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Mexico Joins ICSID: What You Need to Know

On January 11, 2018, Mexico became the 162nd country to sign the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention). If the Mexican Senate proceeds to ratify the ICSID Convention, Mexico will join a community of nations in giving investors access to an independent forum to administer disputes between sovereigns and their investors.

For Mexico, ICSID is an opportunity to generate confidence in its investment regime. With U.S. negotiators casting doubt on the future of NAFTA’s dispute resolution mechanisms, and upcoming elections creating uncertainty as to the economic agenda of the next Mexican administration, joining ICSID reinforces Mexico’s commitment to investment arbitration and sends a comforting message to foreign investors.

For investors, ICSID provides an opportunity to resolve investment disputes under the auspices of an arbitration regime that has several potentially advantageous features. Perhaps the most distinctive among them is that ICSID requires that an award be recognized and enforced as if it were a “final judgment of a court in that State.”  As a result, the ICSID Convention largely strips Host States of the right to refuse enforcement on some of the grounds provided for by ICSID’s most popular enforcement alternative, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), which applies to ICC or UNCITRAL arbitrations.

Under ICSID, awards are subject to only limited review by ad hoc annulment committees established under its rules. These committees are empowered solely to review whether (1) the Tribunal was properly constituted; (2) the Tribunal has manifestly exceeded its powers; (3) there was corruption on the part of a member of the Tribunal; (4) there was a serious departure from a fundamental rule of procedure; or (5) the award has failed to state the reasons on which it is based.  This limited scope of review provides some protection for arbitral awards from recognition and enforcement challenges by sovereigns that have lost an arbitration.

Subscribing to the ICSID Convention does not mean that every dispute involving Mexico or a Mexican investor can be brought under ICSID. In order to fall under its jurisdiction, the Convention requires (1) that both the Host State and the investor’s Home State have ratified the treaty, and (2) that the governing arbitration clause specifically allow ICSID arbitration. The good news is that almost all of Mexico’s bilateral and international investment treaties – which most often serve as the governing arbitration clause in investor-state disputes – already provide for ICSID arbitration. U.S. and Mexican investors should be aware, however, that there is no bilateral investment treaty between Mexico and the U.S. that would provide for ICSID jurisdiction should the U.S. withdraw from NAFTA.  Investors may be able, however, to restructure their investments with the aid of counsel so as to fall under the protection of an existing treaty.

-- Julissa Reynoso, Marcelo Blackburn, Michael A. Fernández, Ariel Flint

5 Tips to Improve Your Company's Performance
By Lucía Galván

Defining a productivity process is essential. It is worth mentioning that the training and participation that a good leader provides its employees with, will be the basis of the results; therefore, I offer 5 effective tips to improve a company’s performance.

1. Define purposes
Sharing a short and long-term plan that has established dates with the employees, will allow them to be involved by knowing the importance of their participation in it. Once the plan has initiated, the production processes should be looked over in order to point out where more time could be invested in and adjust it.

2. Modernize
Being in constant renovation increases the capacity to adapt to change. It is a way to project the company towards the future. If acquiring new technologies reduces the hours invested in each process, they should be taken into consideration.

  3. Effective motivation
A good attitude increases productivity. The activities in favor of human capital play an important role in any company. Activities such as trainings, recognizing performances, commemorating anniversaries, are all actions that make a difference by making the employees more motivated, effective, and with a positive attitude.

4. Strategic communication
In order to accomplish an organizational process, communication is key. This way, the leader can be aware of both, the performance of the employees, and their needs within the company. Likewise, the employees will know precisely what their tasks consist of and what tools they will use.

5. Set priorities
Availability in a leader is fundamental. Nevertheless, one of the main causes of wasted time in a company, is attending unnecessary meetings. Managing the work capital intelligently, allows decisions to be made before adversity.

These day to day elements, create a favorable change in terms of objectives, environment, and communication within a company. For eight years, Directum Translations has not only conserved its labor culture and its values, but it has distinguished itself among its collaborators as a positive environment where everyone is involved in improving internally and personally.

Hiring Practices and the FCPA
By Philip M. Berkowitz on January 10, 2018

U.S. states, as well as municipalities such as New York City, have been proactive in recent years passing “ban-the-box” legislation that severely restricts the right of employers to check, much less consider, the credit and criminal histories of job applicants.

On the other hand, a number of federal laws, including the Foreign Corrupt Practices Act (FCPA) and others, impose significant background check obligations. Regardless of local laws, FCPA-governed employers must carefully screen applicants to determine whether they are former foreign officials— which may include employees of state-owned enterprises—or if they have criminal records.

The laws that impose background-check obligations are not limited to the FCPA. As discussed below, these obligations stem from an array of federal laws that regulate most publicly traded entities and many financial services companies.

While these laws do not necessarily prohibit hiring individuals with criminal records or bad credit records or who are former government officials, they do require employers to identify these individuals and assess whether their hire would violate the laws outright or whose hire would pose a threat or an administratively difficult burden to monitor their activities. Getting it wrong can be costly indeed.

Foreign Corrupt Practices Act
In August 2015, various Asian and U.S.-based JPMorgan Chase & Co. (JPMC) entities agreed to pay a total of $264.4 million in criminal and regulatory penalties for allegedly seeking to gain advantages in winning banking deals by awarding prestigious jobs to relatives and friends of Chinese government officials. The hiring proposal, implemented no doubt with the best of intentions, was called the “Sons and Daughters Program.”

The government argued that this program violated the FCPA, which prohibits issuers and domestic concerns from activities whether committed in the U.S. or overseas, made in furtherance of a corrupt payment to a foreign official using the U.S. mails or other means or instrumentalities of interstate commerce. To be unlawful, the payment or benefit must be intended to induce the recipient to exploit his or her official position in order to direct business to any party.

Entities that are governed by the FCPA must screen applicants to determine whether they may be considered a “foreign official” under the FCPA. The FCPA defines “foreign official” in part as “any officer or employee of a foreign government or any department, agency or instrumentality thereof.”

Even purely commercial enterprises owned by foreign governments could well be found to be instrumentalities in certain circumstances. This would most likely be the case if (1) the entity has a monopoly on what is normally a government function; (2) the government subsidizes the entity’s operations; (3) services are provided by the entity to the public in the country of ownership; and (4) the public and the government of that foreign country generally perceive the entity to be performing a governmental function.

See complete article here.

Philip Berkowitz is practice co-chair of Littler's International Employment Law Practice Group. He advises multinational and domestic companies in a wide range of industries on employment-related matters. He has significant experience advising multinational companies regarding U.S. and overseas employment and executive compensation practices. He represents employers in individual and class action lawsuits and arbitrations. 

NAFTA: Should we stay or should we go?
By Joe Brusuelas, Chief Economist, RSM US LLP

Despite an improved outlook, it is possible that the U.S. political authority will trigger a six-month review period for exiting the North American Free Trade Agreement (NAFTA) sometime during the next 90 days. At stake is more  than $1 trillion in cross-border trade and more than 14 million jobs across three economies. While Mexico has the largest exposure to such an event—in the case of a hasty exit, its economy could contract 2.9 percent in 2019—both the United States and Canada have significant direct and indirect exposure to such a radical policy shift. We expect this to subtract 0.3 to 0.5 percent from United States gross domestic product (GDP) between 2019-20 and Canada to take a 0.5 percent hit to growth over that same time.
Given the increase in overall trade volumes globally, particularly for the United States, the potential for a policy shift toward NAFTA would be ill-timed. U.S. exports are up 5.6 percent on a year-ago basis with a trade volume of $195.9 billion dollars. Given the tail winds behind a global economy that we expect to grow by 4 percent in 2018, the particular timing of such a drastic policy shift is problematic. By effectively imposing a series of taxes across a large universe of goods, withdrawing fromNAFTA would partially negate the positive impacts in store for businesses and households due to the recent Tax Cuts and Jobs Act signed into law by the administration. The impact will be asymmetric throughout middle market ecosystems and the North American economy. The striking degree to which value chains will be disrupted, especially in individual states and industries that significantly add value to finished goods sold domestically and abroad via imports, will be quite noticeable upon any potential enforcement.

Moreover, if the United States pulls out of the treaty, it will likely trigger a series of unintended consequences and indirect economic effects that will negate any short-term positive changes. Substitution effects would quickly be outweighed by the overwhelming shift in costs, losses in competitiveness, rising prices for consumers and widespread disruption to the mature North American supply chain.

Under the status quo, tariffs—which are better understood as taxes on imports and exports—are zero. Once the United States withdraws from the treaty, they would reset under current World Trade Organization rules, to 3.5 percent, whereas in Canada and Mexico, they would reset to 4.2  and  7.1 percent, respectively on average. The major problem that will generate massive uncertainty, and harm overall capital expenditures and capital flows, is that tariffs will increase in an asymmetric fashion for a variety of goods and service exports for U.S.-based firms.
For example, U.S. exports to Mexico of chicken and potatoes would be 75 percent, whereas apparel exports to Canada automatically increase to 18 percent and sales of beef would face a tax of 27 percent. Moreover, the integrated North American supply chain confers a savings of roughly $4,000 to each consumer who purchases an auto produced across the continental economy.
See complete article Here

HR Policy Acknowledgements Overseas: A Whole Other World Out There
By Donald C. Dowling on November 3, 2017

American employers often require their U.S. domestic staff to execute—that is, to wet-ink sign or to computer mouse-click—acknowledgements that say, in essence, “I have received, and I agree to comply with” an employee handbook, code of conduct, HR policy, work rule, restrictive covenant or compensation/bonus/benefit/equity plan. The purpose of an employee-executed acknowledgement is to reduce the chance some worker somewhere might someday claim ignorance of some employer policy. An acknowledgement can be vital, for example, when an employer needs to discipline someone for violating a rule—or needs to enforce a provision in a benefit plan—that an employee seeks to sidestep.

Locally in the United States, employee-signed acknowledgements have become routine, and collecting them under America’s employment-at-will regime is fairly straightforward. Meanwhile, multinationals increasingly seek to collect employee acknowledgements overseas. But the mechanics for collecting acknowledgements from overseas staff raises challenges, and gets surprisingly complex. Here we discuss the need for, the legal/logistical challenges to, and the compliance strategies for international employee acknowledgements.

The Need for Acknowledgements
U.S.-headquartered multinationals increasingly promulgate global HR initiatives like global codes of conduct/ethics and international HR policies or rules addressing bribery, antitrust, insider-trading, conflicts of interests, discrimination/harassment, workplace safety and other topics. Other global HR initiatives include staff cross-border handbooks, whistleblower hotlines, data privacy notices, restrictive covenants and intellectual property assignments, employment-contract amendments and compensation/benefit/bonus/equity plans.

Of course, a multinational cannot afford to “soft open” a global HR initiative, slipping it onto a company intranet site and expecting affiliate employees worldwide somehow to find, read, understand and comply with it. Later, when the employer needs to enforce its global HR initiative, it may bear a burden to prove it had duly communicated relevant provisions to whatever employee may have violated it and is now challenging it. Being able to produce an employee-executed acknowledgement can therefore be vital.

For example, no employer trying to enforce its anti-bribery policy wants to face an employee claiming something to the effect of: What? I just made a huge sale to the government, and you’re firing me? OK, maybe my client-entertainment expenses ran a bit high—but I was just doing my job. I didn’t know about this so-called policy on entertaining government customers. Was it buried somewhere on the company intranet? I never agreed to follow this absurd rule that would prevent me from making sales!

For that matter, employee-executed acknowledgements could actually be required. A multinational might interpret the U.S. Foreign Corrupt Practices Act, Sarbanes-Oxley, Dodd-Frank and U.S. federal sentencing guidelines as requiring organizations not only to communicate compliance policies to employees worldwide, but also to get employee “buy-in.” And law and best practices in some jurisdictions (for example, Austria, Czech Republic, Finland) all but require employee-signed acknowledgements when an employer changes or adds new workplace rules.

See complete article here.

Donald Dowling provides counsel on a wide variety of global employment law matters, including codes of conduct and HR policies that guide operations in multiple jurisdictions, international compensation and benefits issues, whistleblower hotlines, and cross-border internal investigations and HR compliance audits. He regularly advises clients on employment matters that arise with international restructurings, reductions in force, mergers, acquisitions, and outsourcing.


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