The ‘applicable law’ in this global civilization
July 13, 2001 | 12:00am
We now live in a single global civilization. The identity of the civilization does not lie merely in similar forms of dress, in the constant buzz of the same commercial jingles all around the globe, or in the passionate love songs that tug at the hearts of men and women all over the world, or even in international advertising. It lies in something deeper. Thanks to the extraordinary fact of constant progress with its inherent expansionism, and to the remarkable evolution of science that comes directly from it, our planet has, for the first time in the long history of the human race, been covered within the space of a very few decades by a single civilization – one that is essentially technological.
Many of the great problems we face today, as far as I understand them, have their origins in the fact that this global civilization, though in evidence everywhere, is no more than a thin veneer over the sum total of human awareness, if I may put it that way. This global civilization is immensely fresh, young, new and fragile, and the human spirit has accepted it with dizzying alacrity, without itself changing in any essential way. I heard some prophetic words from the former Secretary-General of the International Telecommunications Union (ITU), the oldest and largest United Nations agency, Dr. Pekka Tarjanne. He is an outstanding telecom leader from Finland, very good-looking and cool, who with his wife was a guest in my home in 1995. As early as 1989, at the Plenipotentiary Conference of the ITU in Nice, France, Dr. Tarjanne said: "The world is a paradox of technological progressiveness and social primitivism."
Humanity has very gradually and in very diverse ways shaped our habits of the mind, our relationship to the world, our models of behavior, and the values we accept and recognize. In essence, this new world civilization merely covers or conceals the immense variety of culture, of peoples, of religious worlds, of traditions and historically formed attitudes, all of which in a sense lie "beneath" it. At the same time, even as the veneer of global civilization expands, this "underside" of humanity, this hidden dimension of it, demands more and more clearly to be heard, and to be granted a right to life.
In the midst of all this realization, we cannot help but be aware of the fact that global civilization has led to increasing globalization and global interdependence. Interdependence is not new but global interdependence is a fairly recent phenomenon exemplified by the accelerated growth of a global capitalist economy that ignores state boundaries at an amazingly increasing rate, and has caused the virtual impossibility of what is now called "economic autarky" or self-sufficiency. "Autarky," by the way, which you won’t find in the Webster or Oxford dictionaries, was first introduced by the Kupchan brothers, Charles and Clifford in their most recent book on world politics.
The telecommunications and IT revolutions have been particularly important in the growth of economic interdependence. Erik B. Peterson, global market specialist, in his treatise published in the Washington Quarterly, writes about the astonishing global financial linkages of today, where, in the early 1980s, daily foreign exchange trading was only about $10 to $20 billion, but by the 1990s, it had risen to $800 billion, and today, it is more than a trillion dollars a day. The combination of world stock and bond markets, plus the markets in financial futures, options and swaps account for an additional trading volume of some $10 to $20 trillion annually. Add to these the fact that international bank lending has grown from $40 billion in 1975 to more than $300 billion by 1990, an upward trend that could well be on its way to a continuum on a global basis, in the 21st century. Peterson points out that when the New York Stock Exchange fell 508 points in the Fall of 1987, equity value fell by an average of 30 percent worldwide, exemplifying the interdependence of the world stock markets.
I remember my first visit to the New York Stock Exchange with my mother when I was still a student, as guests of Mr. W. Funston, president of the New York exchange then and a good friend of my dad. May I just skip the year of this visit and just say that this was during the time when the amazing phenomenon of the electronic medium had not yet enveloped us. As in the Manila stock exchange, the New York variety displayed a lot of hollering and shouting, raising of hands and gesticulating ... a lot of frenzied activity, sometimes going haywire with excitement. The communications revolution has changed all these and indeed encouraged the globalization of financial markets which can be influenced instantly by electronically communicated buy and sell orders. At the risk of incurring the displeasure of my friend, Vivian Yuchengco, high-powered stock broker, stock exchange leader and concerned activist par excellence, may I just say that nowadays an investor no longer needs a broker but can engage in financial transactions with greater efficiency via the Internet, from the comforts of home. Stock brokerage could arguably be a dying occupation.
In all nation-states, there is a real sense that the world is rapidly growing smaller. But citizens of the world do not experience the impact of interdependence equally over the globe. Interdependence is neither a uniform nor a homogeneous condition. It certainly cannot be denied that the advanced industrial states in North America, Europe, and Japan are much more economically interdependent with one another than they are with the less developed and developing countries of Africa and Asia. Where more than half of the world do not have what is technically called "access," there is no way we can believe what the commercials say about computer firms, that would make us believe that the technological revolution is already well entrenched in the Philippine barrios, Tibetan monasteries, the Brazilian rainforests or even the mountains of Antigua, Guatemala, for this is simply not the case.
Multinational and transnational corporations, as a result of global interdependence, are more beholden to their stockbrokers and other interested parties, whatever their nationalities, than to any one state. This is the reality the developing world is faced with today. In the Philippines, multinationals have entered into contracts with the government for a mass transit system, for the exploration of our natural resources, for the development of telecom systems, etc. The multinational corporation has the basic responsibility to recognize the applicability of what is known in international law as the municipal law of the state and the situation is replicated in the countries of Asia and Africa, indeed the less developed and developing world. I found out just the other day that one such contract has been going through an extended and laborious process of implementation. Long delays have crippled the project, caused mainly by gross delays in budgetary outlays, to the extent that, at the end of the previous administration, the multinational corporation, already at its wits’ ends, asked for relief through the arbitral procedure provided for in the state contract.
Contemporary government or state contracts between less developed states and multinational corporations like the Philippine contract just mentioned have raised anew the basic issue called "Applicable Law." If new contractual rules of international law applicable to state contracts with foreigners have emerged or are evolving, they will naturally cause several modifications of the law of state responsibility relating to state contracts. What is the present status of the classical rule of state responsibility with regard to defaults of contractual obligations... that state contracts are governed by the national law of the state? It has become increasingly difficult to sustain the rule under contemporary circumstances.
State authorities in both developed and developing countries have assumed the ultimate responsibility for the economic development and welfare of their peoples. At the same time, large national firms have grown into transnational entities which evaluate each and every investment project as a part of an international business strategy. International law, which used to grant protection to the acquired rights of aliens under state contracts against defaults of the state, is now called upon to concern itself also with the protection of the national economic interests of the state against the misbehavior, negligence or abuse of power of multinational corporations. Furthermore, many state contracts with foreign multinationals today regulate quite different economic relationships than they did a few decades ago. Today, the contract often provides a framework for cooperation between a state and a multinational corporation for the benefit of the state’s national development on the one hand, and for the implementation of the international corporate strategy on the other.
Instead of continuing to reformulate the position of international law on state responsibility for defaults of contractual obligations, international lawyers need to seek new approaches to the issues raised by modern state contracts with multinationals and prescribe more realistic rules and procedures more relevant to the political and economic realities of present-day international investments.
Adhering to the theory that the appropriate international law is applicable, and veering away from the state centric approach need not negatively affect the right to life of that hidden dimension we mentioned earlier, the "underside" of humanity in this global civilization of ours.
Many of the great problems we face today, as far as I understand them, have their origins in the fact that this global civilization, though in evidence everywhere, is no more than a thin veneer over the sum total of human awareness, if I may put it that way. This global civilization is immensely fresh, young, new and fragile, and the human spirit has accepted it with dizzying alacrity, without itself changing in any essential way. I heard some prophetic words from the former Secretary-General of the International Telecommunications Union (ITU), the oldest and largest United Nations agency, Dr. Pekka Tarjanne. He is an outstanding telecom leader from Finland, very good-looking and cool, who with his wife was a guest in my home in 1995. As early as 1989, at the Plenipotentiary Conference of the ITU in Nice, France, Dr. Tarjanne said: "The world is a paradox of technological progressiveness and social primitivism."
Humanity has very gradually and in very diverse ways shaped our habits of the mind, our relationship to the world, our models of behavior, and the values we accept and recognize. In essence, this new world civilization merely covers or conceals the immense variety of culture, of peoples, of religious worlds, of traditions and historically formed attitudes, all of which in a sense lie "beneath" it. At the same time, even as the veneer of global civilization expands, this "underside" of humanity, this hidden dimension of it, demands more and more clearly to be heard, and to be granted a right to life.
In the midst of all this realization, we cannot help but be aware of the fact that global civilization has led to increasing globalization and global interdependence. Interdependence is not new but global interdependence is a fairly recent phenomenon exemplified by the accelerated growth of a global capitalist economy that ignores state boundaries at an amazingly increasing rate, and has caused the virtual impossibility of what is now called "economic autarky" or self-sufficiency. "Autarky," by the way, which you won’t find in the Webster or Oxford dictionaries, was first introduced by the Kupchan brothers, Charles and Clifford in their most recent book on world politics.
The telecommunications and IT revolutions have been particularly important in the growth of economic interdependence. Erik B. Peterson, global market specialist, in his treatise published in the Washington Quarterly, writes about the astonishing global financial linkages of today, where, in the early 1980s, daily foreign exchange trading was only about $10 to $20 billion, but by the 1990s, it had risen to $800 billion, and today, it is more than a trillion dollars a day. The combination of world stock and bond markets, plus the markets in financial futures, options and swaps account for an additional trading volume of some $10 to $20 trillion annually. Add to these the fact that international bank lending has grown from $40 billion in 1975 to more than $300 billion by 1990, an upward trend that could well be on its way to a continuum on a global basis, in the 21st century. Peterson points out that when the New York Stock Exchange fell 508 points in the Fall of 1987, equity value fell by an average of 30 percent worldwide, exemplifying the interdependence of the world stock markets.
I remember my first visit to the New York Stock Exchange with my mother when I was still a student, as guests of Mr. W. Funston, president of the New York exchange then and a good friend of my dad. May I just skip the year of this visit and just say that this was during the time when the amazing phenomenon of the electronic medium had not yet enveloped us. As in the Manila stock exchange, the New York variety displayed a lot of hollering and shouting, raising of hands and gesticulating ... a lot of frenzied activity, sometimes going haywire with excitement. The communications revolution has changed all these and indeed encouraged the globalization of financial markets which can be influenced instantly by electronically communicated buy and sell orders. At the risk of incurring the displeasure of my friend, Vivian Yuchengco, high-powered stock broker, stock exchange leader and concerned activist par excellence, may I just say that nowadays an investor no longer needs a broker but can engage in financial transactions with greater efficiency via the Internet, from the comforts of home. Stock brokerage could arguably be a dying occupation.
In all nation-states, there is a real sense that the world is rapidly growing smaller. But citizens of the world do not experience the impact of interdependence equally over the globe. Interdependence is neither a uniform nor a homogeneous condition. It certainly cannot be denied that the advanced industrial states in North America, Europe, and Japan are much more economically interdependent with one another than they are with the less developed and developing countries of Africa and Asia. Where more than half of the world do not have what is technically called "access," there is no way we can believe what the commercials say about computer firms, that would make us believe that the technological revolution is already well entrenched in the Philippine barrios, Tibetan monasteries, the Brazilian rainforests or even the mountains of Antigua, Guatemala, for this is simply not the case.
Multinational and transnational corporations, as a result of global interdependence, are more beholden to their stockbrokers and other interested parties, whatever their nationalities, than to any one state. This is the reality the developing world is faced with today. In the Philippines, multinationals have entered into contracts with the government for a mass transit system, for the exploration of our natural resources, for the development of telecom systems, etc. The multinational corporation has the basic responsibility to recognize the applicability of what is known in international law as the municipal law of the state and the situation is replicated in the countries of Asia and Africa, indeed the less developed and developing world. I found out just the other day that one such contract has been going through an extended and laborious process of implementation. Long delays have crippled the project, caused mainly by gross delays in budgetary outlays, to the extent that, at the end of the previous administration, the multinational corporation, already at its wits’ ends, asked for relief through the arbitral procedure provided for in the state contract.
Contemporary government or state contracts between less developed states and multinational corporations like the Philippine contract just mentioned have raised anew the basic issue called "Applicable Law." If new contractual rules of international law applicable to state contracts with foreigners have emerged or are evolving, they will naturally cause several modifications of the law of state responsibility relating to state contracts. What is the present status of the classical rule of state responsibility with regard to defaults of contractual obligations... that state contracts are governed by the national law of the state? It has become increasingly difficult to sustain the rule under contemporary circumstances.
State authorities in both developed and developing countries have assumed the ultimate responsibility for the economic development and welfare of their peoples. At the same time, large national firms have grown into transnational entities which evaluate each and every investment project as a part of an international business strategy. International law, which used to grant protection to the acquired rights of aliens under state contracts against defaults of the state, is now called upon to concern itself also with the protection of the national economic interests of the state against the misbehavior, negligence or abuse of power of multinational corporations. Furthermore, many state contracts with foreign multinationals today regulate quite different economic relationships than they did a few decades ago. Today, the contract often provides a framework for cooperation between a state and a multinational corporation for the benefit of the state’s national development on the one hand, and for the implementation of the international corporate strategy on the other.
Instead of continuing to reformulate the position of international law on state responsibility for defaults of contractual obligations, international lawyers need to seek new approaches to the issues raised by modern state contracts with multinationals and prescribe more realistic rules and procedures more relevant to the political and economic realities of present-day international investments.
Adhering to the theory that the appropriate international law is applicable, and veering away from the state centric approach need not negatively affect the right to life of that hidden dimension we mentioned earlier, the "underside" of humanity in this global civilization of ours.
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