Legal Relationships Between Transnational Corporations And Host States

Author : Miles Francis Binney
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)

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Download or read book Transnational Corporations written by Miles Francis Binney and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Law and economics theory champions the view that reduction of transaction costs, development of legally robust economic institutions, and related concepts are central to developing economic growth. Other theorists posit that the “South” is exploited, and domestic foreign investment laws as well as international conventions, customs, norms, and laws should redress the balance toward more appropriate economic development. Discuss the extent to which a foreign investment law framework can play an important role in ensuring corporations play an appropriate role in society, citing specific laws, and country specific cases. “Foreign Direct Investment is defined as the purchase of real assets abroad for the purpose of acquiring a lasting interest in an enterprise and exerting a degree of influence on that enterprise's operations.” Investment law mainly impacts upon transnational corporations (hereafter: TNC's) originating from foreign home countries, operating in a different host country. TNCs are of immense economic importance and influence in the modern world; as has been witnessed in the current financial crisis international markets are closely interdependent and TNCs play a major part in most economic activity, which is of great value to all states regardless of the level of development. TNCs have certainly had a positive effect on efficiency in general, but they also have the ability to have a detrimental effect and inefficiency implications. The dual purpose of duty, to promote the positives and to curb the negatives has “necessitated the establishment of legal Regimes and codes relating to TNCs." Where to draw the line in regards to reaching an optimum balance is a question that is considered by various approaches to jurisprudence, most notably the idea of Coase theorem. Should an approach be adopted that promotes efficiency or one that facilitates equity? “Efficiency and equity issues are not necessarily mutually exclusive. Regulation is compatible with both. Some form of regulation is necessary to enhance both efficiency and equity and to ensure harmony in the relations between TNC's and states. On the regulatory spectrum excessive regulation stifles initiative and industry, and lack of regulation - that is, no governing rules and bodies - only produces chaos and confusion.” The debate is a question of efficiency and equity. “The manner in which the debate on the trade-off between equity and efficiency has been conducted has been polemical rather than reconciliatory.” Many arguments regarding TNCs and social responsibility are circumlocutionary and so there is difficulty in dissecting relevant elements of the debate for discussion in a less pleonastic way. For our purposes, stakeholders involved in the transactions between host states and TNCs are not simply restricted to immediate parties. Additional stakeholders include the community in which the TNC is based, the nation as a whole, the geographical region and the wider global economy. Looking at the distribution of wealth internationally it can be observed that the majority resides in the northern hemisphere. With the exception of Australasia, most of the states located in the southern hemisphere are developing economies. The idea of development is to move towards a convergence of living standards of the developed world. Nations are keen to develop and a key part of this involves TNCs. When TNCs enter an under developed country they take with them managerial expertise, capital, networks, technological ability and the potential to develop new markets. TNCs have the potential to stimulate economic growth by several means. For example, through employment of local citizens there are likely to be spillover effects. TNCs will require inputs factors such as raw materials or professional services. The paper is organised as follows. Section 1 covers the development in logic of economic efficiency arguments and their issues when applied to foreign investment law will be explained. Section 2 considers a specific example from China demonstrating transaction costs. Section 3 examines the role of international norms in regulating behaviour. Section 4 evaluates the importance of the international institutional arrangements. Section 5 considers the role of bilateral trade agreements. Section 6 briefly outlines possible future developments. Conclusions will then be drawn based upon observations as to what role is played by foreign foreign investment law structure play, the legitimacy of economic analysis and a brief look into the future.