The International Business Transactions Blog

India Signs Historic Treaty with EFTA

By Kelsey McGillis
Law Student Editor
Prof. Aaron Fellmeth
Faculty Editor

After nearly two decades of negotiations, India has signed a landmark trade and investment treaty with the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway, and Switzerland. This landmark deal, the Trade and Economic Partnership Agreement (TEPA) is expected to bring investments worth $100 billion into India across various sectors over the next 15 years.

The TEPA is, first, a free trade agreement under Article XXIV of the GATT and Article V of the GATS.  It reaffirms GATT commitments, harmonizes customs regulations, and eliminate customs duties according to schedules of commitments in the annexes.  It also includes more detailed regulations on sanitary and phytosanitary measures, technical barriers to trade, and liberalization of trade in services.  In addition, the TEPA incorporates foreign direct investment protections between the EFTA states and India, and investment promotion obligations and expectations. 

Unlike free trade agreements negotiated by the United States, the TEPA includes no TRIPS-plus obligations.  However, consistent with recent EU practice, the TEPA does include obligations relating to trade and sustainable development, including some relating to climate change, compliance with International Labor Organization (ILO) standards, and cooperation in achieving and promoting sustainable development. 

The TEPA is anticipated to bring substantial investment, with the EFTA bloc committing $100 billion over 15 years in sectors like pharmaceuticals, food processing, engineering, and chemicals. Although this investment commitment, primarily sourced from provident funds in EFTA countries, is not expected to be legally binding, but it is an expected result of the conclusion of the treaty.

Prime Minister Narendra Modi emphasized the importance of this agreement in boosting economic progress and creating opportunities for Indian youth. Ratification by both parties is required for the agreement to take effect, with Switzerland aiming to complete the process as soon as next year.

India’s decision to sign TEPA marks a significant departure from its historical stance on import substitution policies.  While political factors still influence some protectionist measures, economic imperatives may eventually lead to a more open trade approach in the future. The timing of these trade deals coincides with political imperatives, particularly the need to address unemployment, which continues to pose a persistent challenge in India, despite economic growth. The TEPA is expected to generate 1 million jobs in participating countries over 15 years, aligning with the focus on job creation in India’s current election.

The TEPA paves the way for a similar deal between the much larger EU and India.  Although negotiations between these two parties had stalled in the past, they were re-launched in June 2022, along with negotiations for two additional treaties: a bilateral investment treaty and an agreement on geographical indications.  The European Commission maintains a website with the current drafts texts that form the basis of negotiations.

U.S. Supreme Court Confirms Presumption that Choice of Law Clauses Govern Federal Maritime Contracts

By Kelsey McGillis
Law Student Editor

On February 21, 2024, the U.S. Supreme Court issued a ruling in the case of Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC, emphasizing the robust enforcement of choice-of-law clauses in maritime insurance contracts. The central question in the case was whether, under federal admiralty law, a choice-of-law clause could be set aside if enforcing the clause would result in a violation of a state’s “strong public policy.”

The case involved a dispute between European insurance company, Great Lakes Insurance SE (“GLI”), and its client, Pennsylvania-based yacht owner, Raiders Retreat Realty Co., LLC (“Raiders”). The parties’ marine insurance contract contained a choice-of-law clause stating that disputes would be adjudicated according to well-established principles of U.S. federal admiralty law and, where no such precedent exists, the substantive laws of the state of New York.

Following damage to the yacht, GLI denied insurance coverage based on the fact that the yacht’s fire extinguishers had not been timely inspected and recertified.  Although no damage to the vessel was caused by fire, GLI sought a declaratory judgment of nonliability based on the claim that the misrepresentation regarding the fire equipment voided the insurance policy ab initio.  Raiders counterclaimed with various counts under Pennsylvania law, including breach of contract, breach of fiduciary duty, insurance bad faith, and unfair trade practices.  GLI rejoined that the policy’s choice-of-law clause barred Pennsylvania counterclaims.

In a unanimous opinion authored by Justice Kavanaugh, the court concluded that choice-of-law provisions in maritime contracts are presumptively enforceable under federal maritime law. The Court held that, while there are narrow exceptions, state public policy is not generally one of them.

Kavanaugh emphasized the need for strong choice-of-law enforcement to reduce uncertainty and facilitate maritime insurance. Although the opinion cited consistent decisions of federal courts of appeals, and precedents like M/S Bremen v. Zapata Off-Shore Co. and Carnival Cruise Lines v. Shute, which enforced maritime forum-selection clauses, it did not rely wholly on these precedents based on the view that choice of forum and choice of law clauses raise some different issues.

The Court rejected the proposal to use Section 187 of the Second Restatement of Conflict of Laws for deciding the enforceability of the choice-of-law clause. The Court argued that Section 187 was intended for interstate cases, not federal/state conflicts like those in maritime cases. Additionally, the Court  pointed out that applying Section 187 could be problematic for the overall development of the maritime industry, which requires predictability in the laws applicable to the agreement.  It appears that Section 187 remains good law outside the realm of maritime contracts.

The opinion concluded with Kavanaugh outlining narrow exceptions to the enforceability of choice-of-law clauses, such as contravention of a federal statute, conflict with established federal maritime policy, or the absence of a reasonable basis for the chosen jurisdiction. In this case, none of these exceptions applied, and New York law was deemed appropriate.

European Union Opens Investigation into TikTok for Alleged Violations of Digital Service Act

By Kelsey McGillis
Law Student Editor

The European Union (EU) has initiated a formal investigation into TikTok, the social media platform owned by the Chinese company ByteDance.  This investigation comes in the wake of similar EU proceedings against Elon Musk’s platform, X, in December 2023, discussed in a January 16 post of the IBTBlog.

Both investigations center around potential violations of the EU’s Digital Services Act (DSA).  Enacted in August 2023, the DSA regulates all online platforms operating within the EU.  Its mandate is to ensure platform transparency and accountability for internet service providers (ISPs) and to streamline certain regulations.  Interestingly, the DSA imposes more stringent requirements on large platforms operating in the EU, with “large platforms” defined as those with over 45 million monthly users.  TikTok, with nearly 136 million monthly active EU users is thus subject to the DSA’s enhanced mandate and increased scrutiny of potential illegal content and security risks.

The formal investigation of TikTok is led by EU internal market commissioner, Thierry Breton, and will specifically focus on potential breaches of child protection rules and transparent advertising guidelines. Breton’s decision to officially investigate TikTok was influenced by the platform’s risk assessment report and TikTok’s responses to multiple information requests. Notably, this investigation follows a $370 million fine imposed on TikTok by EU regulators in September 2023 for insufficient protection of children’s personal information in alleged violation of EU data protection regulations.

The EU Commission will scrutinize TikTok’s age verification tools, designed to prevent children from accessing inappropriate content, to assess their effectiveness. Additionally, they will evaluate TikTok’s transparency regarding advertisements on the platform and the accessibility of its data to researchers. Other areas under review include TikTok’s risk management practices, age verification tools, and concerns about allegedly addictive design, screen time limits, and its algorithmic design.  If TikTok is found to be in violation of DSA rules, ByteDance, TikTok’s parent company, could face fines of up to 6% of its global revenue.  In context, ByteDance reportedly generated over US $110 billion in sales in 2023, which would expose the parent company to a potential fine of US $6.6 billion.

The investigation marks another example of the EU’s aggressive approach to enforce its digital regulations against non-EU companies operating within the EU either physically or digitally.  The EU’s recent DSA enforcements shed light on how regional regulations can transcend geographical boundaries, thereby influencing and shaping the behavior of digital platforms operating on a global scale.

Blog Editors

Faculty Editor
Prof. Aaron Fellmeth

Law Student Editor
Kelsey McGillis

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