Publications

New Zealand Exports and the Time Zone Dilemma for exporting to America

New Zealand exports: The future of New Zealand’s economy lays in exports, as the domestic population growth is too slow to raise domestic production significantly. That means that New Zealand businesses need to be ready to enter the global market place. New Zealand exporters have many advantages over their competitors around the world. NZ exporters benefit from the overall “100% Pure” brand image of New Zealand. They benefit from a smart domestic population and honest business culture. They benefit from the quality of goods that are produced in New Zealand. They benefit from the top notch free trade agreements New Zealand has negotiated.

However, as New Zealand exports start expanding into the North American and European markets, a significant conflict comes up, namely, the difference in time. One thing that I love about New Zealand is that everyone here values their time away from work. Coming from the US Legal world, it is refreshing to see a business culture that does not attempt to burn itself out by churning out ungodly hours. Nevertheless, the reality is that as NZ business reaches further away from NZ shores, it will require more hours in the office to be successful.

Exporting in the US market often requires being available to take calls during US business hours. This may require having staff available for 3 a.m. phone calls with a distributor in New York City, or outsourcing customer service calls to an offshore location.

When it comes to your US legal needs, Norris Echetebu Law remains undeterred by the Time Zone Dilemma. Our attorneys are here for the 3 a.m. phone calls and strive to place your overseas business legal needs on equal footing with your overseas competitors. With our team of American Lawyers on the ground in New Zealand, and our associated US legal team throughout the United States, we will work tirelessly to meet your international legal needs, no matter what the time.

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With the Auckland round of the TPP negotiations wrapping up this week, many Kiwi nay-sayers in the press have declared it an overall loss for New Zealand (See Gordon Campbell and Jane Kelsey). Yet my talks with almost every New Zealand business dealing in any way with the United States believe the exact opposite. Also, after speaking to members of the New Zealand, US and Canadian negotiating teams, all three are convinced that the issues which are on the table in the negotiations are based on solving real problems that businesses face in doing business overseas. This includes the problems that Kiwi businesses face doing business in the United States and other nations at the negotiation table.

So why the disconnect? Why does Campbell and Co. think that this deal offers nothing positive for New Zealand? While Campbell and company point out many problems with the Trans-Pacific Partnership, they fail to see the enormous benefits that arise from the TPP if the common goals of NZ and the US are reached. Campbell and Co are sticking their heads in the sand with protectionist jingoistic ignorance when they pretend that the TPP is not aimed at solving real problems that New Zealand businesses face. The reality is that the TPP provisions do solve real issues that are causing New Zealand businesses to lose money from their operations in the United States and other TPP countries. The reality is that the investor-state dispute chapter is needed to protect New Zealand businesses doing business in the TPP states and there is an exception being worked on to prevent bad faith challenges to health, safety and environmental laws enacted in New Zealand. A TPP investor state dispute procedures require only that if a law made in New Zealand does expropriate the investment of a foreign investor (i.e., act to rob the foreign investor of their investment), then the New Zealand government has to pay damages. No arbitration panel can change any law in New Zealand.

The reality is that agricultural markets once closed to New Zealand are going to be opened. Will the US open up its market to New Zealand dairy? There is no doubt that this is on the table and that New Zealand is pushing hard for it. But Fonterra has clearly stated that while it wants a dairy in the United States, the actual excess dairy available to ship to the United States market is so small that it will not really have an impact on New Zealand’s dairy business. This issue has been overblown as to its true importance by Campbell and Co since the TPP invited the US into talk.

Will medicine costs go up under the TPP? Probably, as a result of some insistence that the US Pharmacy industry is able to protect its intellectual property in New Zealand. However, and one can’t help but feel a certain fairness about allowing a Pharmaceutical company that spends hundreds of millions on developing a single type of medicine to recoup this investment by having protection over its intellectual property. New Zealand’s current rules allow companies access to information which would allow competitors to reproduce a generic form of the drug earlier than most other countries. While this may provide cheaper medicine to New Zealand in the short run, it very well bites the hand that feeds it. The reality is that New Zealand’s current PHARMAC is indeed unfair to foreign pharmaceutical manufacturers. Does the Average Joe like it? Yes, cheaper drugs does have an enticing sound. If New Zealand refuses to compromise will it end the TPP? Maybe. Does this mean a net loss for other New Zealand businesses? Definitely.

No country ever gets all that it wants in a trade deal. It’s a give-and-take. But it certainly seems that New Zealand business wants the deal. Maybe the disconnect from the likes of Campbell, Kelsey, et al, is that they don’t have anything on the line. They are not employed by businesses dependent on international trade. New Zealand has always been heavily dependent on exporting its goods around the world. The TPP is aimed at improving the mechanisms which surround international trade. New Zealand’s future is not in closing its doors, but in expanding its markets. The TPP is a way forward.

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TPPA

As the next round of TPPA negotiations has come to Auckland, there has been increased chatter regarding the idea that the investor-state dispute mechanism in the proposed investment chapter should be scrapped. The investor-state dispute arbitration system, which has been around since the mid 20th century, has undergone recent scrutiny because of its perceived effects on government’s ability to legislate and regulate for the public good.

First emerging in bilateral investment treaties and now a mainstay of many modern free trade agreements, the investor-state dispute arbitration system allows a foreign investor (generally foreign corporations) to sue the government for any act taken which affects the value of the investment. It is meant to prevent direct expropriation by governments of a non-citizen’s investment. It has been expanded, through international common law and investment treaty language, to include indirect expropriation through regulations which directly affect the value of an investment.

In particular, many have expressed concerns that investor-state disputes have prevented governments from making environmental, public safety and health regulations to protect their citizens. The louder voices have called for an end for any treaty provision which would allow a private corporation to sue a government. Several national governments have followed suit, including most notably Australia, which has refused to agree to an investor-state dispute provision in the TPPA.

Yet, there is something troubling about a government’s refusal to agree to a dispute resolution provision in its investment treaties. While many governments feel that the foreign investor may seek redress in the national courts of the situs country, any litigator knows that there is true strength in the home-field advantage. In other words, most practitioners have no doubt that there is bias against a foreign corporation, albeit small, when it sues a government in the government’s own courts, regardless of the professed systematic judicial independence of that court. Thus, the international arbitration dispute resolution process is best suited to prevent this bias from interfering with the foreign investor’s rights of redress.

The counter-point to this argument is that the realm of investor-state arbitrations is actually very small in terms of its practitioners. There are only a handful of arbitrators, which sometime also act as counsel on cases over which they are not presiding. This brings up an argument that there is a conflict of interest in the arbitrators to decide in favour of the foreign investors and so encourage further investor-state arbitrations (which are always initiated by the foreign investor).

However, there is absolutely no empirical data supporting this argument. Further, Supreme Courts around the world have upheld and encouraged the idea of private arbitration and have dismissed the argument that arbitrators cannot decide a case fairly.

To be fair, there is a danger of a conflict of interest involved in this system. Nevertheless, the beauty of the investor-state dispute resolution system is that it is a product of treaty architecture. All of the concerns mentioned by critics of the system may be addressed through language in the treaty. While there have been forays into addressing these concerns by adding rider language, the overall architecture of the investor-state provisions repeats the language of past treaties note for note.

I believe that an overhaul of the treaty text to specifically address the concerns of the negotiating parties (and the public interest groups protesting against these treaties) is merited. Language that precisely and effectively creates a system in which foreign investors may still challenge truly expropriatory governmental actions while protecting the governments’ ability to regulate and protect public safety and health and the environment is a matter of drafting.

Australia, and countries with similar attitudes toward investor-state disputes, should rethink their position and not throw the baby out with the bath water. After all, Australian foreign investors need protection too.

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The Trans Pacific Partnership Agreement with New Zealand

The United States, and therefore American Law, is entering into an exciting new era of economic participation in the Trans-Pacific arena (the market spanning the Pacific between North America, the West Coast of South America, the Asian Pacific, Australia and New Zealand). In the past American participation has been in the form of territorial expansion and military protection. However, in the past two decades we have seen the increase of inter connectivity between the economic powerhouses in Asia and the United States. This has resulted from globalization, which requires international business to utilize the comparative advantages of the different countries throughout the Trans-Pacific region to create a modern global supply chain which is truly unique in its reach and efficiency.

Recognizing this emerging reality, policy makers in the US have jumped in with other countries (namely Australia and New Zealand) to forge a 21st century trade agreement which will at the same time promote and regulate this emerging Trans-Pacific market place through the Trans-Pacific Partnership Agreement. The TPPA will create a free trade zone spanning the Pacific between the US, Canada, Mexico, Japan, South Korea, Vietnam, Malaysia, Brunei, Singapore, Australia, New Zealand, Peru and Chile. While the TPPA is still under negotiation, individuals and businesses with interests in the Trans-Pacific will need to be ready to take advantage of the potential boost in economic activity which will result from this new free-trade zone.

Norris Echetebu Law and the Norris Law Firm are situated strategically in New Zealand and in the United States in help our clients take advantage of this emerging international trade law. American legal principles and American law pervade international trade law in this arena. Clients conducting international trade into the United States should arm themselves with legal counsel that understands the international legal issues as well as the American legal issues involved.

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When I first came to New Zealand a year ago, I was astounded by the natural beauty and the warmth of the people. But this did not come as a surprise to me. What I was surprised by was the very savvy business culture which pervades New Zealand. It makes sense that an island nation founded through maritime trade would be adept at international trade in the 21st century. New Zealand has inserted itself as a vital part of the emerging global supply chain in the Trans-Pacific region.

Another thing I found surprising was the lack of American enterprise and US interests in New Zealand, and vice versa. There are ample opportunities for trade and investment between our two countries. New Zealand produces many wonderful products which would do well on the American market. The American lawyers at Norris Echetebu Law can assist American’s establishing business opportunities in New Zealand by providing you with a legal framework that protects your investments and gives you an organizational architecture going forward.

Also, New Zealand has enormous untapped natural resources, particularly oil and gas. Further, while New Zealand is known as a very green country, its regulatory system is relatively relaxed. This does not mean that there is no environmental protection. There is in the form of ad hoc council and regional oversight, but the oversight is limited in such a way to promote efficient business processes. American companies wishing to invest in New Zealand’s energy sector are able to benefit from this relaxed structure by using self policing techniques and best practices to keep the environment here pristine.

The lawyers at Norris Echetebu Law have an in depth knowledge of environmental protection issues connected with the oil and gas industry. Whether you are a Kiwi looking for representation in negotiations with energy companies exploring in or near your land, or you are an international energy business needing legal consultation on issues faced here, the American attorneys at Norris Echetebu Law can help you. We also have a network of New Zealand and Australian attorneys that can meet your local oil and gas law needs. The future for New Zealand oil and gas is bright, and we look forward to participating in it.

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Why the American Election 2012 Matters in NZ

American Election 2012: A contradictory sense of pride and trepidation enshrouds me every 4 years on the first Tuesday in November when the United States elects its president. Pride in that the soaring rhetoric of the candidates’ campaigns prompts a belief that the legacy of the United States a beacon of democracy and freedom will be carried forward. Trepidation in that I, like many in the rest of the world, fear the worst from each candidate respectively based on the calamities the other candidate has promised will occur if his opponent is elected.

From an American legal perspective in New Zealand, I can look back over the past two elections and honestly see very little change in American foreign policy towards this part of the world. Yes, when President Obama took control there was a more conciliatory diplomatic tone struck with the rest of the world. However, from a policy wonk perspective, not that much changed. The US continued its muscular military stance in the Middle East, if not becoming more militant. President Obama ordered American drones to invade the sovereign air space of countries with which there was no direct US declaration of war to track down and eliminate alleged terrorist suspects. This was only a logical continuation of the long term US strategic military plan in its battle against Islamic terrorists.

Yet, New Zealand’s military posture towards the US did in fact change, with the relations thawing from past chilly disagreements. For the first time in years, NZ planned joint military exercises with the US.

Also there was a noted increase in diplomatic commercial relations between the two countries. Of particular note, the US agreed to enter into the TPPA negotiations and has had both its Secretary of Trade and its Secretary of State pay official visits to New Zealand. Most assuredly this is because of a renewed understanding in the American hierarchy under President Obama of New Zealand’s positioning as an integral part of the global supply chain. This is routed in New Zealand’s work in free trade agreements in the region, and notably with its free trade agreement with China. Yet, this was not a significant change either from the US work in promoting free trade agreements that supplant the multilateral WTO and GATT systems to the extent that negotiations had stalled. Nor does it change what for now two decades has been US leadership in globalizing trade and corporate structures.

This brings me to my point of what is likely the most significant issue to Kiwis in the American election. While American foreign policy does not change significantly between administrations, there is one marked difference between the Candidate Romney and President Obama that touches directly on New Zealand. Candidate Romney has promised from “day 1” to label China a “currency manipulator”.

Under both the WTO and the IMF, labeling China as a currency manipulator triggers certain responsive measures that the US can unilaterally take. Further, it brings forward the possibility of dispute resolution procedures and further involvement of both the WTO and the IMF in resolving the dispute. In any case, this most definitely would be the opening volley of a trade war between the two countries that has the potential to significantly impact New Zealand.

New Zealand’s position as the only country in the world with a free trade agreement with China, its integration into the global supply chain, and its western democratic tradition create the possibility that New Zealand could act as a mediator between the two giants. Also, the very fact that much American industry thrives on cheap Chinese goods could see a redirect of trade into New Zealand, starting a trade triangle of sorts, if the US raises tariffs on Chinese goods which are needed into the US.

If President Obama is victorious, the idea of pressuring China to change its currency treatment will likely persist (as there is not apparently a large mandate for Mr. Obama if he should win this election). A changing Chinese currency will certainly affect the New Zealand dairy industry and may have an effect on the New Zealand dollar as well.

Either way, the new US policies indicated in the campaigns towards Chinese currency manipulation will reverberate in New Zealand. Finding innovative ways to navigate the international trade agreements amongst these countries will be in the interest of Kiwi businesses. Norris Echetebu Law can assist with structuring transactions to help Kiwi business take advantage of the upcoming trade climate change, no matter which way the political wind blows.

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Hollywood Entertainment Law

With the New Zealand Prime Minister, John Key’s recent push to attract American television and movie production to New Zealand by offering a 15% tax rebate, we can expect to see an increase in the amount of entertainment employment available. New Zealand actors and film industry workers have experienced working with the American film industry before.

Hollywood Entertainment Law and New Zealand: Often what is offered to film industry workers is a form contract which they are told is non-negotiable. However, the American attorneys at Norris Echetebu Law have experience negotiating contract terms with Hollywood studio legal departments. While some terms may be set in stone, there are many other entertainment law elements of a film industry contract that may be negotiated depending on the type of employment you are undertaking. Knowing which points in the contract are negotiable is a specialized skill that the attorneys at Norris Echetebu Law have learned through experience.

I have been amazed how often we can take a film industry workers’ contract which is completely one-sided in favour of the studio, and through our knowledge of the deal points, transform that contract into one which provides the film industry worker with many more financial incentives. The other point which comes up in our practice in New Zealand again and again is the difference in style between American contracts and New Zealand contracts.

US contract law and practise is filled with intricacies and subtleties which are simply not well understood by most New Zealand lawyers. What is a 3 page agreement in New Zealand will often be a 20 page agreement in the US. Unfortunately, I have seen local New Zealand lawyers without American legal experience miss negotiation points in American contracts which have come back to haunt their client later on. This, of course, is not because New Zealand lawyers are not savvy, it is simply a different style of practice. American contract practise is written from an adversarial perspective from the get go. Leave one chink in the armour exposed and the other party will take advantage of it when things go wrong, and they usually do. Kiwi film industry workers would be well served by obtaining advice from the US attorneys at Norris Echetebu Law when negotiating their US entertainment contract with the Hollywood studios.

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Incorporation in the United States: New Zealand clients wishing to incorporate in the United States should definitely sit down with a US lawyer and a US tax adviser to discuss the options involved.

Many clients simply wish to have a business presence in the US where they plan on doing business. For the majority of the Norris Echetebu Law and Norris Law Firm’s New Zealand clientele, that is generally in California. Yet, as many American lawyers would advise, incorporation in California may not be the best option for small New Zealand businesses. Both foreign corporations doing business in California and domestic California corporations are subject to both California state franchise tax and California corporate income tax, in addition to any federal taxes that might be due. This tax applies to all income which is considered as generated by sources within California.

Because New Zealand residents don’t live in California, there are different states in which you can incorporate your small business to take advantage of certain tax and reporting advantages but still be able to conduct the American business you need to conduct. Call the US lawyers and American attorneys at Norris Echetebu Law. We can assist you with your US incorporation needs.

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New Zealand business and American Law

As the co-founder of Norris Echetebu Law, the first dedicated American law firm in New Zealand, I am very interested in finding out what kind of American legal advice is most needed by Kiwis. While we offer a full range of business advice, a large amount of our Kiwi clients are in need of expert advice regarding litigation in the US. Not surprisingly, there is a rather large disconnect between the savvy and sophisticated Kiwi business culture and the litigious American business culture. In the United States, litigation and business go hand in hand. Whether that is a good thing can be left for another day, but Kiwi businesses doing business in the US must accept and prepare for very likely possibility that disputes will result in litigation.

I say this not to discourage Kiwis from doing business with American companies, but to encourage Kiwi businesses to take the likelihood of litigation into consideration when drafting contracts, preparing budgets, and when dealing with any disagreement concerning their business in the US. I have run into several situations where our Kiwi clients’ are surprised by the readiness with which their American counter-parts will jump into court to settle a dispute rather than attempt a compromise. Often this is a function of the ultra competitive nature of the US business market. It is also a result of the legal advice being given to American businesses by aggressive US lawyers. There’s an old adage in my home state of Texas which says “don’t ever be caught with just a knife at a gunfight.” In the same sense, when doing business and handling disputes in the US, Kiwis should arm themselves with knowledgeable business and legal advice from counselors experienced in American litigation who know how to handle the aggressive US legal culture.

If you are in a business dispute with a US business or simply need American legal advice regarding your US business endeavours, give us a call. We can consult with you on what to expect, help you draft contracts to protect you from litigation in the US, review proposed settlements for often-missed loopholes, or provide direct representation for you in US courts.

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