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Lack of Consistency and Coherence in the Interpretation of Legal Issues

Published on April 5, 2019        Author: , and

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Editors’ Note:  This is the last post in our ongoing series of posts (see introduction here, first post on costs here, second post on duration of proceedings here, third post on the diversity deficit in investment arbitration here, fourth post on the impartiality and independence of arbitrators here, fifth post on an empirical assessment of ISDS here) , sixth post on incorrectness of ISDS decisions here) authored by individual members of the Academic Forum of the UNCITRAL Working Group III (UN WG III) on Investor-State Dispute Settlement Reform, in parallel with the ongoing UN WG III sessions taking place this week in New York.  The series features summaries of more detailed concept papers prepared by various working groups of the Academic Forum.  This post summarizes a more detailed concept paper prepared by members of Academic Forum Working Group 3.

This post is the product of the work of the UNCITRAL Academic Forum’s (own) “Working Group 3” whose focus is on the lack of consistency and coherence in the interpretation of legal issues. Lack of consistency has been identified in UNCITRAL Working Group III (WGIII)as one of the concerns with regard to the current system of investor State dispute resolution.

In the view of WGIII, the most glaring cases of unjustifiable inconsistency are cases “where the same investment treaty standard or same rule of customary international law was interpreted differently in the absence of justifiable ground for the distinction” (UN Doc No A/CN.9/935 (14 May 2018), para. 21). Other apparent inconsistencies may be wholly justifiable, where tribunals are interpreting similar, but materially different treaty texts – or interpreting the same treaty in relation to materially different facts. Usually, however, inconsistencies in the case-law fall somewhere between these poles. Indeed, there may be problematic inconsistencies where tribunals make too much of formal differences in treaty texts, where different interpretations may nevertheless prove materially unjustifiable. Not every difference in drafting across thousands of investment treaties necessarily signals a divergent meaning.

Rather than focus on only the glaring cases, we have sought to push further into analyzing the incidents, causes, and varied harms produced by discrete inconsistencies in the ISDS case law. In approaching our task, we have focused on three discrete issues:(1) the obligation to provide full protectionand security (“FPS”); (2) the treaty / contract relationship; and (3) the scope of the most-favoured-nation (“MFN”) clause.  In determining whether there are unjustifiable inconsistencies with respect to these issues, we have explored the following questions: (a) what is the inconsistency?; (b) what is the cause of that inconsistency?; (c) what is the harm being caused by this inconsistency?; and (d) what is the solution for this inconsistency (if one can be identified)?

We have found that a fruitful distinction can be drawn between two kinds of unjustifiable inconsistencies: inconsistent interpretations of basic substantive obligations (e.g. FPS) and inconsistent interpretations of more structural “rules of the game” (e.g. MFN and the treaty / contract issue). The former phenomenon can be problematic, but such inconsistencies are to some extent endemic to any legal system. The life of the law is, everywhere, one of change and development. Moreover, such inconsistencies are relatively manageable. For example, should States worry about inconsistent interpretations of FPS, they can clarify the meaning of such treaty terms through treaty drafting, amendment, and/or joint interpretations. Governments and investors can also, in theory, manage such inconsistencies through private agreement, by contracting for what they consider important.

Unjustifiably inconsistent interpretations of the rules of the game are more problematic, insofar as they create severe uncertainty and unpredictability inthe making of investments and for national regulatory choice. Where there is uncertainty as to whether States and investors can contract around investment treaty rules, efficient private ordering is off the table, leaving price as the best lever to reduce uncertainty. Similarly with MFN, uncertainty about whether such clauses allow importation of substantive treaty rules from treaties with third-parties, procedural rules, or neither, creates severe ex ante uncertainty for all parties about the nature and extent of the regime applicable to the investment. In both cases, uncertainty as to the rules of the game creates harms ex ante and ex post. To the extent that States and investors are aware of these problems, they can lead to bargaining and price inefficiencies in the making of investments. To the extent they are unaware, such inconsistencies can lead to unfair and unjustifiable surprise ex post.

For the purposes of this short blog post, we draw out this distinction by sketching our analyses of inconsistencies in the case law on FPS, treaty / contract, and MFN.  

Read the rest of this entry…

 

Comment on Yuval Shany, ‘No Longer a Weak Department of Power?’

Published on June 15, 2009        Author: 

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Dr Chester Brown is Associate Professor at the Faculty of Law, University of Sydney, where he is a Programme Coordinator for the Master of International Law. His research interests are public international law, international dispute settlement, international arbitration, international investment law, and private international law. Dr Brown is a Solicitor of the Supreme Court of England and Wales, and a Barrister and Solicitor of the Supreme Court of Victoria and the High Court. He is an Associate Member of the Chartered Institute of Arbitrators, and a door tenant at Essex Court Chambers, London. He is the author of A Common Law of International Adjudication (OUP, 2007), and is a graduate of the Universities of Melbourne, Oxford, and Cambridge.

 

Professor Yuval Shany’s work on international courts and tribunals has made a significant contribution to our understanding of international adjudication in the modern age.  As already noted by Professor Helfer in his comment, Professor Shany’s publications have ‘mapped the field’s coordinates’.  International adjudication is a discipline where the works of public international law’s doyens have long been considered compulsory reading, including those of Rosenne, Fitzmaurice, Lauterpacht (both Sir Hersch and Sir Elihu), Schwarzenberger, Hudson, Verzijl, and Bowett.  And in the age of the ‘proliferation’ of international courts and tribunals, and the accompanying challenges (such as the possible ‘fragmentation’ of international law), it is increasingly difficult to discuss international adjudication in any complete sense without having reference to Professor Shany’s writings. 

In his recent article, No Longer a Weak Department of Power? Reflections on the Emergence of a New International Judiciary, Professor Shany discusses some of the issues arising out of the recent changes in the field of international dispute settlement.  His article offers a clear and succinct overview of the emergence of the many new international courts and tribunals in the past 20 years, including the International Criminal Court, the ITLOS, the Appellate Body of the WTO, and the large number of arbitral institutions and quasi-judicial bodies (p 79).  In addition to the newly created international adjudicatory bodies, the jurisdiction of a number of existing international courts – most notably the Court of Justice of the European Communities and the European Court of Human Rights – has also expanded, due both to an increase in their membership, and also to the reform of their underlying constitutive instruments (p 75).  Professor Shany also notes the marked rise in resort to international adjudication as a means of settling international disputes, as well as an increasing readiness on the part of national courts to apply public international law in resolving ‘politically-charged cases’ (p 75).  He argues that the ‘cumulative effect’ of these developments is the emergence of an ‘international judiciary’ (albeit one that is fragmented), and also the ‘routinisation’ in the application of international law as a means of settling disputes.  Indeed, he argues that ‘international adjudication … is becoming the default dispute settlement mechanism in some areas of international relations’ (p 76).   

Professor Shany then assesses some of the theoretical and practical implications of these developments, and in particular he argues that ‘the rise in the number of international courts and the expansion of their powers should be primarily understood as a change in the ethos underlying the operation of international courts’ (pp 77–83).  He also identifies what he terms ‘blind spots’ of the existing mechanisms for settlement of international disputes by adjudication, the most notable of which are the ineffectiveness of international courts and tribunals in the context of disputes relating to the use of force and the fight against terrorism, and the continuing difficulties in enforcing judgments and awards of international courts and tribunals (pp 83–86).  He then turns to some difficulties that have attended the increase in the number of international courts and the expansion of their jurisdictional powers.  These include the emergence of inconsistent jurisprudence (pp 87–88), and the question whether it is indeed desirable for many international disputes to be resolved by judicial or arbitral settlement, for, in contrast to the diplomatic forms of dispute settlement, adjudication produces results which are ‘binary’, and its confrontational and adversarial nature may even tend to exacerbate the relations between the parties (pp 88–89). 

No Longer a Weak Department of Power? is impressive in the breadth of its coverage, and the issues it raises can generate much fruitful discussion on the past, present, and future of international courts.  In his comment, Professor Helfer has highlighted and elaborated on several issues, being (i) the principal contributions of Professor Shany’s article; (ii) the scope for international courts and tribunals to contribute to the resolution of ‘high politics’ disputes; (iii) and the importance of empirical analysis and the distinctive law and politics of regional tribunals.  In the space remaining, I will pick up on three issues raised by (but not necessarily treated in) Professor Shany’s article – one substantive, one procedural, and one concerning, in a loose sense, remedies.   

 

The first question concerns Professor Shany’s claim concerning the new ‘ethoi’ of international courts and tribunals, a point also noted by Professor Helfer.  Professor Shany recalls that international courts and tribunals were originally created in order to facilitate the resolution of disputes by peaceful means (and discourage the recourse to force), and also to contribute to the development of international law (p 77).   Today, however, many of the existing specialised international tribunals have been created in the context of a particular regime, such as one which promotes, for example, the liberalisation of international trade rules, the protection of human rights and fundamental freedoms, or the economic integration of a regional organisation.  Read the rest of this entry…

 
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