August 2015

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Articles from the International Law issue of Communiqué (August 2015), the publication of the Clark County Bar Association:

“Judicial Independence and The Rule of Law at Home and Abroad” by Hon. Philip M. Pro (Ret.)

“Financial Regulatory Systems in the EU and Effects on Doing Business” by Senad Hrustanovic and Paul C. Ray, Esq.

“A Global Overview of Data Protection Law” by Brian Dziminski, Esq.

© 2015 The following articles were originally published in COMMUNIQUÉ, the official publication of the Clark County Bar Association. (August 2015, Vols. 36, No. 8). All rights reserved. For permission to reprint this article, contact the publisher Clark County Bar Association, 717 S. 8th Street, Las Vegas, NV 89101. Phone: (702) 387-6011.


Hon. Philip M. Pro (Ret.)
Hon. Philip M. Pro (Ret.)

Judicial Independence and The Rule of Law at Home and Abroad

By Hon. Philip M. Pro (Ret.)

When lawyers and judges in the United States consider issues of foreign law, typically we are concerned with the differences between the common law system with which we are familiar, and the code-laden civil law systems that predominate throughout much of the world. Occasionally, we must address the applicability of foreign law to our case or the impact of foreign law on a client doing business abroad. Differences in the substantive law or procedure of another country may, for example, pose barriers to enforcing contracts or conducting discovery that we do not commonly face in the United States. These same issues may also involve questions of international law commonly derived from treaties or customary law principles. Less frequently, however, we confront directly the ability of the legal system in another country to provide a forum in which the rule of law legitimately exists.

Most people in the United States rightly assume that litigation coursing through our courts will be fairly adjudicated. While complaints of delay and expense are often legitimate, and compromise is inherent, the legal system in this country is guided by the “rule of law” principle that everyone, including those who govern, are subject to: the impartial application of laws derived from a democratic process. The rule of law, and the public confidence in the legitimacy of the justice system that it engenders, are fundamental components of our democracy. The United States is not unique in this regard.

The history, culture, and values of each country are reflected in their laws. Although the structure and nomenclature of various governance and legal systems throughout the world may vary in several respects, the principle of the rule of law transcends these differences. Virtually all stable democratic countries provide a means of fairly resolving disputes in accord with established legal standards which the citizens of that country generally accept as legitimate. However, the legal systems in some countries, particularly post-conflict, authoritarian, or otherwise unstable developing countries, face significant challenges in achieving a society in which the rule of law meaningfully exists.

There are undoubtedly many reasons why the rule of law is more prevalent in some countries than in others. The rule of law cannot exist in a lawless society or, for that matter, in one rife with corruption or dependent on personal power or loyalty to an authoritarian regime. Conversely, the rule of law exists in some form in every democracy because democracies depend upon it to function and survive. The rule of law gives voice to the collective will of a society, promotes order and security, and ensures governmental legitimacy. To achieve these ends, the justice system must be accessible and the law must be fair in substance and application. Equally important, regardless of the governance structure of a country and the separation of powers between the executive and legislative branches, the rule of law is heavily dependent upon an independent judiciary. While it may be accountable to the other branches and to the public, an independent judiciary in a democracy must be able to check the excesses of the other branches and provide a forum in which disputes can be decided fairly according to the law. Though such conditions may be taken for granted by most in the United States, this is more easily said than done in many countries.

The official dissolution of the Soviet Union less than 25 years ago left in its wake several authoritarian governments with corrupt legal systems in former Soviet states in central and eastern Europe, and central Asia. Almost immediately, the governments of many developed democracies, including the United States, reinvigorated efforts to bolster democratization of these countries. Although we can debate endlessly the wisdom, method, and success of these efforts to ensure human and economic rights and civil liberties in other countries, I hope most would agree these are worthy goals. However, my personal experiences over the past two decades suggest that, while these efforts may have produced incremental progress, they have been meaningful and worthwhile.

Since 1998, I have participated in judicial conferences, seminars, and training programs in more than 20 countries, including Armenia, Azerbaijan, Bosnia, Columbia, Georgia, Hungary, Indonesia, Jordan, Kyrgyzstan, Latvia, Malawi, Pakistan, South Africa, and Ukraine. Most have been sponsored by the host countries in conjunction with the United States government through the Departments of State, Justice, and Commerce, or by such organizations as the United Nations, Council of Europe, and government-funded non-government organizations (NGOs). I have returned to some of these countries several times and been inspired by the progress made to strengthen their legal systems.
The specific subjects of each program in which I have participated have ranged from how jury trials and other judicial proceedings are conducted in the United States; criminal and civil procedure rule making; intellectual property issues, including piracy; terrorism financing; money laundering; asset forfeiture; to judicial opinion writing, among others. All have carried an overriding “rule of law” theme designed to encourage the host country to consider options for self-improvement within their domestic legal systems. Regardless of the subjects of the programs, I always include in my presentations a discussion of some of the components necessary for a judiciary to exercise the decisional independence necessary to sustain the rule of law. I suggest this is best accomplished with a strong dose of humility.

While emphasizing the value of the United States constitutional structure, with particular emphasis on Article III, I always acknowledge our system is far from perfect, but that, notwithstanding some notable failures during our 226-year history, our constitution has endured. I stress that while it often is copied by emerging democracies, our constitution is not a template that can be easily implemented in other countries. Instead, I encourage my colleagues abroad to borrow from our experiences of more than two centuries, and adopt within their legal system, history, and culture those constitutional precepts that will work best for them.
Throughout, I repeat the importance of an independent judiciary to the operation of a democracy and try to focus attention on some of the factors that contribute to judicial independence. Among the hallmarks of an independent judicial branch that I frequently cite are: a judicial selection system that ensures the selection of highly-qualified judges; adequate and guaranteed judicial compensation; adequate court facilities, staffing, and security; a judicial power of self-governance in terms of court administration, allocation of resources, and procedural rule making authority; transparent financial disclosure; enforceable codes of conduct; effective case management and technology; public and media access to the courts; public education; and finality, as Dickens reminds us in Bleak House, because cases must come to an end.

As we all have learned from years of experience, judicial independence is not an end in itself. Rather, it is a means of promoting impartial decision making and preserving the constitution against encroachments by the more political legislative and executive branches. Judicial independence makes possible the rule of law and due process and helps fairly and equally ensure the individual human and property rights of the people, which is a worthy message for judges and lawyers to leave with colleagues in any country, including the United States.

A member of the Nevada bar since 1973, former United States District Judge Philip M. Pro recently retired after 35 years of service on the federal bench. He currently provides arbitration and mediation services through JAMS and continues his rule of law activities at home and abroad each year.


Hrustanovic-Senad-web
Senad Hrustanovic
4365_Ray_PaulC_2014-web
Paul C. Ray, Esq

 

Financial Regulatory Systems in the EU and Effects on Doing Business

By Senad Hrustanovic and Paul C. Ray, Esq.

If a Nevada client wants to enter a contract with a European business, for example a Greek travel agency, the client’s lawyer should know a few things about the transaction. First, in this example, besides knowing that tourism is Greece’s top industry; that Greece joined the group of 19 European countries known as the “Eurozone” in 2001; and that Greece uses the Euro as a unified currency, the lawyer should also know about the risks of the client not getting paid when doing business with Greece. What yesterday was not even imaginable, today in Greece is a reality. Many international agreements, contracts, and treaties are at stake. The Greek travel agency example raises issues of historic proportions affecting choices of doing international business generally.

Widespread media reports speculated about the controversial effects of Greece’s June 30 default on the International Monetary Fund bailout, the first such default ever by a developed nation. News stories included effects of enforced capital control, such as long lines at ATMs with reduced withdrawal limits and extended bank closures. Was this the end of Greek membership in the Eurozone? Would Greece return to the drachma, and a long term inflationary economy? That is probably why a majority of the people would like to stay in Eurozone. Greeks argued the “austerity” measures imposed earlier, as conditions of the bailout, were too harsh and inaptly directed, while critics argued that Greek economic policy was to blame for the crisis. Perhaps the biggest question, what would be the effect on the European Union?

The European Union (EU) was created by a series of post-World War II treaties, which contain many amendments to the structure and organization of EU powers, as well as restrictions, referred to as “competencies,” that set forth the relationships between the EU and the member countries themselves. The two major treaties are the Treaty on the Functioning of the European Union, originally signed in 1958 in Rome, and the Treaty on European Union, signed in 1991 in Maastricht, Netherlands. The Treaty of Lisbon signed in 2009 was the last major revision and sets forth how ordinary legislative policy of the EU applies to the 28 member countries, addressing policy issues ranging from agriculture, environment, and energy to transport and travel.

A majority of the EU countries voted to adopt a central constitution, but the adoption was not unanimous, having been rejected by French and Dutch voters. It is thus important to recognize that the EU is not legally governed by a constitution, but rather is governed by the treaties.

The Eurozone has its own European Central Bank (ECB), established by the Treaty on European Union. The central banks of the 28 European Union members own the capital stock of the ECB. The ECB regulates monetary policy, while member countries also have their own national central banks which carry out day to day monetary policy. The ECB is the first and only central bank established by international treaty to govern monetary policy by free international agreement among multiple countries.

Military, police, fiscal, and monetary systems are traditionally sovereign state functions more than any others. Until the ECB, monetary policy was considered one of the pillars of national sovereignty of any state. Even small countries wanted to have a control of that part of sovereignty and had exercised it with varied success in modern history.

The Greek financial crisis raises a number of issues focusing new attention on the strength and the broad objectives of the EU. For example, how strong is the Eurozone? Will the Greek experience encourage populist political movements in other financially troubled Eurozone countries to threaten not to pay debt? And how united are the countries of the EU in pursuing the broad based policy goals set forth by the EU? All these questions will be addressed in times to come in the EU, some of them will be fixed, some of them debated into the future. But businesses and financial institutions will learn a lesson from the Greek crisis–to make much more effort to better understand the financial, economic, and legal systems of the particular country where they do business.

When dealing with a single currency in a stable economy businesses feel a single recognizable level of inflation. But when businesses step out of their local markets and deal in a foreign market, they enter a new situation, a very risky one. International business requires dealing with at least two different currencies and comes with all of the consequences related to that reality.

When establishing new business with a foreign entity, signing an international trade contract or arrangement, or executing any agreement among private parties who reside in different financial systems and jurisdictions, businesses should know the following:

  1. 1. International instruments do not fully protect from the risks of dealing with international markets; businesses should consult experts who will help to identify, evaluate, and efficiently manage risks.
  2. 2. Although the purposes of money are the same worldwide: (a) unit of payment; (b) unit of account; and (c) store of value, exchanging foreign currency and dollars brings dimensions and complexities that a business should carefully evaluate.
  3. 3. Every serious holder of money, investor, businessman, corporation, law firm, attorney, and individual would like to preserve the value of the money in time, at least until being paid for services, products or investment when doing business internationally. Some dare to even try to make extra money (currency income), but that is related to much bigger risks and requires a deeper understanding of finances.
  4. 4. Methodologies of measuring inflation are similar (theoretically), but practically they differ from country to country.
  5. 5. Payment systems are becoming harmonized by international standards (commodities, fiat monies, checks, electronic payments), but differences in execution still exist from bank to bank and country to country (time, procedures and fees), which make big differences in particular cases.
  6. 6. Members of the EU use international accounting standards, which are not the Generally Accepted Accounting Standards (GAAP) in use in the United States; each country has specific rules which make a big difference for doing business in that country.
  7. 7. International standards and regulations in financial transactions are easier to execute in stable times, but these get challenged in times of deep political and economic instabilities of every country.
  8. 8. Execution of the international laws and standards within a country depends on that country’s political and economic system; level of economic development; dependence on foreign markets; legal, economic, and business decision making processes; level of independence of monetary policy and its main executive, the national central bank; exchange rate system; and stability of local currency.

These considerations apply not only in the Greek travel agency example, but also in European businesses generally.

Senad Hrustanovic, a finance, international finance and corporate development consultant, is the Principal of Sengor Inc. and the CEO of the Nevada Center on Foreign Relations. He served as Deputy Finance Minister of Bosnia and Herzegovina before and after the breakup of Yugoslavia.


Paul C. Ray, Esq. practices civil and appellate litigation in the areas of business and real estate and is COO of the Nevada Center on Foreign Relations.


Brian Dziminski, Esq.
Brian Dziminski, Esq.

A Global Overview of Data Protection Law

By Brian Dziminski, Esq.

Data protection law continues to be one of the most complex and dynamic areas of international law. Such laws have greatly been impacted, and accordingly, influenced, by the increase in technological developments, businesses’ realization of the value tied to personal data, and the global nature of business. This article provides an overview for such clients and those lawyers advising them.

General Data Protection Principles

While most countries have now adopted some form of data protection laws regarding natural persons’ “personal information” or “personal data,” what differs between such laws is the degree of protection and the scope of enforcement. All such laws provide varying levels of protection for “personal information.” The protection can be limited, as it is in Nevada pursuant to NRS 603A.040, to a natural person’s social security number, driver’s license number, or a credit or debit card number and pin. Or the protection can be broad, as it is in the European Union (“EU”), where “personal data” is quite broadly defined as any data that identifies an individual or which could be linked to a person. The common factor in almost all data protection laws is some machination of the following eight general privacy principles provided by the Organization for Economic Cooperation and Development (OECD) in 1980:

1. Collection Limitation–personal information should only be obtained by lawful and fair means.

2. Data Quality–personal information should be relevant to the purpose for which it is collected and kept accurate

3. Purpose Specification–the purpose for the collection should be specific and transparent

4. Use Limitation–personal information should not be disclosed outside of the purpose for which it is collected

5. Security Safeguards–reasonable physical, administrative and technical security measures should be taken to protect the personal information

6. Openness–the collection and use of personal information should be transparent

7. Individual Participation–individuals should have mechanisms to obtain information regarding their personal information and have such information corrected, changed and/or erased

8. Accountability–businesses should be accountable for complying with these principles

OECD, 2013, “OECD Guidelines Governing the Protection of Privacy and Transborder Data Flows of Personal Data.” The OECD Privacy Framework. Paris: OECD Publishing.
While these eight principles form the foundation for data protection regulations, what significantly varies is the implementation and scope of enforcing such principles.

The United States Approach

The United States has generally taken a sectoral approach in legislating data protection, meaning that most applicable data protection laws have been adopted in areas where Congress has found such protections necessary. Notable examples of such legislation include the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) and the Health Insurance Portability and Accountability Act (HIPAA) with regard to healthcare records; the Gramm-Leach-Bliley Act (GLBA) with regard to personal financial information; and the Children’s Online Privacy Protection Act of 1998 (COPPA) with regard to the protection of children under the age of 13 years. Beyond these and similar federal laws, the Federal Trade Commission has otherwise usually taken the lead, albeit infrequently, to enforce against unfair and deceptive trade practices involving poor data protection practices.

Most States have enacted some form of data protection laws similar to those adopted in Nevada in NRS Chapter 603A. And, as is true with many consumer protection laws in the US, civil actions have increased as a result. A couple of examples of this are the recent class action cases filed after mass data breaches involving Target (resulting in a recent $10,000,000 settlement) and Home Depot (cases still pending).

The European Union Approach

Contrasted against the US approach, the EU has taken a much more paternalistic view of data protection. In 1995, the EU adopted the EU Data Protection Directive (the “Directive”) with regard to the collection, storage, processing, use, and deletion of personal data. The Directive provides minimum protections that each EU member state must enact through their own legislation.

As noted above, personal data is broadly defined under the Directive and processing of such data under the Directive may only be done under certain circumstances (i.e., when such processing is necessary for the performance of a contract), if there is some legitimate interest being pursued for the processing, or if there is express written consent by the EU resident. Most notable about the Directive from an international law perspective are the strict rules with regard to the transfer of the personal information out of the EU. Specifically, absent the exceptions below, the Directive prohibits the transfer of an EU resident’s personal data to countries outside of the EU that lack “adequate” data protection laws. Notably, the EU has found that such adequate protections are provided in only a handful of other countries, and the US is not one of them. But, all is not lost, and there are other mechanisms through which such personal data can be transferred outside of the EU. One such approach for multi-level corporations is the adoption of binding corporate rules, which allow corporations to adopt legally binding internal corporate privacy rules approved by EU data protection authorities. A second approach is the implementation of model contracts containing specific provisions approved by the EU as providing adequate protection of personal data. Finally, despite finding the US laws inadequate, the European Commission and the US Department of Commerce have entered into a “Safe Harbor” framework that allows US entities to implement a privacy program containing appropriate measures and to annually certify their compliance with the Department of Commerce. See http://export.gov/safeharbor/.

Notably, and highlighting the dynamic nature of data protection law, there is currently a draft proposal for an even stricter Data Protection Regulation (the “Regulation”), which after three years of debate and optimistic expectations that it will eventually be approved, remains in the legislative process. The Regulation will require an even more proactive approach by entities than the Directive, and will include stricter provisions, higher levels of fines, and more detailed consent requirements. If and when the Regulation is adopted, it will become mandatory law throughout the EU.

Other Jurisdictions’ Approaches

Most other countries have addressed data protection, to varying degrees, relying on the same general principles discussed above. Japan has adopted a rather complex scheme, similar in effect to the US framework, through the Law Concerning the Protection of Personal Information. Unlike the EU, Japan’s law does not have any provisions governing international transfers, but instead relies on consent-based requirements for all transfers of personal information to third parties, regardless of location. Many other Asian and African countries, as well as Canada and most Latin American countries, have taken similar approaches to those embodied in the EU Directive. Finally, some countries, including China, have not enacted any comprehensive data protection laws.

Concluding Thoughts

Data protection laws continue to develop as regulators struggle to address technological advances. Failure to abide by such laws can lead to serious consequences, including the imposition of substantial fines and sanctions (for example, Google was fined in an amount exceeding one million Euros for violations in Spain and France in early 2014). Thus, impacted clients conducting business internationally should be aware of such laws, abide by such laws, and, therefore, avoid the consequences of non-compliance.

Brian Dziminski is an attorney at the Law Offices of John Benedict. He is a 2003 graduate of the Boyd School of Law, University of Las Vegas and obtained a Masters of Law Degree, with Merit, in International Business Law in 2013 from the University of London. His practice is focused on business and real estate transactions and litigation.