Commercial Law International

By: Ainsley Brown

As previously reported in another post, four white farmers who had their farms unlawfully seized under the regime of President Robert Mugabe are to seek and by all accounts gain compensation in South Africa. Well, I am please to report that the farmers have indeed gotten – some measure of – justice in South Africa.

Symbolic victory.....they matter

Justice for the farmers comes in the form of the seizure of a property owned by the Zimbabwean government located in Cape Town, this after a South African court ruling allowing this property and perhaps others to be attached and likewise seized. The South African ruling was a move at the enforcement of a Southern African Development Community (SADC) tribunal’s ruling that found that the Zimbabwean government’s seizures of white owned farms illegal and racist.

The property in no way comes close to reflecting the full value of the farms seized but it does represent a very important symbolic victory for the farmers – and yes symbols do matter.

By: Ainsley Brown

Four white farmers who had their farms unlawfully seized under the regime of President Robert Mugabe are to seek by all accounts gain compensation in South Africa.

A South African court has ruled recently that the farmers have the right to seek out and seize Zimbabwean government property in South Africa. The North Gauteng High Court ruled that the judgment in favour of the farmers handed down in December 2008 by a Southern African Development Community (SADC) tribunal was fully enforceable in South Africa. With this ruling the High Court made it clear, if there was any doubt, that as a signatory of the SADC treaty South Africa has an obligation to uphold and enforce judgments coming from a SADC tribunal.

The ruling clears the path for non-diplomatic property owned by the government of Zimbabwe to be subject to a writ of attachment, seized, and possibly sold to satisfy the judgment. Additionally, it also clears the path for similar moves by other white farmers.

But why South Africa? Zimbabwe is also a signatory of SADC, why not enforce the tribunals judgment there?

The simple answer is that for these farmers South Africa wasn’t so much a matter of choice but one of necessity. In fact the same could be said of the use of the SADC tribunal. The framers only tuned to the tribunal when it was clear that they could not get justice at home – the Zimbabwean judges being either complicit or too afraid to stand up to the Mugabe regime.

The SADC tribunal’s ruled in December 2008 that the farm seizures were racist and were an act of thief. It ordered the government to compensate those farmers that had lost their property and to leave those farmers remaining unmolested to continue their farming activities.

This was a great victory for the farmers, well so they thought until they tried to get the tribunal’s judgment registered and enforced in Zimbabwe. There they encountered the usual judicial opposition, this time with a judge dismissing their application because of the enormity of reversing the President’s land seizures.

Imagine that a judge dismissing your case because of the enormity/implications for an illegal government policy; just imagine. To that I have these words and I shall say them thrice: Rule of Law, Rule of Law, Rule of Law.

Fortunate for the farmers the High Court in South Africa knows and will fully up hold the Rule of Law.

By: Ainsley Brown

This forms part of the Middle Passage Law Series on Law Is Cool.

American International Group, better know by its acronym AIG, it seems these days can rarely catch a break. It just seems negative news follows negative news for this company. This time the negative news for this too big to fail company – deeply wounded by the global credit crunch and later recession – has two of its units being accused of racial discrimination in their lending practices.

It is important to note that AIG has not been found guilty of anything; in fact it wasn’t even accused of any wrong doing.

WHAT?

I know, I know, it seem like I am saying that AIG is involved yet not involved in this case. And yes that is exactly what I am saying.

All of this may seem totally contradictory but let me assure you it is not. What we have here is a classic illustration of legal reality vs. public perception of a company’s brand. In order to be successful companies have to be mindful of the differences between these two concepts and effectively manage their interrelation.

The Department of Justice (DOJ) allegations were never directed at AIG, the parent company, but were instead directed at two of its subsidiaries –AIG Federal Savings Bank (FSB) and Willmington Finance Incorporated (WFI). Both banks were accused of not sufficiently monitoring the activities of mortgage brokers who sold mortgages that they funded. The brokers were, according to the DOJ, offered African-American borrowers less favorably borrowing terms than similarly financially situated whites. The two have agreed to settle the case with the DOJ and have agreed to pay at least $US6.1 million without admitting liability as part of the terms of settlement.

The case broke no new ground as far as banks in the US being accused of racial against minorities, namely African-American and Latino-Americans, in fact similar settlements or even full blown litigation involving other US banks will surely be making the headlines in the near future. The case however did break new legal ground in that for the first time US authorities held a lender directly responsible for the racial discriminatory acts of brokers. As a consequence, from now on banks will have a positive duty to monitor the activities/policies of brokers that they fund, to the best of their ability, in order to ensure that they are not using race to determine borrowing terms. This duty also of course carries with the co-duty to take positive action whenever a bank believes that a broker is using race.

From a strict legal perspective AIG, the parent, hands remain totally clean is this matter. It is important to reiterate that AIG was never accused of anything; the allegations were solely directed at the two subsidiaries. And no this is not a simple matter of splitting hairs, while related all three companies are separate. The legal concept of the corporate veil - the independent legal identity of companies, even if related – is a fundamental one in corporate law. The corporate veil is best understood as a shield that is used to protect all the right that come with incorporation. This is not to say that it can never be lifted/pierced, for it can, but this is only done in rear and specific instances where for example fraud is alleged or where for some reason the directing/controlling mind of a corporation needs to be identified.

However, these allegations go beyond strictures of the corporate veil and this is where public perception of the brand and effective management of that brand become important.  AIG and its army of brand management specialists both know that the general public are often not so discerning as to make the distinction between parent and subsidiary; as far as the public is concerned AIG is AIG.  This is the reason I believe that there was such a quick settlement – the last thing AIG, the parent, needs is a protracted legal battle involving accusations of racial discrimination, albeit involving subsidiaries. This would be a public relations nightmare.

By Charles Wanguhu

Churches are once again taking the lead in ethical investing. A short while ago I wrote about the catholic church pulling out of a fund which was found to have investments in defense, contraception and other companies contrary to the catholic faith. Consequently the Church of England has sold its £3.8 million stake in Vedanta Resources, the mining group accused of mistreating indigenous tribes in India, in protest at the London-listed company’s record on human rights. In carrying out this action the church expressed displeasure in the operations of the company and the unlikelihood of the company changing the way it runs its operations.

However one thing that sticks out in this saga is the time that it took the church to come to the decision to pull out its investment in Vedanta resources. The church had earlier claimed that it remained an investor because it was attempting to persuade Vedanta of the error of its ways.

The latter statement brings to fore the arguments against and for Ethical investments Vis a Vis Shareholder activism. One side of the argument is that by taking the action of divesting form the company the church lost its leverage against the company and ability to make a difference from within the company.

In some schools of though shareholder activism is a more effective way of changing companies operations as internal pressure(read voting rights in meetings) and directors duty to shareholders is a statutory requirement. The duty of a company to its other stakeholders is loosely defined with the exception of criminal actions.

However the flip side to the argument is that continued investment in the company increases the reputational risk of its investors. With the shareholders being intrinsically linked to the companies’ actions, the investor risks being the subject of protests against company actions and in some instances are easier targets than the companies. The reputational risk therefore is sometimes considered a greater factor when determining investments than the more idealistic shareholder activism.

The church of England has a rich history of ethical investing policy and in the case Harries v. Church Commissioners for England, [1991] Ch. 1990; [1992] 1 W.L.R. 1241 members of the church sought to ensure that commissioners handling funds of the church would not only act in financial consideration and would consider their Christian faith even if it involved a risk of financial detriment. While the case was unsuccessful in declarations sought I served to showcase an increased level of fiduciary duty of the trustees of the Church of England’s funds.

So really what is the better option?? Shareholder activism or a primary focus on Ethical investing?

By: Ainsley Brown

The safety of the people is not the supreme law

While terrorism, terror financing and constitutional principles such as the rule of law and Parliamentary supremacy are not the usual subjects covered here at Commercial Law International, this seeming break from tradition is in fact not such a stretch.

As our moniker indicates Commercial Awareness is Global – it is important to note and as will soon become clear, coverage of this case in no way departs from this.

This landmark ruling is instructive for the “normal” subjects covered on this blog because it illustrates the legal limits imposed on the state – read the government – as it pertains to its ability to interfere with the assets of an individual (natural or juridical). These limits are even justified, as their Lordships have ruled, when combating the scourge of international terrorism. As the Deputy President of the Court, Lord Hope of Craighead, put it: “Even in the face of the threat of international terrorism, the safety of the peoples is not the supreme law.” In other words the government of the day only has as much power as Parliament has allowed it to have; the will of Parliament being express of course in the laws its passes.

The offending powers struck down by their Lordships are the Terrorism (United Nations Measures) Order 2006 and the Al-Qaeda and Taleban (United Measures) Order 2006. The Orders were issued by the then Chancellor of the Exchequer and now Prime Minister Gordon Brown in response to United Nations (UN) Resolutions passed in response to the September 11th attracts. The Resolutions sought global co-operation on combating the financing of international terrorism.

Unlike in many other countries the United Kingdom under its UN obligations did not pass legislation in order to give effect to the Resolutions. Instead, the Chancellor issued these Orders, empowering Her Majesty’s Treasury (Treasury) to seize the assets of suspected terrorist, Al-Qaeda and or Taleban members or supporters. The seizures could take place on mere suspicion without an hearing and would not be under scrutiny of the courts through judicial review.

The case was the first to be heard in the newly minted Supreme Court when it opened last year. The appeal was brought by five men whom successfully argued their case in the High Court that the Orders were unfair and breached their fundamental right guaranteed by the laws of Britain; however, they were later over turned by the Court of Appeal.

The question before their Lordships though a simple one was non the less a profound one. And it was this when Parliament empowered the Treasury to make orders did it in turn give the Treasury the power to “interfere so profoundly with individuals fundamental rights without parliamentary scrutiny[?]”

With word such as “oppressive,” “paralysing” and “draconian” peppering the decision, their Lordships answered the question with a resounding NO!

In a nation such as Britain, with a “unwritten constitution” it must always be remembered that Parliament is supreme and it is only through Parliament that the government has the exercise power. Moreover, when such power involves the interference with an individual’s basic rights such authorization cannot be implied but must be explicit. In any democratic-capitalistic society access to the courts and property rights are sacrosanct. As Lord Phillips of Worth Matravers, the President of the court put it: “Access to the court to protect one’s rights is the foundation of the rule of law.” And without the rule of law there can be no liberal-democracy.

For those that would say that this ruling is just another example of judges legislating from the bench in breach of Parliamentary supremacy, Lord Philips has a stern rebuke. His Lordship countenanced with “on the contrary it upholds the supremacy of Parliament in deciding whether or not measures should be imposed that affect the fundamental rights of those in this country” without explicit grant by Parliament.

It is important to not that Supreme Court are not saying that these laws are in and of themselves illegal – not at all. However, what their Lordships are saying is that if the government of the day wants exercise such extensive powers they much first seek and then be granted Parliamentary approval. Lord Hope put it best: “If the Executive considers that such far-reaching measures are necessary or expedient for combating terrorism or honouring the United Kingdom’s international obligations it must obtain approval for them form Parliament.”

In response to the judgment the Gordon Brown’s is rushing through Parliament the Terrorism Asset-Freeze (Temporary) Provision Bill which is expected to have retrospective effect and by and large mirror the quashed Orders. If all goes to plan the Bill will become law some time this week.

By Charles Wanguhu

The caveat emptor rule dictates that an individual seeking to purchase land should ensure that he is dealing with the rightful owner. Therefore upon inspection of the register kept at the ministry of lands, an individual seeking to ensure the ownership of land would request the registrar for an official confirmation of search, the advantage of the official search is that it is given priority registration over all other transactions for a period of 14 days from the issue of the search.

However in the Mau forest in Kenya the government aims to evict thousands of families who are said to be on forest land. This is despite the fact that some of the settlers have valid title for the property which was a result of excision of forest land by the previous administration. A similar operation in 2005 resulted in thousands of people being displaced and claims of human rights violations by the evicting forces.

The new administration however views the issuance of the titles as void as in their view they were illegally obtained from the former administration. However, under the Principle of Indefeasibility the title of an innocent Purchaser cannot be set aside, even by the claims of a previous rightful owner. This is so, because the Register of Titles is conclusive evidence of the Purchaser’s rightful ownership of the land.

In the case of Maathai & 2 others v City Council of Nairobi & 2 other 1994 a case in which the Nobela laureate Waangari Maathai sought to stop the sale of a piece of land by the city council the court in its deliberations held that:

Registration of Titles Act Cap 201 of the laws of Kenya which provides inter alia, that the certificate of Title issued by the Registrar to a purchaser of land upon a transfer shall be taken by all courts as conclusive evidence that the person named therein as proprietor of the land is the indefeasible owner thereof …. and the title to that proprietor shall not be subject to challenge.”

The Kenyan government while well intentioned in conservation of forests has opened a pandoras box and thereby creating uncertainty in dealings in land. By ignoring the indefeasibility of first registration land transactions have become a gamble. A commission of inquiry into illegal/irregular allocation of public land revealed that a number of foreign embassy and consulates are actually built on former public land. It would be interesting to see whether the government would take similar measures against these missions as they are attempting to do with the families in the Mau forest.

An AFRICOG report available here looks at some of the recommendations of the Commission of inquiry and looks at the possibility or impossibility in implementing the recommendations.

By: Ainsley Brown

This is part of the Middle Passage Law Series on Law is Cool.

Why am I wearing all black today?

Am I in mourning? No, not exactly. Then why?

Well it is August 1: Emancipation Day.

I am wearing black today not to so much mourn but to remember. To remember that it was today 175 years ago that the British set my ancestors free – well in a manner, they still had six years of apprenticeship to look forward to. Why? Because being free people made them some how forget all the skills acquired during a lifetime of toil.

The Slavery Abolition Act 1833 took effect one year after passage this day 1834 and outlawed slavery in the British empire – including British North America aka Canada – with the exception of all but a hand fully of territories.

So I remember – let’s remember together.

By: Ainsley Brown

The shareholders of Northern Rock, lead by hedge funds SRM Global and RAB Capital, have lost their judicial review appeal at the Court of Appeal this week.

This ruling should end the saga of the shareholders´ attempting to use human rights law in order to gain – to their mind – just compensation from the nationalization of the Bank by the UK government.  Well, not exactly, for now it’s only a maybe.

The shareholders, well at least it would seem SRM Global for now, intends to carry on the fight. They intend to seek permission to appeal to the House of Lords – oh sorry, that is the newly minted Supreme Court – or ultimately if that fails to the European Court of Human Rights (ECHR).

So the saga continues, there could be at least two more chapters to come.

By: Ainsley Brown

This is part of the Middle Passage Law Series and is cross posted on Law Is Cool.

Now I know I have not posted a piece in this series in quite some time and for that I apologize – I have no excuse.

It may seem that I am either picking on L´Oreal, as I have tracked their recent legal battles with eBay on Commercial Law International, either that or I have an obsession with makeup. Let me assure you that neither in the case. With that over, let´s go to the story.

The La Cour de Cassation, the highest court in France, upheld the ruling by the Paris Court of Appeal, finding L´Oreal guilty of racial discrimination. The court also found Adecco, a temp-employment agency, involved through its Districom division, guilty and fined both it and L´Oreal €30,000. The court however, sent back to the Court of Appeal for its reconsideration the €30,000 each in damages payable to SOS Racisme, an anti-racism public interest group that brought the case.

The ruling ends three years of legal wrangling and is no doubt a huge blemish for L´Oreal.

The main issue of fact in the case was BBR. Yes, BBR. What in the world is BBR, you ask?

BBR or blue, blanc, rouge – the colors of the French flag. Now if you were to ask me I would have simply thought that this was a general patriotic gesture, however, it hides a much more sinister meaning. It, as the Times reports is an expression ¨widely recognized in the French recruitment world as code for white French people born to white French parents.¨ This would of course exclude not only the 4 million ethnic minorities current living in France but also any whites not born of pure French stock, including presumably none other than the French President himself Nicolas Sarkozy whose father is Hungarian.

It would seem that word got out that L´Oreal did not want any black, Asian or Arab sales staff to promote Fructis Style, a hair care product made by its Garnier division. Only BBR would do, I guess – because they are worth it – to play on L´Oreal´s because you are worth it ads. But, why?

And this for me is the most troubling aspect of this case. The BBR move by L´Oreal hints at a much larger and disquieting issue in French society. Yes, racism, this is very obvious but much more than that it is brand of racism that operates not just on the fringes of society but at its heart – in the labour and retail markets – while at the same time managing to remain in the shadows .

How is it that this BBR policy that so pervades the French employment and retail markets is only now seeing the light of day?

Like I said, very troubling indeed.

However, a silver lining to all of this is that BBR has now been fully exposed in a court of law. From now on the racial prejudice that operates in the French labour and retail markets can no longer be subject to denials of anecdote or conjecture. The court record stands as an official record by the state that BBR does exist and is a proven fact.

As for L´Oreal, this cannot be good for its brand management. For a company that so fiercely defends its brands, just take a look at its battles with eBay, this was not only a poorly conceived recruitment drive but also incorrectly defended case – this is not to be read as a dig at L´Oreal´s lawyers, not at all, I am sure they represented their client the best way they could, however, I am unreservedly criticizing L´Oreal.

L´Oreal forgot that it´s all about the brand. What they sell is much more than simply a product, it is a lifestyle, it is instant gratification, it is control and it is improved self-confidence through a line of beauty products designed for one thing – to improve the true beauty that is you. Nothing can be allowed tarnish the brand less they lose sales and market share.

If this is the basic market reality of the L´Oreal brand, and for that matter any brand, why would you maintain the spectacle of a public trial for three years with a case that even if it comes out in your favor could still blemish the brand?

There is no doubt that L´Oreal´s PR team is hard at work trying to figure out how to either make this go away or finding an angle on how to spin this. A word to the wise, L´Oreal, you have already been found guilty, it would be an exercise in futility to deny any part of this. In fact such a denial, in whole or in part, direct or indirect, could result in a backlash against the brand. It would be better to fully accept culpability, say sorry and take positive and no doubt public steps in order to combat BBR or other forms of discrimination. That my friend is your angle.

Concentration Camps

By Charles Wanguhu

The above move by the Kenyan freedom fighters to sue the British government has elicited some very interesting responses from some readers of the times online paper:

This is all about money and bashing the UK. Africa does not want to take responsibility for its current problems
Also if this happened in the 50’s so why have they waited till now?

Lawyers and Money again: A poisonous mix. Why after so long drag up these horrors. The Mau Mau allegedly used to drink the blood of the white farmers they killed. The British allegedly tortured Mau Mau. What good can come of this knowledge now? Time to put these things back in the box of history

While the above sentiments may be of a few it may be worth placing their arguments in a context. Firstly during the emergency in Kenya loads of kikuyu men were rounded up and accused of being Mau Mau based on accusations by guards who were collaboratoring with the british. We can therefore not claim that all those held in prison camps tortured and killed were indeed Mau Mau fighters.

Secondly what is more at stake is the recognition by the UK government that it was official colonial policy to run concentration camps and that it was sanctioned at the top.

In the article :

Professor Anderson states that is doubtful the lawsuit in its current form — targeting the state rather than those surviving individuals who allegedly carried out the abuse — will succeed.

“There can be no doubt that torture was used by British Forces . . . but the question remains ‘who is responsible?’,” he said.

Whoever this notion is flawed in that when a criminal offence occurs it is not the role of the victim to seek evidence against the offender and then bring in criminal charges against them. When a state decides to open up institutions of incarceration it is the states responsibility to ensure that the inmates are treated in a humane way and not subjected to torture. In this instance the British colonial state failed in their duty and they should therefore be brought to account for their inaction when it was clear what is happening. The Imperial Reckoning: The Untold Story of Britain’s Gulag in Kenya by Caroline Elkins is an account of the atrocities carried out on the Kikuyu population in Kenya and is worth a read for any individual prior to defending the british actions.

The Mau Mau atrocities cannot be denied and were definitely atrocious.  It is however pretentious to claim that they were on a similar scale as the colonial state with their better equipped and organised forces. In addition the fact that they used Machetes and not guns is akin to declaring that the British killings were undertaken in a humane way.

The question is should it be placed in history and forgotten about? Well while seeming to take a leaf from its predecessors the Kenyan Government extra judicially killed up to 400 Kikuyu young men accusing them of being Mungiki (a group not too dissimilar to the Mau Mau if not claiming their inspiration from the Mau Mau) should we forget about them as well.

While it is in the interest of majority of British people to be forward looking, the victims of atrocities still seek justice. History appears to be relative as the World Cup win in 1966 is considered fresh enough to be brought up at every opportunity but atrocities committed six years earlier than the win are too far to be worth remembering.

The issue is not so much monetary compensation but recognition that it was official British Gvt policy to carry out such atrocities and that indeed the victims of these actions were in some instances innocent people who happened to be members of the wrong ethnic community at the time.