Can you open your sales efforts to international markets and close your eyes to the legal system when you get there?
Recent events in China and Russia show some of the challenges for American companies doing business abroad. They also may cause shareholders and other stakeholders to raise their level of scrutiny on what companies do when responding to international legal issues, particularly where the rule of law is not developed or respected.
Legal Blog Watch editor Lisa Stone recently covered Yahoo’s decision to turn over e-mail information that was involved in a proceeding that led to the imprisonment of a journalist. Ms. Stone linked to a Washington Post story that quoted Yahoo co-founder Jerry Yang:
Like most mail providers, Yahoo has terms of service that you could drive a truck through (see #6 and #7 therein), and rely on the procedural orders from a court–not the substantive issue behind it. Others disagree with this approach. Business Week sides with Yahoo.
Interestingly, China announced yesterday restrictions on the dissemination of news over the Internet. Yahoo last month paid $1 billion for a 40 percent stake in Chinese web commerce portal Alibaba.com.
In other legal news from China, the government recently freed lawyer Zhu Jiuhu, who had been jailed for four months. The offense: organizing a class action lawsuit against the government of western Shaanxi Province on behalf of investors whose private oil wells were seized in 2003. I understand there are some U.S. companies that may find jailing class action lawyers attractive at first blush. The Baltimore Sun reports on this story and others in more detail.
Then in the last few days, Russia has shown contempt for to the rule of law by seeking the expulsion of Canadian lawyer Robert Amsterdam, counsel for imprisoned Yukos Oil founder Mikhail Khodorkovsky. Prosecutors are also seeking to have the law licenses revoked from some members of Khodorkovsky’s defense team. Mr. Amsterdam left Russia Friday.
So what is the right course for an American company doing business in countries like China or Russia? Ignore opportunities completely? Turn a blind eye and forge ahead?
I would say “no” and “no.” In the short run, Yahoo’s Jerry Yang is correct that companies must observe local laws if they want to do business in a host country. But once they decide to invest there, they are now part of the system. If that system does not comport with basic levels of individual and property rights (and due process), they should work with others to let host governments know that continued investment is contingent upon change. Yahoo may have a different view down the road if one of its lawyers in China is jailed for seeking to enforce legal rights against a recalcitrant government ministry over content restrictions on Alibaba.com (this; not this, by the way).
This isn’t just altruism, either. Concerns about host country legal systems are really part of enterprise risk management.
Companies owe it to their shareholders to seek new markets to grow earnings. In doing so, however, they will likely find that corporate social responsibility does not end at the water’s edge.