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SCOTUS Decision in Jam et al v. International Finance Corporation (IFC) Denies Absolute Immunity to IFC…With Caveats

Published on February 28, 2019        Author: 
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Editor’s Note: In view of this landmark SCOTUS decision yesterday, this post is a brief deviation from our ongoing Symposium for the ESIL Interest Group on Migration and Refugee Law on the UN Global Compacts on Migration and Refugees: The Twin Peaks?.  We immediately continue with the Symposium after this post.

When it rains, it somehow pours. February 2019 ended up being such a landmark month for international law adjudication.  A day after the International Court of Justice released its landmark Chagos Advisory Opinion (finely discussed by Marko Milanovic here), the Supreme Court of the United States (SCOTUS) issued its 27 February 2019 decision in Jam et al. v. International Finance Corporation, (586 U.S. ___ 2019).  The decision squarely rejects the defense of absolute immunity invoked by the International Finance Corporation (IFC) through the United States’ International Organizations Immunities Act (IOIA) of 1945, with respect to a damages suit for negligence, nuisance, trespass, and breach of contract filed in 2015 before the US District Court for the District of Columbia, by a group of farmers and fishermen in India (with assistance from the NGO EarthRights), concerning the IFC’s inadequate supervision of the environmental and social action plan over its US$450 million loan to construct a coal-fired power plant in the state of Gujarat.  The damages suit invokes the IFC’s own internal audit through the Compliance Advisor Ombudsman (CAO), admitting that the IFC did not adequately supervise the environmental and social action plan for the project.  

Last week, I wrote about the evidence from Inspection Panel’s body of investigation reports in about 131 cases thus far, showing ongoing gaps between the World Bank’s articulated commitments to Agenda 2030 and the Paris Agreement, with its actual operational practices in environmental and social action compliance methods that deliberately refuse to internalize the actual international human rights, environmental, climate change, and labor obligations of States in the Bank’s lending operations for development projects. In this respect, the SCOTUS decision is of landmark impact, because it opens the door for US courts to potentially determine the nature of the IFC’s legal responsibilities beyond the lines of accountability internally designed at the World Bank through the independent Inspection Panel or the compliance auditing process at the CAO.  Whether or not the suits will prosper on the merits, of course, is another matter altogether, noting how business and human rights litigation strategies have evolved in the United States after SCOTUS decisions in Kiobel v. Royal Dutch Petroleum and Jesner v. Arab Bank PLC.  

There are also caveats to the decision itself, as carefully penned by SCOTUS Chief Justice Roberts.  When one goes through the Court’s reasoning, the Court also signaled that “restrictive immunity hardly means unlimited exposure to suit for international organizations.” 

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The Post-TTIP Transatlantic Cooperation on Trade: Stepping up Conformity Assessment

Published on February 25, 2019        Author: 
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On 18th January 2019, the European Commission published the draft negotiating mandates for its trade talks with the United States, which followed the US-EU Joint Statement on stepping up the bilateral cooperation summing up the Trump and Juncker’s meeting in July 2018. Putting the idea of an ambitious trade deal to the side, the mandates cover two areas where the prospects of the agreement seem less contentious – eliminating tariffs on industrial goods and stepping up conformity assessment (CA) cooperation. The latter is chosen to serve one of the main negotiating objectives of both sides to remove non-tariff barriers (NTBs) that are estimated to have even a more profound effect on trade than tariffs in some areas and thus being of particular concern to the bilateral trade relations. Stepping up CA is also listed as one of the US Negotiating Objectives recently published by the USTR, since the US identifies European CA among main trade barriers to the EU market in its 2018 Foreign Trade Barriers report.

The CA cooperation, however, as this blog clarifies, does not imply cooperation on the content of regulatory disciplines and does not go further than recognition of certificates/ testing/ approvals issued by each Party’s regulatory authorities, making it a less ambitious mechanism than as had been initially intended under the TTIP (“Regulatory cooperation chapter”). However, despite being a “low hanging fruit” in comparison to regulatory cooperation, it still might be difficult to accomplish as the previous efforts on mutual recognition between the US and EU demonstrated. Over the years, though, the CA cooperation models have been stepped up, which is very well manifested in the recently negotiated CETA that might serve as a positive example for the future US-EU cooperation in the area of CA. Read the rest of this entry…

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Lingering Asymmetries in SDGs and Human Rights: How Accountable are International Financial Institutions in the International Accountability Network?

Published on February 22, 2019        Author: 
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The recent US nomination (and thus de facto appointment) of well-known World Bank critic and US Treasury official, John Malpass, as the new World Bank President following the abrupt resignation of Jim Yong Kim (former Dartmouth College president who announced he was leaving the World Bank for opportunities in the private sector) brought a slew of criticisms (see here, here, and here) against the United States’ traditional prerogatives of appointing the World Bank President, in tandem with the European Union’s counterpart prerogatives in appointing the Managing Director of the International Monetary Fund (IMF).  The tradition arises from a “gentlemen’s agreement” struck at Bretton Woods at the inception of the World Bank and IMF.  Neither the IMF Articles of Agreement or the World Bank Group’s Articles of Agreement contain any whiff of this gentlemen’s agreement – but they are effectively carried out because of the United States’ overwhelming voting power at the World Bank and the European Union’s counterpart voting power at the IMF.  In any event, contestations over power and leadership of the Bretton Woods institutions are not exactly new – they are precisely the same matters that have impelled rival geopolitical powers such as China and Russia to set up new international financial institutions (IFIs) where their influence and leadership can be more palpable, as seen from the BRICS New Development Bank and the Asian Infrastructure Investment Bank. Leadership contests at the IFIs – often between one hegemon and other fellow hegemons in the international system – do not, however, scrutinize the real nature of accountability of IFIs under their development mandates, as to the populations for whom such mandates were created to begin with.  During his presidency at the World Bank, Jim Yong Kim was heavily criticized for soliciting private funders in Wall Street to finance the Bank, sourcing capital infusions beyond the traditional donations of governments.  World Bank staff challenged him for his managerial style and the lack of strategic direction, that was alleged to be inconsistent with the Bank’s actual development mandate.  

Even as the IFIs continued to tout “inclusive growth” at the November 2018 G20 meetings – a goal which the World Bank defines as “growth that allows people to contribute to and benefit from economic growth” – it is quite remarkable to this day that IFIs shirk from openly embracing their own member States’ human rights treaty obligations as the normative template for their development mandates, preferring to refer strictly to their internal mandates under their respective Articles of Agreement.  (On this point, see the interesting 2017 article by Thomas Stubbs and Alexander Kentikelenis).  It may be recalled that the UN Independent Expert for a Democratic and Equitable International Order, Mr. Alfred de Zayas, formally called on the World Bank in September 2017 to align their articles of agreement with human rights, and to ensure that development projects with Members’ own international human rights commitments, all the more so because the World Bank could not afford to be a “human rights-free zone”.  

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Are “Transparency” Procedures and Local Community “Consultations” Enough? A Human Rights “Feedback Loop” to International Economic Law Reforms of 2018

Published on December 12, 2018        Author: 
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It is nearly the end of 2018, and so many “reform” efforts are underway throughout all realms of international economic law that one is inclined to think all our good intentions must lead somewhere, eventually.  There is an UNCITRAL Working Group for Reforming Investor-State Dispute Settlement (ISDS) that involves Member States, and to a different degree, academic inputs through the Academic Forum (see the blog’s series of posts on these authored by Anthea Roberts, found here, here, here, here, and here).  New trade agreements have been announced, such as the NAFTA renamed 2.0 version United States-Mexico-Canada Agreement (USMCA, recently discussed here by the Max Planck Institute’s Pedro Villareal and Franz Ebert), a renegotiated Korea-US trade agreement (details here), or the forthcoming entry into force of the US-less 11-nation bloc of the Comprehensive and Progressive Trans Pacific Partnership (CPTPP) on 30 December 2018 (see details here).  With the United States having changed its defense and leadership of the WTO and the multilateral trading system towards a policy of not shirking from initiating open bilateral trade wars to force renegotiations – such as the temporary trade truce with China (contents here) and tariffs slapped on the EU, Canada, and other allies (see Joseph Weiler’s ever prescient portents about the precarious US position here, and further discussions here, here, and here), it is not at all surprising that other States this year have been strategically realigning their economic partnerships, whether it be through deepening EU-Africa trade partnerships; Japan recently concluding a new trade pact with the EU; or more countries moving out of the Western orbit of economic influence towards China’s own expansive march with debt-financed investment projects in the Belt and Road Initiative; or China and/or India leading the state of negotiations at the pending 16-member mega-regional agreement, the Regional Comprehensive Economic Partnership (RCEP), allegedly set to be finalized by early 2019.  All these, apart from the uncertainties of securing any prospective UK-EU treaty, which, as of this writing is still up in the air after British PM Theresa May pulled back from forcing a catastrophic vote at the House of Commons (noting, of course, that the European Court of Justice issued a landmark ruling on 10 December 2018 declaring that the UK can voluntarily revoke Brexit).

Political expediencies and treaty negotiation pragmatisms aside, we have to wonder whether the “efficiency” of these developments will indeed result in “efficacy” or “effectiveness”, and for which constituencies of the international economic system.  Despite the multitude of public policy-driven reform efforts (such as expanding amicus participation, transparency guarantees, as well as public consultations in ISDS, setting out more detailed environmental and labor chapters in trade agreements, or announcing more infrastructure financing avenues for developing countries in new institutions and initiatives), what I have not seen in a year of attempted reforms is any deliberate shift towards broadening global economic governance beyond the usual voices at the negotiating table.  The same political, economic, intellectual, or social elites are crafting the new rules and institutions in the international economic system, with the contours of any local community consultations actually left to be operationalized according to the political auspices and national mechanisms of individual States.  To a great extent, this is understandable, since a relentless cacophony of voices might be anathema to achieving any final treaty text or clear institutional decision (e.g. the Aristotelian version of the tyranny of an extreme democracy).  But to a large extent, this “business as usual” approach remains just as discomfiting as the many paeans regularly being made these days (see here, here, here, for example), towards building in some kind of consultations process for local communities that are somehow intended to depict a “more inclusive” international economic system.  Is it enough that local communities are “being heard” by their respective States, or should the new rules and reforming institutions of the international economic system also start making sure that States are indeed listening?  

Once communities have been “consulted”, one way or another, where is the (hopefully objective and largely depoliticized) “feedback loop” that enables local communities to actually see what the State’s ultimate decision-making process has been with respect to reforming international economic treaties, decisions, and institutions?  That process remains shrouded in mystery – owing to the usual fictions of States claiming to need opacity during hard treaty bargaining.  I make the (rather obvious, but surprisingly still ignored) argument, in this post, that States’ human rights obligations to their populations make it imperative to build in a genuine “feedback loop” for any consultations or transparency procedure that may be contemplated in the continuing reform of international economic law.  A feedback loop is a necessary control mechanism in the communication process that enables communicants to verify whether their respective inputs or views have been used, recycled, revised, or discarded by the decision-maker.  To the best of my knowledge, this still doesn’t exist in the architecture of international economic law and its limited spaces for public participation.  There is “consultation” but no meaningful opportunities for communities’ real-time verification of what their States have promised, traded, conceded, or otherwise bargained at the negotiating table.

It is not enough that local communities just be “heard”, but we should all be properly informed of how community views translate (or not) into the State’s international economic decision, so as to ensure that communities can strategically and effectively participate as fellow constituents of the international economic system.  This is all the more urgent as States persist in these reforms through to the new year, when communities are, in the first place, at the frontlines of the international economic system’s felt impacts on environment, health, economic, social, cultural, civil, and political rights.  If there is any constituency that deserves the information on how States have been making all of these reform decisions, it is our communities who have to live through the consequences of these decisions, years after all the politicians and negotiators have come and gone.  With better information as to States’ actual international economic decisions coming from an actual “feedback loop”, communities are better empowered to choose (or reject) leaders who make these lasting decisions.  The “feedback loop” is thus central to a genuine right to self-determination, in its economic and political dimensions.

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UNCITRAL and ISDS Reforms: Moving to Reform Options … the Politics

Published on November 8, 2018        Author: 
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In the last blog, I provided an update on the UNCITRAL process, including the consensus decision from Vienna last week to move forward to consider possible reforms of investor-state arbitration. This decision is very significant. But to get a sense of how this decision was reached and where the process might be heading, I thought it would be helpful to provide my sense of the politics of the process as well as some projections about how it might move forward.

As stated previously, I am a member of the Australian delegation but I am included in that delegation in my independent academic capacity, so nothing in my writings or talks should be taken to reflect Australia’s views. My academic views are exactly that: mine and academic. Nevertheless, I hope that these views are informed. These blogs are based on official interventions during the UNCITRAL plenary sessions as well as discussions with a diverse range of actors from the process.

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UNCITRAL and ISDS Reforms: Moving to Reform Options … the Process

Published on November 7, 2018        Author: 
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Last week has been described as a watershed moment for ISDS reform. During a meeting in Vienna, states decided by consensus on the desirability of developing reforms in UNCITRAL with respect to investor-state arbitration. States now have an opportunity to make proposals for a work plan about what reforms to consider and how to go about considering them. To the extent that the tide has turned on traditional investor-state arbitration, it is now up to states to tell us where they want to sail.

As you might imagine, reaching a decision like this involved quite a process, along with a lot of politics. In this blog, I set out the process in terms of what was decided in Vienna, what was not decided, and what the next steps will be for moving forward in 2019. In the next blog, I will provide some context to this development, giving some insights into the politics of the process as well as some projections about how this process might develop.

This reform process will be long and its ultimate outcome remains unknowable. But the momentum for and direction of reforms are becoming increasingly clear. The calls for systemic reform are rising, though different states may mean different things by “systemic.”

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The Renegotiated “NAFTA”: What Is In It for Labor Rights?

Published on October 11, 2018        Author:  and
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On 1 October 2018, the draft text of the United States-Mexico-Canada Agreement (Draft USMCA), the North American Free Trade Agreement (NAFTA)’s successor, was published on the official website of the United States Trade Representative. The Agreement has still some way to go though, including extensive legal ‘scrubbing’ by national authorities and, most importantly, approval by the corresponding national legislatures, which is likely to give rise to intense controversies. Much of the debate surrounding the Agreement so far has revolved around its labor implications, with US Trade Representative Robert Lighthizer stating that the renegotiations’ objective was, among others, “to better serve the interests of our workers”.

Against this backdrop, this post takes a look at the Draft USMCA’s labor rights dimension. It analyzes the Draft USMCA’s Labor Chapter and also reviews certain other chapters that are relevant from a labor rights perspective. The main argument is that, while the Draft USMCA entails some interesting legal innovations, the opportunity to address the main structural problems of US trade agreements to date in terms oflabor rights has largely been missed.

What is new in Draft USMCA’s Labor Chapter?

When the NAFTA was adopted in 1993, one of its novelties was the accompanying labor side agreement, which is still in force. At its core, it required parties to enforce their own domestic labor law, set up a Commission for Labor Cooperation, and established a complaint mechanism for third parties. It also allowed, in certain cases, for state-to-state arbitral dispute settlement with possibilities to impose limited fines as a last resort measure. The fate of NAFTA’s labor side agreement, which the Draft USMCA, as it stands, does not refer to, remains unclear.

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From the Indigenous Peoples’ Environmental Catastrophe in the Amazon to the Investors’ Dispute on Denial of Justice: The Chevron v. Ecuador August 2018 PCA Arbitral Award and the Dearth of International Environmental Remedies for Private Victims

Published on September 13, 2018        Author: 
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The recent 30 August 2018 Chevron v. Ecuador arbitral award is yet another example of the ongoing asymmetries of protection in the much-beleaguered investor-State dispute settlement system, in which States have generously afforded protections to foreign investors to bring suits directly against States, without creating parallel avenues for affected local communities and/or indigenous peoples to initiate arbitration proceedings directly against either foreign investors or irresponsible States. Despite all our collective best efforts at ongoing reform in UNCITRAL (see updates on Working Group III’s mission on ISDS Reform here), ICSID (see their latest rules amendment project here) and elsewhere, I retain serious doubts as to whether investor-State dispute settlement could ever symmetrically represent the environmental and cultural interests of indigenous peoples and local communities, as effectively as it does investors’ claims to treaty protection and (significantly substantial) compensatory relief.  Today, environmental plaintiffs have to navigate between an unwieldy, unpredictable, and quite disparate mix of remedies before domestic (administrative or judicial) courts or tribunals of their home States, potentially some regional courts (such as the Inter-American Court of Human Rights) or treaty monitoring bodies (whether those specifically created in environmental treaties or human rights treaties), other foreign courts in other countries that permit some environmental tort claims, and possibly, any cases that their home State can bring under diplomatic protection to pursue remedies against foreign nationals or the home States of these foreign nationals.  And all these frequently take place in the context of abject differences of power, resources, and capacities between environmental and human rights victims as claimants against either States and/or foreign investors, vis-a-vis foreign investors as claimants or States as respondents.  It’s not at all hyperbolic to observe that, with respect to the international environmental system, the deck already appears heavily stacked against environmental plaintiffs at the outset.  

The Chevron v. Ecuador arbitration presents a crystal example of how what was originally an environmental dispute seeking remediation for one of the worst environmental disasters in history involving oil spillage into 4,400 square kilometers of the Amazon rainforest – ultimately mutated into the investors’ denial of justice claim in investor-State arbitration.  At least, in my view, while  the erudite tribunal in this case thoroughly set out the technical legal reasoning in its award on the precise legal issues of the investment treaty breaches alleged, the award itself more broadly demonstrates that we may well be at the point that a dedicated separate international dispute settlement system might already be necessary to properly adjudicate victims’ claims in human rights and environmental disputes. (Notably, other scholars refer to this dispute to highlight the illegitimacy or alleged exces de poivre of arbitral tribunals making assessments and evaluations of the acts or decisions of domestic courts and judicial systems ipso facto – a significant  heavily disputed structural matter about the current investor-State dispute settlement system, which is, however, not the law and policy observation I make here.) Some efforts looking beyond the narrow ISDS framework, among others, include projects such as the drafting of the new Hague Rules on Business and Human Rights Arbitration; the tentative and non-binding 15 September 2016 policy paper of the Office of the Prosecutor of the International Criminal Court exploring the possibility of prosecuting environmental crimes; as well as the Permanent Court of Arbitration’s suite of environmental dispute resolution procedures (interstate arbitration under environmental treaties, mixed dispute resolution under environmental instruments and contracts, specialized environmental rules for arbitration and conciliation).  To date, these initiatives have not gone much further beyond their incubation.

The most difficult aspect of the Chevron v. Ecuador case is the fact that the arbitration turned on the issue of Ecuador’s investment treaty breaches over what Chevron alleged were very troubling serious acts of fraud and corruption committed by lawyers and judges to produce a favorable 2011 Ecuador court judgment for the environmental plaintiffs.  The fraud and corruption allegations have long since overshadowed the urgency of decades of environmental damage that have largely gone without significant and continuing remedy, alongside ongoing health problems from toxic contamination that have impacted indigenous peoples and local communities for generations. (Note: this pollution disaster originated long before I or generations of current international lawyers were even born.) The Chevron v. Ecuador arbitration succeeded in laying the blame on Ecuador since, for the tribunal, Chevron had already been released from its obligations of remediation under the 1995-1998 Settlement Agreements.  Unfortunately, the arbitral award does not lay out any detailed environmental analysis to explain why contracts such as the 1995-1998 Settlement Agreements would be sufficient to release private parties from short-term, medium-term, and long-term remediation efforts to restore the ecosystem, and whether such releases were at all consistent with international public policy and Ecuador’s own commitments under international law (especially international environmental treaties and customary international environmental law).  Neither did the tribunal explore whether Ecuador alone had the right to conclude the Settlement Agreements on behalf of all the environmental plaintiffs and affected communities, or if Ecuador could indeed effectively and exclusively represent the environmental plaintiffs and affected communities in the investor-State arbitration considering how its government agents exercised oversight (or lack thereof) with respect to the environmental disaster.  Because environmental plaintiffs, indigenous peoples, and affected communities continue to be dependent on the host State of the investment to vindicate their claims against foreign investors, the investor-State dispute settlement system simply cannot lend any of these environmental, indigenous, and local plaintiffs any real, much less effective, voice over their fight to restore the Amazon to health.  While plaintiffs are mired in multiple litigations and arbitrations around the world to seek accountability from either Chevron and its affiliates or their own government in Ecuador, there is virtually no dedicated State, inter-State, regional, or public-private partnership cooperative efforts to try and achieve environmental restoration in the affected 4,400 square kilometers of the Amazon, as depicted in the map below (source here):

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Global Pact for the Environment: Defragging international law?

Published on August 29, 2018        Author: 
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A ‘defrag’ computer program that consolidates fragmented files on a hard drive holds metaphorical attraction for international lawyers. Our encounters with international law often seem to be specific to particular legal regimes, which have a functional orientation and professional sensibility that, in the words of the International Law Commission, may be self-contained. International environmental law and human rights, for example, were developed at different times and are supported by different international and domestic institutions. Now, the United Nations is considering a proposal that promises to integrate various parts of international law, thereby improving its performance: the Global Pact for the Environment.

The draft preliminary text for the Global Pact for the Environment entrenches a right to an ecologically sound environment (Article 1), sets out a duty of states and other actors to take care of the environment (Article 2) and requires parties to integrate the requirements of environmental protection into their planning and implementation, especially to fight against climate change, and to help protect the ocean and maintain biodiversity (Article 3). These and other clauses provide a framework that follows the existing international human rights covenants – on civil and political rights and on economic, social and cultural rights – to promote a ‘third generation’ of fundamental rights. On 10 May 2018, a resolution adopted by the United Nations General Assembly established an ad hoc open-ended working group to analyse possible gaps in international environmental law and, if deemed necessary, to consider the scope, parameters, and feasibility of an international instrument (which could include, but is not limited to, a legally binding agreement along the lines of the Global Pact). Two co-chairs were appointed the following month. An accompanying White Paper outlines the Pact’s antecedents, which include the Rio Declaration on Environment and Development. In this short post, I consider three ways in which the Pact impacts upon the interaction between regimes and ‘defragments’ international law. Read the rest of this entry…

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