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Home Archive for category "International Economic Law"

Mackerel War Called Off?

Published on April 9, 2014        Author: 

In November 2013 we wrote about a remarkable WTO dispute initiated by Denmark against the EU (The ‘Mackerel War’ Goes to the WTO). The case is remarkable because it has pitted one EU Member state against the other 27. Denmark, a member of the EU, brought the case “in respect of the Faroe Islands” which are part of Denmark, but not of the European Union.

The dispute concerns fishing quotas jointly managed by the Faroes, Iceland, Norway, Russia, and the EU under the Atlanto-Scandian Herring Management Arrangements. In annual negotiations, the parties decide on the division of the total allowable catch (TAC). In 2013 parties were unable to reach agreement, largely due to refusal to accommodate the Faroe Islands request for a larger part of the Total Allowable Catch (TAC).

When the Faroe Islands unilaterally decided to increase their catch, the EU responded by prohibiting import of herring and mackerel from the Faroe Islands. Denmark then brought a WTO dispute as well as arbitration proceedings under Annex VII of UNCLOS. In its request for consultations to the WTO, Denmark claimed the EU’s response to be in breach of GATT Article I:1, V:2 and XI:1. Denmark also reserved its rights under UNCLOS.

The parties have recently settled their dispute in respect of mackerel. On 12 March 2014, the Faroe Islands, Norway and EU concluded a joint arrangement for the conservation and management of the North East Atlantic mackerel stock for the next five years. The arrangement allocated 13% of the TAC between the parties (not including Russia and Iceland) to the Faroe Islands. This is a sizeable increase compared with the 5% that had been previously allocated to the Faroese, and the proportion is set to increase again next year.

The WTO dispute, however, is centered on herring, whereas the new agreement only deals with mackerel. Pending an agreement on herring, the WTO complaint and the UNCLOS Annex VII arbitration continue, and EU Regulation 793/2013, establishing sanctions against the Faroe Islands, remains in force. Read the rest of this entry…

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Evidence in Environmental/Scientific Exceptions: Some Contrasts between the WTO Panel Report in China-Rare Earths and the ICJ Judgment in Whaling in the Antarctic

Published on April 7, 2014        Author: 

Rare earths imageTwo significant international decisions involving environmental protection claims were issued within the last few days of March 2014.  On 26 March 2014, a World Trade Organization (WTO) Panel issued its Report in China-Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum (hereafter, China-Rare Earths), which held, among others, that “China may not seek to justify the export duties it applies to various forms of rare earths, tungsten, and molybdenum [pictured above left, credit] pursuant to Article XX(b) [exception for measures "necessary to protect human, animal or plant life or health"] of the GATT 1994.” (Panel Report, para. 8.11b)  On 31 March 2014, the International Court of Justice issued its Judgment in Whaling in the Antarctic (Australia v. Japan: New Zealand intervening) (hereafter, the Whaling case) where the Court held, among others, that “the special permits granted by Japan in connection with JARPA II [Japanese Whale Research Programme under Special Permit in the Antarctic Phase II] do not fall within the provisions of Article VIII, paragraph 1 [, of the International Convention for the Regulation of Whaling." [Judgment, para. 247(2)].  In China-Rare Earths, China sought to justify export duties that facially violated Paragraph 11.3 of China’s Accession Protocol to the WTO, by essentially alleging that these duties were justifiable as measures “necessary to protect human, animal, or plant life or health” within the purview of Article XX(b) of GATT 1994.  In the Whaling case, Japan sought to justify JARPA II as a programme “undertaken for purposes of scientific research and is therefore covered by the exemption provided for in Article VIII, paragraph 1, of the [International Convention on the Regulation of Whaling].” (Judgment, para. 49).  While both decisions contain rich analyses of numerous issues of treaty interpretation, one can also look at significant methodological contrasts between the ICJ and the WTO Panel on the treatment of scientific evidence and assignment of evidentiary burdens for the environmental/scientific issues in each case.

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A Follow-Up on International Arbitration under Pressure

Published on March 17, 2014        Author: 

Given the dramatic events in Ukraine, investment law was unlikely to be high up on the international legal agenda these past few days. However, during the weekend, the debate about investor-State dispute settlement (ISDS) I described in my last post may have taken a new turn. On 14 March, the Financial Times reported that Germany – long the most ardent supporter of ISDS and the country with the largest number of Bilateral Investment Treaties – now pushes for the exclusion of dispute settlement provisions from the EU-US Trade and Investment Partnership. This is the relevant bit:

Germany has introduced a stumbling block to landmark EU-US trade negotiations by insisting that any pact must exclude a contentious dispute settlement provision. …. [I]n the biggest blow yet to those seeking its inclusion in the deal, Berlin has decided that it will push for the exclusion of the ISDS provisions …. A spokesman for the economy ministry in Berlin said on Friday that the government had relayed its position to officials in Brussels, where negotiators have ended a week of talks over the proposed Transatlantic Trade and Investment Partnership (TTIP). Earlier in the week, Brigitte Zypries, a junior economy minister, told the German parliament that Berlin was determined to exclude arbitration rights from the TTIP deal. “From the perspective of the [German] federal government, US investors in the EU have sufficient legal protection in the national courts,” she told parliament. The German position pits Berlin against the commission, the US and business groups. All of them argue that the transatlantic deal is an opportunity to update arbitration rights that already feature in existing bilateral investment treaties and are often open to abuse.

 And, as the FT went on, the German position is really something quite new:

Nicole Bricq, France’s trade minister, has raised concerns before over the ISDS provision. Germany has until now backed its inclusion in the new pact. But Berlin has also been confronted with growing public scepticism in recent months over the transatlantic deal as a whole, and the ISDS provision in particular. At a press conference to mark the close of the fourth round of negotiations on Friday, Dan Mullaney, the leading US negotiator, declined to comment on the German decision. Ignacio Garcia Bercero, the EU’s chief negotiator, also refused to comment on it. But he pointed out that the EU’s original mandate to negotiate specifically included an ISDS provision and had been approved by member states, including Germany. “We are working on the basis of the mandate that has been given to us,” said Mr Garcia Bercero.

So, Alessandra Asteriti may be right (in the comments to my previous post) in saying the ‘ground is shifting’.

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International Arbitration: Heating Up or Under Pressure?

Published on March 11, 2014        Author: 

Dapo recently posted on this blog about the rise of inter-State cases before the PCA and predicted that “the current rise of inter-state arbitration will endure for some time“. Many readers will presumably be quite happy about the trend described: binding dispute resolution, if it happens, tends to make us international lawyers happy after all – so the more (cases) the merrier?

Interestingly, there is one branch of international law in which the debate currently seems take a different turn; in which the belief in binding dispute resolution is under attack – and in which many commentators, incl. many with an internationalist mindset and a keen desire for a rights-based global order, strongly feel that we have too much international arbitration. This is the field of investment law, in which the concept of investment arbitration has come under fire. Of course, this is an important debate for those interested in investment arbitration — academics, practitioners, companies, civil society, etc.  But, as importantly (if not more), it is also a debate that general international lawyers interested in dispute settlement should follow, and which I feel would benefit considerably if they did not leave it to the (pro- and anti-) investment communities. So this post is an attempt to introduce it to a wider audience and to encourage a wider debate. Within investment law, the debate has been going on for a while. However, over the past few months, it has suddenly heated up – and it has heated up in Europe, where the EU is formulating its investment policy. And this fresh start has opened up interesting spaces for debate. So what is it all about? Read the rest of this entry…

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Saar Papier v Poland: Comparative Public Law and the Second-Ever Investment Treaty Award

Published on February 3, 2014        Author: 

            Jarrod Hepburn is a Lecturer in Law at the University of Exeter, UK.

There has been much discussion in recent years – and in recent weeks on this blog – of the potential for investment treaty arbitration to benefit from a ‘comparative public law’ approach. In brief, the approach conceives of investment treaty arbitration as a form of public law, and calls for tribunals to draw on comparative domestic constitutional and administrative law, as well as other regimes of international public law such as WTO law and human rights law, to give content to the often vaguely-worded standards of typical investment treaties.

In the midst of contemporary enthusiasm for comparative public law, it is tempting to think that the approach is a new one that has been growing in prominence only over the last few years. However, this week brings news from Investment Arbitration Reporter that an UNCITRAL-rules investment treaty award dating from 1995, Saar Papier Vertriebs GmbH v Poland, has been unearthed. Amongst other aspects detailed by IAReporter, the case is particularly notable for its explicit use of domestic administrative law to interpret the provisions on indirect expropriation in the Germany-Poland BIT.

Indeed, this newly-uncovered investment treaty award – only the second ever (currently) known to be rendered, following AAPL v Sri Lanka in 1990 – contains intriguing indications that the comparative public law approach is a practically useful one for investment treaty arbitration. Furthermore, the age of this award raises the tempting view that, rather than being a new development in the field, comparative public law has been there all along.

However, as I discuss below, despite the treaty context of the claim, it is unclear whether the Saar Papier tribunal considered itself to be applying international law. Without this international law framework, it becomes more difficult to characterise the case as an instance of comparative public law at work. Read the rest of this entry…

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The Right to Regulate for Public Morals Upheld (Somewhat): The WTO Panel Report in EC-Seal Products

Published on January 27, 2014        Author: 

Whitecoat Seal PupThere have been few interpretations of Article XX(a) of the General Agreement on Tariffs and Trade (GATT 1994) – the  specific exception that justifies what would ordinarily be a State’s GATT-inconsistent measure, unless such measure is deemed “necessary to protect public morals”.  As with any of the ten enumerated exceptions under Article XX of GATT 1994, a State invoking GATT Article XX(a) must first meet the requirements of the specific exception (e.g. demonstrating that the challenged measure is indeed “necessary to protect public morals”), and thereafter show that the challenged measure also complies with the overall requirements of ‘good faith’ (Brazil – Measures Affecting Imports of Retreaded Tyres, Appellate Body Report of 3 December 2007, at para. 215) as contained in the chapeau to Article XX (e.g. demonstrating that the challenged measure is not being applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade).  The 25 November 2013 Panel Report in European Communities – Measures Prohibiting the Importation and Marketing of Seal Products [hereafter, "EC-Seal Products"] issued the very first decision upholding a State’s right to regulate for public morals as an exception under Article XX(a) of GATT 1994, in relation to ongoing trade arising from seal hunting (pictured above left,) and seal products.

It may be recalled that the 2009 Panel Report in China- Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products [hereafter, "China - Publications and Audiovisual Products"] was the first occasion for a WTO panel to directly interpret the scope and meaning of measures “necessary to protect public morals” under GATT Article XX(a). China had invoked the “public morals” exception in GATT Article XX(a) to justify a set of measures that regulated the entry of foreign publications, audiovisuals and other media forms.  China argued that its regulations were designed to protect public morals in China by reviewing the content of foreign cultural goods and forms of expression that could potentially collide with significant values in Chinese society.  The China – Publications and Audiovisual Products Panel had little trouble accepting the interpretation of “public morals” (China-Publications and Audiovisual Products, para. 7.759) already laid down in the 2004 Panel Report in United States- Measures Affecting the Cross-Border Supply of Gambling and Betting Services [hereafter, "US-Gambling"], which had defined “public morals” in Article XIV of the General Agreement on Trade in Services (GATS), as “standards of right and wrong conduct maintained by or on behalf of a community or nation” (US – Gambling, para. 6.465).  However, the Panel ultimately rejected China’s assertion of GATT Article XX(a) exception (China-Publications and Audiovisual Products, para. 7.911), finding that China had failed to show the “necessity” of its challenged measures for the supposed purpose of protecting public morals.  The Appellate Body upheld these findings in its December 2009 Report.

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The Public Law Approach in the Practice of Investment Treaty Arbitration

Published on January 22, 2014        Author: 

In my last post, I discussed how comparative public law methodology could inform the resolution of investor-State disputes and thus help to reform the system from within. This may sound like a view from the ivory tower. In this post I will first discuss why arbitrators have an incentive to make use of such a methodology and, second, point to existing cases in which tribunals have already adopted a comparative public law framework.

System-Internal Reform and Identity Change

The success of using comparative public law as a system-internal reform strategy depends on the extent to which those active in practice endorse it. Enculturating public law thinking will need an identity change among arbitrators, arbitral institutions, annulment committees, and disputing parties. But why should a change in thinking take place, if there is nobody who coerces arbitrators to incorporate public law thinking or parties to develop their submissions on the basis of comparative public law? Do arbitrators not even have an incentive to keep the system running in a way that it maximizes the benefits of investors as claimants, and in turn, the arbitrators’ own interest in being reappointed? This is what critics like Gus Van Harten argue. In his view,

the novel situation in which claims can be brought by only one class of parties, and only the other class can be found to have violated the treaty, provides investment treaty arbitrators (including those who are state-appointed) with an incentive to favour claimants in order to advance the interests of the industry and their position within it.

Appointment of Arbitrators as a Source of Change

My view is different. I think that the one-off nature of arbitration and the appointment mechanism for arbitrators have a great potential for bringing change to the system. Read the rest of this entry…

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International Human Rights Law, Investment Arbitration and Proportionality Analysis: Panacea or Pandora’s Box?

Published on January 7, 2014        Author: 

GuntripEdward Guntrip is a Lecturer in Commercial Law at the University of East Anglia.

Investment law jurisprudence has failed to fully explore the relationship between international investment law and international human rights law (for example, see the cursory examination given in Vivendi v. Argentina para 262 and Pezold v. Zimbabwe Procedural Order 2 paras 57 – 59). As a result, the question of how to approach normative conflict between principles drawn from these regimes remains pertinent when resolving investment disputes with human rights implications. Proportionality analysis has been proposed as a suitable methodology for the resolution of this type of normative conflict (see Schill, ‘Cross-Regime Harmonization through Proportionality Analysis: The Case of International Investment Law, the Law of State Immunity and Human Rights’ 27 ICSID Review – FILJ (2012) 87). The use of proportionality analysis received tacit support when an ICSID arbitral tribunal suggested ‘counterbalancing’ competing obligations drawn from international investment law and international human rights law so as to determine which should be prioritised (see SAUR v. Argentina para 332, although the ICSID arbitral tribunal did not conduct the proposed balancing exercise). Despite support for proportionality analysis, the employment of this methodology by investment tribunals to resolve conflicts between investment protection standards and obligations sourced from international human rights law should be approached with caution. Whilst proportionality analysis is attractive as a concept, its application in instances of inter-regime normative conflict remains problematic.

Proportionality analysis is a legal construct that provides a methodology for decision makers to balance conflicting rights and interests by using a three-stage test. Initially, the decision maker must determine whether the measure giving effect to the interest being prioritised is capable of achieving its objective.  If so, the focus turns to whether the measure is necessary to achieve its end, or whether a less restrictive, but equally effective measure could be used. Finally, the decision maker addresses proportionality stricto sensu. This final stage evaluates whether the effects of the measure adopted are excessive compared to the competing right or interest that has been infringed. The decision maker should appraise the weight of each interest before a determination is made regarding whether the means used achieve their aim.

The application of proportionality stricto sensu is the most problematic aspect of proportionality analysis. Read the rest of this entry…

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Comparative Public Law Methodology in International Investment Law

Published on January 3, 2014        Author: 

In my last post I argued that investment law should be reconceived as a system of public law adjudication in order to react to current criticism. The debate over the role of public law in investment arbitration has resounded in other discussions in this forum. It requires understanding arbitration not only as a dispute settlement mechanism, but also as a form of global governance; understanding arbitrators not only as agents of the parties, but also as trustees of the international community; interpreting investment treaties in light of their global implications; and increasing transparency and third-party participation. In other words: Public law rationales should guide the practice of investor-State arbitration.

This framework has important methodological consequences. Under a public law approach to international investment law, parallel problématiques in domestic public law and in other international legal regimes should be studied in order to resolve investor-State disputes in ways that are acceptable to all stakeholders. Comparative public (administrative, constitutional, and international) law, in particular, should become part of the standard methodology of thinking about and interpreting international investment treaties.

Problems with Classical Methods of Treaty Interpretation

Comparative public law is particularly useful because traditional methods of treaty interpretation and reliance on customary international law, while not irrelevant, face significant limits in international investment law. Although numerous inter-State claims commissions existed in the 19th and early 20th centuries, the jurisprudence of these bodies often concerns issues that are different from problems faced by modern regulatory States. Likewise, traditional methods of treaty interpretation often are too vague to guide the application of international investment treaties. In interpreting, for example, fair and equitable treatment provisions, an interpretation of the ordinary meaning may replace the terms “fair and equitable” with similarly vague and empty phrases such as “just,” “even-handed,” “unbiased,” or “legitimate,” but does not succeed in clarifying the standard’s normative content, nor does it indicate what is required of States in specific circumstances. Read the rest of this entry…

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Of Rights and Powers: Waiving Investment Treaty Protection

Published on December 9, 2013        Author: 

BartBart L. Smit Duijzentkunst is a PhD Candidate at Gonville and Caius College, University of Cambridge.

In November, the media reported that Colombia intends to ask foreign investors vying to construct a $26 billion road project to waive their power to bring claims under an investment treaty. Instead, the dispute would have to be resolved through domestic arbitration.

Until now, the question of a waiver of investment rights remained a mere academic exercise. It ties in with the lively debate, including here on EJILTalk!, over the position of the investor enjoying investment treaty protection—in particular whether investors can be considered right holders under investment treaties. Over the last few years, arbitrators (see here, here and here), advocates (see, for example, here and here) and academics (see, inter alia, here, here, here, here, here and here) have all had their say on this issue.

Now it seems that the debate over a waiver will move from theory into practice. Yet before we push theory to the side, I would like to suggest that, in this case, it can help us to identify, if not the answers, at least the correct questions to ask in this debate. Read the rest of this entry…

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