The PetroChina Syndrome: Regulating Capital Markets in the Anti-Globalization Era

By Diamond, Stephen F. | Journal of Corporation Law, Fall 2003 | Go to article overview

The PetroChina Syndrome: Regulating Capital Markets in the Anti-Globalization Era


Diamond, Stephen F., Journal of Corporation Law


I. INTRODUCTION

As one of her last acts as Acting Chairman of the Securities and Exchange Commission, in the spring of 2001, Laura Unger threw what the Financial Times called a "bombshell" into the global capital markets.1 Responding to pressure from Congress and an emerging independent political campaign, Chairman Unger issued a letter that acknowledged that the human rights violations by issuers of securities can be considered "material" to investors, and, therefore, foreign issuers of securities in the United States will now be required to provide disclosure of the risks associated with any investments by these issuers in countries where the United States has imposed sanctions for human rights or other legal violations.2 The Unger Letter followed the unprecedented effort over the previous year by a range of labor, religious, human rights, and anti-slavery groups to change American securities law in part by attempting to derail the initial public offering (IPO) of common stock by PetroChina Company Ltd. (PetroChina), a large oil-producing company controlled by the government of the People's Republic of China (PRC).

For decades, the U.S. capital markets have been considered relatively free of the risk and uncertainty of political interventions that are common in many other jurisdictions. Thus, issuers have been thought to benefit from a lower cost of capital and greater transparency and predictability about regulatory action. Because of these apparent advantages, it is argued that, in recent years, a larger number of foreign issuers have tapped into the deep and liquid U.S. capital markets by listing their securities on a U.S. exchange. In the words of Federal Reserve Chairman Alan Greenspan:

[T]he openness and the lack of political pressures within the [American financial] system . . . has made it such an effective component of our economy and, indeed, has drawn foreigners generally to the American markets for financing as being the most efficient place in many cases where they can raise funds.3

Thus, the Unger Letter on the U.S. capital markets represents a significant break with the hands-off tradition in the United States. Indeed, perhaps not surprisingly, its impact was felt almost immediately. Soon after the release of the Unger Letter, Lukoil, a large Russian oil company that was considered a crown jewel in that country's privatization and economic reform process, announced that it would withdraw a planned listing of its common stock on the New York Stock Exchange in order to list its shares instead on the United Kingdom's London Stock Exchange. In a brief statement, Lukoil said that it wanted to avoid what it called the "political risk" now associated with a U.S. listing.4 This followed a decision some weeks before by the PRC to withdraw a planned sovereign debt offering in the United States.5 These were precisely the kinds of developments that critics of the approach taken by Unger had feared.6 Nonetheless, this reaction to the Unger Letter did not stop those who argue that the capital markets are now an appropriate, and indeed, crucial arena for advocacy of certain political goals. The AFL-CIO, for example, the thirteen million-member umbrella body for America's trade union movement that had played a key role in the protests about PetroChina's IPO, followed that effort with a campaign to block the proposed tender offer by integrated oil giant Amerada Hess (AHC) for the publicly traded shares of the exploration and production specialist Triton Oil (Triton).7 AHC had a twenty-five percent stake in the British oil company Premier, one of the last major multinational companies to maintain an active investment in Burma, or Myanmar, a country laboring under a brutal military dictatorship.8 In addition, Triton has operations in Equatorial Guinea, on the west coast of Africa, and in Colombia. Both countries have severe internal political strife and are the locale of concerns about human rights violations. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

The PetroChina Syndrome: Regulating Capital Markets in the Anti-Globalization Era
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.