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When Others Have a Myopic Mindset, Look Far: Musings on International Commerce, Regulations and Steps Forward in 2017

- Benoit Le Bars

As the year begins, this post is a mosaic of reflections on the different global headwinds and changes that could impact not only arbitration, but also the world’s legal, social, political and commercial framework.

Global political tensions throughout the year 2016 have progressively weighed on negotiations for partnerships and free trade agreements across the world, putting into question the efficiency with which governments will be able to pursue international trade agendas.

Political events in 2016 have, in essence, demonstrated a certain public and political opposition to globalisation. The risk that policymakers put their protectionist words into action is increasing, with the slowdown in world trade and challenges to human security in many regions of the world. The debate around NAFTA, the fact that the TTP and TTIP are in peril, regulation issues surrounding Asean, the African Union finally letting Morocco back into the Union, despite the unresolved conflict of the Saharawi people, shows that each region is battling its own problems; and that we need to take a step back and reflect on the larger implications of these developments.

On the one hand, Brexit has Europe hanging by a thread, and businessmen and lawyers are faced with the daunting ambiguity of not knowing how trade and business structures in the EU and the UK will work over the next few years. On the other hand, Europe recently opened its arms to Canada, with the CETA, which promises to create a new market for both European and Canadian investors. However, the investment protections of the CETA still need to be ratified by national parliaments and the dispute resolution provisions structured and clarified.

Countries are actively thinking about narrowing investor protection, and giving States an opportunity for equal participation in investor-state disputes by, for example, creating the possibility for States to counterclaim against investors in certain circumstances. The reduced faith in investment arbitration is apparent from the fact that some European States challenged, in 2014, the investment arbitration framework of the first draft of the CETA. Similarly, a number of other changes that have been discussed in the context of investment and arbitration, such as limiting direct investment, disallowing claims by indirect shareholders, has put into question the entire corporate law environment, and the way international businesses and groups leading the world’s economy were built.

The Middle East has also taken controversial steps, with regard to international arbitration. The UAE passed Federal Law No. 7 of 2016, which states that arbitrators who act in “contravention of the requirements of the duty of neutrality and integrity” could be punished by imprisonment (between 3 and 15 years). This regulation, which applies to the Dubai and Abu Dhabi arbitration centres, is rather alarming for arbitrators, experts and all professionals involved in arbitration; not least, owing to the vague and broad language used. It is difficult to anticipate a comprehensive list of acts and omissions that could entail a breach of “the requirements of the duty of neutrality and integrity”. How can arbitrators decide freely, if they are under the constant threat of parties misusing the broad language of this provision and possibility of being incarcerated until the question is settled?

At a time of general distrust, we would do well to remember that the tools that we use every day to deal with international commerce and trade (customs, international tax regimes, trade agreements, common markets, BITs, investment codes, customary principles of international law), are tools that we have inherited from a past that believed in globalisation. A past when our forefathers understood that the only way to build sustainable peace, reduce monopoly over resources, facilitate the emergence of new players on the worlds’ evolving markets, was to build a framework of international regulations and cooperative rules. Rules which would make it possible for all investors and entrepreneurs to be protected abroad, and to receive reciprocal protection (the word “reciprocity” seems to have acquired new meaning in today’s world, where each one is looking out for himself, people have become parochial and freedom cannot be taken for granted). Rules which pursued legitimate objectives, such as protecting the environment, human rights and implementing existing international conventions effectively.

If we look back in history, we will never know what was in General Eisenhower’s mind when he set to work in Paris, as Supreme Commander of NATO, and whether he imagined the power that NATO would have in the future years; or what the leaders of Europe were thinking when building the European Union, and their ideas about its lasting success. All we do know for certain is that they were guided by one vision: to level the playing field for future generations, help the economies to develop in order for the rich to help the middle and lower classes, and progressively work towards the evolution of mankind, by achieving enduring peace and stability, longer life expectancy, health, and education for all.

As lawyers, arbitrators, legal counsel, ambassadors or diplomats, we have a duty to push friends and enemies alike to look far instead of looking close. At the end of the day, we influence policy, and therefore we cannot be myopic in our thinking. We no longer have the luxury of thinking about short-term interests, and ignoring the social impact of commercial decisions.

While we are not living in a perfect world, we cannot stamp out what was born in the middle of the twentieth century: a strong belief that common shared economical development will help us evolve together, on our interdependent planet, and the realisation that anyone’s actions could have far-reaching consequences.

Our future is not closed; rather it has never been more open. And this is maybe what frightens many of us. We need to think beyond our boundaries and traditions, and combine lessons learned over the past few centuries, while making policy related decisions. We not only need strong laws, but also possibilities for judges, arbitrators, and law enforcement authorities to apply them in an independent environment. We might not achieve this in two years: it could take decades.

In 2017, we are on the cusp of a number of changes; this could be the year to take a deep breath and reflect of whether we want to remain bystanders or actively participate in all that is transforming.

By Benoit Le Bars, Managing Partner, Lazareff Le Bars