We are aware there is an issue of lighting. This was recorded during a day in which the clouds were fighting with the sun.

We are aware there is an issue of lighting. This was recorded during a day in which the clouds were fighting with the sun.

By
Kelly Ranasinghe JD

At the core of modern legal systems is jurisdiction, an ancient legal concept which means ‘to speak the law.’ However, the legal definition of jurisdiction and the common lay understanding of jurisdiction are not the same. In fact, there are multiple types of jurisdiction which differentiate between time, space and people. The colloquial understanding of jurisdiction refers to `the power’ of an institution, such as a Sheriff, to take a certain action (as in one having ‘jurisdiction’ to do something). This is only obliquely related to the core concept of legal jurisdiction. The second colloquial understanding of jurisdiction refers to the purview of one’s authority (`this is outside my jurisdiction’) and is also an extension of its legal concept, but actually is more consistent with state authority and the police power than jurisdiction proper.

Jurisdiction in its most simple legal form is the ability of an institution sitting in a given territory to hail a party (an individual or organization) into court. For instance, if a man residing in the town of Blackacre commits a crime, a court within the same territory will generally have jurisdiction to summon that person to answer for his misdeeds. This is the simplest form of legal jurisdiction, and is referred to as territorial jurisdiction. The power over a specific geographic area.

A court may also have jurisdiction outside of its geographic area over a category of people. This is called in personam jurisdiction or `personal jurisdiction.’  It is the ability of a court to, again, hail a party into court because of their specific group status. For instance, members of the military are frequently under the purview of a military court system regardless of where they are stationed. Note however, that simply because a person may be under the personal jurisdiction of one court (such as a United States service member in Japan falling under the jurisdiction of a military court located on his base) that does not absolve one from being under the jurisdiction of another court at the same time. This is called overlapping jurisdiction, and is quite common. For instance, a person residing in San Diego, California falls under the jurisdiction of the state superior court of San Diego, but also falls under the jurisdiction of the federal United States District Court for Southern California. He might also fall under the jurisdiction of a city tribunal which hears zoning violations or city code infractions.

A third category of jurisdiction is called subject-matter jurisdiction, and is the ability of a court to adjudicate a certain kind of case. A court which has the ability to hear all cases in a given area, regardless of their subject, is referred to as a court of general jurisdiction. In contrast, a court which has specific purview over a type of conduct or case is called a court of limited jurisdiction. For instance, a Federal Bankruptcy Court confines itself to cases involving Bankruptcy. In lower level courts, courts of limited jurisdiction are typically ‘carved out’ of a court of general jurisdiction to adjudicate special classes of cases such as family law, domestic violence or probate.

In the arena of international business, jurisdictional questions arise for a variety of reasons, many of them stemming from the concept of in personam jurisdiction extending beyond the country’s borders. While the law of a given country prevails when governing the conduct of an organization doing business in that country, expatriate workers often ‘carry with them’ protections under domestic law which allows them to raise claims of unlawful conduct once they have returned to their country of origin. Said another way, if an expatriate worker defrauds a foreign citizen in a foreign nation, he will be at the behest of foreign law. However, if a U.S. company discriminates against a U.S. worker who is living and working in a foreign country for the U.S. corporation, the company is still bound by U.S. law. (Of course, the worker would be suing in the United States, as foreign countries do not adjudicate claims of U.S. law).

Complicated? Consider this added dimension. Assume that a U.S. citizen and a foreign national work side-by-side in a U.S. company’s operation in a foreign country. Both workers perform the same job, work the same hours, and are administratively equal in their hierarchy. For all intents and purposes, the U.S. citizen and the foreign national are identical in terms of employment and profit. The U.S. citizen however, is protected by the powerful civil rights laws of the United States in his employment, the Title VII Civil Rights Act and the Americans with Disabilities Act. He is protected regardless of where he is working, so long as he is working for a U.S. corporation and as long as his suit is filed within the United States. A U.S. citizen could not, of course, bring suit in a foreign country under United States law. (Interestingly enough, the converse is not necessarily true. A foreign citizen can sometimes bring suit in the United States under principles of international law, generally human rights infractions, under the Alien Tort Claims Act, 28 U.S.C. § 1350).   

However, our foreign national, although he performs precisely the same job for the same company in the same location, is not protected by U.S. civil rights law, even if he did choose to bring suit in the United States.

Now assume that our foreign national is instead, working in an identical position in the United States for a foreign corporation. Not only is the foreign national protected under civil rights laws, but he is also protected from discrimination based on his foreign citizenship.[1] Confused? A foreigner working for a U.S. corporation overseas is not protected. A foreigner working for a foreign company domestically is protected. So a Swiss company operating in Texas, and discriminating against a Mexican national is subject to U.S. law. A United States company, operating in Switzerland, and employing a Mexican national, is not subject to U.S. law. (This is not so much a matter of protection, as United States law holds that the Mexican national would not have ‘standing’ or the legal basis to sue in a U.S. court).   To quote the EEOC directly “Individuals who are not U.S. citizens are not protected against discrimination overseas.”[2]

The discerning factor in each of the above examples is territoriality. A company operating in the United States is subject to United States law, just as a United States company operating in a foreign country is subject to foreign law. However, a United States company operating overseas is also subject to United States law, as it remains with the in personam jurisdiction of the United States.

What does this mean for corporations who wish to explore overseas opportunities? Initially, corporate executives should be mindful that simply because operations are lawful in the United States it does not mean that they will be permissible in a foreign country. A corporation establishing a legal presence in a foreign nation is,  just like an individual,  subject to the laws of that country –  without exception. Those laws may differ substantially in character and substance from American laws, and may also differ structurally and procedurally. For instance, in the United States many court systems have ‘fast-track’ court dockets which expedite civil litigation. A plaintiff in the United States can reasonably expect some form of resolution or settlement in months, certainly in 1-2 years. In India, the court system has a backlog of nearly 30 million cases, which, according to some, would take more than three centuries to clear.[3]  If resolution is desired, it will not be within the legal system.

Somewhat counterintuitive to this concept, is the understanding that a corporate executive must also comply with United States protections if he has United States expatriate workers, in addition, to the legal obligations of the host country.

This can be operationally problematic depending on cultural mores.

For instance, if a female United States citizen working in Muslim nation desires to be elevated to a management position requiring her to work at night with male colleagues and foreign national workers, there is the chance that this action might run afoul of nation/ region-specific sharia  law. Assuming that it does, if the company chooses to comply with the law of the host country and promote a male instead, it is subject to litigation in the United States for violation of Title VII.

The corporation above is left with a legal Catch-22 situation where to comply with socio-religio-cultural mores and foreign law would be tantamount to violating United States law. It is thus left in the unenviable position of being legally ‘boxed-in’.   In addition, it cannot simply ‘withdraw’ from the country or ‘withdraw’ or “remove” the worker as a corrective action. The corporation may very well have to conduct two battles at once, as it is assailed by the U.S. worker domestically, and government agencies internationally.

Interjected into the legal structure of international business relations is the Foreign Corrupt Practices Act (FCPA), codified in Title 15, sections 78 et.seq of the United States Code. The FCPA generally covers  American individuals and business in the United States with operations abroad, and prohibits bribery of foreign officials and governments, but exempts certain payments to officials if they are legally permissible under the law of host country ( ‘grease payments’). Corporations conducting business abroad must, as a matter of operational concern, understand that the FCPA may render them non-competitive if bribery in the host country is such common practice as to become part and parcel of industrial relations. Indeed, Prof. Yockey of Notre Dame has a forthcoming paper on the subject of overdeterrence and the FCPA.[4]

American Corporate executives planning on conducting business overseas should understand , and become expert  , the legal ramifications as they relate to Global business strategy prior to committing themselves or their organization  to overseas ventures.

In recent years there has been much discussion about the benefits of `outsourcing’ with little discussion as to the strategic implications from outsourced operation inside a foreign legal environment. In addition, a company extending itself into a foreign country must be prepared to defend against regional legal attacks, as well as attacks ‘behind the front lines’ in the United States, for civil rights and securities violations.

Absent this preparation, a corporation may remain vulnerable to substantial loss from litigation.

Will Burundi make it in time to join the East African Monetary Union? ©

By
Dr. Yvan Nzerwe  D.B.A.  

The Question

Burundi formally joined the East African Community (EAC) in 2007.  The EAC is an intergovernmental organization with its headquarter in Arusha, Tanzania. The other member countries are Kenya, Tanzania, Uganda and Rwanda (www.eac.int).

Burundi   - a francophone African nation – is situated between Rwanda, Tanzania and the DRC Congo. It has a population of approximately 7 Million People. There are three major ethnic groups in Burundi- Tutsi 14%, Hutu, 85% and Twa.1%. Traditionally, Tutsis were considered to be a Royal Tribe, known as Abaganwa.  Since Burundi`s independence in 1962, Burundi has experienced multiple ethnic conflicts. The Tutsis have dominated the military and held power from 1962 until 1993. In 1993, the first democratically elected Hutu President Melchior Ndadaye defeated Major Pierre Buyoya, a Tutsi. President Ndadaye was killed by the Tutsi military after 3 months into his presidency. The coup d’état revived ethnic tensions and several Hutu rebel groups were formed. Major Pierre Buyoya took power again in a coup d’état in July 1996. The neighboring countries imposed an economic embargo that lasted until 1999. The economic embargo was put in place in order to force Major Buyoya to give up power.

Ndikumana (2001) mentioned that the ethnic conflict has severely weakened the Burundian economy. He also mentioned that the Burundian government has shifted the allocation of resources from capital and social expenditures to military and security spending.  Salter (1999) assessed the impact of the economic embargo on the Burundian economy.  The embargo stopped all to and exports to Burundi. Ngendakumana (1999) also said that, with the embargo, foreign donors stopped helping Burundi and the Government deficit reached 6.5% of GDP in 1996.

The EAC comprises 126 million people and has a total annual economic output of $73 billion (www.eac.int). The East African monetary union will be a Euro zone type with a single currency, the East African Shilling. Anand (2011) says that the monetary union will increase the size of the regional market and could potentially bring economic development, gains from regional integration and trade, and enhanced global competitiveness for the EAC. The current negotiations for a single currency are focusing on the differences of inflation, public debt and GDP growth among EAC members.

The East African monetary Union is scheduled to begin functioning in 2015.  The proposed East African Central Bank will be launched in 2013 and  will be designing the interest rates and monitor the exchange rates.

The monetary union will require the harmonization of macroeconomic policies by member countries` governments. The EAC member countries` governments will need to create sustainable and competitive business environments.

At this time therefore a question which arises is: Will Burundi make it by the proposed start date for East African monetary union?

It is this writers’ position  that Burundi has a lot to do before achieving this goal.

Macroeconomic Issues

The Burundian government budget largely depends on foreign aid.  In 2010, the government revenues were approximately $585 million, while expenditures were approximately $699 million.  55% of the revenues came from foreign donors and 65% of the revenues were used to pay government employees` salaries (Central Bank of Burundi Report 2010). It is in the opinion of this writer that the Burundian government should  increase its revenues by efficient tax collections and anticorruption measures.

In Burundo it is generally acknowledged that the inflation rate is high. The inflation rate went from 3.5% in September 2010 to 6.5% in December 2010 (Central Bank of Burundi Report 2010).  According to the Central Bank of Burundi  the increase in  fuel prices was the main driver for this inflation,. It is the opinion of this writer that the Burundian government swiftly undertake policies that can stabilize the inflation rate.

Corruption

While Burundi has started multiple anti corruption strategies and initiatives, corruption is still rife in Burundi. The 2010 report of Transparency International-Kenya  (www.tikenya.org) revealed that Burundi is the most corrupt country in the EAC. Burundi`s East Africa bribery index was 36% while Rwanda, the least corrupt country, had a 6% bribery index.

The Organisation de la Lutte contre la Corruption et Malversations Economiques (www.olucome.bi), an anti corruption watchdog, says that the Burundian government lost $25 million in 2010 revenues due to corruption.  These revenues could have been used to build schools, roads or hospitals.

The fight against corruption will need to be taken to a higher level.  Corruption increases the loss of government revenues and  - in the opinion of this writer – this definitely hampers economic growth.

Private Sector Development

As with almost everywhere else around the world, in Burundi, the private sector is an important potential engine for economic growth and job creation.

However this writer is personally aware that in Burundi, the private sector is underdeveloped and mainly consists of small businesses that produce for the local market.  Also, the private sector does not have similar financing options – available in many other nations – that can contribute to its development.

The World Bank Doing Business Report 2009 reported that business loans typically carry a bank interest rate of around 17% and the corporate tax rate is around 37%. Nkurunziza (2009) emphasized the need for the Burundian financial sector to address the needs of core drivers of economic growth in Burundi. He identified the private sector (agriculture and industry) as the core drivers of economic growth.

In Burundi, the majority of jobs come from the Government.  It is different in Kenya and Tanzania where the private sector employs more people than the Government (East African Business Council Report 2008).

Other EAC countries have created entities that have the sole purpose of supporting the private sector. For example, there are the Rwanda Investment and Export Promotion Agency and the Kenya Private Sector Alliance. Such has not occurred in Burundi.

It is the opinion of this writer that without a vibrant private sector, Burundian businesses will struggle and languish against other East African competitors.

This writer is of the opinion that – at minimum, The Burundian government should:

-          Create and support a Government Agency for the private sector;

-          Work with local banks in getting better financing options for small businesses;

-          Make the Burundi Revenue Authority an efficient and corruption-free agency.

Financial Sector Development

Nkurunziza (2009) says that, in Burundi, the financial sector does not address the needs of core drivers of growth (agriculture and industry). Other studies such as those by Niyubahwe (2008) and Ndikumana (2001) mentioned the important role of financial systems in sustainable economic growth.

Niyubahwe (2008) says that Burundi’s financial sector is still relatively shallow, undiversified, dominated by an oligopolistic banking sector, and characterized by relatively high lending rates, extremely low insurance penetration, a scarcity of long term debt, home mortgage financing and equity capital and an inadequately functioning payments system

Other EAC countries such as Kenya have a stock market and a diversified financial sector.  In Kenya, companies have raised over $1 Billion in Initial Public Offerings through the Nairobi Stock Exchange.

This writer feels strongly that the Burundian government should quickly embark on a series of reforms aimed at modernizing the financial sector, improving the financial regulations and thereby improve the performance of the financial sector in the economy.

In so doing it will begin to ready itself for active and equal membership in the proposed East African Monetary Union.

References

Anand et Al (2011), “Moving Toward a Monetary Union and Forecast-Based Monetary Policy in East Africa”, Policy paper, Princeton University.

Bank of the Republic of Burundi (BRB) Reports, 2009 and 2010.

East African Business Council Report 2008

Internet Research: www.eac.int ,  www.nse.co.ke, www.tikenya.org  , www.eabc.info

Ndikumana L (2001), “Financial Intermediation and Economic Growth in Southern Africa”, Journal of African Economies.

Ndikumana L (2001) “ Fiscal Policy, Conflict and Reconstruction in Burundi and Rwanda”, United Nation University paper 2001/62

Ngendakumana V (1999), “Prospects for Social Protection in a Crisis Economy”, World Bank Policy paper.

Niyubahwe A (2008) ,”Financial Intermediation and Economic Growth: Time Series Evidences from Burundi”, IDEC Policy paper

Nkurunziza J. (2009), “Why is Burundi`s Financial Sector not Development-Oriented?”, UNCDA policy paper

Salter I (1999), Action Aid Policy paper, 1999

Transparency International-Kenya Report 2010

World Bank Doing Business Report 2009