A research position is available to work on the ICRC – British Red Cross cooperation to update the practice collection underpinning the ICRC’s study on customary international humanitarian law. Details on the ICRC’s work on customary IHL can be found here. The job announcement and application form can be found at the British Red Cross website.
Yenkong has now clarified that his original post was suggesting that a State may raise a defense (rather than a counter-claim) to a claim that it violated an investor’s legitimate expectations, on the grounds that the investor engaged in tax avoidance. I agree wholeheartedly that an investor’s own conduct may be relevant to a determination of whether its legitimate expectations were violated. That is an uncontroversial point. However, to be relevant, the investor’s conduct must relate in some way to the State’s alleged breach such that it contextualizes or justifies the State’s actions. Where the State’s conduct would otherwise violate the applicable legal standard, it may show that its conduct was in fact an appropriate response to some action or omission of the investor. In contrast to such a circumscribed approach, Yenkong’s original post seems to argue that a State may raise a “tit for tat” defense without needing to establish the existence of a causal relationship between the investor’s tax avoidance and the State’s allegedly breaching conduct.
Further, it is still not clear to me how invoking “legitimate expectations” would advance the State’s position in such a scenario or even how that standard would become legally applicable to the investor’s conduct. Yenkong acknowledges that the fair and equitable treatment (FET) obligation on which the legitimate expectations standard is based runs one way, defining the State’s obligations to the investor. That the investor’s actions may be relevant to assessing whether the State violated its FET obligation does not imply a reversal of the direction of the obligation. It is not the objective of investment treaties to govern the investor’s obligations toward the host State. The treaties instead set out substantive obligations of the State and offer investors recourse to arbitration in order to correct a real or perceived power imbalance created by the obsolescing bargain problem and a lack of credibility of domestic courts in handling claims by foreigners. The aim is to permit the host State to make a credible commitment to protect foreign investors. The investor’s obligations toward the State, by contrast, are governed by its contract with the State (where applicable) and the host State’s laws. The State is able to pursue the captive investor for violations through its own domestic administrative, criminal, and civil processes and, where applicable, international arbitration. In short, investment treaties do not seek to protect the State’s legitimate expectations (expressly or implicitly), because there are other legal mechanisms available for that purpose.
As regards balancing the interests of the investor and the development needs of the host State as a method of interpreting the State’s substantive obligations, the treaty would have to provide a textual basis for such an approach. Read the rest of this entry…
The Shaky Proposition of the State’s Legitimate Tax Expectations: A Response to Yenkong Ngangjoh-Hodu
I do not share a number of Yenkong Ngangjoh-Hodu’s views about the legitimate expectations doctrine, but this response focuses on the final paragraph of his post, in which he argues that a State could somehow raise a legitimate expectations argument against a foreign investor that engages in “tax avoidance.” For the sake of clarity, I understand Yenkong to mean not tax evasion, which would violate the law of the host State and thus subject the investor to domestic criminal and civil penalties, but what has been defined as “the minimization of tax liability by lawful methods.” This is also known as “tax planning.” (Photo: Avoiding the window tax in England, credit)
I see several problems with Yenkong’s suggestion. First, as he correctly explains, the legitimate expectations doctrine is an interpretation of the fair and equitable treatment (FET) provisions contained in many investment treaties. Those provisions invariably impose a one-way obligation that governs the State’s treatment of the investor, not the reverse. This is a separate issue from whether (a) a State can invoke an investor’s actions to show that it treated the investor fairly in the circumstances (it can), or (b) a State can raise counterclaims (it can in some cases), or even (c) some treaties do or may in the future impose specific substantive obligations on investors (they likely will). However, even considering those possibilities, it is not clear on what legal ground a State would “develop” “an argument . . . that its legitimate expectations [were] frustrated.”
Second, Yenkong asserts that tax avoidance or tax planning is “incongruous with the spirit of any bilateral investment agreement.” While he makes no attempt to support this claim, it is not obviously true. BITs typically state their goals in their preambles, and I have yet to see one that refers to increasing tax revenue. Instead, they refer to promoting greater economic cooperation, stimulating the flow of private capital, fostering economic growth and development, and maximizing effective use of economic resources. It thus appears entirely possible for an investment to uphold the “spirit” of a BIT by creating new and beneficial cross-border economic activity while still minimizing its tax liability within the confines of the law.
Third, he states that, “instead of an unqualified ‘legitimate expectations’, tribunals ought to clearly take into account investor’s conduct.” There are a few problems here. He appears to have shifted from an argument that a State should be able to claim that its expectations were violated to an argument that an investor’s tax conduct might appropriately be raised as a defense to the investor’s allegation that its legitimate expectations were violated. Is he hinting at the possibility of a counter-claim (in which case, on what legal theory, since as noted above FET is a one-way obligation), or is he suggesting a defense? If the latter, as he acknowledges earlier in his post, the investor’s conduct is already considered as part of the determination of whether its alleged expectations were legitimate and whether the State’s actions thwarted them. However, it is not at all apparent in what factual situation tax avoidance/planning would be relevant to an investor’s claim that its legitimate expectations were violated. Such scenarios would certainly be rare.
Finally, assuming for the sake of argument that there were a legal foundation on which a State could raise a legitimate expectations claim, on what basis would a State allege to have developed a legitimate expectation to collect a certain level of tax beyond that legally required? It seems to me there would have to be some kind of agreement on this between the investor and the State to found a claim.
1. The iCourts & Freedom Rights Project, Copenhagen announces a “Conference on the Future Role of the European Court of Human Rights” to be held 15 November 2013. The conference addresses the question of what the role of the ECtHR should – and could – be in the contemporary and future protection of human rights in Europe. It brings together a distinct group distinguished European judges and renowned scholars from the field of human rights to debate these questions and suggest ways forward for the ECtHR. More information is available at the conference website.
2. The University of Cagliari announces the conference, “Natural Resources Grabbing: Erosion or Legitimate Exercise of State Sovereignty?,” to be held in Cagliari, Italy, 4-5 October 2013. Additional details are available at the conference website. For further information, contact angelica.bonfanti AT unimi DOT it.
The Center for International Law at the National University of Singapore announces its 4th Annual Singapore Investment Arbitration Conference, Investment Treaty Arbitration in Asia: What Lies Ahead, to be held 3 December 2013. Details and registration here. A special combined registration is available for those wishing to attend both the conference and the Singapore International Arbitration Forum, organized by Maxwell Chambers, to be held on 2 December 2013.
The Hague Academy of International Law (logo, below right, credit) has offered annual courses in public and private international law for eighty-five years as part of its founding objective of promoting “peace through law.” This year’s courses on public international law ended in July and the private international law courses ended this month. Each year the public international law course attracts students from up to eighty countries worldwide, with this year’s hosting a record number of nearly 350 students. The 2013 General Course on Public International Law was delivered by Professor James Crawford (Cambridge) and was titled “The Course of International Law. Practice and Process of the Law of Nations”. Other courses in 2013 included a course by Professor Eyal Benvenisti (Tel Aviv), “The International Law of Global Governance”; a course by Professor Robert Kolb (Geneva) on “Article 103 of the United Nations Charter;” and a course by Professor Anna Wyrozumska (Lodz) on “The Role of Domestic Judges in the Development of International Law“.
The form and content of Academy courses over the years reflect the evolution of international law and the unfolding of global affairs, and at times Academy courses have even been harbingers of things to come. This post highlights a few examples.
After over forty years of holding courses only in French—then the language of diplomacy—when the Academy reconvened in 1947 after a hiatus during World War II, it offered its first courses in English, reflecting the rise of U.S. global power after the war. That same year, as the UN General Assembly drafted and considered the Universal Declaration of Human Rights, Hersch Lauterpacht taught The International Protection of Human Rights. The Universal Declaration was adopted the following year.
Interestingly, while among States human rights did not gather steam as an international legal doctrine until after World War II, the courses of The Hague Academy remind us that international law scholars were laying its foundation well before then. Read the rest of this entry…
2013 SIEL/CUP Prize for an Essay in International Economic Law
The Society of International Economic Law and Cambridge University Press have established a prize for the best essay submitted on any topic in any field of international economic law. The competition is open to current undergraduate and graduate students and those who have graduated from a university or other tertiary education institution no earlier than five years before the submission deadline. More details here.
1. Students for the Promotion of International Law (SPIL) Mumbai will organize its annual event, the 5th Government Law College International Law Summit, from 31st January – 2nd February, 2014. Law schools from around the world are invited to participate. The Summit will include lectures, panel discussion, and two competitions: the Judgment Deliberation Competition and the Treaty Appreciation Competition. In addition, SPIL Mumbai calls for papers from students, professors, practitioners, and scholars, on the theme of this year’s Summit, international investment law.
2. SPIL Mumbai also calls for original academic work on contemporary developments in Public International Law for its yearly publication, the International Law Annual, which comprises literature on all aspects of international law. Possible forms include short articles, analytic works on landmark cases, interviews with legal luminaries on contemporary issues, discussions and analysis on international legislation, and book reviews.
Details on the Summit and the call for papers here.
3. The Institute of Law Studies of the Polish Academy of Sciences and the COST Action IS1003 announce the conference Constitutionalisation and Fragmentation of International Law Revisited, to take place in Warsaw 18-19 November 2013. The conference organizers also announce a call for papers. Details here.
The Hague Center for Law and Arbitration and the Doshisha University Graduate School of Global Studies announce a Symposium on Unilateral Sanctions and International Law: Views on Legitimacy and Consequences, 11 July 2013 at the Asser Institute in The Hague. Details here.