Poor people don't live under the rule of law - What's Next? - international business - Brief Article

Whole Earth, Spring, 2002 by Michael Hertz

The Long Arm of Commercial Law

The law's becoming global. Because as globalization occurs, there is a very strong interest by multinational corporations to have at least the commercial rule of law implemented in the places where they're investing. You want to be able to protect your intellectual property, and you want to be able to protect your investments, and the only way to do that is if there's some world law that exists in that country. The place where it's happening big time is with big infrastructure projects like power plants, telecommunications, and airports in places like China and Indonesia. Those are all being developed largely by construction companies that are headquartered in the West. And they've got to have a legal regime in place that protects them if the government changes or Indonesia goes into crisis because of its currency. And so there's a globalization of commercial corporate law and securities transactions, and what you're seeing is a lot of countries basically copying our securities laws or copying our commercial code.

International contract law already exists. Take an example of a big power project where you have different banks from different countries financing it. You've got multiple construction companies that are all cooperating to build it--some Italian, some Korean, some Japanese. You've got all the local contractors in the country where the thing's being built. The rights of these various players are governed by contracts and the law of contracts. And, generally, what they've done is agree in their contracts that any dispute will be governed by X law, usually US law, and will be heard in an international arbitration setting, which is basically a contractually created court that has rules and procedures and enforcement mechanisms. If there is a dispute, the parties appoint arbitrators, contractually created judges to resolve the dispute. But they are then the decision makers, and their decisions are binding. It's contractually agreed to that you're bound by this decision. And if you want to play the game of global commerce, you've got to agree. Of course, setting up these contractual arrangements requires lots of money and is generally not available to individuals.

Corporations have it now. Individuals don't. From a global metaperspective, one of the big tensions, I think, is that the rule of law is increasingly available to corporations, or mostly available to corporations. Individuals, especially poor people, do not generally live in a world where the rule of law exists. Think about what a poor person in Bangladesh faces in terms of the rule of law. They don't have it. Exxon has it if it's in Bangladesh. So in some ways, the legal arena has been turned into something that is really serving powerful institutions as opposed to individuals. And I think that's problematic, ultimately.

That's one of the reasons you have these protests at big global conferences, because the people attending the conferences are generally representing big institutions--big government, big corporations, big multinational organizations like the IMF and the World Bank, global institutions of all sorts. Individuals don't really have a voice in a lot of those--or let me say they don't perceive themselves as having a voice, although they do theoretically. And so what are they doing? They're taking to the streets.

The Intellectual Property Battle

The big piece that's out there is intellectual property issues. That's a place where there's not a lot of agreement. You have countries that are engaging in outright piracy of intellectual property--software, drug patents, the whole bit. And then you think about that in the context of something like Napster or other peer-to-peer technologies, where you have fairly large groups of the population spitting in the face of obvious legal principles. While you can argue that the law should be changed, people using Napster knew they were violating copyright laws. But now you have a situation where intellectual property is being stolen in a pretty global way. People are violating the intellectual property rights of others, and you can argue that those rights should be changed or you shouldn't be able to protect your intellectual property. But it's undeniable that those traditional rights are being pretty blatantly ignored.

I think it'll be a huge battleground, and I think ultimately the people who are in favor of changing the current structure in the next ten years will lose. I think the people who have the money and the power are going to fight like hell to keep their intellectual property protected. And I think it's going to take a lot of time to erode that power, and it's not going to be easy.

Michael Hertz is currently on leave from his partnership in a major global law firm and is founder of the startup Pro Bono Net.