knowledge and skills. London: Sage Publications.
Moran, R., Harris, P., & Moran, S. (2007). Managing cultural differences: Global leadership strategies for the 21st Centrury. Burlington, MA: Butterworth-Heinemann
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Tuesday, May 25, 2010
China’s Defaulted Debt: Remedies for U.S. Citizens
Introduction
Between 1913 and 1942 the Chinese Government, through the Hong Kong & Shanghai Banking Corporation, Deutsche Bank and other international banks, issued Chinese Government Bearer Bonds in Europe and the United States. The most notable of these bonds was the 5% Reorganization Gold Loan of 1913. These loans were "denominated as 'gold loans' and were payable in British pound sterling and three other European currencies in semi-annual interest payments with principal due and payable in 1960" (Green, 2002). In 1939 the Chinese Government defaulted on its sovereign debt as a result of the financial stress created by World War II. During that time a group known as the Kuomintang Business Management Committee, ("KBMC"), exerted substantial control over the finances of the Government of China (1912-1926), and the Republic of China (ROC) from 1927 until 2000. The KBMC currently functions as a private, non sovereign entity managing banks, shipping lines, technology companies and assorted other business ventures worth an estimated "$6 billion dollars" (confidential source, 2010).
KBMC has long been involved in the finances of the public and private sectors of China, Hong Kong, and Taiwan. When World War II began in 1939, the ROC defaulted on all of its foreign debt obligations known as "bearer bonds." Following the default, China issued several more instruments of foreign debt known as Victory Bonds and Allied Bonds. In 1949 the Communist party had taken power in China, renaming it the Peoples Republic of China ("PRC") and the ROC government fled in exile to Taiwan. The PRC later renounced all debt obligations incurred under former regimes, despite its assumption of the government owned salt mines and other assets that had been used to secure such debts, including the gold loans.
On October 29, 2003 an Order of the Executive Yuan decreed that the debts would not be repaid prior to national unification. This was to include all outstanding foreign currency bonds issued in the Mainland prior to 1949 and the short term Gold Bonds of 1949. Debts incurred by any government banks or other financial institution that accepted deposits prior to the ROC's retreat to Taiwan were also renounced.
In 2008, the United States District Court for the Southern District of New York found that some of the bondholders' claims against the PRC were barred by the statute of limitation, Morris v. PRC, (2007).
Despite numerous attempts by United States citizens to redeem their gold loan "bearer bonds", to date, satisfaction has not been made. "That debt includes about $260 billion on bonds issued by the former Republic of China. Of that, more than 300 American citizens are owed nearly $100 billion from bonds on which the People's Republic of China has defaulted"
(http://www.washingtontimes.com/).
Various suits within the U.S. court system have cited the Foreign Sovereign Immunities Act "FSIA", denying U.S. citizens the right to sue the PRC. The FSIA places the burden of proof on the defendant to prove that it is a "foreign state" as defined at 28 U.S.C. § 1603(a),(b), thereby entitling such state to sovereign immunity. If the state in question is found to be a "foreign state", the suit may only proceed under one of the exceptions as defined at 28 U.S.C. § 1605, 1605A, and 1607. Common exceptions include: waiver of immunity by the foreign state, § 1605 (a)(1); an agreement to arbitrate the dispute, § 1605(a)(6); engagement in a commercial activity by the foreign state, §1605(a)(2); or the commitment of a tort in the United States, §1605(a)(5). The burden of proof for an exception under the FSIA rests with plaintiff.
The following, is an examination of several cases which have been heard as a result of the PRC's default on the "gold loan" bearer bonds that will evaluate the validity of the United States citizens' rights to collect on the debts, despite the Foreign Sovereign Immunities Act and the Statute of Limitations.
National City Bank of New York v. Republic of China, 348 U.S. 356 (1955)
In 1954 the Republic of China sued National City Bank in a Federal District Court to recover monies deposited by an agency of the Republic. National City Bank filed a counterclaim for over $1.6 billion dollars in defaulted treasury notes that were issued by the Republic. The Republic plead sovereign immunity, and requested a dismissal of the case. The District Court dismissed National City's counterclaims. National City appealed to the Court of Appeals for the Second Circuit, thataffirmed the dismissal and the denial on the ground that the counterclaims were not based on the subject matter of the respondent's suit and therefore it would be an invasion of the respondent's sovereign immunity for our courts to permit them to be pursued. National City Bank of New York v. Republic of China (1955)
However, the pressing question of "sovereign immunity" caused the case to be heard by the U.S. Supreme Court on November 9, 1954. In delivering the opinion of the court, Justice Frankfurter stated, "[t]he status of the Republic of China in our courts is a matter for determination by the Executive, and is outside the competence of this Court" (National City Bank of New York v. Republic of China (1955).The "status", referring to the recognition of the Republic of China as a "foreign sovereign" was viewed by the court as a duty of the U.S. State Department. "The State Department is responsible for conducting foreign affairs, and as such is the usual determining authority for granting immunity for a particular suit." Ex parte Republic of Peru, 318 U.S. 578. However, in this case, the U.S. State Department refused to issue such a "status" opinion.
The court, fearing interference with international relations, similar to those that resulted after the issuance of an opinion in The Schooner Exchange v. McFaddon (1812), was reluctant to issue such an opinion in this case regarding the "status" of the Republic of China. Essentially, the court was reluctant to advise on a matter that would have a direct affect on foreign affairs and international relations, as it was not seen by the court as a power of the judicial branch.
This case demonstrated the need for a re-evaluation of the ability to circumvent valid "sovereign immunity," through the use of counterclaims that ultimately tested the definition of "original subject matter". In addition, it demonstrated the inability of U.S. bondholders to successfully sue the Republic of China, directly, for the defaulted debt in a U.S. court. Despite the 1952 revisions to U.S. law that stripped foreign governments of their sovereign immunity when engaged in "commercial activity" within the United States (e.g. the sale of government bonds), claims arising prior to the 1952 law were barred from consideration. Thus this issue was no longer a matter for the judicial branch, but rather a matter for the executive branch to settle; or so it seemed.
The 1979 Exclusion
In 1979, a bilateral trade agreement between the United States and China was entered into, and the United States formally recognized the PRC as the established government of China. As part of the agreement, all claims of United States nationals against the Chinese government for losses of property were to be settled. However, this agreement only covered losses occurring between October 1, 1949 and May 1979. The Chinese Government bonds that had been in default prior to October 1949, were
therefore excluded from this agreement and bondholders were not eligible to receive any of the proceeds from the 1979 settlement. Again, holders of the "gold loan" bearer bonds, which defaulted in 1939, were without remedy.Jackson v. People's Republic of China, 794 F.2d 1490, 1497-98 (11th Cir. 1986)
Jackson v. People's Republic of China (1986) was heard in the U.S. Court of Appeals, 11th Circuit on July 25, 1986. The Plaintiffs, were investors in bearer bonds that were issued by the Imperial Government of China in 1911, seeking a review of the 1982 Hu Kuang Railway Case. This decision, of an American court, set aside default judgment against the PRC and dismissed the case for lack of subject matter and jurisdiction.Initially, the Hu Kuang Railway Case resulted in default judgment in favor of the plaintiff, do to China's refusal to appear before the court. The default judgment resulted in the Chinese government's prompt attention to the matter in the form of an aide memoire which expressed China's view regarding sovereign immunity. The memoire stated,
[a]s a sovereign State, China incontestably enjoys judicial immunity. It is in utter violation of the principle of international law of sovereign equality of all States and the UN Charter that a district court of the United States should exercise jurisdiction over a suit against a sovereign State as a defendant, make a judgment by default and even threaten to execute the judgment. (Nisuki, 2001, p. 163)
The same memoire argued that the debts at issue in the Jackson case were "odious debts" incurred by the prior regime, and as such the current government of China refused to recognize them. The Chinese out of fear of internal affairs compromise continued to hold fast to the principle of "state equality," as defined in the UN Charter.
The Foreign Compensation (Financial Provisions) (No.2) Order 1987
China's refusal to recognize the bonds issued under the PRC regime was a matter of principle. This became increasingly evident in 1987 when China entered into an agreement with Britain to satisfy the bonds of "British citizens holding the 1913, 5% Reorganization Gold Loan bearer bonds – the same bond issue held by many American bondholders" (Testimony of Jonna Z. Bianco, July 17, 2008, p. 4)The agreement between Britain and China was reached through the implementation of Britain's Foreign Compensation Act of 1950, which established the Foreign Compensation Commission (FCC). The FCC's duties included the registration, settlement, and disbursement of compensation arising out of claims against foreign Governments.
Under the Foreign Compensation Act of 1950, section 7(2), the power to direct payment was given to His Majesty. Section 7(2) stated,
…His Majesty may by Order in Council direct the payment into the Exchequer by the Commission, out of any sums paid to the Commission for the purpose of being distributed by them under this Act, of such amount as may be determined by or under the Order…(www.opsi.gov.uk)
In 1987 Her Majesty exercised this power and, Statutory Instrument 1987 No. 2201, The Foreign Compensation (People's Republic of China) Order, was issued. The Order stated,
…an Agreement (hereinafter referred to as "the Agreement") entered into between Her Majesty's Government and the Government of the People's Republic of China on 5th June 1987 provides that the Chinese Government shall pay to the Government of the United Kingdom the sum of £23,468,008…(www.opsi.gov.uk)
Part I (2) of the Order defined the claims to be settled as,
a bond or other document of title in respect of a loan or obligation issued or guaranteed before 1st October 1949 by a former government of the territory or any part thereof or by another public authority in the territory. (www.opsi.gov.uk)
Prior to this agreement the Chinese government had never formally recognized any debts
issued before 1949. This agreement, however, only remedied the debts owed on pre-1949 bonds that were owned by a British national (individual, corporation, firm, or association) prior to January 1, 1980.
This restrictive settlement with British nationals meant that China had chosen to finally acknowledge the debts. However, U.S. bondholders were still without remedy, and the pre-1949 bonds were now considered to be in a "selective default" status.
Selective default is a term often used by various credit rating agencies to describe the default of an issuer on a bond, loan or other material financial obligation. This is different from a "default" rating in that the issuer has not entered into bankruptcy filings or any other proceedings which would otherwise cease business. According to Fitch Ratings, this includes "the selective payment default on a specific class or currency of debt" http://www.fitchratings.com/creditdesk/public/ratings_defintions/index.cfm?rd_file=ltr ).In addition to the Fitch ratings, " S&P has maintained an 'investment grade' rating for China since 2001, which S&P defines as an issuer not having any defaulted full faith and credit sovereign debt outstanding and unpaid"(
China's 1987 agreement with Britain established formal acknowledgement and responsibility for the outstanding PRC bonds by the current regime. This, by definition, should have resulted in a lower credit rating for all issues of sovereign debt until all of the defaulted bonds were satisfied. However, this was not the case.
U.S. bondholders, recognizing this anonymity and having been barred from remedy in all previous cases, decided to take an innovative approach. If remedy was not available through the U.S. judicial branch; political power and the use of the legislative branch was seen as a possible solution by the bondholders.
Senate Concurrent Resolution 78 (2008) and House Resolution
1179 (2008) In 2008 Senate Concurrent Resolution 78 and House Resolution 1179 were introduced on the floor of the 110th Congress of the United States.
House Resolution 1179
(2008) stated the following:
defaulted debts, including those of the prior ROC regime, when registering prospectuses and other instruments with the Securities and Exchange Commission ("SEC").
While the SEC does not have any control over Nationally Recognized Statistical Rating Organizations (NRSROs), such as Moody's, Fitch, and S&P, they do have a self proclaimed responsibility to U.S. investors. The SEC homepage states that, "[t]he mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation" (www.sec.gov).
The protection of investors in the United States should be derived from the basic laws and rules which are intended to regulate the securities industry. According to the SEC,
The SEC, however, did investigate the three major NRSROs, Moody's, Fitch, and S&P. An article in the New York Times, by Michael Grynbaum (2008), stated that a report issued by the Securities and Exchange commission, "confirmed what many on Wall Street had long suspected: the major ratings firms, including Fitch, Moody's and Standard & Poor's, flouted conflict of interest guidelines and considered their own profits when rating securities, among other suspect practices"(http://www.globalsecurities/watch.org).
NRSROs are private companies, paid by their clients, in this case China, to evaluate the risk associated with their financial instruments. Often, if risk is determined to be higher than usual by analysts, issuers will buy insurance policies to back their securities and other financial instruments, and thus avoid a lower credit rating. Conflict of interest arises when the analysts ignore obvious facts, such as those associated with China's sovereign credit ratings, for fear that issuing a lower credit rating will result in a loss of revenue from the client.
Precedent set by other international agreements and cases, while establishing the current government of China's responsibility for the PRC bonds and commercial activity, have also failed under the time constraints associated with the FSIA and the "commercial exception". Efforts in the legislative branch have not generated results and the Securities and Exchange Commission has yet to issue charges against the NRSROs for fraudulent activity. At this point, it would appear that the only successful remedy for these matters would be the denial of access to U.S. credit markets by executive order, or through the lowering of China's credit rating by the NRSROs.
Denial of access to U.S. markets is not a new practice in the U.S. when negotiating with a non-compliant or un-willing counterpart in international relations. Similar measures have been taken against Iran. The Iran and Libya Sanctions Act ("ILSA") of 1996 authorized the president "to select at least two from a list of six authorized economic punishments for sanctioned firms: for example, the president could deny access to U.S. financial markets" (www.nti.org).
The SEC, while lacking the power to force NRSROs to change credit ratings, could bring charges against the NRSROs for fraudulent business practices. A similar charge was brought against Goldman Sachs & Co by the SEC in 2010. According to Daryl Isherwood (2006),
Finally, the Statute of Limitations should not bar U.S. citizens from collecting on their bonds. The ROC acknowledged in Article 63 (2) of its 1992 amended Constitution, the mutual amity to satisfactory compromise on their debts, upholding the legal effects of any civil matters created in the Mainland Area, with and including "any foreign national". Article 63 (3) of the Constitution was a clear admission that the ROC continued to accept responsibility for all of its pre-1949 debt.
Jackson v. People's Republic of China, 794 F.2d 1490, 1497-98 (11th Cir. 1986).
Gallegly, E. (2008, September 8). China debt syndrome. The Washington Time. Retrieved on
May 22, 2010 from http://www.globalsecuritieswatch.org/SEC_Report_to_Post_on_GSW_Website.pdfhttp://www.washingtontimes.com/news/2008/sep/08/china-debt-syndrome/
Grynbaum, M. (2008, July 9). Study finds flawed practices at rating firm. The New York Times.
Isherwood, D. (2010 April 16). SEC charges goldman sachs with fraud. Fox Business New.
National City Bank of New York v. Republic of China, 348 U.S. 356 (1955).
Nisuki, A. (2001). Japan and international law: past, present, and future. Netherlands: Kluwer
Law and Taxation Publishers.
Office of Public Sector Information. (1950). Foreign Compensation Act. London, UK: OPSI.
Securities and Exchange Commission. (n.d.). Retrieved on May 22, 2010 from
http://www.sec.gov/about/whatwedo.shtml
Sites & Harbison PLLC. (2002) Memorandum: Default by China of Full Faith and Credit
The Schooner Exchange v. McFaddon, 11 U.S. 116 (1812).
1179 (2008) In 2008 Senate Concurrent Resolution 78 and House Resolution 1179 were introduced on the floor of the 110th Congress of the United States.
House Resolution 1179
(2008) stated the following:
Whereas the continued publication of artificial ''investment grade'' sovereign credit rating classifications assigned to the Government of the People's Republic of China provides an incentive to the Chinese Government to avoid a negotiated settlement with United States citizens regarding China's default on its sovereign debt obligations;
Whereas the lack of transparency concerning the selective default of the Government of the People's Republic of China poses a material risk to the investing public and threatens the integrity of the United States capital markets… (H.R. 1179 (2008), p. 3, 3-4).
These Resolutions sought remedy for U.S. bondholders by forcing China to disclose all defaulted debts, including those of the prior ROC regime, when registering prospectuses and other instruments with the Securities and Exchange Commission ("SEC").
While the SEC does not have any control over Nationally Recognized Statistical Rating Organizations (NRSROs), such as Moody's, Fitch, and S&P, they do have a self proclaimed responsibility to U.S. investors. The SEC homepage states that, "[t]he mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation" (www.sec.gov).
The protection of investors in the United States should be derived from the basic laws and rules which are intended to regulate the securities industry. According to the SEC,
[t]he laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. (www.sec.gov)
Essentially, Senate Concurrent Resolution 78 and House Resolution 1179, should have
resulted in restricted access to U.S. capital markets to China until the bonds are satisfied; or required the full disclosure of "selective default" status, on pre-1949 sovereign debt instruments, in prospectuses and post-1949 instruments that are registered with the SEC. Instead, Senate Concurrent Resolution 78 was referred to the Foreign Relations Committee and was never brought back to the floor for voting. In addition, House Resolution 1179 was also referred to the House Committee on Financial Services and never returned for voting.The SEC, however, did investigate the three major NRSROs, Moody's, Fitch, and S&P. An article in the New York Times, by Michael Grynbaum (2008), stated that a report issued by the Securities and Exchange commission, "confirmed what many on Wall Street had long suspected: the major ratings firms, including Fitch, Moody's and Standard & Poor's, flouted conflict of interest guidelines and considered their own profits when rating securities, among other suspect practices"(http://www.globalsecurities/watch.org).
NRSROs are private companies, paid by their clients, in this case China, to evaluate the risk associated with their financial instruments. Often, if risk is determined to be higher than usual by analysts, issuers will buy insurance policies to back their securities and other financial instruments, and thus avoid a lower credit rating. Conflict of interest arises when the analysts ignore obvious facts, such as those associated with China's sovereign credit ratings, for fear that issuing a lower credit rating will result in a loss of revenue from the client.
Possible Remedies for PRC Bondholders
Thus far U.S. holders of the bearer bonds issued by the Peoples Republic of China have found little prospect for collecting on their investments. Bonds issued prior to 1949 were blocked from remedy by the Foreign Sovereign Immunity Act. The 1952 changes to U.S. law denied sovereign immunity to states engaged in activities that were "commercial"; and the subsequent case, Republic of Argentina v. Weltover (1992), defined commercial activity by a state. Despite this progress, the bonds which were issued prior to 1952 remained barred from consideration under the "commercial" exception of the Sovereign Immunity Act.Precedent set by other international agreements and cases, while establishing the current government of China's responsibility for the PRC bonds and commercial activity, have also failed under the time constraints associated with the FSIA and the "commercial exception". Efforts in the legislative branch have not generated results and the Securities and Exchange Commission has yet to issue charges against the NRSROs for fraudulent activity. At this point, it would appear that the only successful remedy for these matters would be the denial of access to U.S. credit markets by executive order, or through the lowering of China's credit rating by the NRSROs.
Denial of access to U.S. markets is not a new practice in the U.S. when negotiating with a non-compliant or un-willing counterpart in international relations. Similar measures have been taken against Iran. The Iran and Libya Sanctions Act ("ILSA") of 1996 authorized the president "to select at least two from a list of six authorized economic punishments for sanctioned firms: for example, the president could deny access to U.S. financial markets" (www.nti.org).
The SEC, while lacking the power to force NRSROs to change credit ratings, could bring charges against the NRSROs for fraudulent business practices. A similar charge was brought against Goldman Sachs & Co by the SEC in 2010. According to Daryl Isherwood (2006),
In its complaint, the SEC alleges that Goldman failed to tell investors in a collateralized debt obligation that a major hedge fund that helped choose the portfolio had also placed bets against it. (www.foxbusinessnews.com)
Goldman Sachs' alleged concealment of the hedge fund, an instrument used to mitigate risk on an investment, essentially deprived potential investors of the knowledge necessary to make an informed decision prior to investing. The "inflated" credit ratings, issued by the NRSROs that ignored China's "selective default" on prior financial instruments, a no different than Goldman Sachs concealing details about the hedge fund. Both instances involve business entities concealing or distorting information about the risk associated with investments and therefore should fall under the regulatory authority of the SEC.Finally, the Statute of Limitations should not bar U.S. citizens from collecting on their bonds. The ROC acknowledged in Article 63 (2) of its 1992 amended Constitution, the mutual amity to satisfactory compromise on their debts, upholding the legal effects of any civil matters created in the Mainland Area, with and including "any foreign national". Article 63 (3) of the Constitution was a clear admission that the ROC continued to accept responsibility for all of its pre-1949 debt.
The Statute of Limitations for these defaulted bonds toiled upon the act of default in about 1939, re-toiled again on about September 18, 1992 by the action of acknowledgement of the debt, and has re-toiled again on about March 1, 2004 when Article 63, paragraph 3, was amended and Article 63(3) became Article 63 paragraph (1) and (2), and 63 (3) was deleted, as promulgated by Presidential Order on about October 29, 2003 and subsequently implemented on about March 1, 2004 by Order of the Executive Yuan. (Source Confidential)
For these reasons, U.S. citizens have a clear and apparent right to satisfaction of their
bonds. The key elements to win such a battle in a U.S. court, while complicated, are available. Successful remedy of this situation, however, will require the coordination and cooperation of all three of the U.S. branches of government. References
Ex parte Republic of Peru, 318 U.S. 578Jackson v. People's Republic of China, 794 F.2d 1490, 1497-98 (11th Cir. 1986).
Gallegly, E. (2008, September 8). China debt syndrome. The Washington Time. Retrieved on
May 22, 2010 from http://www.globalsecuritieswatch.org/SEC_Report_to_Post_on_GSW_Website.pdfhttp://www.washingtontimes.com/news/2008/sep/08/china-debt-syndrome/
Grynbaum, M. (2008, July 9). Study finds flawed practices at rating firm. The New York Times.
Retrieved on May 22, 2010 from
House Resolution 1179Isherwood, D. (2010 April 16). SEC charges goldman sachs with fraud. Fox Business New.
Retrieved on May 22, 2010 from http://www.foxbusiness.com/story/markets/industries/finance/sec-charges-goldman-sachs-fraud/
Monterey Institute for International Studies. (2010). Economic sanctions: Pressuring Iran's nuclear program. Monterey: Sabatini. Retrieved on May 22, 2010 from http://www.nti.org/e_research/e3_economic_sanctions_pressuring_iran_nuclear_program.html
Morris v. PRC, 478 F. Supp. 2d 561(2007).National City Bank of New York v. Republic of China, 348 U.S. 356 (1955).
Nisuki, A. (2001). Japan and international law: past, present, and future. Netherlands: Kluwer
Law and Taxation Publishers.
Office of Public Sector Information. (1950). Foreign Compensation Act. London, UK: OPSI.
Retrieved on May 22, 2010 from http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/1950/cukpga_19500012_en_1
Office of Public Sector Information. (1987). Statutory Instrument 1987 No. 2201. London, UK: OPSI. Retrieved on May 22, 2010 from http://www.opsi.gov.uk/si/si1987/Uksi_19872201_en_1.htm#fnf002
Republic of Argentina v. Weltover, 504 U.S. 607 (1992)Securities and Exchange Commission. (n.d.). Retrieved on May 22, 2010 from
http://www.sec.gov/about/whatwedo.shtml
Sites & Harbison PLLC. (2002) Memorandum: Default by China of Full Faith and Credit
Bonds: 40% of Proceeds to Benefit U. S. Government and Many American Communities. Nashville, TN: Greene, R.
Testimony of Jonna Z. Bianco (2008).The Schooner Exchange v. McFaddon, 11 U.S. 116 (1812).
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Tuesday, May 11, 2010
Challenging Global Policy: A 21st Century Evaluation of Sustainability and Global Governance
Introduction
The reality of the twenty-first century has revealed the need for a comprehensive, logical, coordinated effort from the various agencies responsible for the successful management of global threats. Prior to World War II, international relations occurred within a structure where blood ran thicker than water; conflict resulted over conflicting ethnic values and norms such as religion, race, and tradition. Today, while these issues are still ongoing, international relations and peace operations are occurring in a world where money and, even water, runs thicker than blood. International trade, fresh water supply, food supply, and disease control are key issues that are facing the world today. In short, management of sustainability issues going forward will be the key to peaceful international relations and peace will be the key to a sustainable world.
Keeping the Peace Then and Now
Prior to World War II, keeping the peace meant preventing conflict that resulted from expansionist ideals and opposing religious and cultural values and norms. As far back as 1095, the First Crusade set out with the goal of recapturing Jerusalem and the Holy Land from Muslim rule. These religious wars continued for the next two-hundred years, and the term “crusade” was later used to describe contemporary campaigns outside the Levant in the 16th century.
Over eight centuries later, the blurring of ethnic and cultural boundaries between the Germans and Slavs resulted in a racial, social Darwinism that eventually gave way to armed conflict. Following World War I, the first attempt at modern peace keeping agreements resulted in the Treaty of Versailles.
The Treaty of Versailles did not appease Germany, and did not provide the constraints necessary to prevent it from becoming the dominant continental power once again. Resentment amongst the Germans and Austria-Hungary grew when harsh monetary penalties, breaking of territory, and massive ethnic relocation resulted in the destruction of the German economy.
Hyperinflation and the subsequent German default on sovereign debt owed to the victors of World War I, demonstrated the failure of the Treaty of Versailles and Woodrow Wilson’s Fourteen Points. This failure was evidenced by a short-term goal which failed to evaluate the multi-faceted needs to obtain long-term peace.
Following World War II and progressing through the late Twentieth Century, the United Nations, World Bank, and the European Union were formed. These are just a few examples of today’s international organizations that play a role in international relations and peace keeping operations. In addition to international organizations, the advancement of technology and international business has resulted in many non-governmental organizations (NGOs), and international corporations becoming actors on the international stage.
Today, the international structure has become more complex. While armed conflict, or threat thereof, has decreased, the issues that give rise to conflict have become more abundant and diverse.
Water Wars
A great Twenty-First Century example of the complexity of today’s system and new challenges to international relations can be demonstrated by examining the world’s most abundant resource; water. Water has become a key issue for states, corporations and NGO’s. Privatization of water and an ever expanding global population has resulted in sustainability concerns and conflicts, now called “water wars”.
According to Vandana Shiva (2002),
Paradigm wars over water are taking place in every society, East and West, North and South. In this sense, water wars are global wars, with diverse cultures and ecosystems, sharing the universal ethic of water as an ecological necessity, pitted against a corporate culture of privatization, greed and enclosures of the water commons. (p. x)
In addition to the paradigm wars, real wars, explicitly over water, have already erupted in some areas of the world. The Middle-East has already seen conflicts arise solely over water between Syria and Turkey as well as Egypt and Ethiopia.
Sustainable, strategic, and coordinated policy will be critical to the peaceful existence of this region within the first quarter of the Twenty-First century. According to Adel Darwish’s 1994 lecture at the Geneva Conference on Environment and Quality of Life,
Israel's population is projected to grow from 4.7 million in 1990 to about 8 million in 2025. By that time Palestinians in the west bank - because of their higher birth rate, are likely to reach just under seven million - the two peoples are to share the same water resources which they both now say are not enough. (http://www.mideastnews.com/WaterWars.htm)
Current international law provides little guidance for the control of water. There are very
few agreements that exist today other than customary rights, established by long-term use of the resource. In the Middle-East upstream countries often control the water resources affecting downstream peoples dependant on the water supply. This is the case between Egypt and Israel as well as Turkey.
The conflict between Egypt and Israel dates to the mid 1960’s when Israel acted against the diversion of the Jordan River. Conflict continued until the early 1970’s when meetings at Camp David, resulted in a peace treaty in 1979. Originally, Israel suggested cooperation on water projects. Sadat, Egypt’s president, agreed, but rescinded when the Egyptian army rebelled against him.
Amazed that the army could plot against him, Mr Sadat questioned Field Marshal Abdel Halim Abu Ghazala, the defense minister, who said the loyalty of the Egyptian army could not be guaranteed if a coup was mounted `to stop Israel [from] stealing the Nile’. The president quickly dropped the water-sharing idea. (Darwish, 1994)
The lack of clarity in international law should be the focal point for relevant agencies going forward. Little precedent exists “that the UN International Law Commission or the International Court of Justice could [cite] to establish some rules to arbitrate on water sharing. . .” (Darwish, 1994).
The World Bank, often criticized for its role in the privatization of water resources, financed a dam project in India in the late 1940’s. The bank set precedent by requiring an agreement between surrounding nations that established usage and rights prior to the dam being built. While successful, this practice by the World Bank has been criticized by those like John Perkins (2004), who argues that the financing of such projects is a manipulative move which places emerging countries into large amounts of debt, leaving them no choice but to give into the demands of the Bank and global politics. Perkins (2004) stated,
Ecuador is awash in foreign debt and must devote an inordinate share of its national budget to paying this off, instead of using its capital to help the millions of its citizens officially classified as dangerously impoverished. The only way Ecuador can by down its foreign obligations is by selling its rain forests to the oil companies. (p. xxiii)
These issues combined with a culture that has demonstrated the willingness to use armed force over less crucial matters is a recipe for disagreement. In addition, water plays a primary role in many religious beliefs throughout the world. According to Vandana Shiva (2002),
Those who control power prefer to mask water wars as ethnic and religious conflicts. Such camouflaging is easy because regions along rivers are inhabited by pluralistic societies with diverse groups, languages, and practices. It is always possible to color water conflicts in such regions as conflicts among regions, religions, and ethnicities. In Punjab, and important component of conflicts that led to more than 15,000 deaths during the 1980s was an ongoing discord over the sharing of river waters. However, the conflict, which centered on development disagreements including strategies of the use and distribution of Punjab’s rivers, was characterized as an issue of Sikh separatism. (p. xi)
Twenty-First Century Sustainability
As evidenced by the previously mentioned examples, peace is critical to sustainability and sustainability is important to peace. Conflict of any type reduces the resources that might otherwise be available to a nation’s citizens. In addition to the reduction of resources, war affects human lives, infrastructure, and the global economy. By obtaining peace, critical resources such as human capital, money, and environmental resources are freed for the betterment of a nation’s people. The quality of life is therefore improved and the threat of discord is thereby reduced.
A similar argument was presented in the United Nations’ document titled, Report of the World Commission on Environment and Development: Our Common Future, (“the report”). The report concluded that,
[a] world in which poverty and inequity are endemic will always be prone to ecological and other crises. Sustainable development requires meeting the basic needs of all and extending to all the opportunity to satisfy their aspirations for a better life. (http://www.un-documents.net/ocf-02.htm#I)
This leaves one question. What creates and defines sustainable development in a globalized world? The interdependent nature and challenges of today’s world often conflict with the nature of institutions that currently exist. Most of these institutions tend to be “independent, fragmented, and working to relatively narrow mandates with closed decision processes” (http://www.un-documents.net/ocf-02.htm#I).
The solution to this problem is simple; sustainable management processes and good governance of the nation state, NGOs, and international corporations can help to bridge the gap that currently exists in the international system.
A 2009 study by the Organization for Economic Cooperation and Development (OECD), Sustainable Governance Indicators (SGI), found that,
… the quality of governance is most important in ensuring sustainable policy outcomes. Countries with ‘good executive management performance, a sound democratic order and an effective inclusion of societal actors into policymaking processes are more successful in terms of sustainability and also in terms of social justice’. (http://www.sgi-network.org/pdf/SGI09_Brochure.pdf)
The quality of governance for a nation, NGO, or corporation should be evaluated by the
willingness to recognize a need for change, and the ability to adapt the policies and processes necessary to implement such change.
If this principle is applied to the current international system, the probability of achieving peace will be much greater. The inclusion of varying societal actors and an open, coordinated, policymaking process will reduce fear, define clear standards, and optimize the existing standards of governance and management.
In conclusion, the Twenty-First Century, while arguably a globalized world, can seize the opportunity to leverage globalization through good governance and sustainable management practices. It should not be seen as a need to “undo” or “reinvent” the current system and hundreds of years of international relations precedent; rather an opportunity to evolve and optimize the current system for the attainment of long-term global cooperation.
References
Darwish, A. Geneva conference on environment and quality of life. Retrieved from Lecture
Notes Online Web site: http://www.mideastnews.com/WaterWars.htm
OECD. (2009). Policy performance and executive capacity in the OECD: Sustainable
governance indicators 2009 [PDF document]. Retrieved on May 9, 2010 from http://www.sgi-network.org/pdf/SGI09_Brochure.pdf
Perkins, J. (2004). Confessions of an economic hit man. New York, NY: Penguin Group.
United Nations. (1987). A/42/427 Our common future: Report of the World Commission on
Environment and Development. Retrieved on May 9, 2010 from http://www.un-documents.net/wced-ocf.htm
Vandana, S. (2002). Water wars: Privatization, pollution, and profit. Cambridge, MA: South
End Press. Retrieved on May 9, 2010 from http://books.google.com/books?id=J7CGlu3qAOIC&printsec=frontcover&dq=Water+Wars&source=bl&ots=LlvX3JQ3Xc&sig=flTYmk8BczM83XEgNK9K-z4W3OI&hl=en&ei=UxjmS6C9CYGC8gaZvqiiDQ&sa=X&oi=book_result&ct=result&resnum=9&ved=0CEAQ6AEwCA#v=onepage&q&f=false
The reality of the twenty-first century has revealed the need for a comprehensive, logical, coordinated effort from the various agencies responsible for the successful management of global threats. Prior to World War II, international relations occurred within a structure where blood ran thicker than water; conflict resulted over conflicting ethnic values and norms such as religion, race, and tradition. Today, while these issues are still ongoing, international relations and peace operations are occurring in a world where money and, even water, runs thicker than blood. International trade, fresh water supply, food supply, and disease control are key issues that are facing the world today. In short, management of sustainability issues going forward will be the key to peaceful international relations and peace will be the key to a sustainable world.
Keeping the Peace Then and Now
Prior to World War II, keeping the peace meant preventing conflict that resulted from expansionist ideals and opposing religious and cultural values and norms. As far back as 1095, the First Crusade set out with the goal of recapturing Jerusalem and the Holy Land from Muslim rule. These religious wars continued for the next two-hundred years, and the term “crusade” was later used to describe contemporary campaigns outside the Levant in the 16th century.
Over eight centuries later, the blurring of ethnic and cultural boundaries between the Germans and Slavs resulted in a racial, social Darwinism that eventually gave way to armed conflict. Following World War I, the first attempt at modern peace keeping agreements resulted in the Treaty of Versailles.
The Treaty of Versailles did not appease Germany, and did not provide the constraints necessary to prevent it from becoming the dominant continental power once again. Resentment amongst the Germans and Austria-Hungary grew when harsh monetary penalties, breaking of territory, and massive ethnic relocation resulted in the destruction of the German economy.
Hyperinflation and the subsequent German default on sovereign debt owed to the victors of World War I, demonstrated the failure of the Treaty of Versailles and Woodrow Wilson’s Fourteen Points. This failure was evidenced by a short-term goal which failed to evaluate the multi-faceted needs to obtain long-term peace.
Following World War II and progressing through the late Twentieth Century, the United Nations, World Bank, and the European Union were formed. These are just a few examples of today’s international organizations that play a role in international relations and peace keeping operations. In addition to international organizations, the advancement of technology and international business has resulted in many non-governmental organizations (NGOs), and international corporations becoming actors on the international stage.
Today, the international structure has become more complex. While armed conflict, or threat thereof, has decreased, the issues that give rise to conflict have become more abundant and diverse.
Water Wars
A great Twenty-First Century example of the complexity of today’s system and new challenges to international relations can be demonstrated by examining the world’s most abundant resource; water. Water has become a key issue for states, corporations and NGO’s. Privatization of water and an ever expanding global population has resulted in sustainability concerns and conflicts, now called “water wars”.
According to Vandana Shiva (2002),
Paradigm wars over water are taking place in every society, East and West, North and South. In this sense, water wars are global wars, with diverse cultures and ecosystems, sharing the universal ethic of water as an ecological necessity, pitted against a corporate culture of privatization, greed and enclosures of the water commons. (p. x)
In addition to the paradigm wars, real wars, explicitly over water, have already erupted in some areas of the world. The Middle-East has already seen conflicts arise solely over water between Syria and Turkey as well as Egypt and Ethiopia.
Sustainable, strategic, and coordinated policy will be critical to the peaceful existence of this region within the first quarter of the Twenty-First century. According to Adel Darwish’s 1994 lecture at the Geneva Conference on Environment and Quality of Life,
Israel's population is projected to grow from 4.7 million in 1990 to about 8 million in 2025. By that time Palestinians in the west bank - because of their higher birth rate, are likely to reach just under seven million - the two peoples are to share the same water resources which they both now say are not enough. (http://www.mideastnews.com/WaterWars.htm)
Current international law provides little guidance for the control of water. There are very
few agreements that exist today other than customary rights, established by long-term use of the resource. In the Middle-East upstream countries often control the water resources affecting downstream peoples dependant on the water supply. This is the case between Egypt and Israel as well as Turkey.
The conflict between Egypt and Israel dates to the mid 1960’s when Israel acted against the diversion of the Jordan River. Conflict continued until the early 1970’s when meetings at Camp David, resulted in a peace treaty in 1979. Originally, Israel suggested cooperation on water projects. Sadat, Egypt’s president, agreed, but rescinded when the Egyptian army rebelled against him.
Amazed that the army could plot against him, Mr Sadat questioned Field Marshal Abdel Halim Abu Ghazala, the defense minister, who said the loyalty of the Egyptian army could not be guaranteed if a coup was mounted `to stop Israel [from] stealing the Nile’. The president quickly dropped the water-sharing idea. (Darwish, 1994)
The lack of clarity in international law should be the focal point for relevant agencies going forward. Little precedent exists “that the UN International Law Commission or the International Court of Justice could [cite] to establish some rules to arbitrate on water sharing. . .” (Darwish, 1994).
The World Bank, often criticized for its role in the privatization of water resources, financed a dam project in India in the late 1940’s. The bank set precedent by requiring an agreement between surrounding nations that established usage and rights prior to the dam being built. While successful, this practice by the World Bank has been criticized by those like John Perkins (2004), who argues that the financing of such projects is a manipulative move which places emerging countries into large amounts of debt, leaving them no choice but to give into the demands of the Bank and global politics. Perkins (2004) stated,
Ecuador is awash in foreign debt and must devote an inordinate share of its national budget to paying this off, instead of using its capital to help the millions of its citizens officially classified as dangerously impoverished. The only way Ecuador can by down its foreign obligations is by selling its rain forests to the oil companies. (p. xxiii)
These issues combined with a culture that has demonstrated the willingness to use armed force over less crucial matters is a recipe for disagreement. In addition, water plays a primary role in many religious beliefs throughout the world. According to Vandana Shiva (2002),
Those who control power prefer to mask water wars as ethnic and religious conflicts. Such camouflaging is easy because regions along rivers are inhabited by pluralistic societies with diverse groups, languages, and practices. It is always possible to color water conflicts in such regions as conflicts among regions, religions, and ethnicities. In Punjab, and important component of conflicts that led to more than 15,000 deaths during the 1980s was an ongoing discord over the sharing of river waters. However, the conflict, which centered on development disagreements including strategies of the use and distribution of Punjab’s rivers, was characterized as an issue of Sikh separatism. (p. xi)
Twenty-First Century Sustainability
As evidenced by the previously mentioned examples, peace is critical to sustainability and sustainability is important to peace. Conflict of any type reduces the resources that might otherwise be available to a nation’s citizens. In addition to the reduction of resources, war affects human lives, infrastructure, and the global economy. By obtaining peace, critical resources such as human capital, money, and environmental resources are freed for the betterment of a nation’s people. The quality of life is therefore improved and the threat of discord is thereby reduced.
A similar argument was presented in the United Nations’ document titled, Report of the World Commission on Environment and Development: Our Common Future, (“the report”). The report concluded that,
[a] world in which poverty and inequity are endemic will always be prone to ecological and other crises. Sustainable development requires meeting the basic needs of all and extending to all the opportunity to satisfy their aspirations for a better life. (http://www.un-documents.net/ocf-02.htm#I)
This leaves one question. What creates and defines sustainable development in a globalized world? The interdependent nature and challenges of today’s world often conflict with the nature of institutions that currently exist. Most of these institutions tend to be “independent, fragmented, and working to relatively narrow mandates with closed decision processes” (http://www.un-documents.net/ocf-02.htm#I).
The solution to this problem is simple; sustainable management processes and good governance of the nation state, NGOs, and international corporations can help to bridge the gap that currently exists in the international system.
A 2009 study by the Organization for Economic Cooperation and Development (OECD), Sustainable Governance Indicators (SGI), found that,
… the quality of governance is most important in ensuring sustainable policy outcomes. Countries with ‘good executive management performance, a sound democratic order and an effective inclusion of societal actors into policymaking processes are more successful in terms of sustainability and also in terms of social justice’. (http://www.sgi-network.org/pdf/SGI09_Brochure.pdf)
The quality of governance for a nation, NGO, or corporation should be evaluated by the
willingness to recognize a need for change, and the ability to adapt the policies and processes necessary to implement such change.
If this principle is applied to the current international system, the probability of achieving peace will be much greater. The inclusion of varying societal actors and an open, coordinated, policymaking process will reduce fear, define clear standards, and optimize the existing standards of governance and management.
In conclusion, the Twenty-First Century, while arguably a globalized world, can seize the opportunity to leverage globalization through good governance and sustainable management practices. It should not be seen as a need to “undo” or “reinvent” the current system and hundreds of years of international relations precedent; rather an opportunity to evolve and optimize the current system for the attainment of long-term global cooperation.
References
Darwish, A. Geneva conference on environment and quality of life. Retrieved from Lecture
Notes Online Web site: http://www.mideastnews.com/WaterWars.htm
OECD. (2009). Policy performance and executive capacity in the OECD: Sustainable
governance indicators 2009 [PDF document]. Retrieved on May 9, 2010 from http://www.sgi-network.org/pdf/SGI09_Brochure.pdf
Perkins, J. (2004). Confessions of an economic hit man. New York, NY: Penguin Group.
United Nations. (1987). A/42/427 Our common future: Report of the World Commission on
Environment and Development. Retrieved on May 9, 2010 from http://www.un-documents.net/wced-ocf.htm
Vandana, S. (2002). Water wars: Privatization, pollution, and profit. Cambridge, MA: South
End Press. Retrieved on May 9, 2010 from http://books.google.com/books?id=J7CGlu3qAOIC&printsec=frontcover&dq=Water+Wars&source=bl&ots=LlvX3JQ3Xc&sig=flTYmk8BczM83XEgNK9K-z4W3OI&hl=en&ei=UxjmS6C9CYGC8gaZvqiiDQ&sa=X&oi=book_result&ct=result&resnum=9&ved=0CEAQ6AEwCA#v=onepage&q&f=false
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Wednesday, April 21, 2010
The Expanding Reach of International Law: A Historical Evaluation
Introduction
The expanding reach of international law has been heralded by some and scoffed at by others during the last century. This expansion has not been without atrocity and triumph. To better understand the expanding reach and evolution of international law, it is necessary to understand its evolution from a historical perspective. International law, when evaluated through the historical lenses, reveals a transition from "statism" to "positivism", and more recently, "globalism". Understanding each of these concepts individually becomes a critical component when critiquing the application of international law as it applies to matters directly involving the individual.
Statism
Statism became paramount in the nineteenth century following the dissimilation of the concept of nobility and the de facto right and capability of an individual to make decisions. The individual, through this lens, was no longer given consideration, and resulted in a period of reformation and the emergence of the nation-state. Following the Age of Enlightenment the concept of "sovereignty" changed from Church supremacy to State supremacy. State supremacy and the modern parameters of sovereignty were established by the Treaty of Westphalia in 1648. The concept of statism, therefore, "vested [sovereignty] not in the people but in the national state, and [conceived] that all individuals and associations exist only to enhance the power, the prestige, and the well-being of the state" (Plano, 1973).
Positivism
This state-centered philosophy gave rise to a positivistic concept of law. This concept of law dominated for more than two-hundred years, resulting in a "subject-based approach" (Huber, 2009). According to Huber (2009), the"subject-based" approach to international law is firmly founded on the doctrine of inalienable state sovereignty. In this positivistic legal framework, state sovereignty prohibited the imposition of legal obligations on states for the purpose of protecting human rights. In essence, no longer was there any legal or moral authority higher than the state.
The authority of the state was finally challenged following the atrocities of World War II. Grave violations of human rights, during the war, resulted in the Nuremberg trials. The trials resulted in the ability to charge and prosecute individuals under international law.At the request of the General Assembly of the United Nations, the International Law Commission prepared a formulation of the principles of international law recognized in the Charter and the Judgment of the Nuremberg Tribunal (Nuremberg Principles). The General Assembly unanimously affirmed these principles and in 1947 further requested the International Law Commission to take them into account in preparing the Draft Code of Crimes Against the Peace and Security of Mankind (Draft Code). (Gallmetzer & Klamberg, p. 60)
The Nuremberg trials ushered in the return of classical political philosophy, as it applied to the individual. Whereas prior reformation had offered protection to the individual by giving supremacy to the state, the Nuremburg tribunal rejected such notions stating that, "'[c]rimes against international law are committed by men, not by abstract entities and only by punishing individuals who commit such crimes can the provisions of international law be enforced'" (Huber, 2009).Following the trials at Nuremburg international law further expanded its reach to the individual. This was evidenced by several important cases in international law. One of the first was Liechtenstein v. Guatemala which was held before the International Court of Justice in 1955. The "Nottebohm Case," as it was called, resulted in a decision that defined effective nationality.
While Liechtensten v. Guatemala could be considered a set-back for the rights of the individual, under international law, later cases returned some protection to the individual's right to be protected under the state.
From or about 1998 the Strasbourg court [ECHR] has further implied or read into article 2, positive obligations on the state to establish and enforce a general framework of laws, regulations and procedures to ensure the due protection of the lives of individuals within their (legal) jurisdiction. (O'Neill, 2009)
The Nuremberg and later Tokyo International Tribunals established the basis for individual and state liability, under international law, for criminal acts against human rights, global peace, and war crimes.The specific responsibilities and guidelines for legal application of these principles were defined by Article 6 of the Charter of the Nuremberg International Military Tribunal, and later affirmed and codified by the International Law Commission, a subsidiary of the United Nations.
Globalization
Essentially, Nuremberg was the beginning of many events which would define and recognize, not only individual rights under international law, but also individual responsibilities. This expansion and recognition of the individual forced the decline of statism, the erosion of the concept of nationality as defined by territorial boundaries, and the rise of a new concept known as "globalization".Globalization, driven by technology, has resulted in the high-speed sharing of information, ideals and norms between states and individuals. It has challenged the traditional view of sovereignty "by trends toward extraterritoriality, regionalization, and universality of laws" (Huber, 2009).
The challenges for international law, created by these trends, have resulted in a world that is desperate for guidance. In an attempt to meet these needs many intergovernmental organizations (IGOs) were developed. In 1949 the recognition of IGOs as a "legal personality" by the International Court of Justice essentially transformed international law.
Today these IGOs, the most important being the United Nations, have played important roles in protecting human rights. Human rights protection has developed and been established through various international tribunals and courts. This too, presents new challenges for international law.
These international courts can suffer from insufficient funding, lack of jurisdiction, and especially impotence in implementing their decisions. Even the International Criminal Court, with its compulsory jurisdiction, must have its jurisdiction originally accepted by parties in treaties. (Huber, 2009)
Another challenge for the expansion of international law, as argued by many scholars today, is the erosion of the State and the over-empowerment of the individual. If an over emphasis is placed on the individual's rights, national norms and customs will be skewed. Hence the argument emerges that international law should respect and remain "rooted in a transcending moral order, the natural law" (Huber, 2009).Globalization has undeniably resulted in the need for structure within international law that can develop and manage mutual respect, reasonable responsibilities, and expectations between and among States, individuals and intergovernmental organizations. The establishment and recognition of human rights has been a great triumph, resulting from this evolutionary process. Nonetheless, a system lacking the power of enforcement struggles, and will likely continue to struggle to find balance.
Conclusion
In conclusion, international law, and the expansion thereof, must be regarded as a malleable science. It should adjust accordingly to the needs of the system, yielding when necessary to the supremacy of the State, and when necessary suppressing that same power for the protection of the individual. It is unlikely that we will see a complete resurrection of prior philosophies. However, historical lenses should be applied when necessary, and the lessons of our ancestors, both "positivists" and "statists" incorporated, in an effort to achieve and maintain this delicate balance.Footnotes
Effective nationality is a principle critical determining the dual-national citizen's protection under the state. "The application of the 'genuine link' theory, borrowed from the very different context of dual nationality problems, has the unfortunate effect of depriving an individual of a hearing on the merits and the protection by a state willing to espouse his claim in the transnational arena. The net effect is an immense loss of protection of human rights for individuals" (http://www.law-lib.com/LW/lw_view.asp?no=4149).
2
McCann v. United Kingdom (1996) brought into question Article 2 of the European Convention on Human Rights.
3 "Legal personality" for IGOs was established by the Reparation Case (1949). Prior to this case, international law only applied between States; as States were interpreted as having international personality and were therefore respected to have their claims heard internationally. "The 1949 Reparations of Injuries Advisory Opinion confirmed that IGOs, as well as individuals and multi-national corporations could posses rights and responsibilities as the State may attribute to them" ( http://www.icj-cij.org/docket/files/4/1837.pdf).
References
Advisory Opinion. (1949). Reparation for injuries suffered in the service of the United Nations:
Advisory opinion of 11 April 1949. Retrieved on April 17, 2010 from http://www.icj-cij.org/docket/files/4/1837.pdf
Gallmetzer R., Klamberg, M. (n.d.). Individual responsibility for crimes under international law: The un ad hoc tribunals and the international criminal court. Retrieved on April 17, 2010 from http://www.iclklamberg.com/files/Individual%20responsibility.pdf
Huber, N. (2009). The challenges of expanding the scope of international law. Retrieved on April 17, 2010 from
http://www.journalonline.co.uk/Extras/1007024.aspxhttp://www.nathanhuber.com/essays/challenges-expanding-scope-international-law
O' Neil, A. (2009). The European Court and the duty to investigate deaths. The Journal Online. http://www.journalonline.co.uk/Extras/1007024.aspxhttp://www.nathanhuber.com/essays/challenges-expanding-scope-international-law
Retrieved on April 17, 2010 from
Plano, J. (1973). Statism. In political science dictionary. Dryden Press.
Reviews on the principle. (2004). Reviews on the principle of effective nationality. Retrieved on
April 17, 2010 from http://www.law-lib.com/LW/lw_view.asp?no=4149
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