RSS FeedCredit rating agencies as courts of international finance
As I am writing this, President Obama announced a deal to avoid default on US government debt. If lawyers think in terms of courts, then what would be the legal consequences of the US default? While the legal issues of government’s failure to pay its debt to domestic lenders are unique and complex, the default in respect of foreign nation-state lenders such as China is probably even more interesting. There are no courts of international jurisdiction that can declare the US bankrupt, administer its assets, or enforce their judgment. The US is an independent country subject no one’s will despite the international law. But since the international law is a legal system, there must be some consequences for the US. One such factor is international rating agencies. You could hardly hear about the debt crisis in the US without learning that its excellent credit rating would likely suffer as a result. Apparently, private international rating agencies are filling some of the void in the international legal system that courts usually occupy within nation-states.
The three most important international credit rating agencies are Standard & Poor’s (S&P), Moody’s, and Fitch Group. S&P and Moody’s are American, and Fitch Group is controlled by a French corporation.
The biggest difference between credit rating agencies and courts is that rating agencies do not adjudicate disputes. But under the surface this difference is not so important. We can view events affecting credit ratings as disputes between the debtor and the lending community. Such events include defaults, budget deficits, and so on. The lending community wants some objective basis, for example, to charge a different interest rate as a result of one of the events above. And the debtor government wants to minimize its borrowing cost. Often these interests would come into conflict giving rise to the need for a third party to establish an objective basis for new lending terms. It sounds awfully like adjudication.
In theory, credit ratings are such independent, impartial, and objective assessments of the most optimal relationship between lenders and a borrower in accordance with generally accepted rules. Credit ratings basically result from applications of such rules and principles to a given debtor.
In practice, credit agencies are hardly accountable to anyone. They are for-profit, private organizations whose decisions are final and are not subject to review. The ratings’ impact is fast and powerful, and it usually directly affects interest rates available to the borrower. There is a good overview of other criticism of rating agencies on Wikipedia.
When countries, which desire to keep as much of their independence as possible, fail to establish formal and binding international governance and adjudication bodies, private organizations fill the legal void. It’s not necessarily a bad or a good thing, but it’s important to recognize the legal and enforcement role that these organizations play. Their existence also supports the view that international law exists.
Pulat Yunusov is a Toronto litigation lawyer.
(Post sponsored by AdviceScene)
The purpose of blawgs
More than a year ago I wrote a post entitled “How lawyers think.” Its basic idea is that a lawyer’s job is to maximize legal protection of his client’s rights. Protecting rights means either of two things: one, letting the world know what your rights and their legal basis are, and, two, getting a court or tribunal to change the mind of someone who disagrees. Lawyers predict what kind of rights the courts will find that you have if it comes to litigation. That’s called giving legal advice, and that’s why lawyers think by imaging what would happen if this issue gets to court and how courts have decided similar issues in the past. All lawyers think about courts whether they are in litigation or not, and the courts is where the law becomes the law.
The previous sentence means that an act of Parliament is not really the law until the courts have adjudicated a dispute about what the specific legislative act or its provision means in a specific case. If all people understood the same text and applied it to the same facts the same way, we wouldn’t need courts. Lawyers predict what the courts will say the law is for the given facts, and litigators, in addition to that, offer judges their theories of what the law is in a given dispute. So advocacy in court is trying to influence the judge’s vision of what the law is and of how to apply it in this particular case. Without impartial and binding adjudication of disputes by the courts, the law is only what the strongest party (the police, the employer, the rich, and so on) says it is.
So if lawyering is predicting how the courts or tribunals will apply the law to a particular situation, blawging, in my opinion, is the same thing but by way of informal and accessible writing in a blog. A blawg should predict what the law is in some interesting case of current interest. A blawg is always a legal opinion, but it’s almost never legal advice, because it is addressed to a broad audience rather than a client. If I write about telephone number portability, the blog post should give a basic idea about what enforceable rights you will have if your telephone company decides to take your phone number from you. A blawg is not about what will happen, but rather about what you can reasonably accomplish by taking your case to a court or tribunal, if you have the time, the money, and the expertise.
In this sense, blawgs can be a little removed from reality because most people don’t have the time, the money, and the expertise to go to court. In fact, of those who do begin litigation, most never sustain it all the way to trial, which would be the first chance a judge will get to decide the case. That’s why lawyers, of course, must give practical advice in addition to pure legal advice, and it’s hard, and that’s why there is a disconnect between the public and lawyers. The client expects a solution and doesn’t care about the method, and the lawyer often must think in terms of courts because that’s all he or she may be qualified to do.
Perhaps blawgs can bridge this gap by educating the public about the law and teaching the public to self-regulate due to better knowledge of legal consequences. But unless we make access to the courts cheaper and easier so judges can hear and decide more cases that deserve to be heard and decided, blawgs alone will face an uphill struggle.
Pulat Yunusov is a Toronto litigation lawyer.
(Post sponsored by AdviceScene)
The law of telephone numbers
A few days ago, I was shopping around for a good fax service. Besides receiving faxes by email and a few other musts, I needed a stable fax number. Who can afford to lose a number after spending thousands on advertising? There is goodwill in your number. Sometimes it is catchy and easy to remember. And many people still call businesses, so losing your listed number means losing clients or customers. For a lawyer, it can also mean not receiving a document, which was properly served at the lawyer’s listed fax. The bottom line is your phone or fax number can be precious. But is it really yours? The answer is no if “yours” means private property. But you can still rest assured that your number will point at your business unless you cancel your service.
The Telecommunications Act, a federal statute, empowers Canadian Radio-television Telecommunications Commission (CRTC) to regulate telephone numbering in Canada. So at least the local telephone company doesn’t own phone numbers. CRTC regulates the Canadian portion of the North American Numbering Plan, which includes Canada, the US, and many Carribbean countries. That’s why the country code for all these countries is the same: +1.
One of the basic CRTC rules local telephone companies must follow is uninterrupted service. It means if you pay for your basic phone line, your telephone company cannot cut you off. The important concept here is this: if Bell or Rogers could change your number at will, it would amount to interrupting your service because uninterrupted telephone service means that people can reach you at your number, not just that you can dial out. If your number suddenly changed, you’d lose half of your telephone service: all the people who had your number wouldn’t get through to you.
This is important because that’s how the law keeps your number yours right now. Telephone companies must provide uninterrupted service, and that obviously means a permanent phone number. Telephone service wouldn’t make sense if your number randomly changed.
It’s important to know this because if you interrupt your own service by not paying your bill for example or by closing your account, the uninterrupted service rule does not bind the phone company anymore. Since you cancelled the service, the phone company can give your number to someone else. That’s why when you want to move your number to another provider, they will always tell you to stay with the old one until the move is complete. If you cancel too early, you can lose your number.
Your number stays yours due to the uninterrupted service rule. This is not really ownership. It’s more like rent, since as long as you pay your basic phone bill, the telephone company must connect your number.
It make sense to have a telephone number registry linking numbers to specific people or organizations as long as they pay for the registration. This is exactly how Internet domain names work. It doesn’t matter who connects you to the Internet or who hosts your website: as long as you pay Godaddy or some other registrar a small annual fee, your domain is safe. And it’s not like telephones are going out of fashion. The demand for numbers is so explosive, we are getting a third area code in Toronto. It’s time to give us more control over our telephone numbers.
Pulat Yunusov is a Toronto litigation lawyer.
(Post sponsored by AdviceScene)
The monarchy in Canada
The recent royal visit offers a good chance to talk about monarchy in Canada. Besides just being nice Canadians, the people who greeted the newly married royal couple were often ecstatic, filled with genuine love for the two people, one of which has done nothing of significance while the other has never been heard of until recently. Despite a minimal role in Canada, the monarchy seems to enjoy support here, and the republican groups occupy the margins of our political discourse. But the history of the Canadian democracy is the history of overcoming the monarchy. All the good things we are proud of: the rule of law, democratic elections, and civil rights—emerged despite the monarchy and often out of conflict with the monarchy. Today, Canada’s democracy is the fruit of the monarchy’s defeat. The royals have zero power in this country. The Queen is Canada’s head of state only on paper, and many people don’t know or remember that this is the finale of a centuries-long fight between the people and the monarchy. But besides the remaining formal royal footprints on our political system, there are other, more substantial remnants of monarchy in the Canadian government and legal system.
The less monarchy we had in Canada, the more democracy we had. The history of Canada’s democracy is the history of pushing back the monarchy until it was reduced to a rubber stamp for our democratically elected legislators. It is the triumph of the Canadian democracy that the Royal Assent is a formality. Monarchs have not always been as likable as the young couple from London, UK. In 1776, the US Declaration of Independence called the British rule “absolute Despotism.” Five centuries earlier, English nobles forced their king into signing
Magna Carta—a historic document that granted civil liberties and limited the royal power. Magna Carta, a blueprint for modern democratic constitutions, came about in spite of the monarch. The barons basically fought with the king for their rights. That’s the role of the monarch in our democratic tradition: give up more and more power to the people as the royal vigour increasingly declines.
The era of the strong monarchy also represents the backward times of racism and religious discrimination. The monarchy itself remains discriminatory: no Catholics and no bloodline outsiders. If any Canadian institution used the rules of succession to the British throne, the public would ostracize that institution and the courts would probably stop the practice. But the Ontario Superior Court of Justice refused to apply anti-discrimination provisions of the Charter to the rules of succession to the British throne. In 2003, Justice Rouleau of the Superior Court essentially recognized the British throne and the Queen as a foreign institution governed by foreign rules inherited by our constitution (O’Donohue v. Canada, 2003 CanLII 41404 (ON SC)). Since we can’t change the foreign rules and we can’t change our constitution, we are stuck with the discriminatory foreign monarchy.
Some of the best things about Canada are the rule of law, civil liberties, and a democratically elected legislature. The view that the monarchy somehow links us to the English legal and political tradition that gave us all those things is quite absurd. We owe much of our legal and democratic tradition to England, but that tradition emerged in England despite the monarchy. Democratic rights and the independent judiciary were a concession by the monarchy in favour of powerful land owners, first, and the general public, later. Besides, much of our Canadian democratic tradition is completely domestic, and some was borrowed from the US. While we have two Constitution Acts, the UK doesn’t even have a written constitution.
When we see the royal couple on TV, we should remember that they symbolize an institution that fought long and hard against civil liberties, the rule of law, and a democratic legislature. That institution has completely lost its power as a result of this conflict. The people and the democracy have won. For some reason, we still allow the royals to live in palaces and act out a fairy tale at our expense.
But there are other dangers in the monarchy fetish, especially in its recent revival. Our government still retains some qualities of the monarchy. Generally, these powers of the Prime Minister and the Cabinet are called the royal prerogative. These are the powers that the monarchy has always enjoyed but that do not come from the constitution, an act of parliament, or the common law. These are basically the powers that the government has not surrendered to Parliament or to provincial legislatures. This is, for example, the power to have foreign relations. When the courts reviewed the Prime Minister’s decision not to request the repatriation of Omar Khadr, government lawyers argued that his decision was an exercise of the royal prerogative and not subject to Charter scrutiny. The courts have rejected this position (Canada (Prime Minister) v. Khadr, 2010 SCC 3).
Besides the royal prerogative, the government has a wide array of powers that give it discretion in making decisions. Discretion means the government is less accountable about the rules and reasons it follows in making a decision. Often we want to give the government discretion for the sake of efficiency, but the courts must be able to control the limits of discretion and to overturn obviously unreasonable decisions. This is how the rule of law works.
Fascination with the monarchy can produce or can be a symptom of a lower expectation of accountability from the government. We may defer to the government more and more. The danger is when we start treating the government as a benevolent ruler. Governments are made of people, and people are corrupted by unaccountable power. The history of democracy in the UK and in Canada was a history of people taking the power back from the ruler.
The ceremonial formality of the Queen also breeds constitutional uncertainty, for example, when the Prime Minister prorogues Parliament so often that some parts of the public genuinely expect the figurehead governor-general to refuse to cooperate. She of course, did cooperate and that was the right thing to do from the legal standpoint, but the potential for a crisis exists.
Do we even need a head of state? It is an inheritance from the Middle Ages, when every nation had a powerful ruler. Modern democracies have leaders but they should be professional officials hired for a limited term, and nothing more. Prime ministers should not generate patriotic fervor. They must be professional politicians who embody certain popular political platforms. Let’s hope that prime ministers cannot mess up too much, and fortunately we have the ballot and the independent judiciary to hold them and their ministers to account. A foreign figurehead doesn’t really figure in this equation.
Pulat Yunusov is a Toronto litigation lawyer.
(Post sponsored by AdviceScene)
