Home Archive for category "International Economic Law"

Beneficial Ownership and International Claims for Economic Damage: Occidental Petroleum v. Ecuador and Restoring Limits to Investor-State Arbitral Tribunals’ Jurisdiction Ratione Personae

Published on November 16, 2015        Author: 

On 2 November 2015, the ICSID ad hoc Committee composed of Prof. Juan Fernandez-Armesto (Committee President), Justice Florentino Feliciano, and Mr. Rodrigo Oreamuno in Occidental Petroleum Corporation v. The Republic of Ecuador (ICSID Case No. ARB/06/11) partially annulled the massive US $1.769 Billion award of damages issued on 5 October 2012 by the majority of the arbitral tribunal (Mr. Yves Fortier, President, and Mr. David A.R. Williams) over the strong dissent of arbitrator Prof. Brigitte Stern. Agreeing with arbitrator Stern’s position that Occidental Petroleum had split its ownership to give a 40% ownership interest to a Chinese company Andes/AEC (Committee decision, para. 204), the ICSID ad hoc Committee whittled down the damages awarded to only reflect the actual 60% ownership of claimant Occidental Petroleum in the assets that Ecuador expropriated. The Committee’s decision significantly brought down the compensation value for the expropriation to the 60% as owned by Occidental Petroleum to US$1.061 Billion (Committee decision, paras. 586 and 590). The Committee treated the Chinese company Andes/AEC’s beneficial ownership of 40% of the expropriated assets as outside the scope of its jurisdiction over covered investors protected under the US-Ecuador BIT.

In issuing its landmark decision, the Committee stressed proscribed limits under the law of investor-State claims; the distinct confined mandate and authority of arbitral tribunals as derived from the creation and consent of States; and the ensuing narrow availability of the investor-State treaty arbitral system only to treaty-covered investors: Read the rest of this entry…

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China’s View of International Litigation: Is the WTO Special?

Published on November 13, 2015        Author: 

Yesterday, Geraldo Vidigal put up a really interesting post looking at recent patterns of use of the World Trade Organization’s dispute settlement system. One thing that was particularly striking to me was the extent to which China has participated in the WTO dispute settlement system given its previous position on resolution of disputes by international tribunals. Geraldo’s chart of the latest 100 disputes at the WTO shows that only the United States, the EU and Japan have initiated more cases at the WTO in recent years than China (with Japan initiating just one more case than China in this period). Given that the WTO system is the most widely used inter-state dispute settlement system, it might not even be an exaggeration to say that: in terms of numbers of cases brought before international tribunals by states, China is one of the most enthusiastic state users of international tribunals! Of course, that enthusiasm is only before one particular system.

In October 2010 I posted here on EJIL:Talk a piece titled “Is China Changing its View of International Tribunals?“in which I noted that China’s view on international tribunals more broadly seemed to be changing. At the time, I noted China’s participation in the Kosovo Advisory Opinion at the ICJ, which was the first time that the People’s Republic appeared in oral hearings before the ICJ. I also pointed out China’s participation, around the same time, in the written and oral phases of International Tribunal for the Law of the Sea’s (ITLOS) first advisory proceedings –  the Responsibilities and obligations of States sponsoring persons and entities with respect to activities in the Area (Request for Advisory Opinion submitted to the Seabed Disputes Chamber). In 2014, China submitted a substantial written statement in the Request for an advisory opinion submitted by the Sub-Regional Fisheries Commission (SRFC) though it did not take part in the oral hearings.

Of course, we have non-participation by China with respect to the United Nations Convention on the Law of the Sea Annex VII arbitration initiated by the Philippines (in respect of which the tribunal issued an award on jurisdiction a couple of weeks ago). Read the rest of this entry…

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WTO: The First 500 Disputes and the Last 100 Disputes

Published on November 11, 2015        Author: 

Yesterday, the WTO dispute settlement system received its 500th formal request for consultations. Because members may only request a WTO panel after unsuccessful consultations, filing such a request is the first step in the initiation of WTO disputes. For this reason, the request for consultations, without being per se a contentious act, signals the willingness of the member requesting consultations to take a dispute to adjudication. Between 1995 and 2015, therefore, the WTO received almost 24 disputes a year – an impressive amount for a purely inter-state dispute settlement system. Confirming the tendency of increased participation of developing countries, the 500th request was filed by Pakistan and targeted a measure imposed by South Africa.

I took this opportunity to undertake a small and very simple (some might say crude) quantitative exercise: who are currently the main WTO litigators? If we go back to 1995, the US and the EU will clearly dominate (the WTO helpfully provides a map of disputes). However, China only joined the WTO in 2001, and Russia in 2012. Thus, a more helpful exercise is to look at the last few disputes. Read the rest of this entry…

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Published on November 4, 2015        Author: 

I invited our Book Review Editor, Professor Isabel Feichtner, to write a Guest Editorial, which was published on the blog in July. As the reader will immediately note it would have been foolish, given the circumstances addressed in that Editorial, to wait for the next issue of EJIL and so I proposed that it be posted immediately on EJIL: Talk! where it was widely read and justly applauded. Given its importance, going well beyond the so-called Greek Crisis, we republish it in the current issue of the Journal as an official EJIL Editorial – which of course, as is the case with all Editorials in this Journal, represents the views of the author, not of EJIL as such.

It is our hope that this Editorial will stimulate a broader discussion on our role as international lawyers in today’s world of politics. To this end, let me make an open call for contributions, to the Journal and to EJIL: Talk!, on the role of international law scholarship in making sense of questions of how the refugee crisis, austerity politics, megaregionals, security politics, and so on interrelate, and how we as international lawyers can usefully intervene.

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Filed under: Editorials, EJIL, Financial Crisis

A Bacon Dispute at the WTO? International Trade Regulation and the WHO Decision on Red Meat and Processed Meat

Published on October 28, 2015        Author: 

To the chagrin of meat-eaters worldwide, the International Agency for Research of Cancer (IARC) – the cancer agency of the World Health Organization – has just published a summary of over 800 studies, some of which decades-long, on the link between consumption of red meat and processed meat and cancer. The summary concludes that consumption of red meat is probably linked to cancer, and that consumption of processed meat is demonstrably linked to bowel cancer. Specifically, every 50 gram portion of processed meat consumed daily increases the risk of bowel cancer by a significant 18%. An average sausage weighs about 70-80 grams.

On the basis of this research, IARC experts decided to add red meat and processed meat to the list of potential cancer-inducing agents. Red meat, i.e. ‘all mammalian muscle meat, including, beef, veal, pork, lamb, mutton, horse, and goat’, was classified under Group 2A, as ‘probably carcinogenic to humans’. More worryingly, processed meat, including all red meat ‘that has been transformed through salting, curing, fermentation, smoking, or other processes to enhance flavour or improve preservation’, was classified as ‘carcinogenic to humans’ (Group 1).

With this decision, processed meat now ranks together cancer-wise not only with the usual suspects against which healthcare professionals advise us – alcoholic beverages, tobacco smoking, and solar radiation – but also with less pleasant substances such as mustard gas, arsenic, and plutonium. To leave no room for doubt, the Q&A clarifies that among the new known carcinogens are ‘hot dogs (frankfurters), ham, sausages, corned beef, and biltong or beef jerky as well as canned meat and meat-based preparations and sauces’. (Surprisingly, bacon was left out of this particular clarification.)

Few people, of course, were under the illusion that these products were good for your health. However, their classification as known carcinogens has significant public health implications, which may lead governments worldwide to consider adopting measures to prevent consumption, or at least excessive consumption, of processed red meat. As with regulatory measures aimed at lowering consumption of tobacco and alcohol, we can expect the new anti-bacon measures to become the subject of international litigation under trade and investment dispute settlement.

The question of how to give weight to health and other public interest concerns under investment law is still a tricky one. Under the law of the World Trade Organization (WTO), on the other hand, I believe the issue is essentially settled: once a decision of an internationally recognized scientific body such as the IARC exists to ground policies, WTO law will in principle pose no obstacle to even-handed measures aimed at reducing consumption or even removing the product from the market entirely. Read the rest of this entry…

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Authors’ Concluding Response: Assessing the Case for More Plurilateral Agreements

Published on October 2, 2015        Author: 

Editor’s Note:  This is the authors’ concluding response in a series of posts discussing the article in the current issue of EJIL Vol. 26 (2015) No 2, by Bernard Hoekman and Petros Mavroidis. The original post is here. See also the  posts  discussing the article by Junji Nakagawa, Diane Desierto, and Geraldo Vidigal.

We have profited a lot reading the responses to our article by our three colleagues. Undoubtedly, this discussion will help us streamline our thinking going forward, since we believe the discussion regarding the institutional design of the WTO is about to start. Indeed, the passage from the Tokyo round ‘GATT clubs’ approach to the ‘WTO single undertaking’ was not discussed in depth among the institutional stakeholders. It is high time it takes place now, and this is what we hope our contribution will help happen.

We would like at the outset to set the record straight regarding property rights on this issue. We claim no originality in making a case for more plurilateral agreements (PAs). The main contribution on this front is a paper by Robert Z. Lawrence (2006), to which we refer a number of times in our article, and which, surprisingly had been left unanswered. Lawrence brought together discussion that preceded him, and provided a clear framework to think in concrete policy terms about clubs within the multilateral system. Academic literature on ‘clubs’ or ‘codes’ (the term used during the Uruguay round, in the GATT, and more generally, “minilateral” liberalization and cooperation goes back to the 1980s). A notable contribution on this score is B. Yarborough and R. Yarborough (1992), Cooperation and Governance in International Trade: The Strategic Organizational Approach.

Our basic point, simply put is that there are three factors that all bolster the case for PAs, and the ensuing ‘club of clubs’ approach originally advocated by Lawrence almost ten years ago. These factors are:

  • the proliferation of PTAs (preferential trade agreements) following the advent of the WTO, that is, at a time when tariffs are at an all-time low. Modern PTAs deal to a significant extent with regulatory matters;
  • the geo-political dynamics associated with the rise of China and other emerging economies; and
  • the fact that the trade agenda increasingly centers on regulatory differences, an area where the ‘single undertaking’ approach has not proved to be much of a success.

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Whose Club Is It Anyway? PTAs 2.0 and the Creeping Non-Trade Rules

Published on October 1, 2015        Author: 

Editor’s Note: This post responds to Bernard Hoekman and Petros Mavroidis’ article in the current issue of EJIL Vol. 26 (2015), No. 2, titled “WTO ‘à la carte’ or ‘menu du jour’? Assessing the case for more Plurilateral Agreements”. For a post by the authors of the article, introducing their piece, see here. For other comments see here and here. For the authors’ concluding response, see here.

Bernard Hoekman and Petros Mavroidis’s article comes at an important time for the WTO. Alternatives to the multilateral trade talks have always existed, both outside the WTO (PTAs) and within it (PAs). However, the repeated failure of Doha talks to deliver meaningful results is leading PTAs to take an ever more important role. Their capacity to displace WTO rules has so far been limited, in no small part because they do not cover trade between the largest WTO Members. This is about to change, however, if TTIP and TPP really get off the ground – one could add to the list the China-led Regional Comprehensive Economic Partnership (RCEP). We may call these agreements PTAs 2.0. Both the US and the EU have been signing similar deals with third parties over the past two decades. A PTA 2.0 between the two would amount to a fait accompli to everyone else regarding a number of issues. To avoid a fragmentation of global rules, Hoekman and Mavroidis propose to expand the scope of intra-WTO plurilateral agreements, and incorporate the rules conveyed in PTAs 2.0 into WTO law, as PAs if necessary.

I should begin by saying that I am generally suspicious of the argument that the WTO has somehow become too big for consensus decision-making. It is not the world’s Cubas, Venezuelas and Nicaraguas that are halting trade talks (even if they can delay results for a few hours). If we are to go beyond consensus, it seems reasonable to state whose veto it is we expect to overcome. In this case, it seems that it is mainly large developing countries – in particular India, who has repeatedly been playing spoilsport in trade talks, but perhaps China and Brazil as well – who will be given an option between accepting the incorporation of PTAs 2.0 into the WTO or being left out of trade rules 2.0.

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Flexibility or Gridlock? The Promises and Perils of Popularizing Plurilateral Agreements at the WTO

Published on October 1, 2015        Author: 

Editor’s Note: This post responds to Bernard Hoekman and Petros Mavroidis’ article in the current issue of EJIL Vol. 26 (2015), No. 2, titled “WTO ‘à la carte’ or ‘menu du jour’? Assessing the case for more Plurilateral Agreements”. For a post by the authors of the article, introducing their piece, see here. For other comments see here and here . For the authors’ concluding response, see here.

Professors Bernard Hoekman and Petros Mavroidis’ EJIL article WTO ‘a la carte’ or ‘menu du jour’? Assessing the Case for More Plurilateral Agreements provokes much thought on opportunities for achieving better flexibility and neutralizing gridlocks at the WTO. The article was published soon after WTO Director General Roberto Azevedo lamented the organization’s failure to reach a work programme under the Doha Development Agenda (DDA) under its 31 July 2015 deadline, which could conceivably impede trade negotiations at the next WTO Ministerial Conference at Nairobi in December 2015. Professors Hoekman and Mavroidis provide a brilliant exposition of the factors to be considered in using the plurilateral agreement (PA) route while attempting to build multilateral agreement on more frontiers of world trade.

While I completely agree with Professors Hoekman and Mavroidis that more ‘variable geometry’ is needed now to breathe life into the trade negotiations mandate of the WTO, I do wonder whether devoting organizational resources at this stage to develop a PA ‘code of conduct’ with transparent terms on the mode of negotiating issue-specific PAs, is something that the WTO can politically afford at this stage of institutional stagnation and negotiations inertia over the DDA. A PA duly approved by the WTO membership under Art. X.9 of the WTO Agreement could indeed be a viable path to achieve harmonization and discipline over non-tariff measures, but how could this be harnessed to incentivize reaching a multilateral agreement among WTO members? If the two remaining PAs to date – on civil aircraft and government procurement – have not been universally ratified or widely opted into by WTO members to date, how can this be done under a strategically-crafted PA (as Hoekman and Mavroidis appear to suggest in proposing more usage of this route under an upfront code of conduct addressing the scope of coverage, e.g. an issue for WTO Plus, or a WTO Minus X issue on regulatory policy cooperation)?

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Feasibility and desirability of ‘clubs’ within the WTO: A critical comment on Hoekman/Mavroidis’ case for plurilateral agreements (PAs)

Published on September 30, 2015        Author: 

Editor’s Note: This post responds to Bernard Hoekman and Petros Mavroidis’ article in the current issue of EJIL Vol. 26 (2015), No. 2, titled “WTO ‘à la carte’ or ‘menu du jour’? Assessing the case for more Plurilateral Agreements”. For a post by the authors of the article, introducing their piece, see here. For other comments see here and here. For the authors’ concluding response, see here.

Two phenomena characterize the contemporary world trading system, namely, the deadlock of the Doha Development Agenda (DDA) and the proliferation of preferential trade agreements (PTAs), in particular, mega-FTAs such as Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP). The former illustrates the difficulty of the 161-member WTO in reaching consensus in trade negotiations, and this may have been one of the driving forces for the latter. Proliferation of PTAs has both pros and cons for the world trading system. On the one hand, PTAs facilitate trade liberalization between the parties, and they may be an incubator of new rules governing global trade and investment. On the other hand, PTAs may have trade diverting effects for non-parties. Their proliferation may result in the fragmentation of rules for global trade and investment. To sum up, the contemporary world trading system is suffering from the decay of the multilateral trading system and the disorderly proliferation of PTAs. Hoekman and Mavroidis’ recent article, titled “WTO ‘à la carte’ or ‘menu du jour’?”, published in the latest issue of the EJIL (Vol.26, No.2), tries to find a breakthrough in the world trading system by advocating the use of plurilateral agreements (PAs).

They are not the pioneers of advocating PAs. For instance, Richard Baldwin, in his article in 2012 (Richard Baldwin, “WTO 2.0: Global governance of supply chain trade”, Centre for Economic Policy Research Policy Insight No.64, December 2012), advocated a ‘WTO2.0’, which is practically a PA with limited membership, consisting of those WTO members who accept high-level rules that secure the well-functioning of global supply chains, without the special and differential treatment (S&D) to developing countries which is incorporated in the current WTO Agreements, or WTO1.0. A similar proposal was made by Michitaka Nakatomi in his article in 2012 [Michitaka Nakatomi, “Exploring Future Application of Plurilateral Trade Rules: Lessons from the ITA and the ACTA”, RIETI (Research Institute for Economy, Trade and Industry) Policy Discussion Paper 12-P-009, May 2012]. These proponents of PAs and Hoekman/Mavroidis share the common view of the contemporary world trading system. First, they regard the stalemate of the DDA as a result of the incapacity of the WTO in meeting the needs of the 21st century global trade, characterized by the globalization of value chains. Secondly, they regard the proliferation of recent RTAs, in particular mega-FTAs, as attempts by major trading countries to meet such needs. Thirdly, however, they don’t think of the proliferation of RTAs as an optimal solution to the challenges of the 21st century global trade, mainly because it might result in the fragmentation of rules for global trade and investment.

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WTO ‘à la carte’ or ‘menu du jour’? Assessing the case for more Plurilateral Agreements

Published on September 30, 2015        Author: 

Editor’s Note:  This is the first in a series of posts discussing the article in the current issue of EJIL Vol. 26 (2015) No 2, by Bernard Hoekman and Petros Mavroidis. See also the  posts  discussing the article by Junji Nakagawa, Diane Desierto, and Geraldo Vidigal. For the authors’ concluding response, see here.

The WTO and … ‘clubs’

The long-running Doha Round deadlock illustrates how difficult it has become to get agreement on new rules of the game among 161 WTO Members. The Agreement on Trade Facilitation that was negotiated at the 2013 WTO Ministerial meeting in Bali demonstrated that this is possible, but the proliferation of preferential trade agreements (PTAs) illustrates that many countries have been moving away from using multilateral trade agreements to liberalize international commerce and agree to new policy disciplines. Recent examples of PTAs that involve major trading nations include the agreements signed by Korea with the EU and the US and the ongoing Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) negotiations. It may be that one of the consequences of the Doha deadlock has been to give countries greater incentives to engage in PTAs. But there may be a reverse causality effect as well: the existence of the PTA option may reduce the incentive to agree on rules on a multilateral basis. Whatever the case may be, the proliferation of PTAs results in fragmentation of the global trading system and generates substantial information and transactions costs for traders.

There has been some action in the WTO on market access issues. This has taken the form of so-called critical mass agreements, under which concessions negotiated among a subset of countries are extended to all WTO Members a nondiscriminatory, most-favoured-nation (MFN) basis. Examples include ongoing negotiations to liberalize trade in environmental goods and the effort to extend the coverage of sectoral initiatives to liberalize trade, most notably the 1997 Information Technology Agreement (ITA). Critical mass agreements have always been an important mechanism in the GATT/WTO setting: if enough large players participate in a liberalization exercise they need not worry about free riding by other countries that do not want to participate.

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