July 22, 2005
Ronald Cass on Congress and the CNOOC Bid
In an editorial in today's Wall Street Journal, Ronald Cass, the ex Dean of the Boston School of Law, pilloried the House of Representatives for passing and amendment to an appropriations bill that attempted to block the CNOOC takeover of Unocal. CNOOC is a Hong Kong company, 70 percent owned by another state-owned Chinese company. In essence CNOOC is a Chinese state run company. The House, he argued "tilt[ed] the game-board in mid-play" and did not "repect the rule of law." He equates Congress's action on CNOOC to bowing out of international rules when "it suits its political fancy." This is, of course, nonsense. Congress's unilateral action on CNOOC is very different than bowing out of an international obligation. In the former unilateral action is permissible without violating any international agreement and in the later it is not (absent the agreement of the counterparties to the treaty).
No only is Congress's action on CNOOC permissible, it may have been sensible. Congress created the review process in CFIUS and empowered the President to block deals that threaten national security in the first place in 1988 legislation. Congress certainly has the power to supercede or even revoke the authority if Congress views the process as ineffective. Are we so enamoured with federal administrative agencies that we view a Congressional grant of authority to an agency as somehow permanent or quasi-constitutional, vesting rights in all those affected by the original grant? I hope not (excepting civil enforcement actions or executed contracts of course). The ultimate authority for the commercial health of the country is in Congress and it is delightful to see them still recognize the fact. It was troublesome that the rider focused on one deal rather than a more general category of cases but Congress has done so many times -- recall the deals with the first transcontinential railroads for example.
The House was, Mr. Cass, negotiating with the Chinese in its own way and using the power of a resolution to demonstrate that it was serious. There would be many steps before the resolution would become law (Senate vote, Conference Committee, President Signiture or Veto) and in those steps was negotiating time and power. The result? The yuan finally gets revalued and China is on notice that we take reciprocity (let us buy or control Chinese companies) seriously. The House did act quickly, another pleasant happening as in most cases it takes years to get anything done, but it did have a great deal of information about the bid -- as we all did -- as the public filings and press coverage were extensive.
When Congress steps up to the plate and gets involved in a matter of national interest we should not hammer it for not giving total deference to often very isolated federal agency personal that Congress itself empowers and pays.
July 22, 2005 | Permalink
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