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Home Archive for category "International Economic Law"

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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The MERCOSUR Protocol on Investment Cooperation and Facilitation: regionalizing an innovative approach to investment agreements

Published on September 12, 2017        Author:  and

The States Parties of the MERCOSUR (Argentina, Brazil, Paraguay and Uruguay) signed in April 2017 the Protocol on Investment Cooperation and Facilitation (“MERCOSUR Protocol”).

As discussed in this post, the Protocol draws significantly on the Brazilian model investment agreement (the Agreement on Cooperation and Facilitation of Investments – ACFI), which stands out for departing from the traditional design of Bilateral Investment Treaties (BITs), particularly – but not only – by excluding the possibility of investor-State dispute settlement (ISDS).

The emergence of the MERCOSUR Protocol has implications at the level of investment policy, as it represents a step towards the regionalization of the Brazilian model. It reflects the attempt to include in a single document the realities of four countries with important political, economic and investment policy differences, as expressed by the varying trajectories of Argentina and Brazil in the investment area.

It also raises interesting questions from an international law perspective. It highlights the legal challenges faced by Brazil, which not only joined the network of international investment agreements (IIAs) as a late-comer but also opted for embracing a particular approach to investment treaties. Accordingly, aside from provisions that innovate in investment law-making, the MERCOSUR Protocol incorporates provisions whose intention seems to be to insulate Brazil from applying protection standards often found in the over 3,000 treaties that now comprise the network of BITs, but which have been deliberately absent in the ACFI.

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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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Protecting the Environment at the World Trade Organization: the Eventual ‘Greening’ of Trade?

Published on June 20, 2017        Author: 

This post is the result of work conducted for the ILA Committee on Sustainable Development and the Green Economy in International Trade Law.

In a recent post, Diane Desierto discussed the Port State Measures Agreement (‘PSMA’) and its role in attempting to combat illegal, unregulated, and unreported (‘IUU’) fishing. Aside from the numerous interesting aspects of the PSMA identified in that post, the Agreement is also expected to play a key role in regulating IUU fishing beyond the law of the sea. At the World Trade Organization (‘WTO’), members are currently in negotiations to prohibit the use of subsidies which contribute to IUU fishing, as well as those that contribute to overfishing or overcapacity. While the elimination of fisheries subsidies which contribute to IUU fishing have been on the agenda of WTO members since the Doha Declaration in 2001, little progress has been made. The adoption of Agenda 2030 and its 17 Sustainable Development Goals (‘SDGs’) in 2015 has changed this, giving new energy to the international community to achieve a specific set targets. Of most relevance here is SDG 14.6 which requires

‘by 2020, prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, and eliminate subsidies that contribute to IUU fishing, and refrain from introducing new such subsidies, recognizing that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the WTO fisheries subsidies negotiation.’

The objectives of SDG14.6 extend beyond subsidies that contribute to IUU fishing to include those that contribute to overcapacity and overfishing. Disciplining such subsidies raises a number of challenges for the WTO. While the regulation of subsidies is a standard feature of world trade law, fisheries subsidies present unique challenges. For example, where a member considers a subsidy to harm their interests, they have two options under the Agreement on Subsidies and Countervailing Measures (ASCM): through direct challenge under the WTO’s dispute settlement system, or through the imposition of countervailing duties as a self-help remedy which seeks to counteract the effect of the subsidy. In each instance, the rules on subsidies seek to avoid harm to members’ interests, understood (inter alia) as injury to domestic industry, lost opportunities in third markets, or nullification or impairments of benefits.

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The Shifting Landscape of Investor-State Arbitration: Loyalists, Reformists, Revolutionaries and Undecideds

Published on June 15, 2017        Author: 

The investor-state arbitration landscape is shifting under our feet. The utility and legitimacy of traditional investor-state arbitration have come under fire, but states have not converged on a viable alternative. In simplified terms, three main camps are developing, which I call the “loyalist,” “reformist,” and “revolutionary” camps. The vast majority of states, however, are yet to take a public position on whether and, if so, how to reform investor-state dispute settlement. These “undecided” states are not a homogenous group, nor are they necessarily passive. Many states within this group are actively watching these developments and debating the various reform proposals.

One of the big strategic questions for the investment treaty system in the next few years will be whether the loyalists, reformists or revolutionaries will be able to attract a critical number of the undecideds to their cause in order to create a reasonable measure of convergence on a particular approach. The alternative is that the undecideds will split among the existing camps and/or develop their own distinct or hybrid positions. Another question is whether any members of the existing camps will shift their alliances. It is unclear how this will ultimately play out. What is clear, however, is that the tide appears to be turning against the traditional model of investor-state arbitration as it has few – if any – real supporters among states.

Loyalists, Reformists and Revolutionaries Read the rest of this entry…

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Foreign control and ICSID jurisdiction on Energy Charter Treaty Claims of Local Companies: The Eskosol Case

Published on June 12, 2017        Author: 

The ICSID tribunal in Eskosol in liquidazione v. Italy rejected Italy’s Rule 41.5 application to have the claim thrown out for being “manifestly without legal merit.” I offer a summary and some reflections on two interesting aspects on the tribunal’s jurisdiction.

Background

The claimant challenged, under the Energy Charter Treaty (ECT), Italy’s 2011 regulatory rollback regarding a feed-in tariffs (FIT) scheme (check this report by the claimant’s lawyers). Investment connoisseurs are familiar with the topic, litigated in Charanne, Eiser and other exhausted or pending cases, some confidential. The claimant is an Italian company, Eskosol in liquidazione (bankruptcy receivership). Eskosol claims to have invested in a 120-megawatt photovoltaic energy project, expecting to benefit from the 20-year FIT scheme. At the time of the rollback, the Belgian company Blusun held 80% of Eskosol. Eskosol alleged that this change rendered its business unviable. It abandoned its projects, became insolvent and entered bankruptcy receivership in November 2013. In December 2015, the tribunal-appointed receiver brought the ICSID claim, on the company’s behalf.

Blusun, the Belgian company controlling 80% of Eskosol, had brought ICSID proceedings  in 2014, under the ECT, against the same measures. Eskosol attempted to file a non-party submission in that arbitration, asserting that Blusun had usurped its claim and sought damages owed to Eskosol alone. Blusun’s abusive claim would prejudice the rights of Eskosol, its creditors and its minority (non-Belgian) shareholders, since Blusun showed no intention to channel any potential gain to Eskosol. Eskosol’s request was denied. Blusun’s claim failed on the merits in December 2016, and in May 2017 Blusun launched annulment proceedings.

The Decision 

In Eskosol, Italy raised four Rule 41.5 objections for expedite consideration (i.e., invoking glaring legal impediments and not hinging on disputed facts [36; 98]; see Álvarez y Marín [95]). The tribunal considered Eskosol’s claim not “manifestly” meritless. This conclusion does not prejudge the defendant’s full preliminary objections, which the tribunal shall examine, jointly with the merits, in the next phase. 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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