Managing the New “Trade Secrecy” Risks in Global Sourcing: Criminal Theft, Criminal Negligence, Espionage, Bribery, Antitrust and Cross-Border Law Enforcement

April 30, 2010 by Bierce & Kenerson, P.C. · Leave a Comment

Trade secrecy risks arise whenever an enterprise shares confidential business information with a supplier, service provider, joint venturer or customer. Trade secrecy protection measures should be planned and implemented through appropriate non-disclosure covenants by the third party and possibly even its employees and others in the value chain. Current trade secrecy are reflected in three seemingly disparate events: the Rio Tinto employee economic espionage and bribery case in China, the U.S. Department of Justice’s investigation into the anticompetitive use of non-competition covenants (“non-competes”) by high-tech companies and the Algerian-U.S. Mutual Legal Assistance Treaty (“MLAT”).

These three current events suggest that both enterprise customers and their service providers take a second look at their current practices for protecting trade secrets. At the end of this article, we offer a series of questions that need answers before any kind of outsourcing – indeed, any cross-border data flow — can take place. Such questions offer a basic refresher course, with “James Bond-compliant” updates, on challenges of trade secret protections in global operations.

I. The Current Context of Trade Secrets at Risk

Item #1: Bribery and Espionage in China (the Rio Tinto employee case). On March 28, 2010, China convicted a local sales employee of a British-Australian mining company named Stern Hu, a Chinese-born Australian citizen, and other Chinese-resident employees of Rio Tinto (but not Rio Tinto itself) of bribery and theft of trade secrets relating to price negotiations of iron ore for sale to Chinese state-owned companies. The trial was conducted largely in secret. Rio Tinto had previously rejected an investment offer from Chinalco that involved some Australian national security issues. Some analysts suggested the case was a political retaliation for that rejection and an abuse of judicial authority. Others suggested that the case leaves open the question of whether there was any rule of law or was this merely the use of judicial power to punish foreign business that used aggressive means of driving hard bargains. The case attracted global attention to the concept in Chinese law that identifies non-public commercial information of a Chinese state-owned enterprise as a “state secret.” Rio Tinto initially defended the employees but then said they had acted outside the scope of their operations and authority. The employees were convicted and sentenced to 7 to 14 years in prison plus financial penalties.

On March 25, 2010, China’s State-Owned Assets Supervision and Administration Commission issued regulations on commercial secrets, but did not disclose them until the Rio Tinto employee verdict. Those regulations remain somewhat vague, leaving foreign companies (and Chinese companies that are not state-owned enterprises, or “SOE’s”) to interpret them at their peril. See www.outsourcing-law.com/jurisdictions/countries/china.

Item #2: Anti-Terrorism and Cybercrimes under a Mutual Legal Assistance Treaty. On April 7, 2010, the U.S. and Algeria signed a mutual legal assistance treaty to combat international crime and terrorism. According to the press release:

The mutual legal assistance treaty, or MLAT, will be an effective tool in the investigation and prosecution of terrorism, cybercrime, white collar offenses and other crimes. Among other tools, the treaty will help law enforcement officials from the two countries obtain testimonies and statements; retrieve evidence, including bank and business records; provide information and records from governmental departments or agencies; and provide a means of inviting individuals to testify in a requesting country.

The U.S. has approximately 50 such MLAT’s. Such agreements could be used to enforce criminal prosecutions of misappropriation of trade secrets, assuming such misappropriation is a criminal act in the relevant jurisdictions. The press release announcing the MLAT did not link to any copy of the treaty, and the Justice Department website does not publish a copy either. Interested parties will need to do some further investigation then in how such a treaty might be used to enforce trade secret protections.

Item #3: Hiring Practices by Global Services Providers. Now, enterprise customers have to be worried about the legality of hiring practices – at least in the United States – of their outsourcing service providers. Since July 2009, the U.S. Department of Justice has been investigating the hiring practices of Google, Intel, IBM, Apple and IAC/InterActiveCorp., according to the Wall Street Journal and other news reports in April 2010. The reports claim that the U.S. Government could challenge, or chill, the use of non-competition covenants in industries, such as high-tech, where innovation drives comparative advantage and non-competes might constitute illegal collusion on cost management, thereby depriving knowledge workers of a market for their skills. The investigation appears inspired by cases where innovators are hired away and the former employer seeks to enforce a non-competition covenant, particularly where the new employer claims that the litigation lacks a valid legal basis and thus is anticompetitive. (Such a case happened in 2005 when Google hired a Microsoft engineer in China, and Google claimed that Chinese law did not permit enforcement in China of a non-competition covenant). Enterprise customers should now be concerned with compliance by their service providers with antitrust concerns.

II. The Law of Trade Secrecy

All these recent events underscore the need for prudent trade secrecy practices in the global supply chain. Trade secrets are now at risk due to potential civil and criminal espionage, bribery, cybercrime, and antitrust prohibitions on abusive and illegal anticompetitive practices. Further, the area of trade secrecy is now engulfed in national security and public policy considerations, underscoring the importance of a stable political environment for assuring the predictability of legal rights and enforcement actions in the various jurisdictions where trade secrets are shared and used in an outsourcing business relationship.

Trade Secrets. It is a best practice in outsourcing contracts, to protect the enterprise customer’s trade secrets. The customer wants to know how this is done. Such protections can be applied to individual employees under non-disclosure agreements and maybe even non-competition covenants. NDA’s are generally enforceable but are generally construed in a manner to avoid depriving an employee (or service provider) of “general skill and knowledge” in the industry.

NDA’s are essential to enable any outsourcing, resourcing (retro sourcing back in-house) and transfer sourcing (to a new service provider on expiration or termination). As a matter of public policy under national laws, NDA’s are critical. The WTO protections of trade secrets are not very strong, based instead on non-secret intellectual property rights such as patents, trademarks and copyrights.

Non-Competition Covenants. Non-compete covenants are unenforceable in California as a matter of law and possibly in the BPO provider’s service delivery jurisdiction. Non-competes deprive employees of a right to be hired by competitors. They are unenforceable in some jurisdictions, and where enforceable they must be limited to reasonable scope in time, territory and subject matter. Employers can make the arguments, in an antitrust context, that non-competition covenants:

are not anti-competitive in practice;
do not deny employees the right to find work in non-competitive companies;
are widespread across industries and countries; and
are used by companies across many industries to maintain good business relationships by promoting exchanges of information across the full spectrum of personnel (not just through a narrow channel, like a chaperone of trade secrets), and as a result collaboration between technology-based companies is promoted by such practices.

An antitrust enforcer might argue that non-compete agreements distort access by skilled workers to mobility and job choice, thus depressing competition for skilled workers and depressing wages.

Risk Management: Knowing Your Service Provider’s Hiring Practices. Based on this antitrust activity, enterprise customers should investigate the employment practices of their service providers to understand clearly the contractual framework and legal enforceability of employment practices in the relevant jurisdictions. The legal framework for protecting trade secrets, or allowing them to be disclosed to the local government without judicial review with open adversarial procedure, should also be explored and fully appreciated. Thus, trade secrecy risks should be assessed in the selection of service providers, the scoping of the functions to be outsourced and the use of encryption and decryption before data transfers.

Compliance: Knowing Yourself and the Law. These recent events raise questions that compliance officers and legal departments, as well as product managers and CEO’s, should answer before any kind of outsourcing takes place:

1. What does the enterprise customer do today to identify and protect its trade secrets internally?

a. Identify types of non-public information from all sources that needs to be maintained as non-public.

i.   Securities (risk of liability for securities fraud)
ii.   Financial information (risk of loss of advantage in pricing negotiations; risk of securities liability for failure to comply with Regulation FD or other “fair disclosure” rules)
iii.   Human capital information (governed by labor laws and privacy laws)
iv.   Technical data, such as designs, processes, formulae, manufacturing techniques (risk of loss of patent rights or loss of competitive advantage)
v.   Marketing information (customer names and related business information relating to the enterprise’s customer relationship)
vi.   Sales information (the existence of RFP’s and the contents of offers and other responses to RFP’s)

2. How much data does the enterprise need to have to accomplish its mission?

a. Avoid excessive collection and preservation of unencrypted

i.   personally identifiable information (“PII”) of individuals in any business relationship.
ii.   healthcare information.
iii.   credit card information.

b. Avoid collection of non-public information from third parties who might be under a duty of non-disclosure, or who cannot explain how they legitimately obtained the non-public information.

3. How does the enterprise ensure that it has the legal right to know the non-public information?

a.   Obtain written confirmation from the disclosing party that it has the authority to make the disclosure.
b.   Identify non-disclosure agreements and categorize the information so that it can be accessed, stored, retained and destroyed in accordance with the non-disclosure agreement.
c.   Limit access by persons having a legitimate “need to know.”
d.   Use the non-public information only as necessary to perform a legal and permitted business activity.
e.   Avoid use of bribery, coercion, theft and other illicit means of acquiring non-confidential information.

4. How does the enterprise identify and protect the trade secrets of third parties with whom it does business.

a. Identify source of non-public information.
b. Identify the duration of any holding period for non-public information under any non-disclosure agreement.

5. What measures does the enterprise take to train and audit its employees for compliance with trade secrecy policies?
6. Does the enterprise identify special duties and special risks.

a. Take special measures to identify, segregate and protect “commercial secrets” or “state secrets” when dealing with a foreign state-owned enterprise (“SOE”)?

7. How are trade secret rights recognized and enforced under local law? Are such rights clearly protected, or must a company rely upon contract or criminal prosecution?
8. What are the best ways to protect trade secrets from a practical viewpoint?

a.   Divide work flows or discrete functions across suppliers, countries and sources to avoid having one person or supplier know too much.
b.   Retain competitive information in-house.
c.   Segregate sales and marketing functions from non-public information in internal technical, financial and human resources departments.

9. What is the history of trade secret enforcement in the country?

a.   Risk of inadvertent criminal liability, including vicarious liability of senior executives for misdeeds of employees (See China’s Criminal Law, article 219).
b.   Risk of investing in new products or services that cannot be exploited due to misappropriation.
c.   Identify any history of data security breaches and remediation activities.

10. Does the enterprise customer’s country have a “mutual legal assistance treaty” or other agreement with the service provider’s country to prosecute “cyber-crime”, so that evidence can be exchanged and used in international abuses of trade secrets?
11. What policies, practices and contractual measures does the service provider take to protect trade secrets? Are such measures a violation of antitrust law and therefore unenforceable?

Outsourcing Law & Business Journal™: April 2010

April 29, 2010 by Bierce & Kenerson, P.C. · Leave a Comment

OUTSOURCING LAW & BUSINESS JOURNAL (™) : Strategies and rules for adding value and improving legal and regulation compliance through business process management techniques in strategic alliances, joint ventures, shared services and cost-effective, durable and flexible sourcing of services. www.outsourcing-law.com. Visit our blog at http://blog.outsourcing-law.com for commentary on current events.

Insights by Bierce & Kenerson, P.C., Editors. www.biercekenerson.com

Editor’s Note:

Three recent events conspired to produce our article about trade secrecy risks in this month’s newsletter; they were the conviction of a Rio Tinto employee in China, the signing of a mutual legal assistance treaty between the U.S. and Algeria, and the on-going investigations of hiring practices of tech companies, using non-competition covenants, by the U.S. Dept. of Justice. As a result, we are providing you with a checklist of questions that you need answers to before your company shares confidential business information during the course of contract negotiations. Read on…

Vol. 10, No. 4 (April 2010)
_______________________________

1. Managing the New “Trade Secrecy” Risks in Global Sourcing: Criminal Theft, Criminal Negligence, Espionage, Bribery, Antitrust and Cross-Border Law Enforcement. Trade secrecy risks arise whenever an enterprise shares confidential business information with a supplier, service provider, joint venturer or customer. Trade secrecy protection measures should be planned and implemented through appropriate non-disclosure covenants by the third party and possibly even its employees and others in the value chain. Current trade secrecy are reflected in three seemingly disparate events: the Rio Tinto employee economic espionage and bribery case in China, the U.S. Department of Justice’s investigation into the anticompetitive use of non-competition covenants (“non-competes”) by high-tech companies and the Algerian-U.S. Mutual Legal Assistance Treaty (“MLAT”).

2. Trade Secrets. Chinese Criminal Law, Article 219, imposes criminal liability for improper conduct relating to “commercial secrets.” The Criminal Law has only a vague definition of “commercial secrets.”….On March 25, 2010, the State-owned Assets Supervision and Administration Commission (“SASAC”) adopted regulations on commercial secrets applicable to approximately 120 state-owned enterprises (“SOE’s”)….The regulations were announced on April 26, 2010, shortly after the convictions of certain Rio Tinto employees of bribery and theft of commercial secrets. For the complete article, go to http://www.outsourcing-law.com/2010/04/trade-secrets/

3. Humor.

MLAT, n. (1) mutual legal assistance treaty; (2) milk-flavored coffee latte; (3) multi-legal aptititude test.

Trade secret management, n. (1) Hear no evil, see no evil, speak no evil; (2) keeping secret how you keep your secrets.

SOE, n. (1) state-owned enterprise; (2) social oriented environmenta; (3) sorry out of energy.

4. Conferences.

May 10-12, IQPC’s 7th Annual HR Shared Services and Outsourcing Summit, Chicago, Illinois. This event will be a gathering for corporate HR & shared services executives from companies across North America to exchange ideas, develop new partnerships and discuss the latest tools, technologies and strategies being employed in the profession to enhance departmental efficiencies and propel corporate growth. The event will focus on the most current topics in the HR shared services industry including metrics, automation, outsourcing, globalization, compensation & rewards, benefits and an overall focus on the new strategic role of HR shared services.how to tackle change management, analyze current and future projects and further develop the instrumental key areas within HR shared services. Visit their website at http://www.hrssoutsourcing.com/Event.aspx?id=270796 to register and get more information.

May 17-19, IQPC presents its Information Retention & E-Disclosure Management Summit, London, UK. This is Europe’s premier event in this field, designed to help you steer your organisation successfully through lawsuits and regulatory inquiries. Topics include:

Fast track your understanding of the Civil Litigation Costs Review: Hear directly from Lord Justice Jackson and engage in debate with our acclaimed international Judge’s panel
Develop a legally defensible and technically sound Information Retention policy with a multidisciplinary approach with insights from Debra Logan of Gartner plus Pfizer, and Kleinwort Benson
Reduce risk, cost, time and complexity of eDisclosure with critical updates on advances in technology
Ensure compliance by sanity checking your strategy with the FSA and ICO

For more information, visit their website at http://www.informationretention.co.uk/Event.aspx?id=262244i

June 6-8, 4th Annual IQPC Shared Services Exchange™, Austin, Texas, United States, an elite event for shared services executives who are looking to develop new strategy, solve challenges and source partners that will allow them to create efficiency and drive more value out of their shared services centers.

This event will continue IQPC Exchange’s ongoing tradition of offering cutting-edge, strategic networking and learning opportunities for senior level shared services executives, combining conference sessions, one-on-one business meetings and numerous networking functions to allow executives to speak with their peers. With pre-scheduled one-on-one advisory meetings and personalized itineraries, the Share Services Exchange™ provides the opportunity to create an agenda that directly reflect the goals and initiatives of participating executives.

To request a complimentary delegate invitation or for information on solution provider packages, please contact: exchange@iqpc.com, call 1-866-296-4580 or visit their website at http://www.sharedservicesexchange.com/

July 14-16, 2010. IQPC Presents Shared Services for Finance and Accounting, Chicago, Illinois. The SSFA 2010 Summit brings together leading financial shared services experts to network, benchmark and learn through keynote presentations, interactive roundtables, case studies and discussion panels. This program will help you improve internal accounting processes, maximize your efficiency with less resources, make smarter sourcing decisions, and drive continuous value through your financial services. For more information, visit http://www.sharedservicesfa.com/Event.aspx?id=314126

September 26-28, 2010. IQPC Shared Services Exchange™ Event, 2nd Annual, to be held in The Hague, Netherlands. Shared Service Centres have long been seen as the cost saving centre of HR, Finance & Accounting and IT processes, but with changing employment trends and global challenges facing organisations, how can SSC’s continually offer service value?

Unlike typical conferences, the Shared Services Exchange™ , which will be co-located with the Corporate Finance Exchange™, focuses on networking, strategic conference sessions and one-on-one meetings with solution providers. The Exchange invites strategic decision makers to take a step back from their current operations, see what strategies and solutions others are adopting, develop new partnerships and make investment choices that deliver innovative solutions and benefits to their businesses.

To request your complimentary delegate invitation or for information on solution provider packages, please contact: exchangeinfo@iqpc.com, call +44 (0) 207 368 9709, or visit their website at http://www.sharedservicesexchange.co.uk/Event.aspx?id=263014

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FEEDBACK: This newsletter addresses legal issues in sourcing of IT, HR, finance and accounting, procurement, logistics, manufacturing, customer relationship management including outsourcing, shared services, BOT and strategic acquisitions for sourcing. Send us your suggestions for article topics, or report a broken link at: wbierce@biercekenerson.com The information provided herein does not necessarily constitute the opinion of Bierce & Kenerson, P.C. or any author or its clients. This newsletter is not legal advice and does not create an attorney-client relationship. Reproductions must include our copyright notice. For reprint permission, please contact: wbierce@biercekenerson.com . Edited by Bierce & Kenerson, P.C. Copyright (c) 2010, Outsourcing Law Global LLC. All rights reserved. Editor in Chief: William Bierce of Bierce & Kenerson, P.C. located at 420 Lexington Avenue, Suite 2920, New York, NY 10170, 212-840-0080.

Filed under: Newsletter
Tagged: compliance, hiring practices, MLAT, NDA, non-competition covenants, Rio Tinto, risk management, state secrets, trade secrets

Tuesday, March 23, 2010, Webinar on Sourcing of Global Talent

March 2, 2010 by Bierce & Kenerson, P.C. · Leave a Comment

Back by popular demand, this webinar will again be presented:

Managing Knowledge, Compliance and Legal Risks in Sourcing of Global Talent
Tuesday, March 23, 2010
11:00AM, EDT
45 Minutes

Speakers:
• William B. Bierce, Esq., Bierce & Kenerson, P.C. – outsourcing lawyer
• Chris Nuttall, PA Consulting, Member of PA’s Management Group
• Larry Scinto, PA Consulting, Managing Consultant

This webinar will discuss the human capital management for the contingent workforce in our current economic climate. The speakers will address issues in designing a contingent workforce strategy, managing this contingent workforce, effective governance and the managing risks and legal issues that arise with the implementation of such a workforce using internal and external resources. In this webinar, some of the questions that will be discussed are:

• How do I put together an effective contingent workforce strategy to optimize my investment in contingent labor?
• How do I ensure that my business customers are engaged in the case for
change and buy-in to common technology, process, policy and governance?
• How do I govern multiple providers and ensure effective performance and
value for my investment?
• What technologies should I be using to track provider/contingent worker
utilization and performance?
• How do I identify and manage legal, regulatory and compliance risks
in all geographies where I operate directly and through external service
providers?
• How do I ensure that there is effective governance across the entirety of my
contingent workforce?
• What policies and procedures should I adopt to design a flexible contingent
workforce into my global workforce and service supply chain?

Who Should Attend – Corporate decision-makers and both buyers and sellers of outsourced services.

Space is limited.
Reserve your Webinar seat now at:
https://www2.gotomeeting.com/register/162314754

After registering you will receive a confirmation email containing information about joining the Webinar.

Please forward your questions, comments and feedback to
Laura Sanfiorenzo of Bierce & Kenerson, P.C.

Filed under: Webinar
Tagged: compliance, effective governance, global talent, legal risks, management, sourcing, workforce

Risks of “Climate Change”: SEC Highlights Global Need for Business Resiliency Planning and Policies

January 27, 2010 by William Bierce · 1 Comment

On January 27, 2010, the U.S. Securities and Exchange Commission adopted an “interpretive guidance” to public companies on existing disclosure requirements as they relate to business or legislative events on the issue of climate change. Such “interpretive guidance” is not a new regulation, but serves to express an intention to clarify existing requirements. It was adopted by a vote of 3 Democrats to 2 Republican commissioners, who in principle are not representing their respective political parties. The interpretive guidance will have a significant impact, both in the U.S. and across the world, on investor relations, risk management and indirectly on corporate social responsibility.

Impact on Business Continuity and Profitability. Climate change could have material impacts on a company’s business. Disclosures of the impact of changes in climate – such as more severe storms, a rise in sea levels, increases in the costs of farm products, etc. – could be a “ material” factor for an investor in deciding whether to buy, sell or hold securities in such a company. Thus, the issue of climate change has, in a sense, always been a material factor for discussion in management’s general discussion and disclosure of risk factors.

The SEC’s Interpretive Guidance. Quoted below, the SEC’s interpretive guidance on January 27, 2010 highlights several specific areas as examples of where climate change may trigger disclosure requirements:

Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.
Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.
Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

Impact on Global Sourcing. This interpretive guidance is important for outsourcing service providers that support global or globalizing businesses in outsourcing of IT, business processes, call centers, knowledge processing, HR staffing and administration, legal processing and other services. The possibility of severe storms in a service delivery center should thus be reflected in a disclosure about the susceptibility of such a center to service outages and damages to facilities and resulting consequential damages to the reporting public company. Such disclosures should consider the related disaster recovery plans and business resiliency plans that might mitigate such outages and lost business.

What does this regulatory concern mean for global sourcing?

Corporate Investor Relations. “Climate change” is now on the scoreboard for disclosures by public companies and evaluation by portfolio managers.

Corporate Strategy, Business Process Design and Risk Management. Business resiliency measures that relate to climatic conditions have now become a subject of scrutiny.

Global Workforce Management. “Climate change” is now a matter of very public concern. The impact of weather and climate change on a service provider’s capacity to deliver services, as well as on the customer enterprise’s ability to receive services from different service centers, have now become very openly a regulatory disclosure concern.

Corporate Social Responsibility. The interpretive guidance gives a new impetus for corporations, both public and private, to identify their strategies and contingency planning for reducing the impact of adverse climate changes. While not commanding any CSR initiative, the interpretive guidance will undoubtedly highlight this on the corporate business agenda for branding of “good corporate citizens.” It could further spur greater interest in measuring and reducing the carbon footprint of publicly traded companies.

Underscoring Existing “Best Practices.” The SEC’s interpretive guidance has given enterprises a clear path on managing risks related to climate change. This is actually nothing new, since sophisticated service customers have already been demanding disaster recovery plans and contingency sourcing plans as “best practices” in global sourcing. Such plans require considerable attention to scenario analysis, alternative sourcing strategies and contingency planning. Business resiliency planning will require continuing development of policies and procedures, training and testing. What was a “best practice” has now become an even more compelling “best practice.”

Filed under: Newsletter Article
Tagged: compliance, disaster recovery, resiliency, SEC, security

Outsourcing Law & Business Journal™:November 2009

December 21, 2009 by Bierce & Kenerson, P.C. · Leave a Comment

Vol. 9, No. 11 (November, 2009) Last Opportunity to Register - Webinar on Sourcing of Global Talent

Managing Knowledge, Compliance and Legal Risks in Sourcing of Global Talent
Thursday November 17, 2009, 11 A.M. – 12 Noon, Eastern Daylight Time U.S.

Speakers:

William B. Bierce, Esq., Bierce & Kenerson, P.C. – Outsourcing Lawyer
Larry Scinto, PA Consulting, Managing Consultant
Neil McEwen, PA Consulting, Managing Consultant

Agenda. This webinar will discuss the human capital management for the contingent workforce in our current economic climate. The speakers will address issues in designing a contingent workforce strategy, managing this contingent workforce, effective governance and the managing risks and legal issues that arise with the implementation of such a workforce. In this webinar, some of the questions that will be discussed are:

How do I put together an effective contingent workforce strategy to optimize my investment in contingent labor?
How do I ensure that my business customers are engaged in the case for change and buy-in to common technology, process, policy and governance?
How do I govern multiple providers and ensure effective performance and value for my investment?
What technologies should I be using to track provider/contingent worker utilization and performance?
How do I ensure that legal/regulatory/compliance risks are recognized and managed in all geographies where I operate?
How do I ensure that there is effective governance across the entirety of my contingent workforce?
How do I manage risk and compliance issues that arise through the implementation of a contingent workforce?

This webinar is by invitation only. To register, please click here. _________________________________________________________________________
1. “ObamaCare”: Promotion of Automation, Offshore Outsourcing and Job Losses; Penalizing Foreign Companies Based in Tax Havens (and Other Non-Treaty Countries).

2. Humor.

3. Conferences.
____________________________________________________________________________________

1. “ObamaCare”: Promotion of Automation, Offshore Outsourcing and Job Losses; Penalizing Foreign Companies Based in Tax Havens (and Other Non-Treaty Countries). If enacted, President Obama’s healthcare reform would probably hurt domestic employment and accelerate automation, outsourcing and offshoring. It would change the economic incentives for keeping service industries in America. And it would hurt foreign-owned businesses whose ultimate parent company is based in a tax haven or other country that has no U.S. income tax treaty. On November 6, 2009, by a paper-thin margin of 220 votes to 215, the U.S. House of Representatives passed the “ Affordable Health Care for America Act,”H.R. 3962, the 1,990-page health care reform law that has been frequently called “ObamaCare.” If substantially adopted by the Senate and passed into law, the bill would impose significant new burdens on employers and self-employed persons. For the complete article, please click here.

2. Humor.

Healthcare reform, n. (1) a plan to make healthcare “affordable” in America by making employment less affordable.

Independent contractor, n. (1) a staffing company, outsourcing service provider or personal service company working on projects under a defined scope, subject to change control procedures and never under the direction or control of the enterprise customer except by contract revision; (2) a free spirit, within the freedom of the statement of work.

3. Conferences.

December 6-8, 2009, IQPC and SSON’s 4th European Shared Services Exchange, The Hague, Netherlands. Following the success of our Shared Services Exchanges in North America we are now launching the new format for Europe, bringing together senior level conference topics in a highly productive and interactive meeting platform. The 4th European Shared Services Exchange is an invitation-only gathering for VP and C-Level senior Shared Services executives from successful European organizations. With a distinguished speaking faculty from Dell, Lafarge and Microsoft amongst others, the seats at the 2009 Exchange are limited and filling up quickly. We have limited complimentary invitations available for qualified delegates for a limited time. Please give us your reference when inquiring. There are solution provider opportunities also available for companies who want to be represented. You can request your invitation at exchange@iqpc.com or call us at 1866-296-4580. Visit the website for more information.

December 7-9, 2009, Legal IQ and IQPC’s 8th Annual E-Discovery Conference in New York, New York. Legal IQ and IQPC present the 8th eDiscovery event this December in New York City. Bringing industry leaders together to explore current risks, opportunities and challenges facing eDiscovery, this event will offer best practices and possible solutions to the ever remaining question: How can we lower our costs? This event goes beyond the traditional basics by examining the critical, high level, and strategic issues. Some of the topics to be addressed by the expert speaker faculty will be:

Organizing an effective records program by tapping into existing resources
Developing a litigation preparedness plan
Determining judges’ priorities when eDiscovery conflicts arise
Aligning the interests of IT, inhouse and outside counsel
Handling eDiscovery via social media sites and other new sources of ESI
Controlling the cost of review while maintaining defensibility
Saving money by employing Early Case Assessment tools and new technologies

For more information and to register for this event, please click here.

January, 24-26, 2010, IQPC Business Process Outsourcing and Shared Services Exchange 2010, West Coast, USA. This is an invitation-only gathering for VP and C-Level senior Shared Services and Outsourcing executives made up of highly crafted, executive level conference sessions, interactive “Brain Weave” discussions, engaging networking opportunities and strategic one-on-one advisory meetings between solution providers and delegates. With a distinguished speaking faculty from McGraw-Hill, Ingram Micro and Pfizer, amongst others, the seats at the 2010 Exchange are limited and filling up quickly. We have limited complimentary invitations available for qualified delegates for a limited time. Please give us your reference ‘Outsourcing Law’ when inquiring. There are solution provider opportunities also available for companies who want to be represented. You can request your invitation at exchange@iqpc.com, call at 1866-296-4580 or visit their website.

February 22-24, 2010 ,SSON and IQPC 8th Procure-to-Pay Summit, Miami, Florida. Join Procurement, Accounts Payable and Sourcing professionals at the 8th Procure-to-Pay Summit to discuss new initiatives for procurement as IQPC and SSON continues with its Procure-to-Pay series in 2010. More information will be available shortly. In the interim, check out what happened at the 7th P2P Summit this past summer.

March 22-26, 2010, SSON presents the 14th Annual North American Shared Services & Outsourcing Week, Orlando, FL. Here’s a sneak peek of new and enhanced features, which include:

Speakers from Top Companies:Aramark, Arbys/Wendy’s, AstraZeneca, Chevron, Coca-Cola, Conagra Foods, General Motors, Kellogg, Kraft, Microsoft, Monster, NASA, Northrop Grumman, Oakley, Perdue Farms, Schering Plough, Warner Brothers and more
G8: Global Sourcing Think Tank Eliminating the White Noise: The first ever neutral platform to help shape a common industry agenda in the US
Under the C-Suite Spotlight with Rene Carayol, An Exclusive Onstage CXO Interview: Board-room revelations regarding shared service & sourcing model strategy
New, Strong, Business Outcome-Focused Content: 8 content-intense tracks, from Planning & Launching and BPO Evolution to IACCM’s Contracting to Collaboration
Enhanced Annual Features: Quick Wins Energizers, Speed Networking, Blue Sky Innovation Room for Mature SSO’s, and more.

Please contact Kim Vigilia directly at 1-212-885-2753 or at kim.vigilia@iqpc.com with your special code IUS_OSL_#1 to get a 20% discount off the all-access pass. You can also visit the website at www.sharedservicesweek.com.

Filed under: Newsletter
Tagged: Business Process Outsourcing, compliance, contingent workforce strategy, e-discovery, human capital management, humor, ObamaCare

Case Study for Legal Risk Management for “Cloud Computing”: Data Loss for T-Mobile Sidekick® Customers

October 29, 2009 by Bierce & Kenerson, P.C. · Leave a Comment

Telecom providers are increasingly outsourcing IT functions for “cloud computing.” A widespread data loss in mid-October 2009 by an IT outsourcer to a mobile telephony provider underscores the practical limitations of using the Internet as a data storage platform.

In this episode, subscribers to T-Mobile Sidekick® mobile devices were informed that their personal data – contact information, calendars, notes, photographs, notes, to-do lists, high scores in video games and other data – had almost certainly been lost. T-Mobile (a service of Deutsche Telekom AG) had outsourced the management of the “cloud computing” function for the Sidekick® devices to Microsoft’s subsidiary, Danger, Inc. While T-Mobile has offered a $100 freebie in lieu of financial compensation and some data was recovered, the case invites legal analysis of the liability of the any service provider – whether for mobile telephony or enterprise backup and remote storage – for “software as a service” (“SaaS”) or “cloud computing.”

Technological Framework for “Cloud Computing. “ “Cloud computing” means simply that data are processed and stored at a remote location on a service provider’s network, not on the enterprise’s network or a consumer’s home computer. Such data could be any form of digital information, ranging from e-mail messages (such as those stored by Google and Yahoo!) to databases, customer records, personal health information, employee information, company financial information, customer contracts and logistics information.

“Clouds” come in two flavors: public and private.

In a public cloud, the general principles of the Internet apply, and data transmissions can flow between many different third-party computers before reaching the service provider’s servers. Amazon offers hardware in variable computing capacities in its “Elastic Compute Clouds” (or “EC2”) services. Similarly, Google offers an “Apps Engine.”

In a private cloud, one service provider (alone or with its subcontractors) controls the entire end-to-end transport, processing, storage and retrieval of data.

Cloud computing exposes users to some key vulnerabilities and added costs:

The user depends on a high-performance Internet connection. Service level performance cannot be guaranteed except in private clouds.

‘Single points of failure” (“SPOC”) in data transmission, processing and storage, for which special security measures and redundancy may be required. Heightened security risks require extra resources.

Loss of control over the public portion of a “public cloud” can impair performance through delays and data loss resulting from uncontrolled environments.

Delays in data restoration may occur due to interruptions in data transmissions.

Business continuity, resumption and data protection require special solutions.

Passwords could be guessed at using social networking tools, but if the user accounts are maintained internally in a controlled network, the systems could use techniques to detect and eradicate misuses and abuses from users based on aberrational access profiles and unauthorized territorial access. In a public cloud, security tools such as data leak prevention (“DLP”) software, data fingerprinting, data audit trail software and other tools might not be effective.

Such vulnerabilities explain why “cloud computing” needs special controls if used as a platform for providing outsourced services.

In the October 2009 T-Mobile debacle, users relied on the telecom service provider to store and backup the data. Mobile telephony devices (other than laptops) were seen as tools for creating but not storing, significant volumes of data. Remote data storage was a unique selling proposition, or so one thought.

T-Mobile’s Technological Failure. In its website, T-Mobile exposed the technological sources of the failure of its “cloud computing” for mobile devices. It explained:

We have determined that the outage was caused by a system failure that created data loss in the core database and the back-up. We rebuilt the system component by component, recovering data along the way. This careful process has taken a significant amount of time, but was necessary to preserve the integrity of the data. SOURCE: T-Mobile Forums, Oct. 15, 2009 update.

Mitigating Damages: Public Relations Strategy for Restoring Customer Confidence and Maintaining Brand Goodwill. After some delay, without admitting any liability or damages, T-Mobile adopted a “damage control” strategy adopted from the usual “disaster recovery” process models:

Compensation. It offered any affected customers a $100 gift card for their troubles in addition to a free month of service.

Communication Outbound. It created and updated a Web forum for Sidekick users to get information about the nature of the problems, whether the data loss was irretrievable and the time to resume operations.

Communication Inbound. It provided an e-mail contact address so that it could respond to inquiries and thus identify and counteract rumors that might have been spreading.

Compliance. T-Mobile notified the public media since the “disaster” exposed it to the possibility that more than 5,000 consumers in any particular state might have had their personally identifiable information (“PII”) exposed to unauthorized persons such as hackers. Such notifications (along with other notices to individual customers and designated government officials) are mandated by state law in over 40 states.

Corrections and Control. It focused on remediation first, deferring problem resolution with any claims against its service provider Microsoft’s subsidiary Danger, Inc..

Confidentiality. It kept its communications with its failing provider confidential and focused on remediation.

Escaping Liability for Damages. Generally, telecom service providers disclaim liability in excess of a small amount. Further, service contracts contain exclusions of liability for consequential damages as well as force majeure clauses. Generally, such disclaimers and exclusions are enforceable. However, various legal theories might prevent a service provider from escaping liability for failed service delivery.

Legal Risks for Providers of “Cloud Computing” Services. T-Mobile consumers might assert various legal theories against T-Mobile for damages if their data are not fully restored, or if T-Mobile fails to act promptly and reasonably to mitigate damages to consumers.

False Advertising; Unfair and Deceptive Practices. State and federal laws prohibit false or deceptive advertising and unfair and deceptive practices. Enforcement of these laws is generally restricted to governmental agencies such as the Federal Trade Commission, the Federal Department of Justice and the state Attorneys General. Deception is a term of art and depends on the facts. In this case, the question is how solidly did T-Mobile portray the benefits of “cloud computing,” and did it warn against loss of data. If T-Mobile can show that it warned users of potential data loss and recommended that they back up their own data, such a warning might relieve it from liability. If T-Mobile represented that it would use reasonable security, backup and business continuity services, subscribers with lost data might have a claim of negligence or gross negligence.

Consumer Fraud. Under common law and state consumer protection laws, generally, a fraud occurs when the seller knowingly misleads or makes a false statement of fact to induce the consumer to make a purchase.A massive fraud is subject to a class-action claim in Federal court under Federal Rules of Civil Procedure.

Magnuson-Moss Warranty Act. Normally, an outsourcing services contract is not one that is associated with the maintenance of a product such as a telephone or a computer. If the service provider were also selling any equipment to the customer, and the customer were a “consumer,” and the service provider’s agreed to maintain or repair the consumer product, then the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et seq. would apply. This risk explains why sellers of consumer products (mobile telephones) offer only limited warranties. The Magnuson-Moss Warranty Act is probably not a source of potential liability for T-Mobile, but that depends on the customer contracts.

Privacy Violations. Cloud computing providers may become liable to consumers or enterprise customers for failure to comply with applicable privacy statutes. Such statutes protect personal health information (under HIPAA), personal financial information (under the Gramm-Leach-Bliley Act), personally identifiable information (state and federal laws), financial information of a plan fiduciary under ERISA or other or simply confidential information that could be a trade secret or potentially patentable idea of an enterprise or its customers, suppliers or licensors. Export control laws and regulations governing trade in arms and “defense articles” are thus not good candidates for “cloud computing” except for “private clouds.”

Enterprises hiring third-parties to remotely process and manage their operational data are liable to third parties if any protected data is mishandled, depending on the exact wording of the law. Allocation of liability for privacy and security violations is typically a negotiated element of any outsourcing agreement.

Protecting Consumers in Cloud Computing. The legal framework for “cloud computing” needs to be well defined before it can become a reliable business model replacing networks or local workstations. Regardless of disclaimers in consumer contracts, providers of “cloud computing” services will need to adopt reliable, resilient storage backups, disaster recovery and business continuity services. Moreover, when hiring a “cloud computing” service provider (as T-Mobile did when it hired Microsoft/Danger, Inc.), the seller must ensure high standards by its subcontractors. Telecom outsourcing to IT providers requires special technical and legal controls to protect the consumer and the telecom carrier.

Filed under: Case Study, Newsletter Article
Tagged: Case Study, cloud computing, compliance, Legal Risk Management, Liability, service provider, software as a service, T-Mobile Sidekick

Outsourcing Law & Business Journal™: September 2009

October 29, 2009 by Bierce & Kenerson, P.C. · Leave a Comment

Insights by Bierce & Kenerson, P.C. www.biercekenerson.com

Vol. 9, No. 8 (September, 2009)

Special Notice – Webinar on Sourcing of Global Talent

Managing Knowledge, Compliance and Legal Risks in Sourcing of Global Talent
Thursday November 5, 2009, 11 A.M. – 12 Noon, Eastern Daylight Time U.S.

Speakers:

William B. Bierce, Esq., Bierce & Kenerson, P.C. – outsourcing lawyer
Larry Scinto, PA Consulting, Managing Consultant
Neil McEwen, PA Consulting, Managing Consultant

How do I put together an effective contingent workforce strategy to optimize my investment in contingent labor?
How do I ensure that my business customers are engaged in the case for change and buy-in to common technology, process, policy and governance?
How do I govern multiple providers and ensure effective performance and value for my investment?
What technologies should I be using to track provider/contingent worker utilization and performance?
How do I ensure that legal/regulatory/compliance risks are recognized and managed in all geographies where I operate?
How do I ensure that there is effective governance across the entirety of my contingent workforce?
How do I manage risk and compliance issues that arise through the implementation of a contingent workforce?

This webinar is by invitation only. To register, please click here.
_________________________________________________________________________

1. Mortgage Loan Servicing and Other Outsourcing by TARP-Assisted Entities: Criminalization of Contract Fraud under Government Contracts.

2. Humor.

3. Conferences.
____________________________________________________________________________________

1. Mortgage Loan Servicing and Other Outsourcing by TARP-Assisted Entities: Criminalization of Contract Fraud under Government Contracts. Do you know whether you are a subcontractor receiving payments from an entity assisted under the U.S. Troubled Assets Relief Program or the American Recovery and Reinvestment Act of February 2009? You should be aware of the criminalization of contract fraud and the protection of whistleblowers denouncing contract fraud in your operations. Managing to prevent fraud just became more important. For more information and some “lessons learned,” click here.

2. Humor.

Feral, adj. (1) relating to the Fraud Enforcement and Recovery Act of 2009; (2) undomesticated.

3. Conferences.

October 6-7, 2009, American Conference Institute’s Software Licensing Agreements Event in San Francisco, California. Companies on both sides of the table in software license negotiations are being increasingly confronted with challenges relating to the use and licensing of proprietary products that contain or otherwise incorporate open source code. Coupled with the other core challenges presented by the negotiation of software licensing agreements – IP infringement, warranties, limitations on liability, indemnification, revenue recognition, product development and maintenance, and contract termination, it is imperative to a successful negotiation that one has a process in place to preemptively anticipate, address and quickly resolve these issues when they arise.

To provide you with specific insights into how to confront these and other contentious issues, ACI has assembled an exceptional faculty, including in-house representatives from the major players in this industry who will provide you with the tactical and strategic insights you need to negotiate more lucrative, airtight agreements – whether acting as the licensor or the licensee. For more information, visit the website .

Organizing an effective records program by tapping into existing resources
Developing a litigation preparedness plan
Determining judges’ priorities when eDiscovery conflicts arise
Aligning the interests of IT, inhouse and outside counsel
Handling eDiscovery via social media sites and other new sources of ESI
Controlling the cost of review while maintaining defensibility
Saving money by employing Early Case Assessment tools and new technologies

For more information and to register for this event, please click here.

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FEEDBACK: This newsletter addresses legal issues in sourcing of IT, HR, finance and accounting, procurement, logistics, manufacturing, customer relationship management including outsourcing, shared services, BOT and strategic acquisitions for sourcing. Send us your suggestions for article topics, or report a broken link at: wbierce@biercekenerson.com The information provided herein does not necessarily constitute the opinion of Bierce & Kenerson, P.C. or any author or its clients. This newsletter is not legal advice and does not create an attorney-client relationship. Reproductions must include our copyright notice. For reprint permission, please contact: wbierce@biercekenerson.com . Edited by Bierce & Kenerson, P.C. Copyright (c) 2009, Outsourcing Law Global LLC. All rights reserved. Editor in Chief: William Bierce of Bierce & Kenerson, P.C. located at 420 Lexington Avenue, Suite 2920, New York, NY 10170, 212-840-0080.

Filed under: Newsletter
Tagged: compliance, conferences, contingent workforce, e-discovery, humor, indemnification, IP infringement, limitations on liability, Managing Knowledge, product development, revenue recognition, Shared Services Exchanges, warranties

Tuesday, November 17, 2009 – Managing Knowledge, Compliance and Legal Risks in Sourcing of Global Talent

October 28, 2009 by Bierce & Kenerson, P.C. · Leave a Comment

Special Notice – Webinar on Sourcing of Global Talent

Managing Knowledge, Compliance and Legal Risks in Sourcing of Global Talent
Tuesday November 17, 2009, 11 A.M. – 12 Noon, Eastern Daylight Time U.S.

Speakers:

William B. Bierce, Esq., Bierce & Kenerson, P.C. – outsourcing lawyer
Larry Scinto, PA Consulting, Managing Consultant
Neil McEwen, PA Consulting, Managing Consultant

How do I put together an effective contingent workforce strategy to optimize my investment in contingent labor?
How do I ensure that my business customers are engaged in the case for change and buy-in to common technology, process, policy and governance?
How do I govern multiple providers and ensure effective performance and value for my investment?
What technologies should I be using to track provider/contingent worker utilization and performance?
How do I ensure that legal/regulatory/compliance risks are recognized and managed in all geographies where I operate?
How do I ensure that there is effective governance across the entirety of my contingent workforce?
How do I manage risk and compliance issues that arise through the implementation of a contingent workforce?

This webinar is by invitation only. To register, please click here.

Filed under: Webinar
Tagged: compliance, global talent, governance, human capital management, legal risks, Managing Knowledge, risk management

“Offshoring” of BPO Services within the European Union: A Transatlantic View of the Proposed Services Directive

October 16, 2009 by Bierce & Kenerson, P.C. · Leave a Comment

The European Common Market (and its successor the European Union, “EU”) were founded on the principles of four freedoms of movement: capital, people, goods and information. According to the European Commission, the service sector accounts for more than 70% of economic activity in the EU, much of which involves Europe’s small and medium sized companies. A Services Directive, proposed in January 2004, would liberalize freedom of establishment of EU enterprises and trade in services among EU Member States. The ensuing political debate evokes classic issues in trade policy in international services. Will this Directive have any impact on how outsourcing is conducted in Europe? Will anything change? Who cares?

The proposal, entitled “Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on services in the internal market (presented by the Commission).” Its provisions would be phased in over several years, with full effectiveness due in 2010. As a framework for minimum standards applicable to general services without regard to individual industries, it would not mandate specific rules but rather provide for minimum principles to reduce the administrative and regulatory burdens of cross-border trade in services within the European Union.

According to the European Commission, the service sector accounts for more than 70% of economic activity in the EU, much of which involves Europe’s small and medium sized companies.

I. The Proposed Services Directive.

The proposed Services Directive would allow the free flow of IT-enabled business processes across national borders of members states. Many sensitive sectors, such as public utilities (e.g., postal services and electricity, gas and water distribution services), public service broadcasting, transport and general financial services, would not be affected. Non-economic services (e.g., charitable and governmental services) would not be affected.

Freedom of Establishment.
The proposal would eliminate certain obstacles to the freedom of establishment of enterprises in one EU country to set up operations in another EU country. This would involve several key mandates that would transform the processes of government regulation by enforcing simplification, ease of compliance and minimum standard principles for regulation across the entire EU.
“Simplification” including Single Points of Contact in the Country of the Service Recipient.
The basic principle of simplification would apply: “Member States shall simplify the procedures and formalities applicable to access to a service activity and to the exercise thereof.” Proposed Services Directive, Art. 5(1). Administrative (bureaucratic) measures would be simplified by requiring that Member States establish “single points of contact”, at which service providers could complete the administrative procedures relevant to their activities. Covered procedures would include “all procedures and formalities needed for access to his service activities, in particular, all necessary declarations, notifications or applications for authorization from the competent authorities, including applications for inclusion in a register, a roll or a database, or for registration with a professional body or association and any applications for authorization needed to exercise his service activities.” Proposed Services Directive, Art. 6.
Electronic Government in the Country of the Service Recipient.
To expedite and facilitate compliance with local administrative procedures within the context of this “single point of contact” mandate, Member States would be required to enable enterprises to complete these procedures by electronic means. The laws, forms, rights and administrative law remedies would have to be posted on the Internet. Proposed Services Directive, Art. 7. “Member States shall ensure that the [relevant] information and assistance … are provided in a clear and unambiguous manner, that they are easily accessible at a distance and by electronic means, and that they are kept up-to-date.” Art. 7(3). In effect, compliance with local regulations would need to be Internet-enabled. The Member States would have to operate as an “application services provider” to web-enable the compliance mechanisms.

Governments could circumvent this principle by adopting rules requiring inspection of premises. The draft proposal does not apply the E-Government principle to “the inspection of premises on which the service is provided or of equipment used by the provider, or to physical examination of the capability of the provider.” Art. 8(2).

Minimum Standards for Administrative Procedures on “Authorization Schemes.”
By definition, an “authorization scheme” would mean “any procedure under which a provider or recipient is in effect required to take steps in order to obtain from a competent authority a formal decision, or an implied decision, concerning access to a service activity or to the exercise thereof.” Proposed Services Directive, Art. 4(6). Member States would be required to comply with uniform minimum standards of administrative procedures relating to establishment of foreign enterprises from other Member States. Such minimum standards would apply to”authorization schemes” applicable to service activities (in particular relating to the conditions and procedures for the granting of an authorization).Under Articles 9 and 10, authorization schemes would have to be based on criteria that hich preclude the competent authorities from exercising their power of assessment in an arbitrary or discretionary manner. Principles of such administrative procedure would thus require that the criteria for decisionmaking be non-discriminatory; objectively justified by an overriding reason relating to the public interest; proportionate to that public interest objective; precise and unambiguous; objective; and made public in advance. (These rules of administrative decisionmaking are common and would conform to the U.S. Administrative Procedures Act, 5 U.S.C. 551 et seq.) This principle would effectively change the way in which some EU governments conduct business by exposing all decisionmaking to a standard of reasonableness and transparency.Local governments could not discriminate against foreign EU service providers, even where the number of authorizations available for a given activity is limited because of the scarcity of available natural resources or technical capacity. The proposed Directive would mandate the use of a selection procedure to potential candidates that provides “full guarantees of impartiality and transparency, including, in particular, adequate publicity about the launch of the procedure.” Art. 12(1).In addition, Member States would be prohibited from imposing “certain particularly restrictive legal requirements” existing, or adopted in the future, in certain Member States. Under Article 14, Member States could not make access to or the exercise of a service activity in their territory subject to compliance with any of the following:(1) discriminatory requirements based directly or indirectly on nationality or, in the case of companies, the location of the registered office, including in particular:
(a) nationality requirements for the provider, his staff, persons holding the share capital or members of the provider’s management or supervisory bodies;

(b) a requirement that the provider, his staff, persons holding the share capital or members of the provider’s management or supervisory bodies be resident within the territory.

(2) a prohibition on having an establishment in more than one Member State or on being entered in the registers or enrolled with professional bodies or associations of more than one Member State;

(3) restrictions on the freedom of a provider to choose between a principal or a secondary establishment, in particular an obligation on the provider to have his principal establishment in their territory, or restrictions on the freedom to choose between establishment in the form of an agency, branch or subsidiary;

(4) conditions of reciprocity with the Member State in which the provider already has an establishment, save in the case of conditions of reciprocity provided for in Community instruments concerning energy;

(5) the case-by-case application of an economic test making the granting of authorization subject to proof of the existence of an economic need or market demand, or an assessment of the potential or current economic effects of the activity, or an assessment of the appropriateness of the activity in relation to the economic planning objectives set by the competent authority;

(6) the direct or indirect involvement of competing operators, including within consultative bodies, in the granting of authorizations or in the adoption of other decisions of the competent authorities, with the exception of professional bodies and associations or other organizations acting as the competent authority;

(7) an obligation to provide or participate in a financial guarantee or to take out insurance from a service-provider or body established in their territory;

(8) an obligation to have been entered, for a given period, in the registers held in their territory or to have exercised the activity for a given period in their territory.”

Surprisingly, these prohibited administrative procedures suggest that, within the EU internal market, the EU has not been complying with the non-discrimination principles that the EU has agreed to under the General Agreement on Trade in Services.

Certain restrictions would be classified as subject to evaluation. In general, such restrictions, such as territorial limitations, compulsory provisioning of service and other terms traditionally found in franchise agreements, reflect considerations of competition policy (antitrust).

Proportionality and Other EU Principles for Validity of Local Legislation within a Member State.
Other legal requirements applicable to the right of establishment of foreign EU enterprises would be subject to the higher governing principle of “proportionality.” Under this principle, local legislation would be valid only if compatible with the conditions laid down in the Directive, particularly as to proportionality. The process of determining the validity of a national law would require an evaluation of “the justification and proportionality of a number of requirements listed in the Directive which, where they exist in their regulations, may significantly restrict the development of service activities (Articles 9, 15 and 30).” For example under Article 15(3)(c), “proportionality: requirements must be suitable for securing the attainment of the objective pursued; they must not go beyond what is necessary to attain that objective; and it must not be possible to replace those requirements with other, less restrictive measures which attain the same result.”

National governments would therefore be required to eliminate unjustified requirements and would be the subject of mutual evaluation. Where appropriate, additional Community-level initiatives might be necessary to ensure the application of the principle of proportionality. Proposed Services Directive, Chapter 3(c).
Freedom of Movement of Services.
In order to eliminate the obstacles to the free movement of services, the proposal would mandate:
- Regulation of Enterprises only by the Country of Origin. Under the principle of “country of origin” regulation, a service provider established within one EU Member State would be subject only to the law of the country in which it is established. Member States could not restrict services from a provider established in another Member State. Service providers could provide services in one or more other Member States without being subject to those Member States’ rules.

Member states would be able to apply “national” regulatory schemes. These include “national provisions relating to access to and the exercise of a service activity, in particular those requirements governing the behavior of the provider, the quality or content of the service, advertising, contracts and the provider’s liability.” Art. 16(1).

As a corollary, the Member State of origin would be responsible for the effective supervision of service providers established on its territory even if they provide services into other Member States.

Certain exceptions (“derogations”) would apply. The exceptions would either be general in nature, temporary in duration, or applicable on a case-by-case basis based on the facts and circumstances.

Consumer Protections for Businesses and Individuals who are Service Recipients.
Anyone seeking to receive services from a foreign service provider in another EU Member State would be entitled to certain minimum consumer protections. The proposal considers the possibility of a situation where the service provider would be lawfully entitled to provide a service but the service recipient might not be lawfully permitted to receive the services. To eliminate such procedural possibilities, the proposed Directive would define the right of recipients to use services from other Member States without being hindered by restrictive measures imposed by their country or by discriminatory behavior on the part of public authorities or private service providers. Transborder health care reimbursements would have a special rule.
Customer Service.
Each Member State would be required to offer a mechanism to provide assistance to recipients who use a service provided by an operator established in another Member State.
Allocation of Work Assignments.
The proposal would require Member States to allocate tasks between the Member State of origin and the Member State of destination and the supervision procedures applicable that relate to the posting of workers in the context of the provision of transborder services within the EU. This situation would be an exception to the general rule of “country of origin” regulation of business operations.
International Cooperation between Member States.
The proposal would seek to improve the quality of information available to service recipients so that the background, reputation, quality experience and other bases for service recipients to trust foreign service providers as well as local service providers. This cooperation would adopt minimum standards at the governmental level (national legislation and national cooperation between national authorities of other Member States) and at the level of compliance with quality certifications and codes of conduct.
- Harmonization of Consumer Protections including Minimum Disclosures about the Foreign Services Providers.
  The proposal would require the harmonization of national legislation to guarantee “equivalent protection of the general interest on vital questions, such as consumer protection, particularly as regards the service provider’s obligations concerning information, professional insurance, multidisciplinary activities, settlement of disputes, and exchange of information on the quality of the service provider.” Proposed Services Directive, Section 5.
Mutual Assistance.
The concept of mutual assistance has been long established in the context of protection of citizens abroad and to avoid double income taxation under income tax treaties. The proposed Services Directive would require stronger mutual assistance between national authorities “with a view to effective supervision of service activities on the basis of a clear distribution of roles between the Member States and obligations to cooperate.” This would delineate what outsourcing parties understand as the “statement of work” or “statement of services.” In this case national governments would be required to act as a service provider to its counterparts in other national governments.
Quality Control.
The proposal would facilitate the establishment of brands of quality for foreign services providers. For example, current norms such as the International Standards Organization (“ISO”) 9000 series of standards cover the quality of services. The proposed Directive would require the governments of Members States to adopt “measures for promoting the quality of services, such as voluntary certification of activities, quality charters or cooperation between the chambers of commerce and of crafts.” Proposed Services Directive, Section 5.
New Codes of Conduct.
The proposal lays down a framework to encourage the adoption of codes of conduct to be drawn up by interested parties at the Community level on certain questions, including in particular commercial communications by the regulated professions.

II. Impact of the Proposed Services Does not Affect External Services Providers Outside EU.

Under the WTO’s General Agreement on Trade in Services, the proposal for a Directive is an “internal market instrument” and therefore concerns only service providers established in a Member State. This ncludes foreign-owned companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community. The proposal does not cover “external” trade in services such as

Right of Establishment of Non-EU Service Providers: the case of service providers from third countries who wish to establish in a Member State (first establishment in the EU);
Sale of Services from Non-EU Sources: the case of operators from third countries who wish to provide services in the EU; or
Branches of Foreign Service Providers: the case of branches of companies from third countries in a Member State that are not companies formed in accordance with the legislation of a Member State and therefore are not eligible to not benefit from the proposed Directive.

A. Right of Establishment. Since the advent of the modern nation state, nations have entered into treaties of friendship, commerce and navigation (“FCN Treaties”). The principles of non-discrmination and national treatment, enshrined in the WTO trade agreements since World War II, owe their broad acceptance to FCN Treaties.

In general, FCN Treaties authorize the nationals of one nation state to establish a commercial business within the territory of the ohter nation state. The issue whether a foreign-owned enterprise is subject to the local labor laws was not really resolved in the United States until a sex discrimination claim was filed by a female employee against a U.S. subsidiary of a Japanese corporation. In Avagliano v. Sumitomo Shoji America Inc., __ U.S. __ (1979), the Court ruled that the protections of the U.S.-Japanese FCN Treaty did not exempt a U.S. subsidiary from U.S. labor laws. The ruling concluded that a U.S.-incporated subsidiary was not a “company of Japan” that would have been protected from such regulations under that FCN Treaty.

In the European context, local lawyers may inquire whether the adhesion of the new EU Member States to the EU would abrogate any protections for local business enterprises under historical FCN Treaties. If such protections (as in the U.S.-Japan FCN Treaty) cover branches, then, under the Avagliano principle (as interpreted by a U.S. court), branches from one country might have certain rights to be free of some of the governmnetal restraints on establishment that the proposed Services Directive would eliminate.

III. Legal Structuring of Offshore BPO within the EU – Before and After the Services Directive.

The Services Directive appears to only state the obvious in a direct fashion: trade in services will flow across borders according to economic forces.

Current Law – Consumer Protection.
The principles of national legislation for consumer protection would not be affected. Technically, a xenophobic Member State might adopt strict rules on quality of services, for example. Practically, such rules would likely not be too severe since they would have to apply uniformly and without discrimination against foreign service providers from other EU Member States.

Proposed Directive on Unfair Commercial Practices (Consumer Protection).
The proposed Services Directive is not intended to displace the proposed Directive on unfair business-to-consumer commercial practices, which would regulate those commercial practices that cause harm to consumers’ economic interests. See Proposal for a Directive of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the Internal Market and amending directives 84/450/EEC, 97/7/EC and 98/27/EC (the “Unfair Commercial Practices Directive”), COM(2003) 356 final of 18.6.2003.

However, by adopting rights for service recipients, it would create a new layer of consumer protection applicable to both individuals and enterprises who, as service recipients, would become a specially protected class.

Current Law – Acquired Rights Directive.
Without the proposal, offshore BPO can occur by a local EU company hiring a foreign company to provide services from abroad. Under the Acquired Rights Directive and implementing legislation, it becomes a question of fact whether an offshore outsourcing contract between an EU enterprise and a non-EU services provider results in a transfer of a EU-based job. Under that directive, such covered transfers can occur in a merger or acquisition or an outsourcing. That directive targets any covered transfer of a job, without considering the ultimate destination.

The Acquired Rights Directive is not water-tight. By careful planning and structuring the transaction, the parties can satisfy the Acquired Rights Directive. Consultations with EU legal counsel can help avoid this trap for the unwary.

Communication on Business-Related Services.
The EU Commission had already issued a Communication on business-related services. The proposed Services Directive deals with the removal of legal and administrative barriers and does not specifically address the competitiveness of the services sector that might be improved by complementary economic measures set out in the Communication on business-related services.

Proposed Services Directive.
The Services Directive would not necessarily contradict the Acquired Rights Directive. The Commission did not even mention that the two might be related.

IV. Legal Value of EU “Directive.”

A “directive” is not a law that citizens and enterprises must comply with directly. Instead, a directive commands Member States to adopt implementing local legislation. Thus, a directive acquires its “force of law” by forcing member states to adopt enabling legislation that conforms to the minimum requirements of the directive. As a result, there can be multiple adaptations of a directive, but all must comply with the directive. Directives are drafted and adopted by the European Commission, an administrative body in Brussels.

V. “Social Dumping”: The Consequences of an Enlarged EU with Political Challenges to Centralized Legislative Authority.

This proposed Services Directive evokes fundamental issues of public policy involving the mobility of employment and services within the EU. By allowing free BPO across borders within Member States, the proposed directive would enable enterprises (called “undertakings” in the EU) to choose between local labor and foreign labor within the EU. The purposes of such freedom include increasing productivity of labor and reducing prices for consumers in all countries of the EU.

The debate resembles the political debate in the 2004 U.S. Presidential election. Freedom for businesses to hire labor in any location, without governmental rules limiting transfers of data or protecting classes of local workers, involves important economic policy decisions.

The Advantages of the Proposed Services Directive.
The advocates argue that such freedom promotes competition, reduces consumer prices, makes markets more efficient and creates new jobs involved in project management, new types of services and goods that rely upon lower cost services from the “offshore” labor market, and increases gross domestic product in all affected countries in the aggregate and even in individually. By allowing work, not just people or goods, to cross borders freely,

The Disadvantages of the Proposed Services Directive.
This freedom of choice is opposed by France and Germany. French Prime Minister Pierre Raffarin has stated that the draft proposal is “unacceptable” and that France would “take every measure to oppose this directive. German Chancellor Gerhard Schroeder also criticized the proposal.

Social Dumping.
Critics argue that this freedom will be a “race to the bottom” and result in “social dumping” of low-wage jobs to foreign service providers. In markets such as France and Germany, where labor markets are highly regulated and make hiring and firing both costly and difficult for employers, social dumping means that work protected by such regulations will be done in countries without such regulations. The lack of such regulations is seen as an incentive for exporting the work, and thereby reducing local market jobs.
A “Social Protection Directive.”
The debate over “social dumping” within the EU ignores the larger picture of whether employers within the EU should be freer to improve efficiency by moving certain job functions to locations globally. “Social dumping” connotes transfers of low-wage jobs to underdeveloped countries with no rights of unionization, no minimum wage, no rights against abusive termination of employment and other measures for job security. One solution to “social dumping” would be the adoption of a directive on uniform European “social [labor] protections.:” The proposal of a companion “Social Protections Directive” would highlight the tension between labor policy and innovation and global competitiveness.
Legal Protections for Employees under National Law in the EU.
Member States have adopted a variety of labor laws and regulations that hinder the mobility of labor and protect incumbent employees.
- Workers councils are entitled to participate in decisions on work rules.
- Employers satisfy statutory notification and consultation procedures before major changes including layoffs.
- In Germany, workers in certain large enterprises are entitled to appoint a representative to the board of directors under the principle of “co-determination.”
- In France, the government is a full legal party and signatory to “collective conventions” (“conventions collectives”) that embody the agreements between organized labor and the patronat (organized employers). Changes require governmental consent.
- In France, the government has adopted a prohibition on an employee working more than 35 hours per week, with complex time management accounting rules for carryovers and lookbacks to provide limited flexiblity for a rigid rule.
Legal Protections for Employees under Federal Law in the United States.
Under the federal Fair Labor Standards Act (“FLSA”) and the federal minimum wage law, workers throughout the United States are entitled to certain rights. The FLSA requires payment of 150% of the normal hourly wage for work by non-exempt employees working more than 40 hours per week. Because of the federal system, there is no risk of “social dumping,” where employees in Mississippi could be entitled to only 100% instead of the 150% for work perofrmed in excess of 40 hours per week.
Legal Structures Impeding the Proposed Services Directive.
The proposed Services Directive proposes a legal framework for mutual recognition of internal labor laws, without forcing any specific minimum standard such as a principle of co-determination, a 35-hour week or a minimum overtime rate of 150% for time in excess of 40 hours per week. As a framework, the proposed Services Directive justifiably has been criticized for “social dumping” since it mandate mutual recognition without a floor on worker protections in the Member State where the services are performed.
How the EU Promotes Importation of Services from Providers Outside the EU without Promoting Importation of Services from Providers within the EU.
Enterprises with European operations understand that the it might be an easier solution to outsource to India or China than to outsource to Poland or Slovenia. The newly admitted Member States are subject to all the constraints of EU regulation including the Acquired Rights Directive.

VI. Projected Economic Impact of the Proposed Services Directive.

In defense of its position, the EU Commission hired a consultant to identify the impact of the proposal. The report, issued in February 2005, concluded that the Services Directive would have several benefits:

Job Creation.
The liberalization of the services industry would create up to 600,000 new jobs.
Distribution of Job Creation.
Every Member State would enjoy its share of the newly created jobs. This contradicts the notion that “social dumping” would result in a net loss of jobs in the Member States that have the tightest employment regulation.
Lower Prices.
Not surprisingly, the study showed that consumers would pay lower prices for services obtained from other Member States.
Higher Productivity.
The consultants’ report concluded that higher productivity would result from “offshore” BPO within the EU. Productivity improvements flow from streamlining the work that is required to complete a business process from start to finish. Such streamlining comes from elimination of processes that add little comparative value. And where low-value processes must be performed, they can be “offshored” within the EU to lower-wage countries without depriving the workers in higher-wage countries from exercising managerial roles in process design, evaluation, distribution and customer relations.

VII. Offshore BPO in Action: NAFTA and the World Trade Organization.

This European political debate can be contrasted with the liberalization of trade in services under the North American Free Trade Agreement and the World Trade Organization.

NAFTA.
Under the general principle of non-discrimination and most-favored-nation (“MFN”) treatment, NAFTA encourages trade in services across borders, allowing foreign firms to compete with local firms. Certain licensed professions are granted special TN-visa status for commuting to and from the United States.

WTO.
Under the general principle of non-discrimination and MFN, the WTO Agreement on Trade in Services adopts the general principle of freedom of competition between domestic and foreign service providers. It does protect certain regulated industries such as the licensed professions.

VIII. Internal Market: Analogy to U.S. Constitution.

The proposed Directive would adopt certain principles of free trade in an internal market that are part of the United States Constitution.

Full Faith and Credit Clause.
This clause requires one state to honor the administrative decisions and judicial decisions taken within another state. It corresponds to the “country of origin” concept in the proposed Services Directive.
Interstate Commerce Clause.
The Interstate Commerce Clause reserves to the federal Congress the right to regulate trade between the respective states. This provision creates a strong central government. The proposed Services Directive does not mandate any centrally determined rules, but rather sets up a framework for fairness, transparency, reasonableness (and thus proportionality).

IX. Long-Term Issues.

The EU Commission’s effort to liberalize labor laws challenges many fundamental premises of the labor movement in many key EU countries.

Euro-Sclerosis.
The book entitled “Euro-sclerosis” has highlighted the complex labor protections. According to some EU lawyers, labor laws that insulate existing jobs from outsourcing, and prevent “rationalization” (and layoffs) following mergers, only deprive the EU of the opportunity to add new work to existing jobs. Such lawyers advise us that European employers have no choice but to comply with the protections. As an ineluctable consequence, European employers remain free to establish foreign captive services companies and to outsource their “new” and “innovative” job tasks to such captives or outsourcers.

Export of Innovation.
A local company can still benefit from the “export” of “new and innovative” tasks by establishing a captive or controlling the intellectual property that is created or used when foreigners perform the new tasks. As a result, the company can retain control. But the home country for that company can lose its innovative engine unless economic strategies are in place for innovation at home.

Innovation at Home.
Understanding all this, the U.S. presidential nomination campaigns of Senator Joseph Lieberman and John Edwards, as well as President George W. Bush, called for greater support for local innovation. Such support includes improved quality of education, regulatory incentives and tax advantages for entrepreneurship and investment and the use of government contracting to finance risky new technologies.

X. The Proposed EU Services Directive – “Rest in Peace”?

The impending death of the Services Directive has already been pronounced by the French Prime Minister. But it remains alive to promote a public policy debate that will play out in European elections. For a large segment of an economy that is protected by “social legislation,” the Services Directive augurs risk of job loss. For their children, continuation of such protections may stifle the economy and hinder global competitiveness. Like Social Security reform, debate on the Services Directive underscores the choices between present benefits and future harms of continuing the status quo.

XI. Would the Proposed Services Directive Change Outsourcing in Europe?

In some quarters, any liberalization of trade in services, even within the context of the privileged and trusted long-term alliance of EU Member States, would lead ineluctably down the “slippery slope” towards unlimited outsourcing. The debate over the Services Directive is ironic.

Intra-EU Trade.
The proposal would promote intra-EU trade and could help limit the growth of offshore outsourcing, at least while the wage levels in newly admitted Member States remains significantly lower than in the founding Member States.
External Trade in Services.
Neither existing EU law nor the enactment of the Services Directive will prevent the growth of outsourcing to non-EU service providers in a broad spectrum of business processes. In protected sectors, the outsourcing will continue subject to special contractual risk allocations that reflect the ongoing protection of local labor in the EU. In non-protected sectors, compliance with existing laws does not require a ban on offshore outsourcing. In short, the proposed Services Directive is not needed to benefit non-EU service providers.

Filed under: White Paper
Tagged: compliance, E-Government, European Commission, European Union, FCN Treaties, Member State, Services Directive, social dumping, The Acquired Rights Directive

C&W US Clients Face Uncertain Future

October 9, 2009 by Bierce & Kenerson, P.C. · Leave a Comment

By Ed Agar, primesourcingadvisors.com

October 27, 2003 – The drama surrounding Cable and Wireless’ US hosting business remains an unresolved story for its approximately 1,500 clients. Since declaring its intention to exit the U.S. market in early summer, C&W has yet to deliver a clear update with regard to its business direction. C&W seems to be avoiding the inevitable.

Fundamentally, C&W was viewed to have two alternatives: sell the assets and existing contracts to an interested suitor, or declare bankruptcy. Andrew Schroepfer, founder and President of IT Infrastructure research firm Tier 1 Research (tier1research.com), says there may be a third hybrid option on the table. “We believe there is a buyer at the table for some of the marginally profitable data centers and the customer base where C&W would pay the costs to close down some of the other sites. Such an option would save C&W from the bankruptcy issues and save it several hundred millions of dollars from the option to pay to merely close the entire business.”

Most customers of the firm appear to have remained loyal thus far, which confuses Danny E. Stroud, former CEO of managed hosting firm AppliedTheory. “I don’t understand why CIOs, COOs and in-house counsel are not heads-down working on alternative service strategies – why executives are subjecting their valuable IT assets to significant risk exposure is irrational,” he says. “Since the financial shakedown of the last couple of years, there are now many quality providers. Further, with the availability of hosting vendor rankings like the PrimeSourcing Index there is a multitude of data to help buyers make informed decisions.”

The ‘wait and see’ attitude of C&W customers may be attributed to two factors: 1) customers have remained loyal due to renegotiated flexible terms and distressed pricing offers, and 2) transition efforts to a new provider are time consuming, costly, and rife with execution risks for resource-strapped IT departments.

Outsourcing lawyer Bill Bierce of Bierce&Kenerson PC and publisher of outsourcing-law.com (outsourcing-law.com), thinks current customer indifference is a highly risky approach. He recommends that CIOs review their agreements for termination and transition rights in case of bankruptcy. Should C&W opt for bankruptcy and the sheriff padlock the front doors, customers may be facing some nasty surprises:

Assets could be locked down, forcing customers to petition the court to move their assets out. It would be expected that IT assets would be frozen a period from several days to several weeks, which is longer than the period of the typical disaster recovery service contingency plan.
Bankruptcy could deprive C&W of the flexibility to service its customers in compliance with service level agreements. For managed services, the bankruptcy courts have the right to terminate executory contracts and not pay damages for wrongful termination.
Customers may need to get a license to continue to use software licensed by C&W. The US Bankruptcy Code allows the bankrupt service provider to terminate a service but does not require it to allow the user to get access to any software that was used in providing the service.
Where a bankrupt managed service provider abuses its credit lines with its own suppliers, paying customers have no assurances that funds will flow downstream to subcontracted suppliers or even if subcontractors will be retained by the bankruptcy courts. As the cash cycle stops, the services may stop, too.

How C&W will respond to its obligations will be played out in the coming months. The experience of Exdous, Intel Online Services, WiTel, MFN, PSInet, Genuity, Northpoint, Rhythms, Network Plus, Winstar and others exiting the data center market has been mixed. In some situations, there have been documented examples of looting, destruction of property, stranded customers, and total withdrawal of services accompanying a dark data center. “Some customers were forced to take extraordinary steps under duress to insure service continuity, while other customers sustained revenue loss and productivity hits,” Stroud says. “Further, costs and performance degradation during a hasty transition to a new provider are generally significant.”

Stan Lepeak, VP of Meta Group Inc. (metagroup.com), a research firm, says the best hope for customers “is a prepackaged bankruptcy that allows the customer relationship to be bought by a ‘white knight’ with the court’s blessing. This process allows the shedding of liabilities.” There must be reasons why suitors have not already grabbed C&W’s US assets for pennies on the dollar. In simple terms, this would seem to indicate the business does not appear to be salvageable and that a clean buyout seems unlikely.

Given the above scenarios, it is recommended that prudent executives start to invoke contingency plans. According to Schroepfer, “aside from acknowledging that avoiding a migration is a good thing, we would move our own operations out of C&W if we were there.”

It is recommended that exit strategies be planned with the assistance of independent hosting consultants and specialized attorneys. Such trusted advisors are needed to understand the ramifications of outsourcing contracts. A critical element that hosting advisors are now assessing in selecting new providers is the vendors’ implementation of quality initiatives like ISO 9001, IT Service Management or Carnegie Mellon’s e-Sourcing Capability Model.

As a next step, Global 2000 firms should identify their degree of risk exposure to their internal audit committees in order to determine applicability for disclosure in SEC filing as part of Management’s Discussion and Analysis forms in compliance with the Sarbanes Oxley Act.

C&W is due to report its mid-year financial results in November, and it is also expected that they will communicate their future direction and intentions at that time. One can anticipate that the competition will feature attractive incentives and deeper price discounting in order to woo prospective C&W clients.

As an observer, it will be interesting to see if C&W clients will be enticed by price incentives or if there will be a ‘flight to quality’. Time alone will tell.

About the author

Ed Agar is co-founder and Principal of PrimeSourcing Advisors, an IT advisory firm. For more information, visit primesourcingadvisors.com.

Filed under: Case Study
Tagged: bankruptcy, competition, compliance, Contracts, disaster recovery, IT assets, Sarbanes Oxley Act, service contingency plan, service level agreements, service provider

I. The Proposed Services Directive.

II. Impact of the Proposed Services Does not Affect External Services Providers Outside EU.

III. Legal Structuring of Offshore BPO within the EU – Before and After the Services Directive.

IV. Legal Value of EU “Directive.”

V. “Social Dumping”: The Consequences of an Enlarged EU with Political Challenges to Centralized Legislative Authority.

VI. Projected Economic Impact of the Proposed Services Directive.

VII. Offshore BPO in Action: NAFTA and the World Trade Organization.

VIII. Internal Market: Analogy to U.S. Constitution.

IX. Long-Term Issues.

X. The Proposed EU Services Directive – “Rest in Peace”?

XI. Would the Proposed Services Directive Change Outsourcing in Europe?

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