Midterm 2 Flashcards
What do the clauses that mitigate risk do?
Seek to ensure the protection of:
Property rights
Right of entry into new markets
Availability of natural resources for consumption
The effect of these clauses is not only to avoid the law of a host nation, but also to develop a legal system and a system of precedent outside traditional sovereign courts
Choice of law clauses
Most common. Allow a party to avoid local law and remove issues from local control and forums by predetermining where controversies will be resolved and under whose law the controversy will proceed
Arbitration clauses
Determine who has the authority to decide controversies and usually include a reference to the specific rules that will guide arbitration.
Arbiters have powers similar to sovereign courts
Power to compel discovery
Dispose of property and property rights
Order monetary damages
Stabilization clause
Freezes the law at the time the contract is entered into
prevents law made from having any effect on the ultimate disposition of a controversy
Globalization - One way private parties traditionally mitigate risk?
Enter contracts where specific provisions are tailored to the mutual amount of risk each party is willing to bear
Rise of private power
Based on the increasing role of private parties worldwide
Legal harmonization is on the rise and while many see great promise, there is also a growing reluctance to embrace these efforts. Why?
Two aspects of globalization may explain this phenomenon:
- The rise of private power outside of traditional sovereign mechanisms is filling the institutional gap created by the lack of state authority and capability to regulate the trans-national effects of globalization
- Concomitant with the rise of private power is the expansion of western, market-based liberalism and its spread globally through multilateral institutions
Private power and globalization- what is happening?
Problems go beyond sovereignty but governments do not
Private power is exerting itself giving rise to new global private legal mechanisms
Choice of law clauses impact
Impose a heavy burden on firms located outside centers of commerce such as New York Delaware and London. Travel costs make pursuing a dispute cost prohibitive
Arbitration clause impact
Little transparency to the proceedings. Outcomes difficult to predetermine and/or asses
Local governments in developing word….
Experience a loss in control and influence over trade practices within their borders
Developing world has a procedural disadvantage
Suffers from a lack of expertise needed to enter into agreements with a full appreciation of the costs and consequences
Forum shopping or boomerang politics
Choosing the most propitious site to move an issue forward
MNCs what is new
Number
Resources
Global reach and influence of modern mncs
