Professor Mark Feldman has been appointed by the Geneva Center for International Dispute Settlement (CIDS) to its new Academic Forum on Investor-State Dispute Settlement (ISDS). The purpose of the Academic Forum is to bring together the world’s leading scholars of investor-state dispute resolution to consider the possible reform of ISDS, which currently is under review by a working group of the United Nations Commission on International Trade Law (UNCITRAL).
The inaugural meeting of the Academic Forum was held on April 26, 2018 in New York. The meeting was co-organized by Columbia University and CIDS, and was hosted by the New York International Arbitration Commission.
Professor Feldman previously served as an invited member of the E15 Initiative Task Force on Investment Policy (World Economic Forum/ICTSD). Prior to joining STL, he served as Chief of NAFTA-CAFTA Arbitration in the Office of Legal Counsel of the United States Department of State, where he represented the interests of the United States in investor-state arbitrations.
Visiting Professor Preston Torbert’s innovative course, “Drafting Bilingual Contracts: The Problem of Ambiguity,” was featured prominently in the April 21, 2018 issue of China Legal Daily. An English translation of the article follows.
To Study and in Due Course Practice What One Has Studied, Is This Not a Pleasure?
“Can a Chinese law student improve a contract in English drafted by the most accomplished American lawyers?”
The answer to this question begins with a story from many years ago.
A week after I graduated from Harvard Law School in June, 1974, my mother handed me a new draft lease for a building that my family owned, asking me whether I had any comments on it. I read it carefully and then suggested only one change—a rent escalation clause based on the consumer price index. But after three years of legal education I was unable to make any legal comments on the contract! I was embarrassed and surprised. I had had great teachers of contracts, but they emphasized theory, not practice. I resolved to help law students do better.
To implement this resolution I started teaching at the Peking University School of Transnational Law in 2012. My course, “Drafting Bilingual Contracts: The Problem of Ambiguity,” is based on my experience–several decades of drafting and negotiating Chinese-English bilingual joint venture contracts for American clients. In the 1980s, I formed a China practice group in the Chicago office of Baker & McKenzie that included about ten legal specialists. Working together with my Chinese colleagues over many years, I learned a great deal about the ambiguous nature of the English language and wrote four books on the subject. Therefore, the main theme of the course I have created in Shenzhen is ambiguity, because ambiguity is the major cause of contract litigation and ambiguity, especially in bilingual contracts in international trade and investment. Although ambiguity is ubiquitous, it often is unnoticed. And it causes problems when, during the term of the contract, an unanticipated event occurs and each party carefully examines the language of the contract to determine its rights. Often the language is ambiguous, the parties adopt different self-serving interpretations, and a dispute is born. In the course in Shenzhen, I teach my students how to identify contract ambiguities, how to analyze them, and how to reduce the risk of ambiguity in order to protect a client’s interest. My students acquire three practical legal skills: (1) an understanding of the meticulous attention to detail required in reviewing a contract, (2) a mental checklist of ambiguity issues, and (3) a toolkit for reducing ambiguity.
The exam for the course asks the students to use their understanding, mental checklist, and toolkit to review and comment on an actual contract in English. I have selected “material” (i.e., important) contracts of major companies listed in the United States. The American Securities and Exchange Commission has a database of these contracts and they are available to the public, but only after the parties have deleted any confidential information. In prior years, I have used contracts to which Huawei, Alibaba, Tencent, Google, Microsoft, Motorola, Yahoo, and Goldman Sachs were parties.
The exam instructs each student: “Assume you are an in-house lawyer working at [name of company]. The General Counsel gives you the attached Agreement to review to see whether it should be revised before it is used as the draft for another similar contract in the future.” The exam gives the students three hours to review the contract for ambiguities, comment on them, and suggest changes to protect the company’s interest.
After grading the exams and consulting with the Dean, Phil McConnaughay, I spend two weeks selecting the best student comments and summarizing them in a 20-30 page Summary. Zhang Chenli 张趁利, the Director of Development and Career Services, and I then send the Summary to the General Counsel of the company.
I make clear in the Summary that it “does not constitute a formal legal opinion from me or from Baker McKenzie, the law firm where I spent several decades. It is merely the comments of law students who are not yet members of the bar. Since the students lack an understanding of the company’s business, they look at the contract only from the perspective of the course–searching for and revising ambiguities. Nevertheless, their gratuitous comments can add value for the company.” Since these legal opinions are aimed at actual contracts (such as, contracts of Goldman Sachs and Huawei), in the past three years, Director Zhang Chenli and I have received many favorable responses such as the following from the Legal Departments of the companies:
“We wanted to contact you to let you know how much we appreciate the insights you shared with us from you and your students. [The General Counsel] passed your [Summary] on to our group because we worked on the transaction that ultimately gave rise to the [exam contract]. It is always illuminating to have fresh sets of eyes reviewing our work, and it is clear that you and your students put a lot of thought and effort into reading and thinking about the [exam contract] you used in your class. Thank you for sharing the resulting insights with us. We will definitely keep them in mind.”
“Professor Torbert, thank you for sending us the [Summary], there are valuable comments for our contract drafting and reviewing. I will circulate it internally and let you know if we have questions.”
“I … read the Summary, and found it so impressive! As an in-house counsel mainly working on M&A deals, I deal with M&A contracts and commercial contracts every day… I’ve learned a lot from your Summary, which I believe will absolutely inspire me in my future daily work.”
All substantial contracts—even the best—contain ambiguities because ambiguities, like flaws in computer software programs, are an unavoidable characteristic of the product. To the extent that the drafter can find and eliminate ambiguities or the programmer can find and eliminate flaws, the contract or the software program is better. But a busy in-house legal department usually does not have the resources either to conduct a meticulous contract review itself or to pay outside counsel to do so. In short, my students’ comments can be viewed as similar to a benevolent hacker’s reporting of some minor software flaws to a programmer or perhaps a White Hat community’s “crowd-sourced” reporting.
Ambiguity is the greatest source of contract disputes, but ambiguities are inevitable, so the fewer the ambiguities, the better the contract. The above responses from the Legal Departments show that Chinese law students, with proper training, can acquire unique practical skills developed through many years of practice by me and my colleagues in the China Practice Group in the Baker McKenzie Chicago office.
Therefore, the answer to the question posed at the beginning of this article is “Yes.” The Chinese law students through study and application of these skills can improve the work of the most sophisticated law firms and in-house legal departments. “To study and in due course practice what one has studied, is this not a pleasure?” If I indulge myself, I can say that this is a great achievement of Chinese-American cooperation in legal education.
 The translation is of an article that appeared in Chinese in the Fazhiribao (The Legal Daily) newspaper on April 21, 2018.
 This quote from The Analects of Confucius refers to the unity of theory and practice.
About the author: Mr. Preston M. Torbert is a well-known American “China law” specialist who for many years served as a partner in Baker McKenzie, one of the world’s largest law firms. He has two doctorates, one in law from Harvard, the other in Chinese history from the University of Chicago and for many years devoted himself to Sino-U.S. trade and investment, especially the research and practice of bilingual legal documents.
Back in 1975, Mr. Torbert visited China for the first time. In the 1980s, he established a Chinese law group in the Chicago office of Baker McKenzie. Of the ten members of the group, all were Chinese except for him; he was the only “foreigner.” In 1981, he helped Baker McKenzie establish a Beijing office. Mr. Torbert teaches as an adjunct professor at the University of Chicago Law School and starting in 2012 was invited to teach at the Peking University School of Transnational Law in Shenzhen. His course “Drafting Bilingual Contracts: The Problem of Ambiguity” is the most popular elective course at the School of Transnational Law.
Mr. Torbert has a good command of nine languages (including Chinese) and has published in China four legal books in Chinese, including “Legal English: The Interpretation of Chinese-English Bilingual legal Documents.” When he is in Shenzhen, he is a loyal subscriber and reader of the Legal Daily.
The inaugural King’s Transnational Law Summit (KTLS) was held in London this April. The first global summit dedicated to the topic of transnational law, KTLS was hosted by the Transnational Law Institute of King’s College London. The theme of the Summit was “Creating Justice for Our Future.”
The Summit was held as a space of inquiry into how lawyers, legal scholars and legal education can better engage with the major transnational challenges of our time. Speakers included Shirin Ebadi, Nobel Peace Prize Laureate and Iran’s first female judge, Justice Susanne Baer of the Federal Constitutional Court of Germany and physicist and author Fritjof Capra. Over four days, multiple sessions were held in the thematic clusters of environmental & economic justice, health, technology, inequality & migration, and knowledge & action, in addition to music, film and poetry sessions and an art exhibition.
STL Assistant Professor Stephen Minas participated in the Summit by chairing a panel discussion on the topic of “Technology & Climate Change.” Professor Minas also is a senior research fellow at the Transnational Law Institute and participated in the development of the Summit concept/structure and in the organising team for the environmental stream of the Summit.
The “Technology & Climate Change” session featured a discussion on how technologies, including clean energy, can contribute to a sustainable future, and what law and regulation can do to maximize the positive contributions of technology. Speakers included Robert Berloznik, a member of the Technology Executive Committee of the UN Climate Convention and Director of the Programme of the Global Science Technology Innovation Conferences (G-STIC), Jean-Michel Glachant, who is Robert Schuman Chair, Director of the Florence School of Regulation and Director of Loyola de Palacio Energy Policy Programme at the European University Institute, Peter Vajda, Senior Environmental Expert at the Energy Community Secretariat, and Wendy J. Miles QC, a partner in Debevoise & Plimpton LLP’s London office and a member of the International Dispute Resolution Group.
Speaking after the Summit, Professor Minas said: “Globally, there are few institutions dedicated to the study of transnational law and to transnational legal education, making points of contact such as KTLS very valuable. It was a privilege to represent STL at this cutting-edge event in transnational legal studies and action. All credit must go to Professor Peer Zumbansen, Dr. Liliane Mouan and the whole organising team for an inspiring and thought-provoking Summit.”
Associate Professor Nitzan Shilon’s research on executive compensation was featured in a recent post on The Harvard Law School Forum on Corporate Governance and Financial Regulation. The post discusses Professor Shilon’s working paper, Replacing Executive Equity Compensation: The Case for Cash for Long-Term Performance, available here.
In this paper, Professor Shilon reconsiders the way in which corporate executives in U.S. public firms are paid for long-term performance. He takes the provocative position that equity compensation is undesirable, and that corporate executives instead should be compensated pursuant to carefully designed cash-for-performance schemes in which the executives are rewarded in cash for achieving certain long-term performance criteria.
Following is the Abstract of Replacing Executive Equity Compensation: The Case for Cash for Long-Term Performance:
Paying top executives in equity (stock and stock options) is the most significant reform of executive compensation in our generation. It has been universally welcomed not only by firms but also by academics, investors, and policy makers. Contrary to the consensus, I argue that equity compensation is undesirable. It provides perverse incentives for managers to destroy shareholder value and behave manipulatively and recklessly. It is also an economically wasteful vehicle, and its wastefulness, which is exacerbated by agency costs and cognitive biases, significantly contributes to the immense explosion of executive compensation. Because of the inherent drawbacks of equity pay arrangements, I suggest a radical proposal: to instead use carefully designed cash-for-performance schemes in which executives are rewarded in cash for attaining certain long-term performance criteria. To facilitate this reform, I recommend implementing it systemically and placing tax and disclosure rules that are applied to equity incentive pay on a level playing field with rules that are applied to cash incentive remuneration. The reform is expected to eliminate the significant costs of equity compensation and make incentive pay more effective, transparent, cheap, and better tied to performance, while improving the limited incentive benefits generated by current equity compensation arrangements.
On March 31, 2018, STL co-hosted a Legal Forum featuring London School of Economics Professor Jeremy Horder, a leading scholar of criminal law. Professor Horder delivered remarks on, “Bribery Reform in the UK: Implications for Chinese Businesses.” The Forum was attended by over 100 lawyers and leaders from the Shenzhen and regional legal community, as well as students and faculty from STL. The event was co-sponsored by Dentons and Benchmark Chambers International (BCI). WANG Qianwu, a senior partner in Dentons Shenzhen office, moderated the Forum. STL’s vice dean, Colleen Toomey, made opening remarks on behalf of the law school.
In his keynote address, Professor Horder provided an overview of the major provisions of the UK Bribery Act 2010. Professor Horder was one of the principal authors of the legislation, which set out to consolidate and modernize the UK’s ad hoc and antiquated bribery laws. The Bribery Act criminalizes commercial bribery and bribery of domestic and foreign government officials; receipt of a bribe; and failure by a corporate entity to prevent bribery. The extraterritorial scope of the Act is far reaching, which is a significant change from prior law. Under the Act, the corporate offense of failure to prevent bribery applies not only to U.K. companies, but also to any company that conducts business in the U.K. (e.g., registered on the London Stock Exchange), even if the conduct constituting bribery took place outside of the U.K. Professor Horder spent considerable time discussing these aspects of the Act, as well as steps companies can take to protect against liability under the Act. For example, having “adequate procedures” in place to detect and deter such conduct (such as ethics training programs, compliance and due diligence protocols, etc.) will provide a defense to the corporate charge of failing to prevent bribery. Professor Horder also discussed key differences between the Bribery Act and the Foreign Corrupt Practices Act (FCPA), the anti-corruption legislation adopted in the United States. His presentation was followed by an extended Q&A session.
Against the backdrop of China making an increasing number of investments in foreign countries, Professor Horder’s remarks provided a valuable opportunity for local lawyers and STL students to better understand the UK’s bribery laws.
STL Professor Sang Yop Kang recently participated in a March 2018 international conference on “Diversity of Shareholders and Corporate Governance” at Peking University Law School in Beijing. Professor Kang presented his research on “Unpacking Voting Leverage Mechanisms: Theoretical Analysis,” which analyzes voting leverage mechanisms, controlling minority structures, agency problems, law and finance theory, ownership gap (and its potential abuse in tunneling), and other corporate governance issues. He also raised the possibility that multiple voting leverage mechanisms can be used in a corporation.
Professor Kang was joined at the conference by leading corporate law scholars from China, Japan, Korea, and Germany, including faculty from Peking University, Tsinghua University and Renmin University.
STL Distinguished Professor of Practice Thomas Yunlong Man and 2L students Chen Chuang, Feng Yang and Wang Xianyi recently published a collection of articles in the Tribune of Social Sciences, a comprehensive bi-monthly Chinese-language journal. The articles focused on various dimensions of Evidence Law, including an exploration of “illegally obtained evidence. ” The student articles grew out of course work from Professor Man’s course on, “Emerging Chinese Evidence Jurisprudence from a Comparative Perspective.”
Professor Man is an appointed member of the PRC National Working Group on the “China Justice Index Project,” and he serves on the governing board of the International Association of Evidence Science, one of the leading academic organizations devoted to the interdisciplinary study of evidence law and forensic science.
Assistant Professor Stephen Minas, a scholar of climate change governance, technology transfer and transnational legal structures, recently authored a policy report for the Foundation for European Progressive Studies on “Framing a Just Transition Mission – Mainstreaming an All-Encompassing Approach.” In his report, Professor Minas offers a new approach to mainstream the “just transition” agenda with the aim of accelerating climate action, creating new quality jobs and empowering communities. “Just transition” refers to the aim of switching to climate-friendly energy while actively addressing the employment and social outcomes for fossil fuel-dependent workforces and communities. There is no single process capable of delivering a just transition and international, European Union and domestic law and policy are all relevant to achieving desirable outcomes.
Following is an excerpt from the Introduction of Professor Minas’s report:
The just transition agenda aims to manage overarching societal change in the broad context of responding to climate change. The goal of preventing dangerous climate change demands rapid and far-reaching changes in sectors such as energy, transport and industrial production. As climate policies are increasingly put into practice, the economic and social consequences of climate action for workers, communities, regions and whole countries are multiplying and becoming increasingly potent.
The aim of this paper is therefore to build on recent discussions and provide an analysis of the broader and ongoing developments in the agenda on just transition, which is being pursued at both EU and international levels. Central to the approach proposed in this paper is to mainstream the just transition agenda, by reframing just transition from a component of the climate policy response (of greater or lesser priority) to an overarching ‘mission’ that can include, mobilise and empower diverse actors at EU, regional, Member State and local levels.
On March 20, Professor Minas discussed his report in a series of consultations at the European Parliament and other Brussels-based institutions. The dialogue was an initiative of the Foundation for European Progressive Studies (FEPS). During the day’s sessions, Professor Minas and colleagues from FEPS’ Young Academics Network examined opportunities to strengthen the EU contribution to transnational economic governance, including in the areas of climate change, tax/base erosion and global supply chains. The European Parliament has made tackling climate change and its consequences one of its key priorities.
(Photo courtesy of the Office of Karoline Graswander-Hainz MEP)
Professor Sang Yop KANG was invited to participate in a January 13-14, 2018 conference in Singapore on “US-Asia Comparative Corporate Governance.” The conference was organized jointly by the law research centers at National University of Singapore (NUS), Singapore Management University (SMU), and University of California, Berkeley. Prominent corporate law professors who participated in addition to Professor Kang included Professors Holger Spamann (Harvard University), David Zaring (University of Pennsylvania), Dan Puchniak and Umakanth Varottil (NUS), Wan Wai Yee (SMU), Kon Sik Kim and Kyung Hoon Chun (Seoul National University), Gen Goto (University of Tokyo), and Manabu Matsunaka (Nagoya University).
The conference focused on selected issues of comparative corporate governance, including shareholder activism, minority shareholder protection, and agency-principal conflicts between controlling and minority shareholders and between boards and shareholders.
Professor Kang commented on Professor Kyung Hoon Chun’s draft article on the multiple derivative suit system in addition to commenting on topics presented by other participants.