• Taking a Bite out of Apple: The EU Orders Ireland to collect $14.5 billion in Back Taxes

    The European Commission, the executive arm of the European Union (EU), sent a powerful signal to multinational corporations MNCs) doing business in Ireland and other low-tax EU jurisdictions by rendering a massive tax judgement against Apple, Inc. The Commission declared Ireland’s tax provisions related to Apple, Inc.’s Irish operations illegal and demanded that Ireland assess a $14.5 billion (€13 billion) tax bill on the company immediately.

    Few areas of policy are more important to sovereign states than their tax policies. Tax policy allows a great deal of control over the business environment in a country. It is also seen as a key part of the powers of any nation-state. The EU, as an international governmental organization (IGO) is an agreement between its member states to follow a clear set of rules. In this case, the EU has an unusual degree of control over domestic political decisions by its members, but tax policy has generally been an area of flexibility among EU member states.

    This ruling is not the first time special tax provisions, like those given to Apple, have been ruled illegal, but this is an expansion of the definition of illegal into new areas. The implications for domestic tax policy among EU member states are significant. The EU is essentially ruling that no country can offer tax breaks to companies that establish operations within their borders. The ruling potentially also limits the way that member states determine which parts of an MNC’s profits are taxable in the given country. These are two significant changes in EU tax policy and represent concerns for low-tax states like Ireland.

    Ireland has rejected the ruling, stating that it intends to appeal through the EU judicial system to overturn the ruling. While the money would be a huge boost to Irish tax revenues, it would significantly damage Ireland’s reputation as a low-tax, business friendly place to put your European headquarters. Foreign direct investment (FDI) in Ireland is a large contributor to the Irish economy and the Irish government estimates that over 100,000 jobs are provided by companies primarily motivated by the pro-business culture in the country.

    To make the matters more complicated, the United States has condemned the ruling, claiming that Apple was singled out because it was a US-based company. Tensions between the EU and the US have mounted as trade talks on the Trans-Atlantic Trade and Investment Partnership have stalled as both sides political leaders take on a more populist and protectionist negotiating position.

    The United States unusual way of calculating corporate profits (taxing companies on money earned anywhere in the world, instead of only that earned in the US) also has the odd effect of making the tax penalty in the EU tax deductible in the US, meaning that the EU ruling could rob the US of $14.5 billion in tax dollars that Apple would have paid to the US government.

    In short, taxes are complicated for MNCs and how to manage tax policy can be a major source of political tension. For states like Ireland that are bound to strict rules through IGO’s, tax policy can be even more complicated. In all cases, the international nature of MNCs makes calculating profit (and thus their tax bills) complicated. This ruling by the EU has made it a bit more complicated.

     

    Discussion:

    1. Why are taxes considered a key part of the powers of a sovereign state? If they are so important, why would states like Ireland and other members of the EU give up that power to join an IGO?
    2. Apple is headquartered in the United States, but has operations all around the world. Most of its actual products are made in China, but often with parts for several other countries and intellectual property from several more. To what extend does it matter where the corporate headquarters of an MNC is located? Why should we think of Apple as “American” if it has a global supply chain, global brand presence, and a global tax burden?
    3. One of the key reasons for concerns over taxation is that some states have lower tax rates than others. Do the variations in tax rates reflect a natural competition between states to provide a better business environment? Given the complexities of global economics, does the tax rate matter as much as Apple and other businesses claim?
  • A War without End Comes to an End: Columbia and the FARC Reach Historic Peace Accord

    The war started in 1964 and has killed over 200,000 people, but it has finally neared its end with the peace accord agreed to by the government of Columbia and the FARC rebel group. While obstacles remain, most notably the requirement for the agreement to be approved by a referendum on October 2, the agreement is a very real sign that the peace may be on the horizon.

    The FARC movement began as a rural guerilla movement seeking to promote an agrarian form of communism to replace the existing government of Columbia. The movement never had much chance of winning the war, but it was sustained across decades by revenues from the drug trade, kidnapping, and extortion. The FARC was seen by a majority of countries as a terrorist organization due to its use of terror tactics in its war against the government. Significant human rights abuses were perpetrated by the FARC during the war, leading to a strong feeling of resentment among some Columbians as the peace accord moves to the ballot box.

    Human rights violations were not one sided. The Columbian government sanctioned paramilitary forces that operated using tactics similar to those of the FARC. In addition, the government turned at times to harsh tactics designed to degrade the FARC support networks. As the end of the conflict comes into view, the grievances of many rural Columbians remain a significant political issue.

    In short, this was a difficult conflict that endured for many years in which both sides engaged in actions that violated human rights. By the 1990’s the conflict had settled into a stalemate. The government could not defeat the FARC. The FARC had no hope of defeating the government. But both sides could continue the fight, and they did.

    Alvaro Uribe changed tactics in the early years of the 21st Century, increasing the military pressure on the FARC. The result was significant military setbacks for the FARC organization, but the organization survived. When President Uribe left office, his successor Juan Manuel Santos brought the FARC into negotiations. Recognizing the weakness of the FARC, but also the high costs and risks related to a push for a final military solution, both sides have spent nearly half a decade in talks intended to end the conflict.

    The war against the FARC shows the difficulty involved in ending conflicts against violent non-state actors. There was never a serious question of a FARC victory in Columbia, but the war lasted decades and killed nearly a quarter-million people. As the war continued, the FARC sustained itself through the drugs trade and other criminal activities. While this provided the resources to fight, it was never going to be enough to win. The fight dragged on.

    When an ideologically dedicated group can continue the fight, they generally do. With resources, they can inflict harm indefinitely in spite of having no hope of ultimate victory in military terms. The basic structure of the war against the FARC is duplicated in numerous other locations around the world. The Taliban fuels its insurgency with drugs sales in spite of banning the use of drugs among supporters.

    The hard part for governments is working out how to combat these kinds of organizations without abandoning their basic principles. Counter-insurgency warfare is notoriously hard. It is very rare for an insurgency to be completely defeated, and when they are it is often through tactics of questionable legality under international laws of armed conflict. The Sri Lankan government eventually destroyed the Tamil Tigers, but they did so by first surrounding and then exterminating tens of thousands of fighters and their supporters in the final months of the war. Effective, but terrible.

    In the end, the peace deal between the FARC and the Columbian government offers the chance to end a conflict that has destroyed hundreds of thousands of lives. A set of hard choices for all sides, but a good outcome if they can make it hold up.

     

    Discussion:

    1. The FARC were seen by some as terrorists, but they started by reflecting legitimate grievances among the rural population. Does the legitimacy of the initial goals justify the ultimate use of violence to achieve their political ends? Does the decision about whether violence is justified depend on the type of political institutions (democratic, authoritarian, etc.) of the state in which the organization operates?
    2. In enduring conflicts like this one, grievances often pile up, with actions by each side fueling anger and reprisals from the other. This can poison a future environment for peace. How did the hurting stalemate in Columbia help both sides to get past these obstacles?
    3. Why would an organization continue to wage violent conflict when the military balance clearly shows that it cannot win? What implications does this have for how enduring conflicts come to an end?

  • A First for International Law: Mali Rebel Leader on Trial for Destruction of Cultural Heritage Sites at the ICC

    International law has been on a roller coaster for the last decade. While civil wars have seen unprecedented violations of the laws of war and tens of millions of people have been forcibly displaced by conflict, the legal structure intended to eventually punish these crimes continues to make small steps forward.

    Following the Second World War, international legal tribunals to try war criminals were a normal, if infrequent response to especially terrible crimes. But the experience of the criminal tribunals for Rwanda and the Former Yugoslavia (the latter still operating nearly two decades after the conflict ended) showed the inadequacy of an ad-hoc system of international justice. To resolve this problem, the international community created the International Criminal Court (ICC) as a court of last resort for crimes against humanity and war crimes.

    The ICC faced many challenges (not least the opposition of the United States, who has yet to ratify the treaty that created it) and it continues to face many more. In spite of this, the ICC has made slow and steady progress in creating a system to try those who would otherwise have never faced justice.

    The latest of these small advances is a first for an international tribunal, but a first with massive implications for justice in future conflicts. For the first time, an individual is being tried on the charge of the destruction of humanity’s shared cultural heritage. Ahmad al-Faqi al-Mahdi was a member of Ansar Eddine, a group affiliated with Al Qaeda in the Islamic Maghreb (AQIM). His job was to enforce the extremely narrow vision of Islam that the group promoted. This included the destruction of anything that was seen as remotely un-Islamic by the group’s standards.

    When the city of Timbuktu fall to Ansar Eddine, the group set about imposing their views on the local residents. Mr. Al-Mahdi was charged with enforcing these rules. In this capacity, he led the group of men that destroyed a series of mausoleums housing the remains of a series of early Islamic scholars as well as a Mosque from the early years of the coming of Islam to the region. These were ancient and holy sites that has sufficient reputation that they were considered part of the shared cultural heritage of the human race.

    While this is tragic for many reasons, it also happens that the deliberate destruction of such sites is a war crime. The international laws of war forbid the deliberate destruction of cultural heritage sites.   It was just a war crime that tended to be given little attention in the past.

    The importance of the trial does not come from the facts of the case. Mr. al-Mahdi has pled guilty and has shown genuine remorse for his actions. No one disputes that his actions and those of his organization led to the irretrievable loss of humanity’s shared cultural history.

    What matters is that groups like Ansar Eddine are destroying the shared legacy of mankind in conflict zones across the Middle East and North Africa. The Islamic State (IS) organization has destroyed numerous historical sites in the past two years. Al Qaeda affiliated organizations have destroyed still more. The destruction continues as I write this.

    Eventually, the conflicts in Iraq and Syria will end. When they do, the line of war criminals to be tried will be long, and the headlines will be given to those who butchered families, used nerve gas on civilians, deliberately targeted hospitals and aid workers, and numerous other heinous acts. While important, it is regrettably normal at the end of these conflicts. What will be new is that the line of war criminals will be just a bit longer, and the lists of crimes a bit more comprehensive. The destruction of irreplaceable historic sites will have moved from an oft-ignored afterthought onto the list of crimes for which justice is possible.

    It is too much to ask that this new precedent will do much to preserve cultural and historic sites. The older tribunals and the creation of the ICC have not deterred combatants from illegal brutality in wartime. But it does help build the prospect that some justice can be found once these conflicts end. And that is a step in the right direction.

     

    Discussion:

    1. The ICC represents a global commitment to international justice, but it has not been ratified by all of the states in the international system (most notably the United States has still refused to ratify the treaty.) Thus the ICC does not reflect global consensus on the prosecution of crimes against humanity and war crimes. In the absence of a consensus, or at least a consensus among the great powers, is the ICC just a symbolic organization? Can it really bring justice? Or is it just there to make us feel better?
    2. The ICC is relatively new and continues to struggle for legitimacy in international relations. Does the kind of symbolic precedent in a case like this increase the legitimacy of the ICC? What impact does a case like this have on the place of the ICC in international justice?
    3. The ICC and its ad-hoc predecessors have been prosecuting war criminals and perpetrators of crimes against humanity for more than seven decades. War continues to be nasty and terrible. When nations enter into wars, especially civil wars, the first concern still seems to be to win first and ask questions about the legal niceties after. Does this mean that the efforts to promote international justice in the areas of crimes against humanity and war crimes have had no impact?
  • MSF Evacuates Staff Following another Bombing of its Hospitals in Yemen

    On August 15 an aircraft flying as part of the American-backed Saudi campaign against Iranian-backed rebels in Yemen launched an airstrike that struck a hospital managed by Doctors Without Borders (more commonly known by its French abbreviation MSF.) The attack left 19 dead and 24 injured. This attack was the most recent in a series of attacks on MSF hospitals in the conflict in Yemen.

    On August 18, MSF announced that it was withdrawing its staff from six hospitals in the north of Yemen due to the danger posed by the ongoing airstrikes. While hospital locations are clearly marked and all sides of the conflict are informed of their locations, this has not stopped the locations from being hit in the conflict in Yemen.

    The withdrawal highlights the powerful challenges facing non-governmental organizations attempting to provide vital services in war zones. In Yemen, as in other conflict areas, the provision of services by government has largely ceased. The war has broken down civil order in much of Yemen and left many areas without a functioning set of basic services. Medical services are in particular need as the ongoing fighting sends many civilians to hospitals. Groups like MSF fill the gaps in local services by bringing volunteers to the combat zones. These volunteer doctors are often critical to maintaining medical infrastructure as war rages around them.

    But it is a dangerous job and their ability to operate depends on all sides abiding by the laws of armed conflict. International law requires that parties to a conflict protect medical facilities and civilian infrastructure. To deliberately attack hospitals is considered a war crime. Accidental attacks are more problematic, as when the United States accidentally attacked an MSF hospital in Afghanistan in 2015. The US strike was a mistake and it was an isolated incident. In Yemen, MSF hospitals have been hit repeatedly.

    In a messy conflict involving proxies for regional powers and occasional intervention by the US against terrorist groups taking advantage of the chaos, it is easy to make mistakes. As the war in Yemen has dragged on, the fighting has become messier and the prospects of peace more remote.

    International law requires that humanitarian aid be provided and that aid workers be protected to the extent possible in the conflict zone. But like conflicts in Syria, South Sudan, Libya, and elsewhere the application of international law has been weak. In the absence of a willingness to enforce it, violations have become the norm rather than the exception.

    MSF’s withdrawal from northern Yemen is a bad sign for the people living in that region. A key part of the humanitarian relief efforts has been undermined. The result is likely to be more refugees and still more human suffering.

    But what can be done about it? International law requires the will of the international community. With Yemen as just one of a series of conflicts. Worse it is one on the periphery of the region and thus out of the thoughts of many policy makers. It is difficult to see the international community making a serious effort to address these problems at the present time.

    Governance in the international system depends on states acting without being forced to do so. All MSF can do is hope that its public withdrawal from a large part of Yemen will attract attention, and perhaps shame some of the combatants into a greater respect for the human rights law.

     

    Discussion:

    1. Why do the laws of war protect humanitarian relief programs? What is the incentive of combatants to follow laws that allow relief to flow into areas held by enemies?
    2. MSF shows the powerful role that NGO’s play in the provision of relief internationally. It also shows the limits of non-governmental aid with the lack of powerful support that can be called upon. What does the withdrawal of MSF from much of Yemen teach us about how humanitarian relief is supplied in the contemporary international system?
    3. If the United States were directly leading the bombing campaign in Yemen (as opposed to supporting the Saudi effort) would it be more likely that the laws of war would be more closely adhered to? Why or why not?

  • No Country for Little Green Men: Tensions Rise Again Over Russian-Occupied Crimea

    In signs of rising tensions on the Russian-Ukrainian border, Russia has announced war games in the Black Sea in response to an alleged incursion by Ukrainian special forces into the disputed Crimean peninsula. This marks a further escalation of the already tense standoff between the Ukraine, Russia, and Russian backed separatists in several eastern regions of the Ukraine.

    Since the seizure and annexation of the Crimea by Russia in 2014, the international community has watched the conflict in the eastern Ukraine simmer with occasional flare-ups, but no return to the large scale fighting of late 2014. The Russian accusation that the Ukrainian government sent a special operations team into the Crimea in order to engage in sabotage operations comes barely a month before the two sides were to meet on the sidelines of the G-20 meeting in September. Russia has cancelled talks and has ramped up military pressure with the announcement of war games by the Russian Navy.

    For the wider international community, this marks a significant challenge in efforts to end a conflict in Eastern Ukraine that drags on with no end in sight. American and European Union diplomats have been working to promote a dialog between Russia and the Ukraine, but this effort appears to have failed for the moment.

    This escalation of tensions shows the complex problems of conflict resolution in frozen conflicts involving major power states. While the seizure and annexation of sovereign territory reflects a significant violation of international law, the enforcement of such law requires the will of other major powers. When dealing with Russia, America and the EU have to consider the cost of any pressure they might apply. While token sanctions were imposed following the annexation, these have begun to erode as the interest of doing business in and with Russia trumps commitment to international law.

    Domestic concerns also distract from the conflict. The American presidential election distracts the United States from focusing on the crisis. Close business ties between the Trump campaign and the Russian government have added to the distraction, but have not impacted the policy debate in Washington. The Brexit vote and the coup attempt in Turkey have distracted the EU and focused its concern on matters related to immigration, refugees, and holding the remaining EU states together. While both the US and the EU care, they don’t see the price of raising tensions with Russia as worth any benefits they might receive.

    In the end, the conflict between Ukraine and Russia is a conflict between a weak state and a major power. In the absence of firm support from other major powers, the weak state is left to struggle to hold its own. In this case, the government of the Ukraine has increased its military readiness and is preparing for the likelihood that Russia will re-ignite the shooting war in the east of the country. With little support from the international community, Ukraine finds itself in the classic position of “self-help” and must rely on its own resources.

    While there is still hope that this escalation will remain largely rhetorical, the ball sits largely in Russia’s court. Exactly where Vladimir Putin likes it.

     

    Discussion:

    1. In the case of the Crimea, the international community accepted the invasion and annexation of sovereign territory of a weak state by a strong one. This violates the basic norms of non-conquest and of respect for recognized, sovereign territory. What does the failure to forcefully respond to these events mean for the laws and norms related to territorial disputes in the future?
    2. The ability to impose costs on a state through actions short of war is an important part of the ability to deter violations of laws and norms. Russia is a difficult state to impose costs on, given its strong political will and the relatively authoritarian nature of its domestic politics. What tools could the international community use to enforce its laws and norms short of war? War with Russia is not a realistic option for the US or the EU states. Does this mean that Russia may act with impunity in the Ukraine?
    3. Norms and laws in the international system lack any central enforcement body. In the absence of such a body, the will of the international community is all that exists to enforce these norms and laws. Given these conditions, can these laws and norms be said to have any real meaning, or are they merely justifications for the actions of strong states?
  • Rule by a Committee of Committees: Enforcing Global Anti-Doping Rules at the Olympics

    The scandal that has erupted over Russia’s state-sponsored cheating on global anti-doping rules has been a very fun read. Secret holes in the wall to swap out tainted samples for clean ones, spiking athletes’ drink bottles with banned substances to get competing athletes disqualified, and even security services grabbing an investigator off the street and holding him in custody while they removed and destroyed records. It is like a great conspiracy movie, but at least some of it appears to have been true.

    After a long and thorough investigation, the World Anti-Doping Agency (WADA), the body that oversees drug testing in international sports, decided that most of what was reported by a series of whistle-blowers had actually happened. That is bad for international sports because it taints the results of two Olympic Games and numerous other competitions hosted by Russia.

    On the other hand, it is a great example of how non-governmental organizations provide global governance solutions of important problems around the world. WADA is a private non-governmental organization (NGO) rather than an intergovernmental organization (IGO). This means that WADA is nominally independent from the influence of national governments and can act on its own. But WADA has an unusual funding model: it is funded partly by the sporting organizations whose sports it oversees and partly by national governments.

    This makes WADA reliant on a mixed system of funding and makes it subject to a number of competing influences. The authorities governing individual sports (such as FIFA in soccer and the ITF in tennis) are primarily concerned with their sports. The interests of these sports can vary widely. Income from FIFA-governed soccer event runs into the billions of dollars. The World Archery Federation (WAF) makes substantially less money. Yet all sports have a basic desire to maintain the integrity of their sports. WADA adds credibility to these sports, providing a certification that the athletes are free from banned substances.

    This is where things get complicated for WADA. Its mission is to ensure the integrity of sport, but national governments are often more concerned with winning than with the letter of the rules. In rare cases, such as this most recent scandal with Russia, a state may actively use its resources to subvert the rules and undermine the system.

    As an NGO, WADA has no coercive power. It must rely on the commitment of its members to the norms and rules of the regime that it manages. That means that other organizations actually make the decisions regarding actual punishment. WADA recommended a complete ban of Russia from the 2016 Olympic Games in Brazil, but the International Olympic Committee (IOC) decline to do this and left the decisions to the federations governing individual sports.

    Also an NGO, the IOC depends on its credibility in order to make people watch the Olympic Games and care about who wins. So, when there was a global backlash against the IOC for its inaction, it changed its decision and set up a review panel to oversee the decisions of the specific federations.

    What is interesting here is that nation-states and their sports programs follow these international rules at all. A set of NGO’s with no power beyond reputation establish and manage a system of rules that nation-states are obligated to follow, or pay a reputational cost for flaunting.

    Sport is a collection of games. But games matter. Competition between nation-states includes soft power elements like how many medals your athletes win. And if you cheat at sport where the stakes are low, you may cheat in more serious deals.

    In the complex world of international politics, as on the playground, no one wants to play with a cheater.

     

    Discussion:

    1. States follow international norms for two reasons: 1) because it makes practical sense for them to do so (usually through lowered costs) and 2) because the political culture among leaders of a state align to the norms at the international level. In the case of the rules related to sports, which of these two factors is most likely to be driving cooperation with WADA? How can you tell?
    2. NGO’s are often assumed to be very weak actors in international relations. What does the international response over the Russian cheating tell us about the nature of NGO power in this case? When an NGO has influence in a high-visibility venue, does that make it more powerful?
    3. There is lots of press coverage of the WADA and IOC actions, but mostly in the international media. At the end of the day, do people really care about things like “the integrity of sport” when it comes to the Olympics? Or do people mostly just care about how many medals their country wins?