International Trade and Business Law Review: Volume XV

 
Articles - Abstracts

The Curious Case of Shareholder Primacy Norm: Calling for a More Realistic Theory
by Dr Jingchen Zhao
The shareholder primacy norm is the corporate governance model prevailing in the US, the UK and some other common law countries with effective legal enforcement of shareholder rights. The directors’ duties are exclusively owed to the company and the maximisation of the wealth of the shareholder is the fundamental focus of the fiduciary duties. It is constructed in terms of financing though equity, dispersed ownership, active markets for corporate control, and flexible labour markets. Companies rely more on stock and bond markets for their external financing. Corporate law provides relatively extensive protection for shareholders, with active enforcement of that protection in the court. According to the maintenance of efficiency theory, it is more efficient if directors run corporations with the aim of maximising shareholder wealth since the least cost is expended in doing this. However there are also many disadvantages to adopt shareholder norm as a dominant corporate objective principle in a jurisdiction. Shareholder primacy, as a curious and controversial case in corporate law and corporate governance, will be interpreted in this article based on various legal theories, and the advantages and objections of both models will be presented with further touch on stakeholder theory, which seems to be a more realistic theory.


Is The Newly Published SOAE Law Compatible with the Current State Assets Management System?
by Dr Cheng Wei-Qi
This article discusses a new law The Law of the PRC on State owned Assets Enterprises (SOAE Law) which became effective on 1 May 2009 in China. The focus is on discussing whether the new SOAE Law is compatible with the current state assets management system (SAMS). This article shall discuss three parts, first, the features and drawbacks of the current SAMS and second the main characteristics of the newly published SOAE Law. The last part discusses three potential governance concerns in implementing the newly published SOAE Law.


Reflections on a Critical Aspect of CISG-Governed International Sale of Goods Transactions: The Impact of the Hague Convention on Choice of Court Agreements on Forum Selection
by Des Taylor
The United Nations Convention on Contracts for the International Sale of Goods (CISG) is the prime legal instrument providing the substantive law as regards various important aspects of many international sale of goods transactions. The CISG has gained worldwide acceptance, it being estimated that approximately seventy to eighty percent of all international sale of goods transactions are governed by the CISG. Because of this importance, anything that affects or interacts with the CISG or has the potential to do so must also be taken into account by the parties to CISG-governed international sale of goods transactions. The Hague Convention on Choice of Court Agreements has that potential. This article examines whether there is an interaction or linkage between these two instruments and, if so, whether, based on what is known regarding the behaviour of parties to CISG-governed international sale of goods transactions, there is any reason to expect that the Hague Convention on Choice of Court Agreements, if it comes into force and is widely adopted, will lead to a different forum selection by a large number of parties to CISG-governed international sale of goods transactions.


Reign Investments in Saudi Arabia
by Hussain Agil and Bruno Zeller
In the past few years, the nature of Saudi Arabia’s foreign investments has been under a lot of national and international scrutiny. This interest, according to most scholars, is based on the vibrant nature of the Saudi market thus making it a desirable place for potential investors. In spite of this increased focus, there have only been few studies conducted to understand the effectiveness of the legal investment framework in Saudi Arabia. As a result, most of the information in relation to the legal landscape governing foreign investment in Saudi Arabia is not fully understood. It is with this object in mind that this paper analysis the potential of foreign investments in Saudi Arabia specially addressing who can invest and in which sectors investments are possible as well as the protection mechanism which are in place to guarantee foreign investments.


A Harmonised International Commercial and Investment Arbitration Law Code (HICIALC) Applied to Judicial Review of Investor-State Arbitration Disputes: Upholding Res Judicata of Arbitration Awards and Tribunals from Undue Appeals and Annulment due to Court Intervention
by Mary B Ayad
A Harmonised International Commercial and Investment Arbitration Law Code (‘HICIALC’), governing MENA-FI investment and commercial contracts and disputes between Middle Eastern governments and foreign investors would resolve serious conflicts that arise due to the inherent nature of Investor-State agreements. An economic background of the MENA in light of the benefits of foreign investment will be discussed and implications for foreign investors will be given. It will be shown that arbitral award enforcement is an important contributor to the economic development of the MENA. The question of state intervention in trade is implicated herein when courts conduct judicial review of arbitrations that lead to the prevention of the enforcement of arbitral awards or encroach on arbitral tribunal jurisdiction. Drafting a HICIALC that integrates general principles of law from civil, common and sharia law, allows the central problem of arbitral award enforcement facing investors party to international commercial or investment arbitrations in the MENA, to be settled in a balanced and fair way for both sides allowing economic value to both the state and the investor. Relevant regulatory clauses taken from each of these aforementioned areas of law can be drafted into a new HICIALC. A HICIALC can resolve the weaknesses inherent in these laws when dealing with MENA-FI arbitrations. Several related and overlapping areas of law, particularly those that deal with oil, gas law, and energy law, international commercial arbitration law, international investment arbitration law, foreign investment law, and the law governing regulate these types of contracts when in dispute and can benefit from a HICIALC instrument for a number of reasons not least of which, because many oil producing nations are located in the MENA.


Competition Law Developments and the Australian Banking Sector: The Aftermath of the Global Financial Crisis
by Leela Cejnar
This article has been written by way of follow-up to an article entitled ‘Bank Mergers in Australia: The Past, the Present and the Possible Future Impact of the Global Financial Crisis’, which was published in Volume XIII of the International Trade and Business Law Review in 2010. As discussed in that article, in 2008 two significant Australian bank mergers were allowed: Westpac Banking Corporation with the St George Bank Limited and the Commonwealth Bank of Australia with BankWest/St Andrew’s Australia Pty Limited. Both these mergers took place in the context of one of history’s worst financial crises, raising concerns about whether, going forward, there is likely to be a shift in merger law and policy (particularly with regard to the banking sector), such that the importance of preserving financial stability could come at the cost of competition.

One of the reasons for such concerns was that responses to the global financial crisis included the encouragement of mergers, resulting in the creation of ‘mega banks’ in several jurisdictions worldwide. In addition, government bailouts of institutions (largely but not limited to those in the banking and financial sector), the provision of cash injections into financial systems to keep credit flowing and the pressure for competition authorities to ‘relax’ enforcement of competition rules in the interest of financial stability, all added to fears that political pressure would become increasingly influential on the implementation of competition law, such that competition law and policy would be watered down, in Australia and in other jurisdictions, in the interest of economic and financial stability. By way of example, in the European Union, the European Commission was essentially forced to shift its policy on the application of State aid rules in relation to financial institutions in response to rescue measures taken by European governments to support their financial sectors. While Australia was luckier than most countries, in that the strength of its domestic economy and banking sector helped it to withstand the severity of the crisis’ impact, Australian markets were also affected by the global financial crisis.

This article examines key developments to Australian competition law and policy, in the aftermath of the global financial crisis and focuses particularly on the impact of these developments on the Australian banking sector.


A Digitized Sideshow: Why the ‘Great Debate’ regarding the use of Electronically Stored Information in International Commercial Arbitration Misses the Point and why Practitioners Should Take Note
by Nicholas P Manganaro
Anecdotal evidence suggests there is an ideological divide between attorneys from the United States and their European counterparts regarding the use of electronically stored information (ESI) in international commercial arbitration. Attorneys from the United States are portrayed as favouring expansive evidence production akin to what is available under the US Federal Rules of Civil Procedure. But painting all parties from the United States with so broad a brush may distort the reality of the situation and overstate the need for new and ambitious ESI rules. The results of an informal survey of in-house counsels of the Fortune 500 suggest that US firms may be no more in favour of the liberal use of ESI in arbitration than would the stereotypical civil-law practitioner. Furthermore, treating the ESI question as simply a procedural matter ignores important ethical considerations and gives short shrift to the bedrock principle of party autonomy. Attorneys on both sides of this divide have a duty to inform clients of the evidentiary pitfalls increasingly associated with international arbitration and should recommend the inclusion of language akin to the International Institute for Conflict Prevention & Resolution (CPR) Protocol on the Disclosure of Documents in the arbitration clauses they draft.



The OECD Convention on Combating Bribery of Foreign Public Officials and its Effectiveness in Australia: Are We Doing Enough?
by Shu Ying Wee
This article discusses the significant problem of foreign corruption in transnational business transactions and the steps taken by the international community to combat such corrupt practices, namely prosecuting those liable for bribing foreign public officials. The article revolves around the OECD Convention on Combating Bribery of Foreign Public Officials in International Business (‘OECD Convention’) and evaluates the Convention’s applicability and effectiveness in Australia. Australia enacted domestic legislation to comply with its obligations under the OECD Convention, penalising those who bribe foreign public officials. This Convention has a significant impact in regulating the conduct of companies as the simple act of paying a bribe may result in criminal charges against the individual as well as the company and there are extremely high penalties if successfully prosecuted. Further, the scope of the foreign bribery offence has a wide application as it covers Australian nationals and acts conducted in Australian territory. The author evaluates the various articles within the OECD Convention itself and determines if Australia’s domestic legislation is sufficiently implemented to comply with its obligations at international law.

The article then focuses its discussion on the effectiveness of Australia’s laws to investigate and prosecute for the criminal offence of foreign bribery given that there had been no successful prosecutions since Australia first ratified the OECD Convention in 1999. The lack of prosecutions has often led to criticisms by Transparency International, the anti-corruption watchdog, that Australia has taken little or no action to combat foreign bribery. The article discusses recent examples including the Securency International investigation, as well as the widely-reported 2009 Rio Tinto incident involving Chinese officials. Overall, this article demonstrates that Australia needs to take a more active approach if it wishes to prevent international corruption.


Incorporating Humanity and the Global Economy the Law of International Investment and Human Rights
by Raphaël de Vietri
This article provides an overview of the interrelations that exist between international investment and human rights law. Through an exploration of both investor rights, and human right abuses by investors, the author demonstrates how international investment is fundamentally linked with human rights in many instances. It is argued that legal fragmentation between these two areas of international law is undesirable, and that future research and jurisprudence should focus on encouraging rapprochement between them.


How can Retail Banking Regulation be applied to Micro-Finance Institutions?
by Jonathan Greenacre
The provision of micro-financial services to poor households is considered a highly effective method of alleviating poverty. Traditionally the organisations that provided micro-finance were subsidised by donors and served small numbers of consumers. Recently, many of these institutions have transformed into self-sufficient, commercial, privately-run institutions, or ‘micro-banks’. A large number of micro-banks in India, Morocco and Bosnia-Herzegovina are subject to inadequate regulation and so have begun to fail, damaging or destroying their surrounding markets.

In response to such collapses, the donor community and domestic regulators have begun to explore how the burgeoning micro-banking industry can be regulated, but are yet to decide upon guiding principles and overarching rules which will minimise the likelihood of future micro-banking failures.

This indecision seems to be due to the contradictory objectives for micro-banks and their surrounding markets. Micro-banks must generate profit in order to provide returns to their shareholders and debtors. However, the donor community is still involved in the industry through, for example, serving as micro-bank shareholders and financing market infrastructure, and continues to require micro-banks to serve poor households, even if doing so is unprofitable. Consequently, micro-banks must somehow be regulated in ways which reduce the risk of market collapse but impose minimal compliance costs, so that such institutions can continue to provide financial services to poor households.

This paper argues that regulatory principles and rules used for retail banks in developed markets can also be applied to micro-banks due to the functional similarities between these types of institutions. Principles and rules should not, however, be blindly transplanted from the retail banking sector into the micro-banking industry. Instead, such rules and principles should be appropriately adapted to deal with the realities of micro-finance markets, and be combined with pre-existing micro-finance principles.


A Balanced Approach to Distinguishing between Legitimate Regulation and Indirect Expropriation in Investor-State Arbitration
by Stephen Olynyk
This article is concerned with the interplay between indirect expropriation and States’ rights to regulate their domestic affairs. Expropriation has expanded beyond its origins as a protection from arbitrary and discriminatory seizure of private assets by a host State. It now requires States to consider the consequences of their non-discriminatory regulatory measures to ensure that they have not breached their international obligations. Current approaches to the issue of regulatory expropriation adopted by tribunals using the ‘sole effects’ doctrine and ‘police powers’ doctrine have resulted in a fragmented and often contradictory body of jurisprudence on this issue. This article proposes that in order to resolve this issue in the interests of both the States and investors, a balanced approach is required to determine whether a host State’s regulatory measure amounts to an indirect expropriation.


Establishing Jurisdiction through a Most-Favoured-Nation Clause
by Azlan Mohamed Noh
Most-favoured-nation treatment has long existed at international law, primarily for the purpose of providing equality of treatment of one national of a State’s investment within a host State when compared to another national of a State’s investment within that same host State. However this article explores the increasing trend of claimant States, in a dispute brought under the dispute resolution provisions of a bilateral investment treaty, referring to a most-favoured-nation clause not for the usual purpose of improving the substantive treatment afforded to their national’s investment but rather, with the aim of invoking a more favourable dispute resolution clause found in a third State’s bilateral investment treaty with the host State. This throws into question one of the fundamental cornerstones of international arbitration, that is, party autonomy. This is so particularly with respect to the parties to the treaty’s original selection of seat, arbitral forum and lexarbitri.


When Two Polar Extremes Collide: An Exploration into the Effects of Insolvency on International Arbitration
by Samantha Jayne Lord
The global economic crisis, which burst onto the world stage in mid-2008, saw a dramatic increase in the number of corporate insolvencies. As arbitration has long been established as the leading method of dispute resolution of the international business community it comes as no surprise that arbitral tribunals and indeed enforcing courts have faced, and are still facing, situations in which a party to an arbitration agreement is insolvent. Insolvency and arbitration collide head on because their purposes and natures are diametrically opposed. Many complex problems therefore arise when a party to an arbitration agreement is insolvent. However, given the diversity of insolvency laws around the globe there is to date no unified approach to dealing with the issues which insolvency poses in arbitration.

This paper therefore fosters an understanding of the collision between insolvency and arbitration, draws attention to the issue of applicable law and explores the effects which insolvency can have on the jurisdiction of an arbitral tribunal and the enforcement of the resulting award. In doing so, this paper is not limited in its analysis to a particular jurisdiction; rather it observes common trends across jurisdictions and draws attention to peculiarities. This paper concludes that although insolvency poses many problems for arbitration, in most cases these can be overcome and as such arbitration remains a viable option for those wishing to arbitrate their dispute against an insolvent party.
Foreword to the Sun Rises in the West Conference Papers

The Mannkal Economic Education Foundation and the International Trade and Business Law Review were proud to present the Sun Rises in the West Conference held in Perth on 7-8 October 2010.

The theme of the Conference was The Governance and Commercial Structures: Foundations of Western Law and Liberty. This Conference made a contribution to the understanding of Western Civilisation and its legal, social, political, and economic traditions. It raised awareness about issues which threaten individual rights and freedoms, and indeed the very way of life which we currently enjoy. The themes of the conference covered legal, cultural, educational, economic and socio-political issues, involving the active participation of leading experts in their fields, thus making this Conference truly unique. A selection of papers presented at the Conference has been included in this edition of the International Trade and Business Law Review.

Mannkal Economic Education Foundation was pleased to work closely with the International Trade and Business Law Review to facilitate the Conference by underwriting and administering this important event. In supporting events such as the Sun Rises in the West; Mannkal aims to strengthen the free market system in Western Australia and Australia, by promoting ideals of voluntary co-operation, choice, personal rights, limited government and responsible resourcefulness of individuals. It is a registered non-profit organisation with an independent board. Mannkal achieves its aims by financing and organising a number of projects, including: events for the exchange of ideas; seminars and student scholarships to promote a greater understanding of the concepts which underpin free societies; policy papers pertaining to Western Australia; and, an alternative book store for economic and Australian history books.

Book Reviews

Gregory C Shaffer and Ricardo Melendez-Ortiz (eds), Dispute Settlement at the WTO: The Developing Country Experience, Cambridge University Press, 2010, 567 pages, ISBN 9780521769679, 355 pages
review by Blair Ronald Stewart Simpson

Rashda Rana and Michelle Sanson, International Commercial Arbitration, Thompson Reuters, 2011, ISBN 9780455228242, 365 pages
review by Kenny Yang

Foreword

A Continuing Journey
by Andrew Pickford and Ron Manners

The Limits of Property and Freedom
by Sinclair Davidson

Sleepwalking into Sharia: Hate Speech Laws and Islamic Blasphemy Strictures
by Mark Durie

Money and Liberty
by Jerry L Jordan

Servile State and Liberty
by Greg Melleuish

The Law of Liberty: Natural Law Roots of Western Constitutionalism
by Augusto Zimmermann