Transnational Law Blog

Comparing the Current Account Balances of the U.S. and China

The Crashing Down Now blog has a post entitled, The U.S. Account Balance?, which discussed the CIA World Factbook rank order of each country's current account balance. I've never even heard of a country's current account balance, and so I was surprised to learn that the U.S. has the largest negative balance of any other country in the world! The current U.S. balance is $ -747,100,000,000! And China has the greatest surplus! China's current balance is $363,300,000,000!

This might make sense to the folks out there who took more than one course in economics, but it baffled me. I did a quick internet search and read a couple of articles. All I really learned is that there is more than one way to calculate a country's account balance and each calculation reveals something different about the country. I particularly liked an article published by the IMF entitled, Do Current Account Deficits Matter? This article elucidated three ways of measuring a country's current account balance. One formulation of the current account balance can be expressed as the difference between national (both public and private) savings and investment. For instance, advanced economies like the U.S. invest in developing countries like China, and, as a consequence, the U.S. has a deficit and China has a surplus.

The IMF article's authors went on to ask whether a country should run a current account deficit (borrow more), and it said that it "depends on the extent of its foreign liabilities (its external debt) and on whether the borrowing will be financing investment that has a higher marginal product than the interest rate (or rate of return) the country has to pay on its foreign liabilities." It warned that a country should avoid running at a deficit for too long or else a country might experience an abrupt reversal of financing. Some causes of a reversal could be "overvalued real exchange rate, inadequate foreign exchange reserves, excessively fast domestic credit growth, unfavorable terms of trade shocks, low growth in partner countries, and higher interest rates in industrial countries influence the occurrence of reversals." Aren't some of these causes occurring right now? The authors of the article also inquired whether deficits are bad and their answer was simply, "It depends." And that is why I only took one economics class.

I'm not sure if I really learned anything from my cursory investigation, but I have to agree with the author of Crashing Down Now, who said current account balances are just one piece of the puzzle and, "ultimately, it's pretty hilarious."

A Reason to Have Faith in China's Legal System: The Labor Contract Law

NPR's All Things Considered did a piece recently on the new labor contract law in China.  The show barely skimmed the surface of the new law, summarizing it as "a new law requiring businesses to give workers written contracts and pay compensation if they're fired."  The NPR segment focused mostly on a couple of labor activists who had been attacked for educating workers about their new rights.  For instance, it opens with this sad story:

Companies say the law will raise costs, and some may be fighting back — literally: Labor activist Huang Qingnan, who was promoting the law, was stabbed in broad daylight. He says hired thugs were behind the attack.

For the past few years, Huang has been teaching workers in the southern boomtown of Shenzhen about their rights. He had been distributing brochures on the new labor law to workers late last year. One afternoon, two men came at him with knives on a crowded street.

"After the first cut, I started fighting back," says Huang, who added that he was cut on his arms and chest.

Huang lost so much blood after about a minute that he fell to the ground. Eventually, two friends who were with him threw bricks at the attackers and chased them away.

Today, Huang spends much of his time limping around his apartment in fluffy pink-and-blue slippers. A hunk of flesh is missing from his left calf, the result of a stab wound and a botched surgery.

So who was behind the attack?

"The factory owners," Huang says. They "don't want to lose their profits."

But instead of painting a grim picture of workers' rights here, Huang is surprisingly upbeat.

"I'm optimistic about the future," he says. "Because our workers, their consciousness is increasing."

Articles like this NPR story take travesties that are occurring in China and portray them as the norm, they make comments like "China is a communist country in name only," which have no real bearing on anything whatsoever, and they never delve beneath the surface.  These horrible sorts of acts are happening in China and all over the world, but there is also another story about China and that story is about a country that is building a rule of law system and a citizenry that is learning the law and learning to trust the courts, which are enforcing the laws.

Our previous posts-- A Reason to Have Faith in China's Legal System and Another Reason to Have Faith in China's Maturing Legal System-- shared some of our thoughts about the growing role the law plays in the lives of migrant workers in China and how that role is helping to change the Chinese perception of the law.  A story from Reuters has come out to further bolster those arguments entitled, China Migrant Laborers Learn The Law to Win Rights, and instead of telling horror stories about labor rights activists who have been beaten up or stabbed, this article focuses on the successes migrant workers are achieving by utilizing the law.  Here is a snippet of that article:

Qi Yunhui didn't even graduate from middle school, but on a recent afternoon he addressed the Shenzhen Intermediate People's Court with the confidence of a seasoned litigator.

When he came to Shenzhen in 2002, the fast talking native of China's central province of Hubei worked in a leather shoe factory. Now, he is part of a new and growing breed of "citizens' agents", former workers offering cheap legal aid to fellow migrants involved in labor disputes.

In the past five years or so, these self-taught "barefoot" labor lawyers have proliferated, filling an important niche in a country where migrant workers are increasingly caught in a dilemma -- they are encouraged by the leadership to know their rights, but lack effective, efficient channels to protect them.

"We want to encourage people to go to court," Qi, 30, said over dinner with five toy factory workers he was representing in a case over unpaid overtime.

The more people learn the law and see their rights enforced by the courts, the more people will rely on the courts in future transactions.  This means greater enforcement of contracts and IP rights for foreign investors in China.  We're witnessing the transition in China from a seemingly lawless and guanxi based system to a rule of law system.  Within the next 20 years it won't be who you know in China that matters but who wrote your contract or who is representing you in court.  The time to get in on this is now.

An article by Steve Dickinson at China International Business entitled, Power To The People, (h/t China Law Blog) has a more detailed explanation of the new labor contract law, which I've taken the liberty of partially republishing below:

The LCL makes the following important changes to prior employment practice in China: All labor contracts must be in writing. The LCL imposes significant penalties on the employer for failure to enter into a written employment contract.

All employers must maintain a written employee handbook setting out the basic rules and regulations of employment. This requirement applies to all companies regardless of size and number of employees. The failure to maintain an employee handbook means that an employer will effectively be unable to discharge employees for cause, since “cause” must be determined with reference to the employee handbook.

Severe limitations are imposed on the use of term contracts. Under Chinese law, an employee can be discharged either at the expiration of a term contract or for cause. To avoid the need to terminate for cause, employers in China have typically engaged employees under a series of short-term contracts. This practice is no longer possible under the LCL. The employer is permitted to enter into a maximum of two term-contracts with the employee.

If the employee continues on after the expiration of a second term-contract, the subsequent employment contract is deemed to be an “open-term contract.” Under an open-term contract, the employee is employed until he chooses to terminate the contract or reaches retirement age. The employer can only terminate the employment contract by discharge of the employee for breach. This means that once the relationship has shifted to an open-term contact, the result for competent employees is effectively “employment for life.”

The LCL imposes severe restrictions on the use of probationary periods in the employment relationship. Probationary periods are permitted, but the length is limited based on the term of the employment contract, with an absolute maximum set at six months. Furthermore, an employee can only be subject to a single probationary period by a single employer. Wages during the probationary period must also be no less than 80% of the contract wage.

Non-competition agreements restricted. Many foreign employers require most or all of their Chinese employees to enter into non-competition agreements that restrict their right to work for a competitor after termination of employment. The LCL imposes significant restrictions on the use of these agreements. The most important restriction is that non-compete agreements cannot be imposed on all employees. Only senior management and other employees with access to critical trade secrets can be required to enter into a non-competition agreement. The agreement must be limited in duration to two years, must be limited in geographic scope to a reasonable area and the employer must pay compensation to the employee during the period that the non-competition restriction is in effect.

The LCL imposes significant penalties on the employer for failure to comply with its provisions. These include administrative fines, awards of double wages and liability for actual damages. And virtually every violation of the law gives the employee the right to sue the employer for penalties and damages in the local employment arbitration bureau or in the local courts. The LCL has been actively publicized and employees are well informed about their rights under the new law. Growing numbers of Chinese attorneys are taking a strong interest in representing employees under the LCL in filing group claims against employers. It is this sort of employee “self help,” rather than administrative sanction, that is likely to be the greatest threat to employers under the new law.

Learn it, use it, and become part of the future in China.

Is the United States a Harbinger of Global Economic Mayhem?

It's really not a news flash that the United States is facing tough times ahead.  The Dow Jones Industrial Average fell 300.57 points today, which is attributed to a huge loss from insurance giant AIG.  An article from FOX News says, "Today's sell-off has put the Dow and S&P on pace for their fourth consecutive monthly losses -- something that hasn't happened since 2002."

A post on the Foreign Policy Passport blog entitled, Is The United States Dragging The World Toward Recession?, predicts global economic mayhem:

The Financial Times published three stories yesterday that represent more bad news about the U.S. economy: the dollar is reaching new lows against the euro and a trade-weighted basket of currencies; the Federal Reserve is so concerned about U.S. growth that Chairman Ben Bernanke signaled there would be yet another rate cut in March, in spite of inflation risks; and U.S. manufacturing data revealed that orders were the lowest in five months, and home sales reached a 13-year low. As Nouriel Roubini argues in the cover story of the latest issue of FP, this spells grave news -- not just for the United States, but for the rest of the world.

Roubini argues that the impending U.S. recession will cause global economic mayhem. He lays out five triggers that will form the roots of sharp economic downturn in countries around the world, if not a full-fledged global recession: a drop in trade, a weak dollar, the bursting of housing bubbles around the world, a fall in commodity prices, and a faltering of financial confidence.

The Crashing Down Now blog has an excellent post entitled, China: Savers Versus Debtors, that elucidates how dependent the US dollar is on the kindness of other countries:

Hey, as bad as things are becoming in the US, at least we don’t have 100,580.2% inflation like Zimbabwe.  But, like the Zimbabweans, we are to a large degree kept from complete disaster by loans from China.  In fact, about half of the three trillion dollars we owe to foreign nations is owed to China.

Whereas we Americans like to spend all the money we have, and then spend all the money we don’t have, both on an individual and collective basis (can anyone say 3 trillion dollar war?) the Chinese actually live within their means.  In fact, were OPEC to de-peg the price of oil from the dollar and instead sell in euros, as the leaders of Iran and Venezuela would like, and just as Saddam did back in 2000 (funny how all three of them were never on our friendship list), it would shatter faith in the US dollar so drastically that one of the few things giving the dollar value would be the fact the Chinese had enough faith in the currency to buy it up.

You’d think we’d be at least respectfully polite to the Chinese for doing so, but no.  I wonder what would happen if China dumped all their reserves at the same time OPEC ditched the dollar?

I like to try and remain optimistic, but I find it more and more difficult to not think we're headed into an economic meltdown.

Land of The Not So Free

A recently released report found that more than one of every 100 adults in the US is in jail or prison, making the US the world's top incarcerator!  This report only bolsters past arguments I've made about the US being a police state (see here and here).  Moreover, a citizenry behind bars is not a productive, tax-paying citizenry!  An article by the AP included the following:

The report was compiled by the Pew Center's Public Safety Performance Project, which is working with 13 states on developing programs to divert offenders from prison without jeopardizing public safety.

"Getting tough on criminals has gotten tough on taxpayers," said the project's director, Adam Gelb.

According to the report, the average annual cost per prisoner was $23,876, with Rhode Island spending the most ($44,860) and Louisiana the least ($13,009). It said California - which faces a $16 billion budget shortfall - spent $8.8 billion on corrections last year, while Texas, which has slightly more inmates, was a distant second with spending of $3.3 billion.

An article by the NY Times included the following:

But Paul Cassell, a law professor at the University of Utah and a former federal judge, said the Pew report considered only half of the cost-benefit equation and overlooked the “very tangible benefits — lower crime rates.”

In the past 20 years, according the Federal Bureau of Investigation, violent crime rates fell by 25 percent, to 464 for every 100,000 people in 2007 from 612.5 in 1987.

“While we certainly want to be smart about who we put into prisons,” Professor Cassell said, “it would be a mistake to think that we can release any significant number of prisoners without increasing crime rates. One out of every 100 adults is behind bars because one out of every 100 adults has committed a serious criminal offense.”

Ms. Urahn said the nation cannot afford the incarceration rate documented in the report. “We tend to be a country in which incarceration is an easy response to crime,” she said. “Being tough on crime is an easy position to take, particularly if you have the money. And we did have the money in the ‘80s and ‘90s.”

Now, with fewer resources available, the report said, “prison costs are blowing a hole in state budgets.” On average, states spend almost 7 percent on their budgets on corrections, trailing only healthcare, education and transportation.

Is there any connection between this and a recent survey that showed a significant proportion of teenagers live in “stunning ignorance” of history and literature?  I'm willing to say there is a connection.

Another Reason to Have Faith in China's Maturing Legal System

An article entitled, How One Man in China Strengthens the Rule of Law, (h/t CDT) tells how one lawyer bringing small lawsuits can possibly bring about massive legal reform.  As we argued in a previous post entitled, A Reason to Have Faith in China's Legal System, small lawsuits vindicating the rights of the average Chinese citizen will engender within the citizenry a general interest and trust in the legal system, which will perpetuate a rule of law system.  Our previous article concerned a small legal aid station in Xi'an that represented migrant construction workers, and this current article concerns public interest lawsuits, which reminds me of the work that made Ralph Nader famous. 

In the present article, the lawyer, Hao Jinsong, argues that the law will grow weaker if people don't use legal recourse to defend themselves because they think it's useless but, he says, "When ... people use the law as naturally as they use chopsticks, China will be close to democracy."

According to the article, Hao is best known for cases he brought against the Ministry of Railroads for failing to provide tax receipts for goods bought on trains as well as its ticket pricing policy.

He won the receipt case, on his third attempt, earning the government $2.7 million a year in tax revenue from the railroads. And though he lost two court battles to stop the railroad management raising ticket prices during the Spring Festival, when 150 million Chinese go home for the holidays, his campaign attracted wide public support. Management bowed to the pressure, and has left holiday ticket prices untouched for the past two years.

Instead of directly addressing human rights issues or issues of free speech, which can get a person tossed in jail or worse, Hao says that his way is a way ordinary people can imitate by going to court to defend their rights as consumers. "When they realize they have rights," Hao argues, "they will call for other rights, like freedom of speech or publication, later."

Hao is currently engaged in a suit against the National Forestry Agency, which he accuses of refusing to investigate a false claim by the Shaanxi provincial authorities that a South China tiger, thought to be extinct, had been photographed. The incident drew massive interest on the Chinese Internet, and widespread criticism of the authorities for trying to create a lucrative tourist attraction out of a faked photograph.

The lawsuit, Hao says, is designed "to show people that the government does not have the right to say whatever it likes. The government cannot lie, and ordinary people have the right to unmask the government's lies."

Such cases may not shake the world, but "they have a cumulative effect," says Dr. Lu. "When lots of people bring them, they contribute to positive change."

"Today I am just a butterfly flapping my wings in the Beijing sky," says Hao. "But in 20 years there will be a storm in the whole country."

The Death of Guanxi

I was recently ranting to Steve Dickinson that people who think guanxi is the key to doing business in China don't understand China's legal system and are probably functioning with the misconception that China's legal system is unreliable. He didn't state whether he agrees with me or not, he simply said guanxi is dead, and pointed me in the direction of an article he recently wrote for China International Business entitled, Debunking the Guanxi Myth. Check it out, it's worth the time, and I've taken the liberty of republishing the four basic points Dickinson argues to bust the myth of guanxi.

1. No foreigner can recreate a Chinese-style guanxi network. In China, guanxi refers to a vast network of connections arising from party, family and work connections that may go back several generations. No guanxi network relies on a single individual. The elimination of one member of the network is therefore not fatal. Foreigners almost always rely on only one or two individuals for their supposed connection. This kind of network is too fragile to be of enduring value. Foreign investors who think they have created a guanxi network in China are usually simply deluding themselves.
2. Connections with local government officials are short-term and can be abruptly terminated. Many foreign investors do not realize that government officials in China are regularly moved from office to office and from region to region. As a result, the connection with a local official is unlikely to be a long-term connection. It is quite common to negotiate a project for several years and then learn that the official in charge has been transferred to a new post. Where the project is not in compliance with the law, their replacements will often refuse to sign the documents that have already been negotiated.
3. The Chinese provider of guanxi may suddenly disappear. If the project depends on the protection of a single individual, what will happen if that person dies, is demoted, or prosecuted for corruption? This change in fortune can be a particular disaster where the foreign investor has already contributed funds, because the project can be cancelled with no refund on the investment.
4. A project based on guanxi gives too much power to the Chinese side of the deal. In many cases, the provider of guanxi will make use of the fact that the project is not in compliance with the law to ask for additional benefits. Since the foreign side has no legal recourse, the foreign side must accede to what is in effect a blackmail request or risk the collapse of the project. When the foreign investor comes to a lawyer for help, there is nothing that can be done, since the project itself is either illegal or poorly documented.

In my opinion, "guanxi" refers to the period of time in China from 1980 to 2000 as depicted by books like Mr. China, which essentially advise finding Chinese solutions to Chinese problems. The period in China when the only way to protect your interests was through political connections and bribery is rapidly giving way to a reliable legal system. It's now better to have a good contract than a seemingly powerful friend.

Tangential to this subject is a post by Dickinson's partner Dan Harris over at the China Law Blog called, Chinese Cultural Awareness Simplified: Don't Be an Asshole. Harris argues that "knowledge of Chinese culture is secondary to knowledge of business when it comes to doing a China deal" and that point is very similar to the point argued in this post that guanxi is secondary to knowing and complying with the law.

A Reason to Have Faith in China's Legal System

An article from the Shanghai Daily entitled, Why Migrant Workers Praise The Law, demonstrates how China's young legal system is maturing and being accepted by the populace. The article is about an underfunded legal-aid station in Xi'an that is providing free legal services to migrant workers who have either been hurt on the job or not paid.

Running with a budget of less than 7,000 yuan (US$972) per month, the Xi'an legal-aid station is hailed as a "beacon" for migrant workers by local media which have tracked the station since its formation last year. It is a joint effort by the United Nations Development Program and the All China Lawyers' Association.

In the past eight months, the station has received 432 call-ins and visits and provided legal aid in more than 120 cases, winning 90 percent-plus of lawsuits.

The typical stereotype espoused by expat lawyers working in China is that the Chinese have a general distrust of the legal system and they don't believe the legal system can provide them with a remedy. I've heard expat lawyers and Chinese lawyers say on numerous occasions that getting a judgment in your favor depends on who you bribe and the strength of your guanxi. These stereotypes of the Chinese legal system are antiquated, and this article is evidence of that fact.

Like other second-tier cities in the Chinese mainland, Xi'an, a famous and ancient location famed for its terracotta soldiers, is in the midst of a massive building boom.

Toting their bedrolls from site to site in Xi'an, the migrant workers only earn about 800 yuan a month.

"They often got paid late or never," said Xi'an legal-aid station lawyer Zhao Bin. Instead of contracts, their jobs often rely on word of mouth from sub-contract bosses who break their promises.

The station recently helped 41 construction workers fight to collect about 90,000 yuan, their half-year earnings for last year. "The work is tougher as they were employed indirectly through sub-contractors or, even worse, via oral promises," said Zhao.

The development of workers' rights is a necessary step in the evolutionary process of any legal system because it forces the general populace to engage the system. The experience of having their rights vindicated creates within them a basic interest in and a trust of the legal system. These sorts of actions will continue to grow in China, forcing the legal system to grow to accommodate the growing number of people turning to the courts. As the Chinese come to expect their contracts to be enforced and a greater transparency in their own laws, the foreign investor can also expect these elements in the Chinese legal system. When? It's happening right now and will continue to evolve over the next 20 to 40 years.   

Don't Count on the Chinese, You Better Do It Yourself

The newest wave of shoddy products from China reminds me of the old Jack in the Box debacle.  Back in 1993, the fast food restaurant chain Jack in the Box suffered a huge financial loss after hundreds of people got sick and several children died from eating undercooked hamburger meat that was contaminated with E. Coli (see here).  Recently, a brand of Chinese-made dumplings that are popular with children have sickened at least a dozen people in Japan.  It was later discovered that the dumplings were contaminated with pesticides (see here).  And, on a related issue, there is growing concern now about the safety of the abortion pill, RU-486, which is manufactured by the same Chinese company that produced anti-leukemia drugs that paralyzed approximately 200 cancer patients in China (see here).  How long can China continue to produce products that harm the foreign and domestic public before people start taking their business elsewhere? 

Jack in the Box eventually recovered from the E.Coli debacle after instituting industry standard-setting food handling and cooking techniques.  We keep hearing about investigations being launched in China after each of these shoddy product scandals but what really comes as a result of these investigations?  The investigations are meant to rehabilitate the image of China's products but does rooting out corruption even at the highest levels of their government accomplish this goal?  Executing the person in charge of China's version of the FDA for taking bribes worth 6.4 million RMB from companies he was supposed to be regulating is dramatic and it might pacify some of the naysayers for awhile but it's not a solution.  This kind of spectacle reminds me of the old westerns where the corrupt town mayor decides to hang a couple of nobodies in a desperate attempt to calm the angry public when the injustices become too many.  It's all smoke and mirrors, and in the wake of more shoddy products we should be asking if anything is really being done to regulate the China-made products?

Besides making public spectacles, China is also attempting to legislate some regulations to combat shoddy products. There is a difference though between drafting regulations and actually legislating them, and then there is an even bigger difference between legislating them and enforcing them. We're always hearing of China's problems with enforcing the laws, and I believe China is getting better at enforcing its laws, but can China institute legislation to stop shoddy products and begin enforcing those regulations before the bottom drops out of their export-led growth?   Maybe, and maybe not.   

Some people have been making the argument that a Chinese manufacturer has little choice but to make a shoddy product when the foreign buyer insists on paying as little as possible.  In other words, you get what you pay for!  A post over at the Time's China Blog points out that the Chinese company that was manufacturing the anti-leukemia drugs was making less than you make on a bottle of water-- I guess that means they were making very little profit-- but I fail to see how this justifies harming the public? So what if they aren't making enough money? Tough shit! That's business!  And a business that isn't make any money is a failure and should close shop.  But that is not what's happening here.  The company that manufactured the drugs that paralyzed hundreds of people is a state owned company and it's hard for me to imagine that it's actually running at a lose when it is by definition being subsidized.  But why shouldn't this company cut corners when there are no repercussions?      

Dan Harris over at the China Law Blog also posted a "you get what you pay for" argument.  His argument was not necessarily about paying more to state owned manufacturers to get a better product but it made a similar point that paying a little more might get the buyer some more protection.  He made the very solid point that paying more for such things as due diligence, good contracts, and quality control monitoring will greatly increase the likelihood of good product from China.  I particularly like this portion of his post:

If you are underpaying your Chinese supplier, you will get bad product. It is that simple. By underpaying, I mean that if you are paying your supplier 1000 Yuan to make copper piping that requires 1000 Yuan in copper, you will get bad piping. Guaranteed. Your pipes will not have 1000 Yuan worth of copper in them. They just won't. Paying 2000 Yuan for the piping will not guarantee you get 1000 Yuan of copper in them, but it certainly does improve your odds. Does anyone disagree with me on this?

I don't disagree, but what happens if the Chinese manufacturer simply decides to rip you off because he has no reason not to?  When Jack in the Box poisoned hundreds of kids and killed a few, they were hit with just as many lawsuits and they lost hundreds of millions of dollars.  If the Chinese rewrote their tort laws to mirror the US tort system, then I think the Chinese manufacturers would be less likely to put a shoddy product into the stream of commerce.  A manufacturer in China would think twice about paralyzing a few hundred people if he could be held liable for punitive damages in the hundreds of millions of yuan.  And while they're at it, they should make it possible for foreigners that have been harmed by Chinese product to sue the manufacturer in a Chinese court for the same kind of damages.

But there is a problem, how many of these manufacturers are state owned?  How many of them are run by members of the Communist Party?  The Chinese government has very little incentive to create a tort system that could potentially hold them liable for sums of money that would actually mean anything to anyone.  Because there is no way to hold anyone truly liable for their actions, it seems like there is no way to stop the officials from taking bribes and the manufacturers from cutting corners.  Outside of standing over the manufacturer's shoulder and monitoring their every action, a foreign investor has no guarantees that their China-made product won't harm the public.  Eventually, the cost of labor and the price of babysitting the manufacturer will become too much in comparison to other exploitable countries like Mexico, Vietnam, and India, and the foreign investors will abandon China.

Transnational Commercial Disputes In The USA Ain't Easy

A post on China Law Blog entitled, Who Needs International/Foreign Law? Not Us, We're Americans, raises a number of transnational law issues and is well worth a read. Dan Harris, the author of the post, questions whether or not US courts have an obligation to abide by international treaties and whether they abide by that obligation, and he uses the Hague Convention Rules on International Service of Process as an example. I encourage you to read the entire article but here is a portion of it:

For at least the third time (two times is coincidence, three times is a trend), a US court has allowed a case to go forward against a defendant despite plaintiff's having clearly failed to abide by the Hague Convention Rules on international service of process. The most recent instance is in a still pending case so I cannot go into the specifics on that one.

Virtually every time we have sought to get the US courts to enforce the Hague Convention or even, in one instance, when we sought to get a US court to pretty much ignore the Hague Convention, the US court has seemed perfectly willing to rule as though the United States has no obligation to abide by a treaty it signed. I have a strong sense US Courts (both state courts and federal courts) will not enforce the Hague Convention's technical service requirements (including that the summons and complaint must usually be translated into the language of the country in which it is being served). Oh, and getting a US court to throw out or stay (delay) a case so that an already pending case in another country can be decided first -- forget it. My conclusion is that US courts are happy to ignore foreign/international law in favor of handling things under US law, whether US law should apply or not.

US court judgments usually are not enforceable outside the United States and one of the reasons given for this is the failure of American courts to recognize foreign law. My foreign clients (these are international businesspeople, not in any way anti-American) are complaining to me more and more about US courts and how "they think they can ignore the rest of the world." One particularly piqued client (from a country very friendly to the United States) pointedly told me this is one of the reasons why America is becoming more and more hated and why we are losing our power. He insisted that the courts in his country would have ruled differently on the same issue and I think he is correct.

If the United States is serious about globalization, it is time our courts start recognizing that ours is not the only law in the world and that it actually behooves US business to make our courts more international in the context of business disputes.

The comments that follow the post also address some interesting transnational law issues. One in particular, a comment posted by a person named Twofish, addresses the constitutional issue of whether the Hague Convention is a self-executing treaty or a non-self-executing treaty. A self-executing treaty becomes federal law (and therefore preempts state law) as soon as it is signed. A non-self-executing treaty requires Congress to pass additional laws implementing the terms of the treaty once it has been signed, which means the terms of the treaty are not federal law until Congress has made them federal law.

Whether or not a treaty is self-executing is a very important question when determining whether state law preempts the terms of a treaty. A good example of a self-executing treaty is the CISG. As we mentioned in a previous post, it is considered a self-executing treaty because of the specificity of its language; because of its apparent purpose to create rules that would bind individuals; and because of the apparent views of the political branches that no further action is necessary. As a self-executing treaty, the CISG preempts inconsistent state law under the Supremacy Clause.

Dan Harris of China Law Blog also touches upon the enforceability of foreign judgments in the USA. The enforceability of foreign judgments is determined by state law because the USA is not a party to any treaty. Although the USA has not adopted it, many states have adopted the Uniform Money Judgment Enforcement Act. This Act requires the enforcement of foreign money judgments but allows for a number of exceptions, including lack of notice; lack of subject matter or personal jurisdiction; the foreign court procedures are not compatible with due process; enforcement would violate public policy; or there is a conflict with another final judgment. Many other countries, particularly civil law countries, also require reciprocity.

I am curious as to why Dan Harris does not talk about international arbitration? He has had some very interesting posts about arbitration in the past (see here for example), but he does not discuss it as an alternative in this context. Arbitral awards are enforceable under the New York Convention while the enforceability of court judgments (at least when the US is involved) turns only on local law. His post is discussing these matters in the context of China, which is a party to the New York Convention. China also has its own arbitration body, the China International Economic and Trade Arbitration Commission (CIETAC), which was established to settle international commercial disputes. I would be very interested to know what Dan Harris thinks of CIETAC and arbitration in general as an alternative to a judicial forum.

And the matter is also open to other bloggers and blog readers: Arbitrate or litigate in a traditional judicial forum? Do you tell your clients to put in an arbitration clause? Is it truly easier to enforce an award from arbitration than a court judgment? This inquiring mind wants to know!

Affluent White Women are Sex Tourists in Kenya

Reuters has an article about older, white women going to Kenya to sleep with young, black men-- The word "young" here is being used to denote men old enough to legally consent to sexual intercourse-- entitled, Older White Women Join Kenya's Sex Tourists.

The article points out that older, white men come to Kenya to engage in sexual intercourse with girls that are not old enough to legally consent. According to Reuters, "As many as 15,000 girls in four coastal districts -- about a third of all 12-18 year-olds girls there -- are involved in casual sex for cash, a joint study by Kenya's government and U.N. children's charity UNICEF reported late last year...Up to 3,000 more girls and boys are in full-time sex work, it said, some paid for the 'most horrific and abnormal acts.'"

However, the women "sex tourists" are not sleeping with underage boys. The article uses quotes from local hotel owners that call the practice of older, white women sleeping with young African men "unwholesome." I'm not sure if this epithet is supposed to deter women from partaking in the trade, but I think it's rather inappropriate. Are the people at Reuters so wholesome themselves that they can't imagine older women wanting to have consensual sex with younger men?

Then Reuters goes on a tangent about the more affluent white women "preying on poverty" in Kenya. The article has an anonymous quote from a hotel owner saying, "Old white guys have always come for the younger girls and boys, preying on their poverty ... But these old women followed ... they never push the legal age limits, they seem happy just doing what is sneered at in their countries."

Are you kidding me? The older woman is anything but sneered at these days. We call her a cougar! Our entire culture is embracing the idea that older women can and do have major sexual appeal. And preying on poverty? I'm sorry but that's how the world turns. Some people have money and others don't, and when you don't have it, you're willing to provide services to get it. It sounds simplistic but it really is that simple.  Here is my favorite part of the article because it's completely insane:

Experts say some thrive on the social status and financial power that comes from taking much poorer, younger lovers. "This is what is sold to tourists by tourism companies -- a kind of return to a colonial past, where white women are served, serviced, and pampered by black minions," said Nottinghan University's Davidson.

Oh! That must be it! These older, rich white women want slaves! I was way off in thinking that they were looking for some companionship or that they might be lonely, and I really missed the mark when I thought some of these cougars just want some good, hot sex.

Here is the last portion of the article, which sums it up nicely:

Many of the visitors are on the lookout for men like Joseph.

Flashing a dazzling smile and built like an Olympic basketball star, the 22-year-old said he has slept with more than 100 white women, most of them 30 years his senior.

"When I go into the clubs, those are the only women I look for now," he told Reuters. "I get to live like the rich mzungus (white people) who come here from rich countries, staying in the best hotels and just having my fun."

At one club, a group of about 25 dancing men -- most of them Joseph look-alikes -- edge closer and closer to a crowd of more than a dozen white women, all in their autumn years.

"It's not love, obviously. I didn't come here looking for a husband," Bethan said over a pounding beat from the speakers.

"It's a social arrangement. I buy him a nice shirt and we go out for dinner. For as long as he stays with me he doesn't pay for anything, and I get what I want -- a good time. How is that different from a man buying a young girl dinner?"

What kind of job opportunities are in Kenya? I did a Google search and got a listing of various white collar jobs aimed at someone like me with too much education who'd probably be looking for a job on the internet. For some reason I don't believe these white collar jobs are really available to most of the young men in Kenya-- or to anyone anywhere! According to the CIA World Factbook, the major industries in Kenya are small-scale consumer goods (plastic, furniture, batteries, textiles, clothing, soap, cigarettes, flour), agricultural products, horticulture, oil refining; aluminum, steel, lead; cement, commercial ship repair, and-- you guessed it!-- tourism. Of these options, which would you rather do? Make soap in a factory for a couple dollars an hour (if you're lucky) or get wined-and-dined and "preyed" upon by an older white woman? Ummmm, jeez, let me think about it...