By Sam Willie
The Washington Post has hosted a conversation with an expert on investor treaties to explain the significance of leaked documents concerning the investor-state dispute settlement (ISDS) system in the Trans Pacific Partnership (TPP) free trade agreement. The TPP, which has the potential to be the largest free trade agreement in history, has come under severe criticism from both the left and right since Wikileaks released the documents. At the center of the controversy are two features of the ISDS system. First, the ISDS system would empower multinational corporations to sue countries in which they are invested in for violations of their property rights . Second, the ISDS system would allow companies and investors to challenge rules, regulations and court rulings of countries in which they are invested in before World Bank and United Nations tribunals. This would be the first time companies, rather than their host nations, have standing in multi-national trade agreements. With the left and right united in their disdain for the ISDS it will be interesting to see how the Obama administration will proceed with TPP negotiations.
By Sam Willie
Reuters reports on a potential banking law in Afghanistan that would create a new framework for Islamic banking in the country. Traditional banks are shunned by an estimated 90% of households in Afghanistan for violating Islamic law by earning interest on investments. To date there are no standalone Islamic banks in Afghanistan, only limited Islamic banking products, offered by a few lenders through aptly named Islamic windows. These Islamic windows are not widely accepted because customers have doubts over their religious permissibility. It is hoped that the new Islamic banking system with religious compliance will increase deposits and in turn boost financing in a country that desperately needs economic growth.
By Sam Willie
With €450 million of debt due
to International Monetary Fund on April 9th, Greece has been forced
to take drastic measure to round-up the cash needed to stay afloat. The
Guardian reports that Greece’s government has postponed all payments for state
supplies in an effort to stave-off default. It has also seized money from
pension funds and EU subsidies destined for farmers. Greece’s former Finance Minister
Stefanos Manos has told the Guardian the his country is “scraping the bottom of
the barrel for everything they can find.” Adding insult to injury, Greece is simultaneously
experiencing a sharp decline in tax revenues as investors are withdrawing their
funds and sending them to perceived safer havens abroad.
By Sam Willie
The Wall Street Journal reports on an announcement that the FBI will triple the number of agents it devotes to Foreign Corrupt Practices Act (FCPA) Enforcement from 10 to 30 agents. Joseph Campbell, Assistant Director of the FBI’s Criminal Division justifies this move by arguing that “the growing global economy and the growing nature of international commerce with globalization of more companies and economies, … creat[es] more opportunities for the potential of FCPA and corruption.” The Bureau’s colleagues at the Securities and Exchange Commission and the U.S. Department of Justice will likely welcome this news as they often utilize the FBI to conduct investigations of potential FCPA violations. FBI Agents will also be expected to play a role in assisting other nations claw back funds paid to corrupt officials.
By Sam Willie
Bloomberg covers a much-anticipated move by India’s Prime Minister to crack down on “the Black Economy” in India through new legislation that will hit individuals who stash unreported assets in offshore accounts with big fines and even jail time. The legislation is in tune with a theme that was central to Prime Minister Modi’s election campaign: curtailing widespread tax avoidance schemes and corruption that cheats the country of tax revenue. Recently there have been similar efforts in the U.S. and the UK to solve this issue, though India’s proposed legislation appears to take a particularly tough stance, with punishment including up to 10 years in jail and as much as 300 percent fines on amounts originally owed. It has been reported that India’s unreported foreign asset problem could total as much as $2 trillion, which is more than the country’s annual gross domestic product.
By Sam Willie
The Wall Street
Journal covers
the latest chapter in the Greek debt drama. This past week Greek Finance
Minister Yanis Varoufakis said he was “certain” Greece would have a problem
“paying off the installments of the IMF.” The IMF has an outstanding loan of
$20 billion to Greece, and $1.7 billion of that loan is due in the coming weeks.
It is suspected that Greece may be angling for support to issue more short-term
debt and renegotiate more favorable bailout terms with the IMF and the European
Central Bank. Critics note that failing to pay the IMF would make Greece the
first advanced economy in the Fund’s existence to fall into protracted arrears,
and would seriously undermine any efforts by Greece to obtain financing in the
future.
By Sam Willie
In December 2010, the Executive Board of the International Monetary Fund (IMF) approved a proposal that would shore up
the Fund’s lending power and alter how the Fund apportions voting power, funding, and financial
obligations amongst its member States. The move caused great excitement in the
international community and was heralded by then IMF Managing
Director, Dominique Strauss-Khan, as “the most fundamental governance overhaul
in the Fund’s 65-year history and the biggest ever shift of influence in favor
of emerging market and developing countries.” More than four years on, that celebrated proposal has yet to be implemented, and the
IMF’s lending power, and the quota-based rights and obligations of its member
countries remain much the same as they did in 2010. So what is the holdup?
By Sam Willie
Salil Shetty, Secretary General
of Amnesty International, has published a piece in the
Guardian, arguing for the creation of a binding
international treaty on corporate human rights responsibilities. Shetty believes in building upon the success of the UN’s Guiding
Principles on Business and Human Rights published in 2011 by making key
provisions of the Principles mandatory and requiring
corporations to fulfill a duty to protect people against human rights abuses.
Shetty cites Shell’s oil spills in the Niger Delta, as an example of an event which
may have been avoided had a provision requiring corporate
human rights due diligence been reinforced in a binding treaty.
By Sam Willie
The National reports on a move by Abu Dhabi Global
Market (ADGM), a soon to be financial market in the UAE, to release draft
legislation and regulations for public comment prior to implementation. The
proposed legislation covers topics ranging from corporate formation and
bankruptcy law to labor and property rights. It is hoped that the commenting
period will allow leading financial institutions and business minds to work
hand-in-hand with the ADGM to construct an attractive venue for businesses. The
draft legislation utilizes English common law as its legal base, with modifying
statutes as needed.
By Sam Willie
The New York Times reports on an attempt by Chinese tax authorities to more strictly enforce taxes
on Chinese citizens who earn income abroad. Since 1993, Chinese citizens and companies have been required to pay
domestic taxes on the entirety of their income, regardless of where it is
earned. In reality, reporting of income earned abroad is infrequent and tax
avoidance common. Going forward, it is predicted that China will pursue high
profile enforcement actions against those engaging in international tax
avoidance on income earned abroad as a means of sending a message to wealthy
individuals and corporations alike.
By Sam Willie
The
Economist covers the European
Commission’s announcement
of a $393 million investment package aimed at kick-starting Europe’s economies.
In response to the euro-zone’s economic crisis, the European Commission was
given a great deal of power to regulate the budgets of those countries that
utilize the Euro currency. The investment package is said to be just one prong
of a larger plan, which includes efforts for structural reform and fiscal
responsibility. Though many will welcome the financial fruits of the investment
package, the EC has been criticized for failing to crack down on EU countries
like France, Italy, and Belgium, who have broken promises to implement economic
reforms and reduce budget deficits.
By Sam Willie
The Irish Times covers leaked documents obtained by the International
Consortium of Investigative Journalists (ICIJ), which revealed that as many as
340 corporations had channeled hundreds of billions of dollars through
Luxembourg as part of an alleged tax avoidance scheme. The leaked documents related
to deals negotiated by the accounting firm PricewaterhouseCoopers (PwC), on
behalf of clients like AIG, Amazon, Coach, FedEx, Ikea and Pepsi. This leak
comes at a time when global tax avoidance schemes have come under increasing
scrutiny from U.S. and European regulators. It is thought that the information contained in the leak is
the tip of the iceberg, and that the total amount of money sent through
Luxembourg as part of these tax agreements will undoubtedly grow once tax deals
arranged through other accounting firms are revealed.
