June 1, 2015 nº 1,632 - Vol. 13

“Why limit yourself to the familiar? Make an effort to step outside your circle. Do more than just accept diversity: Seek out diversity. I promise it will make you more interesting, more informed, and more understanding.”

 Mellody Hobson

Read Migalhas LatinoAmérica in Spanish every Tuesday and Thursday. Visit the website at www.migalhas.com/latinoamerica


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  • Top News

US law plays offense overseas

Whether or not US actions against FIFA succeed in rooting out corruption in soccer, the real political story is about the reach of US law overseas. Extraterritoriality is the extension of legal jurisdiction to the actions of individuals or firms outside a nation's physical borders. And contra the foreign minister's statement, extraterritoriality has a long history in international law. It provides the legal underpinning of the diplomatic system, in which embassies and diplomats are governed by the laws of their home country. We observe the rising use of extraterritoriality by the United States to assert its interests in global affairs. In a diverse set of issues – anti-corruption, anti-trust, bank secrecy, counterterrorism and conflict minerals, to name a few — US law extends far beyond its territory. In some instances, no US firm or citizen is even involved. Instead, extraterritoriality is justified through the 'effect' that foreign actions might have on the United States. A merger between Nokia and Alcatel, for example, might limit competition in the US telecommunications market. There is a shift to a legal justification based on 'presence,' in which US authorities can prosecute based on the fact that someone has a mere presence or tie to US markets. In both cases, US officials use the pull of stock markets and financial institutions to extend the reach of domestic law globally.

UN rights office: encryption crucial to free speech

The UN Office of the High Commissioner for Human Rights on Thursday released a report arguing that strong encryption is elemental to basic human rights. The report hails encryption and anonymity as tools that allow individuals to "exercise their rights to freedom of opinion and expression in a digital age," and thus deserve to be protected. The report strongly opposes intentionally compromising encryption, "even for arguably legitimate purposes." These "backdoors" weaken the online security of all users, something it calls on States to avoid. The report also urges the US Congress to consider passing the Secure Data Act. This bill would prevent the US government from requiring companies to include intentional compromises in their encryption, an action some federal officials defend as necessary in case data must be decrypted for criminal or national security investigations.

The Sino-Brazilian principles in a Latin American and BRICS context

Lawyer, Assistant Professor of Finance and Public Budgeting at the State University of Maranhao (UEMA) and long-time reader of Migalhas International, Gutemberg P. Lopes Jr. published an excellent article in the Wisconsin International Law Journal, entitled ‘The Sino-Brazilian Principles in a Latin American and Brics Context: The Case for Comparative Public Budgeting Legal Research.’ He made it available to our readers. Click here to read it.

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  • MiMIC Journal

US calls for land reclamation 'halt' in South China Sea

The US has called for an "immediate and lasting halt" to land reclamation in disputed areas of the South China Sea. US Defense Secretary Ashton Carter told the Shangri-La Dialogue in Singapore that China's actions in the area were "out of step" with international rules. China claims almost the whole of the South China Sea, resulting in overlapping claims with its neighbors. Chinese officials have described US remarks on the South China Sea as "groundless and not constructive". Other countries have accused China of illegally taking land to create artificial islands with facilities that could potentially be for military use.

Beijing public smoking ban begins

Public smoking in China's capital, Beijing, is now banned after the introduction of a new law. China has over 300 million smokers and over a million Chinese people die from smoking-related illnesses every year. Smoking bans already existed in China, but have largely failed to crack down on the habit. These tougher regulations ban lighting up in restaurants, offices and on public transport in Beijing. Thousands of inspectors will enforce the rules.

China considers doubling its local bond-swap program

Chinese policy makers are considering plans to as much as double the size of a clean-up program for shaky local government finances. In what would be the second stage of the program, a further 500 billion yuan ($81 billion) to 1 trillion yuan of local-government loans would be authorized to be swapped into bonds issued by provinces and cities. The first stage of the bond swap, currently under way, is 1 trillion yuan.

Chinese security laws elevate the party and stifle dissent. Mao would approve.

China's new national security law, released in draft form this month, has little to say about such traditional security matters as military power, counterespionage or defending the nation's borders. Instead, to the surprise and alarm of many people here, it reads more like a Communist Party ideology paper and a call to arms aimed at defending the party's grip on power. The law, together with two other recently published draft laws, constitutes the most expansive articulation yet of President Xi Jinping's vision of national security, and the widest interpretation of threats to the Communist Party and the state since the Mao era. Analysts say the laws are aimed at giving the security forces and courts greater leeway in muzzling Chinese civil society and corralling the influence of Western institutions and ideas, which Mr. Xi views as a threat.


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  • Brief News

US surveillance powers expire as Senate deal fails

US anti-terror provisions that allow security services to bulk collect phone data have expired after the Senate failed to reach a deal. Key provisions of the law, known as the Patriot Act, lapsed at midnight local time. A vote on the Freedom Act, a revised bill that imposes greater controls on phone data collection, will not take place until mid-week. The White House has described it as an "irresponsible lapse" by the Senate. The failure to reach a deal means that security services have temporarily lost the right to bulk collect phone records, to monitor "lone wolf" terror suspects and to carry out "roving wiretaps" of suspects. The National Security Agency (NSA) who runs the majority of surveillance programs has already begun switching off its servers that collect data. (Click here)

Give records law teeth

The public records law in Massachusetts has gone past insufficient to reach the point of embarrassment. But state Rep. Peter Kocot has presented his colleagues with a bill, which has several provisions aimed at improving access to official government records. In particular, there is focus on punishing any effort by a government agency to shield, unlawfully, public information from view. Not just for punishment's sake — but because it would provide an incentive for those agencies to disclose the information that a citizen might be seeking, or a member of the media is seeking on their behalf. And really, that is the fundamental purpose of the whole exercise. An individual or organization that successfully challenges the denial of a public record, for example, would be eligible to recover attorneys' fees. Massachusetts is one of only four states without such a provision, according to Common Cause Massachusetts. And as any 3-year-old can attest, when there are no consequences for misbehavior, the misbehavior persists.

Treating corporations as people

Courts have ruled that the Fifth Amendment privilege against self-incrimination does not apply to corporations, but a recent case challenged that notion. A corporation does not have quite the same rights as individuals, including the Fifth Amendment privilege against self-incrimination that an organization cannot assert. There has been a great deal of discussion the past few years about the constitutional rights of corporations. In two controversial decisions, the Supreme Court found that restrictions on campaign contributions by organizations violated their free speech rights, while a provision of the Affordable Care Act could not be imposed on a corporation without violating its right to religious freedom. Despite the trend in recognizing broader rights for corporations, a recent decision by a federal appeals court in Philadelphia, In re: In the Matter of the Grand Jury Empaneled in May 2014, rejected an attempt to assert the Fifth Amendment privilege by a doctor who was the sole owner and employee of an incorporated medical practice that was subpoenaed for its records. The case could be a vehicle for the Supreme Court to revisit its position denying the privilege to corporations, perhaps using it to take another step toward treating them more like ordinary people.

European Union anger at Russian travel blacklist

The European Union has responded angrily to Russia's entry ban against 89 European politicians, officials and military leaders. Russia shared the list after several requests by diplomats, the EU said. The EU called the ban "totally arbitrary and unjustified" and said no explanation had been provided. Many of those on the list are outspoken critics of the Kremlin, and some have been turned away from Russia in recent months. "The list with 89 names has now been shared by the Russian authorities. We don't have any other information on legal basis, criteria and process of this decision," an EU spokesman said.

East African leaders urge Burundi to delay elections

East African leaders have urged Burundi's president to postpone elections due in June. They have also called for an end to the violence sparked by President Pierre Nkurunziza's decision to stand for a third term. A coup attempt against Nkurunziza failed earlier in May and some 90,000 Burundians have fled the unrest.

Vatican finance chief legal threat over 'sociopath' claim

The Vatican's finance chief George Pell is seeking legal advice after being accused of an "almost sociopathic" approach to child abuse allegations. Pell has offered to testify in a major Australian inquiry into institutional child sex abuse. He is accused of silencing a victim of a pedophile priest and aiding the priest's move to another parish.

US police kill more than two people a day

Data collected by the Washington Post newspaper suggests that the number of people shot by US police is twice as high as official figures claim. The paper said that during the first five months of this year, 385 people - more than two a day - were killed. The number of black people was disproportionately high among the victims, especially unarmed ones. Official statistics rely on self-reported figures from law enforcement agencies.

Why aren't sponsors tougher on Fifa?

The Fifa scandal is an "absolute disaster" for the multinationals who sponsor it - because they cannot escape taint from the perceived lapses of football's supreme governing body. Senior business people and marketing gurus seem to agree that "This is a nightmare for them - the reputational damage is huge". Coca Cola, Hyundai, Budweiser, McDonald's, Gazprom and Visa (among others) have signed legally binding contracts. So they may not be able to get out of the contracts without paying spectacular damages - given that they are each believed to be paying Fifa up to $200m over four years for the marketing opportunities associated with the World Cup. They are asking their lawyers to examine whether they have 'moral' clauses in their contracts, which would allow them to get out because of Fifa's behavior.

Appeals court declines to get involved in case regarding Guantanamo video footage

The US Court of Appeals for the District of Columbia Circuit on Friday decided not to get involved, for the time being, in a case regarding whether the public should have access to video footage showing a Guantanamo detainee being force-fed. The court concluded that it was without jurisdiction to issue orders regarding the videotapes. "We cannot reach the merits of this appeal ... because it is premature," the court stated in its opinion.

Intel takeover of Altera is expected

Intel is close to buying fellow chip maker Altera for more than $15 billion, a person briefed on the matter said on Friday, the latest sign of consolidation in the semiconductor industry.

Yahoo's tax-free spinoff plan parallels a historic case

Yahoo's intention to spin off Alibaba stock without paying tax is just a modern twist on an old tax avoidance scheme. Yahoo's plan to spin off Alibaba stock to its shareholders follows the same basic playbook as Mrs. Gregory's old plan, making it vulnerable to the same kind of judicial attack. Mrs. Gregory was the sole shareholder of the United Mortgage Corporation, which owned shares of another company, the Monitor Securities Corporation. Mrs. Gregory decided to sell the Monitor stock, which was worth about $1.8 million in today's dollars. If United Mortgage distributed the Monitor stock to Mrs. Gregory as a dividend, she would have recognized the value of the shares as ordinary income, which at the time was subject to a marginal tax rate of 24 percent. Instead, United Mortgage contributed the Monitor stock to a new corporation, which I'll call SpinCo. United Mortgage then distributed the SpinCo stock to Mrs. Gregory in what purported to be a tax-free reorganization. Three days later, Mrs. Gregory liquidated SpinCo and sold the Monitor stock, reporting the difference between her proceeds and her basis in the stock as a capital gain, which at the time was subject to a marginal tax rate of 12.5 percent. The tax planning saved her about $145,000 in taxes in today's dollars. The transactions met the literal requirements of the tax code as it was written then. Judge Hand ruled for the government, notwithstanding his dictum that it is perfectly O.K. to structure a deal in a way that minimizes taxes. Today, qualified dividends are taxed at the same rate as capital gains, making the shareholder-level tax issues less important. Instead, the spinoff is structured to avoid Yahoo's corporate tax on the appreciation of the value of Alibaba, something that would not have been taxable in Mrs. Gregory's day.

Lawyer sues Skadden for overtime

A lawsuit against legal heavyweight Skadden, Arps, Slate, Meagher & Flom LLP is testing whether some purportedly professional work might in fact be eligible for overtime. The case pits Skadden against a contract attorney hired by a legal staffing agency to review documents for $25 an hour on a Skadden case. Under federal labor laws, licensed lawyers can't earn overtime pay for work in excess of 40 hours a week if what they are doing is considered legal work. But the plaintiff, David Lola, says he deserves overtime pay because the tasks he did were so basic they shouldn't qualify as practicing law. The case could have a far-reaching impact, legal observers say. Contract attorneys are hired on a short-term basis across the legal profession to review reams of documents during the initial phases of litigation and investigations, and many feel they are underpaid.

Little change for companies seeking Cuba business after de-listing

Companies face essentially the same landscape in Cuba as they did when it was listed by the US as a state sponsor of terrorism, legal experts say.

  • Weekly Magazine Review

The last execution. Why the End of Capital Punishment Is Near

James Lovelock: 'Saving the planet is a foolish, romantic extravagance'

Business Week
The Best Advice Commencement Speakers Gave the Class of 2015

The Economist
Social change. The weaker sex

Der Spiegel

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