11 Hastings Business Law Journal, Issue 2

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Articles

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THE TREATY SHOPPING PRACTICE: CORPORATE STRUCTURING AND RESTRUCTURING TO GAIN ACCESS TO INVESTMENT TREATIES AND ARBITRATION
Julien Chaisse, 11 Hastings Bus. L. J. 225 (2015)

This article analyzes the magnitude of the treaty shopping practice and draws relevant theoretical and policy implications for proper rule-making. This fills the gap in the literature, as it is based on a comprehensive survey of tribunal awards to assess the real prevalence of treaty shopping. Also, observing that in all systems of law, whether domestic or international, there are concepts framed in order to avoid misuse of the law; reference may be made in this respect to "good faith" ("bonne foi"), "détournement de pouvoir" (misuse of power) or "abus de droit" (abuse of right), this Article seeks to identify the legal principles used by international tribunals to address the issue of treaty shopping. On this basis, this article more specifically discusses three critical issues. First, whether treaty shopping is good or bad from various angles (from both the state and investor perspectives). Second, what is the implication of having a different type of investment treaty (non-harmonized investment treaties), given that the treaty shopping problem exists? Third, how to mitigate the negative aspects of the treaty shopping problem? What type of provisions and clauses are necessary to prevent treaty shopping or to reduce the negative side of treat shopping?

The article presents in Part II the recent evolution of international investment law and identifies the legal determinants of treaty shopping. Part III goes on to review the practice and reality of treaty shopping. Subsequently, Part IV provides a mapping of the cause of treaty shopping. Part V then presents an account of existing provisions designed to control treaty shopping. Finally, policy conclusions are drawn in the conclusion.

 
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ACTIVIST COMPENSATION OF BOARD NOMINEES AND THE MIDDLE GROUND RESPONSE
Adam Prestidge, 11 Hastings Bus. L. J. 307 (2015)

Shareholder activism has taken an increasingly high-profile and polarizing role in investing and corporate governance. Moves by shareholder activists, and the policy behind those moves, constantly appear in corporate headlines. One of shareholder activists' primary methods of enacting changes in companies is to nominate directors to the board, and often those director nominees are highly compensated by the shareholder activist itself. Some in the corporate world oppose this practice, arguing that it creates a significant conflict of interest and can damage the company in the short term, while others argue that the practice is a necessary tool for investors that may actually lead to a better alignment of interests. Both arguments have strong merit, which is why companies should evaluate director nominee compensation plans on a case-by-case basis, and react to them not with a preemptive prohibition, but with an evaluative middle ground response.


Student Notes

A LOOK AT THE TRADEKEY: SHIFTING POLICING BURDENS FROM TRADEMARK OWNERS TO ONLINE MARKETPLACES
Ashley Bumatay, 11 Hastings Bus. L. J. 341 (2015)

            This note addresses contributory counterfeiting within online marketplaces. Contributory counterfeiting arises when a party materially contributes to, facilitates, induces, or is otherwise responsible for the direct counterfeiting carried out by a third party. This note argues that online marketplaces should be required to take a more active role in combating counterfeiting through their platforms. This note proceeds in five parts. Part I serves as an introduction to the issue. Part II provides background information regarding trademark counterfeiting and gives an overview of the case law regarding contributory counterfeiting in online marketplaces. Part III looks at the implications of the TradeKey case for brands, online marketplaces, sellers, and consumers. Part IV proposes mechanisms that an online marketplace could enact to police trademark infringement effectively. Part V concludes that TradeKey decision has taken a step in the right direction as online marketplaces should take a more proactive role in policing their own websites. 

 

EVADING THE TRANSPARENCY TRAGEDY: THE LEGAL ENFORCEMENT OF CORPORATE SUSTAINABILITY REPORTING
Chloe Ghoogassian, 11 Hastings Bus. L. J. 361 (2015)

Although sustainability reporting is a mechanism for improving labor and human rights practices in global supply chains, it has had limited effects to date because of its voluntary nature. Embracing a uniform reporting standard and making companies legally accountable for the veracity and completeness of their disclosures could enhance the efficacy of sustainability reporting. Generally, this Note explores how such a system could be structured.

Part II of this note describes the Global Reporting Initiative ("GRI") as a case study of sustainability reporting and some of its shortcomings. Specifically, Part II will address how the voluntary nature of GRI's Reporting Guidelines is preventing the complete realization of increased transparency and stakeholder trust in organizations. To solve the shortcomings of voluntary reporting guidelines, Part III of this note will introduce the comply-or-explain mechanism, which is a possible mandatory reporting structure. Part III will describe comply-or-explain policies generally, discuss arguments supporting and critiquing them, and analyze GRI's attempt to adapt them for its own reporting standards. Because comply-or-explain alone does not hold companies accountable to the degree of accuracy in their disclosures, Part IV discusses how there must exist an enforcement structure to find companies liable for misrepresentation. More specifically, Part IV also describes the framework of the 1934 Securities Exchange Act and how “materiality” should be interpreted to include non-financial disclosures since a company's social and environmental information is material information to investors. 

 

THE DELAWARE CARVE-OUT'S CARVE: EXAMINING AND REPAIRING SLUSA'S STATE LAW EXCEPTION
Kenneth Hsu, 11 Hastings Bus. L. J. 385 (2015)

The "Delaware carve-out” is a carefully written savings clause that preserves state law claims that would otherwise be dismissible under SLUSA preclusion. The carve-out's broad statutory language, however, does not provide much clarity for parties litigating its applicability. While three circuit level opinions have addressed particular portions of the carve-out's text, none have offered a controlling understanding of the statute. The carve-out's precise scope instead remains largely defined by an assortment of lower court decisions relying on different interpretations of the statutory language and of related case law. Amid such uncertainty, this note seeks to discern some clarity to the carve-out's reach and evaluate its effectiveness.

Part II of this note details the evolution of federal securities regulation since the Depression, highlighting Congress's expansion and eventual reining in of private securities fraud class action litigation. These trends not only provide the backdrop to the note's findings, but also shed light on Congress's reasons for enacting SLUSA.

Part III investigates how lower courts have interpreted the carve- out since its passage. This analysis is informed by an extensive survey of case law construing the carve-out's text. By dividing the carve-out into four core prongs, this note illustrates how certain portions of its statutory language have determined its influence on securities class action litigation after SLUSA.

Finally, Part IV argues that courts interpreting the carve-out should be more cautious of preempting state law causes of action. The note explains how the carve-out quickly became outdated and suggests that the federal courts compensate by deferring more to their state counterparts. This assertion is also informed by recent federal case law addressing the carve-out's reach and, more broadly, the limits on securities class actions under SLUSA.