 Aloha, welcome to Global Connections on the ThinkTech live streaming network. I'm your host Grace Cheng here today with John Gautanda, president of Hawaii Pacific University, to talk about resolving international investment disputes. Hi John, welcome to the program. Aloha, thank you for inviting me. Great to have you here and talk about this topic which you've had so much experience in and written so much about. First I'd like to kind of talk a little bit about your background because you are back in Hawaii since since July to take over the helmet Hawaii Pacific University after about 30 years on the mainland practicing law. But you're originally from here, right? I'm originally from here. I was born and raised in Manoa Valley, grew up in Manoa, attended Roosevelt High School, then the University of Hawaii. Actually while I was also attending high school and then going on to college, I was involved in the music industry while I was here. I used to play music and then I started producing records while I was here. And then I gave that all up actually once I started college and I ran of all things while I was doing my undergraduate studies at the University of Hawaii, Linz Deli in Alamoana Center. And then after that I decided to go to law school. And at the third year of law school, I've always thought that I would practice law in Hawaii and was very much looking forward to that. And I had the opportunity to go work at the U.S. Court of Appeals in Washington, D.C. And I felt it was an opportunity I couldn't turn down. It was a two-year appointment at the D.C. Circuit. And I thought I would go for two years and come right back. Well, I went for, I moved to Washington, D.C., started working at the U.S. Court of Appeals. And then two years at that point turned into 30. And along the way, after working at the court, I joined a law firm of Covington and Burling. And that's where I was actually introduced to international investment arbitrations. I practiced international law at Covington and Burling for a number of years. Spent a year in Boston as an attorney and then joined Villanova University as an assistant professor. And then became full professor of associate dean and then dean of the law school for a number of years before coming home to join HPU. And it's exciting to be back. That's so great, yes. And I've gotten to know you at HPU. But I have seen so many of the interesting writings that you've done. So I'm really excited to hear more about that directly from you for the first time. And I think it's really important because I think by now we're all very aware how connected our economy is to the global one. And I think it's interesting to know more about how this global economy, it is sustained by this system of different kinds of things like the legal framework that give, for example, investors confidence that their contracts would be upheld or that there's some recourse and when there is some breach of contract or issues with their investment. And this is kind of the area that you've been specializing in. Is that correct? I've been a professor teaching international courses, contracts and other classes. I've been an expert in international matters for both the U.S. government as well as private parties. And I have been a frequent speaker on the subject of international dispute resolution, on resolving international contract disputes and international investment law. And I've also been an arbitrator in resolving large international disputes, investment, particularly investment disputes. Is it quite frequent that there are disputes in international investments? Well, the studies indicate that there are more claims being filed in recent years that that number has gone up. I think it goes up and down, depending on the situation in the world and with the economy. There's never a large, a particularly large group of these cases, but there are some that are particularly newsworthy. And these are these basically, if I could back up for a second, these disputes that we're talking about are basically between investors and a government. And they're usually foreign investors and a particular government. And the reason why this mechanism was created is because we needed a neutral form to resolve these disputes when they arise. And international arbitration provides sort of that neutral form and importantly an enforceable award. Because if there is no treaty, network of treaties that provides for the enforcement of a court judgment. So if you were to obtain a court judgment in the United States and try to take it to another country to enforce, there is no global network of treaties that provide for the foreign enforcement at the moment of court judgments that's been widely adopted. By contrast, there is a network of treaties out there for the enforcement of arbitral awards. And so you can take an arbitral award, for example, that's issued in one of the countries to what is called the New York Convention, one of these big treaties that has over, well over 100, they're up to 106 or so, or more countries. And you can enforce it in any one of those other countries. So it creates a mechanism where one can resolve a dispute and can have an enforceable decision. So it's a very, having this mechanism to resolve the disputes is very important and is vital to I think the system. So this provides a recognized form for enforcing and for the judgments to be accepted by the parties that are in dispute? Right. All right. And what are some of the cases where you might have a dispute arise? You were mentioning this is typically between private investors and governments. Right. What typically happens? And typically there would be an investor, a company would go in or it could be an individual would go in and invest in make an investment in a, let's say a foreign country because it'd be foreign to that that investor. So what are some of the most typical types of claims that we see? Oil exploration, some kind of infrastructure development, water bottling plant. It might be some kind of mining activity, be it gold, silver, copper. It might be the construction of an electrical plant. So there are many different types of investments that can happen in countries that might be big infrastructure projects too. But these are typically and they can be small. They don't have to be large types of investments. But typically I'm involved in the relatively large investments, the investments where a company goes in to extract minerals or oil or to build a power plant or that those types of cases. Those are the cases perhaps you see more often because they're big and they get a lot of attention. But they really involve a dispute between an investor and a foreign government. And typically they're resolving the dispute pursuant to two vehicles. One would be a contract. So typically when the investor goes into a foreign country, they would have an agreement with that country on what exactly are the responsibilities of each party pursuant to this transaction and how to resolve also the dispute. But in many cases also there's a treaty on top of that. And so there's an agreement government to government agreement. And the government to government agreement will all often provide in a number of these ways for investors to resolve disputes pursuant to typically arbitration. So you can have breach of contract cases founded on the contract or you can have a breach of treaty type of claim which is much different from the breach of contract case or could be similar to a simple sort of breach of contract. Sometimes you need different forms to bring them in. Sometimes you can bring them in the same form. It just depends. But the typical treaty case usually involves claims of expropriation. So the government comes in and decides to nationalize the industry and therefore takes the property. And then the question is was this a lawful activity on the part of the government? Did they even do so? And then what would be the remedy in the end? And it could also involve a claim of breach of treaty. And typically the treaty would not only contain an expropriation type of clause saying that the government will not expropriate property without paying just compensation, which is also a concept that's enshrined in the American Constitution. But there would also be a breach of treaty claim perhaps for fair and equitable treatment that foreign investors will be treated on the same terms as domestic parties will be. And it's a bit more complicated than that, but essentially it's that the parties will be treated in similar fashion. You won't discriminate against the party because they are not from that particular country. There are other claims that are also there that you will perform the foreign investor with certain protection, security and protection. So the treaty oftentimes outlines the obligation of a government to provide foreign investors in that government. If those obligations aren't met, then the investor can often bring a claim under the treaty for breach of that treaty. So is equitable treatment that's only if there is a bilateral treaty that stipulates that? So it's not necessarily universal practice that the foreign firms and domestic firms are treated equally? There is a growing body of international jurisprudence on what constitutes a fair and equitable treatment in terms of what a discrimination claim would be and that there could be a violation perhaps of customary international law. On the other hand though, in order to bring such a claim you would need to bring it typically pursuant to a treaty or pursuant to some agreement to resolve disputes. Without that it would be difficult to bring the claim in and of itself without some kind of mechanism to do so. Did you focus on international law while you were in law school or is this something that you kind of developed expertise in? Yeah, I did not. Because I thought in the end I would practice corporate law and when I wound up at the U.S. Court of Appeals I did a lot of litigation in the end, appellate type of work, and then when I wound up at the law firm in Washington, D.C. they had a wide variety of practice areas. I mean they represented everyone from the NFL to governments and they did very fascinating type of work. And so I chose, I asked if I could do international law as a practice area and they gave it to me so I really lucked out in the end. Oh yeah it sounds really fascinating but very very complicated, very very interesting. Well we got to take a break for a minute so we'll come back in one minute to talk more with John Gotanda about resolving international investment disputes in global connections here. I'm your host Grace Chang, see you in a minute. Aloha, my name is Carl Campania. I am the host of Think Tech Hawaii's Movers, Shakers and Reformers. I hope you join us as we take a deep dive into biofuels in Hawaii over the coming weeks and the alternative fuel supply chains necessary for the local and global transition towards transportation fuel sustainability. We are going to invite in and we will have significant interviews with various stakeholders including our producers which are our farmers and our scientists, our conversion technologies including Tara Viva who we'll see in two weeks, as well as our consumers. Within there we're also going to have the investor groups necessary to make sure that this can advance. So I do hope you join us as we explore our deep dive into biofuels in Hawaii. Hi, welcome back to Global Connections. I'm your host Grace Chang here with John Gotanda, president of Hawaii Pacific University and we're talking about resolving international investment disputes. Wow, that was really interesting. I had no idea that there were so many layers to international investments and it's kind of interesting to think about how did this, how did international law in this field unfold? Like did it take a while to develop so that, you know, we could support all of these international economic activities around the world? Well these disputes have been going on for a long time because as there has been forever in global commerce and so you do see some very early decisions and sometimes their governments bring the decisions on behalf of parties but there is unfolding more and more recently a lot of jurisprudence in this area. One of the fascinating things though about these types of disputes is that it is a mix of public and private international law. Public international law meaning it involves treaties and sort of government and policy. Private international law is often involved too because it involves a contract or an agreement between the government and a private party. So it brings together two different types of legal systems and the intersection of that is very fascinating. It's new, it's very much on the cutting edge of the development of law. Yeah, I recall that, I don't know if you remember a few months ago I believe, the Republican candidate Donald Trump had claimed that he would build a wall in Mexico and charge it to Mexico and when he visited Mexico I think there was some controversy in the the Mexican government and one of the officials asserted if he does that if he charges the wall to us we'll we'll seize all the American investments in the country so is this with this I mean this is not happening. And then they would file an after claim because the North American Free Trade Agreement provides for a dispute mechanism for investors in any one of those three countries to file claims and I was actually involved in at one point one of the largest NAFTA cases filed against the United States government. So it doesn't just work with Mexico, it can be Canada, it can be the United States and so an investor filed a claim against the US government under NAFTA claiming various sort of breaches of the treaty and I was brought in actually by the US government as one of their experts on damages because one of my areas of expertise is damages in international law. And as far as damaging and how damages and how to assess that is there a universal calculus for determining damages has that been controversial at all it's been incredibly controversial because there are no one there is no one universal standard and assessing damages and calculating damages is as oftentimes been viewed as more of an art form rather than a science I don't think that that's true I think there is a lot of science actually involved and I think today we are recognizing that the use of finance and economics can have a real impact on on the law and damages is one particular area. So to give you an example in the area of assessing damages there are various ways that one can look at this and figure out what is the in in these particular cases you're often looking at trying to make the investor hole for the loss and so what did they they lose these are big types of projects that often are investments that go on for many years that are now cut short so how does one make that that investor hole if and assuming there is is a breach because there may not be and many of this case many of these cases there are no breaches of treaties or or there or the government has found to have acted appropriately but in those cases where there is damage then the question or there may be a lawful taking in the end it could be that the government says look we do want to nationalize this but we're doing it in a particular manner in a lawful manner and therefore compensation is due and the question is over how much so figuring that out is particularly complicated and various methods one is to look at comparable sales what are the comparable transactions well typically there are not a whole lot of comparable transactions in the hundreds of millions or billions dollar type range in these type of cases so then another way that one might look at this is through using sort of the book value what is the investment and then bringing that up to date another method would be to take the cash flow and it's called a discounted cash flow method and up until recently the discounted cash flow method was relatively discredited in in many arbitration and recently I mean 20 or so years but in the not too distant past many tribunals would say that that they would not look at this yet this is the typical vehicle that investors the markets and others would often value a company so increasingly what we've seen is people are becoming much more sophisticated and they are looking to things like the DCF method to form and inform sort of the valuation of a company so we've seen the law I think evolve in that manner to where it is today a well recognized tool it's not the only tool that can be used but it is one of the tools that can be used another area that we've seen I think particularly developments in the law is at the intersection of law and business in particular is in the area of interest and the awarding of interest these cases tend to go on for many years and because of and they involve large amounts interest tends to be an important part of of the claim and so the question would often arise well what how do you determine the interest rate is it a market rate or is it a fixed rate that's set by statute and whether it's simple or compound you know if we invest in in our savings account we put money in savings account we are earning compound interest there yet until I would say 20 years or so ago compound interest is not norm even though in in international disputes although today it has become the norm because it recognizes tribunals have been recognizing the the reality the financial reality that that compound interest is a regular vehicle that that is paid today and so that if a party loses the use of money they typically will lose the use of money in terms of compound interest not simple interest and and so that it's not always the case but but there has been a growing acceptance of of that and I think it's because of the acceptance of or the growing recognition of financial principles coming to bear and economics coming to bear in the in the law so I think it's a particularly exciting time and you have a background in business administration as well correct and so this must be very helpful but especially as this field is is getting more there's more intersection between the two business and and law itself what have been some of the most interesting cases or situations you've been involved in you talk about oh there are there are a lot of sort of interesting cases that that I've been involved in over over the many years practicing in the international area the fall of the government of Iran and back in the 70s created a host of claims and one of my first experiences and exposures to international arbitration was to work with a private party in in resolving a dispute with with the government of Iran and that that was a fascinating case case to work on in the end and so there are many types of cases out there that are just I think very interesting because they arise from as I said large types of of interesting infrastructure type projects and and that and interesting situations that that governments are faced with and and so I think that that seeing this unfold and then being a part of it is actually quite quite fascinating and we were just talking about interest and and then you bring up the Islamic Republic of Iran and you know the is in Islamic legal principles there is no concept of interest so does is there this kind of a consideration in in the assessment of damages and and what the interest rates are sure absolutely and in fact if the agreement or the choice of law would be the law of the Islamic Republic of Iran or other countries where under sharia law they would not allow for the payment of riba or interest then then interest would not be awarded in in some of these cases on the other hand you it depending on the forum and the venue and the choice of the particular law there may be a provision you know a a way for a procedural or a legal principle that would allow for interest to be awarded in that circumstance and even in countries like Iran there are exceptions to the awarding of interest where the government and and scholars have recognized that it may be appropriate under Islamic law in certain situations for interest to be to be paid now again I'm not a real expert on Islamic law but I have seen decisions that speak to to the awarding of interest and legal opinions on speaking to the awarding of interest under under Islamic law in in certain situations so it is fascinating that you see from a public policy standpoint that there are situations where there are principles and basic important principles that come to bear public policy principles like the prohibition on the awarding of interest in the international legal arena and how does that work how does that interplay when other countries and other practices like in the united states or in many parts of the world interests is a well recognized and accepted principle so what happens how do you resolve the the tension and and that's what happens in these international disputes oh wow that's really fascinating so we have we have not just law but we're talking about business finance as well as looking at different cultural systems as well really fascinating and and that's great to that you are back here in hawaii bringing all of this experience that you've garnered over the past what is it 30 years 30 years now right wow real wealth of experience to bring back here and as far your music though that you you're a really well-rounded individual are you still playing music writing music i haven't done that for a while but i would love love someday to get back into it oh yeah and and what about making donuts yeah oh that's for a short time i was a baker too at at dunkin donuts and uh but i think i've given that up oh really yeah well you have such a fascinating and inspiring story um coming through with so many different you know packs in life and and really really happy to have this opportunity to talk to you john well thank you very much for having me thank you it was very educational okay thank you thank you for thank you for joining us on global connections i'm your host grace chang you can find me here every thursday at one p.m see you next time aloha