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Home Archive for category "International Economic Law"

Creating Conduits: Summary Report of the First Annual Oxford Investment Claims Summer Academy, St. Anne’s College (Oxford)

This July 13-14, Oxford University Press and Investment Claims convened the First Annual Oxford Investment Claims Summer Academy at St. Anne’s College, the University of Oxford. Co-chaired by Diane Desierto, Ian Laird, and Frederic Sourgens, the Academy brought together a select expert group of academic and practitioner delegates to discuss the legitimacy of investor-state arbitration in the context of continuous and often virulent political criticism. The method and structure of the Academy departed from a traditional presentation format. Instead, the Academy as the first gathering of experts of its kind acted as a laboratory for open and rapid discussion of frontier issues among all participants. As a result of this format, the Academy constructively explored both traditional text-based and context-sensitive solutions for these frontier issues. ICJ Judge James Crawford’s keynote address to the delegates aptly captured the spirit of the open and critical discussion when noting that while there is little in the way of feasible alternative to investor-state arbitration and much to lose by its abolition. Bench, bar, and ivory tower must find it in them to become better stewards of this mode of international dispute resolution. In particular, there is an urgent need to address weaknesses made visible by the first two decades of sustained arbitral and annulment jurisprudence. With the depth of engagement at the inaugural session, the co-chairs are planning to hold the Academy again in the summer of 2016.

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Trade Agreements, EU Law, and Occupied Territories – A Report on Polisario v Council

Published on July 1, 2015        Author: 

Speaking of occupied territories, an interesting judgment should soon come from the General Court of the European Union (GC) in Action for Annulment Frente Polisario v Council (Case T-512/12), a case with fascinating international law aspects. I attended the hearing last week and think it warrants a report.

Frente Polisario is a national liberation movement (NLM) that claims sovereignty for Western Sahara – the area between Morocco and Mauritania that has been on the UN list of non-self-governing territories since 1963, and in 1975 was the subject of a fairly inconclusive ICJ Opinion. The Frente sees Morocco as an occupying power, and challenges the EU Council decision approving the 2010 EU-Morocco Agreement on agricultural, processed agricultural and fisheries products. Given that the 2010 Agreement is a development of the 2000 EU-Morocco Association Agreement, the decision will have significant implications for the application of the latter agreement, and may thwart negotiations of the so-called “Deep and Comprehensive Free Trade Agreement”.

These agreements are all silent on the question of what constitutes Moroccan territory. However, Frente Polisario claims, de facto Morocco has been applying the 2000 Association Agreement to Western Sahara. If applied the same way, the 2010 Agreement will facilitate the export to the EU of agricultural products grown in Sahrawi land and fish caught in Sahrawi waters. If Morocco’s control of Western Sahara is illegitimate, this would violate the right of the Sahrawi people to self-determination and to permanent sovereignty over their natural resources.

The case raises a number of interesting questions:

Standing of NLMs

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For or Against International Arbitration: A Perspective of International Law of Dispute Settlement

Published on June 9, 2015        Author: 

Lady Bracknell is not often relied on as an authority on matters relating to international dispute settlement. Perhaps unjustifiably so; some of the recent debates do bring to mind her remark about end-of-season conversations, ‘when everyone has practically said whatever they had to say, which, in most cases, was probably not much’ (I). ESIL Reflections of Mathias Kumm and Stephan Schill, I hasten to add, do not fall into that category. Even if the readers are not persuaded by their arguments, the precise reason for disagreement is useful for reflecting upon and clarifying one’s own position. I am grateful for the opportunity to offer a few observations of my own, presented from the perspective of international law of dispute settlement.

Kumm and the argument against arbitration

Kumm, it is fair to say, is not a fan of investor-State arbitration. He makes the argument against its inclusion in mega-regional agreements in a forceful, clear, and eloquent manner, which is in many ways appealing. Of course, the cost of making a clear argument about a complicated issue of international law is that pedantic blackletter positivists will (attempt to) side-track the discussion by raising spurious ‘well, yes, but’ objections. Read the rest of this entry…

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The Viability of Corruption Defenses in Investment Arbitration When the State Does Not Prosecute

Published on April 15, 2015        Author: 

Corruption has become a focal point in international investment arbitration, as investors and respondent States both have alleged corruption as the basis for claims and defenses in a number of recent investment arbitrations. Decisions in cases such as World Duty Free v. Kenya and Metal-Tech v. Uzbekistan confirm that corruption is contrary to international public policy and the laws of nearly all nations. Accordingly, if an investment tribunal finds that the investor obtained its investment through corruption, the tribunal will conclude that it lacks jurisdiction over the dispute or that the investor’s claims are inadmissible.

Certain commentators have suggested, however, that respondent States should be required to prosecute the allegedly corrupt parties in order to raise defenses based on corruption. A threshold question thus is whether a State should be deemed to have acquiesced in the alleged corruption and thus be estopped from asserting any related defenses, if it failed to prosecute the allegedly responsible individuals.

As early as 2000, the tribunal in Wena Hotels v. Egypt remarked that it was “reluctant to immunize Egypt from liability in this arbitration,” because the government of Egypt had been aware of the consulting agreement that allegedly was used to conceal corrupt payments, and had “decided (for whatever reasons) not to prosecute” the consultant (para. 116). More recently, in the set-aside proceeding of Congo v. Commisimpex, the Paris Court of Appeal held that Congo’s mere allegations of a general climate of corruption within the government administration, without indicating the persons likely to be involved in the corruption or prosecuting the alleged beneficiaries of the corruption, were an insufficient basis to set aside the award against Congo. Notwithstanding the comments in these decisions regarding the State’s failure to prosecute, the State’s failure to prosecute was not dispositive in either case, because neither the Wena tribunal nor the Paris Court of Appeal was presented with persuasive evidence of corruption. As the Wena tribunal explained, Egypt bore “the burden of proving such an affirmative defense” of corruption, and had “failed to present any evidence that would refute Wena’s evidence that the [consulting agreement] was a legitimate agreement. . . .” (para. 117). Read the rest of this entry…

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The Mauritius Convention on Transparency: A Model for Investment Law Reform?

Published on April 8, 2015        Author: 

In the midst of heated debates on investor-State dispute settlement in Europe, on 10 December 2014 the United Nations General Assembly adopted the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration. Prepared by UNCITRAL in the context of its recent revision of the UNCITRAL Arbitration Rules, the Convention, also known as the ‘Mauritius Convention on Transparency’, was opened for signature on 17 March 2015 in Port Louis, Mauritius. Canada, Finland, France, Germany, Mauritius, Sweden, the United Kingdom and the United States signed the Convention at this occasion (see UN Press Release). In my Editorial in the latest issue of the Journal of World Investment and Trade (which this blog reproduces), I interpret this Convention as a piece of constitutional reform of the international investment regime and ask to which extent it can serve as a model for international investment law reform more generally.

A Piece of Constitutional Reform of the International Investment Regime

The Mauritius Convention will extend the application of the UNCITRAL Rules on Transparency, which so far have a very limited scope of application (only to UNCITRAL investor-State arbitrations that are based on treaties concluded on or after 1 April 2014), potentially to the entire treaty-based international investment regime as it stood on 1 April 2014. Notably, it would make the UNCITRAL Transparency Rules applicable to all treaty-based investor-State arbitrations under ‘old’ treaties, independently of the applicable arbitration rules. Whether the arbitration in question is governed by the UNCITRAL Arbitration Rules, the ICSID Convention, the Arbitration Rules of the International Chamber of Commerce, the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce – you name it – the Mauritius Convention would provide for transparency of submissions to arbitral tribunals, arbitration hearings, and decisions by arbitral tribunals, and give more room for third-party participation under a uniform set of rules. It could thus apply to some 3000+ investment treaty relations if both the respondent State and the investor’s home State are contracting parties or, alternatively, if the investor-claimant accepts the unilateral offer to apply the UNCITRAL Transparency Rules made by the respondent in signing the Convention (see Article 2 of the Mauritius Convention).

Provided it is signed and ratified by a sufficiently large number of States and regional economic integration organizations, such as the EU or ASEAN, the Mauritius Convention will bring about a paradigm shift in investor-State dispute settlement. Although possibilities for reservations, including subsequent ones, are broad (Articles 3 and 4 of the Mauritius Convention), and although ongoing arbitrations are excluded from its scope of application (Article 5 of the Mauritius Convention), the Convention will establish transparency as a general principle of international investment law.

This constitutes another step in the incremental adaptation of international investment law to the demands of a more democratic and accountable international public law system of private-public adjudication. The wide-spread application of transparency under the Convention would not only enhance the accountability of the underlying investor-State relations, but also enable better public control of the arbitral process. This turns the Mauritius Convention into an instrument with constitutional implications for the international investment regime. Read the rest of this entry…

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Breaking the Washington Consensus?  The Rise of ‘Alternative’ Development Banks

Published on March 18, 2015        Author: 

The United Kingdom scuttled much of its trans-Atlantic partnership with the United States this week, when it became the first G7 country to join the China-led Asian Infrastructure Investment Bank (AIIB) over US objections.  European countries France, Germany, and Italy followed suit, with Australia and South Korea now re-evaluating their positions to consider joining the USD $50 billion capitalized AIIB. Japan is holding firm on its alliance with the United States in refusing to join the AIIB.  United States National Security Council spokesperson Patrick Ventrell declared that “any new multilateral institution should incorporate the high standards of the World Bank and the regional development banks…we have concerns about whether the AIIB will meet these high standards, particularly related to governance, and environmental and social safeguards.” As I write from my temporary office here at the Centre for Asian Legal Studies (CALS) at the National University of Singapore Faculty of Law, commentaries proliferate on this debacle and the alleged waning geopolitical influence of the United States, most recently from Kishore Mahbubani, Dean of the Lee Kuan Yew School of Public Policy, who declares all these events “a sign of American decline”.  It is not the first indictment on America’s lessening hegemonic grip in the face of China as a rising power. Joseph Weiler’s magisterial Keynote at the 2014 ESIL conference showed how the conflation of politics, cultural cleavages, economics, and moral authority essentially presaged the end of Pax Americana.   More detail to these themes also resonate from a recent 2014 edited book by political science and international relations scholars Vinod Aggarwal and Sara Newland, showing how both the United States and the European Union have deployed various strategies of engagement, cooperation, and confrontation with the rise of China.

Whichever brush we use to describe the decision of key US allies such as the UK and Europe to join the AIIB (e.g. defection from US alliances, or strategic policies towards engagement with China as a rising power), the more interesting international legal phenomenon here is the impact of the rise of the AIIB (and other rival new development banks in the future) on the decades of dominance of the Washington Consensus in international development finance law.  Will the rise of ‘alternative’ development banks such as the AIIB break the stranglehold of the Washington Consensus on international development lending? And if so, what will the AIIB replace it with?  Would the AIIB and new ‘alternative’ development banks necessarily spell sea changes in ensuring compliance with international environmental and social norms and treaty standards throughout international development projects in developing countries?  While the AIIB has been hailed as a needed balance to American dominance in international development lending, China has also been quite opaque thus far on the actual contours of the AIIB’s governance and the terms of its international development lending policies.  And it is precisely this nebulousness that the US appears to interpret as a slide towards the lowest denominator in social inclusion, and the protection of environmental and social safeguards in international development lending.  Never mind that the World Bank is doing its own soul-searching and internal review on this score as well by calling for a long overdue review of its environmental and social safeguards policies, with World Bank President Jim Yong Kim recently warning of the surge of forced resettlement from Bank projects.

The rise of new ‘alternative’ development banks such as the AIIB and the contemplated BRICS bank creates an opening not just to dilute the powerful (almost monopolistic) reach of the United States on international development finance policies, but also to engage all international finance powerhouses – established or emerging – in reforms over global standard-setting in the international development finance ‘soft’ and ‘hard’ law. For over sixty years since the post-war global reconstruction period and in tandem with the evolution of the modern UN Charter era, Washington Consensus policies have dominated reform prescriptions for developing country borrowers.  These policies focus on ten points as the core focus of lending by international financial institutions that heavily depend on US capital (the trio of the World Bank, the International Monetary Fund, and the US Treasury): Read the rest of this entry…

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Anti-Fragmentation Strategies: the Curious Case of the EU and World Trade Law

Published on February 20, 2015        Author: 

The investor-State dispute settlement provisions of the EU’s proposed new free trade agreements with the US (the Transatlantic Trade and Investment Partnership – TTIP), Canada (the Comprehensive Economic and Trade Agreement – CETA) and Singapore (the EU – Singapore Free Trade Agreement) are receiving considerable coverage in the popular media as well as within academic circles (note the recent EJIL: Talk! posts here and here). However, these agreements include not only investor-State dispute settlement but also inter-State dispute settlement provisions which should be equally interesting to international lawyers. On the one hand these provisions provide incentives to resolve trade disputes involving big trading players bilaterally, outside the WTO’s multilateral system, while on the other hand their provisions also reflect an attempt to address problems of fragmentation within the international legal system.

As with many areas of international law, world trade law has historically been concerned with the dangers of fragmentation. While the WTO may be viewed as a ‘fragment’ of the international legal system, within the WTO there is particular worry over the role of new free trade agreements. Why, when you have a multilateral institution with a comparatively clear set of obligations and relatively effective dispute system, would you conclude free trade agreements which contain substantively similar (though often wider ranging) obligations? The fear here is of what Jagdish Bhagwati called the ‘spaghetti bowl’ – a mass of regional or bilateral agreements concluded without consideration for each other or their implications for trade, potentially increasing costs, regulation and distorting conditions of competition for traders.

The concern is not only economic (i.e. that free trade agreements will undermine the non-discriminatory backbone of the current trade settlement), it is also legal: the ‘spaghetti bowl’ can distort the coherence of a legal system and its attendant expectation of certainty as much as it can distort the conditions of competition in trade. Nonetheless, institutional deadlock at the WTO has led to a number of free trade agreements being concluded globally. Until now, cases which have involved overlapping free trade agreement and WTO obligations have been resolved on the system in question’s own terms: for example, the Argentina v Brazil, Pork Subsidies MERCOSUR tribunal using more detailed WTO provisions to interpret a Decision (para. 57) or the Appellate Body in Mexico – Soft Drinks acknowledging NAFTA obligations but not seeing any basis for adjudicating upon them directly (paras. 54-56). Read the rest of this entry…

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European Hypocrisy: TTIP and ISDS

Published on January 21, 2015        Author: 

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For some, the Transatlantic Trade and Investment Partnership (TTIP) in and of itself has become in many European (and American) circles, the enemy: another manifestation of unchecked globalization, the march of Capital trumping social, environmental and other  rights, an unhealthy embrace of the Americans from whose clutches we have painfully managed to extricate ourselves, et cetera. Yes, there is some sarcasm or irony in the above, but visit the blogs and you will see where it comes from. My sarcasm should not be taken as a dismissal of all or any of these concerns. TTIP is far from Snow White. The concerns are not entirely fanciful. It is the final objective I oppose: a no-holds-barred attack on TTIP with the objective of tanking the whole agreement. If this is your view, do not waste your time here and skip to another item.

A wholesale defeat of TTIP, if achieved, will, I believe, be a big time Pyrrhic victory ̶ a hugely missed opportunity for the polities and the peoples of these polities.

I support the TTIP for two obvious and banal reasons. First, there is every reason to believe that on aggregate it will contribute significantly to an increase in welfare in both polities, enhance growth, contribute to stability and constitute another tool, in an embarrassingly empty toolkit, to combat future transatlantic-generated economic shocks. A large and often unspoken asset of TTIP rests not with the content of the various substantive disciplines but in establishing a culture of joint conversation, regulation and management. It will counter the litigious and confrontational culture of the WTO, where the EU and the USA find themselves typically as rivals and antagonists. Constructivist theory actually has something to say here as do the insights of Global Administrative Law scholarship. Read the rest of this entry…

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Towards a Constitutional Law Framework for Investment Law Reform

Published on January 5, 2015        Author: 

Reforming international investment law and investor-state arbitration is a widespread concern. This is nowhere more manifest than in the heated debates (in Germany and elsewhere) about the EU-Canada Comprehensive Economic and Trade Agreement (CETA) and the Transatlantic Trade and Investment Partnership (TTIP). Should there be investor-state arbitration between economies with well-functioning legal systems? Do we need an appellate mechanism to control arbitral tribunals? Who should serve as arbitrator and what ethical standards govern? And how should the substantive standards of investment protection be formulated in order to safeguard policy space for host states? These are some of the questions debated. At the same time, reforming international investment law is not only on the agendas of contracting parties, it also plays an important role for international organizations, such as the United Nations Conference on Trade and Development (UNCTAD), the Organisation for Economic Co-operation and Development (OECD), or the Southern African Development Community (SADC).

The Need for a Normative Framework for Investment Law Reform

The reform proposals that result from these various initiatives reflect the political pressure international investment law is facing; they also put pressure on states to remedy the discontents with the current system (see my earlier post on EJIL: Talk!). At the same time, the large number of reform proposals currently floated risk fragmenting investment law even further. This can be counterproductive if the aim is to arrive at an investment law regime that is both balanced and predictable. Furthermore, reform proposals themselves reflect underlying political and ideological preferences that may not be globally shared. What is needed therefore is a debate about these preferences and their impact on investment law reform. In other words: we need a broader debate about the normative framework for investment law reform.

As I argue in my Editorial of the latest Special Issue of the Journal of World Investment and Trade (entitled ‘Towards Better BITs? – Making International Investment Law Responsive to Sustainable Development Objectives’), this framework should not be seen only as a matter of (potentially short-lived and changing) economic policies that differ from one country to another. Instead, we should develop a framework for investment law reform on the basis of more fundamental principles, in particular if we are looking for ‘systemic reform’ that makes international investment law acceptable to all states. This requires – as Karl Sauvant and Federico Ortino rightly point out in a recent study – consensus-building processes about underlying assumptions and objectives for investment law reform. Read the rest of this entry…

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