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Roger Alford

The Ninth Circuit’s Muddled Comity Analysis in Mujica

by Roger Alford

Last week the Ninth Circuit issued a controversial opinion in Mujica v. Airscan, Inc., that sharply limits the scope of human rights litigation. The claims in Mujica arose in Colombia and allegedly implicate corporate collusion with the Colombian military. Following Kiobel the common consensus was that Alien Tort Statute litigation would be severely curtailed based on the presumption against extraterritoriality. Not surprisingly, the Ninth Circuit rejected the Plaintiffs’ claims, finding that where the only connection to the United States was the Defendants’ nationality, the claims do not “touch and concern” the territory of the United States with sufficient force to displace the presumption against extraterritorial application.

What is extremely surprising is that the court dismissed the state law claims. Because the court was not exercising supplemental jurisdiction over the state law claims, it could not simply dismiss them without prejudice to be filed in state court. As with almost every other common law tort claim brought in federal district court based on diversity jurisdiction, I fully expected the Ninth Circuit in Mujica to apply California choice of law principles to resolve the claim. (For a detailed analysis of choice of law in the human rights context, see my article here).

As set forth by the California Supreme Court in Kearney, California’s comparative impairment analysis considers whether there is a true conflict between the affected states and applies “the law of the state whose interest would be the more impaired if its law were not applied.” California courts generally favor forum law when (1) the forum has an interest in the dispute and the laws of other affected jurisdictions are not different or (2) when the laws are different and the interests of the forum would be more impaired than the interests of the other jurisdiction. Otherwise they apply foreign law. Applying California choice of law, the Ninth Circuit exercising diversity jurisdiction ordinarily would retain jurisdiction of the state law claims and resolve them under Colombian law (as the government with the greatest interests at stake). The whole purpose of Brainerd Currie’s government interest approach (adopted by the California courts) is to exercise jurisdiction in a manner consistent with the legitimate government interests of the relevant stakeholders.

That is not what the court in Mujica did. Instead it relied on a novel prudential comity analysis to dismiss the claims. It first distinguished between prescriptive and adjudicatory comity, and concluded that Hartford Fire’s “true conflict” approach was inapplicable. Fair enough. But then it applied the comity factors enunciated in Restatement Section 403, which also applies to prescriptive comity. So the “true conflict” approach in Hartford Fire does not apply because that is relevant only for prescriptive jurisdiction, but the limitations on prescriptive jurisdiction in Section 403 do apply in balancing factors under adjudicatory comity. Very strange.

With due credit to my conversations with Trey Childress and Bill Dodge yesterday, if the court was going to invoke adjudicatory comity, it should have relied on the Supreme Court’s decision in Colorado River and appellate court decisions such as Royal and Sun Alliance, Ungaro-Benages, and AAR International. Indeed, the Ninth Circuit’s decision in Neuchatel Swiss General specifically addressed adjudicatory comity and held that courts should not dismiss on the basis of adjudicatory comity except in “exceptional circumstances.” Those cases strongly suggest that adjudicatory comity applies only in exceptional circumstances and only when there is a pending foreign proceeding. The Ninth Circuit in Mujica completely ignored binding Supreme Court and Ninth Circuit precedents.

So what the court should have done in a case of diversity jurisdiction with significant foreign contacts is apply California’s choice of law principles to resolve the common law claims. That almost certainly would have resulted in the application of Colombian law, especially Title XXXIV of the Colombian Civil Code. (The Court could not dismiss the case based on forum non conveniens because the district court already determined that there was not an adequate alternative forum, and that question was not on appeal.) With no other avenues for dismissal, the Ninth Circuit dismissed the claims on the basis of a muddled application of adjudicatory comity, leaving the plaintiffs with no obvious means of redress anywhere.

I have written at length about the rise of transnational tort litigation and the application of choice-of-law principles as the logical response to Kiobel. The Ninth Circuit’s decision in Mujica seems to suggest that that approach is perfectly fine for the typical wrongful death claim involving foreign contacts or parties. But if it is a human rights claim dressed up in the guise of a wrongful death claim, then at least two members of the Ninth Circuit will bend over backwards to dismiss it.

I would be quite surprised if this case is not reconsidered by the Ninth Circuit en banc.

Bond and the Vienna Rules on Treaty Interpretation

by Roger Alford

Tomorrow I have the good fortune of participating in the Notre Dame Law Review symposium with leading foreign relations scholars. The topic of the symposium is Bond v. United States. The keynote will be given by Paul Clement, who won the case for Petitioner.

The focus of my discussion will be the relationship between Supreme Court treaty interpretation and the international approach to treaty interpretation. As readers of this blog well know, the Supreme Court has never followed the international approach to treaty interpretation. In the over forty years since the Vienna Convention on the Law of Treaties was signed, the Supreme Court has not relied on its interpretive methodology on a single occasion. This is despite the fact that the Vienna Convention’s interpretive approach (the “Vienna Rules”) reflected the common practice at the time it was adopted, and now reflects customary international law. This is despite the fact that the United States views the Vienna Convention as the authoritative guide to treaty law and practice.

This is not to suggest that the Supreme Court does not utilize the same interpretive tools as the Vienna Rules. Indeed, at one time or another the Court has used every single interpretive tool reflected in the Vienna Rules. It supports reliance on the ordinary meaning of the terms of a treaty. The Court has held that “[a]s treaties are contracts between independent nations, their words are to be taken in their ordinary meaning as understood in the public law of nations.” It recognizes that a treaty should be construed to give effect to its purposes, stating that “[a] treaty should be generally construed liberally to give effect to the purpose which animates it.” It agrees that a treaty should be read in context, reasoning that “when interpreting a treaty, we ‘begin with text of the treaty and the context in which the written words are used.’” It interprets terms in light of subsequent practice and subsequent agreements. It supports recourse to supplementary means of interpretation, such as the negotiating history. It follows general rules of interpretation such as presumptions and constructions that follow ordinary logic and reason. Thus, although the Court has never systematically followed the holistic, unitary approach of the Vienna Rules, it consistently relies on the same interpretive tools.

Bond v. United States marks an important moment in this history of Supreme Court treaty interpretation. Although it did not cite the Vienna Rules, it is the first time that the Supreme Court has analyzed a treaty (and it’s implementing legislation) using the same methodology as the Vienna Rules. That is, the Court interpreted the treaty “in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.” Because the terms of the treaty were ambiguous and could lead to manifestly absurd and unreasonable results, the Court also applied supplementary means of interpretation, including the negotiating history and a federalism presumption.

The ordinary meaning of the term “chemical weapon” was central to the Court’s analysis. “[A]s a matter of natural meaning, an educated user of English would not describe Bond’s crime as involving a ‘chemical weapon.’” The natural meaning of that term accounts for both the type of chemical used and the circumstances in which they were used. No ordinary person would consider that the chemical Bond used was a deadly toxin of the type the Chemical Weapons Convention was designed to address. The ordinary meaning of a “weapon” is an “instrument of offensive or defensive combat.” Using natural parlance, Bond’s behavior was not combat. Interpreting “chemical weapon” to include Bond’s crime “would give the [implementing] statute a reach exceeding [its] ordinary meaning.” Reliance on the ordinary meaning of “chemical weapon” plays a “limiting role” on the scope of the prohibition, and avoids transforming a “statute passed to implement the International Convention on Chemical Weapons into one that also make it a federal crime to poison goldfish.”

The Court in Bond extensively discussed the object and purpose of the Convention. It began with an image of the ravages of chemical warfare during the First World War as the impetus behind the overwhelming consensus that toxic chemicals should never be used as weapons of war. It cited the bold aspirations expressed in the Convention’s Preamble—the complete elimination of all types of weapons of mass destruction used by state and non-state actors in times of war and peace. These purposes were critical to the Court’s interpretation. “[T]he Convention’s drafters intended for it to be a comprehensive ban on chemical weapons … [and] we have doubts that a treaty about chemical weapons has anything to do with Bond’s conduct.” Given the purpose of the Convention to address “war crimes and acts of terrorism,” the Court concluded that “[t]here is no reason to think the sovereign nations that ratified the Convention were interested in anything like Bond’s common law assault.” It found that Bond’s chemical of choice—an arsenic-based compound that causes minor irritation when touched—bore “little resemble to the deadly toxins that are ‘of particular danger to the objectives of the Convention.’” The “purely local crime” that Bond committed “could hardly be more unlike the uses of mustard gas on the Western Front or nerve agents in the Iran-Iraq war that form the core concerns of the treaty.” Accordingly, the United States and the community of nations have no interest in seeing Bond imprisoned for violating the ban on chemical weapons. “[T]he global need to prevent chemical warfare does not require the Federal Government to reach into the kitchen cupboard, or to treat a local assault with a chemical irritant as the deployment of a chemical weapon.”

The Court also repeatedly cited context as an interpretive aid. It concluded that “the context from which the [implementing] statute arose demonstrates a much more limited prohibition was intended” by the ban on chemical weapons. Rather than rely solely on the statutory definition the Court concluded that the “the improbably broad reach of the key statutory definition” was rendered ambiguous by “the context from which the statute arose—a treaty about chemical warfare and terrorism.” The Court interpreted the term “chemical weapon” in light of the entire Convention, including the Preamble, other treaty provisions, and the Annex on Chemicals. These provisions illuminated the purpose and structure of the ban on chemical weapons, and the nature of the banned chemicals.

Most importantly, the Court twice cited another provision of the Convention, which provides that “[e]ach State Party shall, in accordance with its constitutional processes, adopt the necessary measures to implement its obligations under this Convention.” It cited this provision as contextual support for a federalism presumption. The “constitutional process in our ‘compound republic’ keeps power ‘divided between two distinct governments.’” Faithful to federalism and other constitutional concerns, the Convention only required that “necessary measures” be adopted, leaving to the States how they would be adopted within their constitutional system. This context permitted the Court to interpret the treaty obligation consistent with a federalism presumption, a presumption that has a longstanding history within the Court’s jurisprudence.

Bond raises the possibility that the Court’s interpretive approach could more closely align with the international standard. There already are existing canons of construction that support a greater reliance on the Vienna Rules. Among them is the general rule that treaties are contracts between nations that should be interpreted according to a shared understanding. As the Court recently put it, “[a] treaty is in its nature a contract between nations, not a legislative act.” Therefore, “it is our responsibility to read the treaty in a manner consistent with the shared expectations of the contracting parties.” If the shared expectations of the contracting parties is that treaty terms should be interpreted according to the Vienna Rules, then it follows that the Court could apply that canon not only to interpret the meaning of specific treaty terms, but also to its interpretive methodology. It would not do so because the United States has ratified the Vienna Convention or that the Vienna Rules are otherwise part of United States law. Rather, the Court would rely on them because with every treaty the contracting parties have the expectation that the treaty terms will be interpreted using the Vienna Rules.

Another canon of construction is that the Court should give deference to the Executive Branch’s interpretation of treaties. If the Executive Branch recognizes that the Vienna Rules are the authoritative guide to treaty interpretation, then the Court should give great weight to that conclusion. Ordinarily this deference applies to the Executive Branch’s interpretation of specific treaty terms. But it could also support the Executive Branch’s support for the Vienna Rules as the authoritative guide to treaty interpretation. As the United States argued in one recent case, “[a]lthough the United States has not ratified the Vienna Convention on the Law of Treaties, the United States generally recognizes the Convention as an authoritative guide to treaty interpretation.” If the United States views the Vienna Rules as the authoritative guide to treaty interpretation, and the Supreme Court gives deference to Executive Branch’s interpretation of treaties, then the Court could rely on the Vienna Rules in deference to the Executive Branch.

The Supreme Court has long ignored the Vienna Rules. Bond does not change that fact, but it does give support for courts to rely on the interpretive tools that form the basis for the Vienna Rules. The Court has always accepted the tools of interpretation reflected in the Vienna Rules. It now has accepted those tools as part of a holistic, unitary approach. The Vienna Rules are hidden behind the veil of Bond’s interpretative methodology. Consistent with accepted canons of construction, the Court could rely on the Vienna Rules more explicitly.

Insta-Symposium on Scottish Independence Referendum

by Roger Alford

We have invited several academic luminaries to post here at Opinio Juris beginning early next week about the Scottish independence referendum that will be held next Thursday, September 18th. As we have done in the past with other symposiums, we also welcome other academics to submit guests posts for possible publication. We particularly welcome Scottish, British, EU and state succession experts. We will focus on the international legal aspects of the Scottish referendum, not the political or economic implications of the vote.

We can’t guarantee we will publish every post submitted, but we would love to broaden the discussion to include other voices. So if you want to write a 500 to 1500-word guest post for Opinio Juris about the Scottish independence referendum, please do so in the next few days and send it to Jessica Dorsey and An Hertogen (their emails are linked to the right). Our editorial team will review the posts and publish those selected.

On a personal note, given that the Alford clan hails from the town of Alford in Aberdeenshire, and my wife and I spent several glorious years in Scotland when I earned my LL.M. and she earned her Ph.D. at the University of Edinburgh, our family has been following the developments in Scotland closely.

There’s an old Scottish saying: “Scottish by birth, British by law, Highlander by the grace of God.” Next Thursday will put that maxim to the test.

When Treaties Supersede Statutes

by Roger Alford

Anyone familiar with foreign relations law hears the common refrain that treaties almost never supersede statutes under the last-in-time rule. Until recently, it was certainly my understanding that the ancient Supreme Court case of Cook v. United States was the only significant example in which a self-executing treaty trumped an earlier conflicting statute. But my recent research on the last-in-time rule indicates that there are several examples in which that rule has been applied to give effect to a self-executing treaty that conflicts with an earlier federal statute.

In particular, numerous mutual legal assistance treaties (MLATs) have been adopted to facilitate effective investigation and prosecution of criminal activities. These MLATs streamline the process of letters rogatory and guarantee that the United States will provide greater legal assistance with respect to discovery requests by foreign governments for use in criminal proceedings abroad. These treaties are self-executing and conflict with an earlier statute, 28 U.S.C. 1782, which grants courts significant discretion to deny discovery requests based on substantive protections relating to, inter alia, privileged evidence and foreign discoverability. In other words, pursuant to the MLATs, discovery requests are direct and automatic, not indirect and discretionary as required under Section 1782.

For example, in In re Premises Located at 840 140th Avenue NE, Bellevue Washington, the Ninth Circuit held that “a ratified self-executing treaty generally stands on the same footing as a federal statute, that is, a later in time self-executing treaty has the same effect on an existing federal statute as a later-in-time act of Congress.” Consequently, the Ninth Circuit held that, in light of the US-Russia MLAT, courts do not have the broad discretion conferred by Section 1782 to deny the Russian’s request for legal assistance in gathering evidence in the United States.

Similarly, in In re Commissioner’s Subpoenas, the Eleventh Circuit interpreted the US-Canada MLAT as a self-executing treaty that need not comply with the substantive obligations of Section 1782. “A treaty, when ratified, supersedes prior domestic law to the contrary, and is equivalent to an act of Congress…. [T]he Treaty substantively stands on its own as a law and therefore such MLAT requests need not comply with the substantive restrains associated with requests made solely under 28 U.S.C. 1782.” The foreign discoverability requirements recognized by Section 1782 did not apply and the MLAT required issuance of the subpoenas.

Finally, in In re Erato, an American mother had challenged a Dutch discovery request pursuant to Section 1782’s recognition of foreign privilege laws. If Section 1782 controlled the mother would not have to testify against her son because Dutch law recognizes parent-child privilege. The Second Circuit held that “existing law under Section 1782 does not control this case…. the [US-Netherlands MLAT] Treaty is self-executing and … will amend and supplement preexisting law in several aspects. We are bound to give effect to the Treaty because it is self-executing…. To the extent that the Treaty is inconsistent with a preexisting statutory provision, the Treaty supersedes that provision.” Consequently, the court prevented application of foreign testimonial privilege and required the mother to testify against her son.

These cases do not obviate the general point that the last-in-time rule typically results in the enforcement of subsequent statutes that conflict with earlier treaties. But they should at least put to rest the canard that the last-in-time rule never results in the enforcement of self-executing treaties over earlier federal statutes.

Alter Book Symposium: Welcome to the New World of Comparative International Courts

by Roger Alford

Let me join others in heaping praise on Karen Alter’s new book. It marks a growing trend of studying international law from an institutional rather than substantive perspective. My favorite aspect of the book is the lateral thinking that occurs when one examines international tribunals across disciplines. International law scholars typically labor in their own vineyards, missing opportunities for grafting new vines onto old roots. Alter steps back and examines world history from the perspective of new international courts and tribunals. It is a welcome addition.

Her book is a voice for the younger generation, who did not grow up studying international law “during the Cold War when power politics mattered more than law, and when most international legal institutions were virtual entities that barely met and rarely said anything of political or legal consequence.” (p. xix). A younger generation of scholars embraces the cornucopia of international tribunals in all their variety, and will soon treat international dispute resolution as a separate and distinct transubstantive body of international law. We are moving in that direction with the development of the emerging field of global administrative law. But future decades will witness a greater emphasis on procedural rather than substantive international law, and comparative international courts will be a new specialty. Today it is rare to take a course entitled “International Courts and Tribunals.” Today we do not compare across international courts questions such as jurisdiction, standing, evidence, judicial selection, remedies, and enforcement of judgments. Future generations will. The New Terrain of International Law is a major contribution in that direction.

Of course, there are problems with Alter’s book. Her choice of tribunals borrows from the Project on International Courts and Tribunals’ typology, which excludes international tribunals that are not permanent. She concedes that excluding temporary international tribunals is rather arbitrary, (p. 76), but nonetheless limits her typology to only twenty-four permanent international tribunals. Given the magnitude of the task set before her, this is understandable. But I fear that her work will continue an ill-advised trend of excluding tribunals that are not permanent. Rather than including permanency as a threshold requirement, it is far preferable to address it as a variable, similar to geographic reach or private initiation of disputes. Many temporary international courts are simply too important to ignore. Just as any historical analysis would never exclude the temporary tribunals such as the Jay Commission, the Alabama Commission, the PCIJ, or the Nuremberg or Tokyo Tribunals, one should never claim that a comprehensive study of modern courts and tribunals is complete without including tribunals such as the Iran-United States Claims Tribunal, the United Nations Compensation Commission, the Eritrea-Ethiopia Claims Commission, or the Special Court for Sierra Leone. Excluding such tribunals, but then including other temporary tribunals (the ICTY and the ICTR) as well as relatively insignificant permanent tribunals such as ECCIS, EFTAC, and WAEMU only underscores the arbitrary nature of PICT’s and Alter’s typology. Even her case studies belie the problem, for she studies several of the temporary tribunals in her case studies, but then she does not include those same tribunals in her typology.

As an expert on international investment arbitration, let me also address another fundamental mistake in the book. Alter identifies ICSID arbitral bodies as administrative tribunals. She justifies this because the “investor dispute system can give rise to costly litigation and awards, to the point that litigation threats by investors can have a chilling effect on the local regulatory politics.” (p. 202). She suggests that ICSID tribunals function in a “morphed and perhaps unintended administrative review role.” (p. 211). All of this is correct, but it is purely incidental. At their core investment tribunals are focused on the economic consequences of state action. In reality, ICSID tribunals function as international economic courts akin to the WTO. Like other international economic courts, the subject matter of investment arbitration is limited to economic issues such as trade, foreign investment regulation, contract disputes, intellectual property rights, and business law (p. 85). The basic template of an ICSID tribunal is distinct from both the WTO and ECJ models discussed in the book (p. 90), allowing private initiation of disputes before supranational courts without a preliminary ruling mechanism. But an ICSID tribunal is no more of an administrative review court than the ECJ or the WTO, which as she notes, also function as systems of administrative and constitutional review challenging community acts in front of supranational courts (p. 90). In my view it is better to categorize international tribunals based on their core objectives rather than their incidental effects.

Karen Alter deserves hearty congratulations for her excellent work. If you read the book, you will be introduced to an increasingly important field of international law. You will be ushered into the new world of comparative international courts.

Using Investment Arbitration to Enforce WTO Commitments

by Roger Alford

plainpackagingI would like to continue the theme of the emerging convergence of investment arbitration and international trade. In my previous posts (discussed here and here) I discussed the prospect of using trade remedies to enforce investment arbitration awards. Another key example of convergence addresses the emerging trend of relying on investment arbitration to enforce international trade rights. As discussed in my recent article, despite the assumption that international trade disputes must be resolved before the WTO DSB, the existence of broad umbrella clauses in BITs present a promising vehicle for enforcing investment commitments in trade agreements.

Of course, the scope of umbrella clauses is dependent on the language in particular BITs, which varies widely from one treaty to the next. Accordingly, there is no uniform understanding as to the meaning of umbrella clauses. Narrow umbrella clauses are unlikely vehicles for vindicating international trade rights. A treaty commitment such as that addressed in SGS v. Philippines to observe any obligation a Contracting State “has assumed with regard to specific investments” is unlikely to encompass legislative measures or treaty commitments. By contrast, broad umbrella clauses are better candidates for vindicating trade rights, such as the BIT clause at issue in Noble Ventures, Inc. v. Romania, which committed Romania to “observe any obligation it may have entered into with regard to investments.”

ICSID tribunals have interpreted broad umbrella clauses to give investors treaty rights with respect to unilateral undertakings of the State embodied in municipal law. In CMS Gas Transmission Co. v. Argentina, the tribunal concluded that utility tariffs designed to attract foreign investment were “legal … obligations pertinent to the investment.” In LGE v. Argentina, the tribunal concluded that abrogation of guarantees made to investors in a statutory framework gave rise to liability under the umbrella clause. In Enron v. Argentina, another tribunal concluded that the umbrella clause referred to “any obligations regardless of their nature.” This included not only contractual obligations, but also “obligations assumed through law or regulation” that are “with regard to investments.” In Sempra Energy International v. Argentina, a tribunal found that major legal and regulatory changes introduced by the State as part of its public function constituted treaty violations under the umbrella clause. Finally, in SGS v. Paraguay, a tribunal interpreted a broad umbrella clause as creating “an obligation for the State to constantly guarantee observance of its commitments entered into with respect to investments of investors of the other party. The obligation has no limitations on its face—it apparently applies to all such commitments, whether established by contract or by law, unilaterally or bilaterally.”

Note that these sweeping pronouncements do not require that a State’s commitment reference a specific investment or contract. As long as legislative or executive measures relate to the promotion or regulation of investments, they constitute unilateral undertakings covered by a broad umbrella clause. Such ICSID jurisprudence has led María Cristina Gritón Salias to conclude in this book that “tribunals overwhelmingly accept the application of umbrella clauses to obligations assumed unilaterally by host States,” whether those undertakings are “made through legislation or otherwise.” Likewise, Darius Chan has opined here that “the current tide of jurisprudence concerning umbrella clauses is in favor of such clauses encompassing host State commitments of all kinds.”

Assuming such interpretations are correct—which is by no means clear—this has significant implications for the WTO. If trade obligations are subject to investment arbitration, it would authorize private parties to initiate trade cases. Private rights of action through investment arbitration would supplement the diplomatic espousal of claims before the WTO.

This is precisely what one foreign investor has argued with respect to alleged WTO violations as a result of Australia’s plain-packaging laws. On November 21, 2011, Philip Morris Asia Ltd. filed an investment arbitration claim against Australia pursuant to the Hong Kong-Australia Bilateral Investment Treaty. The central contention of Philip Morris is that Australia’s plain packaging legislation violated various international obligations. Among the claims it filed is one under the broad “umbrella clause” in the BIT, which provides that “[e]ach Contracting Party shall observe any obligation it may have entered into with regard to investments of investors of the other Contracting Party.” According to the Notice of Arbitration:

This [umbrella clause] obligation is broader than specific obligations … made by the host State to investors…. It also encompasses other international obligations binding on the host State that affect the way in which property is treated in Australia…. [T]he relevant obligations are those enshrined in TRIPS, the Paris Convention, and TBT. [Claimant] as an owner of the investments is entitled to expect Australia to comply with its obligations pursuant to those treaties. By adopting and implementing plain packaging legislation, Australia has failed to observe and abide by those obligations.”

In response, Australia argued that:

The meaning and scope of such provisions is a matter of great controversy. However it is clear in the instant case that … the “umbrella clause” in Article 2(2) cannot be understood as encompassing general obligations in multilateral treaties…. Rather … the “umbrella clause” … only covers commitments that a host State has entered into with respect to specific investments…. [T]he obligations under the multilateral treaties … are not “obligations” which have been entered into with regard to investments of investors” of Hong Kong, but are rather obligations that operate on the inter-State level, with their own particular inter-State dispute resolution procedures.

It is too early to assess the likely success of such claims, but if the recent “umbrella clause” jurisprudence is accurate the claims are at least colorable.

This potential convergence of trade and arbitration has profound implications for the resolution of WTO violations. An arbitration panel liberally construing a broad umbrella clause could transform how WTO obligations are adjudicated. Exactly how would the adjudication of WTO obligations through investment arbitration alter the landscape? Here are a few thoughts.

First, umbrella clauses in BITs could create a private right of action for resolving WTO disputes. Investment arbitration circumvents the traditional barriers to initiating a WTO dispute. Diplomatic espousal is no longer a reliable check on the pursuit of unmeritorious claims. Through umbrella clauses foreign investors could seek recourse for violations of investment obligations that form part of WTO disciplines.

Second, with WTO dispute settlement the Member States control all decisions with respect to adjudication and resolution of the dispute. Investors may prefer an alternative dispute settlement process that places such decisions within their control. The incentives to settle an investment dispute depend on satisfying investors concerns rather than satisfying the disputing Member States’ concerns.

Third, with limited exceptions, the WTO prohibits unilateral trade remedies. Article 23 of the DSU provides that Member States “shall not make a determination to the effect that a violation has occurred … except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding.” Investment arbitration is not a unilateral remedy imposed in response to a WTO violation, but neither is it WTO dispute settlement. Investment arbitration may provide a vehicle for compensating or attenuating the harm caused to investors without offending the WTO restrictions on unilateral trade remedies.

Fourth, WTO remedies are prospective, while investment arbitration remedies may be retroactive. The goal of the WTO adjudication is to bring Member States into conformity with their trade obligations. The goal of investment arbitration is, consistent with traditional understandings of state responsibility, to “wipe-out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that act had not been committed.”

Fifth, under the WTO dispute settlement process, any losses an investor suffers as a result of a Member State’s WTO violation are not compensable. WTO remedies contemplate compensation directly to a Member State or, failing that, the suspension of concessions paid directly to the Member State in the form of increased duties. With investment arbitration, international law violations result in monetary compensation due directly to the investor.

Thus, liberal interpretations of broad umbrella clauses that encompass investment commitments in WTO undertakings may prove to be an attractive avenue for future investment arbitration.

Using Trade Remedies to Enforce Arbitration Awards: The WTO-Compliance Question

by Roger Alford

Simon Lester has a thoughtful response to my earlier post about using trade remedies to enforce arbitration awards. He questions whether conditioning GSP benefits on compliance with arbitration awards is consistent with WTO obligations. My answer is essentially yes. Because there are so many issues at play, I thought it best to respond in a new post rather than respond in the comment section to his post.

First, there is no question that granting preferential treatment for developing countries does not violate MFN rules. That was settled with the so-called Enabling Clause. The real question is whether a particular GSP-scheme is consistent with the Enabling Clause. The Enabling Clause provides that Member States may accord differential and more favorable treatment to developing countries, provided (a) such treatment is non-discriminatory as between similarly-situated developing countries; and (b) is designed to promote the development, financial and trade needs of the developing countries.

As to the first requirement, the Enabling Clause requires GSP benefits to be conferred in a non-discriminatory manner among similarly-situated developing countries. This, according to EC-Tariff Preferences, requires that the relevant preference be made available to all beneficiaries that share that need. (EC-Tariff Preferences, para. 180). That requirement appears to be met. The U.S. obligation on compliance with arbitration awards is applied to all GSP beneficiaries alike. Argentina might have a discrimination argument if other beneficiary countries refuse to honor arbitration awards but still enjoy GSP benefits. But I am not aware of any such examples, and if anything, it appears that other developing countries like Ecuador will soon face a similar fate as Argentina.

Second, the GSP conditional benefit must be imposed to meet particular development, financial or trade needs. In other words, if you are granted benefits with strings attached, those strings must be for the benefit of the developing country. Simon Lester questions whether conditional tariff benefits can ever meet that requirement. I disagree. If you look at the various GSP schemes, the list of such needs are legion, addressing issues such as drug-trafficking, communism, terrorism, human rights, environmental protection, expropriation, contractual compliance, intellectual property protections, etc.

At one level one might view many of these concerns as primarily about protecting developed countries’ interests more than promoting the developing country needs. But, of course, these goals are mutually-beneficial. Goals such as promoting the rule of law, creating a safe and stable legal climate, encouraging foreign investment, good governance, reducing crime and corruption, guaranteeing human rights, and encouraging environmental sustainability are all legitimate objectives that developed countries legitimately can ask developing countries to pursue.

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Using Trade Remedies to Enforce Arbitration Awards

by Roger Alford

As I discuss in a recent article published in the Santa Clara Journal of International Law, one of the most significant developments signaling the convergence of trade and arbitration is the use of trade remedies to enforce arbitration awards. This is done primarily when a developed country threatens to remove preferential trade benefits to a developing country if that country does not honor its international arbitration commitments.

The WTO allows (but does not require) developed countries to grant preferential trade benefits to “promote the development, financial and trade needs of developing countries.” Many developed countries—including Australia, Canada, the European Union, and the United States—have established such “Generalized System of Preferences” or GSPs to promote trade with developing countries. The major benefit of GSP schemes is the unilaterally lowering of tariff bowers for products from beneficiary countries without a corresponding reduction in tariffs for the developed country’s products.

The discretionary nature of these schemes means that the trade benefits come with strings attached. In the United States and the European Union, for example, developing countries are subject to performance obligations with respect to matters such as drug trafficking, international terrorism, democracy, human rights, environmental protection, government corruption, unlawful expropriation, the rule of law, and good governance.

The United States imposes a number of conditions on beneficiary countries, including that they recognize and enforce arbitral awards in favor of United States nationals. Any country that wishes to secure beneficiary status under the GSP scheme must satisfy this criterion, and any country that fails to maintain this commitment jeopardizes their beneficiary status. The provision was added to the Trade Act of 1974 because of concerns that it was “contrary to sound U.S. policy to give…any… developing nation the favored treatment contemplated by the present legislation in the face of unwillingness to abide by solemn agreements to recognize as final and binding arbitration awards rendered in disputes between it and American parties.” (120 Cong. Rec. 39831).

The use of trade remedies to enforce arbitration awards is best illustrated by the ongoing dispute over Argentina’s refusal to honor adverse investment awards. On March 26, 2012, the Obama Administration announced that Argentina’s GSP beneficiary designation would be suspended “because it has not acted in good faith in enforcing arbitral awards in favor of United States citizens.” It was the first time in American history the United States denied GSP trade benefits to a developing country for its failure to honor arbitration commitments.

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Does the Presumption against Extraterritoriality Apply to the ATS or the Underlying Federal Common Law Claims?

by Roger Alford

I just completed a draft essay on Kiobel for the Notre Dame Law Review (the symposium will include luminaries such as A.J. Bellia, Doug Cassel, William Castro, Bradford Clark, Bill Dodge, Eugene Kontorovich, Thomas Lee, Michael Ramsey, Ralph Steinhardt, Beth Stephens, and Carlos M. Vázquez). To my surprise after careful reflection there remains an important question that I have not seen discussed anywhere thus far: Does the presumption against extraterritoriality apply to the statute only or also to the underlying federal common law claims recognized in Sosa? If it only applies to the ATS, then does it follow that the underlying federal common law claims can be pursued elsewhere, such as in federal courts exercising diversity jurisdiction or in state courts exercising general jurisdiction?

To test the hypothesis, let’s assume that following Kiobel Congress immediately amended the ATS to make it clear that the statute applied extraterritorially. The amendment made no mention of the underlying common law claims one way or another. What impact would that amendment have on the extraterritorial application of the federal common law claims? If the jurisdictional statute suddenly applied extraterritorially by congressional mandate, would the underlying federal common law claims be cognizable for extraterritorial conduct and injury?

If the answer to that question is yes, then does it also follow that the only extraterritorial limitation that Kiobel recognized was with respect to the statute, not the underlying federal common law claims? Reading Kiobel in light of Sosa presents the following possible syllogism: if (1) there is a limited category of federal common law claims actionable for violations of the law of nations; and (2) the statutory canon limits the extraterritorial reach of the ATS, not the underlying common law claims; then (3) the common law claims may be pursued in federal courts exercising diversity jurisdiction or state courts exercising general jurisdiction.

The first uncontroversial premise is that the ATS does not create a cause of action for violations of the law of nations, the common law does. In Sosa the Court held that the ATS, although only a jurisdictional statute, was “enacted on the understanding that that the common law would provide a cause of action for the modest number of international law violations with a potential for personal liability….” It then held that “no development in the two centuries from the enactment of § 1350 … has categorically precluded federal courts from recognizing a claim under the law of nations as an element of common law. Congress has not in any relevant way amended § 1350 or limited civil common law power by another statute.” For such a common law claim to be actionable, however, it must be “based on the present-day law of nations” and “rest on a norm of international character accepted by the civilized world and defined with a specificity comparable to the features of the 18th-century paradigms we have recognized.” The Court in Kiobel reinforced this understanding of a “modest number” of “federal common law claims” actionable for violations of the law of nations. In other words, both Sosa and Kiobel confirm that the ATS is not the source or the limit for common law claims involving international law violations.

The second more controversial premise is that the ATS is a jurisdictional statute and that the presumption against extraterritoriality applies only to the statute, not to the underlying federal common law claims. In Kiobel the Court declared that “the presumption against extraterritoriality constrains courts exercising power under the ATS.” That presumption, the Court said, is “a canon of statutory interpretation” that assumes “when a statute has no clear indication of an extraterritorial application, it has none.” The purpose of the canon is to avoid unintended clashes between our laws and those of other nations by requiring Congress to manifest a clear intent to regulate conduct abroad. Although the ATS “does not directly regulate conduct or afford relief” the Court concluded that “we think the principles underlying the canon of interpretation similarly constrain courts considering causes of action that may be brought under the ATS.” The Court then looked to the text, history and purpose of the ATS to determine whether Congress intended for the ATS to apply abroad, and found “nothing in the statute to rebut the presumption.” Had there been such evidence, the jurisdictional statute would apply extraterritorially without altering the content or reach of the underlying common law claims. Likewise, as noted above, should Congress amend the ATS so that it applies extraterritorially, this too would not alter the content or reach of the underlying common law claims. Thus, the presumption against extraterritoriality applies to limit Congress’ grant of jurisdictional authority to adjudicate federal common law claims for violations of the law of nations.

The surprising conclusion one draws from these two premises is that federal common law claims actionable for violations of the law of nations still may be pursued in federal courts exercising foreign diversity jurisdiction or state courts exercising general jurisdiction. As for the former, foreign diversity jurisdiction pursuant to 28 U.S.C. § 1332 requires a $75,000 amount in controversy and the inclusion of a U.S. citizen either as a plaintiff or defendant. The typical “foreign-cubed” facts pursued in ATS claims would be foreclosed under this grant of jurisdiction. However, where a U.S. citizen is involved in a diversity action, the federal common law claims recognized in Sosa may survive Kiobel’s presumption against extraterritoriality. The presumption against extraterritoriality will apply to the diversity jurisdiction statute as well, but as Anthony Bellia and Bradford Clark argue in their forthcoming essay “[i]t is uncontroversial that federal courts may exercise foreign diversity jurisdiction over tort claims by aliens against U.S. citizens for acts occurring outside the United States.”

This conclusion also means that state courts sitting as courts of general jurisdiction may resolve the federal common law claims recognized in Sosa. Unless one interprets the presumption against extraterritoriality articulated in Kiobel as limiting the underlying common law claims rather than the jurisdictional statute, the international law claims that heretofore were pursued in federal court under the ATS still could be pursued in state court as federal common law claims. There is nothing unusual in suggesting that federal common law claims may be adjudicated in state courts. State courts routinely apply and make federal common law, including claims involving admiralty and implicating the rights and obligations of the United States.

But let’s assume that this syllogism is wrong. If the Court’s application of the presumption against extraterritoriality applies both to the ATS and the underlying federal common law claims, there remains the possibility that state courts could fashion state common law claims based on the criteria established in Sosa. State law routinely mirrors comparable federal law. There is nothing in Sosa or Kiobel that prevents a state court from recognizing a state cause of action for violations of “a norm of international character accepted by the civilized world and defined with a specificity comparable to the features of the 18th-century paradigms,” such as piracy, violations of safe conducts, or offenses against ambassadors. Courts applying the common law already have established gradations of torts that embrace negligence, gross negligence, intentional torts and strict liability. There is no logical reason that an international law violation could not be a state common law cause of action, or at a minimum a critical factor in the determination of liability or damages under state law.

To suggest that the statutory presumption against extraterritoriality does not apply to federal common law claims (or similar state common law claims) is not to suggest the absence of territorial limits. As with the extraterritorial application of state laws, the constitutional limits of the Due Process Clause set forth in Allstate Ins. Co. v. Hague prevent state courts from applying common law claims in the absence of any “significant contact or significant aggregation of contacts, creating state interests, with the parties and the occurrence or transaction.” Nor is there any reason to think courts resolving common law claims for international law violations would go so far as to violate international limits of prescriptive jurisdiction. Both constitutional and international law impose obligations of a territorial nexus separate and apart from the statutory presumption against extraterritoriality. The territorial limits of common law claims for international law violations are derived from constitutional and international law, not canons of statutory interpretation.

I’m not convinced that all of this reasoning is correct, and even less convinced that lower courts will buy these arguments. But I thought it was important enough to flag for our readers.

Guests Posts on Jones v. United Kingdom

by Roger Alford

We are happy to announce that Opinio Juris and EJIL:Talk! will be providing reactions to the European Court of Human Rights decision in Jones v. United Kingdom over the coming days. The critical question in Jones was whether Saudi Arabia and Saudi officials enjoyed immunity from suit for allegations of torture. The Court denied petitioners claims, holding that “The weight of authority at international and national level therefore appears to support the proposition that State immunity in principle offers individual employees or officers of a foreign State protection in respect of acts undertaken on behalf of the State under the same cloak as protects the State itself.” (Para. 204).

Here at Opinio Juris, Chimène Keitner, Bill Dodge (both at the University of California, Hastings College of Law) and Ingrid Wuerth (Vanderbilt) will provide commentary. Over at EJIL:Talk! Lorna McGregor (Essex University), who worked on the case while she was Legal Adviser at Redress (an NGO that helps torture survivors), and Philippa Webb (Kings College London) will discuss the case from across the pond. They all have written influential pieces on the relationship between immunity and human rights.

“We Have Waited Too Long for Our Freedom. We Can No Longer Wait.”

by Roger Alford

The drive from Paarl to Cape Town was only forty-five minutes. The plan was for Nelson Mandela to address the world at the Grand Parade, the great public square adjacent to the Fort of Good Hope, where South Africa’s founding father Jan van Riebeck had established a toehold for the Dutch East India Company in the 17th century. As Mandela drew near to the Grand Parade an enormous crowd enveloped his car. A massive hailstorm of joyous fists hammered down on the boot and bonnet. Well-wishers jumped on the car in celebration, and it began to shake violently. “I felt as though the crowd might very well kill us with their love,” Mandela recalled. Attempts to clear a path were futile and Mandela sat there, stranded in his vehicle for hours. After over ten thousand days of imprisonment, Mandela was now imprisoned by tens of thousands of his most ardent supporters.

Parade marshals eventually came to the rescue, and Mandela finally reached his destination several hours late. Standing on the balcony of the City Hall overlooking the Grand Parade, he looked down on “a boundless sea of people cheering, holding flags and banners, clapping and laughing.” He began his speech in his native Xhosa tongue, leading the massive crowd in the responsive chant that was a regular feature of anti-apartheid gatherings.

“Power!” Mandela bellowed with his fist raised.

“It is ours!” replied the cheering crowd.

“Power!” Mandela repeated.

“It is ours!” yelled the throngs.

“Africa!” chanted Mandela.

“Let it come back!” they chanted back.

“Let it come back!” Mandela replied.

“Africa!” they answered, in a crescendo that was decades in the making.

As the crowd settled down, Mandela embarked on a militant speech that embraced the battle against apartheid on all fronts. “Our struggle has reached a decisive moment,” Mandela said. “We call on our people to seize this moment so that the process toward democracy is rapid and uninterrupted. We have waited too long for our freedom. We can no longer wait.” Saluting communists and combatants, embracing international sanctions, and vowing to continue the armed struggle against apartheid, Mandela catered to his swelling ranks and flamed the fears of his nervous opponents. After twenty-seven years of internal exile, Mandela knew that the first step toward peace was to restore his leadership within the African National Congress.

White South Africans were shocked by Mandela’s fiery speech. The day before President F.W. de Klerk had assured them that Nelson Mandela was “committed to a peaceful solution and a peaceful process.” After hearing the speech, de Klerk felt deceived. “I realized once again that the road ahead would be extremely difficult.”

The great question that had vexed South Africa for decades was, “Not if, but when?” When would the dawn come? The sun-tipped mountains shone bright, but the great valleys, the valleys where old men and women scratched the red blood soil to survive, remained in darkness. “When,” in the words of Cry the Beloved Country, would “that dawn … come, of our emancipation, from the fear of bondage and the bondage of fear?” “Why, that,” Alan Paton concluded, “[was] a secret.” Forty years after that forlorn question was asked it remained an unanswered secret.

The answer did not come on February 11, 1990, the day of Mandela’s release. Nothing Mandela said that day assuaged white fears or emancipated black bondage. At most one could glimpse the first lights of the new dawn on the tips of the mountain. “The road ahead may be long and hazardous,” wrote Archbishop Desmond Tutu, “but at long last it seems what so many have prayed and fasted for … seems more attainable than ever before.”

President F.W. de Klerk, the one responsible for Mandela’s freedom, was more sanguine: “I was struck by an inescapable truth: an irreversible process had begun—and nobody could predict precisely how it would end.”

Morality Play at the WTO

by Roger Alford

“[N]othing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures … necessary to protect public morals.” Article XX(a), GATT 1994

The long-awaited WTO panel decision on the EU’s ban of seal products is now available. The case raises one of the most interesting unanswered questions regarding WTO jurisprudence: to what extent may Member States impose trade restrictions based on moral or ethical concerns? Can a Member State impose a trade ban because the manner in which a product is produced violates the State’s own subjective understanding of public morals? The answer from the WTO panel is a resounding yes.

The case arose out of the EU’s concern for animal welfare. Seal hunting often involves the inhumane killing of seals resulting in needless suffering. The EU banned the importation of seal products, but exempted hunting by Inuit communities (IC hunts) and in furtherance of marine resource management where seals threatened fishing stocks (MRM hunts). Canada and Norway objected to the ban on seal products, and filed a case before the WTO. A WTO panel issued their report last week.

The case required the WTO to assess whether public morals can justify the ban on seal products. Under WTO jurisprudence, the standard for what constitutes “public morals” is exceedingly easy to satisfy. As stated in US–Gambling, “public morals” are “standards of right and wrong conduct maintained by or on behalf of a community or a nation.” The content of public morals “can vary in time and space, depending upon a range of factors, including prevailing social, cultural, ethical and religious values.” (See para. 7.380). In essence, the WTO panel must assess whether there is public concern about a particular issue and whether that concern is animated by that particular Member State’s public morals. (See para. 7.383).

In EU–Seal Products, the WTO panel examined the text of the regulation and the legislative history as evidence that there was public moral concern about the issue. Ethical concerns expressed in the text of a regulation combined with legislative debate about the morality of the issue appeared to be sufficient for the panel. (The panel dismissed public surveys as inconclusive). On finding that there was a EU concern, the panel held that the:

EU seal regime’s objective is to address the moral concerns of the EU public with regard to the welfare of seals, including the incidence of inhumane killing of seals and EU participation as consumers in and exposure to economic activity which sustains the market for seal products derived from inhumane hunts. EU public concerns on seal welfare appear to be related to seal hunts in general and not to any particular type of seal hunts. In other words, all inhumane seal hunts are of concern, not just commercial hunts. (See para. 7.410).

The key holding was that seal welfare is a matter of EU public morals that justifies the ban on seal products. (See para. 7.505; 7.631). As for the exceptions, the WTO panel rejected the EU’s exemptions for IC hunts, finding that Inuit hunts in Greenland were large-scale commercial operations that were similar to the Canadian and Norwegian commercial hunts covered by the rule. In addition, the exception for MRM hunts was rejected because the EU did not apply the exception in an even-handed way as compared to Canadian and Norwegian hunts. (See 7.650).

Several points are worthy of emphasis. First, the WTO has embraced moral pluralism. This includes what Rob Howse and Joanna Langille describe in this YJIL article as “noninstrumental moral beliefs” grounded in philosophical or religious beliefs. Islamic countries may ban alcohol, Hindu countries may ban bovine meat, and Israel may ban non-kosher meat. Not because there is anything inherently harmful about those products, but simply because they violate the public ethic of that community. As Howse and Langille put it, “public morals” may be justified either as “instrumental regulation designed to counter certain social ills, or as expressive regulation designed to express or give force to intrinsic moral intuitions or shared values.” The fact that there is not universal concern for seal welfare, or that Canada and Norway do not share EU’s concerns, is irrelevant for WTO purposes.

Second, the public moral concerns may derive from conduct that is wholly extraterritorial to the Member State. Under this reasoning, a Member State should be free to impose a ban on products that destroy the rainforest in the Amazon, harm child laborers at rubber plantations in Africa, or advance blatant government corruption in Asia. Personally, that makes sense to me in light of the prison labor exception (Art. XX(e)) included in the original GATT 1948 to address extraterritorial evils such as products manufactured in concentration camps and gulags. But it is nonetheless a controversial proposition.

Third, satisfying a WTO panel that a matter is of ethical concern requires little more than the sponsor of the legislation making sure to include appropriate language in the preamble of the draft regulation and raising moral concerns on the floor of the legislature. The test is easily met in the hands of a skillful legislator. The indeterminacy of establishing a genuine moral or ethical public concern regarding a particular practice is fraught with uncertainty.

Fourth, determining whether a restriction is “necessary” to protect public morals requires the WTO panel to determine the efficacy of a means in pursuit of an intangible goal. How does one determine whether a trade ban is necessary to further moral objections to inhumane hunting? The WTO panel indicated that as long as the trade restriction materially contributed to the objective of reducing demand and avoiding exposure, it satisfied the “necessity” requirement. (7.636-7637).

Fifth, the public morals exception may become the new battleground for WTO litigation. Rather than consistently ignoring this exception and rushing to litigate Article XX(b) (protection of human, animal, or plant health or life) or Article XX(g) (protection of exhaustible natural resources), the new litigation strategy may be to identify how a trade restriction advances ethical concerns of the Member State. In the future, we may see IP piracy restrictions justified as a reflection of public concern about the morality of stealing, a carbon tax implemented out of moral concerns for the ethics of sustainable development, and restrictions on any number of Chinese products justified out of concern that Chinese workers are subjected to a mandatory one-child-per-family policy implemented through forced abortions. After EU–Seal Products the public morals argument is open for creative interpretation.

To be clear, I support a liberal reliance on public ethics to justify legitimate trade restrictions. But the difficulty is how to cabin the morality exception to avoid abuse. EU–Seal Products is now before the WTO Appellate Body for review and clarification.