Friday, November 28, 2008

Legal outsourcing

From WSJ, via ATL, "More Legal Work Moves to India, Including 'Sexy Stuff'."

Just for fun, read the comments and see how any industry feels about outsourcing/foreign competition when it intrudes on its profits.

One favorite:
I just can’t believe our worthless bar associations aren’t up in arms about this. But I do have to take a bunch of worthless CLE classes every year, so that’s cool.

Mumbai Attacks

The attacks on Mumbai create a risk/reward opportunity for international law.

The Risk: The U.S. is emerging from seven years of struggling to form a coherent and pragmatic system for dealing with terrorist attacks. The election of Obama, repudiation of torture ("enhanced interrogation"), Guantanamo, and other policies presented a real chance to create a better rule of law for states to apply in dealing with terrorism.

Just as the U.S. was ready to move forward, one of the world's major powers (nuclear at that), a power who shares a contested border region with another major player in international affairs, is facing the same problem. The risk is that India will make many of the same (mistaken) policy choices as the United States did in facing the challenge of these attacks. This would be a grave set-back for creating a real rule of law for dealing with terrorism.

This path would basically affirm the rule that a state can do whatever it deems necessary to fight terrorism, even by acting outside the law.

The Opportunity: If India is brave enough to respond to tragedy with a cool head, and to insist on a response grounded in law, there is an opportunity to create a sound legal system for dealing with attacks of this nature. All the critiques that people have thrown at the U.S. would be put to the test, and new sate practice would emerge.

Of course, there are already certain legal tools (many listed here), but there has not been an effective development of institutions or a comprehensive legal structure to apply to these situations.

The Upshot: The response to these attacks present an opportunity for the world to create an effective rule of law infrastructure for dealing with terrorism.

Friday, November 7, 2008

Higgins Addresses the General Assembly

Rosalyn Higgins' address to the UN General Assembly.

More on Georgia

From the Russian News and Information Agency....

Abkhazia has announced that it is reinforcing its border with Georgia saying that the current situation resembles the run-up to Georgia's invasion into South Ossetia.


BBC reports that about 10,000 Georgians came to a rally to protest against Pres. Saakashvili. The complaint--he used indiscriminate force when Georgia used military force in South Ossetia prior to Russia's invasion.

Monday, October 27, 2008

OIl Prices


Oil has dropped significantly at the same time credit has dried up.

It makes me wonder if speculation did drive the price of oil up to record levels. The inference being that oil was high when futures trading was high. Credit has dried up which makes it harder to engage in massively leveraged futures deals. Oil prices drop.

Entirely circumstantial, and does not look at other variables, but it makes you wonder...

Friday, October 3, 2008

Is there any other option?

Lot's of the "debate" around the bill amounts to House members saying "it's not perfect, but we have to do something."

Of course the "something" is authorizing the Treasury to use federal funds to buy up billions of dollars of assets for which there is no known value and no market.

The goal, as I see it, is to clean up the balance sheets of firms who purposely took on liabilities which they did not have to report. No one will lend money to anyone else (among large financial institutions) because these mystery positions are unknown. The person you lend to today could declare a massive writedown tomorrow and go bankrupt, leaving you with the bag.

So, the plan goes, the United States will purchase these bad assets so that lenders will not be afraid of hidden toxic assets on borrower's balance sheets. Frozen credit markets will thaw.

Okay......not a bad idea. But, if the end goal is freeing up credit and not bailing out individual firms, another way to do this would be to legislate a requirement that these off-the-books over the counter transactions would have to be revealed. Then, lenders would know who was exposed and who was safe. Credit would flow to those worthy of it, and those who took (massive) risks would be responsible for their own fate.

What is the end goal of the bailout? Restore credit markets? Bailout individual firms (AIG but not Lehman)? Protect retirement money in the market?

What is the most narrowly tailored method available to achieve the goal?

Bailout Bill

Catherine Rampell at the NYTimes liveblogging the House Debate on the Bailout Bill.

Tuesday, September 30, 2008

Financial Regulation through Patents

One reason this meltdown has been so bad is because every financial institution has been affected. They all are exposed to instruments linked to mortgages, and all are severely leveraged. I have seen numbers that there are $1 trillion in mortgages tied up in this meltdown, but that there is $62 trillion in paper linked to the performance of those mortgages. Leverage.

Now imagine if only Bear Sterns was exposed. Lehman, Merrill, Goldman, etc. had no exposure. Or only exposure as a counterparty to Bear. Would we be in this mess? No. There would be diversification across the industry.

Convergence of strategy, mimicry of products, and correlation of assets magnify and to some degree create unsound market conditions. One firm develops a hot new product, e.g. Mortgage Backed Securities or Credit Default Swaps. It rakes in great returns and collects huge fees. Everyone else copies that firm, drives down the margins, and over saturates the market. That particular market collapses, and people move on to the next hot new financial product.

Now let's re-imagine that only Bear Sterns had a particular mortgage backed financial product, and further that no one else could sell that product. Get rid of convergence and mimicry and reduce correlation. But how can do this?

Business Method Patents.

Yes, the much laughed at Business Method Patent. So now, when Bear develops its great new financial product tied to mortgages, they patent it so that no one else can copy it. Goodbye convergence. Goodbye correlation.

Three great things come out of this: (1) Other firms have to develop their own products, encouraging competition, (2) The market for this product is effectively capped, and (3) If this product tanks (or the market underlying the product tanks), damage to the macro-economy is limited (because the market has been capped).

As always, the devil is in the details, e.g. defining the product in a narrow enough sense that it doesn't cover all products tied to mortgages but broad enough that it reduces convergence and correlation.

I will try to check with an inside source at the USPTO for his or her thoughts.

Sunday, September 28, 2008

Bailout Mysteries (probably) Solved

As I previously blogged, two looming questions in the Bailout are: (1) how to value the assets the Treasury will purchase and (2) who are the beneficial counterparties to the nominal bailout beneficiaries. 

The Treasury has put forth its answer on the former (greater than market prices) and the answer to latter is apparently Goldman Sachs.  

In a story by Julie Creswell and Ben White in today's NYTimes, it was reported that:
Goldman was A.I.G.'s largest trading partner, according to several people close to A.I.G. who requested anonymity because of confidentiality agreements.

So, under my theory, it is Goldman as opposed to A.I.G. who is being bailed out because without the infusion of Treasury money, A.I.G. would not be able to settle the contracts it had with Goldman, who would then be unable to settle contracts it had with (insert name), and so on....

In other words, systemic risk (this is one of the positions of the Treasury).

Just a reminder that every derivative contract has a winner and a loser, and that a lot of the money the government plans on investing in the losers will be transferred directly to the winners, including, apparently, Goldman Sachs.  

Wednesday, September 24, 2008

All Bailout, All the Time

The best concrete proposals for limitations and conditions yet.

James K. Galbraith and William K. Black at provide 8 points to consider.

Naomi Klein on the Bailout

Naomi Klein (The Shock Doctrine) posted a column at that captures a lot of the spirit surrounding the bailout, at least from those who think that Main Street should not bail out Wall Street.

A choice quote reflective of a lot of public sentiment:
This spectacle necessarily raises the question: if the state can intervene to save corporations that took reckless risks in the housing markets, why can't it intervene to prevent millions of Americans from imminent foreclosure? By the same token, if $85bn can be made instantly available to buy the insurance giant AIG, why is single-payer health care - which would protect Americans from the predatory practices of health-care insurance companies - seemingly such an unattainable dream? And if ever more corporations need taxpayer funds to stay afloat, why can't taxpayers make demands in return - like caps on executive pay, and a guarantee against more job losses?

Bailout Evaluations

Rebecca Christie and Jody Shenn reporting on new developments in the mortgage backed securities bailout at Bloomberg.

Essentially, Bernanke and Paulson plan on paying greater than "market" rates (currently at "firesale" prices because there is no private market) for the securities.

From the article:

The government can help restore liquidity to the banking system by buying depreciated assets at "a price close to the hold-to-maturity price,'' rather than the price they would fetch in the market today, Bernanke said. He also warned the economy will contract "if the credit markets are not functioning.''

Seidman [Note-William Seidman worked extensively on the S&L bailout], who also served as Federal Deposit Insurance Corp. chairman, said a 1990s attempt by Japan to halt that nation's banking crisis failed because the government offered prices that would have drained companies' capital.

The Upshot: Valuation will be for above market rates.

Monday, September 22, 2008

Sirota on "Bailout Bill"

David Sirota (channeling Naomi Klein and Tom Frank) raises five questions about the propriety of the Bailout Bill over at InTheseTimes.

He primarily raises the issue of lack of oversight/writing an effectively blank check which is hot on some of my listserves. With action imminent, we will see where everything falls when the dust settles.

For my two cents, the major questions beyond oversight are: (1) how will the paper be valued and (2) who are the counter parties who are the actual beneficiaries?

On this last point, take the example of AIG. Apparently it has large losing positions in a large number of credit default swaps. The government is taking an 80% stake in AIG, thus "bailing it out." But who holds the winning end of these swaps???? To me, it seems that these are the people who are being "bailed out" (along with anyone who has retirement money in AIG) as the alternative would be for AIG to go into bankruptcy and let the counter parties try get their money from the bankruptcy trustee. Instead, AIG gets the money it needs to settle the swaps.

The upshot: Who are the beneficial counter parties???

Friday, September 19, 2008

Mortgage Backed Securities Bailout

David Stout in the NYTimes today, "Paulson Explains Need for Plan to Buy Mortgages"

Paulson reasoning that this needs to be done, and is far more than a rescue of Wall Street, but is needed to protect ordinary people:
“Their retirement savings, their home values, their ability to borrow for college” and their chance to find and keep good jobs depend on it, he said.

The plan seems to be for Fannie and Freddie to purchase toxic Mortgage Backed Securities, and thus create a market where there really isn't one.

This may actually be a brilliant plan for intervention. It helps address one of the underlying problems of the credit market turbulence--large institutions were unable to liquidate their holdings--at all (partly because there is really no way to accurately value the paper). In steps the government (through Fannie and Freddie), and suddenly there is a market for this paper, and the institutions can liquidate their positions--instant liquidity!!! This is great, as credit has tightened, and everyone needs cash to operate.

Where the rubber hits the road is the valuation of these assets. This is also where it will be determined if this is a bail out of irresponsible firms or a measure to protect macro-stability. If the government pays too high a price, it will in effect be providing free insurance to the firms who made the bad bets in first place. This issue is extremely problematic because one of the reasons there is no private market for this paper is there have been few people willing or able to value the paper. So, if no one in the private market has been able to, how will the government undertake this task????

The upshot: It's a great idea for the government to buy this paper, but what is the appropriate discount???

Tuesday, September 16, 2008

McCain's Financial Regulation

As reported in the NYTimes, the McCain campaign has laid out a four point financial regulation plan:
  1. All financial institutions must have a "safety and soundness regulator,"
  2. Greater consumer protection, e.g. easy-to-read mortgages,
  3. Improved corporate governance, e.g. putting executive compensation to a shareholder vote, and
  4. "the last piece is sort of the systems stability issues."
Not much substance, especially on the "systems stability" issue. It would be interesting to see how the specific example in No. 3 would be implemented--what happens if shareholders vote "no" on the compensation package?

No. 1 is primarily aimed at setting up a regulated derivatives clearing house, with the idea that:
You can’t possibly assess the safety and soundness of an institution if you can’t get clarity each day with where they stand in their net positions versus the people they’re trading with.

No word on what accounting method other than mark-to-market would be used to net daily positions, or what the actual role of the "safety and soundness regulator" would be.

Would the bailiwick of the CFTC be enlarged?
Create a new agency? Go DHS and merge the SEC and CFTC under the Fed?

As with all election proposals, everyone wants to see more.

Thursday, September 11, 2008

UPDATE Freddie/Fannie CDS

Follow up article by Ms. van Duyn at the FT.

Wednesday, September 10, 2008

The more things change.....

.....the more they stay the same.

Two stories highlighting this principle.

First, Russian strategic bombers land in Venezuela. Apparently payback for the missile bases in Eastern Europe, Russia comes and plays in the U.S's backyard a la Cuban Missile Crisis.

Second, forget free trade and non-discrimination. The Pentagon has re-opened bidding on the lucrative refueling project which had been awarded to a Northrop Grumman/EADS (Airbus) consortium. The Pentagon has decided to reopen it to Boeing, a U.S. corp. EADS is the European competitor of Boeing in the most profitable export industry in the world. The back and forth in aviation industry trade disputes is legendary (including European claims that U.S. military contracts were disguised subsidies), and looks to continue despite all rhetoric.

Tuesday, September 9, 2008

CDS triggered by US action on Fannie, Freddie

Aline van Duyn at the FT has a piece of reporting on the effect of US intervention at Fannie and Freddie.

Apparently the act of being placed in "conservatorship" is equivalent to bankruptcy, and triggers many of these "insurance" contracts. The International Swaps and Derivatives Association (ISDA) is working on a protocol to address the situation.

This protocol will likely allow adherents to amend the documentation of their contracts, most likely (if past practice rules) to take advantage of some auction pricing mechanism.

Depending on the specific documentation (I haven't seen any) there could also be disputes over whether the "conservatorship" was actually a triggering event. Whether something actually constitutes a triggering event can be a notoriously tricky question.

Friday, August 29, 2008

ad hoc Tribunal reports are in

Check out International Law Reporter for the reports of the ICTY and ICTR reports.

Tuesday, August 19, 2008

International Arbitration Event

From the International Center for Dispute Resolution (ICDR):
ICDR Y&I is pleased to announce its first event in Brazil! ICDR Y&I, in cooperation with LCIA YIAG and ICC YAF, will join with ITA and CBAR to present this special 3-hour program on September 21, 2008, on the eve of the 4th ITA Americas Workshop and the 8th Annual Congress of the Comite Brasiliero de Arbitragem on September 22-23, 2008.

Details should be posted here shortly.

Monday, August 18, 2008

Russian Power Play

Ali Ettefagh on Russian global strategies, and the divergence in U.S. and European responses in today's Wash Post:

America has been busy with old-fashioned territory grabs and the eastward crawl of NATO towards Ukraine and Georgia, aiming for relatively modest oil reserves in the Caspian region. However, Russia has been nursing a modern global strategy that leaps over borders. Russia has cut landmark deals with former and potential American clients: weapon sales to Saudi Arabia, Indonesia, and Venezuela are the first of their kind. Sales of gas via a new trans-Siberia gas pipeline to northern China and talks of a "gas OPEC" with Iran, Algeria and others is another that towers over the pseudo-democratic ideas of Georgia. Border demarcation of the North Pole (with purported reserves of more than 90 billion barrels of oil-- twelve times the amount in the Caspian region), nuclear power deals with India and Iran and direct under-sea gas pipelines to Germany, Turkey and south-eastern Europe (bypassing the Ukrainian chokehold on Russian gas lines to Europe) are other moves on the multi-dimensional chess board -- all as Russia is simply keeping cool and amusing itself with the much hyped, but failed mission of Tony Blair as the chief negotiator of the Middle East Quartet, of which Russia is a member. From the Russian perspective, all options are on the table!

Sunday, August 17, 2008

Update on Rwanda's Claims Against France

As follow up on my prior post on Rwanda's claims that France was complicit in genocide in Rwanda, here is a link to a an article by Stephen Kinzer in the International Herald Tribune on the same.

Kinzer, writing on the release of a 500 page report by Rwanda, notes:
The report, commissioned by the government and prepared by a panel that heard from more than 150 witnesses, is not only a devastating account of France's eager participation in mass murder.  It is also the most provocative example in modern history of a victimized nation pointing a credible finger of blame at the supposedly virtuous West.

As I noted before, it remains to be seen how or if France will answer the charges, and which jurisdictions will pass judgment, French, Rwandan, or International.

Thursday, August 14, 2008

Auction Rate Securities

Via the FT, more settlements in the Auction Rate Securities blow up:
Regulators have accused banks of misrepresenting ARS as liquid, cash-like instruments. The collapse of the $330bn market in February highlighted the risk in the long-term securities, whose interest rates are periodically reset at auctions.

The gist: Investors are stuck with a product which was sold to them as a money-market with a better yield, but for which there is now no market which they can use to exit.

One story: Via Bloomberg:
"When I bought these I wanted a safe security and I was told they were redeemable at par," said Stokes. "Then when the market failed and I wanted a secondary market to trade out, I was told that Wachovia doesn't make a secondary market."

The upshot: Here is the SEC description of the settlement with Citi. Note that one of the terms prevents the bank from liquidating its own positions before its clients'.

Friday, August 8, 2008

ICC, Africa, and Europe

There was the Special Court for Sierra Leone; the ICTR for Rwanda, and now ICC indictments (or pending indictments) of a number of Africans, including the sitting head of state of Sudan, Omar al-Bashir.

A quiet critique (previously blogged) has been emerging that the ICC is using Africa as its laboratory. Another critique is that the ICC will never go after someone, let alone a sitting head of state, from a World Power.

A new twist on these ongoing critiques was in the news today with Rwanda accusing the late Francois Mitterrand and other French officials of complicity of genocide, as reported by and The Economist.

Background, via

France’s backing of the previous Rwandan regime, led by President Juvenal Habyarimana, is regarded by many analysts as the nadir of its decades-long engagement in French-speaking Africa. The regime, dominated by ethnic Hutus,
created the conditions in which Hutu extremists orchestrated the murder of
800,000 ethnic Tutsis and moderate Hutus in a 100-day killing spree that marked
the apogee of years of systematic anti-Tutsi violence.

Mr Kagame, who came to power after leading a Tutsi rebel army that drove those responsible for the genocide out of the country, has long accused France of playing an active role in the killings.

Some of the accusations include:
France was aware of preparations for the genocide; that it participated in them by training Rwandan troops; that its own soldiers allowed the genocide to continue in an area they were deployed to secure a safe zone; and that they actively participated in the genocide elsewhere. (from

So, it remains to be seen how a major Western Power responds to accusations of international crimes from an African nation. Will it co-operate in investigations? Will it operate under its own domestic law, under Rwandan law, under an ad-hoc tribunal, or what if it is referred to the ICC Prosecutor?

Lessons from Crisis

The FT has a really interesting piece on the Credit Crisis today.

The piece begins with a nice quote from the post-Black Monday days and flashes forward to the present where (some) of the same conditions (computerized trading and equity index futures) were in play. What's old is new, forgetting the lessons of history, etc...

The interesting bit is in two parts. First, it calls for more regulation--after a decade and a half of hearing about deregulation, nearly every business/economic policy publication is calling for more. A regulation market correction if you will.

Second, it points to the big harm in the current crunch as the exposure of systematic weaknesses rather than specific losses. In looking at this issue the FT calls for a new/greater role for central banks.
Out of the credit crunch, therefore, must come change at central banks. New regimes under which they will lend, at penalty rates, against illiquid securities must be institutionalised. The Fed must take over responsibility for Wall Street, while the UK must push through a new insolvency regime for banks. Financiers are ever adept at circumventing rules but regulators must keep trying. As the example of 1987 shows, however, useful financial innovations such as securitisation will make a comeback, and it is up to investors to show greater discipline – a forlorn hope.

Is this expanded Monetarism designed to regulate through market forces?

Wednesday, July 30, 2008

Buttar on the Politicization of the Court

New post from Shahid Buttar over on Huffingtonpost.  

It is the second of a four part series, and critiques what he sees as a politicization of the court, and the court's political use of its power, especially in re-writing constitutional doctrines in pursuit of recognized right-wing policies.

Part I addressed the politicization of voting rights.

Part III will explore the failure of traditional checks on the court, and Part IV will present his proposal for Congressional and Executive strategies for limiting the Court.

Check his post for case analysis and support.

Monday, July 28, 2008

Monica Goodling Investigation

A quick read of the Monica Goodling report shows some interesting information.

For example, Secretary of State Rice is too liberal for the DoJ:

Several candidates interviewed by Goodling told us they believed that her question about identifying their favorite Supreme Court Justice, President, or legislator was an attempt to determine the candidates’ political beliefs. For example, one candidate reported that after he stated he admired Secretary of State Condoleezza Rice, Goodling “frowned” and commented, “but she’s pro-choice.”

Also, the Lexis query used to run background checks:

[First name of a candidate]! and pre/2 [last name of a candidate] w/7 bush or gore or republican! or democrat! or charg! or accus! or criticiz! or blam! or defend! or iran contra or clinton or spotted owl or florida recount or sex! or controvers! or racis! or fraud! or investigat! or bankrupt! or layoff! or downsiz! or PNTR or NAFTA or outsourc! or indict! or enron or kerry or iraq or wmd! or arrest! or intox! or fired
or sex! or racis! or intox! or slur! or arrest! or fired or controvers! or abortion! or gay! or homosexual! or gun! or firearm!

Now I know what words to label my posts with....

Union Membership as a Civil Right

A friend referred me to this recent (but not burning hot) post by David Sirota at

The idea: Add Union Membership into the Civil Rights Act.

The goal: Change corporate behavior. Sirota writes:

For example, because the Civil Rights Act bars racial discrimination, businesses
are motivated to try to prevent bigotry: They want to avoid being sued. This is
why no company brags about being racist.

But when it comes to unions, there is no such deterrent. The lack of civil rights protection effectively encourages businesses to punish pro-union employees — and publicize the abuse to intimidate their workforce. By making the six words law, the dynamic would shift. Companies would have a reason — fear of litigation — to respect workers’ rights.

The man behind the idea: Tom Geoghegan (who is also my employer)

Friday, July 25, 2008

Africa and the ICC

From the Council on Foreign Relations via the Washington Post, Stephanie Hanson writing on the ICC and Africa:

The prosecutor of the ICC has encouraged self-referrals, and the only such
referrals have been from African countries. While the ICC has received some
1,700 communications to investigate alleged crimes in 139 countries, 80 percent
of these communications have been found outside the jurisdiction of the court.
This is "not a question of picking on Africa," says John Washburn (PDF) of the American NGO Coalition for the ICC. "The UN Security Council referred [Darfur], and the other countries came forward voluntarily." Some international law experts say the weakness of Africa's national legal systems has led individual countries to refer situations to the ICC. Most African states have yet to implement the Rome Statutes in their domestic legislation, write Olympia Bekou and Sangeeta Shah in
Human Rights Law Revie
w, which is the first step toward retaining domestic
jurisdiction. "Strengthening domestic prosecutions so that the ICC does not have
to intervene should be the ultimate goal of every state," they write.

Hamdan Evidentiary Rulings

Check out CAAFlog's analysis on the evidentiary ruling in Hamdan. I'll post the ruling when I find it.

UPDATE: Here is the ruling, other available on the DoD website.

Wednesday, July 9, 2008

War Powers

As widely noted, former Secretaries of State James Baker and Warren Christopher are pushing for a redraft of the War Powers Act.

As reported in the LA Times:

The proposed law would require the president to notify Congress of any plans for
combat lasting, or expected to last, longer than one week and require Congress
to vote on a resolution of approval within 30 days of being notified. Military
actions shorter than one week and covert operations would be exempt.

I will post a draft when I find one.

Tuesday, July 8, 2008

Rachman on the ICC

Gideon Rachman has a nice piece on the International Criminal Court in today's FT. It largely relates a lot of the "peace vs. justice" concerns which have been debated for awhile, notably by Doug Cassel.

The debate essentially says that ICC prosecutions, which demand justice and accountability, are a roadblock to peace because they eliminate the incentives of parties to a conflict to end it if they think they will be prosecuted, e.g. Joseph Kony in Uganda.

Rachman also notes a well-founded fear:

Some Africans complain that the ICC is using their continent as a laboratory.
For although justice is meant to be blind, it is clear that there are certain
countries and political leaders that are just too powerful to bring before the
court. There will be no prosecutions of Russian leaders over crimes in Chechnya.
And – despite the fears of American conservatives, which have led the US to
reject the court – the ICC is also highly unlikely to prosecute Americans.

While it has flaws, let's hope the ICC stays around as a valuable institution--if only as an expression of our collective values.

Wednesday, July 2, 2008

Retrospection on Terrorism

While there are definitions of "terrorism" in international law, a potent reminder of the subjective nature of that classification was pointed out by CNN.

This story relates how Nelson Mandela, of all people, was just removed from the United States' terrorism watch list, and can now get a visa without special permission.

Without resorting to an argument of terrorist/freedom fighter, the fact that a person of Mandela's reputation and renown is only now removed from what is effectively a list of terrorists presents an opportunity to reflect on how the concept of a terrorist group, like the African National Congress in Mandela's case, fits in with different legal frameworks and issues, e.g. on ending colonialism (Palestine, Puerto Rico), fighting illegitimate government (portions of Bolivia, Zimbabwe), the growing indigenous rights framework (Latin America), or self-determination (Taiwan, Kurdistan, Western Sahara).

Wednesday, June 18, 2008

Boumedine Legislation

From the National Institute of Military Justice, U.S. Rep. John Shadegg (R-AZ) introduced the Boumedine Jurisdiction Correction Bill, H.R. 6274, yesterday.

The bill proposes to provide a habeas equivalent to persons held "in the part of Cuba leased to the United States" (McMurdo Station in Antarctica would apparently still be fair game).

It also gives exclusive jurisdiction to "[T]he courts established under the Uniform Code of Military Justice and operating in that part of Cuba."

Follow up to come...

Thursday, June 5, 2008

Global Oil Flows

The Financial Times has a nifty flash presentation on global oil here (you can register for free).

One of the neat features is that it shows rough global oil flows. A bit of quick addition shows the following:
  • U.S. oil from Middle East--2.276 million barrels per day (bpd)
  • U.S. oil from elsewhere--9.748 million bpd
  • Rest of the world's oil from Middle East--10.796 million bpd

This begs the question of how "strategic" U.S. interest is in the Middle East actually is, especially in comparison to the "strategic interest" of the rest of the world.

Tuesday, June 3, 2008

New blog

I have updated my links to include International Law Prof Blog.

It is what its name suggests, and features Mark Wojcik (Chicago, John Marshall Law School), Cindy Galway Buys (Carbonadale, Southern Illinois University School of Law), Michael Peil (St. Louis, Washington University School of Law), and Cyndee Todgham Cherniak (Toronto, Lang Michener LLP).

I am very proud to say that I studied EU Law under Dean Peil, who also coached me for moot court. Best wishes to all the International Law Profs!

Who's to blame for high oil prices, take two

There is a new candidate for who to blame for high oil (and other commodity) prices--institutional investors.

As reported in the FT, George Soros is expected to tell Congress that:

rising oil prices are the result of a number of fundamental changes and factors in the market, but that the relatively recent ability of investment institutions to invest in the futures market through index funds is exaggerating price rises and creating an oil market bubble.

Sunday, June 1, 2008

The Problem with "The Problem With the Corporate Tax"

Not to overly rely on the Sunday NY Times for material, but I couldn't help remarking on "The Problem With the Corporate Tax," by N. Gregory Mankiw (Harvard econ prof., Bush and Romney adviser).

The gist of the article:

"In fact, a corporate rate cut would help a lot of voters, though they might not know it."

While recognizing that the proposed McCain reduction of the rate from 35 to 25 percent would cost the federal budget $100 billion a year, and derisively acknowledging that "Populist critics deride this train of logic as "trickle-down economics," he nonetheless argues that lower corporate taxes would be better for everyone.  


Well, the main argument is a variation of trickle-down--he frames corporations not as tax-payers, but as tax-collectors, essentially collecting taxes on the persons who hold equity in the corporations.  Now, one could argue that this is in fact fair because presumably everyone who purchased those shares (or otherwise gained equity) knew what the tax rate was when they did so.  Specifically, they could have taken equity in a non-corporate business, e.g. formed a partnership, but of course people who work in finance or who don't work (live off investments) couldn't always put money in a non-corporate entity--oh well...

Second, it turns out that a corporate tax is actually a tax on labor.  Mankiw points to a study by William C. Randolph of the CBO that 70 percent of the corporate tax burden is borne by labor, and an Oxford study that each $1 increase in a company's tax bill reduces real wages by 92 cents.  Of course, no one is stating that if corporate taxes were decreased, these companies would suddenly raise wages--no, the increase in profitability would instead go to those same equity holders in the corporation.

He also points to suggestions in the Randolph study that "the domestic owners of capital can escape most of the corporate income tax burden when capital is reallocated abroad in response to a the tax."  This, of course, says nothing about what happens if we fail to decrease the tax rather than merely leave it at the current rate.  Additionally, it fails to recognize that the U.S. is projected to continue to be the largest recipient of foreign direct investment by far for years to come, and that up until the very recent past, there has been such a surplus of capital that it has had to move to an entirely synthetic economy, i.e. derivatives, in order to find sources to suck it up.

So, if you are a pessimist and think the U.S. economy is on an irreversible descent, and will no longer be a source for foreign investment, and our only hope is to make it cheaper for corporations, as opposed to other business entities, to conduct business, then you might agree with Mankiw.  If not, should the U.S. reduce its income by $100 billion a year when it has large outstanding debts?

Credit swaps again = insurance

Gretchen Morgenson has another story on the front page of the Sunday NY Times business section on credit derivatives, and those instruments are again described as "insurance contracts."  
I am really surprised there has not been a deluge of people writing in to nuance this description and assure regulators that, of course, these instruments may look like insurance (and are supposedly used like insurance), but are in no case whatsoever actually insurance.

The story, "First Comes the Swap.  Then It's the Knives," is a great read, and begins to reveal some of the dispute between investment bank Paramax and hedge fund UBS.

Share links to other CDO unwinding litigation in the comments....

Monday, May 26, 2008

Futures, I mean insurance, I mean futures...

The Sunday NY Times business section had two stories which had an interesting overlap.

First, Gretchen Morgenson, in reporting on how Fairfax Financial Holdings profited from credit derivatives, described those financial instruments as "insurance contracts that allow investors to bet for or against a corporation's bonds." (Good luck getting anyone in the financial industry to give you an opinion in writing calling a derivative "insurance.").

The second piece, by Nelson Schwartz, reported on Congressional efforts to control energy prices. Of note, Rep. John B. Larson proposed legislation that would ban unregulated (over the counter) trading in energy futures where the parties would not take delivery of the commodity, i.e. the positions would be settled in dollars. This proposal is fascinating in its own right, but where it gets very interesting, and how it really relates to the first article is in this quote from John Damguard, the president of the Futures Industry Association.
"The over-the-counter markets are a very important part of the way industry and institutions manage risk."
Well, he certainly makes over the counter deals sound a lot like insurance. Of course, most of the trades entered are not for true hedging purposes, e.g. futures purchased by airlines, but are instead large, heavily leveraged bets sold by traders and investment banks to investors seeking above market returns. And of course, if these deals were actually "insurance" as opposed to speculation, they (and the dealers who package and sell them) would fall under an entire class of regulation.

So, if we shouldn't regulate over the counter deals because they fill a important need of managing risk, then why aren't they regulated as insurance? It seems like the insurance industry should get on this one, and use a favorable bill to steal part of an industry away from Wall Street.

Saturday, May 24, 2008

Judicial "Activism"


Apparently judicial activism is back on the conservative radar with the California Supreme Court decision on gay marriage.

Judicial activism is one of the great myths of conservatives. Not only does it critique courts for exercising essentially any form of constitutional review (See, e.g., Marbury v. Madison), but it is based in a false "separation of powers" argument.

The classic version of separation of powers that we all learned in high school goes something like, "Congress makes laws, the President enforces the laws, and the Courts tell us what the law is."

Never mind that even this simplistic version gives courts great powers, but what is more important is that the divisions of legislative, executive, and judicial power are not in discrete categories. The President, e.g., has legislative powers in the form of the veto. Congress has judicial powers in that it control the jurisdiction of federal courts. The Courts have legislative power in that they can review and interpret laws.

No one claims that the Executive is "activist" when he veto's a bill, or otherwise asserts the power of his office. No one claims Congress is "activist" when it restricts the jurisdiction of federal courts to hear habeas corpus claims. So why is a Court "activist" when it says that a law violates the right of people?

Dahlia Lithwick has a great piece on this here.

Friday, May 23, 2008

Is O'Connor back on the Court?

Linda Greenhouse on the dearth of 5-4 decisions this term (although there are still 32 decisions yet to come).

While quoting political scientists on the supposed "election effect" on the Court, i.e. not wanting to create or become an issue in an election year, she also noted the narrowness of the decisions.

...the lethal injection and voter ID decisions hewed closely to the facts of each case. Kentucky’s lethal injection protocol passed muster, but the court left open the possibility that another state’s practice might not. The voter ID challenge reached the court on a nonexistent record, so perhaps a stronger case could be made at a later time. Justice Antonin Scalia’s majority opinion in the child pornography case construed the statute so narrowly as to allay the First Amendment concerns of Justices Stevens and Breyer and win their full concurrence.

This reminds me of a feature of the O'Connor jurisprudence which is not always a bad thing--treating each case on its merits, and addressing the facts in that case on their own terms, as opposed to conducting broader ideological battles in each decision.

There is a certain justice in this process in that each person gets their day in (the Supreme) Court to have their case heard on its merits--not in terms of a broader political struggle.

The problem is that many cases are brought as part of a political struggle, and that in some sense it is the job of the Court to engage in a fair degree of looking forward as to the effects of each decision (although who could have guessed the legs that Chevron would have).

Thursday, May 22, 2008

Softwood Lumber in the Farm Bill

You would have thought that after complaining for over 20 years about disguised Canadian subsidies (in the form of below market stumping fees) to its softwood lumber industry, the U.S. would think twice before giving new support to its own softwood producers.

Think again...

I was watching Bloomberg three nights ago and saw it reported that there was a more favorable depreciation schedule for the softwood industry in the 2008 Farm Bill. I have not been able to verify this yet, but if included, it certainly shows bad faith on the part of the U.S.

This is in addition to the new reporting requirements included for U.S. lumber importers in the Softwood Lumber Act of 2008. Thanks to Akin Gump.

Gas prices....who's to blame?

Yesterday was filled with stories about how gas and oil prices are reflecting supply and demand, as opposed to being driven up by speculation, and that the "windfall" profits go to the oil producers and not traders on Wall Street.

Bloomberg reported a different angle in this story that:
Oil's rally to a record above $135 a barrel came as traders bought crude to cover wrong-way bets that prices would decline, according to data from the New York Mercantile Exchange.
The House hearings have tried to investigate the effect of speculation on the commodity pricing of oil.

So who is to blame? Consumers who allow oil and gas to exist in an inelastic market? Producers who (supposedly) fail to increase refinery production? The Fed and the Bush Administration for a weak dollar? Wall Street for driving up futures through speculation? In the end, it is, as always, a combination of all these, and the only power left to consumers is to consume less.

Friday, May 16, 2008

UN Special Rapporteur on Racism to tour U.S.

16 May 2008
The United Nations Special Rapporteur on contemporary forms of racism, racial discrimination, xenophobia and related intolerance, Doudou Diène, will undertake a country visit to the United States from 19 May to 6 June 2008 at the invitation of the Government of the United States।

More at the UN's site...

Welcome back...

I have settled in at my job now, and hope to re-start my blogging. In the meantime, here is a story on the continued saga of expropriations in Bolivia, this time in the telecom sector.

Thursday, January 24, 2008

New international law blog to check out

The Invisible College Blog is a new international law blog, merging two prior sites. It looks to be an interesting site, and is loaded with people who, like me, got hooked on international law through moot courts. The backgrounds of the people include a collection of focused academics, international criminal law specialists, and general internationalists.

Check it out.

Saturday, January 19, 2008

International Law in U.S. Court

The topic of international law in U.S. courts may have reached its peak after the Supreme Court ruled that juvenile death penalties were unconstitutional in Roper v. Simmons (2005), but it continues to be a popular topic for scholarship. Recent contributions include:

  • Judge Diane Wood (a personal favorite as well as "L" alum) spoke at Duke in November;

  • Northwestern Prof. John McGinnis has co-authored a piece in the forthcoming issue of the Stanford Law Review, titled Should International Law be Part of Our Law?, (he is a frequent commentator on this issue); and

  • NYU Prof. Jeremy Waldron presented a colloquium titled "Partly Laws Common to All Mankind: Foreign Law in American Courts" (from International Law Reporter).

All are good, but Judge Wood's talk was particularly interesting, and not only in that it timely addresses Medellin v. Texas (what effect does a U.S. state have to give an ICJ decision). Her insightful discussion noted that the U.S. is party to many treaties with arbitration clauses, and that the ICJ decision could be treated as an arbitral body (albeit with a fancy name-MP). The standard arbitration review questions then become the standard for enforcement, i.e. was there an agreement (Art. 36 of the ICJ Statute), was it within the scope of the agreement (Vienna Convention of Consular Relations and Art. 36 of the ICJ Statute), and is there some public policy which forbids enforcing it?

Friday, January 18, 2008

Personal update

I am now an associate at Depres, Schwartz & Geoghegan, where I will work on a variety of legal matters including ongoing federal litigation in the N.D. of Illinois and the D.C. Circuit Court of Appeals.

I will continue my duties as coach of the DePaul moot court team competiting at this year's Niagara International Moot Court Competition. This year's problem deals primarily with NAFTA rights including free movement of people, goods, and energy; as well as the national security and general exceptions in NAFTA and GATT-WTO.

Florida goes after Allstate

Florida and Allstate are apparently in the middle of a rather nasty dispute. Last October, the Florida Office of Insurance Regulation issued subpoenas to certain Allstate companies to testify at congressional hearings scheduled for Jan. 15 and 16.

Allstate officials appeared, but were less than forthcoming. In response, Florida's insurance commissioner suspended Allstate from writing any new policies in the state. As reported by Reuters:
State investigators have been trying to determine if Allstate and other
companies colluded to prevent property insurance rates from dropping despite the
legislative action last year aimed at reducing premiums.

Allstate struck back in court, getting the Florida First District Court of Appeals to issue a stay, allowing it to continue policy writing.

This reminded me that the insurance industry is largely exempt from federal anti-trust law, and is left to the regulation of the states.

Illiberal capitalism

The Financial Times is hosting a live online Q&A with Dr. Robert Kagan of the Carnegie Endowment for International Peace and the FT's own Gideon Rachman on January 22 on the topic of "illiberal capitalism."

So, what is this "illiberal capitalism"? Rachman describes it as a marriage of capitalism with a large state role in the economy. It also consists of economic liberalization without accompanying political freedoms. Perestroika without Glasnost. And as more "communist" countries enter the global economy, it becomes a much more prevalent model, e.g. Vietnam.

So while this is not technically a legal post, it does remind me that states are people too. What I mean is, like a corporation, a state is a legal person, able to have actions attributed to it, and to have social and economic priorities that it acts on in the marketplace. This is the point that gets lost at times in U.S. domestic politics, and is also the point that people are freaking out about when state investment companies start throwing money into U.S. banks.

It's Pebble Beach all over again.

Thursday, January 17, 2008

Bolivia and ICSID

The International Center for the Settlement of Investment Disputes (ICSID) is a World Bank body formed under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States. ICISD is the primary forum for resolving foreign investment disputes, and is incorporated into many bilateral investment treaties (BITs).

Last May, Bolivia gave notice that it was withdrawing from the ICSID treaty, pursuant to art. 71. This was effective November 3, 2007, presumably closing any new claims against it in that forum. The last complaint registered against Bolivia was by a European Telecom on October 31, 2007 (No. ARB/07/28).

This complaint is the target of a civil society campaign against ICSID and BITs, which calls on Robert Zoellick (who oversees ICSID) to prevent the case from going forward. As noted at the Global Arbitration Review, ICSID still has jurisdiction over the proceedings, as art. 72 provides,

Notice by a Contracting State [of its withdrawal] shall not affect the rights or
obligations under this Convention [of the withdrawing state or its nationals]
arising out of consent to the jurisdiction of [ICSID] given by [the
withdrawing state] before such notice was received [by ICSID].

So what does this mean? While some claim that the "before such notice was received" language implies that no new claims can be filed, this is incorrect as it would lead to the six-month notice period as having no effect. Art. 72 is best read as a "survivor" clause, protecting and preserving claims during the six-month notice period. A further question remains as to whether investors can bring claims relating to investments made prior to the notice of withdrawal after the withdrawal is effective (probably not, but a good argument exists).

The people at Global Arbitration Review point to a further issue, the fact that the BITs Bolivia signed call for ICSID to be the dispute forum. Essentially, they claim that Bolivia needs to withdraw (or modify) from all BITs which provide recourse to ICSID, or ICSID remains a valid forum as an ad hoc tribunal. One major problem with this is ICSID's own jurisdictional statement.

Art. 25 states, in relevant part,

The jurisdiction of the Center shall extend [to any investment dispute] between a Contracting State...
The point being, that the ICSID convention does not provide for ad hoc tribunals; it can only hear disputes between contracting states, and once Bolivia withdraws it is no longer a contracting state!

Wednesday, January 16, 2008

Contracts 101 in Nevada debate suit

The Nevada Supreme Court ruled against Rep. Kucinich in his suit to force NBC to include him in the Tuesday Democratic debates.

The Court's rulings included:

  • The District Court had no jurisdiction over the sec. 315(a) claim under the Federal Communications Act because Kucinich failed to first bring his complaint through the FCC; and
  • There was no contract NBC could breach because of lack of consideration.
So, while pundits spout about activist courts, or the right to vague first amendment rights, it all boiled down to: (1) lack of consideration and (2) failure to plead promissory estoppel at the District Court.

The latter point is interesting. The position that promissory estoppel cannot be raised for the first time on appeal is the general rule, but one Wisconsin court has held otherwise:

"In Winnebago Homes Inc. v. Sheldon, [29 Wis. 2d 692, 700-01, 139 N.W. 2d 606
(1966)], we made it clear that the failure to plead a cause of action for
promissory estoppel in the trial court precludes the plaintiff, as a matter of
right, from raising the question for the first time on appeal. However, in the
instant case, the facts which plaintiff relies upon to support this new cause of
action are of record, and the defendant-respondent has been able to defend on
the basis of the facts as found by the trial court. Under these circumstances,
where the consideration of promissory estoppel for the first time on appeal does
not result in hardship or inequity to either party, we will proceed upon the
basis of the facts found by the trial court to dispose of the plaintiff's
contention upon the merits." [citing to]Babler, 39 Wis. 2d at 572-73. Based on Holt,
Liberty Trucking and Babler, we are confident that our action is supported by
law and promotes justice.

In general, promissory estoppel is used to create a cause of action under a "quasi-contract" theory. So, would it be reasonable, and within the Supreme Court's discretion, to construe the breach of contract claim as implicitly containing a quasi-contract claim? Especially where there is a well-developed factual record?

Even if this theory was accepted, Kucinich would had to have shown some form of detrimental reliance (continued campaign costs possibly?).