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Home Archive for category "International Economic Law" (Page 17)

Necessity in Investor-State Arbitration: The Sempra Annulment decision

Published on August 16, 2010        Author: 
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Sahib Singh is a  member of the international litigation and arbitration group at Skadden and a visiting lecturer at the University of Vienna. This note was prepared before the Enron v. Argentina annulment decision became available at the beginning of August. A note on that case is forthcoming on EJIL: Talk!

On 29 June 2010, the ad hoc ICSID Annulment Committee annulled the initial award in Sempra Energy International v. Argentina, finding that the initial tribunal had exercised a manifest excess of powers. The decision is central to our understanding of necessity in international investment law, and particularly the relationship between necessity under Article XI of the Argentina-US BIT of 1991 and under customary international law. Unfortunately, the committee’s decision leaves much to be desired in terms of its interpretive methodology. The central critique of this post, is the degree of relevance the committee’s decision gives to necessity under customary international law when interpreting Article XI. It also questions the presumptive relevance of necessity under custom as an interpretive tool, when the latter can only apply if the investor does not hold substantive or procedural rights under the BIT.

Background

The investor-state arbitration awards concerning Argentina are, for the most part, centred on the Argentine financial crisis that hit the country in late 2001. As a consequence of the crisis, Argentina undertook specific regulatory measures which liquidated the value of foreign investments (the factual matrix is far more complex, but shall not be entered into here). In the spade of investment arbitrations brought by foreign investors, Argentina has argued that it is not liable under a range of BITs due to the defence of necessity. In regards to US investors, such arguments have fallen under both customary international law and Article XI of the Argentina-US BIT. The latter reads as follows:

‘This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfilment of its obligations with respect to the maintenance or restoration of international peace and security, or the protection of its own essential security interests.’

Thus far six rulings have been made on the operation of necessity under Article XI and custom. Read the rest of this entry…

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EU denies preferences to products from Israeli settlements

Published on March 2, 2010        Author: 
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Dr Lorand Bartels is University Lecturer in Law, University of Cambridge. His publications include Human Rights Conditionality in the EU’s International Agreements (2005, OUP) and Regional Trade Agreements and the WTO (co edited with F. Ortino, 2006, OUP)

The European Court of Justice decided an interesting case last week (Case C-386/08, Brita, 25 February 2010). The Hauptzollamt Hamburg-Hafen (the main customs office of the port of Hamburg) had refused to give preferential treatment under the EC-Israel Association Agreement to products manufactured by an Israeli company in the West Bank.The judgment gives the following facts:

32. The German customs authorities provisionally granted the preferential tariff applied for, but commenced the procedure for subsequent verification. On being questioned by the German customs authorities, the Israeli customs authorities replied that ‘[o]ur verification has proven that the goods in question originate in an area that is under Israeli Customs responsibility. As such, they are originating products pursuant to the [EC-Israel] Association Agreement and are entitled to preferential treatment under that agreement’.

33. By letter of 6 February 2003, the German customs authorities asked the Israeli customs authorities to indicate, by way of supplementary information, whether the goods in question had been manufactured in Israeli-occupied settlements in the West Bank, the Gaza Strip, East Jerusalem or the Golan Heights. That letter remained unanswered.

34. By decision of 25 September 2003, the German Customs authorities therefore refused the preferential treatment that had been granted previously, on the ground that it could not be established conclusively that the imported goods fell within the scope of the EC-Israel Association Agreement. Consequently, a decision was taken to seek post-clearance recovery of customs duties amounting to a total of EUR 19 155.46.

One might have thought that the question would hinge on whether the origin of the products fell within the territorial scope of the EC-Israel Agreement (the ‘territory of the State of Israel’). But the Court took quite a different route. It referred to the EC-PLO Association Agreement, which provides for free trade for products from the ‘territories of the West Bank and the Gaza Strip’ and said:

52. Accordingly, to interpret Article 83 of the EC-Israel Association Agreement as meaning that the Israeli customs authorities enjoy competence in respect of products originating in the West Bank would be tantamount to imposing on the Palestinian customs authorities an obligation to refrain from exercising the competence conferred upon them by virtue of the abovementioned provisions of the EC-PLO Protocol. Such an interpretation, the effect of which would be to create an obligation for a third party without its consent, would thus be contrary to the principle of general international law, ‘pacta tertiis nec nocent nec prosunt’, as consolidated in Article 34 of the Vienna Convention.

Is this correct? Recognizing Israeli competence in relation to products originating in the West Bank does not amount to a denial of Palestinian competence over those products. And even if it did, it does not impose any obligation on the Palestinian authorities not to exercise this competence. They remain free to do so, if they can. So this is not entirely convincing.

The more interesting question is why the Court found it necessary to adopt this odd approach to the case. Why not just determine whether or not the West Bank is part of the ‘territory of the State of Israel’ (as did the A-G)? Could this have anything to do with possible future cases involving annexed territories?

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The International Minimum Standard and Investment Law: The Proof is in the Pudding

Published on August 3, 2009        Author: 
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A             Background

Fair and equitable treatment provisions are found in almost all bilateral and multilateral investment treaties and many international investment agreements. Throughout the course of the last decade, this treatment standard has been frequently invoked in investor-State arbitrations. Under its aegis, tribunals have developed a number of vaguely defined sub-categories, or what have been referred to as ‘facets’ or ‘components’ of the standard, such as the obligation of the State to refrain from acting in an arbitrary manner, to afford justice and due process to foreign investors, to act transparently, and to respect the legitimate expectations of the investor (see comment entitled ‘Fools Gold? Legitimate Expectations as Understood in Glamis Gold v USA). Despite such attention, the precise application of and relationship between these components remains vague and elusive.

The task of interpreting and applying fair and equitable treatment was made more complex by the following series of events.

In 1999, an American investor brought a claim under NAFTA‘s investor protection provisions. The investor alleged, inter alia, that Canada’s regulations with respect to the importation of softwood lumber violated Article 1105 of NAFTA. Article 1105(1) provides that ‘Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.’ At the time of the arbitration, trends in the decisions of arbitral tribunals favoured interpreting fair and equitable treatment provisions as either an autonomous treaty provision or a standalone principle found in customary international law. The tribunal favoured the former, finding for the investor, but leaving the question of damages to be assessed at later date by a new tribunal.

Following the decision, and in a dramatic twist, the NAFTA parties issued a joint interpretive note clarifying their view of both Article 1105, and fair and equitable treatment and full protection and security. The note read as follows:

Read the rest of this entry…

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Ecuador Denounces ICSID: Much Ado About Nothing?

Published on July 30, 2009        Author: 
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Much has been made of Ecuador’s recent withdrawal from the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (‘ICSID’). The notice has the effect of terminating the jurisdiction of the Centre effective 7 January 2010. The most reported justification for this move is the perception in many Latin American countries that international investment arbitration is biased towards investors (see comment entitled ‘International Investment Arbitration: Poisoned at the Root?‘), and more specifically, outstanding international investment claims against Ecuador in the range of $10 to $12 billion US.

However, on review of Ecuador’s international legal position, and, more specifically, international legal obligations generated by her outstanding bilateral investment treaties, it seems that withdrawal from ICSID, whilst perhaps remaining a poignant political statement, offers less than might first be thought in terms of radical change with respect to the country’s exposure to investment claims.

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Fools Gold? Legitimate Expectations as Understood in Glamis Gold v USA

Published on July 29, 2009        Author: 
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The recent decision of Glamis Gold v USA constitutes a leap forward in the articulation of norms of international investment law.  Paragraphs 1 through 9 contain an admirable description of the role of ad-hoc international investment tribunals in the determination of claims, a description that is articulate, precise, accurate and well measured. Such a development is to be welcomed, and was much needed. However, in addition to this, the decision is notable in its contribution to the development of the doctrine of legitimate expectations in the context of international investment law.

The obligation on the host State to respect the legitimate expectations of the investor constitutes what has been variously referred to by tribunals as a ‘facet’, ‘component’, or ‘sub category’ of the fair and equitable treatment provision commonly found in a number of bilateral and multilateral investment treaties. This provision has been elaborated by international investment tribunals over the course of the last four decades, and, in addition to legitimate expectations, has been found to include an obligation to not act in an arbitrary manner, to afford justice and due process to foreign investors, and to act transparently.

In Glamis, the investor argued that a violation of NAFTA’s fair and equitable treatment provision (Article 1105) had been occasioned by the failure of the United States (through its competent agencies) to respect its legitimate expectations. Ultimately, the Tribunal concluded that the claim was not made out. In reaching this conclusion, it introduced two interesting developments to the debate:

(1)    an unambiguous statement that legitimate expectations can only be based on a ‘quasi-contract’; and
(2)    the suggestion that expectations can be reasonable but not legitimate.

This comment will both outline and consider these two developments. Read the rest of this entry…

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Investment Treaties and EU law

Published on July 21, 2009        Author: 
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Piet Eeckhout is Professor of Law and Director of the Centre for European Law at King’s College London.

In two parallel decisions of March of this year (Case C-249/06 Commission v Sweden and Case C-205/06 Commission v Austria) the European Court of Justice ruled that Sweden and Austria are in breach of their EC Treaty obligations by maintaining bilateral investment treaties with third countries which may interfere with the EU’s powers to restrict capital movements.  This is the Court’s first venture into the booming international investment law field.  It should be seen in its broader setting. The Treaty of Lisbon purports to extend the scope of the EU’s common commercial policy to matters of “foreign direct investment”.  Perhaps in anticipation of this significant expansion of Community competence, the Commission is becoming active in this area.  It considers that bilateral investment treaties between Member States and third countries are incompatible with Community law, in so far as they contain a clause on the free transfer of payments connected with an investment.  Such a clause, whilst in principle compatible with the free movement of capital between the Community and third countries, could create problems were the Community to introduce restrictions pursuant to Articles 57(2), 59 and 60(1) of the EC Treaty.  There is as yet no relevant legislation under any of these Treaty provisions, but the Commission is concerned that the future exercise of Community competence could be hindered.

The Commission therefore brought proceedings against Sweden and Austria, referring to a series of investment treaties which they have concluded.  Those treaties come within the scope of Article 307 EC, pursuant to which (a) rights and obligations arising from agreements, concluded before accession, between Member States and third countries are not affected by the EC Treaty, and (b) Member States shall take all appropriate steps to eliminate any incompatibilities with the EC Treaty.  Sweden and Austria were alleged not to have removed the incompatibility between their investment treaties and EC law.  What the Commission would like to see is a so-called Regional Economic Integration Organisations clause in these agreements: a clause which allows and safeguards EC measures. Read the rest of this entry…

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International Investment Arbitration: Poisoned at the Root?

Published on June 24, 2009        Author: 
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 Tolga R Yalkin is a graduate student in the Faculty of Law, University of Oxford and President of Oxford Pro Bono Publico, a public interest law program of the Oxford Law Faculty. His Oxford thesis considers the international minimum standard of treatment in international investment law.

 Earlier this month, the British Institute of International and Comparative Law (‘BIICL’) held its annual conference in London and focussed on the theme of “Business and International Law” in London on 5 June 2009. Together with Professor M Sornarajah (National University of Singapore), Professor Peter Muchlinski, (University of London) and Sylvia Noury (Freshfields Bruckhaus Deringer), I spoke on one of the panels. The discussion in our panel revolved around international investment arbitration, with the two senior panellists focusing on broader systemic developments, and the latter two on specific technical areas of international investment law. In this post, I wish to reflect on the proposition by Professor Sonarajah-one of the doyens of international investment law-that the expansion of jurisdiction by international investment tribunals offers evidence that the investment treaty system is intrinsically pro-business.

Sornarajah advanced the proposition-enjoying increasing purchase in the international legal community-that bilateral and multilateral investment agreements and the system of international investment arbitration was conceived, and indeed continues to operate, on a number of false assumptions. Foremost among these is the ‘hunch’ that a system of international investment arbitration would significantly increase the inflow of capital to developing countries, bringing with it wealth and development to some of the world’s poorest citizens. According to Sonarajah,this justification has been promoted by neo-liberal business interests-rather than arising from genuine social concern, Furthermore, he claims that the system has ‘entrenched’ itself by providing arbitrators and international law firms-for whom the system ‘produces golden eggs’-with vested interests. The result, as he sees it, is that the system is intrinsically geared towards the interests of business and capital-exporting States. In support of this contention he provides examples that illustrate the expansion of jurisdiction enjoyed by tribunals.

Sornarajah believes that the examination of the way in which jurisdiction has been expanded will permit us to determine: (1) whether the system can be ‘salvaged‘; and (2) what measures might be adopted it this respect.

Despite painting a compelling picture of what he sees as the true nature of international investment arbitration, Sornarajah’s submission must be seen, at best, as a starting point for further inquiry. The main flaw of his approach is that reaching firm policy conclusions requires more than polemic arguments and anecdotal examples; Read the rest of this entry…

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The Tension between International Law as ‘Law’ and International Governance: A Comment on the EJIL Debate between Mónica García-Salmones and Andrew Lang and Rosie Cooney

Published on April 17, 2009        Author: 
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Dr Caroline Foster is a Senior Lecturer in Law at the University of Auckland, New Zealand and was a diplomat and legal adviser at the New Zealand Ministry of Foreign Affairs and Trade. She has a special interest in the nexus between trade, human rights and the environment and she has published several articles on the WTO Agreement on Sanitary and Phyto-Sanitary Measures. She is currently working on a monograph to be published by Cambridge University Press on Science, Proof and Precaution in International Courts and Tribunals.  The book focusses on expert evidence, burden of proof and finality of adjudication in international disputes involving science.   

My thanks to Dapo Akande for the invitation to submit this comment and to the respective authors for their papers. Cooney and Lang adopt a broad ambition: a development in the multilateral trade system and its institutional mechanisms towards “adaptive governance”.  García-Salmones sets out to prompt further exploration of the major implications of such a reform in “governance”, including the development dimension.   Reading the authors’ contributions, it occurs to me that together these contributions raise fundamental questions about the respective roles of law and of “governance” in international law – a distinction hinted at by García-Salmones but not taken up. What we require of international law as law, particularly when it comes to the application of the law through binding adjudicatory processes, is not always compatible with what we might ideally require from a system of international “governance”.

 The key point that needs to be added into the equation, I think, is to underline the usefulness of maintaining what could be called the “hard edge” of international law.  At the hard edge, law often requires the availability of authoritative decision-making at fixed points in time – something the WTO dispute settlement system does very well. In dispute settlement by adjudication, the law is interpreted and applied in order to give concrete effect to an agreed balance of interests.  Because of its very nature this aspect of law will tend to freeze the situation at hand.  Adjudicatory processes will generally respond much less flexibly to the dynamics of ongoing scientific research in fields of considerable uncertainty than may be possible within other processes of international “governance”. Cooney and Lang themselves refer to the “one-off nature of WTO dispute settlement.”  (As a practical matter, the result is a technically huge challenge for WTO panelists and Appellate Body members.)

 Certainly, WTO dispute settlement in SPS cases should be carried out with a high level of awareness of the extent of scientific uncertainty in the field in question.  Increasingly, this awareness is manifest. The appellate structure of WTO dispute settlement has been valuable in gradually advancing the interpretation of the Agreement along appropriate lines. And indeed we should continue to strive to improve the substantive international law on an ongoing basis so that the rules themselves will require, prompt and accommodate an allowance for uncertainty- as Cooney and Lang seek to do with their suggestions on the SPS Agreement’s future interpretation.  Success in this will produce better decisions that balance competing interests as well as possible.

 Yet we must remain aware of what it is we seek from international law as law. This is not always compatible with what we might ideally require from the overall system of international “governance”, where there is greater scope for adaptive management and learning.  Read the rest of this entry…

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Human Rights, International Economic Law and ‘Constitutional Justice’: a Reply by Robert Howse to Ernst-Ulrich Petersmann’s Article in EJIL Vol 19:4

Published on December 9, 2008        Author: 
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In issue 4 of our year marking the anniversary of the UDHR, we published an article by Ernst-Ulrich Petersmann on “Human Rights, International Economic Law and ‘Constitutional Justice“. We continue the discussion by publishing a reply and a rejoinder to this piece. We invite our readers to comment.

Herein find a reply by Robert Howse to Ernst-Ulrich Petersmann:

Together with developments in international criminal justice and humanitarian law, the human rights revolution in international law has had a profound structural effect on the international legal order as a whole; we are today only beginning to discern and to digest this effect, to say nothing of the broader consequences for global politics.1 New actors have been empowered in the international legal system (not only individuals but various kinds of non-state collectivities as well); conceptions of responsibility have been altered; classic notions, such as territorial sovereignty and recognition of statehood, have sometimes subtly and sometimes radically been reshaped or adapted; and the balance of institutional actors charged with interpreting and applying international law has shifted towards courts and tribunals (a major theme of Petersmann) and away from diplomats and their ministers.2

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  1. Teitel, ‘Humanity’s Law’, 35 Cornell Int’l LJ (2002) 355. []
  2. Ibid. []
 
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Human Rights, International Economic Law and ‘Constitutional Justice’: A Rejoinder by Ernst-Ulrich Petersmann

Published on December 9, 2008        Author: 
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In this post Ernst-Ulrich Petersmann issues a rejoinder to Robert Howse’s comments [above] on Prof. Petersmann’s article.

All academics learn from discussion and criticism of their published views. Hence, I congratulated the EJIL editors, Alston in 2002 and Weiler in 2008, when they invited a response to my articles in EJIL. Following the insulting EJIL comments by Alston in 2002, this is the second time in my 37 years of academic teaching that a ‘commentator’ has imputed to me intoxicating views which I never expressed. Six years after the confabulations by Alston and Howse,1 Howse remains committed to misrepresenting rather than discussing my legal arguments. Clarifying, in fewer than 2,500 words, the reasons for this ‘Alice in Wonderland non-discussion’ would have been more enlightening if my Australian and Canadian commentators had respected correct academic citation before publicly putting forth their aggressive legal phantasms. Here I want to suggest ways in which such an exchange may be more constructive.

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  1. Petersmann, ‘Taking Human Dignity, Poverty and Empowerment of Individuals More Seriously: Rejoinder to Alston’, 13 EJIL (2002) 845. []