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Doing Business in Latin America By Prof. Attila Andrade Jr. University of Miami Law School – Spring, 2008. Brief biographical data on Prof. Attila Andrade Jr. Prof. Andrade holds two graduate degrees from the Yale Law School :
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By Prof. Attila Andrade Jr.
University of Miami
Law School – Spring, 2008
Prof. Andrade holds two graduate degrees from the Yale Law School :
LLM ( Master of Laws) 1972 and JSD ( Juristic Science Doctor) 1977
He has 16 published books in Brazil and abroad. He is a senior partner at Advocacia Attila de Souza Leão Andrade Jr. , an international law firm based in São Paulo and a law professor at Business School São Paulo.
1st Week : Expropriation in light of international law. Case discussion. ( Reading Material:Exhibit 1)
5- Do you agree that as Secretary Hull’s contention that principles of international law subscribe to the conclusion that any expropriation must be followed by “adequate, effective and prompt payment for the properties seized”?
5.1- If so, where precisely these principles are written ? Or are they part of general principles of law as natural law ?
6- Do you agree with Prof.Vernon’s conclusion that “concepts of the right of citizens to property or the duty of governments to compensate should be thought of as peculiar to different national traditions rather than as part of an international standard “?
7- Do you agree that foreign investors in any country must necessarily foresee and assume the risks of an eventual unfair take-over ? Please justify your answer.
The 1962 Resolution of the General UM Assembly over natural resources
“4- Nationalization , expropriation or requisitioning shall be based on grounds or reasons of public utility, security or the national interest which are recognized as overriding purely individual or private interests, both domestic and foreign. In such cases the owner shall be paid appropriate compensation, in accordance with the rules in force in the State taking such measures in the exercise of its sovereignty and in accordance with international law. In any case, where the question of compensation gives rise to a controversy, the national jurisdiction of the State taking such measures shall be exhausted. However, upon agreement by sovereign States and other parties concerned, settlement of the dispute should be made through arbitration or international adjudication.”
The 1974 Declaration on the Establishment of a New International Economic Order.
Charter of Economic Rights and Duties of States as of Dec. 12 1974 by the UN
“......Each state has the right :
© to nationalize, expropriate or transfer ownership of foreign property, in which case appropriate compensation should be paid by the State adopting such measures, taking into account its relevant laws and regulations and all circumstances that the State considers pertinent. In any case where the question of compensation gives rise to a controversy, it shall be settled under the domestic law of the nationalizing State and by its tribunals, unless it is freely and mutually agreed by all States concerned that other peaceful means be sought on the basis of the sovereign equality of States and in accordance with the principle of free choice of means.”
1) Do you feel that foreign investors are lesser protected after the text as quoted in the previous slide ?
2) You are a legal adviser for a US company. In view of what the Charter provides for as previous slide , what would you recommend as a means of protection for your client?
3) Do you agree that leaving the matter to national courts of the investment host countries would be better as it would not privilege foreigners in relation to their own national citizens ?
4) Do you believe that developing nations on the basis of that text, might start proceeding with a full fledge nationalization of foreign interests in their countries ?
Other interesting questions about expropriation and injury to US companies’assets and interests by foreign sovereign states
5) A US company waives legal protection in the agreement for the investments it made in a Latin American country. Such a country later expropriated the assets of the US company.
Would this US Company be at a complete loss ? Does it have any remedy ?
Please consult # 713 of the Restatement on Protection of Persons.
6) In order to resort to arbitral international courts of law or diplomacy of its own national state, do corporations or individuals have to resort to local courts of law in the expropriatory foreign country ?
For the answer, kindly consult with #713 of the Restatement on Remedies for injury to nationals or other States.
7) Can a national of a third party country sue a foreign sovereignty in a US court of law ?
We interpret the Hickenlooper Amendments aimed at protecting only US persons assets and interests being expropriated abroad.
However, if a third party country person and that foreign expropriating country provide in their agreement, the venue of a US court, then the latter will have jurisdiction. Also the Foreign Sovereign Immunities Act permitted the same in Verlinden B.V. vs. Central Bank of Nigeria ( 461 US 480, 103 S.Ct. 1962, 76 L. Ed. 2d 81 – 1983).
Under this concept, “it is a violation of international law if, in repudiating or breaching the contract, the state is acting essentially from governmental motives ( akin to those that operate in cases of expropriation) rather than for commercial reasons, and fails to pay compensation or to accept an agreed dispute settlement procedure.
Congress has enacted 22 U.S.C.# 2370 also known as the Second Hickenlooper Amendment. This legislation states that US Courts should not apply the Act of State doctrine in cases of expropriation of assets by a foreign government except if the Executive tells them to do so for diplomatic or political reasons. Both the first and the second Hickenlooper Amendments sponsored by Iowa Senator, Bourke Hickenlooper were the Congressional responses to the radicalization of the Act of State doctrine in the US Supreme Court ruling in Banco Nacional de Cuba vs Sabatino.
Finally this Amendment entitles the Executive to examine case by case to determine which cases the Judiciary is to hear .However comentators suggest that courts have narrowly interpreted the Second Hickenlooper Amendment to apply it only when the assets are located in the US.
Conclusion on Hickenlooper Amendments , Courts and Act of State Doctrine
Therefore many US courts insist in applying the Act of State Doctrine in some cases of expropriation.Then it seems that the only effective deterrence to it is actually the First Hickenlooper Amendment
The International Court of Justice ( ICJ) has no jurisdiction to hear cases of expropriation of assets of private individuals or companies by foreign sovereign governments. Its jurisdiction is limited to legal disputes between and among nation states.
Conclusion on remedies available for private individuals and companies against foreign expropriation of their assets:
There are inumerous international arbitral courts to which lawyers can resort to in their agreements, here are the most important:
We have previously seen how vulnerable the foreign investment can be around the world and LA may not be an exception as potential threats to US investments. Expropriations have periodically taken place throughout the continent .
What else, in addition to arbitration clauses in the international agreements, you would recommend your client to obtain ?
The US Congress had passed a number of facilities which are designed to protect the US investments abroad. One of these , most relevant is the OPIC , a government-funded and sponsored political risk insurance policy which purports to insure US investments abroad in case of expropriation. The other facility is the MIGA (“Multilateral Investment Guarantee Agency”).
Eximbank Export Credit Insurance Program (ECIP) as a tool to prevent expropriation of assets abroad