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Trade, Economics and Environment

U.S. Federal Aviation Agency Issues Letter Authorizing(?) Creation of Private Moon Base

by Julian Ku

Glenn Reynolds of Instapundit (and of the University of Tennessee Law School) has a short op-ed in USA Today celebrating the first official US government statement of support for the private exploitation of resources on the moon.  As Reynolds describes it:

Bigelow [a private US company] has decided that it wants to go to the moon, and — here’s the real news — has gotten the Federal Aviation Administration’s space office (Office of the Associate Administrator for Commercial Space Transportation) to give it the go-ahead, and to state that the U.S. government will recognize and protect Bigelow’s right to create a base and to operate exclusively in that base’s vicinity.

The linked report from Reuters elaborates that the FAA is simply using its existing authority to regulate payloads on space launches to authorize activities private companies might use those payloads for on the moon.  In this case, Bigelow is preparing to build an inflatable space habitat, a “moon base”, and would like some statement of US government backing for its project.

According to Reynolds (and many space lawyers), the Outer Space Treaty does not in fact prohibit private exploitation of natural resources on the moon. I am a bit surprised because Article II of that treaty states that:

Outer space, including the moon and other celestial bodies, is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means.

But while national appropriation is prohibited, it appears to Reynolds and others that private appropriation is not prohibited.  This argument takes some interpretive legwork, but it certainly has some historical pedigree, dating back to at least this 1969 essay.

This aggressive reading of Article II is enough to encourage other private space development companies to plan their business models on extracting and then bringing back minerals from the moon. As Moon Express, another company stated:

“The company does not see anything, including the Outer Space Treaty, as being a barrier to our initial operations on the moon,” said Moon Express co-founder and president Bob Richards. That includes “the right to bring stuff off the moon and call it ours.”

I am still not sure about their reading of the treaty’s language.  Did the drafters of the Outer Space Treaty really want to prohibit states from exploiting celestial bodies, but allow any non-state to do so (and without any obvious set of rules to govern those non-states)?  I definitely need to study this question more, but it certainly seems like there will be a dispute on this question someday soon. Any experts out there who wish to comment, please share!

Does Renouncing US Citizenship Make You a Bad Person?

by Kevin Jon Heller

Josh Marshall at Talking Points Memo certainly thinks so:

Which brings us back to Roger Ver, variously known as a “Bitcoin entrepreneur” or the “Bitcoin Jesus.” Ver is now a citizen of Federation of Saint Kitts and Nevis. He was so excited about avoiding taxes that as soon as he became a Nevisian he set up yet another start up that would allow you to use bitcoins to buy a Saint Kitts and Nevis passport so you too could avoid US taxes. Alas, it folded after a few months, apparently because the St Kitts government disavowed it.

Unlike Facebook billionaire Eduardo Saverin who renounced his citizenship to avoid US taxes back in 2012, I don’t get the impression that Ver is remotely that rich. He may be worth a few or even many millions of dollars. But he does not seem remotely in the category of 100s of millions, let alone billions. In any case, now he wants a visa to return to the US to speak at a Bitcoin conference this weekend in Miami. But the US has repeatedly denied his requests. And he’s extremely upset at “the tyrants [who] won’t allow me to attend #CES2015, #TNABC or anything in the US.”

Here’s Roger with his “Borders are Imaginary Lines” t-shirt he wore for his appointment at the US Embassy Barbados to apply for a Visa. He even seems to be selling these shirts as a way people can express their opposition to the tyranny that is keeping him from visiting the US.

As I’ve written before, I don’t think American citizens who renounce their citizenship for tax purposes should be allowed to return to the country ever, except possibly under highly extenuating circumstances. Ver is upset that he cannot ditch his US citizenship to live in a tax haven that is – let’s be frank – under the de facto US security and economic umbrella and come back whenever he wants to hang out or hawk bitcoins.

Ver seems like a rather loathsome fellow, but I do not understand Marshall’s position. Why should renouncing citizenship for selfish economic reasons bar someone from entering the US for life? Paying taxes is the price of citizenship; if you don’t pay taxes, you obviously should not receive the benefits that being an American citizen provides. But if you are willing to give up the benefits of American citizenship, why should the reason for renouncing your citizenship matter? Why should you never be able to set foot in the US again? (Especially given that like everyone who spends time in the US, you will still have to pay sales taxes when you’re there.)

In other words, I don’t see any reason why a former citizen should be treated differently than any other foreigner when applying for a visa. Or, perhaps more precisely, I don’t see any legitimate reason. Marshall’s position seems to rest on the problematic idea that being a US citizen is so inherently wonderful that only a terrible person would voluntarily renounce his citizenship for economic reasons. To me, that’s American exceptionalism of the worst kind.

PS: Does any other country have an equivalent to 8 USC 1182, which automatically excludes former citizens who renounced citizenship for economic reasons? Professor Spiro?

Would Paddington Prefer Christmas Island?

by Kevin Jon Heller

I’m sure most of us will go see the live-action movie version of PADDINGTON, which recently hit the big screen. And we will do so, of course, because we are interested in what Paddington’s residence status says about the UK’s harsh immigration laws. Fortunately, Colin Yeo has prepared a nice primer for us at the Free Movement blog, run by the excellent Garden Court Chambers. Here’s a snippet:

Paddington stows away and deliberately avoids the immigration authorities on arrival. He is in formal legal terms an illegal entrant and as such commits a criminal offence under section 24 of the Immigration Act 1971. It is an offence punishable by up to six months in prison. If or when detected by the authorities it is more likely he would simply be removed back to Peru than that he would be prosecuted, though. To avoid that fate he would need to make out a legal basis to stay.

Incidentally, for offering a home to Paddington — or harbouring him, as the Home Office would have it — Mr and Mrs Brown could potentially face prosecution under section 25 of the Immigration Act 1971, entitled “Assisting unlawful immigration to member State”.

Yeo goes on to explain why Paddington will have a difficult time justifying his illegal entry into the UK — and will probably end up in a poorly-run private detention centre. (Do I hear sequel? Perhaps it could be entitled PADDINGTON MAKES A NEW FRIEND.)

It could be worse, though. Paddington could’ve tried to sneak into Australia. If he had, he’d likely be sent to the ironically-named Christmas Island, Oz’s very own prison camp.

Customary International Law is Obsolete

by Roger Alford

That’s the provocative conclusion of the latest research by Joel Trachtman. Trachtman’s articles are typically succinct and seductive, so you owe it to yourself to read the short article (and skim the long appendix).

Trachtman examined 300 different CIL rules and found that only 13 (4.33%) have not been either incorporated in treaties or codified. Trachtman argues that the move toward treaties is because CIL cannot respond effectively to the great modern challenges of international society: global environmental protection, international public health, cybersecurity, financial cataclysm, and liberalization of movement of goods, services, and people. Trachtman also argues that CIL is incapable of addressing enduring challenges of regulating war, protecting human rights, and reducing poverty.

According to Trachtman, the reasons for CIL’s obsolescence are manifold. CIL (1) cannot be made in a coordinated manner; (2) cannot be made with sufficient detail; (3) cannot be made with sufficiently heterogeneous reciprocity; (4) cannot be made with specifically-designed organization support; (5) is not subject to national parliamentary control; (6) purports to bind states that did not consent but failed to object to its formation, and (7) provides excessive space for auto-interpretation by states or undisciplined judges.

For Trachtman, the obsolescence of CIL should lead states to stop arguing about CIL and start legislating mutually beneficial transactions. It should also lead NGOs and advocates to stop trying to “bootstrap a desired CIL past a target state” and instead engage with those states in treatymaking. Academics should “focus our analysis on the politically immanent, interdisciplinary, work of developing proposed rules that are administratively workable and effective, and that achieve actual social goals.” He suggests that the international legal system could survive just fine without CIL. So stop worrying about custom and learn to love treaties.

This is powerful stuff. With this piece Trachtman has done a great service to the academic debate on the relevance of CIL. Perhaps unwittingly, he also has done great service to customary international law by offering a comprehensive appendix that lists 300 of the most important CIL rules. If you want students to quickly grasp the scope and contours of CIL, just peruse the appendix.

Applying Trachtman’s thesis to my world of international economic law, I must concur with much of Trachtman’s argument. International trade law, in particular, is all about negotiating, interpretation, and enforcing treaties. We rarely if ever discuss CIL in a trade class. The very nature of an FTA is that it confers rights and obligations exclusively its Members. The defects of CIL are significant enough that trade law is almost exclusively treaty law.

International arbitration is more complicated. Trachtman only identifies two CIL rules for international economic law (Rule 207 and 208), both codified in the investment chapter of NAFTA Chapter 11. But the norm for investment arbitration is to articulate a general standard of protection in bilateral investment treaties (or FTA investment chapters), and then leave it to arbitral tribunals the task of devising detailed obligations from those general standards. Indeed, most BITs require States to afford investors protection consistent with international law, leaving to tribunals the task of discerning precisely what international law requires. BITs are not codifying CIL, but in a sense they instruct tribunals to create it.

Trachtman would not disagree that CIL is still relevant in limited contexts. He specifically recognizes that occasionally CIL is more precise than a codified rule. International humanitarian law and investment arbitration may be such categories. Likewise, Trachtman would concede that CIL is relevant where the treaty is binding on only a few states, as is the case with rules of state succession.

One can easily find selective instances where Trachtman is wrong. But what I doubt critics will be able to do is refute his general thesis that the codification of international rules through treaties has made CIL increasingly obsolete.

Guest Post: A Big Deal on Climate?

by Daniel Bodansky

[Daniel Bodansky is Foundation Professor of Law at Sandra Day O’Connor College of Law, Arizona State University.]

Is the US-China joint announcement on climate change a big deal? Opinions differ widely. Paul Krugman says yes, Tyler Cowan, no.

Who’s right? Is the announcement a “gamechanger,” as Joe Romm thinks, or “a well-timed, well-orchestrated press release,” as Cowan calls it? In part, the different answers reflect different measures of success, a point to which I will return in a moment.

But, first, a little background. Back in 2011, the parties to the UN Framework Convention on Climate Change adopted the Durban Platform, which launched negotiations to develop a new legal instrument to limit global greenhouse gas emissions post-2020. The Durban Platform negotiations are to be completed and a new agreement adopted in December 2015 at the Paris conference of the parties. A decision adopted last year in Warsaw called on states to communicate their intended national contributions to the new agreement well in advance of the Paris meeting. What the United States and China unveiled in Beijing – although generally characterized as an “agreement” or “pact” – were their intended national emission targets under the 2015 agreement.

At least four metrics are relevant in evaluating the joint announcement:

First, do the announced targets put us on a pathway towards limiting climate change to safe levels? Safety involves value judgments, of course, but most scientists believe that warming of more 1.5-2° C above pre-industrial levels would result in dangerous impacts – impacts that most people would wish to avoid. (The earth is already about .8 degrees warmer than pre-industrial level, so we’re almost halfway there.) Even the most ardent boosters of the US-China deal don’t claim that, by itself, it will put the world on a 2° pathway, only that it is a first step.

Second, do the targets announced by the United States and China represent a significant improvement over business as usual? Or, to put it differently, will achieving them require the US and China to significantly ratchet up their level of effort? Here, opinions differ widely, because they depend on judgments about what would happen in the absence of the targets, which in turn depend on assumptions about the economy, technology, and government policies more generally – all of which are highly uncertain. Who would have predicted, ten years ago, the Great Recession and the rapid expansion of fracking, both of which have had a huge influence on US emissions? So it is perhaps not surprising that some analysts say the US-China announcement “doesn’t change things much,” while others think it represents a major advance. Climate Interactive, for example, calculates that the US-China targets, if fully implemented, would reduce carbon dioxide emissions by about 650 billion tons through 2100 – and if other countries follow suit, taking similar targets, global emissions would be reduced by about 2500 billion tons through 2100.

A brief sampling of estimates of Chinese and US emissions:  (more…)

The OTP Concludes Israel Is Still Occupying Gaza

by Kevin Jon Heller

As Thomas Escritt has reported for Reuters, the OTP has declined to open a formal investigation into Israel’s attack on the MV Mavi Marmara. I will have much more to say about the decision tomorrow; I agree with the OTP’s conclusion but have serious problems with much of its reasoning. But I thought I’d tease tomorrow’s post by noting that, despite the declination, Israel is going to be very angry at the OTP — because the OTP specifically concludes (as part of its decision to classify the conflict as international) that Israel is still occupying Gaza. Here are the relevant paragraphs:

26. Israel maintains that following the 2005 disengagement, it is no longer an occupying power in Gaza as it does not exercise effective control over the area.

27. However, the prevalent view within the international community is that Israel remains an occupying power in Gaza despite the 2005 disengagement. In general, this view is based on the scope and degree of control that Israel has retained over the territory of Gaza following the 2005 disengagement – including, inter alia, Israel’s exercise of control over border crossings, the territorial sea adjacent to the Gaza Strip, and the airspace of Gaza; its periodic military incursions within Gaza; its enforcement of no-go areas within Gaza near the border where Israeli settlements used to be; and its regulation of the local monetary market based on the Israeli currency and control of taxes and customs duties. The retention of such competences by Israel over the territory of Gaza even after the 2005 disengagement overall supports the conclusion that the authority retained by Israel amounts to effective control.

28. Although it no longer maintains a military presence in Gaza, Israel has not only shown the ability to conduct incursions into Gaza at will, but also expressly reserved the right to do so as required by military necessity. This consideration is potentially significant considering that there is support in international case law for the conclusion that it is not a prerequisite that a State maintain continuous presence in a territory in order to qualify as an occupying power. In particular, the ICTY has held that the law of occupation would also apply to areas where a state possesses “the capacity to send troops within a reasonable time to make the authority of the occupying power felt.” In this respect, it is also noted that the geographic proximity of the Gaza Strip to Israel potentially facilitates the ability of Israel to exercise effective control over the territory, despite the lack of a continuous military presence.

29. Overall, there is a reasonable basis upon which to conclude that Israel continues to be an occupying power in Gaza despite the 2005 disengagement. The Office has therefore proceeded on the basis that the situation in Gaza can be considered within the framework of an international armed conflict in view of the continuing military occupation by Israel.

I’m not certain I agree with this analysis, though the OTP’s conclusion is far from unreasonable. Regardless, let the fireworks begin…

The ICC, Continuing Crimes, and Lago Agrio

by Kevin Jon Heller

Lawyers for the Lago Agrio plaintiffs have filed a communication with the ICC asking the OTP to investigate Chevron officials for alleged crimes against humanity in connection with the company’s “rainforest Chernobyl” in Ecuador. Ecuador ratified the Rome Statute in 2002.

Regular readers know my sympathies — both ethical and legal — lie squarely with the Lago Agrio plaintiffs. The only thing more unconscionable than Chevron’s destruction of the rainforest in Ecuador is its willingness to lie and manufacture evidence in order to avoid paying for its destruction. In a world with better criminal laws, I have no doubt that the CEO of Chevron and everyone else involved in the company’s misdeeds would be serving long prison sentences somewhere.

But we do not live in a world with better laws, and unfortunately the Lago Agrio plaintiffs’ communication faces a steep uphill battle. To begin with, the communication is not quite sure what Chevron has done that qualifies as a crime against humanity. It oscillates — very confusingly — between failing to pay the damages award in Ecuador (p. 19), attempting to cover up the extent of the pollution in Ecuador (p. 23), engaging in unsavoury litigation practices (p. 25), maintaining the polluted conditions (p. 36), and causing the pollution in the first place (p. 36). Those are, of course, very different arguments.

One thing is clear: the ICC could not prosecute Chevron’s deliberate dumping of more than 18 billion gallons of toxic waste-water into the Lago Agrio region, because that dumping occurred long before 1 July 2002, when the Rome Statue entered into force. That’s too bad, because I think a strong case can be made that intentional pollution of an area occupied by civilians could, in the right circumstances, qualify as a number of crimes against humanity — from forcible transfer to persecution to “other inhumane acts.” As the plaintiffs rightly note (p. 27), an “attack on a civilian population” does not have to involve physical violence.

That said, the communication seems to suggest that the plaintiffs view the contamination as some kind of continuing crime. It claims (p. 40), for example, that the potential crimes against humanity involved in the dumping “continue even today.” The idea seems to be that those crimes will continue until Chevron remediates the pollution — similar to the idea, promoted by various scholars, that Israel’s illegal transfer of its civilians into the West Bank will qualify as a crime against humanity until such time as the settlements are disbanded or that enforced disappearances continue until the responsible government identifies the fate of the victims. It is an open question whether the ICC will even recognise continuing crimes, as the ICTR has. I’m skeptical, given the drafters of the Rome Statute’s quite deliberate decision not to give the ICC retroactive jurisdiction. Few Latin American governments would have ratified the Rome Statute if they knew that their actions during the Dirty War would be open to judicial scrutiny.

But let’s assume the ICC will recognise continuing crimes. Would that mean the Lago Agrio plaintiffs have a case? It’s an interesting question. As noted above, it’s possible that Chevron’s deliberate pollution of the Lago Agrio region qualified as the crime against humanity of forcible transfer; “forcible” doesn’t require physical force and the defendant(s) do not have to intend to drive people fro where they are lawfully entitled to be. (They simply have to be virtually certain that will be the result.) So there is at least an argument that Chevron is responsible for forcible transfer until it cleans up the region to the point where displaced residents can return to their homes. But I can’t see the ICC accepting that argument, if only because of the potential implications — there are probably dozens of situations in member-states in which pollution predictably drove people from their homes and continues to prevent their return. That’s the problem with “continuing crimes”: they simply throw open the courthouse door in a manner the drafters of the Rome Statute were unlikely to have intended.

But that is not the only problem with the communication. Even if the ICC recognised continuing crimes, it is not clear how the current crop of Chevron officials could be held responsible for the (continuing) forcible transfer of people from Lago Agrio. Aiding and abetting would seem to be the most likely mode of participation, given that those officials presumably had nothing to do with the dumping of the waste (which was done by Texaco, which Chevron later acquired). Not paying the judgment and litigation misconduct, though reprehensible, would hardly qualify as aiding and abetting the forcible transfer. (I suppose one could argue paying the plaintiffs would make it easier for them to return home, but I can’t see the ICC convicting someone on such an attenuated basis.) The only real argument would be that Chevron’s current officials are aiding and abetting the continuing forcible transfer by failing to remediate the environmental damage in Lago Agrio. That is not a nonsensical idea, but it seems unlikely to succeed. Art. 25(3)(c) aiding and abetting would almost certainly be off the table, because it would require the Chevron officials to subjectively intend for people in Lago Agrio not to be able to return to their homes. No matter what you think of Chevron — and I obviously think precious little — that would be nearly impossible to prove. More likely is Art. 25(3)(d)’s version of aiding and abetting, contributing to a group crime, which would “only” require the OTP to prove that Chevron officials contributed to the forcible transfer by impeding remediation despite knowing that Chevron intended for the displacement to continue. Again, no matter what you think of Chevron’s remediation efforts (much of which was fraudulent), that’s a stretch. Not impossible, to be sure. But a stretch.

In short, unless the ICC is willing to recognise continuing crimes and adopt a very capacious understanding of aiding and abetting, it is difficult to see the OTP opening an investigation into the Lago Agrio situation. All of the other crimes against humanity identified by the Lago Agrio plaintiffs — murder, persecution, other inhumane acts — clearly took place, if they took place at all, long before 1 July 2002. And the current Chevron officials can hardly be held accountable for them.

Guest Post: A CISG Question

by William S. Dodge

[William S. Dodge is The Honorable Roger J. Traynor Professor of Law at the University of California, Hastings College of the Law.]

The U.N. Convention on Contracts for the International Sale of Goods (CISG) sets forth substantive rules of contract law to govern contracts for the sale of goods between parties who have their places of business in different CISG countries. See Art. 1. The United States is one of 83 countries that have joined the CISG. According to figures from the Census Bureau, U.S. trade in goods with CISG countries exceeded $2.4 trillion in 2013, which means a lot of contracts to which the CISG potentially applies. (I have written about the need for American contracts students to have some exposure to the CISG here.) It is possible for contractual parties to exclude application of the CISG (see Art. 6), but they must do so expressly. A choice of law clause stating that the contract is governed by “the laws of California,” for example, would not be sufficient. See, e.g., Asante Technologies, Inc. v. PMC-Sierra, Inc., 164 F. Supp. 2d 1142, 1149-50 (N.D. Cal. 2001).

The CISG entered into force with respect to Brazil on April 1, 2014. But treaties do not become effective as domestic law in Brazil until approved by executive decree, which did not happen until October 16, 2014. See Decree No. 8.327. Trade in goods between the United States and Brazil averages $6 billion a month, so a lot of contracts for the sale of goods between Brazilian companies and U.S. companies were presumably entered between April 1 and October 16.

What law governs those contracts (or more precisely, those that did not effectively exclude application of the CISG)? It may well depend on the forum in which suit is brought. My guess is that a Brazilian court would not apply the CISG to these contracts because it was not effective as a matter of Brazilian law. But I expect that a U.S. court would apply the CISG to these contracts because the treaty was in force between Brazil and the United States as a matter of international law and binding on U.S. courts under the Supremacy Clause of the U.S. Constitution. If the parties have chosen arbitration, the answer should turn on the parties’ (presumed) intent, but that may be hard to fathom in a case like this. In any event, this situation presents a good example of the need for countries to make sure that treaties to which they are bound internationally are properly implemented in their domestic laws.

Guest Post: Recent Reforms for More Orderly Sovereign Debt Restructurings at the IMF

by Yanying Li

[Yanying Li is a Ph.D researcher at Leiden University, the Netherlands, and a visiting research fellow at the University of Cambridge]

Recent reforms for more orderly sovereign debt restructurings have been prompted by the so-called “trial of the century” in sovereign debt restructuring— NML Capital Ltd. v. Republic of Argentina. In short, various court decisions in New York found Argentina in breach of the pari passu clause in its defaulted bonds, and prohibited Argentina from making payments to those creditors who accepted the bond exchange offer unless other creditors who rejected the exchange offer (i.e. holdout creditors), including plaintiffs in this case, were paid the same percentage of the amount due to them. The pari passu clause in question provides that the debtor’s payment obligation under that particular bond series shall rank equally with all other existing and future unsubordinated and unsecured external indebtedness. Given that Julian has already addressed the latest development in this case, my little contribution here will only focus on the issues of legal reform in the context of sovereign debt restructuring.

As discussed in my earlier post, on September 9, 2014, the United Nations General Assembly adopted a resolution entitled “Towards the establishment of a multilateral legal framework for sovereign debt restructuring processes”. The modalities for the intergovernmental negotiations and the adoption of the text of the multilateral legal framework will be discussed at the General Assembly’s 69th session plenary meeting on November 14, 2014. In the meantime, the directors and staff at the International Monetary Fund did not just sit back and relax. As noted in Press Release No.14/459dated October 6, the IMF’s Executive Board approved the staff paper on “Strengthening the Contractual Framework to Address Collective Action Problems in Sovereign Debt Restructuring”. The staff paper suggests a few contractual reforms designed to tackle collective action problems so as to achieve orderly sovereign debt restructurings. These reforms include potential changes to international sovereign bond contracts, namely the pari passu clause and the collective action clause (“CAC”).

(more…)

Further Thoughts: It is Indeed Legal for a U.S. Court Hold Argentina in Contempt

by Julian Ku

I am fascinated by the ongoing Argentina debt litigation saga (and not just because it looks more and more like a train wreck), but because it is forcing U.S. courts to burrow into even fuzzier nooks and crannies of the Foreign Sovereign Immunities Act to figure out what exactly US litigants can do when suing an intransigent foreign sovereign like Argentina.  I promised I would revisit the question of whether the U.S. judge’s contempt order against Argentina on Monday was legal, and here is my further (although still somewhat brief) analysis.

1) It is legal and consistent with U.S. domestic law for a U.S. court to issue contempt sanctions against a foreign sovereign.  

The most recent authority for this proposition is the quite recent 2011 opinion from the U.S. Court of Appeals for the D.C. Circuit, F.G. Hemisphere Associates v. Congo.   In that case, the D.C. Circuit rejected the argument by Congo (and the U.S. Government) that contempt sanctions due to Congo’s refusal to comply with discovery orders would violate the FSIA.  Following the U.S. Court of Appeals for the Seventh Circuit in Autotech Techs. v. Integral Research & Dev., 499 F.3d 737, 744 (7th Cir.2007), the Court held that nothing in the text or the legislative history of the FSIA suggested that there was any limitation on the inherent judicial power to issue contempt sanctions. It also rejected contrary precedent from the U.S. Court of Appeals from the Fifth Circuit in Af-Cap, Inc. v. Republic of Congo, 462 F.3d 417 (5th Cir. 2006).

I think the DC and Seventh Circuits are right that nothing in the text or the legislative history of the FSIA bars a judicial contempt order against a sovereign.

2. There is some authority for the proposition that judicial contempt orders against foreign sovereigns are not accepted under international law, but there is reason to question whether there is international consensus supporting this authority.

Argentina can, and did, rightly point to Article 24 of the Convention on Jurisdictional Immunities of States and their Property as authority against the legality of contempt sanctions against sovereigns.

Article 24
Privileges and immunities during court proceedings
1. Any failure or refusal by a State to comply with an order of a court of
another State enjoining it to perform or refrain from performing a specific act
or to produce any document or disclose any other information for the purposes
of a proceeding shall entail no consequences other than those which may result
from such conduct in relation to the merits of the case. In particular, no fine or
penalty shall be imposed on the State by reason of such failure or refusal.

I think that the language of this provision seems to pretty clearly cover the situation in the Argentina debt case.  But I am less sure that Argentina is correct to call Article 24 of the Convention a rule of customary international law.

U.S. briefs citing Article 24 have been careful to call this rule an “international norm or practice” rather than a rule of international law.  There are good reasons to be circumspect on this point. After all, the Convention on Jurisdictional Immunities has NOT come into force, and has NOT even been signed by either Argentina or the United States, and has only been ratified by 14 other countries.  Moreover, the particular rule in Article 24 banning all court contempt-like orders is much broader than the domestic laws of states like the U.S. (see above) and even those agreed to by European states in the European Convention on State Immunity.  Article 17 of the European Convention is focused only on contempt orders for failure to produce documents, not all contempt orders for any act by the foreign sovereign.

So in conclusion, I am very confident that U.S. domestic law does NOT preclude a contempt order of any kind against a foreign sovereign.  I am somewhat confident that there is no clear consensus under international law that all contempt orders (even those unrelated to discovery) are prohibited, although I do think Argentina has a stronger case on this front.  However, in U.S. law, a rule of customary international law cannot override a federal statute, especially when the international acceptance of that rule remains uncertain.

As a practical matter, I do wonder if this whole contempt kerfuffle is just symbolic. The contempt order adds to Argentina’s obligations to pay, but it doesn’t really make it any easier for the creditors to collect since Argentina’s non-commercial assets in the U.S. remains immune from collection. While Argentina’s government may be outraged, this contempt order doesn’t really change the overall dynamic of this case, which remains a standoff that neither side is winning.

 

The Allure of Sovereigntism: U.S. Progressives and Libertarians Unite to Oppose Investor-State Arbitration

by Julian Ku

For decades, investor-state arbitration has enjoyed broad support in the U.S. (among those elites who know and care about such things).  While there has been some backlash against investor-state in developed countries such as Australia arising out of controversial cases brought against it, the U.S. has remained pretty solidly in favor of it.  But there are signs that the opposition to investor-state arbitration has sprouted among U.S. elites more influential than more traditional critics like Ralph Nader and Pat Buchanan.  And, interestingly, voices from both sides of the ideological spectrum are invoking “sovereigntist” arguments to bolster their positions.

First, Harold Meyerson of the Washington Post started the ball rolling with this post calling on center-left and progressives to oppose the inclusion of investor-state dispute settlement (or ISDS) in the proposed Transatlantic Free Trade Agreement.  Predictably, he derides ISDS as pro-corporate giveaways.  But he also rings the sovereigntist bell in favor of  protecting the jurisdiction of domestic courts against extra-jurisdictional tribunals (e.g. international arbitral tribunals).

What is more surprising is that Daniel Ikenson of the influential libertarian (“liberal” for you Europeans out there) thinktank the Cato Institute has joined the fray with a manifesto for why libertarians should also oppose ISDS (at least in trade agreements).  Some of his arguments are tactical (they undermine political support for trade agreements and aren’t all that helpful anyway), but some are also sovereigntist as well.

Though I firmly believe the U.S. economy is racked with superfluous and otherwise unnecessary regulations, I do believe that a successful foreign challenge of U.S. laws, regulations, or actions in a third-party arbitration tribunal (none has occurred, yet) would subvert accountability, democracy, and the rule of law.” 

It is certainly unusual to hear a libertarian analyst decry a legal mechanism that would give businesses a new avenue to challenge unfair laws and regulations.  But the sovereigntist bell is alluring.  Because Ikenson’s position seems to go somewhat against his policy preferences, I find Ikenson’s opposition to ISDS a little more compelling than Meyerson’s.

It is worth noting that some of the same arguments against investor-state can also be raised against other proposed forms of international adjudication (e.g. the International Climate Change Court, the International Anti-Corruption Court, international human rights courts, etc).  Similar arguments, in fact, are being used by the Conservative Party in the UK to withdraw or limit the role of the European Court of Human Rights over UK law.   I wonder whether progressives like Meyerson will be so excited about protecting domestic laws and courts from international oversight in those situations.  I somehow doubt it.

Guest Post: U.N. to negotiate a multilateral legal framework for sovereign debt restructuring

by Yanying Li

[Yanying Li is a Ph.D researcher on a legal framework for State insolvency at Leiden University, the Netherlands.]

Following Julian’s post of Argentina’s attempt to sue the United States in the International Court of Justice, I write to share with you the latest (exciting) development in the world of sovereign debt restructuring!

On September 9, 2014, the United Nations General Assembly adopted a resolution entitled “Towards the establishment of a multilateral legal framework for sovereign debt restructuring processes” (document A/68/L.57/Rev.1), with 124 votes in favour, 11 votes against (including the United States) and 41 abstentions. The draft resolution was prepared by Bolivia on behalf of the Group of 77 and China. The last two paragraphs of the resolution provide as follows:

5. Decides to elaborate and adopt through a process of intergovernmental negotiations, as a matter of priority during its sixty-ninth session, a multilateral legal framework for sovereign debt restructuring processes with a view, inter alia, to increasing the efficiency, stability and predictability of the international financial system and achieving sustained, inclusive and equitable economic growth and sustainable development, in accordance with national circumstances and priorities;

6. Also decides to define the modalities for the intergovernmental negotiations and the adoption of the text of the multilateral legal framework at the main part of its sixty-ninth session, before the end of 2014.

According to the General Assembly’s press release, the U.S. delegate stressed at the meeting “that she could not support a statutory mechanism for sovereign debt restructuring as such a mechanism was likely to create economic uncertainty.”  Moreover, she expressed the view that “[i]n the past, market-oriented approaches had been preferred and work was ongoing in the International Monetary Fund (IMF) and elsewhere.” In response to that, the Minister for Foreign Affairs of Argentina stated that “[s]overeign debt held development back and the establishment of a better system could improve global economic security.” The Minister continued that “[t]he clear majority agreed it was time to establish a legal framework for restructuring that respected creditors while allowing debtors to emerge from debt safely. The profits currently made by vulture funds were scandalous and were funnelled into campaigning and lobbying to prevent changes to the situation.”

Needless to say, this is a big step forward in terms of the development of international law on sovereign debt restructuring. (more…)