The 15th annual Herbert and Justice Rose Luttan Rubin International Law Symposium, organized by Kevin Davis, Beller Family Professor of Business Law, examined the increasing role of private actors in providing financial assistance to developing societies.

Co-sponsored by NYU Law's Institute for International Law and Justice and Journal of International Law and Politics, the two-day symposium on December 4 and 5 looked at new forms of accountability, socially responsible investment, and the relationships between public and private financing among a broad array of topics related to the privatization of development assistance. After examining nearly a dozen papers, the symposium concluded with an expert roundtable discussion.

During the panel “Regulating Private Flows,” Davis and his co-author Anna Gelpern, an associate professor at the American University Washington College of Law, presented “Person-to-Person Financing for Development: Governing the Intermediaries.” They gave an overview of the varying types of regulation applied to banks, charities, and investment intermediaries, pointing out newer hybrid forms in which the definitions of institutions are blurred, with elements of charity, banking, and investment fund operation often combined.

One issue, Davis said, was that financial institutions typically receive stricter scrutiny than charities do. Recent innovations such as person-to-person microfinancing, facilitated by microlending Web sites like, introduce new wrinkles—for instance, the possibility that the lender’s intentions in making the loan might run contrary to how funds are actually used once they have been transmitted to an intermediary microfinancing institution. “These are ferociously complicated financial products,” Gelpern said, adding, “We really don’t have a system that captures it all.” The authors’ preliminary stance was in favor of regulating such intermediaries more like financial institutions than like charities.

Professor Mitchell Kane served as the discussant of “Tax Aspects of Private Development Assistance,” presented by Professor Eric Zolt of the University of California, Los Angeles School of Law. Zolt raised a series of questions: Should tax benefits extend to charitable activities in foreign countries, and what would the consequences be? Should foreign charities be taxed differently than domestic ones? Should charitable tax benefits be extended to for-profit entities that can provide essentials in places outside the U.S.?

Kane took the opposite tack from Zolt regarding whether U.S. tax benefits should extend to foreign charitable activities. While Zolt came down on the side of subsidizing such activities, for reasons including the level of need in foreign jurisdictions, Kane argued that this conclusion followed from the wrong starting place. “If you begin with the domestic frame, as a matter of domestic tax policy, and then try to map it onto foreign use of funds, there’s actually just about zero case for a charitable contribution deduction,” Kane said. Expounding on his point, he added, “We must be, in our general redistributive policy in the income tax system, drastically discounting foreign utilities, probably to zero. Although philosophers might come forward and give persuasive arguments for cosmopolitanism, it is not accepted. It is not in the Internal Revenue Code.... If you say the benefits are really high in the foreign jurisdiction, that might give you a great argument for the public sector in that jurisdiction having to spend a lot of money to purchase the public good, but it doesn’t give you an argument for some other jurisdiction to spend like funds.”

Posted on December 10, 2009