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Behind the veil – companies vs the State

Microsoft has been battling the USA over access to data for some time now. And the other big internet companies are backing it too. The USA wants to be able to access data held by Microsoft overseas. Microsoft claims that it does not have to hand it over on request – and that consumer and customer privacy concerns mean it would be a bad idea anyway.

The case has been going though the courts for some time. But it raises some profound questions about the power of companies and the power of the state in the internet age. At the moment most of the law applicable to companies is national law and most national law applies to ‘persons’ subject to the relevant nation state (although sometimes the jurisdiction of the courts is extended to crimes committed overseas). And companies are considered persons before the law.

Now while multinational companies certainly present as a monolithic presence, in fact in order to operate in a different country, it is necessary to set up a separate company registered in that country and subject to its laws. For commercial purposes this doesn’t matter much, since the country where the group is headquartered will own the overseas company and is therefore able to control it.

Companies like to play this both ways. As far as profits are concerned, they may be extracted by HQ as desired, but where a crime or environmental or human rights harm has been perpetrated, the overseas company is assigned responsibility. In this they are helped by the doctrine of the ‘corporate veil’ by which shareholders (including organisational shareholder) are not liable for the acts of their company.

So while we may now be seeing corporate acts through a glass darkly, it is possible that the Microsoft case may lift the obscuring veil. Of course, that would still leave the arguments about privacy. But those should be tackled on the basis of privacy issues, not of general corporate responsibility.

 

 

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Ineos in a state

Fracking is controversial and widely rejected by the communities where it could take place. But the oil company Ineos is pushing forward with its fracking plans in the UK. It seems content to do this at almost any cost to community good will, pursuing legal injunctions making any practical protest illegal.

The damage this is doing to its public relations seems without limit. By taking such a heavy-handed approach, Ineos is storing up trouble for years ahead.

What can possibly justify this? It’s (private) shareholders’ motives are unfathomable.

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Accountability for Syria

Obama should just give up and admit he got it wrong. A little bit of humility is worth it to avoid a catastrophe in Syria.

It is unclear whether Obama will even ask for Congressional approval. By law he does not have to, despite many requests to do so. But international law does require UN approval for military action against Syria. And whatever Syria has done, the argument that it should be punished for chemical weapons attacks would guarantee that any resulting action was illegal.

Beyond national accountability, the arguments against military action include that it will:

  • cause more loss of innocent life as a direct consequence
  • not work as a deterrence against using such weapons – or even to stop the conflict
  • cause even greater instability and loss of life in the region more widely.

All of which seemed lost on David Cameron who is looking more and more out of his depth. But, to his credit, Cameron has decided to give up on military action against Syria. He agreed to submit to the will of parliament – and demonstrated his accountability. That is far more something to make one feel good, than dropping bombs – even though it seems only bombs could make Lord Ashdown feel good.

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Companies as if they mattered

The police are investigating possible crimes at News International committed by the company, not just by a bunch of individuals. It is sometimes claimed that the most effective deterrent to crimes committed while operating a company is the individual prosecution of senior management figures. And of course this is a real deterrent. But the question remains, what of the company itself? Should it go free?

It is of course difficult to prosecute companies for crimes, particularly since a key requirement will be to identify a controlling mind of the company for the alleged offence. But the law was changed recently in the UK to make at least corporate manslaughter easier to prosecute. In contrast the prosecution of companies under civil law is more common, but usually effectively dismissed by management as just a cost of doing business.

The News of the World is claiming that the effect of a prosecution would be catastrophic, causing worldwide licences to be at risk and threatening the whole Murdoch empire. (And that is just a prosecution, not even a conviction – they may, after all, be found innocent.) It is just as well the Crown Prosecution Service does not feel that this is a valid consideration, as otherwise large businesses would be effectively above the law.

And it may also be worthwhile for initiatives such as the Ecocide project to include corporate commission of ecological rights abuses within its remit.

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Maybe companies are not people after all!

A Pennsylvania judge has ruled that companies, while they may be legal persons, should not enjoy all the rights that human persons have.

It was in the context of  questioning the right to privacy of a fracking company, which had argued that a compensation agreement it  had made was a private matter and so need not be disclosed.

But the impact of the decision, while it may be  helpful for anti-frackers, is also likely to question the common assumption that companies enjoy human rights in a wide variety of fields. And this could affect not only matters of privacy and confidentiality but also judgments on free speech (think of the Nike-Kasky case).

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Where does innovation come from?

Drug manufacturers think it comes from protecting profits. No doubt this leads to the development of drugs that can be patented – tweaking an existing drug usually does the trick with minimal effort. But the Indian courts have ruled that tweaking an existing drug does not create a new drug that merits a patent. And India is the capital of the world for cheap drugs.

So the drug companies will have to work on things that are really different. Innovation is needed in treatments for the diseases of the poor, such as TB and malaria and for ‘orphan drugs’ that have a small number of users.  And we will all need new antibiotics when the over-use of the current ones causes them to fail. The problem for the pharmaceutical companies is that these areas are not always profitable.

While there have been innovative attempts to develop treatments in some of these areas, many have been premised mainly on extending financial protection in some way. A more radical approach to health is needed, beyond patentable drugs.

In the end, real innovation comes from opening up, not from closing down and protecting.

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Royal Charters: the way forward for voluntary self-regulation?

It looks like the new UK press regulation regime will both be voluntary and have teeth. It will have the power to impose significant sanctions on those who break their own rules.

So why can’t other industry sectors adopt this approach – alcohol production, gambling and retailing perhaps? At the moment, where self-regulation exists at all, it is weak and ineffectual like the Press Complaints Commission. If companies don’t like the rules, they either ignore them or change them. Not much to respect there.

What it took to change press regulation was a huge scandal. So can similar scandals  in other sectors be avoided by establishing meaningful self-regulation first?

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When win-win turns into win-lose

Bilateral Investment Treaties are complex, technical, boring – and dangerous. They turn the win-win of CSR into ‘heads I win, tails you lose’.

These treaties specify the conditions under which a company will invest in a country. They’re typically used by large companies making major infrastructural investments in relatively unstable countries. From the companies’ point of view, their intention is to provide certainty around their investment. For example if a developing country improves its health and safety regulations, the company would be entitled to compensation for its increased costs. so it’s a way for a company to off-load risk. From the countries’ point of view, they have no choice. The investment, even with such conditions, is an offer they can’t refuse.

According to UNCTAD, there have been hundreds of such cases. When companies sue countries, money is sucked out of the country. It also acts as a break on the improvement of social and environmental conditions.

According to an IPS report, the companies involved include Chevron and Philip Morris – amongst many, many others.

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Taxing codes

The Code of Practice that banks have signed up to – which is meant to stop tax avoidance – has a glaring loophole. The main provision says that banks “should not engage in tax planning other than that which supports genuine commercial activity”. But financial engineering (including tax planning) is a commercial activity. So there should be no problem in banks undertaking tax planning for schemes specifically designed to avoid tax.

It would appear that the activities of banks, and the complexities of the codes designed to govern them, are too byzantine to be understood and managed by anyone. Hence the appeal to the ‘spirit’ of the law. I fear that the only spirits to co-operate will be those at the bar.

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Shredding Reputations

How should the media be regulated?

The painful accounts of intrusion into private lives by the newspapers that the Leveson Inquiry has revealed should provoke some government reaction. Is there a danger that ‘good’ journalism will be regulated away in some fashion in the name of protecting privacy? Will some instances of bad behaviour by those who should know better be missed if privacy is protected? Probably. But it seems a price worth paying. And of course most ‘good journalism’ does not involve exposing salacious details of people’s lives.

I believe transparency is a good thing – but only until it does harm. The harrassment that goes with exposing private lives to the public very rarely has any justification, except to those who profit from it.

The key to any useful regulation of the media is to distinguish properly between what the public is interested in and what is in the public interest. The former should always be trumped by privacy; sometimes the latter should not.