Regulating Offshore Outsourcing

Introduction Offshore outsourcing has changed the way business is conducted in the contemporary world of globalised trade and industry[1], as has been argued by Mehlman, who sets the influence of offshore outsourcing into financial context: ‘United States-based companies gain opportunities to win global business, particularly as developing nations improve their own domestic markets for hardware, software and services. In 2001, U.S. cross-border exports of IT services totaled $10.9 billion, while imports totaled $3 billion, yielding a trade surplus of $7.9 billion….In 2002, overall commercial services exports exceeded imports by $58 billion….[2]’. Businesses are therefore organising on an international level, and splitting up the components of their business so that these components may be transported to a location where the function itself can be carried out more cost effectively and efficiently[3]. The overall business aims are still achieved, however the functioning of the business at organisational and administrative level has been changed[4]. There has been a related and, in many respects a resultant effect upon how the law regulates the behaviour of actors interested in the processes of business connected with offshore outsourcing[5]. Additionally, in many respects, offshore outsourcing is symptomatic of the changes which are occurring on a more global scale[6], such as those brought about by changing technological capacity[7], globalisation and the growing influence of international regulatory bodies such as the UN[8]. This complex business environment has precipitated change in the most fundamental organisational structure and operation of business[9]. Businesses need to adapt to how the world around them operates, to ensure that they retain a competitive edge. The maintenance of this competitive edge has contributed to the rise of offshore outsourcing, as some regard this as a practice which makes good business, and economic sense. To link these concepts to legal processes, it is arguable that the changed face of organisational processes has necessarily changed the way these processes are regulated and overseen by legal processes[10]. International trade agreements, as well as structures, organisations and bodies who seek to enforce these agreements have a more significant role in how these legal processes are reconciled to the changed face of business modelling[11]. This project is aimed at reviewing the processes which regulate the behaviour of companies involved in the business of offshore outsourcing. This involves an identification of the relevant laws, and an appreciation of the socio-political environment in which they operate. This project will attempt to address and explain how the processes involved at the interface between legal regulation, and the expansion of offshore outsourcing have changed, and developed in relation to each other and in relation to the interests of various actors such as employees, legal fact-finders, businesses, international legal regulating bodies and the end consumers of products and services. The background to the development of these processes will be explained, and evaluated, and will be explained in contemporary terms. The concept of offshore outsourcing, its functions, its definition and factors which are related to its development will be discussed and evaluated. To assist in this exercise, the writer will draw on examples from businesses organised in different countries and will identify what aspects of legal regulation are the most pertinent within the terms of reference of this process. The writer will then review the laws associated with offshore outsourcing, which affect of these factors, and the review will also encompass the changing areas of law and the proposals which have been made by interested parties in terms of law enforcement and legislative change. In this sense the review will not be confined to the legal regulations in place. It will contextualise this analysis by considering the wider debate, and socio-economic and legislative proposals aimed at how developing the regulation of offshore outsourcing. This project will focus on the argument that, due to the increasing levels of complexity which the offshore outsourcing business model has given rise to, there has been a proportional increase in the reliance on contractual relationships which are designed to regulate the position between two, or more parties to such arrangements. This culture has evolved due to the diffuse legislative provisions which regulate similar principles, differently in different countries. This has increased the onus there is on individual participants within these processes, as different approaches to issues such as data protection, confidentiality, insolvency, choice of law, standardisation, employment and intellectual property rights can all have different consequences for actors, depending on how they are dealt with in any pre-existing agreements which exist between the parties. International agreements have been negotiated between major international states, and these are designed to ensure the operation, and enforceability of such agreements[12]. The evolution of these processes will be examined, critiqued and evaluated alongside the micro, and macro level economic and political factors which have influenced them. Offshore outsourcing Offshore outsourcing refers to the splitting of an organisation in terms of where and how its functions are preformed[13]. The processes which together make up the organisation are separated and a location for the best performance of each process is identified. Where the processes involve an organisation which is a business, some processes are exported to countries and locations best suited to the performance of the each individual process[14]. To move away from the abstracted explanation; in terms of a business this means that certain tasks are often exported to a location, or a country which is external to the location where the main business is operated and conducted. It is often the case, that a process, for example the customer service communications aspect of a telecom provider is outsourced to a part of the world where the cost of labour is lower than average. This enables the organisational processes involved in a telecoms service provider to be separated in order to facilitate the cheaper administration of some aspects of the business[15]. Mehlman has argued: ‘Expanding operations around the globe enables American companies to operate closer to growth markets and new customers, improving economies of scale for entire enterprises with global reach and tapping the best-and-brightest talent around the world….[16]’. The administration of business organisations are assisted by processes such as advances in technology[17], and the concept of globalisation which enables businesses to function on an international plain, more readily[18]. The globalised technological structures facilitate the separation of aspects of particular businesses[19]. The factors which influence offshore outsourcing As has been explained in the introduction section, the motivation of those who operate offshore outsourcing processes, in a business environment, is to impose a structure on the business model which is cost effective and competitive[20]. This involves isolating the components of business which can be carried out singularly, and establishing these parts of the business in an environment which is conducive to efficiency and cost saving[21]. This involves an ergonomic assessment of how this part of the business must be run, and what resources are needed to operate it. Then it is simply a matter of locating a combination of the required resources in an environment where all the required resources can be assimilated as cost effectively as possible. The resources which a company wishing to set up an offshore outsourcing business model need to consider are several-fold[22]. Issues relating to taxation, the labour force, technological advancements, health and safety policy and regulations, training and environmental concerns all feature highly in the list of resources, and processes which will need to be understood in order to ensure that the offshore outsourcing approach to business is established in a manner which is conducive to good business practice[23]. These processes and issues are all extraneously affected by the laws which are enacted separately within different countries, to deal with different manifestations of problems and requirements connected with them. Legal processes therefore affect the position of an offshore business model both directly, and indirectly and the essential key to ensuring a successful approach to the offshore outsourcing business model is identifying which of these processes and/or resources are the most important to the functioning of a specific part of a business and ensuring that the location chosen for the establishment of the offshore outsourced business structure assimilates these higher priority resources most favourably. THE OFFSHORE OUTSOURCING BUSINESS MODEL LEGAL REGULATION AND SOCIO-ECONOMIC AND POLITICAL CONTEXT This section will address and review the wider environment which affects the offshore outsourcing business model. The Bush administration, labour markets and employment will be discussed before a more in depth discussion of how this environment is regulated through legal principles. The Bush Administration Fiscal, and socio-economic law reform has brought the issues of the legal regulation of offshore outsourcing to the forefront of the political agenda in America. Mehlman has argued: ‘Administration continues to offer aggressive fiscal policies that promote jobs and growth, essential economic medicine in the face of the 2000 “bubble” market collapse, 2001 recession, and continuing business uncertainty caused by global terror and the corporate finance scandals of the late 1990s….[24]’. Policies and law reforms have been designed to secure more domestic jobs for Americans, and make it more advantageous for corporate actors to follow this course of action as well[25]. Policies have aimed to open up global markets to American-based products and services, and there has been an emphasis on the WTO and the extension of bi-lateral trade agreements to facilitate this. It has been anticipated that this will assist in making it more competitive for employers to administer their businesses from domestic locations. There has also been a planned expansion of research and development of new technologies, to ensure that business can improve the efficiency of their businesses through technological advancement[26], which perhaps could be an alternative to the prospect of transferring operations abroad. The budget for research and development investment has been increased; some have argued by 25%, with an estimated $123 billion being provided for research and development into new technologies. Taxation regulation has also been addressed, since this has an indirect effect on how corporate actors made strategic business decisions about where to locate their businesses. The newly elected Bush administration has provided tax credit schemes to support the research and development industry[27]. Investment has also been targeted at the infrastructure in the US, facilitating domestic enterprise by making resource distribution more efficient, and cost effective. In terms of technology, the internet has played a large part in the proposals to address issues relating to offshore outsourcing[28]. The internet has been regarded as a tool which can attract domestic investment[29], and persuade those actors who are more inclined to locate offshore to reconsider their position. A greater emphasis on internet security and the launch of 3G services has encouraged the retention of jobs in a domestic context[30]. The internet as a network of communication has therefore been focused upon, as a mechanism which can deliver more security to national users of broadband services. National energy plans have also supported corporate actors and a side effect of these initiatives has encouraged more corporate investment, and job creation at national level. There have been efforts to stimulate the growth of small businesses and entrepreneurial initiatives by providing better access to capital and by making the achievement of regulatory approval for building more efficient. In light of how the issues associated with offshore outsourcing have been addressed, therefore it is arguable that the efforts made to offset the detriments which offshore outsourcing can manifest have largely germinated at Federal level, and through initiatives conceived by the administration. This policy agenda has changed how labour markets have developed, and has changed the nature of employment, which of course has in turn changed how these processes are regulated on a micro level. These changes within the labour market and in terms of more specific employment issues will be addressed in the next sections. Location In analysing the legal context for the operation of offshore outsourcing, one has to attempt to evaluate how critical the idea of location is to an individual organisation[31]. Legal, and regulatory efforts to encourage onshore as opposed to offshore administration and management of business have to take these factors into account, if efforts to discourage the displacement of employment to other locations are to be effective. Many industries, for example the telecom, service and communications industries are labour intensive[32]. They require large numbers of trained workers to carry out repetitive tasks, for example a customer service, call centre requires workers to communicate with customers and follow appropriate customer service procedures. Within these sectors, the benefits of offshore outsourcing are demonstrable[33], however efforts have been made to reverse the trend towards offshore outsourcing which are not stifling to the business actor. After all, the last thing that the regulators of these industries wish to happen is damage to the financial interests of these corporate stakeholders. The provision of employment could be more drastically effected by such damage. The laws and regulations which best encourage these companies to source their staff, and retain such operations in an onshore environment, are arguably mainly related to taxation, visas and subsidies. Mehlman has surmised: ‘Many experts believed the 2001 tax cut moderated the recession that began just after President Bush took office…(the)…stimulus package extended benefits for displaced workers and accelerated depreciation schedules for businesses investment in capital equipment, which helped maintain new business investment in IT. The President’s recently enacted jobs and growth package is stimulating job creation, investment and growth……[34]’. Other industries, for example some branches of the IT industry have identified advantages and disadvantages which may be associated with offshore outsourcing of their business operations, and administration. It has been argued that industries such as the IT industry do not necessarily derive as much benefit from the offshore outsourcing of their operations, and elements of their business[35]. IT programming is one example of business competency which may be done, as cost effectively onshore as offshore. The current regulatory legal climate in the US can disincentivise the process of relocating these competencies abroad. This has been done both directly and indirectly, and it can mean that where there is an overall cost benefit analysis of whether moving functions offshore is considered beneficial. Take the insurance industry for example. The provision of insurance in the US, by an insurance broker, often requires the input of a registered agent. It is not permissible for this process of registration to occur outside the US, so overall the benefits of outsourcing are relatively marginal, or even marginalised. Labour markets The cost of labour is perhaps one of the most significant factors in the success of an offshore outsourced business enterprise[36]. Take call centres for example. There is a well accepted model of business, particularly within the telecoms, IT service providers and utilities service providers which recommend that customer contacts be managed centrally through a call centre through which all calls are channelled. These call centres do not have to be located in close proximity to the main provision of the service, or product to which the customer care pertains. The most important element of the offshore outsourced call centre is arguably the labour force who run it. India and other developing countries have a much greater supply of educated, graduates[37] who can easily be trained to work within the call centre business model, and this labour is often more cheap to obtain, with relatively little disparity in terms of skills and quality of service[38]. However, this growing complexity in relation to labour markets has created more complex employer and employee relationships, a theme which will be explored in the next section. Offshore Outsourcing and employment Offshore outsourcing delivers a series of benefits to the employer, as has been argued by Mehlman ‘Others suggest that the rise of global competition in service work is a net positive trend for our nation. Competition drives down prices for businesses and consumers and increases their choices. By outsourcing to lower cost operations, businesses are able to reduce their overhead, compress time-to-completion with around-the-clock operations, and focus on core, strategic investments and hiring….[39]’. The employee however is forced into an employment situation which is more uncertain, and the offshore outsourcing trends have resulted in increases in domestic unemployment in certain sectors. With increased competition for jobs, and the prospect that jobs could disappear by being moved into another country where labour is cheaper represents a threat and a risk to employees. The research group, the Gartner Group have given the following statistical analysis: ‘….in July 2003 that “by year-end 2004, one out of every 10 jobs within U.S.-based IT vendors and IT service providers will move to emerging markets, as will one of every 20 IT jobs within user enterprises…[40]’. It has therefore been argued that the offshore outsourcing trends which have emerged have mainly affected the IT, service industry sector as well as the telecoms and the communications industries[41]. Employees in these sectors, their trade unions and political representatives have argued that the benefits which offshore outsourcing delivers to corporate actors are delivered at the expense of employees and their dependants[42]. Although the converse position has been articulated in the following way: ‘Many observers suggest that global competition for white-collar service work mirrors trends we have seen for decades in other sectors and will benefit our nation……[43]’. Nevertheless, these concerns have been directed at law makers, and there is ever increasing pressure to legislate to protect the position of both employees and employers within the complex legal dynamics which offshore outsourcing can precipitate. These efforts have resulted in a general legislative prohibition on the outsourcing of government work in various states across America. However, the corporate actors, enthusiastic to reap the rewards of outsourcing the operation of parts of business processes are a little harder to constrain. The views which are being expressed by interested groups have resulted in legislative reform as we have seen explained above. These process runs concurrently with proposals for reform in the US. It has been argued that the legislature should commission more research into the effects which the concept of offshore outsourcing has on the levels of unemployment within certain sectors in the US. This research has been commissioned and conducted, and it serves to highlight the concerns of employees, and prospective employees in the US about how the demand for their services is being displaced and made increasingly redundant. The regulation, and issue of visas has been tightened, and various tax incentives have been offered to employers to encourage them to ensure that jobs which could be outsourced are made available nationally. Tax incentives also exist, which are aimed at the investment in training American workers, to ensure that there is an adequate supply of educated and competent workers to sustain such employment. The employer wishing to relocate certain parts of a given business will have to take on board that the laws are different in the country which the business originates and the country where the business is sent, will often be different, in terms of the law, but also oftentimes in respect of language, culture and political ideology. It is a good strategy to ensure that the parts of a given business transferred offshore, are transferred to a country which has laws that are broadly similar. Take for example a company wishing to set up an offshore component of their business (based in the US) in Canada, or in the UK as an example. Perhaps the most notable difference in terms of employment law, is that the idea of ‘employment at will’ which enables an employer in the USA to terminate the employment of an employee without giving any notice period, does not exist in Canada. Instead employees enjoy rights such as entitlement to notice, which are prescribed for by the legislature. The Canadian legislation, which is similar to the British system, protects the employee in the following terms. The employee is entitled to notice of any planned termination of their contract, or alternatively the employee is entitled to pay in lieu of notice. In common with the British system, the length of the notice period is calculated in accordance with the length of time that the employee has been employed for. In Canada there is supplementary provision for when employees are laid off on a large scale, and in general terms it may be argued that employment laws in Canada protect the employee’s position more. In Canada the most important factor in determining what laws regulate the position of the employee is the location of where the work is being carried on. The only exception to this is if the employee is employed by the government, in which case the Federal law applies to regulate the relationship between employee and employer, in every case. The legislature, in the UK and in Canada also provide for minimally acceptable standards for employees in respect of paid holidays, time off for public holidays, overtime provisions and remuneration, health and safety, maternity provisions and remuneration and acceptable maximum levels of employment in any given period of time. In Canada, basic levels of medical provisions are also guaranteed to the individual employee. Health insurance plans are made available to employees and it is often the case that employers provide supplementary health care provision as part of the package of benefits available to employees. It is clear to be seen therefore, that from an employment law perspective there are very different conditions which are expected from individual employees and employers. Because of this, employment is one of the areas which needs to be outlined and provided for in advance of any offshore outsourcing agreements. It may be argued that the increasing levels of complexity have drawn the actors involved in the process away from the national laws of their countries of origin and more towards individual contractual agreements which pre-select the terms of employment through contractual affiliation with one, or more countries. The next section will address, and review how all of these factors manifest at more of an individual organisational level. LEGAL REGULATION OF THE OFFSHORE OUTSOURCING BUSINESS MODEL: A MICRO LEVEL PERSPECTIVE This section will address how the law has attempted to regulate the processes associated with and involved in the offshore outsourcing business model. The themes which will be focused upon will be conflict of laws, choice of law, location of business, standardisation, intellectual property and intellectual property rights, service level agreements, data protection and confidentiality agreements. Service level agreements SLAs define the scope of the service which is required from the outsourcer, and the expectations which are considered important in relation to each actor within the process[44]. These agreements are commonly drawn up to define and regulate the expectations of the outsourcer vis-à-vis the actor to whom the outsourced task has been delegated. The parameters and extent of quality expectations, response times, and technological availability will therefore all form part of the terms of this agreement. The laws relating to the enforceability of service level agreements have been discussed previously, and it has been argued that the existence of the service level agreement is a mechanism through which the various actors involved in the business model of offshore outsourcing can both delineate and limit their responsibilities towards the various actors who may be associated with the process of offshore outsourcing, such as the end user of the product, or service being outsourced, employees and managers. The service level agreement is the pivot of the offshore outsourcers’ relationship with all of the actors involved in the process of offshore outsourcing. It must address issues such as the transfer and security of protected information, confidentiality agreements and clauses, intellectual property concerns, employees’ rights and responsibilities, the responsibilities of the offshore vendor, the forum in which any disputes may be dealt with and in what ways and the position of the various actors if there are legal disputes. These major functions of the service level agreement and the laws which affect it will be discussed in the next sections. The laws which govern and delineate the smaller scale functions of the service level agreement will also be reviewed and evaluated. Data protection and privacy Outsourcing companies have to take data protection issues into consideration when they contemplate the transfer of their businesses, or a part of their businesses to another part of the world. In this section, the main provisions of data protection principles will be reviewed. In Canada, as is the case in the UK and the rest of Europe data protection is something which is legislated for and protected at a statutory level. In Canada, the federal enacted Personal Information Protection and Electronic Documents Act applies to information stored by actors in the business sector. This legislation accrues rights towards individuals about whom personal data may be stored and used by these organisations. However, in Canada there are no regulations affecting the transfer of data outside the country in which the data is held. The approach in the USA is very different. Different data protection provisions protect individuals and create obligations in relation to personal data according to which sector the personal data pertains to, for example different rules exist for data held in relation to health, or financial data. In the USA the safety and management of personal data is a live issue, and there are currently a number of privacy bills in Congress which aim to ensure that data used by offshore outsourcers is more stringently protected by the companies, and organisations who have access to them and manage them. Legal complexities arise when organisations are handling data in two different jurisdictions and there are different rules which apply to the maintenance and protection of the same data. One example is when data is managed at call centres in India. In India there are no rules which protect the data outsourced by corporate actors. Corporate actors must therefore implement strategies which protect them from penalties which may be incurred when an outsourced organisation commits an infringement of data protection rules which is the subject of a penalty. In the UK this problem is addressed through statutory provisions such as the recent amendments to the Data Protection Act 1998. The changes have been communicated by the Information Commissioner’s office, and they mainly consist of legal rules which transfer the protections which apply to certain data sets to all actors who handle the data eventually. So, if information is transferred to India from the UK, UK standards govern how the data should be handled and protected. This can present a problem, for the principal businesses of organisations which have certain functions outsourced. This difficulty may be addressed through the inclusion of data protection clauses in the service level agreement. Clauses which require offshore vendors to maintain appropriate and requisite levels of privacy and data protection are typically included in service level agreements. These clauses can also require the offshore vendor to agree to maintain the same standard of privacy and data protection security as they themselves are. Procedures requiring an offshore vendor to notify the main business vendor of any breaches of data protection principles also effectively protect the offshore outsourcer, as do clauses which require a vendor to carry out training and regular audits of the data protection principles. In terms of reviewing the data protection laws, from the perspective of an offshore outsourcer, it is true to say that the data protection provisions across the world are complex and generally place onerous responsibilities upon the data controllers. These effects may be addressed through the use of contracts which anticipate potential difficulties in advance, set out how these can be avoided and where disputes about them may be resolved. The law relating to the protection of data is therefore quite an emergent set of principles. Additionally, it is quite diffuse and can create a lot of uncertainty for offshore outsourcing agents, particularly at an international level, given how differently the subject is handled in terms of legislation throughout the world. This complexity and uncertainty has led to a trend whereby the service level agreement and all corollary agreements have had to address the complex legal situation and determine in advance how it is to apply to the actors involved. This emphasis on the importance of the service level agreement has evolved resultantly, and it currently exists as a natural counterbalance to the risks which have accrued to offshore outsourcers who seek to expand their business globally using this business model. Offshore outsourcing and confidentiality agreements Confidentiality agreements are often used to set out in advance and protect the interests of both parties to an outsourcing agreement. These agreements are often agreed separately from the principle outsourcing agreement. These agreements protect the confidentiality interests of the parties who agree to them, precisely because they set out the understandings between the parties in relation to confidentiality issues in advance of any potential dispute. The courts will intervene to impute what is supposed to have happened where disputes arise, but this is often a lengthy and expensive process. In this sense, the confidentiality agreement makes the route to judicial remedy more certain and more accessible for a party to one of these agreements. Confidentiality agreements attached to outsourcing agreements will usually contain what are referred to as non disclosure clauses. These protect information, which is usually sensitive and could damage the commercial interests of an organisation, if it were to be widely and freely disseminated. Examples of industries which may operate offshore outsourcing of parts of their businesses, and have use for confidentiality agreements, and non disclosure clauses are for example, pharmaceutical operatives, where formulas for drugs have been made available to employees, and a situation arises where an employee moves to a competing company. Typically, these agreements have legal force through the doctrine of privity of contract. It is usual for the contracting parties to nominate the laws of a particular country which will have application in the event of a dispute which needs to be adjudicated. This circumvents any expensive litigation which may be involved in nominating a country to have the dispute resolved in, which is the course of action which would need to be employed if there was no such governing law clause. In this sense there is no real regulation of these agreements, at federal or local level, rather it is supposed that the parties to the agreements are aware of the implications of such contracts and where their agreement is secured in advance, the agreements have legal force, and may be relied upon by both parties. Conflict of laws When businesses operate on an international level, the domestic laws enacted in individual countries often become ill-equipped to deal with the complex legal scenarios which are played out between the interacting companies and interested actors[45]. Because of this, the law has evolved to put together a system of legal regulation which arbitrates in situations where conflict arises. The ambit of contract law enables businesses to clarify in advance which law will be applicable to any anticipated dispute which may arise between two parties to a business transaction. Ordinarily, contracts allow a party to stipulate which country’s laws will govern the adjudication of any disputes which arise between the parties. Choice of law Specifically in relation to the offshore outsourcing business model, because the complex legal relationships which offshore outsourcers frequently encounter through the course of following this business model, it is often necessary for them to compile a comprehensive set of agreements which will chart how any legal disputes will be dealt with, and what laws apply to the transactions and business actors involved. The 2005 Convention on Choice of Court Agreements Treaty gives legal force to contractual clauses which identify the forum in which legal disputes may be dealt with if they arise, and also gives legal force to clauses in contracts which designate the legal forum in which any contractual disputes may be adjudicated. The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards also imputes legal force into contractual clauses of this nature. These treaties were designed to encourage a more global emphasis on trade, by providing more certainty to the actors involved in the process. Interestingly, in the advent of the offshore business model, the emphasis has shifted more towards the efficacy and operation of these agreements, which are supported by and given more certainty through the international treaties which often lend support to their operation. Intellectual property Intellectual property is another domain which has been thrust to the forefront of business considerations in the field of offshore outsourcing. The idea that patents exist to protect ideas, and original inventions is predicated upon the idea that these patents will have legal force and recognition on an international level[46]. Without a consistent mechanism to enforce these protections, businesses could be irreparably damaged because multi-million pound agreements in relation to products and services are often contingent upon the ownership of an idea or a combination of ideas which make the provision of such a service or product uniquely identifiable. These patent protections therefore protect, not only the idea, but the agreements which are enforced in relation to the ownership of the idea, which are frequently more valuable than the idea itself. Patents therefore amalgamate the creativity of the person to whom the patent belongs with the creativity of individuals or organisations who understand how the idea can be ‘packaged’ or sold to society. Such relationships are therefore mutually advantageous, and uniquely symbiotic because the value of the transaction is so utterly reduced without the input of one or other of the key players (typically, the person who invents the idea, and the person who markets it). Without intellectual property protection laws, such mutual benefits would be protected in much more uncertain respects[47]. Intellectual property rights are protected in different manners, through different legal systems. The advantageousness of a particular system of legal regulation in respect of intellectual property laws may be seen as a resource, or as a business risk, depending on whose interests require protection and how easy it is to engage these legal protections, in a given location. In light of how important intellectual protection laws are, therefore it is easier to see how an offshore outsourcer could perceive the match between favourable intellectual protections, and an identified requirement of a business in this respect, as a resource which can be used to the advantage of an outsourced corporate competency. Investing in intellectual property The investment in intellectual property protection has also been identified as a way in which corporate actors may be encouraged to establish more domestic operations and business solutions[48], as an alternative to the outsourcing of business abroad. It has been argued that patents are more readily protected, particularly within the pharmaceutical industry in America. This contrasts with the focus on this niche area of business support, which is often overlooked in emerging global market contenders such as China and India. Links with government Government approval of outsourcing is another key strategic advantage to be cultivated and engaged by the business savvy offshore outsourcer. Government approval of the substance and aims of an outsourced venture can often mean that public funding can be secured in the form of subsidies, or grants. An important example could be the peace process in Northern Ireland, where development of infrastructure is subsidised in areas which are sectarian strongholds. Call centres therefore have grown up in these areas, and have been successfully managed by international organisations such as Teletech who manage outsourced customer care projects for telecoms providers based in mainland Britain. The management of these projects mutually benefit the organisations concerned, as a result of the heavily subsidised construction initiatives, which are seen by Government as politically advantageous because they improve areas, historically considered ‘no-go’ areas in terms of the employment opportunities which are available, and also aesthetically. In such areas, the rate of unemployment is typically lower, in large part because corporate interests typically shy away from investing in building expensive infrastructure because of the risks associated with terrorism which have existed. The mutually beneficial offshore outsourcing project therefore benefits financially from the Government, but simultaneously delivers an advantage which can be used by the Government for increased political leverage. This process is known generically as the peace dividend. The involvement of the government in the process of offshore outsourcing does not just revolve around subsidies and ensuring that economic and political conditions facilitate the expansion of business. The government have important supervisory functions which are perhaps overlooked because they are often delegated. The next section will consider an important branch of the US government’s supervisory role, within and relating to the offshore outsourcing business model. Standards, although they appear on first examination to be only tangentially connected with the process of offshore outsourcing are actually very important if positive economic relations, and strong economic foundations are to exist within the US. The topic of standardisation is therefore considered in the next section. Standardisation The concept of standardisation is another factor which affects the propensity of corporate actors to participate in offshore outsourcing[49]. In America, there has been a renewed focus upon the maintenance and regulation of standards for products produced by American manufacturers. Because the assurance of higher standards ensures a more competitive position for products and their producers in global markets, the programme of strengthened regulation of standards within these areas has supported domestic corporate actors, in national businesses, and encouraged more of these actors to produce their products from domestic locations, where access to this standards support is more readily available. One of the reasons why standards and the maintenance of standards is so critical is that, the presence of appropriate standards can support and facilitate trade with global actors, and markets[50]. Equally standards can thwart access to global markets. It has been estimated that standards issues affect approximately 80% of world trade transactions, and the process of standardisation can both support and impede these transactions[51]. Some commentators regard the issue of standards as the most important non tariff barrier in global markets. The operation of effective standards control, and the regulatory and legal context in which it takes place is therefore a pertinent factor which impacts the decision-making processes of corporate actors considering offshore outsourcing. The onshore regulation of standards is supervised by the Department for Commerce in America. This department provides supervisory functions, in relation to the maintenance of standards, it can investigate concerns about products. It also provides training and subsidies in the form of grants. Other initiatives such as the ‘best practices’ database aim to support the reputation, of products governed through these standards regulations, and schemes which disseminate technical information and recommendations about trade associated standards issues and risks[52]. The US system for the supervision of standards has been described as decentralised, and aligned with industry actors, and stakeholders. Quasi-governmental organisations exercise delegated supervisory powers, and those agencies are referred to as Standards Development Agencies (SDOs). There are approximately 450 of these organisations[53]. The activities and regulatory powers of these organisations are commissioned and spurred on through government interventions, policies and the passage of legislation which is implemented by the agencies concerned. A law referred to as Public Law 104-113, the National Technology Transfer and Advancement Act of 1995, along with the Office of Management and Budget Circular A119 both require that federal authorities attempt to establish voluntary consensus about the implementation of aspects of regulation. The agencies to whom delegated functions derive, are required by this legislation to participate in these initiatives also. On a more international level, the regulation of standards is also impacted by the WTO Technical Barriers to Trade Agreement. There is an associated code of practice which must be adhered to, which operates in conjunction with this agreement[54]. In accordance with Article 4 of the WTO TBT Agreement, members of the WTO must accept that their central administrations, and or executives implement and oversee the implementation of this code. These functions exist concurrent with the functions of the International telecommunications Union, which is an agency funded through the United Nations and which develops standardised guidelines and policies associated with technology in the communications sector. Within the Food and Agriculture sector, an organisation referred to as Codex develops similar guidelines in relation to food. Codex aims to enforce standards relating to fair trade and protect the health of consumers. The aviation industry is similarly supervised through the International Civil Aviation Organsiation which recommends industry specific standards relating to the aviation industry. Equally, the enforcement of legislation is overseen by the International Maritime Organisation in relation to shipping and the safety of maritime activities, and associated issues such as the pollution of the marine environment. The organisation for economic co-operation and development (OECD) assists with the oversight of international standards, as do working groups such as the United Nations Commission for Europe (which advises about issues connected with transport). Through these organisations, standards are enforced in the US in line with the policy that federal laws must be overseen at as local a level as possible, and the participation of some voluntary consensus representatives must be facilitated. The main procedure for the enforcement of law within these involved the implementation of a conformity assessment. This is a system of standardisation, which itself is standardized across the various industries. This process involves the sampling of products, produce, and equipment. Testing is carried out, along with evaluations, certifications, software monitoring and assurances of conformity are given. These processes support and ensure the smooth operation of the offshore outsourcing business model. Many industries which have reaped the rewards of offshore outsourcing are dependent upon the reputation which their business has by virtue of the fact that in may be principally based in a particular location such as the US. Standardisation ensures that products and services known to originate from the USA are guaranteed to have a certain standards, for example in relation to health and safety and quality. Without standardisation, there would be a lot more uncertainty for businesses to cope with. The legal regulation associated with standardisation prevents this and provides a strong foundation for businesses to build their own reputations and the brands, or trademarks which drive their businesses. Conclusion This project has considered the topic of the offshore outsourcing of business processes, along with the complex relationships which underpin and drive these processes. The concept of offshore outsourcing was defined and its functions were explained and evaluated. The position of the offshore outsourcing model of business was then considered within a legal context and the laws which regulate offshore outsourcing were reviewed in depth. The bigger picture was also considered, in terms of the wider socio-political environment which determines the nature and the applicability of legal regulation of such processes and relationships to a large extent. This included a review of fiscal policy under the Bush administration, and how this has impacted upon the regulatory and commercial environment within the US. It was argued throughout the project that while the extraneous legal processes themselves are important, of and by themselves, they do not stand alone in terms of how significantly they affect the interests of corporate stakeholders responsible for offshore outsourced business enterprises. It is suggested therefore that it is not the legal processes themselves which should correctly be the subject of research and pre-project planning, but their potential application within the context of pre-identified goals of such enterprises. In short the legal processes themselves are not as important as the intersecting relationships which affect how these legal processes take effect. It has been argued that the most important aspect of the regulated offshore outsourcing business model is the service level agreement which is so often supported through treaties such as the 2005 Convention on Choice of Court Agreements Treaty, and the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. These treaties underpin and lend credibility and reliability to the most important functions and structure of the offshore outsourcing business model. The service level agreement ensures that complicated legal processes and regulation can be understood and anticipated by actors both reliant upon and regulated by such agreements. In many senses, because of the levels of complexity which are brought into the equation by the intersecting relationships between international locations and actors, the service level agreement has been used and has evolved as a mechanism which reduces the level of risk to which corporate actors are exposed by virtue of these complexities. The service level agreement is therefore a legal construct which defines the functions and relationships which underpin the offshore outsourcing business model. It continues to be an important tool for those involved in the process and is malleable enough to absorb and reflect changes to the structures and processes which, may be deconstructed but which together represent the business model of offshore outsourcing, a model which has brought sweeping change to the way business is conducted and developed in the USA and internationally. 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