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Trade, Economics and Environment

Book Symposium The Electronic Silk Road: The Unexpected Alliance of Trade and Human Rights

by Molly Land

[Molly Land is Professor of Law at the University of Connecticut School of Law]

I’m delighted to be able to take part in this online symposium dedicated to Anupam Chander’s new book, The Electronic Silk Road: How the Web Binds the World Together in Commerce. Chander’s book masterfully brings together a set of debates about technology, privacy, and human rights to consider the pitfalls and promise of regulating Internet trade. In an accessible and engaging way, Chander reorients our thinking about the Internet by locating it firmly in the trajectory of global commerce. While attending carefully to the unique challenges posed by both digitization and networks, he persuasively demonstrates the continued vitality of established doctrines in conflict of laws, trade, and international human rights with respect to some of the most pressing problems we face today in Internet regulation.

To my mind, one of the book’s most interesting and compelling contributions is its discussion of the relationship between trade in services and human rights. Chander rightly notes that trade in goods and human rights have long been in tension with one another, as liberalization of trade is often associated with labor rights violations and other human rights abuses. Trade in services, however, might be an unexpected ally of human rights causes. Information and communication technology companies are providing services, and liberalizing the flow of those services across borders promotes human rights both directly (in the form of freedom of expression) and indirectly (in the form of greater political liberalization). Chander argues that given this relationship, the General Agreement on Trade in Services (GATS) might be considered a human rights document.

Trade law can be an ally of human rights causes in two ways, Chander argues. First, the principle of national treatment limits the extent to which states can discriminate against foreign service providers, including information services. Second, the transparency provisions of GATS could be used to require states to disclose how they are regulating information goods. I think the second of these—the transparency argument—could be incredibly powerful in challenging repressive policies because it will enable advocacy and organizing. It is especially difficult for citizens to hold states accountable for their policies in the area of information and communication technology because such regulation is often invisible. To the extent trade law can be used to make some of this regulation more transparent, that would be a significant gain. This is particularly the case with respect to governments like China that use vague censorship restrictions to incentivize Internet service providers to overblock.

I was also intrigued by the argument that national treatment could be employed in service of human rights. (more…)

Book Symposium The Electronic Silk Road: Comment by Paul Stephan

by Paul Stephan

[Paul B. Stephan is the John C. Jeffries, Jr., Distinguished Professor of Law and David H. Ibbeken ’71 Research Professor at the University of Virginia School of Law.]

I applaud Anupam Chander for picking a great subject for his book. New communications technologies have transformed the way we deliver services by radically lowering the cost of dematerialized, long-distance transactions. The resulting explosive growth of cross-border sales of services is one of the most significant aspects of the modern global economy. There are, of course, a host of books about the Web, some silly cheerleading and some exceptionally good (my favorite is Who Controls the Internet? by my sometimes colleagues Jack Goldsmith and Tim Wu). What Chander seeks to do is bring international law, and especially international economic law, into the mix. He explores how a body of rules developed three decades ago in a pre-Web world (the General Agreement on Trade in Services started in the Uruguay Round, born in 1986) can be brought to bear in the new, radically changed environment.

Much of the book describes the new face of international services. These accounts are apt and vivid. As a legal academic, however, I want more. In general I expect a careful study of a complex set of social relations either to propose a positive theory that links legal developments to social conditions with more or less rigor, or a normative vision of the world that will inspire us to correct unseen problems and cash out unrealized opportunities. I realize these categories are messy. The development of a positive analysis rests on certain normative choices, beginning with the decision to concentrate on one set of phenomena rather than another. A normative vision is incomplete without at least a rudimentary account of how we might get from here to there. But they provide a start.

I take Chander’s project to be at its heart more normative than positive. He reports on the fascinating growth of the information sector in the global economy, but he does not have a more general story about what explains this growth or how one might predict the next transformation. Rather, he wants to manage the transformation, to promote human flourishing, to expand the range of choices people can freely make, to respect local diversity, and to fight tyranny. (more…)

Book Symposium The Electronic Silk Road: Connecting dots in a world of bits

by Mira Burri

[Mira Burri is a  senior fellow and lecturer in law at the University of Bern, Switzerland.]

In early October this year the World Trade Organization (WTO) held its annual Public Forum typically devoted to topics that are key to the world trading system and particularly high on the agenda of the community of the WTO’s 159 Members. The theme of this year’s edition was uniquely framed under ‘Expanding Trade through Innovation and the Digital Economy’. To some observers, the topic appeared somewhat detached from the WTO’s core mandate and daily business and distant from burning concerns, such as financial crisis responses, poverty or other development-oriented actions that demand the concerted effort of the global community.

Yet, the casual observer may be mistaken – at least in two aspects. The first is more evident and has to do with the deep impact that digital technologies, and specifically the Internet, have had and continue to have upon numerous facets of societal life. The associated transformations range from the trivial to the momentous – from online shopping, through the emergence of global value chains, to the very ways we work and write, create, distribute and access information − bringing distant geographical locations within instantaneous reach, millions of people organized within hours, encyclopaedias and virtual libraries produced on a collaborative basis. The world of brick-and-mortar trade, of freighter shipments, border inspections, duties and stamps, has also been thereby profoundly changed. For the first time is trade in services unleashed on a global scale, and this definitively goes beyond the classic ‘the world is flat’ example of outsourcing call-centres to India.

The second aspect is more illusive and possibly escapes a clear-cut answer. It has to do with the regulation, or to put it more broadly – with the governance, of the so emerged world of cyber-trade. Who, if anyone, is in charge of it? Does jurisdiction matter and if yes, how does it matter? And then also and more fundamentally, is this cyber-trade, as an extreme and sweeping expression of globalization, something that we should cherish and foster, or rather restrain in order to preserve non-economic and possibly more critical interests, such as national security, freedom of speech, and privacy – both in the online and in the offline spaces?

(more…)

Book Symposium: Comments on Anupam Chander’s The Electronic Silk Road

by Michael Birnhack

[Michael Birnhack is a Professor of Law at Tel Aviv University]

Anupam Chander’s new book, The Electronic Silk Road is an admirable scholarly achievement. Chander draws our—the global community of cyberspace users—attention to the increasing globalization of information-based services. He discusses the pros and cons of what he calls cybertrade or Trade 2.0, or more specifically, net-work, with much clarity, drawing on a wide array of examples, ranging from North to South. The book provides a rich description and timely observations, as well as a sound and coherent set of principles to address the new challenges. The book is a highly important contribution to the discussion about international trade, globalization studies, and to the on-going debate about the role of the law in a dynamic technological setting. In fact, Chander paves a new path in these discourses.

The trigger is the observation that alongside global trade of products, we increasingly experience net-work, which is (p. 2) “information services delivered remotely through electronic communications systems.” Importantly, these services are provided in both directions of the North-South global division. Net-work raises a regulatory challenge: which law should govern? Chander examines various options—should it be the law of the country that exports the services or the law of the importing country? His judgment favors the latter: “importing of services should not require us to import law as well” (p. 6). In other words, he would require global service providers to conform to the local law at the country of destination. This is the principle of glocalization, as applied to cybertrade, which he elaborates in Chapter 8. Glocalization’s role is to curtail the race to a deregulated bottom: under a legal regime that allows global service providers to apply their own law, i.e., the law of origin, they are likely to choose and operate from the most convenient regime, to their benefit, at the expense of the global consumers. Glocalization does not allow this race. Importantly, Chander insists that glocalization should be consistent with international norms and is supplemented by harmonization, where possible.

Glocalization is the meeting point of the global and the local. (more…)

Book Symposium: The Electronic Silk Road by Anupam Chander

by An Hertogen

This week, we are pleased to host a symposium on The Electronic Silk Road (Yale University Press) by Anupam Chander (UC Davis). The publisher’s description is:

On the ancient Silk Road, treasure-laden caravans made their arduous way through deserts and mountain passes, establishing trade between Asia and the civilizations of Europe and the Mediterranean. Today’s electronic Silk Roads ferry information across continents, enabling individuals and corporations anywhere to provide or receive services without obtaining a visa. But the legal infrastructure for such trade is yet rudimentary and uncertain. If an event in cyberspace occurs at once everywhere and nowhere, what law applies? How can consumers be protected when engaging with companies across the world? In this accessible book, cyber-law expert Anupam Chander provides the first thorough discussion of the law that relates to global Internet commerce. Addressing up-to-the-minute examples, such as Google’s struggles with China, the Pirate Bay’s skirmishes with Hollywood, and the outsourcing of services to India, the author insightfully analyzes the difficulties of regulating Internet trade. Chander then lays out a framework for future policies, showing how countries can dismantle barriers while still protecting consumer interests.

Commentators will be Michael Birnhack (Tel Aviv University), Paul Stephan (Virginia), Molly Land (UConn), Mira Burri (World Trade Institute), Joost Pauwelyn (Graduate Institute) and Jake Colvin (National Foreign Trade Council), and hopefully also you as our readers!

 

Legally Distinct Corporate Entities and Agency Theory in Bauman v. Daimler AG and Kiobel

by Kenneth Anderson

Guest commentary here at OJ by Adam N. Steinman (Seton Hall) on the Supreme Court’s oral argument in Daimler AG v. Bauman, along with earlier comments on the case by John Bellinger at Lawfare, have been helpful to me – no expert in civil procedure, certainly – in understanding issues of jurisdiction in Daimler, Kiobel, and other such cases.  As Professor Steinman notes, although Daimler is an ATS case, the question for SCOTUS argument is much broader than merely the ATS statute alone.  The Court’s question runs to the kinds of contacts necessary to sustain jurisdiction not just across borders, but across legally distinct (though, through share ownership, economically interlinked) corporate entities that make up the contemporary multinational enterprise:

“[W]hether it violates due process for a court to exercise general personal jurisdiction over a foreign corporation based solely on the fact that an indirect corporate subsidiary performs services on behalf of the defendant in the forum State.”

This is a different question from that presented in Kiobel, which addresses so-called “foreign-cubed” ATS cases. It is instead to ask when it is proper for a US court to find jurisdiction over a foreign corporate entity on the basis of of a US corporate subsidiary.  Chief Justice Roberts flagged the importance of this further question at the very end of his Kiobel opinion, which relied upon the presumption against extraterritoriality; for something to “touch and concern” the United States, he said, sufficient to satisfy jurisdictional requirements under the ATS, contacts would have to be more than mere corporate presence.  Corporations are often

present in many countries, and it would reach too far to say that mere corporate presence suffices … a statute more specific than the ATS would be required.

Daimler offers a case premised on this issue.  What contacts, activities, and relationships across legally distinct corporate entities suffice?  What is merely “mere” and doesn’t? The Ninth Circuit’s ruling in favor of jurisdiction over Daimler AG (a foreign corporation – not its US, Delaware-chartered corporate subsidiary) relied upon an agency theory that had the effect, with respect to jurisdiction at least, of disregarding the separation of distinct corporate legal entities in favor of treating the multinational enterprise as a unitary enterprise.  The agency theory permitted the Ninth Circuit to find, in turn, “general jurisdiction” over Daimler AG.

Professor Steinman gives a much more nuanced account of this, but at a crude level, it’s a two-step process using agency theory to disregard the legal walls between corporate entities, and then a “general jurisdiction” assertion over the whole enterprise.  This means, however, that if the Court is inclined (as observers widely think it is) to rule for Daimler, it has a variety of ways and places where it could fault the Ninth Circuit’s steps to general jurisdiction, some broader than others.

In an essay on Kiobel for the most recent Cato Supreme Court Review, I remarked that it might turn out the real work of the Chief Justice’s Kiobel opinion might be done, less by the presumption against extraterritoriality, than by the answer to final, dangling question: how much “corporate presence” is enough?

In earlier days, ATS plaintiffs didn’t see themselves having to worry about questions contacts with the forum, jurisdiction over persons or the territorial locus of activities.  Jurisdiction was satisfied by having (only) a foreign plaintiff and a violation of the law of nations or a treaty of the United States. Sosa v. Alvarez-Machain put some (delphic) limits on the nature of the “law of nations” violations that had to be at issue, but those were in terms of subject matter, not where the alleged violations took place or by what kind of a defendant. Kiobel made territory, contacts, presence, nationality of defendants an issue running beyond beyond Sosa‘s subject matter constraints.  I added in my Cato essay, comparing Kiobel to Daimler:

[T]he questions [in Daimler] are not the same as an acknowledged “foreign-cubed” case [Kiobel] because at issue is whether and what contact are sufficient to establish perosnal jurisdiction.  Bauman [v. Daimler AG] is really an attempt by the plaintiffs to turn a foreign-cubed case into one by which agency theory provides a path to finding personal jurisdiction – and thus is no longer entirely “foreign” or premised purely on “universal” considerations.

Analysis and discussion of these ATS cases has mostly been in terms of cross-border jurisdiction. I’m pretty sure corporation law scholars have not taken note; I teach both Business Associations and International Business Transactions and don’t see stirrings among scholars of business organizations.  It’s tangential to corporate law, at one level, of course. Still, just under the surface of the jurisdiction issues is a question about the robustness of corporate form. (Note: Since posting this, I’ve been reading more extensively through the amicus briefs – the corporate questions were thoroughly discussed there, and they do show up throughout the oral argument; I’ve added one quotation from Justice Breyer in the oral argument, below.)

How much legal separation (that is, legal insulation) does legally distinct corporate existence confer, whether for purposes of jurisdiction or liability? Seen from within corporation law doctrines, the question is one of piercing the corporate veil, at least to get at other corporations that have links to each other through share ownership, even if not to get to ultimate shareholder-investors. The opening questions from Justice Scalia to the Daimler AG counsel ask, after all, about the legal effects of the “corporate form” (not corporate forum, as the initial oral argument transcript puts it). Late in the argument, Justice Breyer says to counsel to Bauman (the Argentine plaintiffs in the underlying ATS suit):

You’re seeing it through the lens of jurisdiction. I’m not. I’m seeing it through the lens of corporate law. Five shareholders get together from outside California and they set up a corporation in California. Why? To insulate themselves from liability, particularly lawsuits. Now, instead of those five shareholders, everything is the same, but now it’s a German corporation and suddenly, they can’t insulate themselves from the lawsuits in California. I think it unlikely that California would have such a corporate law, whether it goes by the name of jurisdiction or some other name. But that’s a State law question. So what am I supposed to do?

As I remarked in my Kiobel essay, Daimler AG is an attempt by plaintiffs to

sidestep the formal doctrine of legal separation of corporate entities; it asserts a view that multinational corporate enterprises are to be treated as essentially one economic entity.  This is, indeed, a plausible view of their globally unitary economic substance, but by arguing for economic substance over legal form, it renders impossible any real legal principle for why any particular national court should or should not hear a case.

Not to mention (as I forgot to do in that essay) that this agency theory would seem to be equally fatal to any legal form over economic substance basis for respecting corporate forms in US domestic settings as well – and that does not seem likely to be a result embraced by US courts any time soon. Justice Sotomayor asks why this case shouldn’t be settled on the economic substance over legal form argument of tax cases dealing with attribution of income; the response – correct, in my view – is that tax cases have consistently been viewed very differently from personal jurisdiction cases.  But the oral argument in this case leaves me wondering whether the next rounds of cases in the ATS and cross-border jurisdiction areas might be less about jurisdiction as such, and more about the strength of the walls that separate corporate entities across borders – at least as an essential underlying predicate to the jurisdictional issues as such.  How much will the corporate form be respected in establishing jurisdiction in cross border cases?

The broad agency theory embraced by the Ninth Circuit in Daimler will be swept away – I can’t imagine that it won’t – but there can much more nuanced approaches to it. The federalism issues of Daimler are complicated, certainly, and might mix up easy predictions about how justices will view the issues, certainly; they touch not just federal jurisdiction issues but also questions about state corporation law (including state-to-state issues, given that the US subsidiary is incorporated in Delaware).

Though I happen to think that there might be circumstances in which corporate form should not necessarily be treated the same in domestic situations as cross-border ones, I’m think the Court should not shift the understanding of the corporate form or increase – in the context of global investment and business activities – uncertainties surrounding its legal protections.  Certainly, judging by the amicus briefs, the United States’ trading partners abroad do not want to see increases in uncertainty over the separation of entities, whether in jurisdiction or liability.  On whatever ground the Court rules, however, broad or narrow, I’m pretty sure John Bellinger is right to say that the Court would not have accepted the case unless …

it plans to reverse the Ninth Circuit.  Conservative justices are loathe to miss an opportunity to try to curb the Ninth Circuit’s consistent efforts to be a world court, and the more liberal justices may have wanted to demonstrate (as Justice Breyer argued in his concurrence in Kiobel) that the extraterritorial reach of the Alien Tort Statute can be limited by other jurisdictional restrictions.

Book Symposium Investment Law: “Investment Lawyers are from Mars, Human Rights Lawyers are from Venus” – Comments on Hirsch

by Andreas Ziegler

[Andreas Ziegler is Professor at the University of Lausanne and Counsel at Blum & Grob Attorneys-at-law in Zurich.]

The reference to John Gray’s bestselling “Men Are from Mars, Women Are from Venus” which states that most of common relationship problems between men and women are a result of fundamental psychological differences between the genders certainly oversimplifies Moshe Hirsch’s argument in his Chapter. And yet a recurring idea in his contribution is that human rights lawyers refer differently to human rights treaties than investment lawyers because of their socialization. What he describes as the sociological perspective can be summed as the explanation of these different attitudes by the different career paths of those involved in investment cases and those involved in human rights cases. He holds “[w]hile most human rights lawyers work in legal divisions of NGOs of academia, foreign investment lawyers (and arbitrators) are predominantly senior lawyers/practitioners, legal scholars of former judges affiliated with major international firms.” (p. 90 in fine).

This is not the only argument in his contribution but I would like to focus on it as I find it particularly intriguing and worthwhile to be developed in more detail. There is certainly some truth in this statement. When it comes to the application of investment treaties we are traditionally confronted with lawyers who take a certain interest in the global economy and especially the role of investors (normally multinational enterprises). These were for a long time mostly civil servants negotiating such treaties and (national) business associations interested in the conclusion of such treaties with specific partner countries. More recently when these treaties (or chapters thereof – most prominently Chapter 11 NAFTA) were discovered for their practical use by practicing lawyers we got used to their arguments being heard by investment tribunals.

When it comes, however, to the arbitrators one must say that originally and still to a large extent today we see small group of specialists in international commercial arbitration being appointed to the respective arbitration tribunals. But there is an increasing number of arbitrators being appointed who are not specialized in international commercial law but come from public international law – not only international economic law. Some may remember the very early appointment of René-Jean Dupuy as sole arbitrator in Texaco Overseas Petroleum Company and California Asiatic Oil Company v. The Government of the Libyan Arab Republic (1977). It is certainly still true that it is more often the State appointing a specialist in public international law than the investor involved in a case. This is not surprising as the investor is focusing on his individual commercial interests and the State often invokes some public policy concern or constraint for his action. Also commercial law firms actively search for appointment by multinational firms and have traditional links to commercial lawyers they have worked with in the past. Yet, one can no longer claim that there would not be an increasing number of arbitrators appointed who do not have a commercial arbitration background. Among the academics being appointed there is an increasing number of academics who have a broader view of the applicable law and are open to consider the relevance of human rights treaties or other norms of public international law that should be taken into account when settling a dispute. This is also true for the other participants in the proceedings where Parties have normally the possibility to involve experts from other fields and NGOs are increasingly making contributions – be it officially in amicus curiae briefs or using the public domain. The same is obviously true for academia where non-investment specialists have only recently discovered the relevance of investor-State arbitral awards but now contribute considerably to the debate on how investment treaties should be interpreted- and more importantly negotiated in the future. (see my forthcoming volume “Towards Better BITs”)

A particularly interesting situation results from the case law of tribunals when their character as a human rights or an investment tribunal is not so clear. (more…)

Book Symposium Investment Law: Investment Tribunals and Human Rights Treaties – A Sociological Perspective

by Moshe Hirsch

[Moshe Hirsch is Professor of International Law at the Hebrew University of Jerusalem Faculty of Law.]

Sociology of international law involves the study of how social factors influence the development and enforcement of international law. As elaborated below, sociological analysis casts a new light on a significant dimension of the relationships between different branches of international law, and enriches our understanding of social factors involved in in legal decision-makers’ inclination to incorporate or reject legal rules developed in other branches of international law. This chapter aims to analyze the particular set of interactions between two branches of international law – human rights and investment treaties – from a socio-cultural perspective.

Analysis of investment tribunals’ decisions relating to human rights instruments reveals that while these tribunals often incorporate rules of general international law (particularly on state responsibility and treaty law), they adopt a quite consistent approach opposing the incorporation of international human rights law in investment disputes.  Investment tribunals have generally declined to thoroughly examine the specific provisions of international human rights instruments invoked by the parties, notwithstanding the various arguments raised during different stages of litigation by the various parties. In all cases dealing with the interaction between investment and human rights instruments, not one investment tribunal has absolved a party from its investment obligations or reduced the amount of compensation as a result of the consideration of human rights instruments.

Sociologists of law have long emphasized that law is “always rooted in communities”; and laws are considered by these scholars as expressive types of these communities.

The basic argument of this chapter is that legal interactions between branches of international law may also be analyzed as social interactions between the relevant communities. These legal interactions are affected by the particular features of relevant social settings, as well as by the mutual relationships between the relevant social groups. More specifically, the socio-cultural distance between the particular international legal settings affects the inclination of relevant decision-makers to incorporate or reject legal rules developed in other branches of international law. Generally, greater socio-cultural ‘distance’ between the involved social settings and groups decreases the prospects for mutual incorporation of legal rules developed in the other legal sphere.

The social settings in which international investment and human rights laws emerge and are interpreted, are very different. (more…)

Book Symposium Investment Law: Comments on Alschner and Tuerk

by Andrea K. Bjorklund

[Andrea K. Bjorklund is the L. Yves Fortier Chair in International Arbitration and International Commercial Law at McGill University Faculty of Law, Canada]

Mr. Alschner and Ms. Tuerk’s contribution very usefully highlights three areas where international investment law and sustainable development principles may intersect: climate change, industrial policy, and corporate social responsibility.  This precision is particularly valuable given the less-than-concrete nature of the idea of “sustainable development”. 

Two common threads running through each section are the essential participation of the host state in fostering sustainable development and the tension between the pursuit of short-term goals (such as rapid economic development and the influx of capital and immediate returns in investment) and long-term goals (such as fostering sustainable economic development).  Investment agreements, either individually or in the guise of a multilateral instrument establishing shared principles, can contribute only a limited amount to the furtherance of sustainable development goals unless their reach expands drastically.  That point is well illustrated in the area of climate change.  Investment agreements themselves do not require that states legislate in environmentally friendly ways, or that states prioritize fighting climate change over promoting robust short-term industrial growth.  Thus, amendments to existing investment agreements, or carefully drafted new agreements, can satisfy one side of the equation – they can eliminate whatever constraints investment agreements might impose on states’ desire regulate to combat climate change or to promote certain industrial policy goals.  Yet states must still want to enact those laws.

States also must be the primary architects of their industrial policy, and certainly should strive to ensure that their investment agreements do not interfere with their pursuit of those goals. Yet, as Mr. Alschner and Ms. Tuerk note, many policies designed to foster municipal economic development can also lead to unjustified investment protectionism.  For example, the “infant industries” argument often offered by states (and by industries) seeking to facilitate the establishment of a national entrant into a competitive industry.  In the short term such policies are possibly beneficial.  In the long run, however, a state might be left with elderly infants who do not want to leave the shelter provided by policies, often somewhat costly, that insulate them from competition, particularly in the home market.

Insofar as fostering responsible investor behavior is concerned, again the host state’s laws are, at least in principle, the best vehicles for regulating and monitoring the activities of investors.  Host states can impose conditions on investors prior to granting concessions, ensure compliance with local laws prior to granting licenses, and generally police investors’ behavior.  Some states might lack the capacity effectively to ensure that investors follow those laws, but their strong commitment to requiring responsible corporate behavior is the ideal situation and without host states’ engagement and cooperation fostering that behavior will be very difficult.

The authors recognize potential impediments to active host-state regulation, and suggest a few alternatives.  One is to amend international investment agreements to include references to corporate social responsibility and to encourage their interpretation in a manner that gives effect to those principles; another is encourage states themselves to engage in their best endeavors to promote companies’ adoption of corporate social responsibility principles.  A third is to ensure that incoming investors, prior to their admission, be subject to a screening procedure identifying their corporate social responsibility practices.  The fourth, and most ambitious, would be to include corporate-social-responsibility obligations in international investment agreements themselves – in other words, ensuring that investors have rights as well as responsibilities.

Given my suggestion that host states are in the best position to impose and enforce obligations on corporations doing business in them, I query whether the recommended alternatives are adequate to compensate for deficiencies in regulation by host states.  (more…)

Book Symposium Investment Law: The role of International Investment Agreements in Fostering Sustainable Development

by Wolfgang Alschner and Elisabeth Tuerk

[Wolfgang Alschner is a PhD Candidate and Teaching Assistant at the Graduate Institute in Geneva, and Elisabeth Tuerk is Officer in Charge (OiC) of the Section on International Investment Agreements (IIAs) in UNCTAD’s Division on Investment and Enterprise.] 

One of the policy tools typically aimed at attracting foreign investment has been the conclusion of international investment agreements (IIAs). Foreign investment is an important source of finance for sustainable development, especially in low-income countries. However, the benefits from foreign investment are not automatic and the link between IIAs and sustainable development is a complex one: whereas IIA may contribute to more attracting more (sustainable) investment, they also constrain regulatory action by host governments that seek to maximize the positive and minimize the negative effects of foreign investment on sustainable development.

This paper gives an overview of recent UNCTAD research on the nexus between IIAs and sustainable development in three areas of public policy-making. These include 1) combating climate change; 2) integrating investment and industrial policy; and 3) promoting responsible corporate behaviour. The paper concludes on the need for more inter-State cooperation to address the various challenges facing the IIA regime today and to enhance its sustainability dimension.

1) IIAs and climate change

When it comes to combating climate change, IIAs are a double edged sword. (more…)

Book Symposium Investment Law: A Reply to Gabrielle Marceau

by Mary Footer

[Dr Mary E. Footer is Professor of International Economic Law at the University of Notthingham, School of Law.]

First of all my thanks to Freya Baetens and Opinio Juris for hosting the Book Symposium on Investment Law and for giving me the opportunity to post details of my chapter. I would also like to thank Gabrielle Marceau for her generous praise of my piece but more importantly for her instructive comments.

In response I shall pick up on one of her comments concerning the issue of “cross-fertilisation” of WTO jurisprudence and investor-state arbitration to which I refer in my chapter. I was unaware of the recent review of a large number of decisions of international courts and tribunals, including investor-state arbitration decisions, that make reference to WTO case law in their findings. While this is an impressive undertaking, I am wondering to what extent those decisions have been analysed and what conclusions, if any, can be drawn from this exercise? For example, is there a trend in investment arbitration to reach out to WTO case law in dealing with principles common to both trade and investment such as the principle of non-discrimination? As I have noted in my chapter, with reference to Occidental v Ecuador not all investment arbitration tribunals have been sympathetic to the importation of WTO case law when interpreting the national treatment standard. Or is the trend more in the procedural sphere, for example with respect to things like the burden of proof – here again there may be limits on the cross-fertilisation of WTO jurisprudence, as was demonstrated in Thunderbird v Mexico.

And what, if anything, can WTO panels and the Appellate Body understand from investor-state arbitration? Are there lessons to be learnt from the way in which investment arbitration tribunals interpret and apply ‘any relevant rules of international law’ in the sense of Article 31(3)(c) of the Vienna Convention on the Law of Treaties? What about the customary international law rule on attribution in the field of state responsibility – in particular where it concerns organs that exercise elements of governmental authority – as suggested by Santiago Villalpando? Could the interpretation of investment treaty-based defences in the form of exceptive clauses for the environment and consumer health and safety or the doctrine of necessity, including ‘economic necessity’, offer any guidance in WTO dispute settlement? Likewise, could the application by investment arbitration tribunals of broader principles of international law, such as good faith, equity and the doctrine of legitimate expectations in investment law yield insights for WTO jurisprudence?

There are of course a host of other contentious issues in the relationship between WTO dispute settlement and investor-state arbitration involving inter alia competing jurisdictional issues, competing fora (giving rise to parallel investment and trade disputes) and the challenge of WTO-inconsistent measures in investment, to name but a few. Many of them are based on systemic differences and structural variations between investor–state arbitration and WTO dispute settlement that I have discussed elsewhere. Instructive in explaining some of the broader issues in this respect is Anthea Roberts who frames the relationship between the investment treaty system and other areas of public and public international law, including international trade law, as a ‘clash of paradigms’.

Book Symposium Investment Law: Comments on Mary E. Footer’s Chapter

by Gabrielle Marceau

[Gabrielle Marceau is Counsellor in the Legal Affairs Division of the WTO and Associate Professor at the Faculty of Law in the University of Geneva. Opinions expressed are personal to the author and do not bind WTO Members or the WTO Secretariat.]

In her chapter “International Investment law and trade: the relationship that never went away Mary E. Footer explores the relationship between the international investment and trade regimes, from various perspectives. Mary’s chapter is a must read; in a few pages you will learn about the history of the evolution of investment and trade agreements and understand their natural interaction. The term “interaction” is important because trade and investment remain two distinct legal systems or legal regimes that interact with each other in various ways.

Mary’s historical analysis of the essentially bilateral nature of investment rules seems quite persuasive and offers a very insightful background for the discussions which follow.  When the author compares this system of bilateral deals with the multilateral nature of the WTO/GATT regime, the reader is provided with informed explanations.

Then Mary E. Footer makes an excellent comparative study of the investment and trade regimes with the purpose of examining the similarities and differences in their approach towards multilateralism.  With respect to what she calls the “investment regime,” she acknowledges that it may be true that the extraordinary number of individual BITs constitute a special juridical regime. Footer highlights that even though the BITs have a similar structure, they nevertheless differ in details. In fact, they differ in detail to such an extent that it would be difficult to argue that they are capable of giving rise to customary international law principles.

With respect to differences and similarities between trade and investment, Footer points out two grounds of divergence: First, the trade regime, through MFN, promotes multilateral liberalization. A majority of BITs, on the other hand, offer controlled entry that reserve the right of the host state to regulate the inflow of foreign investment into its territory. Second, while the investment regime is left with clusters of individual BITs which bind only two states, the WTO represents a common agreement among all Members.  One similarity between the two regimes she argues, is that both proceed with negotiations that are bilateral in character. I would add that another important similarity is that both systems prohibit unjustifiable discrimination. The two systems have, however, adopted slightly divergent approaches on when discrimination is justifiable and when it is not.   In any case, I believe the impact of those similarities and differences should be further analysed and understood.

Of course I can only agree with Mary Footer’s conclusion that the WTO is much more than the sum of its parts and is a dynamic and evolving institution which operates in a more complex regime of norms, decision-making activities and procedures than the GATT. In contrast, the relatively uncoordinated system of bilateral, regional and plurilateral instruments in the field of investment represents something different from the full-fledged multilateral trade regime.

Ultimately, on the basis of her analysis, Mary Footer comes to the following conclusions:

  • The “living apart together” (LAT) relationship between international investment and trade is as strong today as it ever was.
  • In international relations, there is the emergence of different but interconnected treaty regimes in investment and trade.
  • The challenge would lie in determining the extent to which the interaction between international investment and trade is going to lead to either greater convergence or a possible divergence.

The trade and investment debate is not new.  It is important to try to understand why the trade and investment matter was rejected in Cancun. Certainly the investor-state relationship is an extremely difficult issue.  But trade and investment interact naturally.  Investments can be impeded by restrictive trade discrimination for example, and often trade needs investment to start with and to grow. We cannot deny that the interaction between trade and investment is necessary for sustainable development, but it is a complex and multidimensional relationship. And with this chapter, Footer throws light on the different perspectives of this interaction between trade and investment systems or regimes.

I believe that the dispute settlement of both trade and investment systems can learn a lot from each other.  (more…)