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Home Articles posted by Diane Desierto

Remaking the World towards ‘Fair and Reciprocal Trade’? The Case for (More) Interdisciplinarity in International Economic Law

Published on November 17, 2017        Author: 

Geopolitical changes were on full display last week at multiple economic summits in Asia, where red carpet pageantry converged with the dramatic publicity of States brokering new deals at the regional meetings for the Asia-Pacific Economic Cooperation (APEC) in Viet Nam, the Association of Southeast Asian Nations (ASEAN) Heads of State Summit and the 12th East Asia Summit (EAS) in the Philippines, the side meetings of the China-led 16-country bloc drafting the Regional Comprehensive Economic Partnership (RCEP), the Japan-led Trans-Pacific Partnership-11 (recently renamed into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership), with considerable focus on United States President Donald Trump’s 12 day tour in Asia for these meetings as well as for bilateral trade talks with Japan, South Korea, and the Philippines.  In Viet Nam, US President Trump suddenly renamed the Asia-Pacific into the “Indo-Pacific”, a deliberate policy strategy to define Asia beyond China’s growing hegemony into a sphere of alliances built with India, Japan, and other Southeast Asian countries.  

The Asia economic summits conveyed the implicit assumption that international trade and investment treaties had to be revised or rewritten towards “fair trade”, even if there were differing understandings of what that fairness meant.  US President Trump’s address at APEC demanded “fair and reciprocal trade” as part of his ‘America First’ policy, blaming trade agreements for serious US trade deficits with China and other countries. Canadian Prime Minister Justin Trudeau delayed agreeing to renew the TPP partnership under the aegis of the CPTPP, pushing for Canadian interests in ensuring strict environmental and labour standards in the agreement, and succeeding in suspending the problematic provisions in the intellectual property chapter which the US had originated in the TPP draft.  Newly-minted New Zealand Prime Minister Jacinta Ardern claimed victory with the suspension of investor-State dispute settlement clauses from the CPTPP, in favour of compulsory domestic court adjudication for any investment disputes.  In contrast, China took up the cudgels for globalisation and the established institutions and processes of the multilateral system, with Chinese President Xi Jinping firmly declaring at APEC that “economic globalisation is an irreversible historical trend…in pursuing economic globalisation, we should make it more open and inclusive, more balanced, more equitable and beneficial to all.”

The recent pronouncements by world leaders should be of considerable interest to international lawyers, given the heightened political and economic expectations placed on international economic agreements (trade and investment treaties), and what social outcomes they should (or should not) produce beyond the traditionally narrow objectives of liberalising foreign market access.  The international economic system is moving towards a multi-speed configuration of States oscillating between competing economic ideologies (e.g. resurgent new forms of “mercantilist protectionism”, revised ‘mainstream’ neoclassical economics, ‘new’ behavioural economics, among others); changing philosophies of government (e.g. the revival of authoritarianism and ‘illiberal’ democracies, leaning away from liberal democracies); evolving theories on the regulation of property, competition, and information given rapidly-developing technologies (e.g. artificial intelligence and the explosion of automation in supply chains, the domestic and transnational social impacts of the digital ‘sharing’ economy, climate change-driven restructuring to consumption patterns and production processes); and expanding understandings of domestic and transnational challenges to global public goods (e.g. environment, health, peace and security, among others).  Accordingly, there is an even greater burden for international lawyers (especially those that assist or advise States drawing up their respective visions for a new global economic architecture), to clarify and be transparent about how the political, economic, and social ends sought will be effectively met through the current and future mechanisms of international economic law and its institutions for governance and coordination.  Beyond the fog of press publicity, are we candidly and accurately communicating to the politicians the actual limits of international economic treaties, along with their potentials?  

In this post, I argue that international lawyers – especially international economic lawyers tasked with drafting, revising, critiquing, and building the new bilateral, regional, and global constellation of economic treaties – increasingly have to deepen interdisciplinarity, and not just in the sense persuasively observed by Tom Ginsburg and Gregory Shaffer as the “empirical turn in international legal scholarship” (106 American Journal of International Law (2012), pp. 1-46. Perhaps more fundamentally, international lawyers need even more interdisciplinarity, because we are at present hard-pressed to approximate, if not achieve, an idea of “fairness” in the international economic system’s treaties and institutions (no matter how contested that sense of “fairness” is, to begin with).  If we accept that the “fairness of international law” is legitimately our concern as international lawyers and scholars (as Thomas Franck famously argued), we should be more open to readily engaging the interdisciplinary assumptions marshalled in the reform and remaking of international economic treaties and institutions today.  

While we may not of course be the experts in these other disciplines, and we should, indeed, preserve the “relative autonomy” of international law (as Jan Klabbers cautions), some sharpening of our interdisciplinary sensibilities can nevertheless be useful in helping us to test the “good faith” nature of any postulation or assertion on the desired weight, form, content, and structure of our international economic treaties and institutions.  I use three examples of unstated assumptions in the debate over international economic treaties today that illustrate where interdisciplinarity is sorely lacking: 1) that international economic treaties can somehow erase trade deficits and permanently prevent trade imbalances; 2) that international economic treaties can anticipate and provide the most appropriate and suitable dispute resolution mechanism for the particular States parties to these treaties – for the entire life of these treaties – which is problematic with the growing depiction of a supposed ‘binary’ choice between investor-State dispute settlement mechanisms (ISDS) and local court adjudication (and/or political risk insurance); and 3) that international economic treaties can be designed to fully create desired social, environmental, labor, health, education, and all public interest outcomes.  I posit that while interdisciplinarity may show us that international economic treaties could be a correlative, if not possibly one of the causal, factors for desired outcomes, and that we can probably design them with sensitivity and vigilance towards controlling the negative externalities they cause and encouraging positive distributive consequences, the international economic treaty-writing (and rewriting) exercise is complex. We cannot – as politicians do – simplistically oversell or lionise these treaties as somehow the definitive “one size-fits all” solution to remake the world towards “fair and reciprocal trade”.

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Reopening Proceedings for Reparations and Abuse of Process at the International Court of Justice

Published on August 16, 2017        Author: 

On 28 July 2017, Nicaragua made the rather surprising announcement that it would revive its claim for US$17 billion in compensation against the United States. To recall, in its 1986 Merits Judgment in Nicaragua v. United States, the International Court of Justice declared that the United States was “under an obligation to make reparation to the Republic of Nicaragua for all injury caused to Nicaragua” arising from “breaches of obligations under customary international law” [Dispositif, para. 292(13)] and for “breaches of the Treaty of Friendship, Commerce and Navigation between the parties…on 21 January 1956” [Dispositif, para. 292 (14)]. The Court further decided that “the form and amount of reparation, failing agreement between the Parties, will be settled by the Court, and reserves for this purpose the subsequent procedure in the case”. [Dispositif, para. 292(15)]. After the Court issued an Order fixing time limits for the filing of pleadings on the matter and form of reparation, Nicaragua thereafter informed the Court in 1991 that it did not wish to continue the proceedings. One would have thought that Nicaragua’s discontinuance of the proceedings somehow ensured the finality of the Court’s Judgment on the Merits and left the matter of reparations to political negotiations between the parties. However, as Nicaragua’s recently stated position appears to suggest, there is no time limit for reviving a judicial determination of the form and amount of reparations claims, even if it does not appear that Nicaragua took any steps to pursue its compensation claim against the United States for over thirty years.  The Court’s recent practice likewise appears to lend support to the view that reparations claims can feasibly reopen ICJ proceedings at any point in time, if the Court does not itself fix a time limit to determine when parties’ negotiations on reparations have failed. In its Order of 1 July 2015, the Court in Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v. Uganda), the Court observed that since the parties therein had been unable to reach a political settlement since its Judgment of 19 December 2005, it would reopen proceedings as requested by the Democratic Republic of Congo.

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Rising Legal Costs Claimed by States in Investor-State Arbitrations: The Test of ‘Reasonableness’ in Philip Morris v. Australia

Published on July 12, 2017        Author: 

The Final Award Regarding Costs in Philip Morris v. Australia recently became public this July 2017 (although dated as of 8 March 2017), in (somewhat surprisingly) redacted form, signed by arbitrators Professor Karl Heinz-Bockstiegel (President), Professor Gabrielle Kaufmann-Kohler (Co-Arbitrator) and Professor Donald Mc Rae (Co-Arbitrator). Reasons were not given for the redaction of virtually all monetary amounts from the Final Award Regarding Costs, and the actual numerical figure of costs awarded to Australia was likewise redacted.  The Financial Times reported, however, that legal costs and fees that Australia claimed against Philip Morris will likely run to AUD $50 Million, or approximately USD $37 Million. For sure, according to the redacted Final Award, the figure that Australia claimed as legal costs and fees incurred defending against Philip Morris is much higher than the maximum legal fees and costs that have been claimed by the United States (USD $3 Million) and Canada (USD $4.5 Million) (Final Award Regarding Costs, para. 74.).

Assuming that the reported USD$37 Million/AUD$50 Million claim of Australia for legal costs and fees is correct, these would amount to almost 1% of Philip Morris’ USD $4.2 Billion claim against Australia, quite in contrast to around 1/10 of 1% of legal fees that Russia was ordered to pay (around USD$60 Million in legal fees) in the famous US$50 Billion Yukos arbitration.  Clearly, the alleged Australian US$37 Million claim for legal fees and costs against Philip Morris would be a staggering outlier against a trend observed in the last five years of ICSID arbitrations, where: “a study of ICSID arbitrations concluded between FY2011 and FY2015 reveals that costs incurred, on average, by claimants were US$5,619,261.74, and US$4,954,461.27 by respondents.”  This post examines the Philip Morris v. Australia tribunal’s reasoning on legal costs and fees to identify variables and considerations deemed relevant by the tribunal in reaching its conclusion awarding full costs to Australia (with the caveat that the exact figures of the costs are redacted from the Final Award).  After all, rising legal costs and fees should be a concern for largely self-regulated international lawyers, whose duties of professionalism include “avoiding unnecessary expense or delay” (The Hague Principles on Ethical Standards for Counsel Appearing before International Courts and Tribunals, Principle 2.3).   Read the rest of this entry…

 
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First Global Treaty Against Illegal, Unreported, and Unregulated (IUU) Fishing Entry into Force

Published on June 9, 2017        Author: 

While the world reacted to the US withdrawal from the Paris Agreement on June 2, the first meeting of the parties to a landmark global marine environmental agreement was held three days later with the FAO Agreement on Port State Measures to Prevent, Deter, and Eliminate Illegal, Unreported, and Unregulated (IUU) Fishing [hereafter, “Port State Measures Agreement or PSMA”].  This first global treaty to combat IUU fishing recognizes that “measures to combat IUU fishing should build on the primary responsibility of flag States and use all available jurisdiction in accordance with international law, including port State measures, coastal State measures, market related measures, and measures to ensure that nationals do not support or engage in IUU fishing” (PSMA, Preamble, paragraph 3), and is designed “to prevent, deter and eliminate IUU fishing through the implementation of effective port State measures, and thereby to ensure the long-term conservation and sustainable use of living marine resources and marine ecosystems.” (PSMA, Article 2).

IUU fishing endangers food security, community livelihoods, and marine environments in many developing countries around the world, particularly in hotspots in West Africa and the Asia-Pacific, causing annual estimated losses worldwide at around USD $23.5 billion to developed and developing coastal States, including the United States and the European Union. IUU fishing directly impoverishes local fishing communities, which in West Africa, for example, is estimated at around USD$ 1.3 billion a year. IUU fishing also exacerbates the problem of unsustainable fishing in the world, where 53% of the world’s fisheries are already fully exploited, and a further 32% are overexploited and depleted. The Food and Agriculture Organization (FAO) and the UN Environmental Programme (UNEP) cautioned in 2009 that the destructive impacts of IUU fishing include, among others, the “extinction (or high risk of extinction of the resource and/or the productive ecosystem and its biodiversity.” (p. 7 of FAO/UNEP Expert Report). The prevalence of IUU fishing in the world is illustrated in the map below (source here), where regional hotspots for IUU fishing are in the Eastern Pacific, the Northwest Pacific, West Africa, Southeast Asia, and Pacific Islands:

To date, not all States implicated in the key IUU hotspots are  parties to the Port State Measures Agreement (PSMA), which to date are only Australia, Barbados, Chile, Costa Rica, Cuba, Dominica, the European Union (as a member organization), Gabon, Guinea, Guyana, Iceland, Mauritius, Mozambique, Myanmar, New Zealand, Norway, Oman, Palau, Republic of Korea, Saint Kitts and Nevis, Seychelles, Somalia, South Africa, Sri Lanka, Sudan, Thailand, Tonga, the United States of America, Uruguay, and Vanuatu.  This post discusses some of the key features of the PSMA, which focus on harmonizing standards for States’ domestic control of their ports, and the coordinated enforcement of international rules to prevent and penalize IUU fishing.

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Hegemonic Cooperation or Succession? The United States’ Emerging ‘Abandonment’, and China’s Rising ‘Defense’, of the Global Order

Published on March 21, 2017        Author: 

Many international lawyers all over the world will doubtless have experienced a surge of surrealism over the past weeks, witnessing dramatic contrasts emerging between American and Chinese foreign policies seeking to redefine the global order – with the latter veering towards deepening strategic international cooperation around the world, and the former emphatic about the insularity of its ‘America First’ policy (read: ‘walls’ could be literal and figurative). In January 2017, Chinese President Xi Jinping gave a rousing defense of economic globalization at Davos, pointing to the inevitability and irreversibility of the global economy, where for China, “the right thing to do is to seize every opportunity, jointly meet challenges and chart the right course for economic globalization.” A month later, American President Donald Trump delivered his Address to the US Congress stridently pronouncing the country’s shift towards a “direct, robust, and meaningful engagement with the world…American leadership that is based on vital security interests…[where] partners must meet their financial obligations…[and where] America is willing to find new friends, and to forge new partnerships, where shared interests align.”  The historic first meeting this week between US Secretary of State Rex Tillerson and Chinese President Xi Jinping was the first high-level commitment towards greater joint cooperation between the United States and China, possibly suggestive of softening stances between the established hegemon and the rising world power in containing shared threats, such as North Korea’s demonstrable nuclear ambitions.

The United States’ emerging abandonment of the same postwar multilateral architecture it largely created – in favor of much thicker versions of protectionism, bilateralism, and unilateralism – is ironically taking place at a time when China is gaining confidence in rising to defend the global order and the enduring value of international institutions. It is nothing less than a sharp reversal of the “New Great Game” dynamics I observed four years ago, characterizing the United States as the “unipolar hegemon that incorporates international law justification as part of its operational code in international relations”, and China as the “rising power whose operational code in international relations remains facially deeply sovereigntist but latently appears to be shifting towards some instrumental internationalism – quite consistent with the ideological hybridity bred by ‘socialist modernization’ or what Ronald Coase [described as] ‘Chinese capitalism’.” (at p. 370).

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Economic Nationalism in a New Age for International Economic Law: Recalling Warnings of Ludwig von Mises and the Austrian School

Published on January 30, 2017        Author: 

International economic law developments barely one month into 2017 have been nothing short of tectonic this side of the Atlantic. From US President Trump’s first executive action to withdraw the United States from the unratified Trans-Pacific Partnership; his subsequent announcement (later called mainly an option) to impose a 20% border tax on Mexican imports into the United States to finance a wall between the two countries; a declared initiative to renegotiate the North American Free Trade Agreement (NAFTA) that was signed under the administration of Republican President George Bush; unprecedented changes to the United States National Security Council removing the nation’s top military, intelligence, and security advisers to only permit regular attendance for White House chief strategist Steve Bannon and more limited attendance of the chairman of the Joint Chiefs of Staff and the Director of National Intelligence; threats of punitive tariffs against China and accusations of illegal currency manipulation; to last Friday’s latest executive order announcing a travel ban against individuals from seven predominantly Muslim states (approximately 218 million persons) and the 4-month suspension of any refugee entry, as a possible first step to a broader ban – it is becoming all too clear that barely ten days into the new presidency, the United States will not be above reversing, abandoning, disregarding, or defecting from any of the established rules and institutions of international economic law, through extraordinary actions and reversals that have scarcely any or no inter-agency vetting and consultation, and significantly, with the new president declining to divest himself from all business interests or to introduce transparency and consultation measures even as these political-security-economic policy reversals continue to be formulated with relative opacity. The Dow Jones industrial averages and NASDAQ composite index both dropped with the sudden rush to sell off US equities, and American private companies have taken to hiring crisis management and communication firms for the new age of undisclosed and sudden economic policy reversals, reviewing operations and mergers against possible charges of being “Anti-American”.

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