Power Dynamics in Negotiations

© 2020 Jay Gary Finkelstein

 Lion or Lamb?
 “A less powerful party in an international negotiation is not
always at the mercy of a more powerful party.”

 “The cases show that more important than aggregate power in

influencing negotiation outcomes are:

– (1) the resources that a particular side brings to bear on the specific
issues in a given negotiation, and

– (2) the skill and will with which a party applies its resources to the
negotiating process.

 For the weaker party in an international negotiation, the resources

and skills augmenting its power include the use of wise strategies
and tactics.”

 “The strong who seek to achieve stable advantageous

agreements efficiently should avoid trying to overpower the
weaker side through domineering words or actions.”

HOW SHOULD THE LAMB NEGOTIATE WITH THE LION?, Jeswald

W. Salacuse, Fletcher School of Law and Diplomacy, Tufts University
 Balancing Power – Matching Aggression –
Preparation
 Have a goal or a plan in place before a negotiation starts

– Set a goal and stick to it no matter how counter-party responds

– Have an “if-then plan”: If counter party makes a demand, have a

pre-considered response

– If-then plan can include scripted responses -- PREPARATION.

 Having a goal or plan has been proven to result in superior

negotiating results

 Low-power parties negotiate better when they set goals and

have an if-then plan in place

 Thinking about, and articulating, how both parties will benefit

mitigates aggression – builds collaboration

 Focusing on value rather than loss [expanding the pie],

minimizes defensiveness and aggression
 Tanzania, The Citizen, April 24, 2013
 “It is economic growth and wealth creation that will
pull the majority of Tanzanians out of poverty, not
some welfare or poverty reduction programs.

 “We can learn from the Chinese. It is said that China

has . . . moved over 600 million people out of poverty
through business and economic growth.

 “Sustainable economic growth requires our economy

to remain open and [for the] investment environment
[to] be investor friendly and stable for longer [in order]
to sustain investor confidence.

 “Investor confidence can be measured by the

volume of direct investment flows a country
receives.”

 Eve Hawa Sinare, “The economy is growing, but it could

grow even better,” The Citizen, April 24, 2013, p. 9
 Not without obstacles: “Tanzania faces tax exemptions
dilemma” FT, June 12, 2013
 The government in Dar es Salaam wants to reduce
tax incentives offered to companies to below 1% of
GNP.

 In the past two years it doubled to 4.3% of GNP.

 Dilemma: How to encourage investment by

companies, which have traditionally been courted
with the offer of tax incentives, and at the same
time collect the revenues you need to build
infrastructure and reduce poverty?

Source: Article by Katrina Manson, Financial Times, June 12, 2013

 The New Times (Rwanda), Sept. 13, 2014
 [Tanzania Prime Minister] Mizengo P. Pinda . . .
observed that well-drafted and carefully negotiated
mining exploration and development agreements are
key to ensure countries . . . benefit from revenue earned
from the extractives sector.

 "Some ill-conceived oil and mining agreements have in

the past led to public outcry, forcing governments of
affected countries to seek redress through re-
negotiation, which is often difficult," said the Prime
Minister.

 Pinda also said ordinary people are major stakeholders

in the mining business and must be put into
consideration when negotiating contracts. He advised
lawyers to . . . ensure fairness in the natural resources
sector, noting that Africa remained poor despite having
huge resources partly because of badly negotiated
mining agreements.
 Vivienne Yeda, Director General, East
Africa development bank (speech, Aug 2, 2019)
 Historically, East Africa’s natural resource wealth has not
always benefitted the region.

 Natural resources are a public good which . . . have the

potential to spur economic development, reduce income
inequality and spur job creation.

 Revenues from natural resource discoveries can be

used to catalyze socioeconomic development and to
develop a strong economic base.

 In order to achieve such tangible results, enabling

agreements must be drawn, negotiated and
implemented. East Africa and Africa generally have not
done well in this regard.

 We must purposely and continuously improve the quality

of our agreements. A strong position can be eroded or
lost on the negotiation table due to inadequate
preparation, strategy and negotiation skills.
 The Keys to Success
 Botswana is an example of a developing country
that has successfully negotiated mining
agreements with foreign resource companies.
 It achieved this by:
– deploying a well qualified and interdisciplinary
negotiating team
– maintaining a consistent roster of negotiations
through multiple contract negotiations to build
greater capacity and expertise
– engaging with outside experts when
necessary, and
– taking the lead in drafting documents.
 IMPACT
 Botswana: 2.3M people; Independence: 1966

 Significant diamond mining started in the 1970’s.

Government has exacted taxes and royalties from diamond
producers.

 Government holds an equity stake in De Beers's ventures.

84% of the venture's profits stay in Botswana.

 Lucara Diamond Corp. (Canada) owns the Karowe mine. In

2016, Lucara had $185M profits and paid Botswana $85M
(taxes) and $30M (royalties) totaling 62% of venture profits.

 Government uses diamond royalties to fund infrastruc­ture,

health care, and education, in­cluding study overseas.

 Impact on poverty: 1966 >50% of population lived below

the poverty line; currently, reduced to 16%.
 Source: “The Rock,” Ed Caesar, The New Yorker, February 3, 2020
 RESULTS:
 Challenges remain: Unemployment and over-reliance
on diamond industry. BUT . . . Through

– Careful planning
– Careful management,
– Well-drafted and well-
negotiated agreements
Botswana transformed from a
very poor country to an
upper-middle-income country