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Book Review: Foreign Policy of the European Union—Assessing Europe’s Role in the World. By Federiga Bindi and Irina Angelescu (eds.)

For­eign Pol­i­cy of the Euro­pean Union—Assessing Europe’s Role in the World sets out to treat the for­eign rela­tions of the EU in a holis­tic, all-encom­pass­ing man­ner. For this pur­pose the book is divid­ed into five parts, each of which devel­ops a dif­fer­ent per­spec­tive on the EU’s exter­nal actions.

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Some Quick Thoughts on Transnational Human Rights Litigation in American Courts After Kiobel

By: Pro­fes­sor Burt Neuborne [*]

The hope that the ATS would per­mit entre­pre­neur­ial lawyers to chore­o­graph inter­na­tion­al human rights cas­es involv­ing: (1) alien plain­tiffs; (2) alien cor­po­rate defen­dants; and (3) acts whol­ly occur­ring abroad into an Amer­i­can court in an effort to take advan­tage of Amer­i­can dis­cov­ery rules, Rule 23 class actions, and an inde­pen­dent judi­cia­ry is now his­to­ry. All nine Jus­tices in Kio­bel slammed that door, which was prob­a­bly a pipe dream in the first place. Chief Jus­tice Roberts, writ­ing for five Jus­tices, includ­ing the mad­den­ing­ly vague Jus­tice Kennedy, ruled that the pre­sump­tion against extrater­ri­to­r­i­al leg­is­la­tion blocked use of the ATS as a source of fed­er­al juris­dic­tion when nei­ther the plain­tiffs, nor the defen­dants, nor the oper­a­tive facts had a sig­nif­i­cant link with the ter­ri­to­r­i­al Unit­ed States. Mere cor­po­rate pres­ence for the pur­pos­es of gen­er­al juris­dic­tion over the defen­dant could not, ruled the Chief Jus­tice, con­sti­tute the sig­nif­i­cant link to the ter­ri­to­r­i­al Unit­ed States need­ed to rebut the pre­sump­tion against extrater­ri­to­r­i­al leg­is­la­tion.

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R.I.P. A.T.S.? How much of the Alien Tort Statute survives the Supreme Court’s Kiobel Decision?

This morn­ing, the Supreme Court dis­missed the human rights claims of a group of Niger­ian nation­als against Roy­al Dutch Petro­le­um (Shell) under the Alien Tort Statute (A.T.S.) in a 9–0 deci­sion, though the jus­tices split 5–4 as to the rea­son­ing. For the orig­i­nal opin­ion, see: Kio­bel v. Roy­al Dutch Petro­le­um Co., 569 U.S. ___ (2013)

Jus­tice Roberts deliv­ered the opin­ion of the Court on behalf of 5 jus­tices. First, the Court held that the pre­sump­tion against extrater­ri­to­ri­al­i­ty, explained with force in Mor­ri­son v. Nation­al Aus­tralia Bank, 561 U.S. ___ (2010), applies to the statute and the fed­er­al com­mon law cause of action under the statute. Sec­ond, the court found noth­ing in the statute’s lan­guage or his­to­ry to rebut the pre­sump­tion. Third, there are no facts to rebut the pre­sump­tion in the instant case. Fourth and final­ly, the Court jus­ti­fies its solu­tion as pre­vent­ing the ‘diplo­mat­ic strife’ that may arise from judi­cial inter­fer­ence in for­eign pol­i­cy, an area that is tra­di­tion­al­ly reserved to the polit­i­cal branch­es. The Court implied that even if the pri­ma­ry norm that cre­at­ed the cause of action might not cause strife, the judi­cial search for sec­ondary rules (such as cor­po­rate lia­bil­i­ty) may still do so.

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Territorial-based Income Taxation as International Ostracism

Tax­es not only serve to raise pub­lic rev­enues but also to shape the behav­ior of tax­pay­ers, and thus of the econ­o­my as a whole.  The tax neu­tral­i­ty of Adam Smith is, there­fore, the most hyp­o­crit­i­cal aspi­ra­tion of any tax pol­i­cy.  Impor­tant­ly, gov­ern­ments today not only seek to shape the behav­ior of its res­i­dents, but also of the for­eign­ers who inter­act with the country—thereby trans­form­ing the ter­ri­to­ri­al­i­ty of tax juris­dic­tion into anoth­er hypocrisy.  And the effects of this phe­nom­e­non have an increas­ing impact on inter­na­tion­al pol­i­tics, as well as cer­tain trade poli­cies did in oth­er not so far times.

On Octo­ber 26, 2011, the Com­mit­tee on Ways and Means of the U.S. House of Rep­re­sen­ta­tives issued a dis­cus­sion draft for a “com­pre­hen­sive tax reform” of the U.S. inter­na­tion­al tax­a­tion sys­tem.  The issuance’s pur­pose is to seek feed­back from inter­est­ed pro­fes­sion­als and stake­hold­ers in order to improve the pro­pos­al.  And this pro­pos­al, usu­al­ly called “The Camp Tax/Territorial Pro­pos­al” due to the fact that Con­gress­man Dave Camp pre­sides the Com­mit­tee on Ways and Means, is very impor­tant to be ignored.  This reform, in fact, posits a mod­i­fi­ca­tion that we could con­sid­er a kind of “rev­o­lu­tion” in the U.S. income tax sys­tem.  It pro­pos­es a change from a “world­wide tax sys­tem” to a “ter­ri­to­r­i­al tax sys­tem,” and offers a reduc­tion of the cor­po­rate tax rate (from 35% to 25%) and, as an accom­pa­ny­ing and instru­men­tal ben­e­fit, a “repa­tri­a­tion tax hol­i­days.”

In a few words, a world­wide tax sys­tem (also know as res­i­dence-based tax sys­tem) impos­es tax­es on any income regard­less its phys­i­cal ori­gin (source), both domes­tic and for­eign.  Instead, a ter­ri­to­r­i­al sys­tem only tax­es the domes­tic (res­i­dence) source income while exempt­ing the for­eign one.  In both sce­nar­ios, the income is typ­i­cal­ly taxed first in its source coun­try and, in a cross-bor­der arrange­ment, after­wards in the taxpayer’s res­i­dence coun­try.  So, to alle­vi­ate the con­tin­gent dou­ble tax­a­tion, the world­wide sys­tem grants a cred­it for for­eign tax­es paid (the so-called “for­eign tax cred­it,” which oper­ates as an advance of domes­tic tax­es) where­as the ter­ri­to­r­i­al sys­tem sim­ple exempts the for­eign source income.  Also, in a world­wide sys­tem such as the U.S. sys­tem, tax­a­tion on for­eign income derived from busi­ness (“active income”) is nor­mal­ly deferred until brought to the U.S. (“repa­tri­a­tion”) where­as for­eign income derived from invest­ments (“pas­sive income”) is gen­er­al­ly taxed as soon as it is earned through a num­ber of quite com­plex mech­a­nisms, such as the U.S. Sub­part F rules (Con­trolled For­eign Cor­po­ra­tions or “CFC”) and oth­ers.  The accom­pa­ny­ing ben­e­fit to this reform, the “repa­tri­a­tion tax hol­i­days,” attempts pre­cise­ly to incen­tive U.S. investors to rapid­ly repa­tri­ate their active income earned abroad through a very appeal­ing tax treat­ment, which con­sists basi­cal­ly in a reduced tax rate along with a com­fort­able install­ment peri­od to pay the tax­es (for details, click here).

Although at a first sight (and as many are today argu­ing), this reform would favor allo­cat­ing of U.S. invest­ments abroad through exempt­ing for­eign source income, a more thought­ful con­sid­er­a­tion reveals the con­trary.  Impor­tant­ly, the first goal at hand is to repa­tri­ate U.S. invest­ments cur­rent­ly invest­ed abroad, and that is actu­al­ly an objec­tive with empir­i­cal sup­port from the expe­ri­ence of oth­er coun­tries which have imple­ment­ed a ter­ri­to­r­i­al tax sys­tem such as The Nether­lands and notably, the U.K. (for fur­ther infor­ma­tion, see links below).  On the oth­er hand, noth­ing in this pro­pos­al indi­cates that the Com­mit­tee on Ways and Means attempts to decrease the U.S. rev­enues by exempt­ing for­eign source income that, as argued, would be gen­er­at­ed by U.S. invest­ments that would move abroad by virtue of this reform.  To the oppo­site, the reform also aims to increase the U.S. tax rev­enues just as it has hap­pened in The Nether­lands and U.K.  So, this pol­i­cy has actu­al­ly worked so far.  Con­se­quent­ly, we may con­clude that the pro­posed reform assumes that, in the long-term, the income gen­er­at­ed by U.S. invest­ments will then be pro­duced only in the U.S. and not abroad.  Why?

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