Law & Lemonade

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Golden rule for good deals, judgments and juice – don’t squeeze more than absolutely necessary

Jane Austen didn’t say this, but it’s a truth universally acknowledged…that one lemon can’t make lemonade for five. No matter how hard you squeeze. Get an elephant to step on it, but it won’t. Yet, we forget the limits of squeezing only too often. Look at Iran demanding damages from US, or US demanding Iran’s enriched uranium. Or, India’s retrospective tax that didn’t net the billions govt expected, but slowed down foreign investment instead. Or, the ₹2.5L cr that SC has ordered online gaming firms to cough up. It’s interesting that only ₹1.12L cr is the actual claimed GST evasion by these firms. The rest is penalty charged at the maximum permissible rate. Maximum squeeze. Question is, can an industry that never earned even ₹25,000cr in a year, pay up? What good is a fine if it can’t be paid?

Maybe, Trump hasn’t heard about the 8th Amendment. In 1791, America decided that excessive bail and excessive fines were plain wrong. It’s a golden rule for dealmaking too – know what the other party can give, and would be willing to give. You might negotiate around the ‘willing’ part, but ‘can’ is a hard limit, the complete lemon, or the goose that lays golden eggs. Problem is, one golden egg a day can lead anyone into temptation. A few years ago, US tax authorities fined an elderly woman $3mn for not disclosing a Swiss account her father had left her. They could have fined her $10,000, the normal rate, but decided to beggar her, because the law allowed it. That was Shylock’s logic, too. But true wisdom distinguishes between ‘lawful’ and ‘just’. We don’t drive pedal-to-floor all the time – it’s lethal – why take maximalist positions in judging and dealmaking, or squeezing lemons?