Poverty of International Law in ‘Unsustainable’ Supply Chains

With increased incidence of human & environmental rights violation, by outsourced activities either directly or through their suppliers, the value chain management of manufacturing companies particularly transnational enterprises has come under a scanner. Global reach of multinational enterprises creates global impacts and visibility of their activities to a larger audience. Increased visibility led to greater protests worldwide in case of violations. To shield from the continued criticism, companies increasingly adopt the United Nations’ Global Compact principles. Over 5000 companies across 130 companies are signatory to the principles. The principles encompass the important domains of Human Rights, Labour, Environment and anti-corruption. Inspired from the Universal Declaration of Human Rights, ILO’s Declaration of Fundamental Principles and Rights at Work, Rio Declaration on Environment and Development and the United Nations Convention against Corruption ; these principles are voluntary in nature and very importantly cover the important ills that plague the supply chain relationships.


Notwithstanding the wide adoption of these principles, unabated violations continue. Electronics industry is highly criticized for its laxity in supply chain audits and thereby, obliquely permitting these violations. From Microsoft to Apple, Dell to Hewlett Packard the problem subsists. Increased public scrutiny of Apple due to its media trial and its subsequent tightening of supply chain regulations is anticipated to bring a positive ripple affect across the industry. These are impacts driven by media campaigns and consumer awareness. There is also a need for a more stringent legal backdrop to ensure innovation-loving consumers do not unwittingly find themselves hold another Nike shoe or Apple i-pad with a pang of remorse.

The United Nations Human Rights Council in 2008 adopted the United Nations Protect, Respect, Remedy Framework wherein it categorically laid down that the business everywhere has the responsibility of protecting human rights. But such an occasional communication from the global organizations, without any corresponding acceptance of the same in legal jurisdiction is meaningless. The guiding light notwithstanding its toothlessness, is laudatory, considering the beacon of light it provides to companies that aspire for sustainability. The responsibility to respect is believed to a baseline activity. Companies should therefore, take responsibility for activities that visibly have a direct impact such as the production process; product or services that the company provides; labour and employment practices; provision of security for personnel and assets and company’s lobbying and other political activities. To ensure this the company must conduct a due diligence of its activities. The report further stipulates a Human Rights management framework which shall consist of four elements: First, a statement of policy. This statement can be integrated into the company charter or it can be a stand-alone policy. Second, it should have a framework for assessing the impact of its activities on human rights. Third, the human rights policies should be integrated with the companies objectives and integrated into the companies policies and Finally, there should be a tracking system to observe if policies have been implemented successfully and reporting of the same to ensure accountability in operations. The 2008 framework with these four steps, provides a broad outline skeleton for a human rights management framework.

Like the United Nations Global Compact laws, other significant international standards for corporate responsibility on human rights are the OECD Guidelines for MNEs(2000), the ILO Tripartite Declaration of Principles concerning MNE & Social Policy(2000) and the IFC Performance Standards on Social & Environmental Sustainability(2006). However, all of these, like the Global Compact itself are good and provide a framework for corporate responsibility but none of them is legally binding.

From a somewhat cynical perspective, councils meet and announce a guiding principle; but without a strict enforcement mechanism there is nothing forcing the company from violating or ignoring a violation of the same. In other words, such resolutions are at best toothless tigers. It may be interesting to note that the Universal Declaration of Human Rights were codified into International Law through two 1966 treaties that is the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights and are collectively referred to as the Bill of Rights. With more Corporate flutter globally, it may likewise be relevant to consider codification of a global accepted level of responsibility for Multinationals such as the UN Global Compact Principles, into International Law. The point is even though these principles derive form International Law, they are themselves not International Law and the time such as present is an important moment to give them the same level of explicit recognition.

Copyright: Of Expressions, not Ideas!

It is often questioned why there is no copyright on ideas. Governed by the Copyright Act, 1957, The copyright law protects the creators of literary, dramatic, musical and artistic works & producers of cinematographs films and sound recordings. However, this protection is awarded to the works and a mere idea is not protected under the Act. It is the expression of that idea that is protected. Imagine the typical Bollywood, boy meets girl folklore. The idea has been successfully produced and re-produced in the glorious hundred years of Indian cinema- the same idea, the same underlying theme, but each time(presumably) a different presentation, a different script, a different expression. If the first idea of Laila-Manjnu or Heer-Ranjha was protected, we would never had the opportunity to watch those endless romantic movies!

Thus, there is an economic logic that drives this underlying reasoning of the Copyright Act in India(as any other IP protection Act for that matter). And the economic rationale is if the fist individual who claims an ownership of the idea is given such an exclusive right, then we provide him with a rent-seeking opportunity merely on the basis to be the first one to have an idea.  

Innovation & IP Protection: The 'I' Factor

New information generated has a public goods character that is it is of benefit to the public at large and once common knowledge, it can be widely used. To generate this new information, the Government has to create some incentives. These incentives are in the form of IP protection. The valuation of a asset at the time when these rights are granted to the moment when they create a monopoly position varies tremendously. At the time of granting IP protection, a legal monopoly is generated that is the exclusive right to benefit from the invention and aspire for rent-seeking behaviour. But the extent to which this power generates monopoly power ex-post is referred to as the economic monopoly. This depends upon a number of factor. Most significant amongst others being the innovativeness of the invention that are there closely available and cheaper substitutes available for the product. Availability of closely available substitutes devoids the product of its potential rent seeking behavior. Secondly, as IP enables pricing above the marginal cost of producing a good, it attracts entry of competitors.
Thus, for an IP protection to lead to Significant Market Power(SMP) and thereby, a case for antitrust intervention, the innovativeness of the product and consequently its monopoly power ex-ante become a critical factor. 

Valuation of IP assets in M&As: Recipe to compatible match-making

One of the sine qua non for a successful merger is performance of adequate due diligence and asset valuations. In asset valuations, valuation of IP assets is critical for ensuring a successful transaction outcome. This is particularly true for IP-rich companies. However, valuation of IP assets is often relegated to the backdrop vis-à-vis other valuations. The second important challenge encountered is globalization of deals. Understanding the target’s regulatory environment and cultural attitude towards IP protection becomes critical for a competent valuation. This difference emerges even more strikingly as companies come from different backdrops such as EU and Emerging Economies. Thus, IP rich companies face the twin challenge of valuation of assets and internationalization of deals which often means stepping into unchartered territories.

When transactions are IP rich, a strategic due diligence process benefits from IP intelligence and IP valuation to facilitate target identification, ranking, deal pricing, structuring, setting reserves, prioritizing later-stage “traditional” due diligence tasks and compliance with post deal financing reporting requirement.  When taken in the nascent stage, such a due diligence enables an indepth comprehension of the strategic fit, risks, value extraction; an appreciation of the target’s core and non-core IP assets. Eventually all this can facilitate post-deal IP integration and enhance the probability of realizing full value of transaction.

From the Antitrust perspective too a true determination of the value of IP portfolio is important as it determines the monopoly power ex-ante.

The general practice has so far been to make an estimate and put this lump sum value in the goodwill of the company's balance sheets. Infact even in a developed market like Europe, a recent survey indicates that only 12% of the companies involved an independent third party evaluator to value their assets.

As for the methods to evaluate, there are various valuation methods available: Cost-based, market-based, option based , income-based etc. However, valuation of IP assets is easier said then done, as the traditional methods of valuation such as market based or cost based fail to capture the full value. Another method of valuation is estimates based on past and future economic profits. Which of the models amongst these or an adaptation of them or a hybrid of one or more model best suits the valuation, depends on the particular facts and circumstances of each company as also the information available.

Nothwithstanding the challenges encountered in valuation and the difficulties faced, it is still a fruitful and worthwhile exercise as it helps the company realize the true value of its assets apart from getting a positive market response reflected in its market valuation. 

La Tomatina in Bangalore: To beat or to eat?

 Bangalore’s Palace Grounds will soon be a witness to the first ever Indian tomato festival, the Indian equivalent of the Spanish La Tomatina. Great fun throwing tomatoes, wonderful sunny afternoon in tangy red! That is only if, one has a guilt free conscious.

Look at the numbers to realize from how many hands we snatch the only meal, they possibly could have had; every time we throw a tomato to get a tingling sensation.

Officially speaking, the Tendulakar committee’s report, estimates some 37% of the population below the poverty line in India. The committee calculated the poor, based on their expenditure on food, health & education. The Arjun Sengupta report had gone on to put this number at 77% of the population living on less then Rs 20( less then one third of Euro) a day. Even the World Bank statistics have put this number at around 42%. Huge variations in numbers notwithstanding, one thing is unanimous. We are home to 1/3^rd of the world’s poor.

Now put these heart wrenching numbers in the backdrop of gloomy clouds of food crisis looming large on the horizons of the India growth story. The prices of onions, putting a mouthful of tears in the eyes of consumers is an everyday story in Indian households. Globally speaking too, food riots in Algeria, wheat prices touching the skies in UK, Mexicans speculatively buying corn to keep Tortilla prices under control, are headlines not too distant from the past.


India, officially speaking, has an over 18% food inflation every year and globally speaking, the UN Food & Agricultural Organization sees it unprecedented and all time high, on a global scale.

At this opportune moment, a plush tomato festival in the midst of this hunger and poverty in the heart of Corporate India! On one hand, the emerging corporate & IT hub talks about its Corporate Social Responsibilities and on other throws tomatoes on the face of CSR! Pretty inspiring ain’t it!?

Hungry mouths to be fed and empty hands to serve, are definitely not the inspiring backdrop for a conscious soul to throw tomatoes and have the feel good factor. As conscious citizens and the future of India Shinning, when we should be saving every bite of food and save every bit in our plates, throwing tomatoes with such careless abandon is undoubtedly, moral turpitude at best. It is not cool, but symbolic of a cold heart, blindly trying to ape the west and a culture that existed in a certain cultural context, for a certain reason. Let us not blindly ape, lest we be  relegated to the mental IQ & levels of our ancestors, the Apes.

India, Bharat, Hindustan: Catching the spirit of India

On this independence, it is interesting to look back at the last 63 years and contemplate what all these years have meant to us?

What is this Nation State called India? What is that makes it the oldest living and continuous civilization? And what’s in a name? Is it India, is it Hindustan or is it Bharat?

What is that thread that runs continuously through this five thousand year old civilization? Is it religion? Is it language?  Is it culture? Or is it simply a mixture of Cricket, Hinglish & Bollywood!!

With twenty-three constitutionally recognized national languages and over 600+ different dialects, we are indeed multilingual with Hindi & English as the two most widely used languages. The thread of Indianness then has to go beyond a mere linguistic one.

A surface area of over 3.2 million square kilometers, India on the world map, looks not like a piece of land, but a mother stretching her arms from her 15,000 km long borders shared with Pakistan & Afghanistan in the west to Bhutan, Nepal, Bangladesh China and Myanmar in the east. The Nation State is carved like a feminine figure elegantly placed in the tropical south Asia, with the three water bodies The Arabian Sea, The Indian Ocean and The Bay of Bengal washing her feet. There is indeed something about this Nation that it never ceases to exist. As Iqbal, very famously put it: ‘Kuch baat hai ke haansti mitt thi nahi hamari, saadiyon se raha hai dushman dooren zaman hamara.’ There is something about us, that we have a continuous existence and identity notwithstanding relentless foreign occupation and enemies.

India is famously referred to as the cradle of civilization with the famous Indus Valley Civilization dating as far back to 2400 BC. Though deeply argued, Aryans are controversially referred to as the first invaders from central Asia who imposed their Vedic system and language Sanskrit. It was a golden age with women enjoying equal status as men and making an equal participation in business affairs and politics. The concept of Pardha(system of Veil, an evil which later developed in mid-eighteenth century) was unheard of and marriages were consensual and not forced.

The Golden age of the Gupta Empire and the Maurayans, particularly the Ashoka is famously known as the age of Gold in the Indian history. It is said that people were prosperous and far removed from the avarices and evils of greed and hunger of present life. No one was poor. Literally speaking, India had rivers not of water, but flowing with milk!

The next important conquest with visible architectural influences was the Sultanant of Delhi and the conquest by Turcs, Afghans and the 12^th century conquest by Mohammad of Ghori.

In the south of India, the medieval kingdom of Vijayanagara, had significant impact on art, culture and prosperity of the times. Comprising of modern Karnataka, Kerala, Tamil Nadu, Andhra Pradesh and parts of Maharashtra, it was a period of development and golden age for the southern belt.

Babar’s legendary victory in the Battle of Panipat in 1526 established the great Mughal empire ruled by Babur, Humayun, Akbar, Jehangir, Shah Jahan and Aurangzeb.

The advent of the British with the East India Company in the 16^th century led to the downfall of the Mughal Empire and the British either directly or through 500+ small and large princely states ruled the Indian subcontinent at the time of her independence on 15^th August 1947. When the Indian Independence Act was giving way to the independent India, the then and the last viceroy and first Governor General Lord Mountbatten, had a choice to either admit or refuse admission to the Indian Union by the princely states based on the request made by them. After a long elaborate process, we eventually had a geographically defined territory of what physically exists as the modern day India. The frontiers of land of this great Nation has been defined and re-defined many a times. What constitutes the present day Pakistan and Afghanistan in the west to Nepal, Bhutan, Bangladesh and parts of Mayanmar was once a part of ancient India or Bharat, as it was earlier known. Then there has to be something beyond territorial limitation that we call India!

Religiously speaking, India is like a garland around the Divine’s neck with almost all religions making their religious presence in this secular nation. Even the constitution has special provision for the free practice of religion and development of religion as fundamental right under Article 25. The religious diversity can be gauzed from the fact that India has a woman President(even the most developed nation like USA is still to have a women President) Ms Pratibha Devi Patil, a Christian Defense Minister Mr A.K. Anthony, a Muslim vice-President M. Hamid Ansari, a Sikh Prime Minister Shri Manmohan Singh and a Hindu finance Minister Shri Pranab Mukherjee. That is secularism not just in words but in practice. Secularism being the uniting fabric and religious diversity a matter of Indian pride, religion is again not the driving force that unites this Nation State.

In the opinion of the author, beyond the materialistic and worldly notions of Nation States, there exists a progressive concept of Nation State. A progressive Nation of accepting each other as fellow countrymen, a progressive march towards development and a progressive march of freedom of liberty, thought and expression.

The ageless, timeless, priceless noble prize winning spiritual classic by Rabindra DA perhaps captures this ‘Spirit’, ‘the Soul’ of India, ‘Where the mind is without fear and the head is held high. Where knowledge is free, where the world has not been broken up into fragments by narrow domestic walls. Into that Heaven of Freedom my Father, let my country awake!’

Our ancestors havc dedicated their lives to keep this spirit alive and it is a very hard-earned freedom that we got on 15^th August 1947. It was more then freedom from a foreign empire. It was symbolic of breaking away from all the evils of the past that had crypted into this 5000 year old civilization. It was a promise of a dream, that retaining our rich cultural vast, we will be re-born as a new India, secular and spiritual, progressive in outlook, one in spirit and democratic in approach.

On this independence day, lets re-visit and re-discover the spirit called India!

Happy Independence Day! Swantantra Diwas mubarak ho!!

The City Beautiful Chandigarh: Lessons for the City Capital and City Commercial!

 Thanks to huge infrastructural bottlenecks, a drive can be quite stressful anywhere across the country. Ruminating cows, needless overtaking, screeching horns and a startling wannabe teens cricket team in the middle of the street is not all too surprising. Delhi, Mumbai, Bangalore, Kolkatta; the reservoirs of modern India, the story is everywhere the same. Or so did I thought! Until I visited the City Beautiful. A drive down the Le Coubusier designed capital city, Chandigarh, left me overwhelmed.

Chandigarh, derives its name from Chandi Devi, whose temple is situated in the adjacent Panchkula district. Also, ‘Chandi ki Var’ a ballad poem by Guru Gobind Singh, the first Guru of the Sikhs gives Chandigarh, the word ‘Chandi’ in her name. And the word Chandi in Hindi also means silver! The word Chandigarh is a conjugation of two words, ‘Chandi’ and ‘Garh’, and literally means the fortress of Devi Chandi. And the fortress of the Divine, it indeed is! With its well-manicured lawns, sprawling green, expansive multi-laned roads and huge omnipresent road-side Ashokas, Deodars and Euclyptus, the city retains its spacious heavenly aura with materialist modern day amenities present in abundance. The affluence of the city can be gauged from the presence of international brands, huge malls, multiplexes and not to forget the exhorbitant land rates! Just an acre of land I was told, can cost upto 6-8 crores! Whopping, unreal and of course, unaffordable! After all, it is an expensive affair living in the fortress of the Divine, more so when taxed by mortals like us!

Chandigarh is a new city with historic roots. After the sad partition of India in 1947, the  province of Punjab needed a new capital. Temporarily, Shimla was decided as the capital of undivided Punjab. But the need for new center was strongly felt by the then Prime Minister of India, Pandit Jawaharlal Nehru. Envisioning the concept of Chandigarh, he famously said to the architects that with Chandigarh, India will present to the world a new city that will symbolize the constitutional aspiration of a new India liberated from the archaic traditions and past. In short, the dream was to make Chandigarh an architectural expression of the confidence and reposte of the new emerging India.

The initial architectural plan was made by Albert Mayer, an associate of Mathew Novicki. Unfortunately due to his death in a road accident, the great architect had to be replaced by the legendary Swiss architect Le Corbusier who along with his team of Maxwell Fry, Jane B Drew, Pierre Jeanneret and the young promising Indian team of M.N. Sharma, U.E. Chowdhary and Aditya Prakash laid the plan for the new capital of Punjab in 1951.

With a  human development index of .86 and a population of around 100,000 and the highest per capita income in India, Chandigarh the capital of Punjab and Haryana, is one of the most well laid out cities in the country. The city that was initially designed to home some 500,000 habitants has today over double the population and is one of the highly densely populated city with 7900 habitants per square kilometers. Yet, the signs of infrastructural fabric withering away is far from visible!

With the symbol of an open hand, the city of Le Corbusier, continues to welcome government offices, people & corporations alike with her open arms. The capital of Punjab & Haryana and itself a Union Territory, it holds some15 medium to large Industrial units, has over 2500 small scale industries. The Chandigarh IT Park hosts the best names in the IT sector and continues to retain top spot as the ‘Emerging Outsourcing & IT Services Destinations worldwide.’

 Chandigarh also apparently has the largest number of per capita vehicles and yet is consistently rated as the cleanest city in the country.

So what is it in its architecture that despite her burgeoning population, increasing office and bureaucratic presence, Chandigarh continues to remain clean, green and spacious. Perhaps the reason resonates in the policy making and planning that was subsequently followed by development.

Ambitiously dreamt by India’s first PM, Pandit Nehru and painstakingly envisioned by Le Corbusier, the city is divided in sixty sectors of 800 by 1200 each covering a total area of 114 km square. The highly sophisticated 7 lane system of circulation in the city, successfully mitigates the menace of traffic and preserves the habitant zones from the nuisance of traffic. Interestingly, city has no sector  numbered 13. Seems like even the scientific designers had a touch of superstition! Each sector is well equipped with public amenities, cultural centres and green spaces and there are habitation zones for the rich and for the middle class bourgeoise alike. Interestingly the central sector number 17 situated at the heart of the city iis the principal centres of commerce, restaurant and bars. The infrastructural burden on sector 17 is supported by ancillary commercial centres in sector 35. Also all the other sectors have their fair share of everyday malls, magazines, daily necessities and schools.

Compare this with the 'planned' unplanned development in India’s unarguably very important cities: Delhi & Mumbai. Delhi with a population of around twenty million habitants, 1500 km square and a population density of around 12,000 per kilometer square is an infrastructural nightmare. Mumbai, the commercial capital and significant contributor to GDP and an average per capita income of over $ 1000, is an even more gory story. Millions of homeless sleeping on the streets, living painful lives at the mercy of police, gangs and mafia, it indeed is a deplorable and grim picture of an emerging economy. Is unplanned development, unmitigated migration and policy failure the genus of these modern day soulless jungles of concrete?

Does this development and infrastructural layout in the City Beautiful have any lessons for the Commercial and Political capital of India?