Monday, 27 December 2010

Can Brazil bite without BITs?

"Brazil is not an emerging market. It has already emerged."

Brazil has been attracting an enviable amount of FDI in the past few years. Oh yes, we all know that the 'B' in the BRIC acronym stands for Brazil and that the country is set to become one of the biggest economies in the world by 2050. Yes, we also know that the country has found a colossal amount of oil off its coast which could place it amongst the biggest oil exporters in the planet. We are also aware that a number of companies once known as the emblem of Western life are now owned by Brazilians (Burger King, Budweiser, Keystone Foods, Pride etc).
We are not, however, conscious that Brazil has been somewhat of a rebel in the international investment arena. Indeed, the country has never ratified a bilateral investment treaty (BIT). It has signed some, but never ratified them. BITs offer numerous protections to foreign investors. Brazil, however, claims that its domestic legal system is enough to protect the investment of foreigners. The country does recognize arbitration as a dispute resolution method but - it is argued - lacks the formalism granted to investors by a BIT.

Despite the absence of BITs in the Brazilian legal fabric, FDI continues to pour in the country at the same rate that I pour champagne in my guest's flute glasses on New Year's Eve. FDI-wise, Brazil is "on a roll". Nothing seems to be able to hold it back. (I, on the other hand, should probably limit my alco-hospitality this year.)

Does the Brazilian experience suggest that in some cases BITs aren't necessary to attract FDI? Can investors nonetheless rely on international customary law to protect themselves in Brazil? Would Brazil's ratification of BITs further increase FDI?

I'm currently looking at these issues. Your thoughts on the matter would be greatly appreciated. Do not hesitate to drop me a line on lucasvelozo@hotmail with your views.

Happy New Year!

Thursday, 2 December 2010

UK and US Takeovers

The hostile takeover is a powerful tool of corporate governance. In this context, takeover defences have evolved into increasingly complex and varied corporate weapons, with the goal of protecting target companies from the threat of hostile acquisitions. Nowadays, a large set of takeover defences exists. Despite their popularity, these defences remain controversial. Advocates of such defensive devices maintain that they increase the ability of target management to extract a higher price for target shares, as well as protect implicit labour contracts and pensions of target employees. Opponents of such devices argue that resistance reduces the probability of takeover and favours managerial entrenchment. And as a result target shareholders are worse off overall. Existing empirical work has been unable to resolve this issue since the effect of defensive devices on the value of target firms is inconclusive.

Despite clear similarities between their business and legal structures, the United Kingdom and the United States have not only pursued strikingly different models of corporate takeover regulation but also in the methods by which tactics are employed to counter takeovers i.e. via defensive mechanisms. As Armour and Skeel noted, “surprisingly little attention has been paid to the very significant differences in takeover regulation between the two countries.” This two-part post will set out the different takeover defences existent in both jurisdictions as well as try to review and compare them. Check it out by clicking here.