The nomination of Sonia Sotomayor for the Supreme Court of the United States took on a new meaning with the recent news surrounding efforts to ask the Supreme Court to block the Chrysler sale to Fiat, the Italian automotive giant. If things go according to plan, the Obama administration could have a say in the appointment of two justices, and if he does manage a second term, probably four. One should, therefore, look closely at how a future Democrat-appointed bench could affect the Indian economy and Indian business.
That Republicans favour big business and globalisation, while the Democrats favour inward-looking policies is well known. The Democrats hold a majority in both the House of Representatives and the Senate, and the only important area of legislature where the Republicans still hold an edge is in the razor-thin 5:4 balance of power they enjoy in Supreme Court appointees. This advantage is precarious, depending on the health and priorities of the remaining Republican appointees. Judge Antonin Scalia is 73 years old, Judge Anthony Kennedy is 72, and both, especially Scalia, are dependable votes for the conservatives/Republicans. With Justice John Paul Stevens now 89, and Judge Ruth Bader Ginsburg, 76, expected to retire, if things go according to plan there will be five Democrat appointees in the Supreme Court during Obama?s (two-term) tenure, tilting the scales towards the Democrats.
Democrats, including Obama, have vociferously opposed outsourcing and offshoring, and are wary of the shifting of the balance of power towards the new front: China and India. Supporting labour unions and opposing preferential treatment to foreign nations with regard to import/export tariffs and subsidies are hardly conducive to promoting the flow of business towards the US.
The Supreme Court sets the standard: for policy, ethics, prevention of crime, individual rights, and also, interstate commerce. Regulating how large corporations conduct business and the effect domestically is a crucial element of the Supreme Court?s mandate. A liberal bench deciding matters pertaining to corporate conduct resulting in jobs lost to international locations would be a frightening thought for most process-oriented entities, as would the bench presiding over anti-trust, shareholders? rights, workers? welfare and other union-related rights among others.
US Supreme Court decisions have a global impact. Corporate governance, abortion, search and seizure rights (Miranda), gun-control, monopolies, citizenship, and religion are just a few areas of the law that have forever been circumscribed by the highest legal power of the nation. In the recent bestseller Freakonomics, Steven Levitt and Stephen J Dubner emphasise how the Roe vs Wade decision effectively reduced crime significantly in the US. The ripples that emanate from Supreme Court decisions are far-reaching and profound. A Supreme Court decision limiting the extent to which a foreign auto manufacturer (read: Tata) can bail out a potential Chapter 11 firm (read: GM) by outsourcing production and managerial functions in an overall effort to protect domestic unions and shareholders, could stem the flow of business across industries, and between countries. Similarly, anti-trust legislation banning the collaboration/merger of an Indian IT giant with a reasonably large player in the US could curb the global acquisition syndrome with respect to the US that has become a cornerstone of the Indian corporate mentality, starting with the Corus deal, and continuing with the Bharti-MTN merger (even though neither deal involved a US entity).
There is a reason why the Sensex rallied strongly when George W Bush won the 2004 Presidential election, and although the Obama administration seems to be making all the right moves, the euphoria needs to be tempered by a sense of perspective. Corporate India may find the going tougher with respect to its business relations with the US, and a Democrat-appointed Supreme Court bench majority is unlikely to help matters. One can only hope that the Obama administration looks at centrist judges who balance the global economic considerations with socio-liberalism.
?The author is an attorney with J Sagar Associates. These are his personal views