International Economic Law and Policy Blog

Theorizing Precedent in International Law

In light of the discussions of precedent in the previous two posts, I thought it might be worth posting something from a piece by law professor Harlan Cohen entitled Theorizing Precedent in International Law (I think he has more coming on this issue):

The ingredients discussed in Part III—sources, features, actors—can be combined to tell three intertwined stories about the emergence of international precedent, one rationalist, one jurisprudential, and one sociological.

A Rationalist Account

Under this account, interpretations should be invoked or treated as precedent when doing so helps achieve various actors’ broader goals. Such an account largely tracks existing explanations for precedent described earlier.70 For a state actor, this may mean citing a precedent that supports a position a state wants to take or that a court might predictably favor (for example, one of that court’s own prior decisions). For the judge, it might mean citing a precedent from a court it is trying to convince or citing its own decisions to solidify its control over interpretation.

But such a rationalist story could also explain why states might support a broader system of precedent, even when doing so may not always favor their desired positions. To the extent states are invested in a particular regime, predictability may be valuable enough for them to support precedent-based arguments generally. This is true whether the potential precedents are found in state actions or in judicial opinions. To the extent third-party decision-making is capable of resolving difficult coordination problems, states may give a court or tribunal’s decision precedential force in order to preserve that court or tribunal’s authority in the regime.71 (Questioning that body’s decisions too often might undermine that body’s authority.) Moreover, treating prior decisions as precedential might add desirable clarity to the rules. To the extent states value general clarity more highly than winning the cases precedent might cost them, states should support precedent.72

Of course, few (if any) regimes explicitly provide for precedential effect. This suggests that for the states designing those regimes, the optimal level of clarity and predictability is greater than a system of de novo review but less than one of stare decisis. Denying the force of precedent, while nonetheless arguing from it, may be a way of calibrating precedent’s exact weight. Assuming that arguments from precedent will have some natural force (see the next story), this strategy could allow states to take advantage of the predictability of precedent, while still retaining some room to argue against a precedent’s relevance in a particular case. The danger of this strategy, as demonstrated by the precedent-creep in the WTO, ECJ, and ECHR, is that if every state uses this strategy, precedent-based arguments are likely to predominate. Even if one state has an interest in flexibility in a given case, states, in the aggregate, are likely to favor predictability over flexibility, and a de facto doctrine of precedent will likely emerge.73 This is reinforced by the normative power of oft-cited precedent (discussed below), which may make erasing the prior interpretation nearly impossible.

A Jurisprudential Account

But all of this assumes that when an argument is made that a prior interpretation dictates a current one, that argument carries some independent additional weight and has some authority beyond the reasoning attached to it. Under the rationalist account, this extra weight may just reflect an implicit understanding of the system-value of precedents for achieving the relevant actor’s goal. But from a jurisprudential standpoint, it might be that the authority of precedents inheres in legal argumentation.

Precedents carry whatever weight or authority they have within a legal argument. As noted above, precedent might best be seen as the burden a prior interpretation of a rule places on future arguments about that rule. In the absence of any prior interpretation, an interpreter has a lot of latitude to choose a particular interpretation of a rule. Evidence of a prior interpretation seems to change that equation. As a matter of reasoned legal argument, such an interpretation cannot be ignored. Depending on a variety of factors that might give the prior interpretation greater legal authority—the prestige of the prior interpreter, the quality of the legal reasoning behind it, its perceived adherence to other prior interpretations or coherence within the system—that decision might be brushed aside, distinguished, narrowed, adopted, or extended, but it must be dealt with. Failing to do so might be seen as arbitrary and a violation of rule of law norms.74 This effect is compounded the more the particular prior decision is considered and cited.75 The greater the frequency of citation, the harder it is to ignore the decision, and the greater the burden on current interpretation.76

Moreover, the discursive power of precedent may have normative force. Common to many theories of law is a view that one of law’s core principles or qualities is that it treat like situations alike. Lon Fuller describes consistency as part of the internal morality of law,77 Ronald Dworkin’s law as integrity denies the legitimacy of checkerboard laws that treat like cases differently,78 and Tom Franck describes coherence and adherence as key factors in the perceived legitimacy of laws.79 From this standpoint, precedent’s pull can be seen as a direct articulation of rule of law norms. If like cases must be treated alike, future decisions must at least make reference to prior ones.80

A related jurisprudential argument often made in support of precedent is reliance, that law must protect the reasonable expectations of the governed.81 It might seem bizarre to suggest that states have a reliance interest in the decisions of international tribunals that they have so deliberately denied precedential effect, but such arguments are sometimes made.82 (States are more likely to argue that they relied on the precedent set by prior state acts than a prior tribunal decision.83) More often, the argument about reliance on prior decisions is made on behalf of individuals rather than states, either in the human rights or investment protection context. It is essentially an argument against state prerogative. Invocation of the legality principle in the international criminal context may contain a version of this argument. Some notion that individuals should be able to rely on the prior decisions of international criminal courts may explain why the International Criminal Court is the sole international court authorized by treaty to look to its prior decisions as a source of law.84

Whether the argument is about treating like cases alike or concerns about reasonable reliance, these jurisprudential arguments suggest that it is the most proximate and similar decisions—from the same body or actors or on the same issue—that will carry the most weight. The easier it is to distinguish the context, the less weight an interpretation will carry. It also suggests that the less clear the precedent and the more ad hoc the interpretation appears to be, the easier it will be to distinguish. This helps explain why judicial interpretations, which are usually clearer and nested within a body of jurisprudence, seem to become precedents so much more rapidly than interpretations derived from state practice, which are often purposely ambiguous.85

A Sociological Account

But for this jurisprudential account to have force, someone must actually believe in it or have some other incentive to abide by it.86 Nor can the jurisprudential account on its own choose between different sources of precedent. Prior interpretations might have weight, but which ones: judicial opinions, state practice, expert reports? It is here that a sociological account of the actors who invoke and respond to arguments from precedent becomes essential. This sociological account has so far been neglected in the literature on international precedent, but it is this account that provides the key to understanding the operation and effectiveness of the other two. It explains why invoking precedent self-interestedly may get a response and why the jurisprudential account may exert some independent pull. In essence, the sociological account provides the context of the game in which precedent-based moves will either succeed or fail.

Specific actors may be trained to see certain sources an authoritative. Lawyers, particularly those trained in a common law tradition, are trained to seek out, read, and argue from judicial decisions.87 Members of the military may be trained to look to historical combat actions for lessons. Specific actors may also belong to professional communities that respond to those sources or expect reference those sources. Lawyers, for example, might experience professional opprobrium or sanction for failing to cite relevant precedents. And different actors may face a range of social and political incentives to cite particular sources. Politicians, for example, will have incentives to cite precedents that will help sway voters in their favor.88

Take the example of lawyers very generally. Lawyers are indoctrinated with rule of law principles, principles which, in turn, are embodied in legal professional ethics. To the extent they work with other lawyers, particularly domestic lawyers, they may be expected to argue from judicial precedent. Within a legal organization, arguments that follow the professional script and reference judicial precedents will be rewarded. Arguments that seek to be overly creative or iconoclastic might not. Given their skill sets, judicial precedents may be more readily available to them than other sources.

Most of all, when working with non-lawyers, arguments from judicial precedent may enhance the lawyer’s stature. Lawyers as a professional group have specific sources of political and social capital that they can use to maintain their importance and relevance in relation to other societal actors.89 Among these is lawyers’ purported expertise in interpreting and applying complex legal sources. Lawyers, seeking to maximize their own power and authority vis-à-vis other international actors, will want to emphasize the value of precedents and their unique ability to understand them.

In other words, lawyers at the U.S. State Department or Defense Department may argue that precedents need to be followed (a) because they believe that rule of law requires it, (b) because they fear formal or informal professional or group sanction (i.e., shunning) if they fail to adhere to it, or (c) because arguing for precedent reinforces their authority within decision-making circles.90 One need not choose between these reasons; they reinforce one another.

Of course, the actual story is much more complicated. Lawyers are not all the same. Hailing from different parts of the world, they may have been trained differently. They may belong to different organizations with different organizational cultures, priorities, and scripts. A lawyer in a foreign ministry may see the world differently from a military lawyer or a lawyer at the ICRC. 91 Or they may belong to different epistemic communities.92 The results of these differences, including how lawyers interact with other actors in a community of practice, may go a long way towards explaining different patterns of precedent or different ways of arguing from precedent in different areas of international law.93 Scholars have only begun to study the sociology of these actors.94 Much more work needs to be done. 

Along these same lines, when the issue of past AB rulings as precedent came up over on Twitter, Harlan offered the following:

"Something I've written about and am writing about now - the problem is that the formal terms are red herrings. How much weight precedent has in any system is really cultural. In that sense, what everyone is really fighting about is how constrained to *feel* about prior opinion."

He also said this: "Arguing against terms like precedent and cogent reasons can have the effect of freeing others from a prior decision's burden, but perhaps paradoxically, changing the terms to something looser might change nothing at all."

The Arguments Before the Appellate Body on "Precedent" in U.S. - Stainless Steel (Mexico)

The "cogent reasons" standard set out by the Appellate Body in U.S. - Stainless Steel (Mexico) (see paras. 154-162) has come under a great deal of criticism. But I think it's worth taking into account what the Appellate Body was hearing from the participants to the appeal (this comes from the summary of the participants' arguments -- it would be nice to see the full submissions, but most of these are not online. The U.S. appellee submission is here).

Here is Mexico, the appellant:

19. Finally, Mexico argues that the Panel acted inconsistently with Article 11 of the DSU by refusing to follow Appellate Body reports adopted by the DSB that address identical issues with respect to the same party—the United States. More specifically, Mexico asserts that, by making findings and reaching conclusions that are "identical" to those that have already been rejected or reversed by previous Appellate Body reports adopted by the DSB, the Panel has failed to comply with its duty under Article 11 of the DSU to assist the DSB in discharging its responsibilities under the DSU.45

20. Mexico acknowledges that, in the WTO dispute settlement system, a panel is generally not bound by previous Appellate Body findings or conclusions. However, quoting the Appellate Body Report in US – Oil Country Tubular Goods Sunset Reviews, Mexico asserts that "following the Appellate Body's conclusions in earlier disputes is not only appropriate, but is what would be expected from panels [...] where the issues are the same."46

21. Furthermore, Mexico emphasizes that a panel's duties under Article 11 are underpinned by Articles 3.2 and 3.3 of the DSU, which establish that the dispute settlement system is "a central element in providing security and predictability to the multilateral trading system", and that the "prompt settlement of situations", in which a Member considers that any benefits accruing to it are being impaired by measures taken by another Member, is "essential to the effective functioning of the WTO".47 Mexico suggests that the Panel's failure to follow established Appellate Body precedent has forced it to appeal findings and conclusions of the Panel that are identical to those that have already been overturned by the Appellate Body in previous disputes that involved the same measures and the same responding party. According to Mexico, this is inconsistent with the Panel's function to assist the DSB in discharging its responsibilities under the DSU because it interferes with the prompt settlement of this dispute, thereby frustrating the effective functioning of the WTO dispute settlement system and undermining its security and predictability. The Panel's failure to follow previous Appellate Body reports, if left uncorrected, would diminish Mexico's rights under the covered agreements relative to other WTO Members.

Here is the U.S. response as appellee:

38. The United States disagrees with Mexico that the Panel failed to fulfil its responsibilities under Article 11 of the DSU by not adhering to previous Appellate Body findings. The United States refers to the Appellate Body Report in Japan – Alcoholic Beverages II, stating that adopted reports "are not binding, except with respect to resolving the particular dispute between the parties".80 In the case before it, the Panel "carefully considered and took into account the Appellate Body's previous rulings on zeroing and explained in detail why it did not believe they should apply in this case."81 In the view of the United States, "treat[ing] DSB rulings as fully binding and definitive, even in a situation where experts have openly and cogently disagreed, would only undermine the legitimacy of the system".82

(Note the word "cogently" here.)

And here are the third participant views:

Chile:

41. Chile notes that this appeal raises the critical questions of whether panels are required to follow previously adopted Appellate Body reports addressing the same issue, and whether the Appellate Body should follow its own prior interpretation when reviewing a panel report that disregards that interpretation. Chile suggests that the Appellate Body should exercise caution in relation to Mexico's claim that the Panel violated Article 11 of the DSU by not following previous Appellate Body findings on the same issue covered in this dispute. Chile agrees with Mexico that the Panel's conclusions undermine the security and predictability of the multilateral trading system and, if upheld by the Appellate Body, would prejudice Mexico in relation to other WTO Members. Nevertheless, the Panel's findings cannot be considered a failure to conduct an objective assessment of the matter pursuant to Article 11 of the DSU. Chile stresses that the Appellate Body itself has only suggested that it would be "appropriate" and is "expected"86 that panels follow previous Appellate Body findings, but has not found that they are bound to do so.

EU:

51. The European Communities argues that the Panel erred by not following previous Appellate Body findings on the same issues of law and legal interpretations involved in this dispute. In so doing, the Panel attributed to previous Appellate Body findings that have been adopted by the DSB the same legal significance as it attributed to previous panel findings that have been reversed by the Appellate Body. This subverts the hierarchical structure provided in the DSU, which confers to the Appellate Body the "final say"106 on issues of law and legal interpretations developed by a panel. For the European Communities, panels are not only "expected" to follow Appellate Body conclusions in earlier disputes, "especially where the issues are the same"107, but are also "de jure" 108 obliged to follow the findings of the Appellate Body where the Appellate Body has interpreted the same legal questions. This is consistent with the need to provide security and predictability to the multilateral trading system, as well as the need for prompt settlement of disputes. Moreover, the Panel's view on the value of precedent defeats the object and purpose of the appeal mechanism provided in the DSU, because panels would be entitled to examine all legal issues "afresh"109 in every dispute. The European Communities suggests that, in performing its treaty interpretation task under the DSU, the Appellate Body seeks to ascertain the common intent of all WTO Members in relation to the provisions of the covered agreements. For this reason, the Appellate Body's interpretation "necessarily transcends the particular facts of one case, and is not confined to the Members who are parties to a particular dispute."110 A rule whereby panels must follow Appellate Body findings on legal questions would not prevent panels from departing from earlier decisions, provided there are "cogent reasons"111 for doing so. In this dispute, however, such departure on the part of the Panel was not justified, because it was grounded solely on the Panel's disagreement with previous Appellate Body findings. While panelists might not always agree with the findings of the Appellate Body on particular legal issues, the role of the Appellate Body is "to definitively settle such disagreements over points of law".112 Therefore, the Appellate Body should reaffirm that all panels are not only expected, but are "obliged"113 to follow its findings in relation to the issue of zeroing. 

Japan:

58. Finally, Japan submits that the Panel's refusal to follow previous Appellate Body reports addressing "exactly the same measures and claims"130 amounts to a failure to conduct an objective assessment of the matter as required by Article 11 of the DSU. The adoption of Appellate Body reports by the DSB creates "legitimate expectations among WTO Members"131, and reflects a clarification of all WTO Members' rights and obligations with respect to the matter addressed in those reports. By setting aside adopted Appellate Body findings on the same matter, the Panel "d[id] not bring the required degree of objectivity to its work, substituting its subjective assessment of the matter for one that carries the approval of the DSB."132 In addition, Japan asserts that the Panel's assessment of the matter compromised the objectives of the WTO dispute settlement system under Articles 3.2, 3.3, and 3.7 of the DSU, because it "introduce[d] uncertainty and unpredictability into the law, disturbing the stability of the rules-based system"133, and prevented the prompt resolution of this dispute.

Thailand:

59. Thailand agrees with Mexico that the Panel erred in finding that simple zeroing in periodic reviews is not inconsistent with Articles VI:1 and VI:2 of the GATT 1994 and Articles 2.1, 2.4, and 9.3 of the Anti-Dumping Agreement. Thailand also submits that the Panel's failure to follow previous Appellate Body findings on the issue of zeroing raises systemic concerns in relation to the functioning and credibility of the WTO dispute settlement system. Although strictly speaking not binding, previous Appellate Body findings "create legitimate expectations among WTO Members"134, and therefore panels are "expected" to follow previous Appellate Body conclusions, "especially when the issues are the same".135 Thailand emphasizes that a panel's failure to observe the hierarchy between panels and the Appellate Body, especially where the Appellate Body has repeatedly decided on the same issue, impairs the effective functioning of the WTO dispute settlement system, and undermines its security and predictability. Moreover, if WTO Members cannot be reasonably confident that the decisions of panels will be consistent with the jurisprudence of the Appellate Body, they "will begin to see the dispute settlement process as requiring both panel and Appellate Body proceedings in order to obtain an objective assessment of the matter at issue."136 According to Thailand, "[t]his will increase the costs of using the system and decrease the efficiency of the system in promptly resolving disputes between Members"137 and discourage participation by developing country Members.138 

 

In the face of these views from the participants, the Appellate Body had to say something about the issue. For those who don't like what the Appellate Body did say, I'd be curious to hear what they would have wanted the Appellate Body to say instead.

 

ADDED:

This is from the U.S. appellee submission:

11. The United States fully recognizes that the reversal by any judicial body of an earlier ruling is a serious matter, and that it is not something to be done lightly. However, even in common law systems, where the doctrine of stare decisis applies, rulings can be overturned in exceptional circumstances.⁹ ...

^{9 Japan – Alcohol (AB), p. 14 (rejecting the application of “aim and effect” test adopted by earlier GATT 1947 panel to Article III of GATT 1994). Accordingly, there is even more flexibility to depart from an earlier finding if the Appellate Body concludes that a mistake was made. In contrast, Mexico’s proposed approach, which would treat DSB rulings as fully binding and definitive, even in a situation where experts have openly and cogently disagreed, would only undermine the legitimacy of the system and this Body’s credibility.}

I can see how the Appellate Body would take this to mean that a system of "fully binding and definitive" prior rulings was unacceptable to the United States, but that the United States would be OK with a standard under which departing from past rulings could occur where there were "cogent" reasons.

Precedent in GATT Dispute Settlement

There has been a lot of talk recently about how the Appellate Body has elevated its past rulings to the level of "binding precedent," and this is in contrast to how things worked with GATT panels. Senator Hawley was picking up on that point when he said the following in an exchange on Twitter: "the largely advisory dispute resolution process of GATT replaced w/ binding WTO process, complete w/ appellate body able to rely on its own decisions as precedent."

As I wrote about here (with Jim Bacchus), I disagree with that take on what the Appellate Body has done with its past rulings. Nevertheless, Hawley's statement got me thinking about what things were like under the GATT, so I did a couple searches. I offer below a sampling of some references to "precedent" I found in GATT panel reports (either from the summary of the parties' arguments, or from the panel's reasoning). Clearly, the parties and panels were comfortable with the term "precedent." What they meant by it is a little unclear to me, though, and I'd be happy to hear from people who were involved in litigating these cases.

EEC - Apples (US) may be of particular note here, because the panel seems to indicate that it will look at precedent to a degree, but that it is not "legally bound." To me, that seems like a less precise way of expressing the Appellate Body's "cogent reasons" standard, under which the Appellate Body tried to explain when it will depart from past rulings. (Of course, given the controversy over "cogent reasons," perhaps greater precision is not always a good thing!)

A sampling of GATT cases that mention "precedent"

U.S. - Auto Taxes (1994): 

3.59 The United States noted that GATT history and precedent established that it was not inconsistent with Article III to distinguish between similar products based upon objective criteria with a legitimate (non-protectionist) underlying policy purpose, as was the case here.

...

3.73 The European Community considered that under applicable precedent, GATT employed a two-step process to determine whether a challenged internal tax or other measure conformed with Article III.

...

3.205 The United States argued that the EC's argument was not based on precedent or language of Article XX(g).

...

3.287 The United States disagreed with the EC's assertions in every respect. ... This was inconsistent with all GATT precedent. As stated by a previous panel, "the Article III:4 requirement was one addressed to relative competitive opportunities created by the government in the market, not the actual choices made by enterprises in that market."¹⁰⁰

EEC - Bananas I (1993):

143. Costa Rica, Guatemala, Nicaragua and Venezuela said that application of the procedural principle of "estoppel" to this case would be inadmissible. As had been clearly established by international doctrine and precedent, for "estoppel" to exist it was not sufficient for a party to act in a specific way, but there must also be an injury resulting from this action from another party.

EEC - Apples (US) (1989)

3.4 ... By invoking the burden of proof, the United States was attempting to sidestep the precedent of the 1980 panel in favour of other panel reports. The Community had based its approach on the 1980 precedent, particularly as that panel dealt specifically with the subject of the dispute, whereas the others did not.

...

5.1 ... The Panel noted carefully the arguments of the parties concerning the precedent value of this Panel's and other previous panels' recommendations, and the arguments on the legitimate expectations of contracting parties arising out of the adoption of panel reports. The Panel construed its terms of reference to mean that it was authorized to examine the matter referred to it by the United States in the light of all relevant provisions of the General Agreement and those related to its interpretation and implementation. It would take into account the 1980 Panel report and the legitimate expectations created by the adoption of this report, but also other GATT practices and panel reports adopted by the CONTRACTING PARTIES and the particular circumstances of this complaint. The Panel, therefore, did not feel it was legally bound by all the details and legal reasoning of the 1980 Panel report. 

U.S. - Tuna (Mexico) (1991)

3.12 Mexico responded that the precedent cited by the United States referred to the interpretation of Article XI and not to the interpretation of Article III as such; the same precedent clearly stated that "the General Agreement distinguishes between measures affecting the importation of products, which are regulated in Article XI:1, and those affecting imported products, which are dealt with in Article III"; another panel report had stated that: "the Panel considered that it was not necessary to decide in this particular case whether the practices complained of were contrary to Article III:4 because it has already found that they were inconsistent with Article XI"²¹;

U.S. - Tobacco (1994)

47. Australia considered that the U.S. regulations governing the importation, internal sale and use of tobacco contained in section 1106 of the 1993 Budget Act violated its obligations under the General Agreement. ...  The 1978 Animal Feed panel⁴⁷ provided a relevant precedent with the conclusion that "the measures ... with a view to ensuring the sale of a given quantity of [domestic product] protected this product in a manner contrary to the principles of Article III:1 and to the provisions of Article III:5, second sentence".

EEC - Dessert Apples (1989)

3.12 The EEC also noted that the 1980 Panel (para. 4.6 of its Report) had found that the Community did restrict the quantities permitted to be marketed. As the system (outlined in paras. 2.1-2.8 above) remained the same, there were no grounds on which to reverse this finding. The precedent value of the 1978 Panel finding concerning the Community's régime for tomatoes was obviously less than that of the previous Panel which had looked directly at the marketing restrictions on apples. More generally, the EEC distinguished between relevant and irrelevant precedents. They saw the 1980 Panel report as a clear and relevant precedent in the present case. Other cases were irrelevant because they concerned a totally different situation, or they lacked any precedential value because the legal reasoning involved had not been agreed upon by the CONTRACTING PARTIES. The latter point was particularly true of the 1987 Panel on the Japanese import restrictions. The EEC recalled the reservations expressed concerning its adoption by several contracting parties, including the Community. Indeed, the EEC had agreed to its adoption only on the basis that it did not in fact constitute a precedent.

Two More Countries Join the MPIA

The Multi-Party Interim Appeal Arbitration Arrangement Pursuant to Article 25 of the DSU is up to 21 participants now: Ecuador and Nicaragua just joined. Other governments can join whenever they want, but if they want to be eligible to nominate candidates for the pool of arbitrators, they have 10 days left.

Competition, subsidies and trade remedies in the draft UK - EU FTA

The UK Government has made its version of an EU -UK FTA available to the public (link below), and not surprisingly it differs dramatically from the text proposed by the EU.

I have restricted myself for now to a quick look at subsidies, competition and trade remedies. I say a quick look, but in fact not much time is required, because the texts on these three issues together total seven pages.

The UK's approach on subsidies and competition (Articles 21 & 22) is minimalist. A smidgen of transparency, a few consultation requirements, a dash of coordination, a carve-out from dispute settlement to ensure it’s not enforceable. This is a far cry from the regulatory symmetry sought by the EU, and, in respect to subsidies, falls short even of recent EU FTAs with Japan, Korea and Viet Nam, which contain various innovations regarding subsidies to ailing companies, to/by SOES, etc..

Not surprisingly, therefore, disciplines on trade remedies (Article 4) are also minimal, barely more than WTO rules. Beyond a bit of supplemental disclosure, the only significant commitment is to consider information about public interest in AD/CVD cases, something both jurisdictions already do. Even use of the lesser duty rule seems hortatory (“may”), perhaps reflecting that the EU has been backing off its use in recent years.      

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/886010/DRAFT_UK-EU_Comprehensive_Free_Trade_Agreement.pdf

Searching for the Next Leader of the WTO

Steve Charnovitz

19 May 2020

The World Trade Organization (WTO) is under stress with all three of its governing branches suffering instability.  Unfairly assaulted by the Trump Administration, the WTO's judicial branch has suffered a loss of its appellate court.  The WTO's legislative branch is still operative, but the WTO was unable to hold the legally-required Ministerial Conference in 2019 and now will probably fail to convene such a Conference in 2020.  The WTO's executive branch has continued to perform, but recently the Director General (DG) Roberto Azevêdo announced that he will step down at the end of August 2020. 

Later in May 2020, the WTO is expected to begin the DG selection process and to announce that it will try to conclude the internal election in late June.  Count me as skeptical that this selection process will succeed on such a rapid timetable.  Choosing a DG requires consensus and after the shameful misbehavior of the Trump Administration in blocking the consensus needed to fill Appellate Body vacancies, I see no reason to believe that the Trump Administration will cooperate with the rest of the world in appointing a new DG for the WTO. 

Although the WTO Director-General is not the most important international post, this position has become more vital for the WTO in this time of economic upheaval.  Even before Covid-19, the WTO was reeling from the centrifugal forces of nationalism and protectionism.  Now, the whole future of the world trading system is mired in doubt. 

The world economy depends upon an effective WTO to enforce its rules and to improve the rulebook to address many new challenges that are destabilizing cross-border trade.  As a so-called "Member-driven" organization, the WTO's DG has not played as central of a role as the analogous chief executive does in other organizations.  Yet, that intentionally passive leadership may be one reason why the WTO has suffered a disappointing performance over the past 15 years in liberalizing world trade and attaining the needed complementary  economic policies.  The WTO needs a DG with a moral mandate to put new ideas on the table and to corral governments into considering deeper cooperation and balanced compromises. 

The WTO DG election process is typically an un-transparent affair.  Operating behind closed doors, WTO member governments offer nominations from among their own nationals that are then winnowed down to choose a consensus candidate.  Some good men (no women yet!) have been selected through such an insular process over the past 25 years.  But the nominees are typically drawn only from domestic trade ministries and departments.  No role exists for civic society, parliamentarians or the world business community to influence the election.

My proposal is to establish an informal search committee that would prepare a short list of the best candidates from around the world that might be induced into taking the job of leading the trading system and the WTO out of our current crisis.  The WTO itself would never hire an executive search firm or appoint a non-bureaucratic search committee.  But a group of forward-thinking governments could establish such an informal search committee to look for the ideal candidate that would be trusted by both the rich and the poor countries and by most of the WTO's stakeholders.  With a few key governments signing onto the effort, perhaps some foundations interested in preserving and improving the best parts of the global economy could provide support for an open, transparent process of finding the best candidates to head the WTO.  In addition to WTO member governments, participation should be sought from the many stakeholders concerned about the future of the WTO such as international nongovernmental groups focused on:

            -- the environment and sustainability,

            --workers, unions, and employment,

            --investor and trader rights,

            --consumers,

            --advanced manufacturing,

            --food production and nutrition,

            --human health and safety, and the duties of regulators,

            --economic development and poverty alleviation,

            --transportation, logistics, and supply chain design,

            --fair competition in the market,

            --internationally-traded services,

            --human rights, and

            --world peace and security.

Candidates to become the WTO DG should be given an opportunity to make online presentations as to how they would lead the WTO.  Candidates should also be asked to respond to questions from responsible stakeholders. 

Bringing innovation to hidebound organizations, especially intergovernmental organizations, is never easy. Conceivably, the WTO, which has been struggling for years, may find a way on its own to conjure the new leadership that it needs.  But equally or more likely is that the WTO won't find a way forward without an infusion of outside help.  Disasters sometimes beget new opportunities.  In my view, the current world health and economic crisis of the novel coronavirus can provide the extra time and the newly-accepted virtual tools to experiment with novel methods for finding the best candidates to lead the WTO through these pivotal and dangerous times.

WTO Young Professionals Program

The WTO is seeking applicants for its Young Professionals Program (see link below). This is a one year temporary position for young professionals up to thirty-two years of age with 2+ years of relevant professional experience. The YPF prioritizes applicants from developing WTO Members not currently represented in the WTO Secretariat; a list of such Members is included in the vacancy announcement. The application deadline is 29 May.      

(https://erecruitment.wto.org/public/hrd-cl-vac-view.asp?jobinfo_uid_c=6009&vaclng=en)

PEPA/SIEL Online International Economic Law Research Marathon 2020

The Postgraduate and Early Professionals/Academics (PEPA) Network of the Society of International Economic Law (SIEL) and the Hebrew University of Jerusalem Faculty of Law are thrilled to announce the PEPA/SIEL Online International Economic Law Research Marathon 2020. The Virtual Conference, which for the time being replaces the postponed conference in Jerusalem, will host 23 emerging International Economic Law academics and practitioners from all over the world. Each author will present his/her paper in a Zoom session of one hour, including comments from experts in their field and open discussion. We invite you to join us to attend the talks and to engage in enriching academic discussions on pressing issues in International Economic Law.

To attend any of the talks, please sign up through the Guests' Registration Form (which includes the program): https://docs.google.com/forms/d/e/1FAIpQLSdmFWp6mQi5ba0vR5__Fk54y50Y3SlCibazLw-7v-EhN0HIzw/viewform?fbclid=IwAR35wq0OzU7LvjZBrmrl4hgBbL-rdGtSYnyGt9Y_gal_cDi1ybLbAxexaV0. 

Registrants will receive Zoom invitations for the paper sessions they signed up for, and papers will be sent upon request by the authors. Please note that the times listed in the schedule are in 'real' GMT (eg, London is now GMT+1).

The program is available below.

 

The Conference Co-Chairs
Freya Baetens, Tomer Broude, José Caiado.

	Sunday May 17
1.	10:00-11:00 (GMT)	Shani Friedman, the Hebrew University in Jerusalem International Economic Law and the construction of the Marine Resources Utilization Law Commentator: Tomer Broude.
2.	11:00-12:00 (GMT)	Rachel R. Du, the World Trade Institute, University of Bern Dispute Settlement under Regional Trade Agreements:  A Saboteur or Helpmate for the Multilateral Trade System? Commentators: Sivan Shlomo Agon, Rachel Frid de Vries and Holger Hestermeyer.
3.	12:00-13:00 (GMT)	Sunanda Tewari, the Centre for Trade and Investment Law, New Delhi The Case of “Draft Reference Paper on Services Domestic Regulations” at the WTO: End of WPDR? Commentator: Federico Ortino.
4.	14:00-15:00 (GMT)	Dr. Regis Y. Simo, Mandela Institute, School of Law, University of the Witwatersrand, Johannesburg The External Dimension of the African Continental Free Trade Area: Challenging the Relevance of the WTO Enabling Clause Commentator: TBA.
5.	15:00-16:00 (GMT)	Carrie Shu, California State Polytechnic University, Pomona Transnational Law in a Time of Crisis Commentator: Marcia Harpaz.
6.	16:00-17:00 (GMT)	Svetlana Yakovleva, the Institute for Information Law, the University of Amsterdam The Power of Discourse in International Trade Law: Privacy and Personal Data as Exemplars Commentator: Joel Trachtman.

   

	Monday May 18
7.	09:00-10:00 (GMT)	Charalampos Giannakopoulos, Centre for International Law, National University of Singapore Coherence, Reflective Thinking, and Investment Arbitration Commentator: Suresh Nanwani.
8.	10:00-11:00 (GMT)	Carlo de Stefano, Roma Tre University From Arbitrators to Judges? Reflections on the Reform of Investor-State Dispute Settlement Commentators: Venetia Argyropoulou, Holger Hestermeyer and Stefan Mayr.
9.a.	11:00-12:00 (GMT)	Sparsha Janardhan, the Centre for Trade and Investment Law, New Delhi ‘Exporting’ Domestic Support in Agricultural Products: Can FTAs Offer a Way Out? Commentator: Jose Caiado.
9.b.		Ludovica Mulas, University of Bologna Prudential Regulation and International Trade in Financial Services: Between Rules and Regulatory Discretion Commentator: Michael Waibel.
10.	12:00-13:00 (GMT)	Johannes Tropper, the University of Vienna Promises by States to Foreign Investors:  A Role for Unilateral Acts and Estoppel? Commentators: Federico Ortino, Freya Baetens, and Tony VanDuzer.
11.	13:00-14:00 (GMT)	Dr. iur. Mariela Eletti de Amstalden, University of Edinburgh Law School Regulating Cultured Meat: Implications of Biotechnologies for Trademark Rights under Art. 20 TRIPS Commentators: TBA.
12.	14:00-15:00 (GMT)	Pedro Schilling de Carvalho, University of Cambridge In Search of a Map: Reframing Processes in the Fragmented Waters of International Financial Regulation Commentator: Joel Trachtman.
13.a.	16:00-17:00 (GMT)	Omar Yousef Shehabi, Yale Law School Wage Labour and Foreign Capital: Industrial Relations in International Investment Law Commentators: Kathleen Claussen and Velimir Zivkovic.
13.b.		Can Eken, the Chinese University of Hong Kong, and Stanford University, California A Detailed Comparison of Third-Party Funding Regulations in Hong Kong and Singapore Commentator: Tomer Broude.

 

 

	Tuesday May 19
14.	09:00-10:00 (GMT)	Martin Luther Munu, Institute for Globalisation and International Regulation, Maastricht University Constructing a Development Oriented Analytical Framework for E-Commerce Trade Negotiations Commentator: Jose Caiado.
15.	10:00-11:00 (GMT)	Rimdolmsom Jonathan Kabre, Centre for Human Rights, University of Pretoria, South Africa The Establishment of an Advisory Centre in Investment Law and its Significance for African Countries Commentator: Tomer Broude.
16.	11:00-12:00 (GMT)	Christian Perrone and Amy Ertan, Institute for Technology and Society of Rio de Janeiro and Royal Holloway, University of London International Data Transfers and Data Protection Legislation: Challenges and Opportunities for Brazilian Trade Commentator: Victor do Prado.
17.	12:00-13:00 (GMT)	Daniel R. Quiroga-Villamarin, Graduate Institute of International and Development Studies, Geneva Normalizing Global Commerce: The Materiality of Containerization as Transitional Lawmaking (1956-1968) Commentator: Jose Caiado.
18.	13:00-14:00 (GMT)	Mmiselo Freedom Qumba, the University of the Free State in Bloemfontein, South Africa The backlash against international investment arbitration: Does Africa need ISDS? Commentator: Freya Baetens and Tony Vanduzer.
19.	14:00-15:00 (GMT)	Hsien Wu, the Graduate Institute of International and Development Studies, Geneva The Role of the WTO Judicial Body as Independent Advisor to the DSB – An Alternative Narrative Regarding the Design of the WTO Dispute Settlement System Commentator: Sivan Shlomo Agon and Freya Baetens.
20.	15:00-16:00 (GMT)	Charles Ho Wang Mak, University of Glasgow Sovereign Debt Regulation: Towards a Unified International Legal Regime? - The Rise of Arbitration in Sovereign Debt Restructuring Commentator: Venetia Argyropoulou.
21.	16:00-17:00 (GMT)	Pablo D. Colmegna, University of Buenos Aires Human Rights Standards for the Protection of Indigenous Peoples Traditional Knowledge and Genetic Resources Commentators: Yuval Shany and Tal Mimran.

 

Globalization Is Not "Hyper" and There Was Never a "Neoliberal Market Fundamentalist Consensus"

Anthea Roberts and Nicolas Lamp are working on a book about "narratives" in international economic law, and Nicolas has written about this on his own already, so I've been thinking a bit about the role and value of narratives. Generally speaking, I'm suspicious of them, because they often end up being catchy slogans that do not fully capture the nuances of the debate. At the same time, I recognize the reality that catchy slogans are a good way to get people to pay attention to what you are saying, so perhaps I better come up with some of my own! Even before all this talk of narratives, there were certain terms that I tried to play up (e.g. "protectionism") and others I tried to cast aside ("market access"). I did this because I felt that some terms were clearer than others and could better focus everyone on the issues being debated.

However, there are some terms, and resulting narratives, that are misleading and I wish people would stop using them because they make important policy debates less productive. Dani Rodrik used a couple of them in a recent op-ed:

The relationship between markets and the state will be rebalanced, in favor of the latter. This will be accompanied by a rebalancing between hyper-globalization and national autonomy, also in favor of the latter. 

...

The neoliberal market fundamentalist consensus has been in retreat for some time now.

First up, let me talk about "hyper-globalization." I'm not sure what the relationship of the market and the state will be going forward (although if I had to guess I would say it will be roughly the same as it is today, with some fluctuations back and forth), but I am fairly confident that there is nothing "hyper" about today's globalization as it relates to international trade agreements and national autonomy. If you look at the various multilateral, regional, and bilateral trade agreements that are out there, the vast majority promote only modest economic integration and leave nations with their autonomy intact. Tariffs have come down, but they are still permitted, and special trade remedy tariffs can and are used regularly by most major trading countries. There are rules on regulatory trade barriers, but there are also exceptions, and only a tiny percentage of national regulations are actually challenged under trade agreements. And services trade has seen only a small amount of liberalization. On top of that, the enforcement mechanisms in these agreements are pretty flexible.

Summing up: Globalization through international trade agreements is far from "hyper," and "national autonomy" is safe. That doesn't mean the current crop of trade agreements is perfect, and I have plenty of objections to specific aspects (many of the IP provisions for a start!). But the narrative of "hyper-globalization" is just plain wrong. It may be a catchy slogan, but we should strive for more nuance here.

Second, there is the alleged "neoliberal market fundamentalist consensus." In general, I have been surprised in recent years at how the term "neoliberal" is thrown around as a general insult towards people who support some degree of markets, and I've been intrigued by people who want to reclaim it and turn it into a positive. (To make it great again, you might say.) I'm not sure this is worth the effort either side is putting into it, but it is interesting to watch.

Then there is "market fundamentalist," which implies that the people in question are not using reason but rather are slavishly attached to markets for the sake of markets. I don't think I've ever come across anyone with this view, but I see why the people who use it think it's a good stereotype to play up as an insult. It reminds me of conservatives who call Obama or the Clintons "socialists." It's a silly exaggeration, but a little hyperbole can be emotionally satisfying. (Amusingly, some of the market skeptics also call Obama and the Clintons "neoliberals"! Can you be a "neoliberal socialist"?) 

But putting that aside for a moment, what surprises me even more is the idea that there was a "neoliberal market fundamentalist consensus." Does anyone actually believe that there was a period in recent history where "market fundamentalism" had a consensus behind it? Let's just stipulate that we have had periods of privatization, deregulation, liberalization, and reductions in the social safety net. But in all those periods, the state's role in the economy remained significant. We are so far from laissez-faire that I don't see how anyone can proclaim a "market fundamentalist consensus" with a straight face. When you look at major institutions such as the U.S. government, the World Bank, or the IMF, what percentage of the people there could credibly be called "market fundamentalists"? 1% at most I would think, and probably far less. Just about everyone in the establishment wants a mix of the state and markets, with plenty of the state thrown in there.

I understand that people want to use catchy slogans to support their narrative. But some of these attempts seem completely over the top. We all want to bring attention to our ideas, but we should try to keep the sloganeering within reason.

The MPIA Arbitrator Nominations Are Coming In

The deadline for submitting nominations for the Multi-Party Interim Appeal Arbitration Arrangement pool of arbitrators is May 30. The EU didn't waste any time with their pick, nominating Joost Pauwelyn.

First off, let me say congrats to Joost! I can't think of a better choice.

Second, just about everyone knows Joost, but perhaps there are a few people who don't, so his CV is here.

I hope the other nominations become public. I'll post about all the names that are public, offering whatever background info I can find.

The MPIA and the WTO Secretariat

The law firm Sidley Austin has been hosting a series of Webinars about the Multi-Party Interim Arbitration Arrangement. Because Geneva-based delegates are the principal speakers, the Webinars provide some insights into the intentions of MPIA parties.

One issue sometimes raised regarding the MPIA is the extent to which it seeks to offer reform models that respond to critiques of the Appellate Body. The MPIA takes some steps in that direction, such as:

    the 90-day time-limit can be extended only with the parties' agreement, and procedural tools (such as page limits) are offered to help the arbitrators achieve it;

    an authorization for arbitrators to propose (but not impose) that the parties take "substantive measures", such as dropping Article 11 claims, and 

    a sort of judicial economy clause, under which the arbitrators "shall only address those issues that are necessary for the resolution of the dispute".

At today's Webinar, another issue emerged: the role of the WTO Secretariat. The MPIA is notably vague on this point, envisaging only that the arbitrators be provided with "appropriate administrative and legal support", which would be separate from the WTO Secretariat staff and its Divisions supporting panels and "would be answerable, regarding the substance of their work, only to appeal arbitrators". The MPIA asks the Director-General to ensure the availability of a support structure meeting these criteria.

At the Webinar, one issue raised was whether Secretariat support will be along the lines of the AB Secretariat, or whether it might take a different form. For example, will it be provided by a structured support unit, or an an ad hoc basis? Perhaps more significantly, will the support team report to the arbitrators collectively, or would support be provided by individual staff to specific arbitrators, along the lines of US judicial clerks? This latter approach has been advocated as a possible AB reform by some observers.

The EU and Chinese delegates, speaking in their personal capacities, seemed to favor replicating the AB Secretariat, because this would favor consistency and coherence.  However, the vagueness of the MPIA on this point suggests that not all parties share that view. The decision in any event is left to the Director-General, who therefore has an important decision to make.  It will be interesting to watch how this plays out.                     

Guest Post: Will the ‘Charnovitz Principles’ Improve Global Health Governance?

This is a guest post by Prof. Ernst Ulrich Petersmann, European University Institute (Florence)

Professor Charnovitz is among the few international lawyers who have carefully studied the history - and past governance failures - of international economic law, labor law, environmental and health law in order to elaborate proposals for improving multilevel governance of global public goods. In his contribution to the IEL and Policy Blog of 10 May 2020, he has explained four convincing proposals for strengthening ‘international pandemic law’ (IPaL) beyond the existing law of the WHO. Will his appeals to ‘public reason’ and to multilevel civil society support induce the more than 190 WHO member governments to put his reform proposals into legal practice?

In the 1940s, US leadership for the 1944 Bretton Woods Agreements, the UN Charter and the Universal Declaration of Human Rights (UDHR) enabled revolutionary reforms of ‘international economic law’, ‘human rights law’ and of international institutional law for multilevel governance of public goods. Yet, even though the ‘Constitutions’ (sic) establishing the WHO, FAO, ILO and UNESCO justified their functionally separate governance regimes in terms of human rights (e.g. to health protection, food, decent work, education), the cold war and neo-liberal nationalism prompted US governments to progressively abandon US leadership for global public goods. The hegemonic nationalism of the Trump administration renders US leadership for reforming global health governance based on the ‘Charnovitz principles’ unlikely.

 My 2017 book on Multilevel Constitutionalism for Multilevel Governance of Public Goods used the example of multilevel European constitutional law constraining the EU’s multilevel governance of public goods for explaining why the ‘Charnovitz principles’ can also be interpreted as ‘constitutional principles’ that have become progressively recognized in the historical struggles for human rights law, democratic constitutionalism and decolonization since the ‘democratic revolutions’ of the 18^th century. Modern public goods research and theories of justice support ‘constitutional justifications’ of the ‘Charnovitz principles’. For instance:

The ‘first Charnovitz principle’ (global emergencies require global responses based on principles of subsidiarity and ‘hard core international law rules’ supplemented by ‘soft law principles’) seems to apply the human rights principle that – in times of emergencies – the ‘inviolable core’ of human rights must be protected even if over other human rights dimensions may need to be mutually ‘balanced’ and restricted in view of the scarcity of resources (e.g. in national health systems). The Covid-19 health pandemic adversely affects most civil, political, economic, social and cultural rights protected in UN human rights law; multilevel health governance must respect the diversity of national ‘balancing decisions’.

Charnovitz’ institutional reform proposals reflect the constitutional insight that the effectiveness of constitutional and human rights depends on their progressive ‘institutionalization’ and protection (e.g. through democratic, administrative, judicial and civil society institutions). Neither the WHO ‘Constitution’ (sic) nor its recognition of human rights (e.g. to health protection), its supra-national adoption of ‘international health regulations’, and its rules-based health governance monitoring national health policies seem to be effectively embedded into the domestic constitutional, health protection, legal and political systems in most WHO member states.

The third ‘Charnovitz proposal’ reflects the fact that the interdependent nature of ‘overlapping public goods’ (like the world trading, public health, food security, political and legal security systems) remains insufficiently protected in the fragmented, international treaty systems. The recent joint Declarations issued by the Heads of the WTO, WHO and the IMF – for instance, on avoiding trade restrictions for medical supplies and food – need to be transformed into ‘hard law’ securing institutionalized ‘emergency supplies’ so as to avoid protectionist, national emergency responses.

The fourth ‘Charnovitz proposal’ reflects the multilevel, ‘constitutional bottom-up approaches’ underlying human rights, labor and environmental law and institutions: Even if ‘aggregate public goods’ like health protection are constructed bottom-up as national public goods prioritizing rights of citizens and ‘democratic balancing’ of competing public goods at national levels of governance, global emergencies require more coherent, complementary responses from international public goods regimes that must protect the universally recognized, interdependent and indivisible nature of the adversely affected civil, political, economic, social and cultural human rights. Citizens remain democratically responsible for the fact that the economic and human rights crises created by Covid-19 governance now threaten many more people than those infected by Covid-19!

Can constitutional and ‘social contract approaches’ to reforms of multilevel governance strengthen political support for the ‘Charnovitz principles’? They have enabled multilevel constitutional restraints of EU governance through multilevel European constitutional law and EU foreign policy initiatives for reforming global governance (e.g. through the EU’s New Green Deal of December 2019, the EU’s leadership for multilateral appellate arbitration based on Article 25 DSU pending the US assault on the WTO Appellate Body); but they remain resisted by the constitutional nationalism prevailing in most UN member states outside Europe.

Yet, the ‘Charnovitz principles’ for reforming ‘IPaL’ offer a broader policy insight: Protection of most global public goods can become effective only if embedded in multilevel ‘emergency response systems’ based on mutually coherent ‘constitutional principles’ constraining multilevel governance. Every UN member state depends on UN/WTO multilevel governance of transnational public goods in order to enhance national welfare and security (e.g. against global health, environmental, political and legal threats). Fortunately, even China participates in the EU’s ‘multilateral interim appellate arbitration’ in order to protect the global public good of WTO third-party adjudication of trade disputes. The less US nationalism (‘America first’) recognizes global public goods (like WHO law, UN human rights law, WTO third party adjudication), the less US responses may be capable of protecting public goods for the benefit of US citizens (as illustrated by the exceptionally high Covid-19 case fatality rates and social inequality inside the USA). Can this obvious need for multilevel constitutional reforms be made an election issue in the 2020 US presidential elections? Do James Bacchus’ proposals for civil society support by the ‘willing word’ of multilevel environmental governance indicate a realistic, democratic ‘reform strategy’?

Guest Post: Suspending Investor-State Arbitration During the Pandemic

This is a guest post from law professor Ben Heath:

There is growing concern in some quarters that international investment law and arbitration will limit national governments’ ability to respond to the Covid-19 pandemic and its economic fallout.  Last week saw the rollout of two related but distinct non-governmental initiatives designed to reduce this risk.  Last Monday, the International Institute for Sustainable Development (IISD) began soliciting comments on its draft proposal for an agreement suspending investor-state dispute settlement for Covid-19 related measures. Then, on Wednesday, the Columbia Center on Sustainable Investment issued a letter, signed by economist Jeffrey Sachs and six other experts in human rights and development, calling for a moratorium on all investment claims during the pandemic.

These proposals are certainly timely. Over the past four months, governments have taken a wide range of measures to address the pandemic, including restricting non-essential services, restrictions on travel and movement, issuing compulsory licenses, temporarily nationalizing hospitals, screening foreign investment, and restricting exports (see the IISD’s summary here). Prominent investment lawyers have already predicted that such measures, depending on their design and implementation, could give rise to investment claims. Already, at least one government has been warned of potential investment claims arising from Covid-19 related measures.

In my view, these proposals for suspensions and moratoria on investment claims are seriously worth considering. In that spirit, yesterday I submitted the below comments to the IISD regarding their draft suspension. (IISD is currently engaged in a public consultation process on their draft text, and is seeking feedback through the end of the month here.). My comments support a strong agreement that effectively suspends any investment claim connected with Covid-19 related measures, even at the risk of shutting out some legitimate grievances. Even a broad suspension, I argue, is a modest and reasonable response, which facilitates diplomatic problem-solving in the face of a global crisis.

I am reposting the comments below because I think this initiative, as well as the parallel proposed moratorium on investment claims, deserve substantial consideration. In addition, the IISD draft suspension agreement raises a number of difficult questions of international law that are not addressed in my comments, except perhaps in passing. I encourage others to engage with these proposals.

General comments

I fully support this project’s aim to find a coordinated solution to suspending investment treaty claims relating to the Covid-19 response. Such a measure would significantly reduce concerns about regulatory chill and the anti-democratic effects of international investment law. The proposed measure is also modest in scope, and appears calibrated to creating the necessary space for states to seek coordinated diplomatic solutions to what is undoubtedly a worldwide crisis. 

The proposed suspension responds directly to concerns that investor-state dispute settlement may “chill” legitimate health and safety regulation in response to a pandemic. The empirical basis for regulatory chill remains contested, but it is not necessary to pick a side in that debate to support the proposed text. The prospect that threatened investment claims would chill legitimate regulation is supported by theory, confirmed in our anecdotal experience, and not contradicted by empirical study.  Caution counsels that we should remove this potential chilling effect in order to enable states to respond freely to a global health and economic crisis. We can leave to another day the debate over whether and how investment treaties must be recalibrated to avoid chilling regulation in the future.

The suspension of investor-state proceedings relating to Covid-19 also responds to potential anti-democratic and, more broadly, anti-political tendencies in investment arbitration.  As Jonathan Bonnitcha and Zoe Williams recently noted, investment tribunals tend to display a “reflexive distrust” of state measures that are seen to be “politically motivated.” This can be especially problematic in times of emergency, where crisis responses inevitably take on a political character and are rarely dictated by science, economics, or administrative rationality alone. In the context of crisis, states should retain the ability to respond in ways that are politically feasible, even if those responses disadvantage foreign investors.

A suspension of investor-state claims is also a modest intervention. First, it maintains the substantive obligations of investment treaties, meaning that, as a matter of law, states are not permitted to discriminate among investors, to take property without compensation, or to treat investments inequitably without regard to the underlying treaties. Second, treaty partners may still enforce these obligations through any means available under the treaties or general international law, including interstate arbitration, if provided for in the underlying treaty.  Third, the proposed agreement is merely a suspension of investor-state claims: it would not necessarily preclude investment claims for Covid 19-related measures if the suspension is lifted, provided those claims are valid and consistent with any underlying limitations period.

These elements of the proposal facilitate diplomatic problem-solving in the face of a global crisis. States can continue to rely on the substantive investor protections to evaluate each other’s ongoing responses to Covid-19. In the event of disagreement, governments can seek to reach a mutually agreeable solution through good-faith negotiations, diplomacy, or interstate arbitration. Most critically, in interstate arbitration, state governments control the initiation of the claim, the pleading, and settlement. Compared with investors, who have no reciprocal obligations under most investment treaties, states are less likely to to push draconian interpretations of investment protections, and they may be more open to reaching settlement.  Finally, states could agree to allow investor-state claims at some future date as part of a mutually agreed settlement, similar to other claims settlement agreements from the past.

Some of us would hope that a suspension of investment claims relating to Covid-19 will lead to a broader rethinking of investment law and the role of investor-state arbitration. Already, there is some discussion of using multilateral agreements to effect a coordinated withdrawal from investor-state arbitration altogether. Proposals similar to this one could be used to exclude other sectors from investor-state dispute settlement, such as climate-related measures. With respect to Covid-19, a group of experts has recently called for a moratorium on all arbitration claims during the pandemic, as well as a “permanent restriction on all arbitration claims related to government measures targeting health, economic, and social dimensions of the pandemic and its effects.” These are proposals worth considering.

The proposed text, however, is far more modest. It leaves for another day discussions about the appropriate scope of investment law, the value of investor-state dispute settlement, and the benefits of politicized versus “depoliticized” approaches to investment protection. It is a targeted measure to prevent investment law from undermining national responses to an unprecedented and ongoing crisis, and it should be readily endorsed by all sides in the ongoing debate over investment arbitration.

Specific comments

The remainder of this comment offers specific suggestions on the proposed text. It focuses on the suspension provided for in paragraph 1, the definition of “Covid 19 related measures” in paragraph 4, and the linkage to international health law. This is not meant to be exhaustive of all the legal issues raised by the agreement, and in particular it does not discuss the implications for the law of treaties.

Paragraph 1: The Justiciability of the Suspension Obligation

The drafters of the proposed text may wish to consider redrafting Paragraph 1 to address or limit its justiciability. As written, Paragraph 1 suspends the operation of investor-state provisions in respect of claims “over Covid-19 related measures.” For a tribunal exercising its authority to decide its own jurisdiction (kompetenz-kompetenz), this will raise at least two issues: whether the measures at issue concern “Covid-19 related measures” (a defined term), and whether the investment claims at issue are “over” such measures. Either of these points can create opportunities for claimants to prolong investment claims or potentially to circumvent the suspension.

These problems could be mitigated by amending the text. The requirement that a claim be “over” Covid-19 related measures could be adjusted to provide for a broader nexus, such as “claims directly or indirectly concerning Covid-19 related measures.” And the definition of “Covid-19 related measures” could be streamlined to minimize points of contention, as I discuss further below.

It is also worth considering whether self-judging language is appropriate here. Self-judging terms are common in provisions that concern states’ vital interests, such as security exceptions in trade and investment treaties. Self-judging language would, with one caveat, remove the question from the authority of a tribunal, and empower the host state to declare for itself that a claim relates to the Covid-19 pandemic.  It would thus provide a measure of assurance that, in extraordinary times, the signatories’ agreement to suspend recourse to investor-state dispute settlement would not be disrupted.

The caveat is that such “self-judging” provisions are subject to an overarching requirement that treaties be performed and interpreted in good faith, and the weight of opinion suggests that this good-faith requirement is justiciable. There is a wide range of opinions in the literature on what “good faith” requires in connection with a self-judging provision.  While the international courts and tribunals to address the question have so far been relatively conservative, there remains a risk that a state’s genuine decision that a claim concerns Covid-19 related measures might be overturned by an overreaching application of the good faith requirement.

This risk could be sharply reduced by using language such as that which appears in the security exception to the U.S.-Panama Trade Promotion Agreement. That agreement provides: “For greater certainty, if a Party invokes Article 21.2 [(Essential Security)] in an arbitral proceeding initiated under Chapter Ten (Investment) or Chapter Twenty (Dispute Settlement), the tribunal or panel hearing the matter shall find that the exception applies.”  This is understood to reduce or even eliminate a tribunal’s ability to overturn a state’s determination based on the principle of good faith, though it does not impact the general obligation of treaty partners exercise good faith in the performance and interpretation of their obligations.

In light of this discussion, Paragraph 1 could be reformulated along the following lines:

The operation of the provision or provisions of any Investment Treaty in force between two or more signatories to this agreement providing for the settlement of disputes between an investor and a state are hereby suspended in respect of claims that the respondent state considers to concern COVID-19 related measures.

[optional: For greater certainty, if the host state considers that a claim concerns a Covid-19 related measure or measures, then the tribunal hearing that claim shall determine that the suspension in Paragraph 1 of this agreement applies.]

Including self-judging language of this nature may heighten concerns about the already open-ended language of the suspension. As written, the proposed draft text does not contemplate a particular endpoint for the emergency period, at which point suspensions will be lifted. This is sensible, given that the public health and economic fallout could be with us for some time. Nevertheless, the drafters should consider whether some mechanism — such as a sunset clause or a periodic review period — would be appropriate. The drafters may also wish to consider stating explicitly under what conditions states could withdraw from the suspension agreement — either unilaterally, bilaterally, or plurilaterally — without seeking the consent of all signatories.  The threat of unilateral withdrawal from the suspension agreement could significantly reduce the possibility that signatories would abuse a self-judging suspension of claims. It is therefore important to give further consideration under the law of treaties to issues of withdrawal, denunciation, suspension, or termination of the suspension agreement itself.

Paragraph 4: The definition of Covid-19 related measures

The definition of “Covid-19 related measures” in the draft text is useful for drawing public attention to the range of measures that may be necessary to address this crisis, but as a legal text it is unduly complex. If the text is not streamlined significantly, it is likely to simply create a new legal battleground, which could undermine the purpose of imposing a quick and efficient suspension on claims concerning Covid-19 related measures.

The text advisedly creates an open, rather than closed, list for what constitutes a Covid-19 related measure. Even so, the itemized types of measures, state actors, and regulatory aims set out in Paragraph 4 can provide relevant context for an arbitral tribunal, exercising its kompetenz-kompetenz, to limit the scope of “Covid-19 related measures.”  The complexity of this text creates substantial opportunity for mischief.

First, as written the definition does not explicitly cover all conduct attributable to a state under international law. While the first line references “any conduct by a signatory,” the subparagraphs (a) through (c) could be understood as limitations on this reference. These subparagraphs, while broad, do not necessarily include: conduct of organs placed at the disposal of one state by another state; conduct by a person or group acting on the instructions of, or under the direction or control, of a state; conduct carried out in the absence or default of official authorities; conduct of an insurrectional or other movement; conduct acknowledged or adopted by a state as its own; actions ultra vires; or any applicable lex specialis.

Second, the types of measures listed in subparagraphs (i) to (iv) provide extensive language that litigants will point to as “context” to limit the suspension in Paragraph 1. The reference to “preventing or slowing” transmission of disease could drag a tribunal into deeply disputed questions about whether certain types of orders are effective health measures. Likewise, there is significant dispute—which quickly takes on an ideological character—about whether export controls or stockpiling are measures that “ensur[e]” the availability of essential goods. The reference to economic “impacts” in subparagraph (iii) could raise difficult questions of causation. The examples of economic measures may be too narrow, in that dual-purpose interventions to address Covid-19 impacts but also to redress preexisting issues may be seen as falling outside the scope. And the phrase “consistent with international practice” could be read to suggest that such measures must be in compliance with instruments of international health law — an issue discussed further below in connection with the International Health Regulations.

These issues could be mitigated by including self-judging language, either as described above or, alternatively, in Paragraph 4 itself.

They could also be significantly reduced by streamlining the formulation in the final text, along the lines of the following:

The term “COVID-19 related measures” includes any conduct attributable to a signatory to this agreement taken on or after December 1, 2019, in connection with the Covid-19 virus. For greater certainty, this term includes any conduct relating to the transmission of the virus; to the availability of goods, services, materials, or technology; or to national economic recovery, stability or development during or following the spread of the virus and the international response; as well as to any other objective relevant to the Covid-19 virus and its spread.

Preamble: Reference to International Health Law Instruments

The drafters may wish to reconsider the preamble’s reference to the International Health Regulations (2005). The preamble appears to understand the Regulations as primarily an instrument of global health law, affirming the sovereign right of states to regulate to attain the highest attainable level of physical and mental health. These are of course admirable aims, and they are consistent with the objective of the Constitution of the World Health Organization. But the reference to the Regulations complicates matters, and, insofar as the suspension provision in paragraph 1 is justiciable (see above), this reference may create problems for host states.

The International Health Regulations (2005) are in many ways a trade treaty, and they reinforce certain principles and norms of international economic law. The objective of the IHR is to provide for a response to the international spread of disease “in ways that are commensurate with and restricted to public health risks, and which avoid unnecessary interference with international traffic and trade.” This objective reflects a longstanding preference for free trade and international commerce, and for narrowly tailored public health interventions.

Other provisions of the Regulations confirm this preference for limited state intervention. Articles 24-41 place some limits — albeit flexible ones — on states’ ability to place restrictions on arriving ships and other conveyances, on the treatment of travelers and goods, on the use of health documents, and on charges for inspections and other health measures.  Article 42 imposes a general requirement that health measures be implemented “without delay, and applied in a transparent and non-discriminatory manner.” Article 43 affirms the right of states to impose measures that go beyond those permitted by the Regulations or by WHO recommendations, but such measures “shall not be more restrictive of international traffic and not more invasive or intrusive to persons than reasonably available alternatives that would achieve the appropriate level of health protection.” Measures covered by Article 43 are also subject to certain procedural requirements. As other scholars have noted, these disciplines mirror the requirements of scientific rationality and strict proportionality reflected in some trade and investment treaties and in arbitral decisions.

States are frequently accused of violating the International Health Regulations during emergencies, and the Covid-19 pandemic is no exception. Here the recent history of travel restrictions is instructive. In January 2020, the WHO declared a public health emergency with respect to Covid-19, and issued a “temporary recommendation” advising states that it did not recommend restricting travel from affected territories. Many states nonetheless did so — some almost immediately after the WHO’s declaration. (Indeed, one report suggests that public health experts in the United States switched position and began supporting travel restrictions on the day following the WHO’s announcement.) These travel restrictions, while not necessarily violations of the Regulations, trigger the states’ substantive and procedural obligations under Article 43. Some health advocates thus argued that the travel restrictions violated the Regulations.  But legal experts have also suggested that the WHO’s recommendation—which has since been modified—was unduly restrictive, and did not account for political and social realities or for the need for governments to “manage uncertainties” during a crisis.

Signatories to the proposed agreement should not want investment arbitral tribunals to get involved in these disputes. While the reference to the Regulations in the proposed text is preambular and should not itself give rise to binding obligations, there is some risk that it could draw tribunals into interpreting states’ obligations under global health law. As noted above, Paragraph 1 of the proposed agreement is likely justiciable, meaning that a tribunal could adjudicate whether a claim falls within the suspension. A tribunal could read the preambular reference to the International Health Regulations to suggest that claims are suspended only for measures that are broadly consistent with the Regulations. While this would not be the best reading of the text, it would be consistent with the practice of some tribunals to use preambles to narrowly construe limits on their jurisdiction.

This result should be avoided. The obligations in the International Health Regulations are complex, and investment arbitrators have neither the expertise nor the mandate to interpret the Regulations or resolve their ambiguities. Moreover, the Regulations’ preoccupation with avoiding undue restrictions on international commerce could, if imported into the hotly contested world of investment arbitration, have negative consequences for the right of states to regulate to attain the highest achievable standard of health.

Conclusion

This is a valuable and worthwhile project. While I have no special insight into the political feasibility of adopting an agreement of this sort, it is a timely and modest intervention that addresses significant legal risk in the face of a global emergency. Even if this project should prove unsuccessful, an open and frank conversation about this proposal would go some way toward reassuring states and educating potential arbitrators about the need to protect regulatory flexibility during this crisis.

The specific proposals offered here are meant to maximize states’ regulatory flexibility.  This is in line with the draft agreement’s intention to eliminate the negative effects of threatened or actual investor-state claims on the global response to this pandemic. As of this writing, it appears that the great majority of measures adopted by states to address Covid-19 are genuine attempts to limit the virus’s spread and mitigate the damage. These are not the kinds of measures that should be deterred by investment treaties, or for which states should owe full compensation after the fact.

Of course, we should not be naïve. There are already indications that some states have used Covid-19 as an excuse for measures that violate human rights and further entrench authoritarian regimes. International institutions can and do have many roles to play in combatting these tendencies.

But to suggest that investor-state arbitration can prevent such authoritarian measures in the midst of a global emergency is either a delusion or a deception. Investment treaties are not general human rights treaties. They provide a special set of protections for a special class of individuals and corporations — namely, “investors” with “investments.” The question is whether these special protections outweigh the risk that states will be deterred from, or made to compensate for, enacting legitimate regulations to address a global crisis. Put this way, the answer is clear.

Call for Submissions: Trade, Law and Development

This is from the Board of Editors of Trade, Law and Development:

The Board of Editors of Trade, Law and Development is pleased to invite original, unpublished manuscripts for publication in the Winter ’20 Issue of the Journal (Vol. 12, No. 2) in the form of ‘Articles’, ‘Notes’, ‘Comments’ and ‘Book Reviews’.

Manuscripts received by August 15^th, 2020, pertaining to any area within the purview of international economic law will be reviewed for publication in the Winter ’20 issue.

Founded in 2009, the philosophy of Trade, Law and Developmenthas been to generate and sustain a constructive and democratic debate on emergent issues in international economic law and to serve as a forum for the discussion and distribution of ideas. Towards these ends, we have published works by noted scholars such as WTO DDG Yonov F. Agah, Dr. Prof. Ernst Ulrich Petersmann, Prof. Steve Charnovitz, Prof. Petros Mavroidis, Prof. Mitsuo Matsuhita, Prof. Raj Bhala, Prof. Joel Trachtman, Gabrielle Marceau, Simon Lester, Prof. Bryan Mercurio, and Prof. M. Sornarajah among others. TL&D also has the distinction of being ranked the best journal in India across all fields of law for seven consecutive years by Washington and Lee University, School of Law [The Washington & Lee Rankings are considered to be the most comprehensive in this regard].

Manuscripts may be submitted via e-mail or ExpressO. For further information about the Journal, please click here. For submission guidelines, please click here.

In case of any queries, please feel free to contact us at: editors[at]tradelawdevelopment[dot]com.

LAST DATE FOR SUBMISSIONS:15 August, 2020

The Field of International Pandemic Law

The Field of International Pandemic Law (IPaL)

Steve Charnovitz

10 May 2020

As a scholar who has written to define the field of international economic law (IEcL), I now see a need for more attention to the vital topic of international pandemic law (IPaL).  Although the origins of international health law in the 19th century were concerns about contagious disease, I am not aware of any project to specify a program for IPaL in the 21st century. I have taken note of an excellent paper published in March 2020 in the Max Planck Institute by Armin von Bogdandy and Pedro A. Villarreal.

What is IPaL?  It is the emerging and potential law of how governments and international organizations should address pandemics like Covid-19.  To answer whether such law is needed, unpack the term.  The proposed field of law is "international" because viruses do not respect national borders and because the course of disease in one country affects other countries.  In other words, contagion externalizes transborder negative effects.  This new field of law properly focuses on pandemics because of the huge damage that Covid-19 is having and will wreak on world progress and because the next Covids are likely to occur before 2119.  The new field requires law at all levels of government from the local to the global because each level of government, under the principle of subsidiarity, has a role to play.

To be sure, some pandemic law at the international level already exists.  The International Health Regulations (IHR) of the World Health Organization (WHO) have already guided (or failed to guide) the responses of countries regarding notifications and travel restrictions.  And many existing fields of international law, such as international human rights law and international trade law, certainly have relevant principles of law that would be important in developing IPaL.  But that there is currently a gap cannot be doubted.  For example, the United Nations (UN) Sustainable Development Goals (SDGs) for 2030 do not mention the term "pandemic" and do not seem to anticipate a novel global epidemic. 

This brief post seeks to introduce the field of IPaL and lay out a few key points of design:

First, IPaL should be a mix of both hard and soft law and public law and private law.  The hard law would be in the form of minimum standards that all governments agree to incorporate into domestic law and to enforce. Moreover, just as treaties and model laws have been valuable features of IEcL — for example in trade agreements, UNCITRAL treaties and model laws — IPaL would need to adopt many mechanisms that have proven successful in other regimes.  The soft law would be in the form of principles that governments would subscribe to.  Even though IPaL would be always in place, it might be situated as rules that would become fully operative only when there is an active pandemic as some of the rules might conflict with other international rules that would be utilized in times without pandemics.

Second, better international institutions are needed.  To be sure, the WHO will need to be a player in IPaL, just as the League of Nations Health Organization acted on epidemics before the UN.  But the WHO's longtime discrimination against Taiwan (a problem that I began to write about in 2007) is one disqualification for the WHO to be the center for IPaL.  Another is the suboptimal performance of the WHO during the Covid-19 crisis which shows at a minimum that an organization with as broad as a mission as the WHO is probably not up to the task of mobilizing the world for a pandemic.  Whether a new international organization is needed is a matter for reflection, and I am aware of how little progress has occurred from my longtime efforts to catalyze a World Environment Organization. In the meantime, there are many international organizations in and out of the UN that have programs and law relevant to pandemics — for example, the International Labour Organization, the World Organization for Animal Health, the World Trade Organization (WTO), and the Organsation for Economic Co-operation and Development (OECD). Interaction with the climate regime is also needed.  Yet the normatively empty nature of the Paris Accord should surely not serve as a model for tackling pandemics. 

Third, there should be a monetary, development, and financial dimension. This requires involvement by the International Monetary Fund, the World Bank and the Regional Banks.  There are serious short-term problems such as financing for human needs during economic shutdowns.  But there are also serious long-term problems such as making the investments in global public goods needed on a worldwide scale.  The world needs to save more in advance, an allocation that is hard to achieve.

Fourth, the war against pandemics is too important to be left to the governments.  Intensive involvement is needed by foundations, universities, research institutes, pharmaceutical companies, banks, medical associations, etc.  Intense private sector involvement will be needed to be better prepared next time and, as always, the role of nongovernmental organizations (NGOs) is vital is developing new ideas and communicating information to the public.  New prizes should be introduced for innovation in pandemic prevention and management.  Such a (Nobel/Gates) Prize might be easy to award in 2020 or 2021, and yet we also need to be doing it in 2031.

The role of public health education is vital too in developing the expertise and skills requisite for crises that may not recur for years or decades. 

In summary, as the current health and economic crisis plays out, there will be efforts in every country to improve domestic law (and local law) for pandemics.  One can easily foresee the establishment of international and UN commissions that will tilt toward policy rather than law.  Yet we should also be attentive to the need for putting better international law in place to promote cooperative behavior among (sometimes competing) governments and within civil society. 

Call for Submissions: Trade Experettes COVID-19 Blog Post Series

This is from the Trade Experettes Blog Editors:

Call for Submissions: Trade Experettes COVID-19 Blog Post Series

We are the Trade Experettes. We are women professionals in international trade - economists, academics, lawyers and public policy experts that strive to build a global interactive platform for trade policy discussions and to share outstanding ideas.

The Trade Experettes are located in countries around the world, all of which have been hit by COVID-19 to varying degrees. Given our multidisciplinary and diverse network, we are well placed to contribute to the discourse on the trade-related aspects of the current crisis, and to find pragmatic solutions and possible areas for cooperation. 

The editors of the Trade Experettes blog are requesting submissions to contribute to a special series of blog posts dedicated to the current crisis. Topics can include, but are not limited to the impact of the COVID-19 pandemic on:

• Global value chains

• Import/export restrictions

• Consumer behavior

• Infrastructure requirements 

• International institutions (WTO, FTAs, BITs, etc.) 

• International/regional cooperation

• Particular challenges for developing countries

• Food trade and food security

• Regional/country specific impacts

• Patents/licensing with regard to vaccine development

• Regulatory barriers to trade (ie. PPE, ventilators, medicines)

Blog posts should aim to be anywhere from 750-1200 words, include hyperlinks for in-text citations, and accessible to a broader audience (please limit jargon). 

We are accepting submissions on a rolling basis. Please send your posts and any questions to editors@tradeexperettes.org. For more information about the Trade Experettes, visit our website here. 

We look forward to sharing your expertise with our broader network!

Stay safe and healthy,

Trade Experettes Blog Editors

Inu Manak

Evelyn Suarez

Anna Jerzewska

Maria Sokolova

Stephanie Honey

Hanna Norberg

Ania Jankowska-Ericksson

MPIA Arbitration: What will happen to the present AB jurisprudence?

There is a deafening silence in the MPIA documents published so far about the future status of current AB jurisprudence before the MPIA arbitrators. Since, after all, the MPIA arbitrators will function as an arbitral tribunal, it is essential to consider the role of arbitral jurisprudence in International Investment Law. And here, there is no illusion to be had!

Although decisions by investment treaty arbitral tribunals are not a formal source of law in the strict sense, their subsidiary status in the canon of sources should, however, not disguise the following fact. Arbitral tribunals' pronouncements on the rights and obligations of parties in international investment law, are becoming the principal reference point for understanding the substance of those rights and obligations. In other words, even though arbitral tribunals do not become tired of emphasizing that arbitral precedent is not binding, arbitral precedent  becomes the principal reference point to determine the content of International Investment Law.

The statement of the arbitral tribunal in Saipem v Bangladesh is representative of a position that has widely taken hold among investment arbitrators:

The Tribunal considers that it is not bound by previous decisions. At the same time, it is of the opinion that it must pay due consideration to earlier decisions of international tribunals. It believes that, subject to compelling contrary grounds, it has a duty to adopt solutions established in a series of consistent cases. It also believes that, subject to the specifics of a given treaty and of the circumstances of the actual case, it has a duty to seek to contribute to the harmonious development of investment law and thereby to meet the legitimate expectations of the community of States and investors towards certainty of the rule of law. (Saipem SpA v People’s Republic of Bangladesh, ICSID Case No ARB/05/07, Decision on Jurisdiction and Provisional Measures (21 March 2007), para. 67.)

As underlined by Stephan Schill ( ACIL Research Paper 2017-16, available at SSRN), while arbitral precedent does not bind later arbitral tribunals, it shifts the burden of argumentation by demanding a reasoned justification for departing from established precedent. This is because, as stated by another tribunal, ‘it is a fundamental principle of the rule of law that “like cases should be decided alike,” unless a strong reason exists to distinguish the current case from previous ones.’ (Daimler Financial Services AG v Argentine Republic, ICSID Case No ARB/05/1, Award (22 August 2012), para. 52.) This is reminiscent of the "cogent reasons" pronouncement by the WTO Appellate Body!

It seems therefore that MPIA arbitrators will pay lip service to the fact that they are not bound by the previous AB jurisprudence but only by WTO Agreements. This will undoubtedly please the US administration!  However, we must expect that in practice, both the arbitrators and the parties would constantly invoke the previous AB jurisprudence.This is what International Investment Law teaches us. 

NB: I don't exclude that MPIA arbitrators will take this opportunity to put aside some contested AB jurisprudence, a job that the AB did not want to do itself because it supposedly never makes mistakes. I am thinking here of the AB definition of a "public body" in the context of Article 1/SCM.  I would be surprised to see MPIA arbitrators adopting this absurd definition.

The Pool of Arbitrators for the MPIA

From the European Commission:

Today, the EU and other WTO members have formally notified the ‘Multi-party interim appeal arbitration arrangement’ (MPIA) to the World Trade Organization (WTO). This notification marks the start of the application of the MPIA to disputes arising between the participating WTO members.

Annex 2 of the MPIA says the following:

COMPOSITION OF THE POOL OF ARBITRATORS PURSUANT TO PARAGRAPH 4 OF COMMUNICATION JOB/DSB/1/ADD.12

After the notification of the present communication to the DSB, the participating Members will promptly commence the composition process. The following will apply:

1. Each participating Member may nominate one candidate, by notifying the other participating Members.

2. The deadline for nominations will expire 30 days after the date of this communication.
...

The participating members identified in the MPIA text posted by the European Commission today are: Australia; Brazil; Canada; China; Chile; Colombia; Costa Rica; European Union; Guatemala; Hong Kong, China; Iceland; Mexico; New Zealand; Norway; Pakistan; Singapore; Switzerland; Ukraine; and Uruguay. That means each one of these may nominate a candidate within 30 days. I think it also means that other governments have an incentive to join the MPIA before the 30 days is up, so that they can make a nomination too.

It would be nice if the names of the nominated candidates become public, but we'll see how it plays out.

John H. Jackson Moot Court Competition: Call for Case Authors

ELSA International invites proposals from prospective case authors to write the Moot Court Case for the 19th edition of the John H. Jackson Moot Court Competition, formerly known as the ELSA Moot Court Competition on WTO Law.

The Competition is a simulated hearing of a World Trade Organization dispute settlement panel. Teams of interested students from all over the world prepare written submissions for the complainant and the respondent on a fictitious case. The purpose of the Competition is to teach students about WTO law and the WTO dispute settlement system as well as to assist them in developing practical litigation skills. Teams then travel to Regional Rounds where they compete against each other before a WTO dispute settlement moot court panel composed of WTO and trade law experts. The best teams from each regional round participate in the Final Oral Round of the Competition held in Geneva.

Case proposals will be evaluated by an Academic Board composed of WTO law academics, practitioners, and staff of the WTO Secretariat. After acceptance of the case proposal by the Academic Board, the case author will work with the Academic Board to refine the issues presented in the proposal before the launch of the Competition with the publication of the case on 15 September 2020. In addition to the initial moot case, the case author will also prepare written clarifications addressing questions raised by students on the case (due in November 2020) as well as a bench memorandum and score sheet for panelists to use in judging the written submissions and competition (due in the first week of December 2020). A detailed schedule of this review process will be provided to the selected author. The case author would be invited to the WTO in Geneva to judge the Final Oral Round of the Competition, along with distinguished WTO scholars and practitioners, in June 2021.

The Case should enable students to engage with a realistic trade dispute raising legal issues under the WTO covered agreements. The case proposal (approximately 1000 words in length) should present a factual scenario and identify approximately three to four WTO legal issues (which may include procedural issues) that arise from the scenario. The Case should provide a relatively balanced opportunity for legal arguments in favour of both the complainant and the respondent. Ideally, the Case would address some legal issues raised but not resolved in the jurisprudence to date and provide the opportunity to study and argue existing case law. The resolution of the legal issues should not depend on an evaluation of complex evidence or data. The proposals will be evaluated on the basis of the novelty of the issues raised, along with the opportunities provided by the case for students to engage with the existing WTO jurisprudence. Candidates are encouraged not to repeat the issues in the previous year’s case.

Case proposals should be made to mootcourts@elsa.org, copying iryna.polovets@wto.org and miguel.villamizar@wto.org, by 8 June 2020. The case author would be notified as soon as possible and begin work with the Academic Board to develop the case over the summer, before the case is launched on 15 September 2020. Please note that a complete draft of the case is expected by the first week of August, to allow for sufficient time for its review by the Academic Board.

 

A Short History of Buy American Content Requirements in SBA Loans

A couple weeks ago, Steve Charnovitz posted about a domestic content requirement in the U.S. Paycheck Protection Program being run by the Small Business Administration. We discussed the issue a bit in the comments, but I was curious about the origins of the requirement. I asked a Cato intern named Catherine Kraft, a University of Baltimore law student, to look into it. Here's what she came up with:

Introduction

Over the past few weeks, Americans across the country have read accounts of the financial burdens faced by local businesses throughout the country due to the COVID-19 worldwide pandemic. Businesses, including family-owned restaurants, hardware stores, and shops, have been forced to close their doors for an unforeseeable amount of time because they cannot afford to pay the overhead to stay afloat. On March 27, President Trump signed a $2 trillion stimulus package aimed at helping small businesses, among others, weather the crisis. The stimulus package allocated $350 million to the Paycheck Protection Program (PPP), to fund small business loans to pay for payroll and operating costs (additional funding is on the way).

Beyond all the various general policy issues that arise here, a narrower trade policy question can be found in the wording of the Small Business Administration’s (SBA) Borrower Information Form, also known as Form 1919, which must be filled out by any business seeking a PPP loans. By signing the form, small businesses agree to purchase American-made products and equipment. Specifically, a provision on the form states that a small business owner agrees “[t]o the extent feasible, to purchase only American-made equipment and products.” This blog post will discuss the origins of this provision, to the extent I have been able to identify them. If anyone knows more, please feel free to mention it in the comments.

Placement and Origin of the “American-made” Provision in Form 1919

The “American-made” provision is not noticeable at first glance. The provision is not bolded and is not underlined. It is placed strategically at the end of the form in a section entitled “Representations and Authorizations.”  But that does not mean the provision is a sneaky insertion by a nationalist Trump administration: A crucial point here is that the provision pre-dates Trump.

The provision has been on Form 1919 for almost 14 years. The form first appeared on the SBA’s website around July 19, 2006. Prior to Form 1919’s debut, there were no other forms containing similar language to suggest a predecessor of the form. Although the form first appeared on the SBA’s website in July 2006, it did not become effective until June 28, 2007. A careful look at an older version of the SBA website revealed that there was a heavy focus on the September 11 terrorist attacks and natural disasters around the time the “America-made” provision first appeared.  Perhaps these incidents gave rise to a nationalist sentiment that triggered the inclusion of the provision.

It is worth pointing out that while the state of trade or the economy at a particular moment may have been the trigger to incorporate the “American-made” provision in the application form, the language found in the provision can be traced to section 102 of the Small Business Investment Act of 1958. Section 102 states in part “[i]t is declared to be the policy of the Congress and the purpose of this Act to improve and stimulate the national economy in general and the small-business segment thereof… by establishing a program to stimulate and supplement the flow of private equity capital and long-term loan…It is the intention of the Congress that in the award of financial assistance under this Act, when practicable, priority be accorded to small business concerns which lease or purchase equipment and supplies which are produced in the United States…”[1] The Small Business Investment Act allows for small businesses to apply for loans to receive funds to help pay for operational expenses.[2] Thus, similar language has always existed, but it is likely that the SBA, due to various specific events affecting the economy, relied on the language from the Act as the basis for inserting the “American-made” provision. 

Wording of the “American-made” Provision

The first time I read the “American-made” provision, the phrase that caught my attention was “to the extent feasible.” The phrase has been consistent throughout every version of Form 1919, dating all the way back to its inception. The SBA makes no attempt in the current form, earlier forms, or on its website to explain “to the extent feasible.” What does this phrase actually mean? Does it mean that small businesses can purchase international products, but only up to a certain percentage? Or does it mean that small businesses can purchase international products if it is unavoidable or an instrumental part of the business? If it is the former, the SBA has failed to identify what percentage is acceptable. If it is the latter, we run into the problem of what the SBA deems as unavoidable or instrumental.  A quick search in the dictionary reveals that “feasible” means capable of being done successfully. The definition of feasible does not assist in decrypting what the SBA likely meant when it chose to preface the “American-made” provision with “to the extent feasible.”  

Another problem with the “to the extent feasible” preface is whether the SBA will enforce punishment if the “American-made” provision is violated. Since Form 1919’s debut, there is no case law to indicate that the SBA has enforced violations of “American-made” provision. This could also indicate that small businesses that have received loans from the SBA have not violated the “American-made” provision; however, this is unlikely because of how much the United States engages in global commerce.

What is concerning about the “to the extent feasible” preface is that because there are no clear standards on how it will be assessed, the SBA has discretion over when it will enforce the “American-made” provision. This effectively forces small businesses to comply out of fear of facing fines or the repeal of its loan. But what about small businesses that did not read Form 1919 meticulously? Most small businesses may be unaware of any of this, and there is a risk that it could surprise them later.

Conclusion

It does not appear that the “American-made” provision will be disappearing from Form 1919 any time soon. The provision has been on the form since its inception and it pulls from the language found in the Small Business Investment Act to support its presence on the form.  Although it does not appear that the provision has been enforced, this does not mean the SBA will not enforce the provision in the future. The major concern with the wording found in the “American-made” provision is that it lacks specificity in providing standards or guidelines. Small businesses are navigating blind when they receive SBA loans and they have no clue how to adhere to the “American-made” provision. Because of the ambiguity and lack of enforcement in the past, it is unlikely that the SBA will enforce the provision in the future. Small business, however, should stay vigilant and purchase wisely because there is no telling when the SBA will start enforcing the provision.

 

[1] Small Business Investment Act of 1958, 15 U.S.C. § 661 (1958).  

[2] 15 U.S.C. § 661 (1958).  

Guest Post: Are the ‘Lester Principles’ too ‘neo-liberal’ for a WTO consensus?

Guest Post by Prof. Ernst-Ulrich Petersmann, European University Institute, Florence

In his Post of 19 April 2020, Simon Lester made three proposals in order to satisfy the most significant US concerns with the WTO Appellate Body in ways acceptable for the rest of the WTO membership: ‘(1) limiting the scope of appellate review; (2) providing more deference on “trade remedies”;  and (3) giving more powers to WTO members to object to the reasoning in dispute settlement reports.’ As Simon and most other people believe that the ‘Trump administration is not likely to change its view or approach’, Simon’s proposals are made in case ‘Joe Biden becomes president’. Let me start by congratulating Simon for his timely proposal. I fully support his pragmatic argument that ‘(i)f we want to get the Appellate Body up and running again’, WTO lawyers all over the world ‘need to be thinking about what sort of compromise might work’. The needed compromise is unlikely to come from WTO diplomats alone. We are all affected by illegal WTO power politics, and we are all democratically responsible!

Unfortunately, the ongoing WTO negotiations on DSU reforms since 1998 suggest that WTO diplomats risk remaining incapable of agreeing on reforms that are also acceptable to democratic institutions and civil societies in more than 160 WTO member countries affected by the US assault on the rule of law in international trade. Hence, before engaging in a discussion of the details of the DSU reforms as proposed by Simon, we should ask broader ‘constitutional questions’ – notably taking into account the reality that US hegemonic nationalism is driven by domestic business interests and ‘neo-liberal values’ (like ‘market fundamentalism’, utility-maximization by the homo economicus, Chicago school economics neglecting social inequalities inconsistent with economic and social human rights) that are fundamentally different from those of European, ordo-liberal constitutionalism (proceeding from more comprehensive protection of fundamental rights and public goods, viewing markets as legal constructs that cannot protect general consumer welfare without legal limitations of ‘market failures’, ‘governance failures’ and ‘constitutional failures’). State-capitalist WTO members may have even less reasons for accepting hegemonic US proposals for ‘special deference to trade remedies’. The more the normative contradictions between US neo-liberalism (e.g. denying global public goods like climate change and worldwide ‘courts of justice’), European ordo-liberal constitutionalism (e.g. committed to a ‘New Green Deal’ aimed at mitigating climate change and endorsing climate change litigation) and totalitarian state-capitalism affect regulatory WTO challenges, the more their diverse conceptions of ‘embedded liberalism’ risk rendering WTO negotiations difficult (as explained in a forthcoming article of mine in the JIEL 2020).

As DSU amendments ‘shall be made by consensus’ (Article X:8 WTO Agreement): What are the reasonable self-interests of the 164 WTO members that must be taken into account in order to enable ‘WTO consensus’ on DSU reforms, beyond the technical legal details that have been deliberated in special sessions of the DSB since 1998? Have the more than 120 WTO members insisting – at each DSB meeting – on the filling of the WTO Appellate Body vacancies, and the DSB members supporting the ‘Walker principles’ for resolving the Appellate Body crisis, not better reasons to use the multilaterally agreed ‘appellate arbitration’ under Article 25 DSU than to agree to the ‘Lester principles’ for reducing the judicial Appellate Body functions? Article 3.2 DSU rightly recognizes that the ‘dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system’ (Article 3.2 DSU). How can DSU reforms help to protect rule of law in international trade, reduce global transaction costs, and secure supply of goods and services demanded by billions of people? The nationalist focus on US protectionism in the 2020 USTR Report on the WTO Appellate Body has ignored such broader, systemic WTO challenges affecting all WTO members and the future of humanity. Would WTO negotiations on the ‘Lester principles’ risk, likewise, getting lost in technical DSU discussions based on conflicting value premises provoking further, democratic backlash against WTO power politics? What kind of DSU does the WTO need to realize its declared ‘objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development’ (WTO Preamble)?

The need for such broader questions is illustrated by the facts of global climate change, global health pandemics, and one-sided government responses in many countries (at least here in Italy, where I remain confined to staying at home since 6 weeks). The obviously inadequate governance responses now risk triggering even worse economic, social, food and health crises than post-1929. Unless we acknowledge that our governments have failed to prevent climate change, global health pandemics and the global economic crises as now predicted by the IMF, also the DSU negotiations risk to fail in responding to the existential challenges of our time. If we compare the ‘Walker principles’ discussed in the DSB with the ‘Lester principles’: Aren’t the latter not far too narrow responses to the peculiar US context of neo-liberal interest group politics? Climate change mitigation will not be possible without introducing carbon taxes, border carbon adjustments and economic restrictions (e.g. on fossil fuel subsidies) in the near future that are bound to provoke hundreds of WTO disputes in the coming years. Does Simon’s first proposal to limit the judicial functions of the WTO Appellate Body protect the global interest in transnational rule-of-law, e.g. in view of the fact that the USA has never demonstrated that the Appellate Body has not complied with its mandate ‘to clarify the existing provisions of (WTO) agreements in accordance with customary rules of interpretation of public international law’ (Article 3.2 DSU) in its ‘prompt settlement’ of WTO disputes? If the Appellate Body ‘may uphold without further comment’ panel findings (as proposed by Simon): would this not further ‘politicize’ and undermine the legitimacy of Appellate Body findings? If WTO members cannot prevent US governments from engaging in illegal, national protectionism (e.g. for US steel and aluminum industries and their lobbies): Will other WTO members be convinced by Simon’s second proposal to reduce the judicial accountability for ‘trade remedies’ even further by taking away the rights of adversely affected WTO member states to maintain their multilaterally agreed ‘reciprocal balance of concessions’? Will such promotion of unilateral protectionism not adversely affect future WTO negotiations?

Simon’s third proposal touches the true, most fundamental failure of the WTO Appellate Body crisis. Simon adds to the many proposals made by WTO lawyers over the past decades (e.g. by the International Law Association’s ‘International Trade Law Committee’ under my chairmanship from 2000-2014) in order to induce WTO diplomats and the DSB to exercise stronger political control over WTO jurisprudence. Both the USTR and the DSB have failed to ‘institutionalize critical public reason’ in the WTO disputes settlement system in ways that could have improved WTO jurisprudence (e.g. through majoritarian ‘authoritative interpretations’ pursuant to Article IX:2 WTO Agreements, majoritarian procedural decisions pursuant to Article IX:1 WTO on filling Appellate Body vacancies ‘as they arise’ in conformity with Article 17.2 DSU). The WTO ideology of ‘member-driven governance’, the illegal power politics in the DSB, the interest-group driven neo-liberalism of the USTR, and the WTO neglect for its ‘sustainable development’ objectives have all contributed to the fact that – since 1998 – the DSU reform negotiations have failed to adjust the WTO dispute settlement system and jurisprudence to the obvious, regulatory and judicial problems that have arisen in WTO practices (like the much criticized ‘public body’ case-law of the Appellate Body).

The supporters of a rules-based international trading system should be grateful to Simon for provoking a global debate beyond WTO diplomats on how the necessary compromise for reforming the WTO dispute settlement system could look like. This debate must continue. Yet, ordo-liberal critics of power-oriented ‘member-driven WTO governance’ – if it remains disconnected from effective democratic control, rule-of-law, the regulatory challenges of climate change and from other global emergencies - may be forgiven for suggesting that the global priorities for WTO reforms should be different from those proposed in the ‘Lester principles’. The purpose of this ‘European response’ to Simon’s good intentions is to broaden our perspective in this time of global governance failures, which reasonable citizens find as difficult to understand as Trumpian nationalism and power politics. For instance, why are the ‘Covid-19 health risks’ for primarily elderly people so much more important than the 9 million poor, and often much younger people dying every year from hunger and unnecessary poverty? Is it justifiable that now thousands of people are dying from other diseases because many hospitals currently admit only Covid-19 patients? We should recognize ourselves as vulnerable ‘citizens of the world’, who have learnt that the WTO history is not a never-ending march towards human progress and protection of human rights that remain neglected inside many WTO member states. Shouldn’t we transcend nationalism and learn from the current global governance crises (e.g. in the WTO and WHO) in order to prevent even worse crises like the unfolding climate catastrophe and the economic and social world crises now predicted by the IMF? Just as local mistakes in a fish-market in Wuhan can trigger global health crises that risk ushering in global economic crises if health policies are mishandled, so risk nationalist US assaults on global trade, health and environmental institutions to aggravate our current environmental, health and social crises to the detriment of citizens all over the world. DSB diplomats and WTO lawyers should avoid ‘sleepwalking’ and use the needed DSU reforms for strengthening transnational rule of law in order to better respond to the existential threats, which billions of citizens are facing today

U.S. Says It Won't Comply in DS505 (Supercalendered Paper)

Here is a communication from Canada dated April 16 related to the Supercalendered Paper case:

The Dispute Settlement Body (DSB) adopted the recommendations of the panel and Appellate Body in US – Supercalendered Paper (DS505) on 5 March 2020. Pursuant to Article 21.3 of the Dispute Settlement Understanding (DSU), the United States must inform the DSB of its intentions in respect of implementation of those recommendations. It is Canada’s understanding that the United States has not done so.

Canada assumes that the relevant time frames under DSU Article 22 with respect to this dispute will be interpreted in the light of the current suspension of all WTO meetings, including DSB meetings, until the end of April 2020 and potentially beyond that time. While the DSU provides that the DSB shall meet as often as necessary to carry out its functions within the time frames provided in the DSU, Canada understands that there is currently no means for the DSB to do so.

In view of these circumstances, Canada informs you that it intends to request authorization from the DSB, with respect to US – Supercalendered Paper, to suspend the application to the United States of concessions in accordance with Article 22 of the DSU at the next DSB meeting held after the end of the current suspension of such meetings.

Canada has already communicated its intentions to the United States so as to provide it with an opportunity to comment on this proposed course of action before 12:00p.m. CEST on 17 April 2020. In addition, Canada has indicated that it remains at the U.S. disposition to discuss a mutually agreed solution with respect to this dispute.

Here is an excerpt from the U.S. response on April 17:

The United States is in receipt of Canada's April 16, 2020, letter, concerning its intention in the dispute United States – Countervailing Measures on Supercalendered Paper from Canada to request authorization from the Dispute Settlement Body (DSB) at the next DSB meeting to suspend the application of concessions to the United States. My authorities have requested me to provide the following comments.

The United States objects to the premise of Canada's communication, which is that the DSB adopted recommendations in this dispute on March 5, 2020. The position of the United States is clear that no recommendation was or could be adopted by the DSB because the appellate and panel reports were not adopted by DSB consensus. ...

...

as the United States made clear at the March 5 DSB meeting, because there was no valid Appellate Body report in this dispute, the appellate and panel reports could only be adopted by positive consensus. As there was no consensus on adoption, the DSB did not adopt any reports in this dispute. Accordingly, there is no recommendation for the United States to bring a measure into conformity with a covered agreement.

At the same March 5 DSB meeting, Canada agreed that the allegations with regard to Ms. Zhao's affiliation with the Government of China and participation in the appeal are serious and stated that they deserve full and impartial consideration in a manner that provides due process for all parties.

The United States therefore expects that Canada will join the United States in seeking to ensure that the integrity and impartiality of the WTO dispute settlement mechanism is maintained.

The United States requests that you distribute this communication electronically to the Members of the DSB and circulate it when feasible to do so.

We could make a lot of the U.S. arguments, but I'm not sure they really matter. They go against the spirit of the rules, but the spirit was in trouble long before this happened. Practically speaking, the issue is that the United States says it's not going to comply (something that is not unheard of in WTO disputes). So now the question becomes, will Canada go ahead with retaliation right away (subject to an Article 22.6 arbitration if the U.S. requests one)? Canada certainly has an argument that it is permitted to do so. It's worth noting that if the United States had made a half-hearted effort that sort of looked like compliance, it could have delayed retaliation until after an Article 21.5 proceeding was completed.

ADDED: I had wondered what the practical impact of all this would be, and perhaps this is the answer:

“There are currently no duties being levied by the U.S. on Canadian supercalendered paper,” said Ryan Nearing, a spokesman for International Trade Minister Mary Ng. “However, Canada intends to keep its right to retaliate in case duties are ever unjustly imposed in the future.”

The absence of retaliation makes it easier for the U.S. to take this approach.

Virtual Symposium on EU Investment Screening

This is from Steffen Hindelang, University of Southern Denmark and Jens Hillebrand Pohl, Academy of European Law / Maastricht University:

Virtual Symposium on EU Investment Screening

You are warmly invited to attend an online symposium on Investment Screening in the European Union, to be webcast live on 29 April 2020, 14:00-17:00 CET, and 30 April 2020, 10:00-13:00 CET. The event is organized in cooperation with the European Commission and stakeholders from business, private practice, and academia as part of the CELIS initiative. It is hosted by Steffen Hindelang (University of Southern Denmark) and Jens Hillebrand Pohl (Academy of European Law / Maastricht University). Please kindly see the programme here and visit the website https://CELIS.institute for more information.

The purpose of this ‘virtual symposium’ is to provide uniform practical training and analysis on the application and implications of the new EU Investment Screening Regulation 2019/452, before it becomes fully applicable on 11 October 2020. Invitations are extended to investment screening authorities and investment protection agencies of the Member States. The event is not open to the public.

We would be glad if you could also circulate our invitation to interested persons in your institution. Participation is free and by invitation only, but registration is required. Please send an email to: jens.pohl@maastrichtuniversity.nl (cc.).

For your information, we are also organizing a high-level conference on Investment Screening in Brussels on 12-13 November 2020. More information, including programme and how to register, is available here: www.era.int/?129433&en

We are looking forward to your response. If you would like further information, please do not hesitate to contact us.

Best regards,

Steffen Hindelang and Jens Hillebrand Pohl

WTO Dispute Settlement Misunderstandings: How To Bridge the Gap Between the United States and the Rest of the World

When the Uruguay Round of multilateral trade negotiations was completed, the world trading system was transformed in several important ways: A formal institution was created, as the World Trade Organization (WTO) replaced the General Agreement on Tariffs and Trade (GATT) (which had been operating as a de facto institution); the scope of coverage was expanded considerably, with trade in services and intellectual property now included; the system was now unified under a single governing framework; and the dispute settlement system became more legalized, with an appellate review mechanism added and some diplomatic elements removed.

In its early years, the WTO and its new dispute settlement system received praise in many circles. Academics wrote about it as a successful "constitutional" system. And people in many other policy areas were jealous of its effective international enforcement mechanism.

But flaws soon became apparent. Ambitious negotiating goals were set but rarely completed. Since the Uruguay Round, no new major "round" of negotiations has succeeded, although deals on smaller issues have been concluded.

In the meantime, dispute settlement became the main engine of activity at the WTO. For most of the GATT era, governments who were the subject of a complaint could block the proceedings from even taking place. That was no longer the case at the WTO. If a WTO Member filed a complaint against another government, the case would be heard.

The United States filed a lot of complaints, and had success in using WTO dispute settlement to open foreign markets. But it also had many complaints filed against it, as a wide range of politically sensitive U.S. statutes, regulations, and administrative actions were challenged. Some influential interest groups and politicians were upset by this and expressed concern about various aspects of the WTO dispute settlement process.

The U.S. government began offering reform proposals in the early 2000s, and its critique continued quietly but forcefully for the next decade. The situation escalated under the Obama administration, first in 2011 as the United States decided not to reappoint the U.S. Member of the WTO's Appellate Body in 2011, and again when it blocked the reappointment of a Korean Appellate Body Member in 2016. Then under the Trump administration, the U.S. approach intensified, with a block on all appointments to the Appellate Body that has threatened to bring the entire dispute settlement system to a halt.

The Trump administration is not likely to change its view or approach. If, however, Joe Biden becomes president, the difference of opinion between the United States and the rest of the world might not look so stark. Differences will remain, though, and a return to the pre-Trump system is unlikely. There will be a chance for a new U.S. administration to sit down with other WTO Members and look for a way to resolve these issues, but both sides will need to be willing to compromise.

This blog post presents a possible compromise. It is not the system I would prefer (although there are some suggested changes that I have argued for previously), but I think it could be acceptable to a future U.S. administration and to the rest of the world. It considers the specific U.S. complaints about the current functioning of the system and identifies which WTO dispute settlement provisions could be modified in a way that satisfies the most significant U.S. concerns, while maintaining the core features of the system. There are three categories of changes: (1) limiting the scope of appellate review; (2) providing more deference on "trade remedies"; and (3) giving more power to WTO Members to object to the reasoning in dispute settlement reports.

The Role of Appellate Review in WTO Disputes

When creating an appellate review mechanism for WTO disputes, there are many fundamental questions that need to be answered: How many "judges" should there be? How many should hear each appeal? How long are their terms? How many terms should they have? Is it a full-time position? Should there be a permanent appeals body, or simply ad hoc bodies for each appeal? Should they get legal support from personal clerks, ad hoc assistants, or a permanent secretariat? What is the relationship of the appellate "judges" and staff with the rest of the WTO Secretariat? Should they be in the same physical location?

These are interesting questions, but putting them all up for discussion and debate now is likely to slow the process of resolving the current crisis. Instead, the focus should be on the particular issues raised by the United States over the years that are most contentious and the resolution of which could make the Appellate Body functional again.

In broad terms, the fundamental criticism by the United States is that the Appellate Body is doing too much. The United States would like to see it play a reduced role.

One of the biggest U.S. complaints is that the Appellate Body has been "overreaching," "gap-filling," and issuing "advisory opinions." According to the United States, the Appellate Body has not respected the mandate in the DSU not to "add to" the rights and obligations in the covered agreements.

The difficulty here is that Article 3.2 of the DSU says, "Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements." (emphasis added) In addition, that same provision assigns panels and the Appellate Body the task of "clarify[ing] the existing provisions of those agreements in accordance with customary rules of interpretation of public international law," which puts them in a challenging position. There will always be a range of understandings of what particular words mean. In coming up with their clarifications, panels and the Appellate Body need to explain what they think the words of the agreement mean, and in doing so try not to go outside the accepted range. But there will be a range, and as a result some party or observer is likely to object to where on the range the clarification ended up. Whichever direction a panel or the Appellate Body goes, someone will assert that they have "added to" or "diminished" the rights and obligations.

There is not much that can be done with the Article 3.2 language to help with this problem. It is inherent in the nature of third-party adjudication that interprets ambiguous legal texts.

However, at the appellate level, it is possible that a change in culture could help here. The Appellate Body has a tendency to re-do the panel reasoning on most issues that are appealed. This is not strictly necessary, and in many cases the Appellate Body could simply uphold the panel's rationale without going through the reasoning exercise itself. DSU Article 17.13 states, "The Appellate Body may uphold, modify or reverse the legal findings and conclusions of the panel." In practice, the Appellate Body's reasoning often constitutes a modification even where the ultimate result is the same and the Appellate Body classifies its decision as one to uphold. An explicit option to uphold without conducting any new reasoning might change how the Appellate Body approaches its task. For example, Article 17.13 could be revised to say: "The Appellate Body may uphold without further comment, modify or reverse the legal findings and conclusions of the panel." The option to "modify" would then cover the situation where the Appellate Body reaches the same result but with different reasoning.

This change could encourage the Appellate Body to take an approach that it has not been inclined to use under the existing DSU rules. Under those rules, the Appellate Body may not have thought such an approach was permitted, or it may not have wanted to do so. But with such an approach explicitly designated as an option, the appellee in a particular case could push the Appellate Body to take it, and the Appellate Body would feel justified in upholding the panel's finding without any further discussion. Doing so would limit the extent of the Appellate Body's opportunities to clarify, and thus reduce the chances of aggravating a WTO Member.

This problem could also be addressed more indirectly by enforcing the 90 day limit for issuing Appellate Body reports. Article 17.5 states, "As a general rule, the proceedings shall not exceed 60 days from the date a party to the dispute formally notifies its decision to appeal to the date the Appellate Body circulates its report," and also that, "In no case shall the proceedings exceed 90 days." The Appellate Body began exceeding this limit regularly with the permission of the parties, and eventually stopped seeking permission. If the Appellate Body were forced to issue reports within 90 days, it would have less time for extensive reasoning on all the issues before it.

It is also worth putting some degree of burden on WTO Members to think carefully about whether to appeal and what to appeal. DSU Article 3.7 states: "Before bringing a case, a Member shall exercise its judgement as to whether action under these procedures would be fruitful." A similar provision could be useful for appeals. This provision may be difficult to enforce, but it can set the tone and influence the culture.

One of the reasons for the proliferation of appealed issues is the emergence of DSU Article 11, and to a lesser extent Article 12.7, as a basis for appeal. Article 11 says that "a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements"; and Article 12.7 says, "the report of a panel shall set out … the basic rationale behind any findings and recommendations that it makes."

Precursor provisions existed under the GATT, when there was no appeal, which suggests that these provisions were not meant to be used as a basis for appeal. Nevertheless, that is the direction WTO Members took, as they began to cite these provisions in their appeals, and the Appellate Body's response encouraged them. This has led to a broader scope for appeal and longer Appellate Body reports. The United States has objected in particular to the way factual issues have been considered in appeals through allegations of error under DSU Article 11, in relation to the "objective assessment of the facts of the case."

Reining in these appeals could take one of two forms. The first option is that it could be made clear in a new DSU provision that Articles 11 and 12.7 cannot serve as the basis for an appeal. Alternatively, these appeals could be allowed under a stricter standard. For example, a finding that a panel had not complied with Article 11 would only be made if the panel's assessment was "an egregious error that calls into question the good faith of a panel." (See para. 133 of the Appellate Body report in Hormones).

Related to the concern about consideration of factual issues on appeal through DSU Article 11, the Appellate Body has said that "municipal law" (i.e. domestic law) is a question of law that it can address on appeal. There is broad disagreement with this conclusion (although some support as well). In the Walker Principles, an effort led by New Zealand Ambassador David Walker to find a solution to the Appellate Body crisis, there is a sentence that seek tries to correct this Appellate Body finding with the following language: "The 'meaning of municipal law' is to be treated as a matter of fact and therefore is not subject to appeal." A new DSU provision to this effect should resolve this U.S. criticism.

And finally, exacerbating the problem the United States sees with "overreach" is the role of precedent. The United States worries that all this extraneous Appellate Body reasoning is now a permanent part of WTO law. It may be that the United States is exaggerating the role of past cases. Nevertheless, some new DSU language is possible to ameliorate the U.S. concerns. The following amendment to DSU Article 3.2 might resolve the issue: "Clarifications provided by panels and the Appellate Body can have persuasive value, but are of less authority than the interpretations adopted under Article IX:2 of the WTO Agreement."

Special Deference to "Trade Remedies"

The trading system has long struggled to deal with "trade remedies," which are trade restrictions used to address both "unfair" and "fair" trade. "Unfair" trade refers to imported products that are "dumped" or subsidized and cause injury to domestic industries, and anti-dumping and countervailing duties are a permitted response under WTO rules. Where imported products cause injury without an "unfairness" aspect, they are subject to "safeguard" measures, which can take the form of duties or quotas.

For most economists, anti-dumping and safeguards are, in practice, simply forms of permitted protectionism, whereas countervailing duties try to address a real problem (trade-distorting subsidies). As a policy matter, it is important to continue to make the case against protectionism. However, as a matter of politics, preserving a system with broad benefits requires compromise. The practice of trade remedies needs to be accommodated.

The U.S. concern is that Appellate Body overreach and lack of deference has limited the ability of U.S. agencies to use all three forms of trade remedies. Here are two suggestions for changes that might satisfy the United States.

First, there need to be rules that ensure that deference is given to domestic agencies in their interpretation of WTO obligations. Article 17.6(ii) of the Anti-Dumping Agreement was intended by U.S. negotiators to provide that deference for issues of law, stating: "the panel shall interpret the relevant provisions of the Agreement in accordance with customary rules of interpretation of public international law. Where the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, the panel shall find the authorities' measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations." In the U.S. view, this provision has not worked in practice, as the Appellate Body has never considered that the (often vaguely worded) provisions of the Anti-Dumping Agreement "admit of more than one permissible interpretation."

There are ways to improve the drafting of this provision to make the additional deference more clear. For example, the provision could read as follows:

"(ii) the panel shall interpret the relevant provisions of the Agreement in accordance with customary rules of interpretation of public international law. Where the panel finds that a relevant provision of the Agreement admits of more than one permissible interpretation, the panel shall find the authorities' measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations. As an illustration of a situation where more than one permissible interpretation exists, if the panel concludes that the interpretive approach set out in Article 31 of the Vienna Convention on the Law of Treaties leaves the meaning of a provision ambiguous or obscure, there shall be a presumption that the provision admits of more than one permissible interpretation, and the panel shall find the authorities' measure to be in conformity with the Agreement if it rests upon one of those permissible interpretations."

(For more on this idea, see here). By linking the possibility of multiple permissible interpretations to the Vienna Convention interpretation rules, the provision can offer more clarity to WTO panels and the Appellate Body as to how they should apply it.

Importantly, this special standard of deference could apply to all trade remedies, including the Safeguards Agreement and the SCM Agreement. The United States has expressed concern about particular interpretations in both of these areas, and additional deference will provide the basis to correct them.

As a second change, the rules should ensure that the decision-makers at the appellate level have sufficient trade remedy expertise. At the panel level, the Legal Affairs Division of the WTO Secretariat assists with most disputes, but for trade remedies cases the Rules Division is in charge. With its focus on these issues, the staff of the Rules Division has developed special expertise and a deep understanding of the political and policy debates.

Similar expertise would be helpful at the appellate level. Jennifer Hillman has proposed a special Appellate Body just for trade remedies, or additional Members with trade remedy expertise, which is one way to achieve this goal. But if two separate Appellate Bodies is too much of a change for WTO Members to accept, it may be possible to accomplish the objective by setting up a separate section of the Appellate Body Secretariat that is staffed with trade remedy experts. In this way, the Legal Affairs/Rules split on panel assistance could be replicated at the appellate level.

The Balance Between the "Legislative" and "Judicial" Functions

One of the major topics of discussion during the Appellate Body appointment crisis has been the role of WTO Members in overseeing the dispute settlement process. One of the Walker Principles proposals is for "a mechanism for regular dialogue between WTO Members and the Appellate Body where Members can express their views on issues, … in a manner unrelated to the adoption of particular reports." Such a process could be helpful, but is not likely to satisfy the United States. In the past, the United States (in a joint proposal with Chile) went much further on "Member control," suggesting the "partial adoption" of reports: "the DSB may by consensus decide not to adopt a finding in the report or the basic rationale behind a finding." This proposal was met with resistance, but perhaps there is a variation that might work.

WTO Agreement Article IX, on "Decision-Making," provides the following in paragraph 2: "The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements. … The decision to adopt an interpretation shall be taken by a three-fourths majority of the Members." This provision has never been used, which is not surprising given the difficulty of getting a three-fourths majority to support a particular interpretation. But it could play a role in addressing issues related to reasoning in dispute settlement reports.

Rather than have partial adoption of a panel or Appellate Body ruling, as suggested by the United States and Chile, parties to the dispute could identify reasoning in a report that they found problematic. Identifying this reasoning would not have any impact on adoption or implementation of the findings in the particular case. Instead, it would trigger a process of discussion for an Article IX:2 interpretation. Achieving such an interpretation would be a challenge, and cannot be expected to happen easily. However, in the meantime, the amended DSU would state explicitly that the particular reasoning that was identified as being of concern would not serve as persuasive authority for future disputes.

Conclusion

I have tried to come up with a balance that I think would satisfy a future U.S. administration and also be acceptable to the rest of the world. It's not necessarily the balance I would prefer, but I see how it might work as a compromise. Feel free to offer alternatives. It would be great if people with different perspectives could put ideas out there. If we want to get the Appellate Body up and running again, we need to be thinking about what sort of compromise might work.

AJIL Agora on Pandemic

The American Journal of International Law is issuing a worldwide call for papers for an Agora symposium to be published in the October 2020 issue of the Journal. The topic – “The International Legal Order and the Global Pandemic” – recognizes that the present crisis raises foundational questions for the international legal order that extend beyond the immediate challenges to public health and economic stability. More information about the Agora can be found here.

Hyperlink URL: https://www.cambridge.org/core/journals/american-journal-of-international-law/information/worldwide-call-for-papers-the-international-legal-order-and-the-global-pandemic

Trade Policy in the 2020 Presidential Campaign

In the coming months, we will start seeing political ads for the 2020 presidential campaign. Trade policy is likely to feature prominently, especially in certain industrial states. The Trump campaign posted a video recently that perhaps gives us a flavor of their message. The trade part starts around 17:50. At about 18:30, there is a clip of Joe Biden talking about NAFTA on the floor of the Senate, in which he says: "I'm supporting NAFTA because I think it is a positive thing to do, but not because I think it's going to cure the workers' fears, who have legitimate reason to be concerned." If that's the most controversial statement the Trump campaign could find related to Biden and NAFTA, I think the Biden campaign is going to do fine on trade policy.

It's going to be interesting to see each side's messaging on this issue. I'll try to track all of it here on the blog.

Call for Papers: When International Courts and Tribunals Defer to States

This is from PluriCourts:

Concepts and Methods Workshop: Call for Papers.

We  invite paper proposals for a PluriCourts-iCourts "Concepts & Methods" Workshop on the topic When International Courts and Tribunals Defer to States, to be held in Oslo, Norway, on 24-25 November 2020.

International Courts and Tribunals (ICs) sometimes allow national actors a certain discretion in their implementation of international obligations. To illustrate: The WTO Appellate Body has granted states some latitude to restrict trade under reference to protection of 'public morals' (GATT, article XX (a)); the European Court of Human Rights sometimes grant states a 'margin of appreciation' in applying the European Convention on Human Rights. Such deference by ICs towards states raises several theoretical, conceptual, and methodological challenges for philosophical, legal and social science scholarship: when do ICs defer, why, what are the effects - and how should we assess such deference?

Link: https://www.jus.uio.no/pluricourts/english/news-and-events/news/2020/methods-and-concepts-cfp-2020.html

China's New SCM Violations and the Larger Implications

Steve Charnovitz

12 April 2020

According to the Wall Street Journal, the government of China is now providing "a 9% rebate on the export of animal products, such as edible snakes and turtles, primate meat, beaver and civet musk, and rhino horns, despite banning their domestic trade."  A bounty on exports is illegal per se under SCM Article 3 of the World Trade Organization (WTO).  But applying an export subsidy to a domestically prohibited good would seem especially heinous as it compounds the moral transgression in allowing exports of domestically prohibited goods. In light of the descent of the world economy into rampant autarkic and protectionist policies, I will not be able to keep track of or chronicle all of them.  

But China's transgressions in the WTO are paralleled by its serious transgressions of the International Health Regulations (IHR) in not immediately notifying the World Health Organization (WHO) of the SARs outbreak in November, but rather waiting until the last day of December.  I am not an expert on the IHR, but on a perusal, I do not see any requirement to carry out containment efforts rapidly and effectively.  I also do not see any rule requiring governments like China to prevent zoonotic infections occurring in laboratories or to notify WHO and neighboring countries about any such human errors.  So the IHR would seem to be ripe for renegotiating and I would urge the WHO to proceed in a process open to participation by the civic and private sectors.  

I have always been a strong supporter of China's entry into the world economy and into the WTO.  I have admired China's forward looking competitiveness policies and its positive actions on climate.  But China has not shown much leadership in the WHO; in fact, China's paltry funding of the WHO and its objections to Taiwan's membership betray China's global leadership and should be roundly condemned.

New U.S. Export Restrictions on Personal Protective Equipment (PPE)

Last week, President Trump issued a "Memorandum on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use," which including the following passage:

On March 25, 2020, the Secretary of Health and Human Services designated under section 102 of the Act 15 categories of health and medical resources as scarce materials or materials the supply of which would be threatened by accumulation in excess of the reasonable demands of business, personal, or home consumption, or for the purpose of resale at prices in excess of prevailing market prices (“scarce or threatened materials”).  These designated items include certain PPE materials.  To ensure that these scarce or threatened PPE materials remain in the United States for use in responding to the spread of COVID-19, it is the policy of the United States to prevent domestic brokers, distributors, and other intermediaries from diverting such material overseas.

An accompanying statement clarified:

Nothing in this order will interfere with the ability of PPE manufacturers to export when doing so is consistent with United States policy and in the national interest of the United States.

These kinds of memos and statements sometimes don't lead to much, and I wondered where this was going. But now it has gone somewhere. The following is from a temporary final rule just issued by FEMA (and scheduled to be published on April 10) entitled "Prioritization and Allocation of Certain Scarce or Threatened Health and Medical Resources for Domestic Use":

II. Provisions of the Temporary Final Rule

Following consultation with the Secretary of HHS; pursuant to the President’s direction; and as an exercise of the Administrator’s priority order, allocation, and regulatory authorities under the Act, the Administrator has determined that the scarce or threatened materials identified in the April 3, 2020 Presidential Memorandum (“covered materials”) shall be allocated for domestic use, and may not be exported from the United States without explicit approval by FEMA. See new 44 CFR 328.102(a).

The rule is necessary and appropriate to promote the national defense with respect to the covered materials because the domestic need for them exceeds the supply. Under this temporary rule, before any shipments of such covered materials may leave the United States, CBP will detain the shipment temporarily, during which time FEMA will determine whether to return for domestic use, issue a rated order for, or allow the export of part or all of the shipment under section 101(a) of the Act, 50 U.S.C. 4511(a). FEMA will make such a determination within a reasonable time of being notified of an intended shipment and will make all decisions consistent with promoting the national defense. See new 44 CFR 328.102(b). FEMA will work to review and make determinations quickly and will endeavor to minimize disruptions to the supply chain.

In determining whether it is necessary or appropriate to promote the national defense to purchase covered materials, or allocate materials for domestic use, FEMA may consult other agencies and will consider the totality of the circumstances, including the following factors: (1) the need to ensure that scarce or threatened items are appropriately allocated for domestic use; (2) minimization of disruption to the supply chain, both domestically and abroad; (3) the circumstances surrounding the distribution of the materials and potential hoarding or price-gouging concerns; (4) the quantity and quality of the materials; (5) humanitarian considerations; and (6) international relations and diplomatic considerations.

This rule contains an exemption that the Administrator has determined to be necessary or appropriate to promote the national defense. See new 44 CFR 328.102(c). Specifically, the Administrator has determined that FEMA will not purchase covered materials from shipments made by or on behalf of U.S. manufacturers with continuous export agreements with customers in other countries since at least January 1, 2020, so long as at least 80 percent of such manufacturer’s domestic production of covered materials, on a per item basis, was distributed in the United States in the preceding 12 months. The Administrator decided that this exemption is necessary or appropriate to promote the national defense because it would limit the impact of this order on pre-existing commercial relationships, in recognition of the importance of these commercial relationships to the international supply chain, and for humanitarian reasons, in consideration of the global nature of the COVID-19 pandemic. If FEMA determines that a shipment of covered materials falls within this exemption, such materials may be transferred out of the United States without further review by FEMA, provided that the Administrator may waive this exemption and fully review shipments of covered materials subject to this exemption for further action by FEMA, if the Administrator determines that doing so is necessary or appropriate to promote the national defense. FEMA may develop additional guidance regarding which exports are covered by this exemption, and encourages manufacturers to contact FEMA with specific information regarding their status under this exemption.

The Administrator may establish, in his discretion, additional exemptions that he determines are necessary or appropriate to promote the national defense and will announce any such exemptions by notice in the Federal Register.

FEMA will implement this rule with the cooperation and assistance of other U.S. Government agencies, including CBP, and will work with manufacturers, brokers, distributors, exporters, and shippers to ensure that the applicable requirements are carried out. Any covered materials intended for export may be detained by CBP while FEMA conducts its review of the shipment. FEMA will review the shipment and provide notification as soon as possible regarding the disposition of the covered materials under this order, provided that any goods that have been detained by CBP and are subsequently made subject to a DPA-rated order will be consigned to FEMA pending further distribution or agency direction. FEMA may provide additional guidance regarding the application of any exemptions to this temporary rule, as appropriate.

FEMA may conduct such investigations and issue such requests for information as may be necessary for the enforcement of the Act, including this rule. See new 44 CFR 328.104(a); see also section 705 of the Act, 50 U.S.C. 4555; Executive Order 13911, 85 FR 18403 (Apr. 1, 2020). FEMA may seek an injunction or other order whenever, in the Administrator’s judgment, a person has engaged or is about to engage in any acts or practices which constitute or will constitute a violation of the Act or any rule or order issued thereunder. See new 44 CFR 328.104(b); see also section 706 of the Act, 50 U.S.C. 4556. In addition to an injunction, failure  to comply fully with this rule is a crime punishable by a fine of not more than $10,000 or imprisonment for not more than one year, or both. See new 44 CFR 328.104(c); see also section 103 of the Act, 50 U.S.C. 4513. In addition, pursuant to 18 U.S.C. 554, whoever fraudulently or knowingly exports or sends from the United States, or attempts to export or send from the United States, any merchandise, article, or object contrary to any U.S. law or regulation, or receives, conceals, buys, sells, or in any manner facilitates the transportation, concealment, or sale of such merchandise, article, or object, prior to exportation, knowing the same to be intended for exportation contrary to any U.S. law or regulation, faces up to 10 years’ imprisonment, a fine, or both, if convicted.

At any point in time, and to the extent consistent with United States policy, the FEMA Administrator may determine additional materials to be subject to this allocation order. Upon a determination under section 101(b) of the DPA that an additional material is a scarce and critical material essential for national defense, and that being allocated to domestic use under this allocation order is the only way to meet national defense requirements without significant disruption to the domestic markets, the Administrator will include these additional materials in this allocation order, and will provide notification of this decision through publication in the Federal Register. 

I don't have a problem with this sort of export regulation in theory. I think governments should be keeping track of where all the personal protective equipment is, so they can make sure it gets to the people who need it most. And the six criteria set out above seem reasonable. What's going to be important here, in my view, is how the rule is applied and whether it prevents this equipment from getting where it should go.

New US Domestic Content Requirement for State Aids

New US Domestic Content Requirement for COVID-19 State Aids

Steve Charnovitz

While I was pleased to see the G20 Statement on 30 March 2020 that governments should avoid "unnecessary interference with international traffic and trade," I also note that the Statement does not mention the word "law," as in "international law" or "WTO law."  So, I was disappointed, but not surprised, that the Trump Administration added a domestic content requirement to the $350 billion U.S. "Paycheck Protection Program" to provide subsidies to US businesses.  In order to obtain the financial contribution, the applying business executive has to certify that "To the extent feasible, I will purchase only American-made equipment and products."  The recipient is also required to agree that "if the funds are used for unauthorized purposes, the federal government may pursue criminal fraud charges."

This may be the largest WTO-illegal subsidy in the history of international trade law.

A disaster provides opportunity, and the COVID-19 disaster is giving the United States yet another opportunity to engage in discrimination and protectionism in international trade.