Sunday, 21 November 2010

Back to The Future: The Living Contract's Tale

A contract is a legal instrument that binds the promisors to their original promise. To some, it may appear that signing a contract is the act of setting in stone the agreement to the effect that it becomes inflexible and unchangeable. In other words, what is done is done.

But the Futures Contract is different. It wrestles with the weather, wars and world trade.
It lives in the promisors' future; a future not yet materialized. The price may be set today - but the sale only occurs tomorrow. It evolves; it is elastic. The transferability of the futures contract reminds me of a nomad: it doesn't quite know where it'll end up but it will end up somewhere.

Eventually, however, this great journey through time comes to an abrupt end. We all know that at some point, the present - now past? - catches up with the future. And so does the futures contract, as it dies in the sea of trades in the futures exchange floor. Eventually, the commodity is sold and consumed. What is done is done.

In Towne v. Eisner 245 U.S. 418 at 425. (1918)
Hobhouse J stated:

"A word is not a crystal, transparent and unchanged; it is the skin of living thought and may vary greatly in colour and content according to the circumstances and the time in which it is used."

In similar fashion, the futures contract is not set in crystal like other contracts. It is the skin of living international commerce and although it may vary greatly in colour(?), content and value, it will invariably remain subordinate to its internal explosive device: Time.

Sunday, 14 November 2010

Negotiation Strategy and the Piracy Market

"To negotiate or not to negotiate, that is the question"

Ransom payments have reached a new peak. A few days ago, Somali pirates received a total of $12.3m in ransom money to release two ships (the Samho Dream and the Golden Blessing). We are dealing with highly sophisticated and organized criminals.

Pirates are getting better at what they do. The international effort which sought to combat piracy has failed.

What's going on?

Let's look at the mechanics and incentives behind piracy. A major incentive is clearly economic gains. When pirates hold property and/or crew hostage, it's difficult for shipowners/insurers/lawyers/law enforcement authorities to keep their heads cool. So how is the release of crew/property negotiated?

The fact is that little attention has been paid to this practical concern of the piracy problem. Can negotiation strategy help? What are the negotiation strategies employed with pirates? Are these the right ones? Perhaps part of the problem is how we negotiate with pirates.

States usually refuse to negotiate with terrorists for policy reasons. So why do we allow ourselves to negotiate with pirates?

We should recognize that ransom payments are counter-intuitively part of the problem.

The Piracy Market's logic is clear:
  • Ransom payments = incentive for pirates;
  • Incentives create and formalize the market for piracy;
  • The "Piracy Market" attracts new market participants;
  • The new market participants perpetuate piracy.
It's a vicious cycle that's getting worse.

But what is the alternative?

I'm trying to explore these issues in more detail. The scarcity of information and the relatively secretive nature of ransom negotiations complicates research in this area but it is hoped that I'll be able to hypothecate on what information is available so as to help stakeholders better deal with pirates in these delicate situations.

It may be that we should re-consider not only whether current negotiation strategies are effective, but - perhaps more controversially - whether we should negotiate with pirates at all.

Any contributions from lawyers/negotiators/law enforcement agents are highly welcome.