FCN treaties work against Americans in America, but no help to Americans abroad!

I am a bit embarrassed to admit that I have been searching around for interesting blog topics that aren’t rehashing the same themes all the time. This month, in real life, I have been working on a motion, and so it has consumed more of my writing time. I can write a lot, of course, but at a point in the day I think I reach “Peak Text”, and then it just gets harder to keep having something to write.

In my motion research, I happened to come across a case, Schanfield v. Sojitz Corp. of America, 663 F.Supp. 2d 305 (S.D.N.Y. 2009), which people familiar with employment law refer to as an “FCN treaty case”.

FCN stands for Friendship, Commerce and Navigation. The United States has many of these with other nations throughout the world; and, yes, of course, with Japan.

Usually, in an FCN treaty, each country allows the other country to discriminate in favor of its own citizens in certain managerial and executive positions in that country’s foreign corporate subsidiaries. So this would mean that a Japanese company, doing business in an affiliate in America, could choose Japanese citizens for particular managerial or executive jobs, and this would not be considered discrimination under Title VII of the 1964 U.S. federal civil rights law.

Likewise–and you will rarely, if ever, see this happen–an American company operating in Japan can choose Americans over Japanese for similar roles. I think the reality of it is that that Japanese routinely hone very close to the FCN treaty when they do their business in America, and the Americans in Japan probably think FCN is a new cable channel back home.

There has been some case law that suggests that FCN treaty-based discrimination has some borders to it. I can’t think of the one off the top of my head, but it did come out of New York or the Second Circuit. That would be an interesting one to find if I have spare time that I don’t want to use for something else . . .

This recent one, Schanfield, though, is one where the American flat out lost, and in a plain-vanilla variety analysis where the District Court for the Southern District simply said “sorry”, that it wasn’t discrimination if Sojitz placed Japanese citizens in certain functions and never considered Americans for the same function.

You see, this is the opposite of discrimination by U.S.-parent firms doing business in Japan. There, FCN should allow the U.S. multinational to favor Americans. Again, after all, look what happens to Americans who are, well, foolish enough to accept positions with Japanese subsidiaries!

But as a policy matter, I think the U.S. mulitnationals in Japan would be more likely to discriminate against the American in Tokyo (Osaka, etc.). And then the American gets the shaft in New York as well.

Here is interesting commentary from one of those law firm bulletins. Sometimes they really have some interesting nuggets of news.