Tuesday, May 18, 2021

Globalization and it's discontents?

Two interesting pieces on how globalised we really are and what does data localisation actually mean?

Financial Times reports on the nationality of some top executives of global firms and how that can be relevant seems to be jarring in a world where large corporations work across borders- and the reason is political tensions across the world.

There is a risk that foreign-born decision-makers may have a strong allegiance to their country of origin, one that puts them at odds with their company.

Data localitsaion is major issue in ecommerce negotiations. Data should be stored locally, within borders. So while globalisation is important, data localisation would mandate that data of a country's citizens should not cross borders. What this actually means comes out in a NYT's article of Apple and China - a large physical data centre being built in Guiyang, China to sore all data of Apple phone users in China.

In China, Apple has ceded legal ownership of its customers’ data to Guizhou-Cloud Big Data, or GCBD, a company owned by the government of Guizhou Province, whose capital is Guiyang. Apple recently required its Chinese customers to accept new iCloud terms and conditions that list GCBD as the service provider and Apple as “an additional party.” Apple told customers the change was to “improve iCloud services in China mainland and comply with Chinese regulations.

Globalization and its discontents?

Monday, May 17, 2021

A quid pro quo?

Views of the IP waiver resolving the current crisis of vaccines are divided. Some say it is necessary and the first step to bring about vaccine equity. Others contend that it is a blow to innovation and will not solve the more complex problems of technical know how and production capacity.

Alan Wm Wolff writes about the need to resolve this issue on the IP front with a structured discussion and steps to combat various aspects of the problem. What I found instructive in his piece is the reference to other aspects of WTO negotiations other than the waiver of IP:

The US willingness to engage in talks on a TRIPS waiver should be reciprocated by those who are reluctant to give their consent to trade talks and negotiated results on other matters in the WTO of great importance, such as dealing with climate change, making the planet greener, limiting fisheries subsidies, crafting rules for the digital economy, and agreeing to prohibit the use of export restrictions where purchases are being made by the World Food Program.

Interesting. There is nothing a like a free lunch in economics. 

A quid pro quo? What would the contours of the quid pro quo, if any, be?

Sunday, May 16, 2021

What drives FDI?

The relationship between strengthening the international legal framework and the flow of Foreign Direct Investment (FDI) has been a contested one. Proponents argue that a strong, pro-investor friendly regime is a pre-requisite for encouraging FDI into an economy while the naysayers argue that other factors are critical to FDI flow and not the international investment regime.

WSJ's piece on FDI flows during the pandemic is revealing. FDI as a percentage of GDP has fallen from 3.39% in 2007 to 1.24% in 2021. And it is expected to fall further.

What are the factors impacting FDI flows - both equity investments as well as greenfield investment. For one, the covid situation across the world would be a factor. An interesting aspect of FDI growth is the ability for investors to travel - fairly straightforward right? You can't travel - how will you decide on investing abroad!
FDI is particularly sensitive to the ability of investors to travel. Buying shares in a manufacturing firm in a foreign country is one thing. Buying a plot of land, building a facility and running the factory yourself is quite another: FDI cannot fully recover until international travel starts approaching previous levels.

Reference to a report by Kearny on FDI global trends was interesting. What are the factors that influence business leaders to invest in economies?

As per this table in the report referred to above, "strength of investor and property rights" stands sixth. Does this refer to strong IIAs with ISDS clauses? What if the other factors are stronger without a IIA in place? Or is it a combination of factors? Also, investment facilitation probably has a role when looking at point 4. But overall, the domestic regulatory framework of taxes and governance efficiency seems to play a major part.

Interestingly, data protection and localisation issues figures pretty high in the confidence boosters:

Local storage requirements mandating that companies must keep a copy of certain types of data within their national territories are also growing more common in other parts of the world and are top of mind for investors (see figure 9). This often applies to specific types of data, such as accounting or bookkeeping. Denmark is one example of a nation that mandates local storage of accounting data through its Book Keeping Act, which dictates that companies must store their accounting data for five years. Under special circumstances, the Danish Commerce and Companies Agency may grant companies permission to preserve accounting records abroad. However, permission is rarely granted. Finland’s Accounting Act (1997) also requires that companies store a copy of their accounting records, though the records can be stored in another EU country if a real-time connection to the data is guaranteed. And Germany’s Commercial Code requires companies to store accounting data and documents locally.

Data localisation does impact costs and it is something businesses have to factor in.

In terms of risk factors that businesses look at, the report suggests the following:

However, lack of strong investor protection or the mode of dispute settlement doesn't seem to be a major factor.

What explains Brazil's position in the ranking then? It is in the top 25 - without BITS and ISDS.

The analysis above indicates that there are a multitude of factors that businesses look at in terms of potential investment destinations. The existence of BITS as well as provisions relating to ISDS may be a small or insignificant part of the overall consideration. On th eother hand, in countries that do have a high confidence rating, these protections do exist.

Scope for further research?


Saturday, May 15, 2021

Intellectual property and ISDS - an interesting read

An interesting article on the interface of intellectual property rights and ISDS in the latest edition of the Michigan Journal of International Law by Daniel Gervais here caught my attention. 

No it has nothing to do with IP waivers and the present debate on the covid pandemic. Titled "Intellectual Property: A Beacon for Reform of Investor-State Dispute Settlement", it relates to the challenge of state action related to intellectual property in ISDS tribunals and what lessons cases have on treaty negotiation and tribunal interpretation.

The two cases referred to were the Eli Lilly case against Canada and the Philip Morris case against Uruguay. Ofcourse, in both the instances the ISDS tribunals did not find the measure to be incompatible with the State's obligations under the investment treaty. However, in the case of Canada, a judicial decision invalidating a patent on the ground that it did not satisfy the utility test was challenged. Thus, decisions of courts pertaining to patentability were seemingly under the scanner.

The article also brings to light how treaty drafting adapted to this challenge. The future treaty texts of the EU-Canada CETA had specific provisions dealing with exclusion of decisions of domestic courts regarding intellectual property. Annex 8-D of the Canada-EU CETA states:

Mindful that the Tribunal for the resolution of investment disputes between investors and states is meant to enforce the obligations referred to in Article 8.18.1, and is not an appeal mechanism for the decisions of domestic courts, the Parties recall that the domestic courts of each Party are responsible for the determination of the existence and validity of intellectual property rights. The Parties further recognise that each Party shall be free to determine the appropriate method of implementing the provisions of this Agreement regarding intellectual property within their own legal system and practice. The Parties agree to review the relation between intellectual property rights and investment disciplines within three years after entry into force of this Agreement or at the request of a Party. Further to this review and to the extent required, the Parties may issue binding interpretations to ensure the proper interpretation of the scope of investment protection under this Agreement in accordance with the provisions of Article 8.31.3.

The author asks the relevant question - does this mean that earlier treaties that do not have this exclusion allow such claims to be made? Or is the new treaty language just clarificatory and not a new addition to the earlier intent?

Intellectual property cases are not extensively covered in ISDS cases so far. Would tribunals show more consideration to state regulatory discretion or will property rights be more strictly observed?

The article brings out the tensions between regulatory power, treaty obligations, intersection of intellectual property and public policy and the inevitability of legal challenges.

A great read!

Friday, May 14, 2021

Fisheries Subsidies Chair's text out - Fishing in troubled waters?

Negotiations at the WTO, one of the three pillars of the multilateral trading system along with adjudication and monitoring has been stalled for a while.

However, those interested in following negotiations and the process may be interested in the Fisheries Subsidies negotiations that are underway.

The Chair of the Negotiating Group on Rules releasd a detailed Chair's text for further consideration of the membership. The text is found here. The explanatory notes here.

i was curious on the S and DT provisions considering the recent debates on developing country status inside and outside the WTO.

The S and DT provisions in the Chair's text is as follows:

With respect to illegal, unreported and unregulated fishing the S and DT provisions are as follows:
3.8 [The prohibition under Article 3.1 shall not apply to subsidies granted or maintained by developing country Members, including least-developed country (LDC) Members, for low income, resource-poor or livelihood fishing or fishing related activities within 12 nautical miles measured from the baselines for a period of [2] years from the date of entry into force of this [Instrument].]

With respect to  prohibition on subsidies concerning overcapacity and overfishing, the S and DT provisions are here:

[ALT 1 

5.5 (a) The prohibition under Article 5.1 shall not apply to subsidies granted or maintained by LDC Members for fishing or fishing related activities. 

(b) The prohibition under Article 5.1 shall not apply to subsidies granted or maintained by developing country Members for fishing or fishing related activities within their territorial sea. 

(c) The prohibition under Article 5.1 shall apply to subsidies granted or maintained by developing country Members, including LDC Members, for fishing or fishing related activities within their EEZ and the area of competence of RFMO/A if all the following criteria are met: 

i. the Member's GNI per capita exceeds US$5,00012 (based on constant 2010 US dollars) for three consecutive years; 

ii. the Member's share of the annual global marine capture fish production exceeds 2% as per the most recent published FAO data; 

iii. the Member engages in distant water fishing13; and 

iv. the contribution from Agriculture, Forestry and Fishing to the Member's annual national GDP14 is less than 10% for the most recent three consecutive years.]

[ALT 2 

5.5 (a) The prohibition under Article 5.1 shall not apply to subsidies granted or maintained by LDC Members for fishing or fishing related activities. 

(b) The prohibition under Article 5.1 shall not apply to subsidies granted or maintained by developing country Members for low income, resource-poor or livelihood fishing or fishing related activities within 12 nautical miles measured from the baselines [for a period of [7] years from the date of entry into force of this [Instrument]]. 

(c) For subsidies other than those referred to in subparagraph (b), a developing country Member may grant or maintain the subsidies referred to in Article 5.1 for fishing and fishing related activities within its EEZ and the area of competence of a relevant RFMO/A for a maximum of [5] years after the entry into force of this [Instrument]. A developing country Member intending to invoke this provision shall inform the [Committee] in writing before the date of entry into force of this [Instrument]. 

(d) If a developing country Member whose: 

i. share of the annual global volume marine capture fish production does not exceed [0.7%] as per the most recent published FAO data; and

 ii. subsidies to fishing or fishing related activities at sea do not exceed US$[25 million] annually deems it necessary to apply subsidies referred to in subparagraphs (b) and (c) beyond the [7 or 5] years provided for, respectively, in those subparagraphs, it shall not later than one year before the expiry of the applicable period enter into consultation with the [Committee], which will determine whether an extension of this period is justified, after examining all the relevant needs of the developing country Member in question. If the [Committee] determines that the extension is justified, the developing country Member concerned shall hold annual consultations with the [Committee] to determine the necessity of maintaining the subsidies. If no such determination is made by the [Committee], the developing country Member shall phase out the remaining subsidies prohibited under Article 5.1 within two years from the end of the last authorized period.] 

So two alternatives for developing countries to adopt the disciplines. Will this be enough? Is this too much?  Is it the middle path?

Thursday, May 13, 2021

IP Waiver dynamics

The IELP blog has highlighted the use of labour provisions in the USMCA in the USTR's Senate Committee testimony hearing here.

What I found also interesting is the questions on the IP waiver policy and USTR's response to them in the Senate hearing. A must watch to understand the dynamics of the IP waiver proposal and the challenges ahead!

Questions of crushing innovation, precedent in IP waivers during the HIV crisis, Congress approval, geo-politics, need for text based negotiations, consensus at the WTO, need to save lives and pharma companies having the chance to be heros as well as addressing the pandemic - watch the whole session.

Two precedents were cited wherein similar "waivers" were put in place - 2001 Agreement and PEPFAR. While one is the Doha Declaration on Public Health, the other is the Presidents program on Emergencies. Not sure how they are TRIPS waiver related. We will have to wait and see how these transalte into negotiating positions.

Monday, May 10, 2021

Another interesting blog - Law and Political Economy Blog

For many us following international economic law and policy issues, mainly trade and investment, the international economic law and policy blog has been a great source of direction and information.

Now, I came across another blog the Law and Political Economy Blog that is quite interesting covering much more than international trade and investment law but asking similar questions - state autonomy, globalization in the era of the nation state, flexibilities, international governance and protectionism.

Found this rather enlightening video on the fragmentation and development of the trade and investmest regimes by leadingscholars in IEL.

Have a good watch.