Can Trade Law Prevent War?

Can trade promote cooperation and consequently prevent war?

Can trade law, in promoting trade, prevent war?

I've written a new article exploring these issues - feel free to read it at USLEXCODEX by clicking here.

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!

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.

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.

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.

NEW Paper on Maritime Piracy

Incorpolis' author has published a new paper on the dualistic nature of maritime piracy, arguing for greater uniformity and clarity in this area of law.

Download the paper by visiting the SSRN (Social Sciences Research Newtwork) website here.

[Full citation: Velozo de Melo Bento, Lucas, 'Along Liquid Paths': The Dualistic Nature of International Maritime Piracy Law (September 25, 2010). Available at SSRN: http://ssrn.com/abstract=1682624]

The paper will be published in the Berkeley Journal of International Law in 2011.

Super Petrobras and the Largest IPO in Corporate History

The September issue of the Brazilian business magazine "EXAME" crowned Petrobras as the national "Superpoderosa" (the super powerful/ the Almighty). Rightly so, too. The company is already the biggest company in Brazil and one of the largest in Latin America. It is currently the 8th biggest oil company in the world. The company's shares feature in the top 20 most traded in the NYSE.

And in the next few days, it could enter the record books with the largest IPO in the world's corporate history (circa $75bn). If all goes well, the company's market value could surpass $220bn, making it the 4th largest listed company in the world, ahead of giants Walmart and Microsoft.

As already one of the most profitable oil companies in the world, it wouldn't be surprising if Petrobras overtook Exxon and BP in the race to world domination of the "black gold". The company already plans to invest $224bn until 2014 - more than any other listed oil company in the world. The organisation's excellent CSR record is also to be praised - from its investment in education, culture and environmental protection, Petrobras is considered a world reference in CSR and community development. Sure, there are technological and managerial challenges related to Petrobras' growth. But with the "jeitinho Brasileiro" (the Brazilian "way"), it is possible that the "superpoderosa" could take the world by surprise and succeed to the Global Crown of what is one of the largest industries in the world.