Exploiting the crowd: The New Zealand response to equity crowd funding

<p>The crowd funding exclusion in the Financial Markets Conduct Act 2013 allows issuers, often innovative start-up businesses, to raise up to $2,000,000 in a 12 month period from retail investors through an internet platform provided by a licensed intermediary service, without the need for the product disclosure statement and on-line disclosures usually required under Part 3 of the Act. In order to protect the interests of investors in a market with a high risk of negligible return, other protections need to be provided. International jurisdictions have imposed investor caps, but New Zealand has failed to do so. This essay argues that, particularly in light of shortcomings with other aspects of crowd funding investor protections, a mandatory investor cap of five per cent of the amount being raised should be imposed, to protect investors both from the high risks of venture capital investing and from their own inexperience in this new and rapidly developing market.</p>

Exploiting the crowd: The New Zealand response to equity crowd funding

<p>The crowd funding exclusion in the Financial Markets Conduct Act 2013 allows issuers, often innovative start-up businesses, to raise up to $2,000,000 in a 12 month period from retail investors through an internet platform provided by a licensed intermediary service, without the need for the product disclosure statement and on-line disclosures usually required under Part 3 of the Act. In order to protect the interests of investors in a market with a high risk of negligible return, other protections need to be provided. International jurisdictions have imposed investor caps, but New Zealand has failed to do so. This essay argues that, particularly in light of shortcomings with other aspects of crowd funding investor protections, a mandatory investor cap of five per cent of the amount being raised should be imposed, to protect investors both from the high risks of venture capital investing and from their own inexperience in this new and rapidly developing market.</p>

The UK’s Post-Brexit Investment Policy: An Opportunity for New Design Choices

Brexit presents an important opportunity for the UK to reimagine its investment policy. The UK formulated its independent investment policy, separate from the European Union’s, more than a decade ago. Since then, State practice relating to investment protection, facilitation, liberalisation and dispute resolution has changed. New model bilateral investment treaties (BITS) and other recent international investment agreements offer innovations. The UK can learn from these developments in formulating its post-Brexit investment policy. The UK’s recent policy documents suggest that its investment policy will closely track its historical practice. The UK has historically offered investment protection to foreign investors in its bit s. Investors have been allowed to initiate arbitration against States. However, the UK’s current negotiations with the EU suggest that investor protections may be more limited. This article begins by describing the UK’s existing trade agreements and recent trade practice as an EU Member State. It also describes the anticipated impact of Brexit on these arrangements and practices. The next section explains the likely direction of the UK’s future investment policy, as indicated in recent policy documents. The final section offers ideas for selected design choices that the UK could make in formulating its investment policy.

Fortifying Inequality

In this chapter, foreign investor protections are introduced as a symbol and guarantor of global inequality. Backed by the most powerful adjudicative mechanism in international law, these protections benefit 255,000 people whose combined wealth exceeds that of 80 per cent of the world’s adult population, about four billion people. They lead one to ask if the one hundred companies responsible for most industrial greenhouse gas emissions, for example, are so vulnerable or helpful to others as to deserve extraordinary international protection. Commonplace arguments in favour of investor–state dispute settlement (ISDS) are surveyed and criticized. The promotional role of the ISDS industry of arbitrators, lawyers, and experts, for which ISDS has generated to billions in fees, is also highlighted, focusing on arbitrators whose pro-investor interpretations laid a foundation for the explosion of ISDS.

Fault Lines and the Future of ISDS

In this chapter, it is argued that removing foreign investor protections is a feasible and important step to re-invigorate the institutions needed to confront pressing concerns of humanity. By limiting government capacity to employ the policy levers recommended by scientists to protect society from climate-related damage, for example, investor–state dispute settlement (ISDS) hampers state action to confront a global emergency. Reform efforts in Europe, North America, and developing or transition countries are surveyed, and the deleterious role of the ISDS industry is revisited. Countries are encouraged to terminate their ISDS treaties to bolster their position in relation to ISDS reform. If ISDS continues to expand, however, a foreseeable outcome is that it will ultimately play a role in the collapse of society.

RECALIBRATING THE INTERNATIONAL INVESTMENT REGIME THROUGH NARROWED JURISDICTION

The legitimacy crisis confronting the international investment regime has called for reforms to eliminate the asymmetric and troubled nature of investment treaties. These instruments grant extensive investor protections without offering reciprocal safeguards for host States wishing to preserve regulatory space. This article argues that any reform designed to redress imbalances in the existing regime should first aim at narrowing the personal jurisdiction of investment tribunals. Problematically, access to most investment treaties depends on broad nationality requirements, which have enabled investors to use corporations or passports of convenience to obtain treaty protection. This practice exacerbates the unbalanced relationship between host States and investors. It increases host States’ exposure to investment treaty claims and allows investors to circumvent newer, more State-oriented investment treaties. Using as an example the novel anti-nationality planning approach embraced in the 2019 Dutch Model BIT, this article suggests effective treaty mechanisms that States can adopt to restrict the range of investors that are entitled to claim.

United Nations Constitutional Assistance

This chapter conceptualizes UNCA as an ‘institution’ or ‘established practice.’ Towards this end, it maps out UNCA’s use to produce the Western liberal constitution, conceptualized as a rule of law/development strategy (discussed in Chapter 5) from 1989-2018 in Asia, Asia-Pacific, Africa, Eastern Europe, the Caribbean and Indian Ocean regions and Latin America. In this way, UNCA’s use in the post-conflict and development assistance contexts is covered. This chapter also covers the five UNCA-ITA projects, explaining how UNCA gave rise to and governed ITA’s role. The role of UN Family members such as the Bretton Woods Institutions and the United Nations Development Programme in shaping constitutional content is underscored. This chapter tabulates the constitutional commonalities produced by UNCA: the common constitutional provisions in all UNCA-recipients-states (e.g., constitutional supremacy; foreign investor protections, and anti-corruption commissions). On this basis it concludes that the UN promotes a one-size-fits-all model in all states, conflict-torn and stable.