Tag Archives: Rule of Law

A Different Way to Experience International Law

 

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Maksim Karliuk is a CIPE-Atlas Corps Think Tank LINKS  Fellow serving at the Cato Institute.

This year I had a great privilege to serve as a judge at the International Rounds of the Philip C. Jessup International Law Moot Court Competition – the world’s largest moot court competition, with participants from over 550 law schools in more than 80 countries. The Competition is a simulation of a fictional dispute between countries before the UN International Court of Justice. The best teams worldwide qualify for the International Rounds, which are held yearly in Washington, DC.

In 2009 I was among such participants, representing Belarus at the International Rounds as a member of the team from the Belarusian State University. It was a great experience that allowed me to broaden my knowledge, practice real application of international law, acquire important skills, and meet the best international law students and professionals from around the world.

This time I was on the other side, which was a completely different but still rewarding experience. It is indeed inspiring when you see incredibly capable, intelligent, and skillful individuals pleading their case in front of you. No less outstanding were the benches of judges I was privileged to be part of – legal professionals from all over the world.

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Why Do Entrepreneurs Operate in the Shadow Economy?

What is the “rule of law” and why does it matter for entrepreneurs? In this video, Democracy that Delivers for Entrepreneurs keynote speaker Hernando de Soto explains how the legal and institutional structures that entrepreneurs and business people in the developed world take for granted are sorely lacking in many developing countries. As a result, those who want to start a business are often forced to operate in the shadows — lacking formal registrations, licenses, and any protection for their property.

De Soto’s organization, the Institute for Liberty and Democracy (ILD), estimated that up to five billion people may be completely shut out of the legal system. The results can be catastrophic and even world-changing.

When Tunisian fruit peddler Mohamed Bouazazi had his cart, scale, and inventory confiscated by a police inspector in 2011, he was so despondent that he set himself on fire — igniting the Arab Spring that brought down several governments around the region.

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How Do Institutions Facilitate Entrepreneurship?

The great Peruvian democracy advocate Hernando de Soto has spent much of his career focused on bringing informal entrepreneurs into the formal sector, where their rights are enshrined in and protected by law. When citizens have the tools to access to capital and a business environment that supports them, they are able to move up the development ladder from the survival entrepreneurship of the informal sector to the prosperity of the formal economy.

De Soto’s work encouraged an important new way of thinking about how to create opportunity where none previously existed. In so doing, he and his organization, the Institute for Liberty and Democracy (ILD) in Peru, have had a profound and positive impact on the lives of millions in Peru and around the world. CIPE’s first partner 25 years ago, De Soto’s and ILD’s work personifies the proven belief that strong markets require vigorous governance and vice versa, and that open participation in both markets and government are a foundation of democracy.

In this most recent Economic Reform Feature Service article, De Soto looks at the necessity of institutions—and specifically the rule of law—to create and nurture a successful entrepreneurial environment.

Article at a glance

  • Creating wealth through entrepreneurship requires combining different resources (for example, the parts of a pencil or those of a watch). Institutions are crucial to facilitating that combination.
  • To do all the things that entrepreneurs in developed countries take for granted – like dividing labor, using property as collateral, protecting personal assets, expanding markets, or creating economies of scale – entrepreneurs in developing nations need the standards that only legal institutions can provide.
  • The wealthy in developing nations have convinced the poor that no matter how talented or enterprising they are, they will never succeed. In fact, the world’s most successful entrepreneurs just have access to superior legal institutions.

Read the entire article.

Georgia Justice Minister Outlines Reform Agenda

Georgia's Justice Minister Tea Tsulukiani is interviewed on Georgian television.

Georgia’s Justice Minister Tea Tsulukiani is interviewed on Georgian television.

In October 2012, Georgia’s parliamentary elections resulted in the unseating of the incumbent United National Movement party by the opposition coalition, Georgia Dream, with 55 percent of the vote. In the wake of the post-Saakashvili era, the newly elected government is working tirelessly to define the priorities for democratic reform, governance, and rule of law.

Speaking at the Carnegie Endowment for International Peace in Washington, DC on February 22, Georgia’s newly appointed Minister of Justice Tea Tsulukiani — previously a renowned human rights lawyer — outlined her agenda for judicial reform. Throughout her speech, transparency, accountability, and impartiality were stressed as cross-cutting themes for reform initiatives.

Three key reforms highlighted by Tsulukiani included: universal free access to laws and penal codes; inclusion of civil society and the private sector in the drafting of new legislation; and strengthening the position of the defendant before a judge in the criminal procedure code.

This attention to democratic reform of the judiciary was warmly welcomed by many, as Georgia’s judicial system is perceived as highly corrupt with little to no independence from the regime. It is nearly impossible for ordinary citizens to win a court case against the state – the acquittal rate in Georgia is a miniscule 0.01 percent. This stark statistic comes into the light when you consider the fact that there are 300 state prosecutors, yet only 33 defense investigators. What this means is that judges are provided overwhelmingly with evidence for the prosecution, rather than a balanced argument.

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New Tool Puts Spotlight on Rule of Law for Business

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By Patrick Kilbride and Terri O’Connor, Coalition for the Rule of Law in Global Markets, U.S. Chamber of Commerce

It’s a brave, new, global world for business.  Plenty of opportunity; plenty of risk.  As e-commerce, free trade agreements, and modern infrastructure have opened the world’s markets, many companies have found that on the frontiers of trade there are not always a lot of rules.  And where rules exist, they are not always enforced.

In markets where transparency and accountability have been scarce and investors have feared to tread, the U.S. Chamber’s Coalition for the Rule of Law in Global Markets is striding in, spotlight blazing.

This new tool for business is featured in the 2013 Index of Economic Freedom released by The Heritage Foundation and the Wall Street Journal.  Myron Brilliant writes for the U.S. Chamber of Commerce, “Companies look to invest in markets where they have confidence in the integrity of public and private institutions and where there is fairness, enforcement, and proper adjudication of the law.”

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The Path Towards Democracy in Burma

President of Burma U Thein Sein at the US-ASEAN Forum (Photo: The Nation)

In his speech at the July US-ASEAN Business Forum in Siem Reap, Cambodia, U Thein Sein explained that Burma “has embarked on a democratic path” and is “moving toward a new democratic era.” He went on to outline the reform efforts his country is presently undertaking, efforts that give reason for optimism following April’s dramatic electoral victories for Aung San Suu Kyi and the National League for Democracy.

In addition to promises of regular and free elections, increased media freedom, and constructive engagement with leaders of ethnic minorities, President Thein Sein announced plans “to transform [Burma’s] centralized economy into a market-oriented economy.” At this same event, US Secretary of State Hillary Clinton said that President Thein Sein is a leader “who has moved his country such a long distance in such a short period of time.”

Moving forward, a successful and sustainable transition in Burma requires that economic growth be widespread and that economic opportunities arise for more than the well-connected few. However, numerous key institutions that are necessary for the realization of this goal are either weak or completely missing in Burma today.

Paramount among these institutions are private property rights and the rule of law. If these institutions, which are fundamental for the development of a market economy, are not substantively reformed and strengthened in Burma, its economic and democratic transition will prove unsustainable.

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Democracy Rules: Why Business Thrives in Democratic Societies

Villagers protesting in Wukan in 2011. (Photo: AP)

Recent data suggests that in countries which have made the transition from “Not Free” or “Partly Free” to “Free” (according to Freedom House) the average rate of GDP growth increased from just over 6% to over 14%.  Countries categorized as “Free” also seem to draw more overseas investment: while  the total level of US foreign direct investment (FDI) in “Free” countries is well over $250 billion a year, FDI in “Not Free” countries remains under $20 billion.

For some, though, China’s recent success stands as a counterpoint to the idea that democracy is better for business and economic development.  Multinational corporations as well as local companies have fared extremely well over the course of China’s last 30 years of economic development, which was accomplished under an autocratic regime.  China’s economic triumphs indeed deserve recognition, but weak rule of law seems likely to inhibit continued growth.

By most accounts, more than 90,000 protests occur in China every year, a manifestation of popular discontent with corruption and other instances of officials disregarding the rule of law.  The villager revolt in Wukan at the end of 2011, for example, highlighted the role that corruption plays in issues such as income inequality and access to capital.  In Wenzhou last summer, a high-speed train crash that killed at least 40 people can be traced to improper implementation of safety protocols.  Instead of investigating the incident and punishing those responsible for the lapse, officials attempted to cover up the wreckage, literally.  And while local officials deny it, the practice of police abducting “suspects” without due course is reportedly widespread.  Add to this numerous labor strikes, and many companies are naturally concerned  about their ability to maintain the productivity of their workforce.

Issues surrounding intellectual property (IP) rights are also a major threat to many companies.  This goes beyond pirated movies and fake Puma sneakers (or “Pumba” sneakers as I have seen in local shops).  When foreign companies do business in China, they often run the risk of having their patented technology copied, reproduced with minor alterations, and then re-patented.  This naturally leads to a loss in competitiveness resulting in reduced revenues.  Foreign companies have often invested in Chinese projects only to be shoved out by local competitors who have managed to replicate proprietary information. Such behavior has led to some major losses and many businesses rethinking whether or not it is worth it to do business in China.

Foreign investment is not the only victim of lax regulation regarding intellectual property.  A recent article exploring the topic suggests that the value of a Chinese start-up’s IP is generally discounted by between 33 percent and 50 percent.  Weak institutions for protecting property deter investment in new ideas and reduce the drive to innovate.  Why spend time, energy, and resources to engage in productive innovation when there is no guarantee of being able to profit from it?

Such disregard for laws and regulations has a direct impact on investors, both foreign and domestic, who fear their money may be squandered.  The general consensus is that China must now transition away from its export-based model and foster a more robust domestic market.  However, would-be entrepreneurs — the agents of growth and development — are effectively denied the ability to convert their assets into capital, and so are unable to turn ideas into reality.  Domestic companies and start-ups are also hindered by regulations put in place to prop up the state champions that have driven growth over the past three decades.

Unlike China, democracies are built on institutions that help to foster an environment conducive to enterprise, where citizens and businesses are able to voice their opinions and contribute to the development and enforcement of laws and regulations.  Democratic societies are also more transparent, allowing for greater accountability and more effective and fair enforcement of the law.  When officials are accountable to the public, they have a larger stake in tackling issues such as corruption that inhibit economic growth.  Additionally, wider access to information helps to arm businesses with the knowledge they need to make important decisions and conduct effective strategic planning.

Recently, questions have arisen about whether or not China can maintain its high rate of growth.  In a recent discussion at the Carnegie Endowment for International Peace, Justin Lin of the World Bank stated that he is confident that China has the potential to continue growing at rates of over 8 percent for at least 20 more years.  However, in order to do so, the reforms that Deng Xiaoping initiated in 1978 must be completed. This process includes the removal of market distortions that support state-owned champions, the development of a reformed financial system that allows local entrepreneurs to access capital, and much stronger rule of law. Without such reforms, growth may falter in the face of problems related to the rule of law and corruption.