U.S. sanctions against the BNP and the emergence of a tri-polar legal world. Part I: The U.S. Legal problematic

Enormous fines and public apology, accompanied by partial disqualification from the banking profession in dollars, the sanction against the BNP is not only very strong, it may seem to some totally exorbitant in Law and in facts.

This is partly because even broader than the autonomy of the judicial decision, we find here the very large autonomy of the unilateral administrative decision. Which could be called: le Fait du Prince. It is the U.S. government which is exercising independently of any external control - for now, as you can imagine future judicial remedies - in respect of a very large entity, the BNP. Major large banks are global, international. They have branches in almost every country.

Some legal logic would dictate that each country enacts its financial norms and enforce these standards on its territory and do not extend its long arm jurisdiction (legal American theory jurisdiction of jurisdiction extending beyond borders which is called literally the long arm jurisdiction) over the entire planet, or any other country in which these banks have activities.

This would be to forget that the U.S. financial system and the U.S. economy as well as the U.S. legal system are based on the legal theory and practice to search for big pockets. In other words, while the administrative and judicial civil legal system, e.g. French legal system, will seek to define the responsibilities of offender's by regulations, including criminal, on behalf of the interests of the State and its citizens, the people, the largest number, some common law systems like the American legal system will seek civil monetary responsibilities and will look for those who can pay.

The American legal system, based primarily on negligence, liability and damages (often considerable) seeks to sue, join in lawsuits or in administrative proceedings the greatest number of individuals and corporations. It then determines one or a few targets through lengthy investigations and plea bargain in which individuals and corporations are encouraged to denounce each other in order to be exempted partly or wholly by loading the other responsibilities the widest possible and fractionated. Therefore this division of responsibilities is based on the facts but also mainly on the ability to pay.

Then the judicial or administrative system will identify the greatest potential target for paying damages and focus its attacks on him. The other co-leaders will be invited to denounce one or a few big payers and benefit from reductions in charges and penalties, even full exemptions.

If criminal law is used, it is to support and act as leverage to civil law. The threat of criminal sanctions will push the offender to accept significant civil penalties in exchange for reduced criminal penalties allowed by the plea bargain.

This is why non-American financial institutions, businesses and even non-American States sometimes struggle to grasp and accept this American supremacy which they consider in effect a way for Uncle Sam to dictate fiscal policy to the world.

Theoretically, the basis of U.S. law in that federal law is passed by the Congress of the United States, or the law of a State is passed by the parliament of one of 50 the State of the Union and will apply DE JURE to the U.S.

In reality it does apply DE FACTO to the world.

According to the American Constitution, the constitutions of every State in the Union and the international legal system, these laws are intended to apply only to the territory and legal persons, individuals and corporations, who live on the territory or have their main activity on the territory (link, principal place of business, point de rattachement).

Curiously, in the interest of an extensive cause of action, it is simply not the case.

Take the BNP case as an illustration.

Will, however, Europe, China, and the rest of the world, remain passive before such a concept of an American global law?

This is the subject of the following parts:

The European response

The Chinese response

Prof. Olivier Chazoule

Professor of Law, City University of New York

Director of Studies, The New York Institute for Business and Finance

Telephone (646) 775 2812

Mobile: (347) 721 1331

Website: http://nyibf.com/

Email: olivierchazoule715@gmail.com

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The Power of Negotiation

The incredible amount of $10 billion that the BNP will pay the U.S. financial authorities which have violated U.S. restrictions on international funding dollars with embargoed countries of the United States between 2008 and 2009.

This exceptional situation raises several questions:

The first question relates to the jurisdiction which is subject to the BNP, as did the other French banks, like all non-US banks worldwide. This is a question of territorial and legal jurisdiction of U.S. law. With what right? How the American justice system recognize the actions of a moral legal entity, a commercial and finance company operating under French and European law?

Part of the answer lies in the nature of the offending companies, subsidiaries of the BNP operating on the territory of the United States.

But this response is insufficient.

The second part of the answer lies in the currency in which the operations are performed, the dollar is still the world's reserve currency. But in this case, we can consider that each country has vocation and / or legitimacy to act globally in transactions that take place anywhere, will trade in its own currency?

The third part of the answer lies in the nature of the interests considered strategic by the United States. In other words, everything that may directly or indirectly threaten thesecurity of the United States must be controlled and prevented if necessary. If taken too late, and after commission of what is considered a failure or a fault, then a penalty is warranted.

The most famous law in this area is one that has been issued by Congress on 26 October 2001, in response to the events of 11 September 2001, the Patriot Act. Intended to protect the United States from any illegitimate financial transactions,money laundering and cash, the Patriot Act is to regulate and control financial transactions with U.S., as well as international implications and impact on the United States in order to restrict access sources and transferring channels of funding by terrorist groups.

There were already comparable U.S. provisions from the Cold War, which restricted exports of sensitive technology to the USSR, which included the allies of the United States. They have been transformed into export restrictions sensitive to Chinesetechnologies.

The fourth question is: With what right does the United States allow themselves to enact global legislation, where laws passed by only Americans can and do have an effect on the rest of the world? The series of laws Foreign Account Tax Compliance Act, or FATCA, 2010 is an example. It provides a pragmatic answer: it’s just the way it is! We will come back to this later.

The Romans said that the perfect laws or pefectae leges, laws are enforced by sanctions. In other words, if there is no sanction applied and nobody respects the law. This is what leads to the fifth question: what are the ways to pressure and sanction of the United States against foreign banks and financial institutions, non-U.S. companies?

This major penalty, this bottleneck is the denial of access to Wall Street, which remains the dominant financial market in the world and the potential driving ban transactions in dollars, which is the major currency in international trade and of world reserves.

If a bank is banned access to Wall Street and / or effect transactions in dollars, it's not considered a bank.

This means that U.S. federal authorities have the power to validate and invalidate any bank in the world; and this power they wield discretion.

It's not exactly The Prince’s Act, but it’s close.

Faced with such an exorbitant power of the common law, what strategy should be adopted?

The U.S. banks, as powerful as they are, go in the direction of the current.

Like them, we must consider the psychology and sociology of American business and finance, enough to know the right federal administrative procedures and key states in this area, New York, Delaware, and finally engage in direct negotiations using what we observe.

The last thing to do is to face head-on the federal government, we must persevere in negotiations.

As Americans often say is explicit and should be considered here: if you cannot beat them, join them.

Prof. Olivier Chazoule

Professor of Law

Director of Studies

New York Institute of Business and Finance

Website: http://nyibf.com/

Email:  olivierchazoule715@gmail.com

Blog Business Schools:  http://wallstreetbusinessenglish.blogspot.com/

Blog Executive Education: http://wallstreetexecutiveeducation.blogspot.com/
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