March 23, 2009

February Maritime Law Meeting

In February 2009, legal research volunteer Jorge & I had lunch with a noted international expert on the Law of the Sea, who we’ll call X. We mainly discussed near-shore medical tourism as the initial business model. Here are my notes from the meeting:

There is a tension between credibility and regulation of flagging states. The ones which will monitor you the least also have the least credibility in the world of international law. Patri & Jorge believe we should follow a laddered approach. Start with whoever will take us – Tuvalu, Marshall Islands, Liberia, Panama. See how it goes. If we need more credibility and don’t mind the regulation, use bigger states. Incremental! And of course, this isn’t one decision b/c seasteading is not monolithic – different ventures can make different choices and we will see how it all works out.

X mentioned that Dubai is building land in international waters ([Dubai International Arbitration Centre]( partly so that disputes can be resolved by international arbitration experts applying English law, rather than under UAE law. You can go to their website and plug in the amount of your dispute and the number or arbitrators to calculate the cost of arbitration. Great example of using the ocean to get a better regulatory environment.

Jorge points out that seasteads can do the same. And we can declare our corporate law, for example, to be that of Delaware or the Bahamas. (Like Monaco does w/ French law – they sign a copy of every bill) This is great b/c we leverage the best existing systems out there, we don’t have to build the system ourselves, and we don’t have to establish a new brand. A perfect example of what seasteading is trying to do – mix and match the best legal and political systems worldwide to make something new and better.

Corporations want stability and predictability. They would rather be regulated than unregulated! Oil companies encouraged the continental shelf grab for seabed resources by coastal states – because they wanted to be able to sign a contract w/ a coastal state and be able to depend on it. They would rather a coastal state own the oil than no one own it, even though they have to pay the state for access!

X made it clear that law is about power, money, political capital. Not just rules and regulations. We cannot ignore this. If we don’t have powerful stakeholders on our side, then the powerful stakeholders we offend will just change the laws to make our lives hard. Example – American Medical Association (AMA) doesn’t like us undercutting the salary of American doctors, pressures CA to make medical cruise ships or CoastSteads illegal (can’t dock in US, passengers not allowed to head there from US ports, Americans not allowed to go to Mexico to take a boat there).

But…if we are partnering with a cruise line and/or a health insurance company – we have the balance of power. We can undercut the AMA and get away with it. Crucial part of strategy – leverage existing powerful stakeholders by allying with them.

X points out that getting on a cruise ship in a US port *feels different* than getting on a plane to Thailand, even though it seems like the same to us, based on international law. The expectation of public and customers will be that there is US protections, regardless of actual international law. And that expectation affects politics and law.

Surgical procedures have big reputational issues. Something will go wrong eventually, and the 60 Minutes TV piece writes itself, and then the AMA can shut you down. Again, need powerful allies. Probably better to start with things that don’t have disastrous failures, rather than a major procedure like orthopedic surgery. Cosmetic? Dental? Lasik? Let’s take it one step at a time, from least radical. Incremental!

X was a big fan of starting on ships. Far cleaner legal situation, backed by centuries of law. Coastal states get to exert oversight when you dock, inspections and so forth. That makes them more comfortable. There is a flagging state, that makes everyone more comfortable.

We need some regulation. Otherwise we will scare the hell out of powerful players and get shut down. And scare off investors, customers, etc. If we do medical tourism under Marshall Island “regulations”, the international community will see us as rogues. Even Panama. If we do it under Norwegian regulations, they might respect us.

“Permanent living on the ocean is inevitable.” He expects it to happen on the seabed b/c of the problems of the air/water interface (ie waves). But said it is inevitable.

The UN Law of the Sea is *irrelevant* to what a coastal state does in its territory. (P: Look at US arrests of internet gambling magnates.) They can declare *whatever they want* to be illegal in their territory. This is about politics more than it is about law. “There are definitely ways to structure it within existing international law, if you have political support” For example, easiest thing for us is to ally with small island nation to open a free trade zone / business park somewhere in its EEZ. Very strong legal status. (Unfortunately, also in the middle of nowhere – South Pacific). Secondary to that, we need a nation on our side. But will it let us have autonomy? Dunno.

Economic model matters enormously. X really wanted more detail on this, besides “medical tourism”, “low-regulation Hong Kong”. Both to be convinced our project is economically viable, and to understand exactly what our challenges are – like what stakeholders are threatened / supported by the venture. Politics is shaped by special interests, and law by politics, so it is hard to know what our legal challenges will be without knowing what special interests we threaten/support.

X found the discussion fascinating – “This lunch was not boring! Very interesting!”. He had to consciously choose the hat of “what is possible” – as a lawyer, and employee of / consultant to governments, his natural hat is “Here’s why you can’t do it”. But he understands that if that perspective is taken too far you never get any progress for humanity.

He didn’t buy / seem to get at all the idea of dynamic geography, which was part of why he was skeptical of the economics, because he didn’t see the regulatory advantages. His focus is law, not economics. I didn’t feel like this was a point against dynamic geography, since it wasn’t that he got the idea and thought it wouldn’t work, it seemed more like the economic language / reasoning was alien to him. From what I could tell, he is not a fan of economists in general.

Jorge felt the meeting went really well. X was skeptical of economic details, and he & I tended to get sucked into those. But at a high-level, he is fascinated by the concept, and I suspect when we have something more solid in place that he would be even more intrigued.

Jorge adds: there are two other points that should be noted. The first is that, as X quickly observed, it is generally understood (with the exception of a few natural rights scholars) that the right to free navigation of the seas does not inhere to individuals, but to states. In other words, don’t expect governments to recognize that seasteads have any rights to be or travel around international waters without impediment unless the seasteads are answerable to some government. The second is that a governance model for seasteads has existed for a very long time – condominium law.