Home Articles posted by Julian Arato

Lack of Consistency and Coherence in the Interpretation of Legal Issues

Published on April 5, 2019        Author: , and

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.  

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Equivalence and Translation: Further thoughts on IO Immunities in Jam v. IFC

Published on March 11, 2019        Author: 

At the end of February, the Supreme Court of the United States issued a landmark judgment on the immunity of international organizations in Jam v. International Finance Corporation, 58 U.S. (2019). The case concerned the meaning of the 1945 International Organizations Immunities Act (IOIA), which affords international organizations “the same immunity from suit … as is enjoyed by foreign governments.” 22 U.S.C. § 288a(b). Writing for a 7-1 majority, Chief Justice Roberts found that the IOIA incorporates a dynamic immunities regime, equivalent to whatever immunities US law affords to foreign states. The immunities of international organizations are keyed to sovereign immunity. The former evolve to meet the latter. Thus, as the US law of sovereign immunity has shifted from an absolute to a restrictive paradigm with the enactment of the 1952 Foreign Sovereign Immunities Act (FSIA), so too does the IOIA today incorporate merely restrictive immunity for international organizations.

Writing in dissent, Breyer laments the majority’s approach, arguing for a static interpretation of the IOIA on purposive grounds. Given his druthers, Breyer would have interpreted the statute as affording international organizations absolute immunity from suit – which foreign sovereigns were entitled to under US law when the IOIA was enacted in 1945. In his view, a static interpretation best accords with the IOIA’s purpose of freeing international organizations from interference through domestic litigation.

Between Diane Desierto’s thorough recent post on this blog, and Ingrid Wuerth’s preview of the case on lawfare last year, there is no need to rehash the facts and issues here. Suffice it to say that the case mostly plays out on the familiar turf of statutory interpretation – pitting Roberts, the textualist, against Breyer, the purposivist. Read the rest of this entry…


Subsequent Practice in the Whaling Case, and What the ICJ Implies about Treaty Interpretation in International Organizations

Published on March 31, 2014        Author: 

Today the ICJ delivered its long-anticipated judgment in the Whaling Case (Australia v. Japan: New Zealand Intervening), finding Japan’s whaling program in breach of the Whaling Convention on several counts. It is a rich judgment, which will be more fully digested over the next few days.

In this post I want to draw attention to one specific point on the ICJ’s approach to the interpreting the Whaling Convention – specifically the Court’s approach to subsequent agreement and practice in relation to its prior advisory jurisprudence on the interpretation of the U.N. Charter. The relevant aspect of the Whaling Judgment concerns the Court’s assessment of the weight of resolutions issued by the International Whaling Commission (IWC).

The IWC is a supervisory body established by the Whaling Convention. It has the capacity to amend certain provisions of the Convention by three-fourths majority vote (though amendments will not bind any State Party that objects). It can also render non-binding recommendations. The Court indicates at the outset that while such resolutions are non-binding, when “they are adopted by consensus or by a unanimous vote, they may be relevant for the interpretation of the Convention.” (¶46). The Court notes that the Commission has amended the Convention several times, and that “the functions conferred on the Commission have made the Convention an evolving instrument” (¶45). Read the rest of this entry…


A Preemptive Strike against European Federalism: The Decision of the Bundesverfassungsgericht Concerning the Treaty of Lisbon.

Published on October 9, 2010        Author: 

Julian Arato is a J.D. candidate and Institute of International Law and Justice Scholar at the New York University School of Law .  His article on  Subsequent Practice and Evolutive Interpretation: Techniques of Treaty Interpretation over Time and Their Diverse Consequences, 9 Law & Prac. Int’l Cts. & Tribs. (forthcoming 2010) is  available here.

Editor’s Note: Readers may be interested in previous EJIL:Talk commentary on the Lisbon Judgment discussed below. For pieces by Joseph Weiler see here  and here . See also Piet Eeckhout’s  ” The European Union and International Law Under the Treaty of Lisbon“. For analysis of the legal guarantees offered to Ireland to secure ratification of the Lisbon treaty, see Laurent Pech’s  “The European Union’s Lisbon Treaty: Some Thoughts on the Irish Legal Guarantees“.

 On first reading the 2009 Lisbon case of the German Constitutional Court appears to hew quite closely to the Court’s reasoning in 1993, reviewing Germany’s accession to the Maastricht Treaty.  Both cases declare that European integration must respect the inviolable core of the German Constitution (Grundgesetz). (Specifically, in these cases, Article 20, entrenching democracy and the rule of law.  See Zitierung: BVerfG, 2 BvE 2/08 vom 30.6.2009, ¶233 [hereinafter Lisbon]; Decision concerning the Maastricht Treaty, 33 I.L.M. 388, 422 [hereinafter Maastricht]). In both cases the Court declares that under the Treaties it retains final say over whether European Law is compatible with the Grundgesetz and is thus applicable in Germany (judicial Kompetenz-Kompetenz).[i] Finally Lisbon, like Maastricht, finds that the Treaty ultimately passes constitutional muster. Thus, at first blush, the Court of Lisbon seems to basically restate its 1993 reasoning.  I want to argue, however, that the Court has substantially sharpened its challenge since Maastricht, elevating much of the Court’s earlier state-centric interpretation of the status of integration under the Treaties to a statement of German constitutional principle.

I will focus on three ways in which Lisbon represents an advance on Maastricht.  The Court announces: 1) that the Grundgesetz entrenches an absolute and unamendable limit on integration, that State sovereignty as such is inalienable, and thus forbids the delegation of excessive competences, especially Kompetenz-Kompetenz; 2) the Grundgesetz requires the German Constitutional Court to retain final review over the actions of German and European public authorities for possible alienation of, or encroachment on, German State sovereignty (judicial Kompetenz-Kompetenz); and 3) the Court goes about rigorously reviewing the Lisbon Treaty for infringements of German sovereignty in a far more searching manner than it had done in the past.  Leaving little to implication, the Court spells out the consequences of its decision: in the exceptional case where European institutions overstep their enumerated powers, even with the interpretive blessing of the ECJ, the German Court will exercise review and may instruct German authorities not to apply the European law, even if it means engaging Germany’s international state responsibility.

 1. Constitutional limits to integration: Germany must retain substantial competences.

            The rhetoric of Lisbon suggests that, like Maastricht, it concerns a democracy review on the model of Solange.  However, I want to suggest that Lisbon is really, at its core, about protecting state sovereignty in light of the expansion of competences at the Union level. In this regard, in 1993 the Court held only that under the Treaty of Maastricht, integration would not yet reach the point of a federal state.  In 2009 the Court went further, holding that full integration into a supranational federal state (federalization) would be in principle forbidden by the Constitution. Read the rest of this entry…