Brad Smith: American Society of International Law Second Century Dinner

Text of prepared remarks by Brad Smith, Senior Vice President, Legal & Corporate Affairs, General Counsel and Corporate Secretary, Microsoft Corporation
American Society of International Law Second Century Dinner
Washington, D.C.
November 3, 2006

BRAD SMITH: Thank you for inviting me to be with you this evening, to help commemorate the launch of the Society’s second century. In addition to the other firsts you’ve been talking about this evening, I’ll venture there’s a first associated with having me as your speaker. I’ll venture that I’m the first speaker who has ever appeared before you who can look at all these flags at the front of this room and recall vividly visiting the antitrust agency in every jurisdiction.

It’s great fun for me to be here, given the number of people in the room I’ve had the pleasure to work with and count among my friends the last two decades. It’s a little bit like old home week for me to be here this evening. I think the real question you should all be asking yourself at the moment is not why this is a nice opportunity for me to be here with you, but why the heck did you invite someone from Seattle to talk about the next century of international law, as you look ahead to the next century of what is obviously one of the premier organizations in the world focused on this topic.

In an odd sort of way, part of the answer was captured by Judge Schwebel when he arrived this evening and handed me a document. It was an e-mail that he had received, addressed to Winner Number 17 from Microsoft Cooperation Management Worldwide, which was very pleased to inform him that he was the winner of our Annual Microsoft Word Lotto Lottery.

In fact, he has won, according to this purported e-mail from Microsoft, the sum of $1 million, based on a $50 million pot being divided equally among 30 people. I haven’t quite figured out who is currently doing that division within our Finance Department.

The e-mail informs him that he is “urgently” required to provide a great deal of information through e-mail to Microsoft. I think it basically asks for every sensitive piece of personal information about him and his entire family, including most of their bank accounts.

Judge Schwebel did with this e-mail what literally happens tens of thousands of times a year. He submitted this to somebody at Microsoft’s legal department and asked, “Is this thing for real?” And, in an interesting sort of way, it is because our customers basically risk this possibility of being defrauded, it is because software is so easily copied and is so frequently counterfeited and because it relies solely on intellectual property law, that those of us who work at companies like Microsoft have the opportunity to experience local, national and international law on a daily basis.

Every year we at Microsoft file over 2,000 lawsuits in almost 100 countries around the world. And every day, other people file lawsuits against us. While there’s no statistical compendium to prove the point, I will venture that it’s quite possible that we have more cases in more courts in more countries than any institution on the planet. This experience really does provide a window on the world. It gives one a sense of perspective, the ability to follow what’s happening, where things are going, and think about the opportunities, and challenges that lie ahead.

As we look to the second century of the American Society of International Law, I’d like to take a few minutes and talk about these topics with you. First, where is international law going and how is technology shaping its direction? Then more importantly, what are some of the big opportunities and challenges, at least as seen from the perspective of a technology company that experiences some of this every day?

Technology, Commerce, and International Law

The development of international law has always been shaped by changes in technology and commerce. International law as we know it today has its roots in the 16th century in the writings of Grotius in the Netherlands. It’s not a coincidence that Grotius was the son of one of the leading shipping merchants in the country at that time. Indeed, it was advances in shipbuilding technology and the changes in maritime commerce that they enabled that led the Dutch to focus on creating a body of international law that would facilitate the free and open use of the high seas.

One can see similar phenomena in the decades and centuries ever since. For example, if one looks at the 19th century and the roots of international intellectual property law, one finds the Bern Convention for the Protection of Literary Works. That treaty had its roots in the work of Victor Hugo and his contemporaries, the great literary luminaries of the time, who were grappling with the problems that arose because of changing technology and economics that facilitated the very broad piracy of their plays and books in countries across Europe. They lobbied successfully for new international legal rules to address the situation.

In the 16th century, in the 19th century, and in the 21st century, technology has brought peoples and countries closer together. Indeed, the people who lived in each era were brought together in a way that people had never experienced before. Certainly that is true for the people of our generation.

I think it’s fair to say that if there is a single technological development that is bringing the world closer together in new and profound ways today, it is the Internet. It is the advances in information technology that have shaped the last two decades and have taken globalization to a much higher level.

Around the world, officials, whether they are government officials in the executive branch or judges in the judiciary, look to what’s happening globally and think about how their actions are going to affect developments elsewhere and how developments elsewhere are going to impact the decisions they make. If one thinks about the world and international law as having evolved in the 20th century from bilateralism to greater multilateralism, I think we very clearly live now in an era of what I would describe as massive multilateralism. We live, for example, in a time in which it’s very difficult as a technology company to ship a product around the world without engaging in discussions with governments, with agencies, with judges and in courts on a massively multilateral basis.

This gives international law a whole new level of urgency and relevance. I think it’s interesting to hear people ask, as you heard earlier this evening, “How do we show that international law matters?” I can tell you, as the general counsel of a major technology company, it does matter. It matters every day to the way we work and the decisions that we make and the activities in which we engage.

Because it matters so much, I think the challenges confronting the world and international law are more important than ever before. And when I step back and think about the challenges that we confront, that we have the opportunity to advance, I think of three challenges in particular: challenges at the individual level, the national level, and the global level. I’d like to focus briefly on each of these.

International Law and Challenges at the Individual Level

It might seem odd to start by talking about international law and challenges at the individual level. After all, for years we’ve all heard the saying that we’re a nation of laws and not of men. But one thing that is very clear to those of us who experience courts and government decisions around the world every day is that it is simply not possible to have the rule of law without men and women who are trained in it.

It’s probably particularly unusual to stand in Washington, D.C. and say what I’m going to say, which is that the world does not have enough lawyers.

It really doesn’t. At least many parts of the world do not.

If you want to put this into perspective, think about this: the next time you drive down Pennsylvania Avenue and look at the office buildings that line the street, consider the fact that if you’re driving during working hours on a working day, there are more lawyers in any one of those office buildings than in the entire nation of Cambodia. And if you turn up Connecticut Avenue and do the same thing, you’ll see building after building, and in each of those buildings there are more lawyers than in the entire country of Mozambique.

Cambodia today has a population of 14 million people but only 250 lawyers. Mozambique has a population of over 19 million people but only 275 lawyers.

The situation is even more severe in some respects when we think about judges. Take a country like India, a great democracy with great legal institutions. Yet the number of judges per capita is only one-tenth the number of judges that we have per capita in the United States.

When one thinks about these things, one thing becomes clear above all: there is no hope for law without lawyers, and there is no prospect for justice without judges. Ultimately there is no cause for optimism about the next century of international law in a massively multilateral world unless all the nations of the world can create the kind of scale that’s needed for the education and development of lawyers, public prosecutors, and judges.

I think those of us in the American legal community have great cause for pride in a lot of things that many people have been doing over the last two decades to address this situation. And yet as we think ahead to the next century, I believe we need to recognize that we’re not doing enough, and we need to do some things that are qualitatively different from the things we’ve been doing before.

The great law schools in our country – institutions that rank among the great law schools in the world – have been making a major contribution by expanding LLM programs and reaching out to mid-career fellows. And organizations like the ABA and CEELI have been doing great things by taking the word directly to these countries. Yet we’re still not anywhere close to approaching the scale that we need to approach.

At some level, we need to recognize that although we live in a country with the best legal education in the world, we also live in a country with the most expensive legal education in the world. And that won’t change. There are only so many people one can reach when it costs $50,000 per year to educate one person for less than 12 months.

There are additional and different things we can and should do. This was brought home to me a year ago when I had the opportunity to spend a day at a law school outside Hyderabad, in southeastern India. I was there to do something that we do as a company in many places around the country and around the world – launching a program to donate money to expand legal education. On this particular day, we were launching a program to create a center at the law school for the study of legal issues related to the Internet and to fully fund the education of three law students per year.

As we prepared to go there to spend the day, I turned to my colleagues from Microsoft and I said, “This is great. This is a wonderful program. How much is it costing us to educate these three students each year?” And the answer was “$3,000 a year.” I asked “$3,000 for each student?” They answered, “No, $3,000 for all three of them together.”

Clearly, it is much, much cheaper to educate students in these countries than to bring them to Western Europe or the United States. That doesn’t mean we should stop bringing them. But in addition to doing that, we need to help fuel the expansion of legal education throughout the developing world. If one thinks about the next century and about what corporate philanthropy can do, what the legal community can do, what the World Bank can do, what the Agency for International Development can do, it is amazing to consider how many people could be educated in the law even for a relatively affordable amount of money.

As we look to the next century, this should be one of our goals. It’s certainly something that we are interested in at Microsoft. Yet I know that what it really requires is a broad partnership for us as a legal community.

Legal Challenges at the National Level

The second challenge that I think we need to confront, which I’ll talk about more briefly, is the critical need for the broadening and deepening recognition of the importance at the national level of a fair and independent judiciary.

You might ask “what does that have to do with international law”? In answering, I would say this: one of the greatest threats to international law is and has always been the prospect that executive power will simply ignore it. I don’t know how one can create a world in which executive power respects law at the international level if executive power doesn’t respect the independence of the law and the judiciary at the national level.

We have a great heritage in this area. It is a heritage that started in France in the 1600s, that spread to the United States in the 1700s, and is increasingly recognized around the world. Yet here too we need to do more. I believe that we in the business community have a particular opportunity to help spread the word that if countries want to grow economically, if they want to create better futures for their people, if they want to build new jobs, the independence of the judiciary in fact plays a critical role in economic development.

As you all here debate the great problems of the day and think about solutions and how you can connect with people around the world, I hope that you’ll use the opportunity to connect with your counterparts in countries around the world to reinforce this theme. I don’t believe that we’ll have the kind of world in the future at the international level unless we make that kind of progress at the national level.

The Challenges for International Legal Convergence

There is a third great challenge. It is a challenge that you all are focused on perhaps more than any other comparable group of people. It is a challenge that we live with each and every day at companies like Microsoft. It is the need to develop more and better processes and mechanisms for coordination among governments and to use these to expand and strengthen international law in the century ahead.

I thought more about this recently when I read the book “A New World Order,” written by Ann-Marie Slaughter, who of course is in this room. Ann-Marie’s book talks about regulatory convergence. It talks about the fact that regulators are the new diplomats of our time. Regulation in most fields is now an issue that crosses borders. As the book points out, both regulators and the regulated now need to figure out how to coordinate and address issues on a transnational basis.

My first reaction when I read the book was that it was a description of my job. Because it is exactly what many of us in technology companies have to grapple with each and every day. Consider as an example the new version of Windows, called Windows Vista. Over the past two years in order to finish this product, we’ve not only had to do all the things we did with all the prior versions of Windows – create it, test it, get feedback, coordinate with others in the industry – we also had to do something we hadn’t done before. We had to discuss the product with antitrust regulators in country after country on continent after continent. All this took place in an atmosphere in which the antitrust legal rules are unsettled in their application to this kind of technology. It was also in an atmosphere in which regulators wanted to address the very specific product features that were being added and consider regulating them in very, very precise ways, at times down to the precise words that would be used in particular commands.

And perhaps most relevantly for what you all think about every day, in some jurisdictions each regulator wanted whatever outcome it negotiated with us to be applied and followed on a worldwide basis. It was quite a challenge to address. As you might expect, it sometimes required people on the West Coast of the United States to get up early to talk and work with people in Europe, then work with people in North America during the day, and finally interact with people in Asia when it got to the evening of our day.

Thankfully, it was a process that resulted in a successful conclusion. We were able to deal with all the wrinkles and somehow keep these issues and outcomes consistent, so that we could move forward. Yet, as with some other issues we’ve dealt with over the years, it left me with one very strong and overriding conclusion: we simply do not have in the world today the kinds of international processes and mechanisms that we will need in the century ahead if technology, if research, if commerce, and if the creation of jobs are to move forward the way we hope they will.

I look at each negotiation we have and each legal issue we encounter as an opportunity to experiment, and experiment we have. And there have been some good results. For example, we were the first company, and interestingly even though it was over a decade ago, we remain the only company, to negotiate an antitrust consent decree jointly with the United States Government and the European Commission. Similarly, we’ve looked at new ways to enhance regulatory coordination by contributing and implementing new ideas so that governments could rely at times, even in a federalist society like the United States, on a single joint group of engineers to give advice to multiple regulatory agencies, thereby helping to bridge the gap across governments.

And yet it is so clear to me that we have opportunities and needs for more experimentation, and greater leaps will have to come. In some respects, it’s hard to be optimistic about the prospects for significant advances. After all, if one looks back at the 20th century, very clearly, the single great leap in international legal institutions and norms for the world economy came very near this location in what emerged as the Bretton Woods system. Unfortunately, as that advance reflected, great leaps in international law all too often follow only upon great calamities and none of us wishes for a great calamity in order to create the foundation for the next great leap forward.

In this area I don’t believe there is a great leap forward just around the corner, at least not in the next few years. But I do believe that we all have the opportunity to continue to take important incremental steps to develop new ideas, to nurture new concepts, to experiment and take step after step forward. I believe that is the path to progress over at least the next decade or two.

Ultimately, I think it’s impossible to stand here in 2006 and really have any kind of vision of what international law will look like a century from now, when the people who have followed you get together to celebrate the conclusion of the second century of the American Society of International Law. But I do know this: if we take the kinds of steps that we have the opportunity to take in the next 20 years, then the 80 years that will follow will be much more promising.

By focusing on these needs at the individual level, at the national level, and the global level, we have the opportunity to make great strides ahead. That’s an opportunity worth seizing.

Thank you very much.

MR. ALVAREZ: Brad has graciously decided to take some questions, so, please fire away. He can handle them.

QUESTION: In terms of your comments of Microsoft’s problems around the world, do you support convergence as being a possible solution in the years ahead? Namely, countries adopting similar approaches to the same problem, or do you think international law really has a role quae international law?

BRAD SMITH: I believe in two things. First, I think it’s important for international legal agreements relating to comity to continue to evolve so that governments respect the jurisdictional boundaries of others. Microsoft has a case that’s going to the Supreme Court in the next few months in the patent law area that is focused on trying to encourage the U.S. courts to apply our patent law in precisely that kind of way. I believe that positive comity will continue to be quite important.

But I also believe that there is a need for regulatory convergence. One of the interesting things I’ve encountered when it comes to regulatory convergence, and I actually had this conversation with a government official here in Washington just a few hours ago, is how a lot of it frankly comes down to human nature. Whether you’re talking about coordination across a government, about companies thinking about what it would mean to have regulatory convergence, or about convergence and coordination among nations, everybody sort of has the same view. Each person says, “I would love to see everyone converge around me.”

(Laughter.)

By definition, genuine regulatory convergence requires that we all take a bit of a leap, even a bit of a leap into the dark. There’s risk associated with that. And yet I genuinely believe that the international economy has become so knitted together and the problems associated with the lack of convergence today are becoming so paramount that we are better off being as thoughtful as we can working with each other and taking that kind of leap. So, yes, I do believe there needs to be more regulatory convergence, and that is part of what will be needed to create the kinds of international legal processes and mechanisms that don’t yet exist today.

QUESTION: Could you talk a little bit about Montesquieu and the role of the modern corporation? We all grew up with separation of powers, but there are many, many countries in the world where the judiciary is not, as you were discussing, truly independent of the executive. Yet you’re a business and you have to get things done. We’d all love to see this develop, but what is the real word direction of this, and what can corporations do to promote Montesquieu?

BRAD SMITH: One of the things I first discovered when I was working in Central and Eastern Europe in1990 and 1991, when the Iron Curtain had just fallen, was how enthusiastic people were to welcome foreign investment, especially investment that they perceived as having real potential to generate economic growth.

That remains the case today. People want corporations to be subject to their laws and regulations, and quite rightly so, and they also want them to be present and investing in the local economy. I think that one of the important messages we have the opportunity and indeed do convey is that we’re able to make those kinds of investments only if we have confidence that there is a legal system with principled rules applied in an objective manner by an independent judiciary.

I think that the threats to the independence of the judiciary come today in a variety of forms and frankly exist almost everywhere. In some places they exist in ways that are obvious. In other places they exist in ways that are less obvious. In some parts of the world, for example, we’ve seen administrative processes grow to an enormous degree, but administrative law has not grown to accompany them.

Our opportunity in the business community is to help explain that we can’t grow a market for information technology unless there is intellectual property law in place. We find that people readily appreciate that. But one thing we’ve also learned is that one cannot have a country with intellectual property law unless it has a healthy system for law in general.

So intellectual property rights and human rights in many respects do go together. And they all rest critically on having confidence that when one gets to court, the decision is going to be made by somebody who’s going to act in an independent and objective manner and not simply on the basis of pressure from someone else or economics of a different sort that are nefarious and undermine the confidence in the judiciary as a whole.

That is a message that we seek to advance around the world. It’s one reason that I spend time talking at law schools, visiting with judiciary ministers, and with heads of supreme courts. It is something that I think people increasingly understand.

QUESTION: My question is inspired in part by something you said, and that is, and it focuses on the Society’s program over the next century, and that is the question of the programming of the Society in the world.

As you know, we’ve done some programming in The Hague. We had a program that went to Asia, to Australia and New Zealand. But as you speak about the difficulty of students coming to America to study, it sounds as though you think we ought to really broaden that kind of programming into Africa, Latin America, parts of Asia we haven’t been to because in some ways, carrying that dialogue elsewhere is going to be a lot more affordable and attract a larger audience than what we can do with our annual meeting to which some people come.

But I’d like to hear you on that, because we’ve got people in this room who will decide that.

BRAD SMITH: I very much hope that you will. Look, everywhere in the world, at every law school you go to on this planet, people know of the American Journal of International Law. They may not have a legal copy of it, but they’ve got a copy of it.

(Laughter.)

I’ve seen them, believe me. They’re there. You have influence that far exceeds your subscription level.

(Laughter.)

We live with that problem every day, too, for our products. It’s not a happy situation. But you do have an enormous opportunity to have an impact. And I think it’s important to keep in mind how interested many people are in developing countries in obtaining this information and interaction, and it’s cheaper to go there than to bring people here. You can take five people from this room and reach every lawyer in Mozambique long before you’ll ever get every lawyer in Mozambique to come to this room.

You not only have the opportunity to reach people through your personal travel. You have the opportunity to reach people through new forms of communication such as the Internet.

Another conversation that had an impact on me was over a decade ago, just after the GATT became the World Trade Organization, when I and others went to see people there in Geneva. We were talking about what we could do to help them better serve the trade ministries of the world. One of the things that they said at that time was that there were 75 governments that had trade ministries that had no access to the treaties of the WTO. So what we did was form a partnership with HP, put the treaties on CDs, and provided computers for those trade ministries. Today the Internet has made a lot of that better still.

But there are still critical needs. Information technology has an opportunity to bring people closer together, through advances such as distance learning, distance communication, videoconferencing. You all have the opportunity to reach hundreds and thousands and tens of thousands of people around the world every year through these new means of communication. And if you think about that concept and think about the decades ahead, it’s a huge opportunity to expand your impact, all to the good.

QUESTION: Mr. Smith, I wonder if in connection with legal education in developing countries you are aware of the influence of the Jessup Competition. I may say one of the sponsors of this dinner, White and Case, alone has paid for sponsorship of the Jessup Competition in Russia, and is expanding their support of the Jessup Competition. Do you — are you aware of how many countries learn about international law through their local Jessup Competition?

BRAD SMITH: Over 20 years ago I bought a PC as a third-year law student at Columbia Law School for one principal purpose – to write my brief for the Jessup Competition.

(Applause.)

So I readily appreciate what you’re saying. It’s an incredibly great way to reach people. I think that law students elsewhere relish that opportunity to interact and compete with their counterparts around the world and then with their counterparts in the United States. It’s a fantastic program.

And believe me, I say what I say not because I don’t appreciate everything that you have done to date, but because I do. It’s because you all – our law schools, the ABA, CEELI – it’s because you’ve done great things that you have the opportunity to do even more in the decades ahead. The need for new great things is so substantial.

QUESTION: Hi. I just wondered if you had thought about when you spoke of regulatory convergence, the flip side of it. Not simply the things that the corporations need to not be papered to death by a thousand different flags around the world with independent antitrust authorities with their own idiosyncratic views, but what the abiding worries also about labor and environment?

And we all remember the bad news of the Transnational Corporate Code in the ’70s that the U.N. was doing. But at the same time, I think as a responsible corporation, has Microsoft taken any particular initiatives in thinking about how to coordinate minimum labor conditions, minimum environmental conditions so you don’t have race to the bottom in the flight of capital?

BRAD SMITH: Microsoft is a signatory and a supporter of the United Nations Compact, which addresses some of the issues that you’ve identified. In fact, I think we’re one of the relatively few supporters of that compact among corporations that have their headquarters here in the United States.

And, like most things in life, it’s all about balance. I think one can and should be concerned that either law goes in a direction that is too cumbersome on individuals and companies and opportunities for economic growth, or to the contrary, it goes to too low level and doesn’t do enough to address the economic actors that play such a role in the world today.

We readily appreciate that as a global company, we have global responsibilities. And while idiosyncratic antitrust laws may be a challenge, antitrust law is extremely important. Intellectual property law, environmental law, labor law, all of these legal fields are very important and corporations all have responsibilities to live up to those obligations.

One thing I worry about is that every group can focus so intensely on the risks associated with doing new things – everyone can focus so much on protecting their defensive interests rather than identifying opportunities for us all to grow together — that legitimate concerns thereby become a recipe for standing still.

Even in national governments, all too often, I encounter people whose principal reluctance to advance an international legal norm is that they’ll have to live with it, too. We all do have to live with the new rules of international law we create, and yet given how small the world has become, I firmly believe that we would be better off with a world where international law moves forward and doesn’t stand still.

So with that, I’ll conclude. Thank you very much.

(Applause.)

MR. ALVAREZ: Thank you, Mr. Smith, for living up to your advance billing.

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