How to: Conduct corporate foreign policy

Foreign policy used to be a craft practised by diplomats and statesmen. No longer. In an increasingly globalised economy featuring the disruptive presence of state-owned companies, sovereign wealth, and trends of resource nationalism, the foreign investor finds it necessary to seek out new tools, expanding beyond the traditional set of responses to meet political risk.

In today’s economy, the question is no longer whether or not corporations should have a foreign policy, but rather what principles should guide a corporation’s engagement abroad. Below are five practical tips that have evolved from our experience in emerging markets:

1 Speak the language of CSR, but use the methods of CFP (corporate foreign policy)

There already exists extensive literature on the values that a company’s foreign policy should emphasise, including respect for human rights, anti-bribery, pro-democracy, and access to remedies. After six years of development, this past June the United Nations Human Rights Council formally endorsed special representative John Ruggie’s framework for guiding principles on human rights and business, otherwise known as the Protect, Respect, and Remedy Doctrine. These concepts are smart and well intentioned.

However, the CSR narrative has debilitating shortcomings in that it is 1) designed for implementation in a legitimate rule of law state, and 2) is overwhelmingly concerned with regulatory compliance. CFP, on the other hand, is what is needed for our clients operating in countries where the rule of law is an ongoing question, and where, in addition to compliance issues, there are also possible instances of the host government and competitors using unlawful measures against the interests of the company. A good strategy should be about more than just PR; it should be an actionable set of programmes and relationships that are felt by local communities.

2 Diversify your relationships

One of the great mistakes made by many foreign investors is their unshakeable belief that a good relationship with a president or other political leader protects them (see ‘The knowledge’, above). But even the most entrenched and seemingly popular leaderships can quickly change, and the next government may not be eager to offer the same conditions to a company that had ignored their plight for the previous years. It is a much better strategy to remain in touch with all political parties, interest groups and civil society movements.

3 Go local

When a foreign investor encounters difficulties in an emerging market, too much is made of foreign recourse and the imposition of foreign norms, sometimes to the point that it overtly backfires. There is a tendency by many general counsel to simply hire one of the big international law firms, when in fact so much more could be learned from a local veteran criminal lawyer, who would know exactly: where all the fissures lie in the leadership; who you should (and should not) be doing business with; and how results are accomplished particular to the local system. Local remedies may often surprise. Finding good local counsel, local lobbying, and local public relations teams are essential to understanding the business environment.

4Think outside the box, but act within the system A foreign investor should understand and explore the full universe – no matter how unrelated it may seem – of local and international legal options, including the often overlooked areas of administrative law, criminal law, environmental law, investment law review, extra-territorial application of US/UK law, bilateral investment treaties, human rights, and constitutional law. For example, many corporations do not realise the potential leverage and benefit of lobbying in their home country to solve their issue, apply pressure, or even assist the host government in achieving a goal.

5 Seek sustainable social programmes

What a government wants, and what it may ask the foreign investor to provide as part of its CSR programme, is often very different from the needs of the local community. The Chinese have experienced this several times in Africa, and have suffered a declining reputation among officials who do not appreciate unfulfilled promises. Corporations need to listen to the needs of the local community and focus on doing more altruistic projects, rather just talking about them. SR

Robert Amsterdam is a founding partner of the law firm Amsterdam & Peroff