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.
Rising Legal Costs Claimed by States in Investor-State Arbitrations: The Test of ‘Reasonableness’ in Philip Morris v. Australia
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…
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.
Hegemonic Cooperation or Succession? The United States’ Emerging ‘Abandonment’, and China’s Rising ‘Defense’, of the Global Order
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).
Economic Nationalism in a New Age for International Economic Law: Recalling Warnings of Ludwig von Mises and the Austrian School
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”.
Remaking Globalization for the Local: The Real Search for Equality and Diversity in International Law
From Western liberal democracies in the United States and the European Union, to historically democratic developing countries such as the Philippines, ignored, disenfranchised, and disempowered local communities emphatically made themselves heard in elections and referenda around the world. For better or for worse, the international economic order will be remade, somehow. It would be specious and condescending to merely say that this is the rise of “populism” without truly understanding the concerns of local communities who have driven electorates all over the world to reject any form of the “establishment” – whether they be traditional politicians and parties, State apparatuses, international organizations, mainstream media, or multinational corporations.
The supranationalist structures of modern international law’s prominent institutions – the United Nations (UN), the Washington Consensus behemoths such as the World Bank (WB) and the International Monetary Fund (IMF), the World Trade Organization (WTO), the European Union (EU), among others – are premised on deepening inter-State cooperation while still ensuring full respect for the basic UN Charter of the “principle of sovereign equality” of all States. However, the actual power and felt impact of these global institutions on the daily modern lives of individuals, groups, and local communities reveals serious fissures that expose an obvious imbalance between the terms of international cooperation and States’ sovereign equality – from the micromanagement of Greek agencies by EU fiscal managers and inspectors during the worst nadir of the EU’s financial crisis; the enforced austerity and structural adjustment programs of World Bank technocrats harnessing the leverage of the Bank’s conditionality lending to developing countries; the loss of jobs and social dislocations caused to communities throughout manufacturing states in the United States of America when multinational corporations move operations offshore to China or Mexico; as well as the drastically increased competition for resources and the rise in challenges to religious, social, ideological and group identity posed by cleavages within multicultural societies emerging from formerly hermetic communities now overrun by refugees and other immigrants fleeing political persecution, climate change-related natural disasters, and other humanitarian crises.
Restive “Westphalian” political elites push back against the seeming tyranny of the international system and its global institutions, in order to increasingly assert the sovereign prerogative of states and their supposed ‘independence’ from any form of international governance that ultimately erodes any of these elites’ real bases of power. The recent rise of populist, anti-establishment, anti-trade, and anti-internationalist leaders throughout established democracies – from France’s Marine Le Pen, the United States’ Donald Trump and (to a certain extent) Bernie Sanders, the United Kingdom’s Nigel Farage, the Philippines’ Rodrigo Duterte, Venezuela’s Hugo Chavez, among others – is no coincidence. ‘Silent’, faceless, and individually powerless, electoral majorities are clearly voting for leaders who project themselves as best able to roll back the worst excesses of inequality, insecurity, and uncertainty faced by households from an (actual or imagined) unrestrained international order. The rise of an unstable, deep populism throughout liberal democracies around the world does not only express what IMF Managing Director Christine Lagarde calls “a groundswell of discontent” against globalization, but rather, a return to a much harder ‘Westphalian’ version of State sovereignty insulated from the common interests and shared concerns of this century’s community of nations forged and united in the aftermath of the First and Second World Wars.
Detecting Prohibited Subsidies and Determining Continued Compliance: WTO Panel Rules (Again) for the US in the Airbus Dispute with EU
On 22 September 2016, the United States Trade Representative (USTR) scored another victory in its long-running dispute with the European Union (EU) over subsidies provided by certain EU Member States to large civil aircraft manufacturer Airbus. The USTR sought to prove that 36 challenged EU measures remained inconsistent with its duty to comply with the rulings and recommendations issued by the WTO Dispute Settlement Body (DSB) after adopting the original 30 June 2010 Panel Report in this case. Specifically, the US challenged four types of subsidies allegedly made by the EU and/or certain EU Member States to Airbus for continuing inconsistency with the Subsidies and Countervailing Measures (SCM) Agreement: 1) launch aid or member State financing; 2) equity infusions for the corporate restructuring of Aerospatiale and Deutsche Airbus; 3) infrastructure related measures of German and Spanish authorities; and 4) research and technological development funding provided by the EU and certain member States.
The 22 September 2016 WTO Panel Report European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft [hereafter, “2016 Panel Report”] found, among others, that: 1) French, German, Spanish, and UK launch aid or member State financing for the Airbus A350XWB constituted actionable specific subsidies (2016 Panel Report, para. 7.1.c.ii.); 2) the EU and certain member States have failed to comply with their obligation to withdraw the subsidies for other Airbus aircraft (2016 Panel Report, para. 7.1.c.ix.); 3) the EU continues to be in violation of Articles 5(c) and 6.3(a)(b) and (c) of the SCM Agreement by failing to comply with previous recommendations and rulings of the WTO Dispute Settlement Body in the original 30 June 2010 Panel Report (2016 Panel Report, para 7.2); 4) to the extent that the challenged EU measures remain inconsistent with the SCM Agreement, they have nullified or impaired benefits accruing to the US under that Agreement (2016 Panel Report, para. 7.3); and 5) the EU and certain member States failed to bring 34 of its 36 challenged measures into conformity with their obligations under the SCM Agreement (2016 Panel Report, para. 7.4).