Glocal when you least expect it


"Glocal when you least expect it 


by Geoffrey D. Creighton, President, In-House Counsel Worldwide (ICW), Principal at GC Counsel Canada & BlackRock Independent Review Committee


When we speak of “glocal”, it is usually shorthand for the adaptation of a global business to the requirements of local legal and regulatory requirements. But the tension between global and local can also manifest itself in two other, less obvious, ways – even within one’s home jurisdiction.

One is the local effect of global legal developments; the other is the global effect of local legal developments.

As to the first, more and more local courts are citing international law – for example, Oxford’s database of “International Law in Domestic Courts” has more than 1400 decisions from 94 countries, in courts worldwide. And quite apart from strictly legal application, developing norms of international conduct, such as the OECD Guidelines for Multinational Enterprises, can influence public perception – and create domestic political pressure – in such areas as environmental, human rights and industrial relations.

This local effect of global developments is relatively benign – it leaves courts and governments the discretion to adopt changes suited to their own situations.

On the other hand, the global effect of local legal developments can be more pernicious. An example may illustrate: I recently opened a new bank account in my home country, Canada. As part of that process, the bank asked me a new set of rather intrusive questions. This had nothing to do with Canadian law. Rather, it was because of a domestic tax law of the United States (known as “FATCA”) which effectively compels every financial institution in the world to establish that each of its clients is not subject to U.S. tax, or face punitive withholding on any amounts payable to the institution which may emanate from the U.S. This is a global effect of a local legal development that has cost non-U.S. institutions, worldwide, inestimable amounts of money in new compliance systems.

Similarly, the attempts at domestic reforms that followed the 2008 financial crisis have often been felt beyond their native shores. For example, limitations on bank executive compensation have been applied abroad on the basis of the home jurisdiction of the institution, rather than on the residence and jurisdiction of work of the executives in question. Another instructive example is the “Volcker Rule” by which the U.S. forced banks out of proprietary trading for their own accounts. Some strange (unintended?) consequences of that continue to be felt worldwide. Last week I was told of a Canadian investment fund which, by some wrinkle in the Volcker Rule, was now precluded from putting its own corporate name in its fund name (I have no idea why).

Perhaps these are just the most recent demonstrations, (repugnant when they are intentional), of countries passing laws with deliberate extraterritorial effect. Yet as our enterprises spread themselves across multiple jurisdictions, these “glocal” effects become more common. The teaching is that even purely domestic organizations can find themselves caught by local laws of some other country.