April 2012

VJIL Symposium: Rachel Brewster Comments on “Interpretation and Institutional Choice at the WTO”

[Rachel Brewster is an Assistant Professor of Law at Harvard Law School.] This post is part of the Virginia Journal of International Law Symposium, Volume 52, Issues 1 and 2. Other posts in this series can be found in the related posts below. I have the pleasure of commenting on Gregory Shaffer and Joel Trachtman’s innovative and important article, "Interpretation and Institutional Choice at the WTO," recently published in the Virginia Journal of International Law. The authors present an analytical framework for assessing the interpretative choices made by treaty drafters and the WTO judicial bodies based on social welfare and participatory values. This framework provides international law scholars with a comprehensive overview of the different forms by which international law can be established (the drafting stage) and the various methods by which the law can be understood and applied (the interpretation stage). By integrating the drafting and the interpretation processes, the authors address important questions in international law concerning the tradeoffs treaty drafters consider, how specific texts like the WTO Agreements relate with other international laws and institutions, and the consequences of different approaches to treaty interpretation. The article is of great interest to international legal scholars and also sociologists, economists, international relations theorists, and policymakers. In this short comment, I want to highlight one point that I particularly appreciate in the article and want to explore further. It is the relationship between the drafting text and the interpretative methods of the Appellate Body. One of the few places that the treaty drafters were explicit about the interpretative methods that WTO panels and the Appellate Body should use was in the Anti-Dumping Agreement. That interpretative rule requires deference to national government actions when the action is within a “permissible interpretation” of the Agreement. As the authors note, several commentators believe that the Appellate Body has not been constrained by this rule and has adopted a more exacting substantive review process than the drafters intended. Indeed, this issue has raised the question of whether Appellate Body rulings have precedential status for subsequent WTO panels, because panelists have disagreed with the Appellate Body’s interpretation of the appropriate standard and failed to apply the Appellate Body’s rule. This issue seems to be an interesting one for the authors’ framework because it raises several questions. First, what drives Appellate Body decision-making? As the authors discuss, the possibility of a legislative veto is relatively low because of the reverse consensus rule and the infrequency of new multilateral agreements (although the Appellate Body selection process may remain influential). As a result, the interpretative approach of the Appellate Body (Part III of the Article) is particularly important to international law scholars and international relations theorists who question what judges will do with policy discretion in treaty implementation.

VJIL Symposium: Introducing “Interpretation and Institutional Choice at the WTO”

[Gregory Shaffer is the Melvin C. Steen Professor of Law at the University of Minnesota Law School. Joel P. Trachtman is the Professor of International Law at the Fletcher School of Law and Diplomacy at Tufts University.] This post is part of the Virginia Journal of International Law Symposium, Volume 52, Issues 1 and 2. Other posts in this series can be found in the related posts below. First, we would like to thank the Virginia Journal of International Law for inviting us to participate in this online discussion and Opinio Juris for hosting this discussion on our recent Article, "Interpretation and Institutional Choice at the WTO." Our article develops a new framework for understanding the drafting and interpretation of the agreements of the WTO, based on comparative institutional analysis. Our aim is to provide a better means for describing and assessing the consequences of choices in treaty drafting and interpretation. Both treaty drafting and judicial interpretation implicate a range of interacting social decision-making processes, including domestic, regional, and international political, administrative, judicial, and market processes — which we collectively refer to as institutions. Our framework focuses attention on the way that choices among alternative institutions implicate different social decision-making processes, thereby affecting participation and welfare. We draw on specific examples from WTO case law to illustrate our framework. While our article focuses on the WTO, the framework that we develop has general relevance for understanding the interpretation of international and domestic legal texts from “law and economics” and “law and society” perspectives. It builds on work by Grief, Komesar, North and Williamson. We develop further the comparative institutional analysis suggested by these and other authors. Like any dispute settlement body confronting a legal text, WTO panels and the Appellate Body have choices in applying the text to particular factual scenarios that are not specifically addressed by the text. More than one WTO provision or WTO agreement may apply to the factual situation, whether the provisions are drafted as fairly precise rules, more open-ended standards, or exceptions. The resolution of these interpretive arguments has important consequences, not only regarding who wins or loses a particular case, but also regarding broader systemic issues of domestic and international policy.

VJIL Symposium: Stephan W. Schill Answers to Anthea Roberts and Jürgen Kurtz

[Stephan W. Schill is a Senior Research Fellow at the Max Planck Institute for Comparative Public Law and International Law.] This post is part of the Virginia Journal of International Law Symposium, Volume 52, Issues 1 and 2. Other posts in this series can be found in the related posts below. I face the difficult task of responding, in limited space, to two very thoughtful and thought-provoking comments by Anthea Roberts and Jürgen Kurtz – many thanks to them for taking the time and trouble! Instead of an exhaustive answer, I want to clarify my concept of public law that arguably should inform our thinking about international investment law. This answers many points Anthea and Jürgen raise. My concept of public law can be circumscribed as global public law. This merits clarification on several accounts. First, I view international investment law as a system of global public law. Despite numerous differences among bilateral investment treaties (BITs) and despite the one-off nature of arbitration, I see considerable convergence in investment law in light of common principles, an emerging jurisprudence constante, and a common doctrinal reconstruction. All in all, international investment law is one system because there is an epistemic community that treats it as such. This is also not thwarted by recent changes in investment treaty practice, such as that of the U.S. and elsewhere. Certainly, we see recalibration and rebalancing, but little fundamental contestation or complete remodeling. In my view, the network of BITs is not deeply heterogeneous, as Jürgen suggests, but based on sufficient commonalities. I see differences, but do not think they are formative for the functioning of the system. Second, let me re-emphasize the importance of viewing investment law as global public law. Only sensitivity for how deeply investment law penetrates domestic public law unveils why the regime is so potent and controversial. Neither traditional public international law nor commercial arbitration can analyze this dimension, nor answer to concomitant legitimacy concerns as they embody a horizontal ordering paradigm where power is coordinated among equals. Only a public law approach can address how public authority should be exercised. Notwithstanding, my public law approach is not incompatible with public international law or commercial arbitration, but complementary in pointing to the specificities of investment arbitration that need more attention. It helps adjust the system, not kill it as other proponents of public law approaches to investment law demand. Third, a global public law perspective rejects viewing investment law through a purely domestic public law lens (which would indeed kill international investment law). For me, states are embedded in an international community where controlling and legitimizing public authority is not limited to domestic public law. Instead, I support a cosmopolitan vision that encompasses public law at both the domestic and the international level, thus constituting one global public law space filled by both international treaties and investor-state contracts. I do not, by contrast, advocate a re-nationalization of international investment law, or prioritize domestic law over international law, as Jürgen claims. Instead, my integrated vision of comparative public law focuses on the core question of public law, that is how to restrict and legitimize the exercise of public authority, without making a principled difference between domestic and international law. The only reason why domestic comparative public law seems more prominent is that it is domestic law that primarily deals with the relations between public authority and private individuals. But international law is essential in a comparative public law exercise, for example when standards of review and the relation between investment tribunals and states are concerned. What we still need to develop, however, is a clearer understanding of the interaction between different levels so as to avoid the pick and choose Anthea fears.

VJIL Symposium: Commentary on Dr. Stephan Schill’s Virginia Journal of International Law Article

[Jürgen Kurtz is an Associate Professor at the University of Melbourne Law School in Australia.] This post is part of the Virginia Journal of International Law Symposium, Volume 52, Issues 1 and 2. Other posts in this series can be found in the related posts below. For a respectable number of commentators in the field of international investment law, its dispute settlement machinery – which often confers procedural rights on foreign investors as well as states - position the field closer to the private rather than public law end of a spectrum. In his thoughtful new article, Dr. Stephan Schill comprehensively dismantles this claim by advancing “an understanding of international investment law as an internationalized discipline of public law” (p. 59). There is, of course, an important structural justification for positioning international investment law as an integral part of the public international law universe. Various international regimes similarly accommodate non-state actors as either complainants or respondents in dispute settlement, including both human rights protections and international criminal law. It would be implausible to characterize these systems as carve-outs to public international law, and the investment treaty network is no different. For Schill however, the mechanisms to address the growing disenchantment of states parties towards this regime go beyond the confines of public international law itself. Instead, his “core idea is to tackle problems arising under international investment treaties by means of a comparative public law method, which takes inspiration from the more advanced systems of public law at both the domestic and international level” (emphasis added, p. 60). Comparativism is a powerful methodology. It is one of the few laboratories open to lawyers to assess and understand the operation of different legal and institutional models designed to tackle similar objectives and problems. But at least when it comes to investment law, there may be another approach which is logically and strategically a necessary precursor (at least at this particular stage in the evolution of the system). One of the premises underpinning Schill’s argument is that states only “occasionally react to the decision-making of arbitral tribunals by recrafting investment treaties” (p. 81). Schill’s preference then is for “system-internal adaptation” (pp. 68-71) with the lessons drawn from a comparative law analysis seemingly intended for consumption by adjudicators ruling on an assumed stable set of legal norms. My reading of the treaty landscape is very different. I see the network as deeply heterogeneous with states employing complex (but sometimes highly problematic) strategies to recalibrate their treaty obligations. Most fundamentally, there is a distinct shift away from the classic protective BIT model as states parties refine treaty standards by matching them against identifiable political and economic risks faced by foreign investors. This then logically suggests that interdisciplinary analysis should play an earlier role in probing and testing the contemporary justifications for particular investment protections, before advancing select lessons from other legal systems. It would, after all, be imprudent to erect a roof on a house that is built on soft sand.

VJIL Symposium: Questions about the Public Law Approach to International Investment Law

[Anthea Roberts is currently the Visiting Professor of Law and John Harvey Gregory Lecturer on World Organization at Harvard Law School. She also holds the position of Lecturer in Law, Department of Law, London School of Economics and Political Science.] This post is part of the Virginia Journal of International Law Symposium, Volume 52, Issues 1 and 2. Other posts in this series can be found in the related posts below. Thank you very much to Opinio Juris for hosting this discussion and to the Virginia Journal of International Law for inviting me to participate. Investment treaty arbitration has typically been viewed as a field that marries public international law (as a matter of substance) with international commercial arbitration (as a matter of procedure). During the 2000s, however, a number of authors - including Gus Van Harten (2007), David Schneiderman (2008), Santiago Montt (2009) and Stephen Schill (2010) - have argued that investment treaty arbitration should be reconceptualized as a form of public law because it performs a function that is akin to international judicial review. Public law approaches have played a key role in legitimacy critiques of the investment treaty system. Some authors, such as Van Harten and Schneiderman, have used the public law approach to argue for the system to be fundamentally overhauled by, for instance, proposing that ad hoc investment tribunals be replaced with a standing investment court. Others authors, such as Montt and Schill, argue that many of the legitimacy critiques leveled against investment treaty arbitration could be countered by an expansion of public law thinking within the existing structure of investment treaty arbitration. In thinking about these public law approaches, some questions continually recur in my mind. I am grateful for this opportunity to pose some of them to Schill: * What motivates some scholars to use the public law approach to suggest fundamentally revising the system and others to suggest refining the system from within? If most investment arbitrations continue to be heard by arbitrators with a primary background in public international law or international commercial arbitration, how effective can we expect the public law approach to be in revamping the system from the inside? Can some public law changes be affected only by a radical revision of the system? If so, what are the limits of Schill's more moderate approach? * Public law principles often seem to be drawn from North American and Western European states, such as the USA, Canada, England, Germany and France. To what extent does the public law approach assume that the respondent state is robustly democratic? How do principles like deference and standards of review apply when dealing with non-democratic states? Could this result in a two-tiered approach with considerable deference being granted to established democracies and little deference being granted to non-democracies? If so, would this reinforce some of the North-South critiques that have plagued investment protection in the past?

VJIL Symposium: Introducing Stephan W. Schill’s “Enhancing International Investment Law’s Legitimacy”

[Stephan W. Schill is a Senior Research Fellow at the Max Planck Institute for Comparative Public Law and International Law.] This post is part of the Virginia Journal of International Law Symposium, Volume 52, Issues 1 and 2. Other posts in this series can be found in the related posts below. I am grateful for the opportunity to present, on Opinio Juris, my Virginia Journal of International Law Article – “Enhancing International Investment Law’s Legitimacy: Conceptual and Methodological Foundations of a New Public Law Approach.” It is connected to a book project I edited and published with Oxford University Press in 2010 on International Investment Law and Comparative Public Law. The Article, as well as the book, proposes a new conceptual and methodological approach: to think about international investment law and investor-state arbitration as a public law discipline and to draw on the methods, concepts, and insights of comparative public law in responding to the concerns increasingly often raised about investment law. Often couched as a “legitimacy crisis,” these concerns predominantly stem from the perception that investment law and investor-state arbitration threaten domestic public law values, including democracy and the rule of law, because party-appointed arbitrators, not democratically-legitimated courts, review government acts and actively craft the substantive standards of investment protection. In my Article, I acknowledge the validity of the concerns raised but suggest system-internal responses that safeguard the considerable advantages of the current system of investment protection over both domestic solutions and an interstate system of dispute settlement like under the WTO. In my Article, I suggest that, short of radical institutional reforms, much of the criticism of investment law can be countered by a paradigm shift within the mainstream of international investment law. First, those involved in investment arbitration should break with the predominant self-understanding that we operate here in a sub-discipline of international commercial law and arbitration where responsiveness to the will of individual parties to arbitrations is key. Instead, we have to realize and recognize the considerable governance impact the field has on state-market relations and government behavior more generally. This requires accepting the public law nature of the system, which also explains why questions of legitimacy and calls for more transparency and accountability abound.