As the summer moves into August, we are already publishing the second issue of The Globe for the current Illinois State Bar Association year.
The material includes the “Message from the Chair” by Shannon Jackson, “Investor-State Disputes” by Mark E. Wojcik, former Chair of the International and Immigration Law Section Council, “A World of International Law Coming to Chicago” by Violeta Balan who is Assistant Editor of The Globe, and Pat Kinnally, and International and Immigration Law Section Council Member who has provided us “Removal Orders Redux: An Analysis of the Immigration Deportation Reinstatement Statute.”
In addition, we wish to welcome back Michael L. Coleman and Céline van Zeebroeck with Baker & McKenzie. The authors first appeared in The Globe in March 2004 concerning the tension of sales agents or representatives in Algeria and in April 2004 concerning an “Overview of the Algerian Code of Public Tenders.
We also are welcoming a new author. Caitlyn McEvoy is a legal assistant with Matuszewich, Kelly & McKeever, LLP. She has reviewed two Web sites for us. The first Web site resulted in the article “Foreign Law Resources: Government Gazettes Online.” The second Web site led to “Protecting ‘Works of the Human Spirit’ Worldwide.”
In the May 2006 (vol. 43, no. 7) an article appeared called “The Need for International Law in a Global Perspective” by Joshua Fellenbaum, a second year law student at Cleveland-Marshall College of Law. Inadvertently, I had failed to note that the article appeared with the permission of the World Arbitration and Mediation Report in which the article had previously appeared.
Thank you to all the contributors and we are always looking for additional authors and material.
Lewis F. Matuszewich
Matuszewich, Kelly & McKeever, LLP
Telephone: (312)726-8787;
Facsimile: (773) 279-8872
E-MAIL: lfmatuszewich@mkm-law.com
This summer the Chicago legal community is getting ready to host the International Bar Association Conference in September. The Conference will take place September 17-22 and will bring attorneys from around the globe to the windy city. A look at the daily schedule of sessions shows it will be difficult to decide which programs to attend! This is a great opportunity for Chicago lawyers to show their hospitality and to get to know legal professionals from all over the world. I hope each and every one of you will take advantage of this event. To find out more, or to register, you can visit the IBA’s Web site at <www.ibanet.org>.
Other events of interest to the International practitioner include the Juris Conferences LLC’s Leading Arbitrators’ Symposium on the Conduct of International Arbitration, which will take place at the Swissotel on September 14-15. For more information please visit <www.jurisconferences.com>.
And for the asylum and human rights practitioner, a great new web site has arrived at <www.humanrightstools.org>. This convenient site puts all the important tools for preparing an asylum case at your fingertips, including country reports, information on international treaties and law, and articles on pertinent issues.
Thanks to all our contributors who made this second issue possible!
Shannon M Jackson
Azulay Horn & Seiden LLC
Chicago, IL 60601
312-832-9200 x150, Fax: 312-363-6150
sjackson@ahslaw.com
Investors have choices. They can put their money into businesses in their home countries, or they can invest abroad. Either choice entails some risk, both in the choice of location and in the particular investment itself. But when the investor chooses to put that money in a foreign investment, there may be protections available that domestic investors may not enjoy. Simply put, there has been a fundamental shift in the landscape of dispute resolution for those who invest in other nations. This shift represents not only a change in how investment disputes can be resolved, but also represents a fundamental shift in the philosophy of international dispute resolution.
Those who do not work regularly in the field of international dispute resolution may not have noticed the expansive and continuing growth of “investor-state” arbitration proceedings. In these proceedings, an investor can directly “sue” a foreign government for governmental actions that the investor believes adversely affect the investment.
These cases are usually not reported in newspapers. Indeed, the nature of many arbitration proceedings necessarily avoids any publicity whatsoever. Nonetheless, there has been a dramatic increase in the number of investor-state proceedings.
Consider an example shared by Kenneth B. Reisenfeld, a past Chair of the American Bar Association Section of International Law. He pointed to the caseload of the International Center for the Settlement of Investment Disputes (ICSID), which the World Bank created in 1966 to facilitate the settlement of investment disputes between governments and foreign investors. The philosophy behind creating ICSID was that an international institution for investment disputes would help promote increased flows of international investment to countries that needed it. In the first 25 years of ICSID’s existence, there was only an average of one state-investor case per year. But Reisenfeld noted that more recently there have been 90 cases per year. In fact, Reisenfeld noted that the number of cases now filed each year effectively means that the current ICSID docket is as large as all of the previous ICSID cases combined. And if one remembers that ICSID is not the only forum for the resolution of such investment disputes, one will see that this is a practice area that will continue to grow (particularly as investors realize that they can more easily identify and enforce investment claims). As Reisenfeld and others also note, what was once the public international law province of “isolated academics” (like me, I suppose) has become a mainstream practice area for many large law firms. And as we know from local experience, there are many Illinois law firms that recognize this as an important practice area.
In the past, investors would usually have enjoyed relatively few (if any) remedies to resolve investment disputes arising from a foreign government’s action. The investor would have, at least in theory, the ability to seek redress in the national courts of the other country. But many investors felt (often correctly so) that they could not receive a fair hearing in some of those national courts, particularly when they were challenging actions of the foreign government. There were always many reasons for this belief. Additionally, it became particularly difficult to challenge an action that affected not only foreign investors but also domestic investors; in these cases, it was almost impossible to prove that the actions challenged were capable of any redress by the foreign court.
There was, at that time, almost no ability of investors to bring another nation before an international tribunal. Individual investors lacked “standing” to sue other countries before these international tribunals. International law was the traditional province of sovereign nations, and only nations had the ability to bring claims against another state—even when the claims involved that state’s treatment of an individual foreign investor. The treatment of foreign investors within another nation thus was an issue that usually fell outside of this traditional province of classical international law, and investor disputes were often without forum or remedy—unless the investor’s home state took up the interests of its national in an international forum.
In the rare cases where a state did take up the interests of its national investors, the national government might then engage in state-to-state arbitration to vindicate alleged violations of investor rights. It was usually only the most exceptional cases, however, that could even convince a national government to take up the case in the first place. And more often than not, the problems of a single investor (or group of investors) would often succumb to more pressing national and foreign policy interests. Investors might have a difficult time convincing their own governments to take up (or continue to prosecute) their case when many government officials believed that (1) the investor had voluntarily assumed the risks of investing in another nation, and that the alleged deprivation was just “a cost of doing business”; (2) the investor could have instead invested that money in the home country (instead of seeking profits elsewhere), and thus lacked moral standing to pursue any remedy; and (3) pursuing a remedy on behalf of a single investor might lead to foreign policy problems or possible retaliation against other investors, or against the government itself.
The situation for foreign investors began to change after the first bilateral investment treaty (“BIT”) was signed in 1959. It proved to be especially popular; today there are said to be more than 22,000 BITs. This extraordinary development is largely unknown to those who do not regularly focus on international arbitration and dispute resolution.
These investment treaties will generally establish the consent of a state to be sued in those situations where the state pursues an action that harms a foreign investor from the state with which it singed the treaty.
For example, if a state expropriates a foreign national’s investment without paying adequate compensation to the investor, the investor may seek a remedy under the BIT to obtain adequate compensation. There will then often be an arbitration proceeding, after which the investor may win an award of damages from the foreign government. Other relief might also be available, such as repeal of an offending measure that adversely affects the foreign investment.
The development of BITs is by itself an interesting development, but this development also presents a profound philosophical shift in the nature of international dispute resolution.
First, with these BITs, the investor has the opportunity to seek a remedy directly against that foreign nation. It is no longer for the investor to have to seek the permission from the investor’s national government. This development is one that classical scholars of international law might never have anticipated—that individual investors could sue foreign governments directly and require that government to defend its actions. The individual investor no longer had to convince its own government to take up its case, but could vindicate its own rights.
Second, the reality that investors could proceed directly against another country reduced the foreign policy implications of the dispute. Because it was not the nation suing another nation, there was less risk of any particular dispute being seen as a political dispute rather than one related strictly to the investment.
Third, in a related point, the ability of investors to proceed directly against another country without having to obtain permission from their national government meant that many investment disputes would no longer be national issues (involving the investor’s entire country). Instead, the dispute could be focused on a particular investment, often resulting in a remedy specific to that investor. Even so, there would still be disputes where a foreign government’s actions affected more than a single investor or group of investors.
Fourth, the ability of investors to proceed directly in a forum where the foreign government had to act served to increase the number of cases where investors did act to protect their rights, and did so by a method that did not risk the perceived prejudice of a local national court. These factors helped contribute to an overall increase in the number of international arbitration cases, and, in turn, the creation of a body of jurisprudence that may be looked to for the settlement of future disputes. Even though cases from other arbitration tribunals are not “binding,” they provide a framework that others might follow.
Fifth, the increased number of cases might eventually be proven to have resulted in a decrease of government actions that might later be challenged. If a government knows that it is going to be brought before a tribunal because of a particular action, that government may be less inclined to pursue that particular course of action. For investors, this meant a greater likelihood that their investments might be left alone, or at least that they would be more like to recoup their investments. Governments are not always in the habit of defending their actions before a tribunal.
Sixth, lawyers working in this area of law have identified many opportunities to advise those who want to invest in other countries, including giving advice on how an investor should register (or take other measures to qualify for protection under a BIT). This has not only resulted in new practice areas for law firms, but has also facilitated increased investment in countries where investment is needed. It might be demonstrated that many foreign investments have improved the quality of life for many people.
Seventh, because of the tremendous possible benefits, some investors who are actually from a particular country may find creative ways to make themselves “foreign” and accordingly take advantage of a dispute settlement mechanism procedure that may not be available to them as domestic investors. An investor may create a foreign company that then invests in the home country, or may create partnerships with nationals of a country that has ratified a BIT with that other country. Some will see this as a fraudulent use of BITs; they see a situation where national investors pose as foreign investors in order to obtain an otherwise forbidden remedy. Others, however, will see a system where national investors have the same potential remedies as foreign investors in a particular country; they see equal opportunities to pursue remedies.
The factors here—as well as others—show a philosophical shift in how investment disputes are handled. There is absolutely a trend toward increasing the use of state-investor arbitration proceedings, particularly as more investors learn: (1) about the availability of a forum where they can challenge a foreign government’s actions; (2) that certain government actions that might otherwise be accepted can possibly be challenged, and often successfully so; and (3) that the availability of international dispute settlement mechanisms can indeed help promote foreign investment in countries where it is needed most.
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Mark E. Wojcik is a Professor of Law and Director of Global Legal Studies at The John Marshall Law School in Chicago. An earlier version of this article appeared in the Spring 2006 issue of The International Arbitration News, published by the International Commercial Dispute Resolution Committee of the American Bar Association Section of International Law. Professor Wojcik is a past Chair of the ISBA Section of International and Immigration Law and a current member of the Section Council.
Government Gazettes Online (found at <http://www.lib.umich.edu/govdocs/gazettes/>) stemmed from a project at the Dag Hammersköld Library at the United Nations in which two University of Michigan students searched for foreign gazettes published online. Currently, the Web site is hosted by the University of Michigan’s Document Center.
Generally speaking, gazettes are published by governments to inform the public of government decisions in a process wikipedia.com (a free online encyclopedia) refers to as “a way for the government to think aloud to the people.” Although many countries publish gazettes, their structure and circulation is dependent on each individual government. This Web site was created to assist researchers by compiling worldwide government gazettes into one location. It is organized alphabetically and features gazettes from over 50 countries, including Canada, China, European Union, France, Germany, Japan, Russian Federation, United Kingdom and United States. Rather than merely offering web links, this Web site provides supplemental information to help an individual in his or her initial stages of research. In addition to listing each government gazette’s URL, this Web site provides the language of the publication, the frequency it is published and the cost of accessing the publication. The most beneficial aspect of this Web site is the description of content for each country’s publication. This section notifies researchers whether laws, decrees, notices, international agreements or treaties can be found, however, researchers must navigate each respective government gazette Web site to gather the specific titles and texts of those legal documents
Foreign gazettes are a primary source to find existing laws as well as how foreign governments are progressing (or regressing). The University of Michigan has eliminated the often tedious aspect of online research by sifting through these online gazettes and providing essential information to Web site viewers. Government Gazettes Online can serve as a starting point for researchers or other individuals seeking sources of information directly from foreign governments, but it is only intended to be utilized as a basis for further research.
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Caitlyn McEvoy is a 2006 graduate of Bradley University with a Bachelor of Arts in History and a concentration in International Studies. She anticipates entering law school in 2008.
The ISBA’s International & Immigration Law Section Council would like to let you know about several upcoming international law events that might be of interest to you. The first three events mentioned below will take place in Chicago during the month of September, while the last one will occur in Washington, D.C. in October.
First, the International Bar Association’s Annual Conference will be held in Chicago, September 17-22, 2006, at McCormick Place. This Conference offers an opportunity for practitioners from around the world to meet and hear first-hand about legal developments in various jurisdictions. This year’s Conference features two sessions for lawyers of all disciplines. On Monday, September 18, the Public and Professional Interest Division will offer a session on the power of judicial reform to advance economic and social stability. On Wednesday, September 20, the Legal Practice Division will discuss the shifting environment of corporate governance reform in light of recent front-page events. In addition, there will a wide variety of practice-specific sessions which promise a lively exchange of views and will bring together practitioners from all over the world. For additional information about the conference, please visit <http://www.ibanet.org/chicago06/index.cfm>. Furthermore, everyone is invited to a special affair that will take place during this Conference. On Wednesday, September 20, 2006, the International Bar Association will be holding an evening event with the Chicago Symphony Orchestra. This Gala Charity Concert is open to all members of the Illinois State Bar Association for only $35 per seat and will feature Beethoven’s 6th Symphony (Pastoral) and Shostakovich’s 5th Symphony. The net proceeds of the ticket sales will be donated to the International Bar Association’s Human Rights Institute.
Second, on September 14-15, 2006, Juris Conferences LLC presents its Leading Arbitrators’ Symposium on the Conduct of International Arbitration in Chicago, at Swissotel, in cooperation with the ABA Section of International Law, and with the support of various other bar associations and arbitral institutions. Leading international arbitrators and practitioners will discuss, in Socratic form, four topics of importance to lawyers, arbitrators and businessmen who are involved in the resolution of international commercial disputes through arbitration. Attendees will learn about discovery in international arbitration, advocacy before international arbitration tribunals, presentation of evidence, and management of arbitral proceedings. Please visit <www.jurisconferences.com> for complete information and registration forms for this event.
Third, on September 19, 2006, the Hong Kong Trade Development Council in conjunction with the Hong Kong International Arbitration Center will conduct a Breakfast Briefing between the hours of 8:30 am and 10:30 a.m. While the Chicago venue was not yet confirmed at time of printing, readers who are interested in the event may contact Bridget Lee, Marketing Manager, Hong Kong Trade Development Council, tel: (312) 726-4515.
Finally, for the practitioners who have an interest in Investment Treaty Arbitration (sprang by Mark Wojcik’s article on this topic or for other reasons), and may find themselves able to travel to Washington, D.C. in October, the following event may be of great interest and use to their practice. On October 9-12, 2006, the International Arbitration Program at American University’s Washington College of Law presents its Third Annual Seminar on International Commercial Arbitration focusing on “How to Handle a BIT Arbitration.” The program is a four-day intensive advanced program that uses a mock case as a tool for providing practitioners with skills, strategies, and tactics for successfully conducting a BIT arbitration primarily under the ICSID rules. The faculty includes worldwide experts on the topic. 22 CLE Credits are available for those attending the program. For further information, please visit <www.wcl.american.edu/arbitration>, call (202) 274-4321 or email: arbitration@ecl.american.edu.
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Violeta I. Balan practices in the areas of international law and international arbitration. She is an Adjunct Professor of Law at The John Marshall School, Center for International Business and Trade Law, the current Chair of the Chicago Bar Association International and Foreign Law Committee and an editor of this newsletter. She can be contacted at vbalan@mayberbrownrowe.com or (312) 701-8387.
Juanita and her husband, Jorge, have come to see you about Jorge’s immigration status.
Juanita is a United States citizen and Jorge is an undocumented citizen of Mexico. They have twin sons, Hector and Ramon, who were born in Sandwich, Illinois, where they have lived for the last five years. They own a modest home. Juanita is a nurse, and Jorge works for a local landscape contractor.
In talking with the couple you learn they are stable, law-abiding citizens, who are involved, like most parents, with their children, attend church regularly and pay their taxes. Jorge tells you that he last entered the United States in 1996 by wading the Rio Grande into Big Bend National Park and then came to the Chicago area. Juanita shows you a visa petition approval notice for Jorge, which indicates it was filed in March of 2000 when she was a permanent resident alien. She naturalized as an American citizen in 2004. She wants to know whether her husband can now become a permanent resident alien. Juanita thinks it’s a good time to get this all straightened out.
Given only those facts, this appears to be a not-too-complicated immigration case. But when you ask Jorge if he ever entered the United States prior to 1996, he says he entered in 1995 and was sent back to Mexico by the Border Patrol. He does not recall having any type of hearing before being sent back. It is an area of concern because if an adjustment of status case is filed for Jorge, he may find out that when he goes to the interview concerning that application he might be arrested by Immigration and Customs Enforcement agents. Why? Because if Jorge was deported, excluded or removed from the United States previously, the government can reinstate the prior removal order without so much as a hearing. (Fernandez Vargas v. Gonzalez, 547 U.S. ____, 2006)
Reinstatement of removal is the process whereby the federal government takes an old removal order that applied to the same person and uses it again. They can be executed on short notice by immigration agents who are not trained in the law. All they need to do is issue what is called a Notice of Intent to Reinstate. It does not provide the person against whom reinstatement is sought any right to a hearing before an administrative, immigration judge. The person can make a statement orally or writing. That’s it. And, if the reinstatement order is issued the only recourse is for the applicant to seek review before the circuit court of appeals that has jurisdiction over the place where the reinstatement order was issued. (Gomez Chavez v. INS, (7th Cir., 2002) 308 F.3d 796). Not only is that a place where few lawyers advocate, but the review one is entitled to is not very meaningful. Obviously, this is a potent tool in a government agent’s enforcement tool box. It is one of which we must be wary.
This provision of the Immigration and Nationality Act is of obvious concern since there are many people in the United States who have been deported previously. This statute became effective on April 1, 1997 and is now a major method for the Department of Homeland Security to remove people from the United States. Also, it is retroactive. It applies to any deportation, exclusion and removal order that was entered prior to and after its effective date. Fernandez Vargas v. Gonzalez. This statute casts a wide berth. It says:
* * *
Reinstatement of removal orders against those illegally reentering. If the Attorney General finds that an alien has reentered the United States illegally after having been removed or departed voluntarily, under an order of removal, the prior order of removal is reinstated from its original date and is not subject to being reopened or reviewed, the alien is not eligible and may not apply for relief under this chapter, and the alien shall be removed under the prior order at any time after the reentry. 8 U.S.C. 1231(a)(5)
* * *
Humberto Fernandez-Vargas (“Fernandez”) originally arrived in the United States illegally in the 1970s and was deported for immigration violations. He reentered the United States illegally in 1982 and began residing in Utah. He built a successful trucking business. He fathered a United States citizen child, and eventually married the child’s mother in 2001. His spouse was a United States citizen. She filed a visa petition for Fernandez and an application for adjustment of status to that of lawful permanent resident alien. These applications and the information contained therein were the basis for the DHS issuing a Notice of Intent to Reinstate Fernandez’s 20-year-old deportation order in 2003. Also, it was his undoing. He was then arrested, imprisoned for 10 months, and deported to Mexico based on the reinstated prior deportation order. What Fernandez thought was going to be a good thing—namely regularizing his status to that of permanent resident- turned into the break up of his family, business and a way of life.
Fernandez filed a petition for review with the federal Circuit Court of Appeals claiming that the prior order should not be reinstated because he was in the United States prior to the effective date of the reinstatement provision and the law should not be applied retroactively to a deportation order issued years earlier. The Tenth Circuit Court of Appeals rejected these arguments and found the statute could be applied retroactively. The U.S. Supreme Court affirmed that decision.
The reinstatement statute does not say whether it is to be applied prospectively or retroactively. Prior to Fernandez, in differing factual scenarios, the Circuit Court of Appeals were split on the issue. ( Cf. Faiz-Mohammad v. Ashcroft (7th Cir., 2005) 395 F.3d 799 (statute could not be retroactively applied), with Velasquez-Gabriel v. Crocetti (4th Cir., 2001) 263 F.3d 102 (statute could be retroactively applied)). Generally speaking a statute is not to be given retroactive effect unless it is required by the words of the statute or by necessary implication Fernandez, (slip op. at 5 citing United States v. St. Louis S.F. & T.R. Co. (1926) 270 U.S. 1, 3).
In situations where the legislature has not spoken, a court divines legislative intent by utilizing a default theory of statutory interpretation which is found in Landgraf v. USI Film Products 511 U.S. 244 (1994). This rule of construction has two prongs. First, the court looks at whether the statute says it should have retroactive effect. In performing that review the court looks not only at the statutory provision but also the entire statute’s structure and purpose (Faiz Mohammad v. Ashcroft). This analysis may include a review as to whether the statute was amending or eliminating a prior statute, (and, what the prior statute said) whether in the same statute retroactive and/or prospective applications, albeit to different statutory situations are employed, and the fact the legislative body was aware of the Landgraf rule of construction when it enacted the law, as well as other rules of statutory construction.
If the court finds no clear intent based on this initial inquiry it goes to a second spur. This stage requires the court to determine whether the statute would impose a new burden or attach a new disability to actions that have already occurred such that to do so would offend basic principles of fair notice and reasonable expectation. (Arevalo v. Aschroft (1st Cir., 2003) 344 F.3d 1, 13).
Following Landgraf, the Supreme Court observed the reinstatement statute does not say whether it is retroactive; nor did Congress indicate in an unambiguous manner in which the statute was written as to whether the provision should be applied retroactively or prospectively. This required the court to proceed to stage two of the Landgraf analysis and determine whether application of the law would impair rights a party enjoyed when he acted, increased a party’s liability for past conduct, or created new duties in relation to a transaction that has already occurred (see, Faiz-Mohammad v. Aschcroft; and Bejjani v. Immigration and Naturalization Service (6th Cir. 2002) 271 F.3d 670).
The court then went on to hold that if the reinstatement statute only applied to departures or removals after April 1, 1997, it would in effect exempt any prior deportee from the statute’s reach as to anyone who was removed prior to April 1, 1997. The court observed if that was true, the purpose behind the statute, which was to expand the reach of the reinstatement statute (not limit it) would be frustrated.
Finally, the court dismissed Fernandez’s argument that there was a presumption against applying a law retroactively. It observed that the statute applies to Fernandez because he chose to remain in the United States after April 1, 1997, not because he reentered illegally. The court believed that this was significant. The court said it was Vargas’ choice to continue his illegal stay in the United States that he could have stopped if he wanted to do so. Although it observed, it was a difficult choice to depart the United States the court found that such a “continuing violation” was not a past act that he could not alter. The court observed that Fernandez had ample warning as to when the law went into effect (it was passed on September 30, 1996 but not implemented until April 1, 1997), but did nothing.
So what you thought might be a simple immigration case has now become more complicated. Was Jorge deported or removed? Before you undertake this representation you need to do some investigation. File a Freedom of Information Act request with the Department of Homeland Security to find out if Jorge was deported. Go a step further. Have Jorge fingerprinted and send his prints to the FBI, (CJIS Division, 1000 Custer Hollow Road, Clarksburg, West Virginia 26306) with an $18 fee and his personal authorization, and get a copy of his rap sheet. These records will show (sometimes inaccurately) prior deportations. Be patient. Remember, if you file an application and there is a prior removal order your client may end up being arrested and deported based on the reinstatement of a prior deportation order. Be realistic. Often times doing nothing may be more advantageous to our clients than doing what we think must be right and just.
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Patrick M. Kinnally, Esq.
Kinnally, Flaherty, Krentz & Loran, P.C.
2114 Deerpath Road
Aurora, Illinois 60506
Telephone: 630/907-0909
Facsimile: 630/907-0913
pkinnally@kfkllaw.com
1. Introduction
This article discusses the removal of what is thought to be the last statutory hurdle pertaining to the retention of intermediaries for sales to the Algerian public sector following the adoption of Law 06-01 of February 20, 2006 regarding the prevention and fight against corruption (the “Anti-corruption Law”).1 At the same time, it cautions the reader about internal disclosure and approval regulations and other statutory qualifications which may still stand in the way of such appointment.
2. Historical Background
The retention of intermediaries by foreign suppliers in connection with sales contracts with the Algerian public sector has long been proscribed in Algeria. Specifically, the history of the ban can be summarized as follows:
• Law 78-02 on the Monopoly of the Algerian State on Foreign Trade of February 11, 1978,2 contained a broad prohibition on the use of intermediaries. The use of intermediaries was criminally sanctioned pursuant to Articles 128, 242, 243 and 423 of the Criminal Code.
• Article 423-2 of the Criminal Code was added in 1982,3 under the heading “Other Interferences with the Proper Operation of the National Economy and Public Institutions” of the Criminal Code to broadly mirror the prohibition contained in Law 78-02. This Article provided that:
Anyone who on the occasion of the preparation, negotiation, conclusion, and performance of a contract, tender or amendment concluded in the name of the State or one of the organisms [of the State] receives or attempts to receive, directly or indirectly, for his benefit or the benefit of a third party, a remuneration or advantage of any nature whatsoever, shall be punished by imprisonment from five to 20 years and a fine of 10,000 to 50,000 Algerian dinars.
• In 1988, Law 78-02 was abrogated and replaced by Law 88-29 of July 19, 1988 on the Monopoly of the State on Foreign Trade4 whose goal was to relax the rigid and largely ignored requirements of Law 78-02. Under the terms of Law 88-29, although the use of compensated intermediaries in regard to the importation of equipment or products into Algeria continued to be proscribed, an exception was specifically carved out for legitimate professional advisers such as certified accountants, licensed lawyers and bona fide consultants, provided that these advisers confer added value, “operate in the open” and are paid in compliance with laws and regulations governing the profession. However, Article 13 of Law 88-29 continued to provide that the use of an intermediary, other than a legitimate professional adviser, as defined above, was strictly forbidden and punishable with the sanctions set forth in Articles 128, 242, 243 and 423 of the Algerian Criminal Code.
• In 1997,5 activities of intermediation in economic and commercial matters, commercial representatives and commercial agents were also listed as part of the activities subject to enrollment with the Commercial registry.6
• In 2001, Article 423-2 of the Criminal Code was abrogated by Law 01-09.7 However, Law 01-09 created a new Article 128 bis 1. under the heading “Corruption and Influence Peddling” of the Criminal Code, whose wording was identical to that of Article 423-2, except that the applicable fines were revised upward “from 100,000 dinars to 5,000,000 dinar”8
• Law 88-29 was officially abrogated in 2003 by Ordinance 03-04.9 Ordinance 03-04 also abrogated Article 35 of the Commercial Code which, like Article 16 of Law 88-29, prohibited the use of commercial agents or sales representatives for the importation of products or services in Algeria (this role was until then reserved to State companies). However, the removal of the ban continued to apply, at least in theory, to governmental contracts (including military sales) since the Criminal Code, specifically, Article 128 bis 1., had not been officially abrogated.
• Meanwhile, in practice, several Algerian Ministries, including the Ministry of Defense itself had carved exceptions to the prohibition under the Criminal Code in regard to the use of intermediaries in the framework of their contracts by allowing certain legally recognized intermediaries (including bona fide sales representatives) to provide advice, studies or assistance services which would be necessary during the preparation, negotiation, conclusion or performance of a contract.
• From an implementation standpoint, Article 423-2 and, subsequently, Article 128 bis 1. of the Criminal Code did not find any practical application in recent years. Accordingly, these statutory prohibitions were generally viewed by the practicing bar in Algeria as “dead law.”
This situation has now been officially corrected with the adoption of the Anti-corruption Law. Specifically, Article 71 of the Anti-corruption law abrogates the entire section of the Criminal Code dealing with corruption and influence peddling, including Article 128 bis 1. Pursuant to Article 72 of the Anti-corruption Law, Article 128 bis 1 of the current Criminal Code has now been transposed as Article 27 of the Anti-corruption Law and has been revised to sanction “any public official” who receives a remuneration or other advantage at the occasion of the preparation, negotiation, conclusion, and performance of a contract with the State, rather than the broad “anyone” wording which encompassed any intermediaries (whether public officials or not) involved in the preparation, negotiation, conclusion or performance of a contract.
Article 27 of the Anti-corruption Law reads as follows:
Any public official who on the occasion of the preparation, negotiation, conclusion, and performance of a contract, tender or amendment concluded in the name of the State or one of the organisms [of the State] receives or attempts to receive, directly or indirectly, for his benefit or the benefit of a third party, a remuneration or advantage of any nature whatsoever, shall be punished by imprisonment from 10 to 20 years and a fine of 1,000,000 to 2,000,000 Algerian dinars.
As a result of this statutory change, it is believed that the last statutory hurdle for retaining intermediaries in governmental (including military) sales, whether independent sales representatives or bona fide consultants, has been removed. Accordingly, independent sales representatives can, absent a contractual provision to the contrary in the documentation between the seller and the Algerian governmental purchaser, act on behalf of the foreign principal without being subject to any further notification or disclosure requirement.
We note, however, that a governmental proposal dated March 25, 2006 to substantially revise the Criminal Code is currently being reviewed by the Algerian Parliament. It is not clear at this time whether the proposed revisions, if adopted, would affect the foregoing analysis. Given the clear wording of the Anti-corruption Law regarding the abrogation of Article 128 bis 1 of the Criminal Code, we do not anticipate that a new version of the Criminal Code would reintroduce a prohibition in regard to the retention of intermediaries in governmental contracts. However, this point will need to be confirmed once the revised Criminal Code is adopted in its final version (which may not be until later this year or in 2007).
3. Disclosure to /Approval of Governmental Purchaser
Notwithstanding the adoption of the Anti-corruption Law, there may be circumstances where the representative should be disclosed to the governmental customer if so requested by said customer or if otherwise required under the tender documentation.
Specifically, a foreign supplier would usually be required, under the terms of the bid or other contractual documents submitted by the prospective governmental purchaser, to disclose the proposed retention by the foreign supplier of a sales intermediary. Depending on the level of attention of the purchaser, this disclosure may lead the foreign supplier to give full details regarding the intervention of the intermediary (including amount of compensation to be paid by the foreign principal to said intermediary).
In addition, as far as sales to the Ministry of Defense are concerned, procurement contracts must, in principle, be approved by the Committee of the Ministry of Defense for Tenders. The Committee will review the legality of the tender and bid. It may also review the capacity of a representative of the foreign company submitting the bid and, should an intermediary be involved in the preparation process and performance of a contract, the Committee may also review his/its status, qualification, expertise and payment terms.
In case of participation in the negotiations of the foreign seller with the governmental purchaser of an intermediary who is not fully disclosed while such disclosure had been expressly requested by the purchaser, or the retention by the foreign seller of a disqualified intermediary, depending on the wording of the sale/purchase contract, the transaction may be declared null and void by the Algerian governmental customer. To the extent that there is no violation of the Criminal Code or other statutory provision entailing criminal sanctions, it is doubtful whether, in addition to the civil invalidity of the contract (if so provided under the terms of the contract concluded with the governmental purchaser), any payments made in violation of applicable law by the principal to the unauthorized intermediary could be confiscated (at least in Algeria) by the Algerian governmental customer. However, there may be effectively liability under the Criminal Code for the unauthorized intermediary, including possible sanctions for treason, due, for instance, to the disclosure (even without any intent) of military information without proper authority. In any event, due to the territorial scope of the relevant criminal provisions, it is not clear whether complicity charges could be brought by the Algerian prosecutor against the foreign principal.
As noted above, nothing prevents the governmental customer to include a contractual requirement prohibiting the retention by the foreign seller of sales intermediaries. Accordingly, if the contract contains a prohibition to use intermediaries, the removal of said contractual requirement will need to be negotiated with the governmental customer notwithstanding the recent legislative change. In this respect, it is likely that many purchasers in the public sector, including the Ministry of Defense, will, as a matter of inertia or conscious policy, continue to include the no intermediary language in their procurement contracts as they usually prefer to deal directly with their foreign suppliers.
If the tender documentation contains a prohibition regarding the use of sales intermediaries, our recommendation is that the foreign principal obtain the express approval of the Algerian customer in regard to the proposed retention of the intermediary, whether such intermediary is a sales representative or a true independent consultant. We note, in this respect, that what is stated in the tender documentation may differ from the final language of the contract itself, whether as a result of the abrogation of Article 128 bis 1. or based on negotiations with the supplier. If the current ban remains, our recommendation is that the foreign principal negotiate the wording regarding the retention of the proposed intermediary and the scope of the foreign principal services to be performed by said intermediary with the Ministry of Defense or another Ministry as part of the overall contractual negotiations with said Ministry.
4. Retention of a Former High-level Member of the Armed Forces
Under current law, the retention of a former member of the Armed Forces of Algeria is not, as such, prohibited provided that the governmental official has definitely retired from the Armed Forces for at least five (5) years10 and does not engage in any other official activity at the time of the retention in order to avoid a risk of conflict of interest.
In practice, it is difficult to have access to any internal regulations or instructions of an administrative nature within the Ministry of Defense. For this reason, the foreign principal should request from the former military official a written acknowledgement that he is not subject to any revolving doors limitation and, ideally, for added protection, a statement to this effect by the Ministry of Defense or the Air Force or other governmental agency in which the proposed intermediary may have been active. Given the hyper-sensitivity of the decision makers within the Ministry of Defense in regard to national security issues, it is quite doubtful whether a written statement could be obtained from the Ministry of Defense or the Air Force.
The foreign principal should also refrain from hiring an intermediary who was a signatory to a contract recently awarded to said principal or who had direct decision power to award the contract as the proposed intermediary could be found guilty of influence peddling.
The intermediary could, nonetheless, be found guilty of influence peddling if he is still in a position to influence the decision to award the contract. Until recently, Article 128 of the Criminal Code sanctioned, “anyone who solicits or accepts offers or promises, solicits or receives gifts, presents or other advantages, in order to obtain or try to obtain (…), procurement contracts, enterprises or other benefits resulting from the agreements concluded with the public authority or with an enterprise under the control of the public authority or, in general, a favorable decision from such an authority or administration, and, therefore, abuses of a real or presumed influence.”
Article 128 of the Criminal Code has now been replaced by Article 32 of the Anti-corruption Law, which provides that:
Is sanctioned with two (2) to ten (10) years of imprisonment and a fine of 200,000 dinars to 1,000,000 dinars:
1. the fact to promise, offer or grant to a public official or any other person, directly or indirectly, an undue advantage in order for this official or person to abuse of its actual or presumed influence in order to obtain from an administration or a public authority an undue advantage for the initial instigator of the act or any other person.
2. The fact for a public official or any other person to solicit, accept directly or indirectly, an undue advantage for itself or another person in order to abuse its actual or presumed influence in order to obtain from an administration or a public authority an undue advantage.
Article 32 of the Anti-corruption Law no longer refers to the acceptance of any “other advantage” but to any “undue advantage.” Accordingly, a reasonable compensation (rather than an undue advantage) paid to the intermediary, whether in the form of a commission payment contingent on the conclusion of the contract or a fixed retainer should be acceptable. However, if the proposed commission payment percentage is out of proportion with the services rendered by the representative, there is a risk that this payment could be viewed as an incentive for the representative to abuse its actual or presumed influence in order to obtain a contract from the Algerian government or military. Sanctions for influence peddling were also revised upwards from one to five years of imprisonment and a fine of 500 to 5,000 dinars to two to ten years of imprisonment and a fine of 200,000 to 1,000,000 dinars.
5. Compensation of the Intermediary
In light of the abrogation of Law 88-29 and the adoption of Article 32 of the Anti-corruption Law, the amount of compensation paid to an intermediary is, broadly speaking, no longer restricted. As mentioned above, the amount may be freely agreed upon between the parties but such amount should be reasonably commensurate with the services rendered by the intermediary and should not be paid or used for the purpose of corrupting the buyer. As noted above, with respect to military sales, the amount of the compensation may be subject to approval by the Committee of the Ministry of Defense for Tenders. However, in practice, even in cases which involved (or purported to involve) national security projects of the highest order, no such approval was apparently sought.
Foreign exchange regulations further prohibit payments in foreign currency for services provided in Algeria by a resident of Algeria, regardless of his nationality. Payments must be made in Algerian dinars. It is permissible for a foreign payor to remit the payment for services performed in Algeria by an Algerian resident intermediary in U.S. dollars (or other hard currency) via bank transfer to an Algerian bank, with instructions to convert the U.S. dollars into Algerian dinars and credit same to the account of the Algerian intermediary.
Payment to an Algerian resident may be effected in Algeria or abroad depending on whether the services are performed inside or outside Algeria. If the payment is made abroad in foreign currency for services performed outside Algeria, the resident intermediary must, in principle, repatriate the proceeds to Algeria via bank channels to be converted into Algerian dinars.
Moreover, if the intermediary is resident in Algeria, said resident is required to report the amount paid by the foreign principal in his (her) individual tax return and to pay Algerian income tax on that amount.
6. Summary
By way of summary, it is undeniable that the enactment of the Anti-corruption Law, together with Ordinance 03-04 which repealed the broad prohibition to use commercial agents or sales representatives, provide greater clarity in regard to the compatibility with Algerian law of the retention by foreign principals of sales intermediaries. Certain statutory qualifications remain, such as the provisions of the Criminal Code governing the “trafficking of influence.” However, these limitations are largely comparable to similar limitations in the criminal law systems of Algeria’s European trading partners.
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©Michael L. Coleman
Céline van Zeebroeck
Michael Coleman and Celine van Zeebroeck have previously provided to the readers of The Globe “Retention of Sales Agents or Representatives in Algeria” which appeared in the March 2004 issue of The Globe and “Overview of the Algerian Code of Public Tenders of July 24, 2002” which appeared in the April 2004 issue of The Globe.
Michael Coleman is a Partner at Baker & McKenzie, Chicago. He received a JD from the Free University of Brussels (Belgium) and a JD from Tulane University. He is admitted to the Illinois Bar. He does a significant amount of cross-border counseling in regard to the Maghreb and, in particular, Algeria, and may be reached at michael.l.coleman@bakernet.com.
Celine van Zeebroeck is an Associate at Baker & McKenzie, Chicago. She received her JD from the Catholic University of Leuven (Belgium) and her LLM from The University of Chicago. She is admitted to the Brussels Bar. Her area of practice include cross-border counseling on matters related to the Maghreb countries, and may be reached at celine.vanzeebroeck@bakernet.com.
1. Law 06-01 of February 20, 2006 published in the Algerian Official Journal of March 8, 2006.
2. Law 78-02 on the monopoly of the Algerian State on Foreign Trade of February 11, 1978.
3. Law 82-04 of February 13, 1982.
4. Law 88-29 of July 19, 1988 on the Monopoly of the State on Foreign Trade.
5. Decree 97-39 on the nomenclature of economic activities which must be registered with the Commercial Registry and Decree 97-41 regarding the conditions of registration with the Commercial Registry of January 18, 1997.
6. Under the name “Business Office” (Bureau d’affaires), Code number 612205.
7. Article 12 of Law 01-09 of June 26, 2001 which modifies and completes the Criminal Code.
8. Article 423 of the Criminal Code was also abrogated and replaced by Article 128 bis.
9. Article 22 of Ordinance 03-04 of July 19, 2003 on the General Rules applicable to the Importation and Exportation of Merchandises.
10. Ordinance No. 06-02 of February 28, 2006 as published in the Algerian Official Journal of March 1, 2006.
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Caitlyn McEvoy is a 2006 graduate of Bradley University with a Bachelor of Arts in History and a concentration in International Studies. She anticipates entering law school in 2008.