International Economic Law and Policy Blog

CETA: Limits on Domestic Wine Preferences

From a Canadian news report:

A trade deal between Canada and the European Union could restrict Canada’s wine sales by limiting the number of privately run outlets selling domestic products, if a leaked document turns out to be close to the finalized treaty.

A German website posted the 521-page document this week, and claims it’s a copy of the trade agreement between Canada and the EU. You can find the entire document below.

Last fall, Prime Minister Stephen Harper travelled to Brussels, where he reached a tentative agreement, the details of which have yet to be formally outlined by either Canada or the EU.

If the leaked document is accurate, the trade agreement will clamp down on the expansion of Canada’s wine sales by limiting the number of privately run wine outlets in Ontario and B.C. that only sell Canadian products.

The text of the leaked document states that there “shall not exceed 292 (private outlets) in Ontario and 60 in British Columbia.” Those limits have already been reached in those provinces, suggesting restrictions on opening any new stores that sell local wines.

Here's the full language, from pp. 15-16 of the leaked CETA text:

Article 2(2)(b) of the 1989 Agreement, as amended by Annex VIII to the 2003 Agreement, shall be replaced by the following:

(b) - requiring off site private wine store outlets in Ontario and British Columbia to sell only wines produced by Canadian wineries. The number of these off site private wine store outlets authorised to sell only wines produced by Canadian wineries in these provinces shall not exceed 292 in Ontario and 60 in British Columbia.

The 1989 Agreement is here; the 2003 Agreement is here.

So as I understand it, there are provincial laws that allow private liquor stores to operate, but only if they sell local wine exclusively.

But if that interpretation is right, here's my question: Doesn't this violate GATT Article III:4? Does Canada have some sort of waiver for this?

Barcelona Workshop on Global Governance

Call for Papers: 2015 Barcelona Workshop on Global Governance: The Public and the Private in Global Governance

IBEI (Institut Barcelona d’Estudis Internacionals) and ESADEgeo (ESADE Business School’s Center for Global Economy and Geopolitics) are organizing the third edition of the Barcelona Workshop on Global Governance, an international workshop to discuss questions relating to global governance, on 15 & 16 January 2014. The workshop will focus on 'The Public and the Private in Global Governance'. Confirmed keynote speakers include Andrew Hurrell (University of Oxford) and Jonas Tallberg (University of Stockholm) as well as Narcís Serra (former Spanish Minister of Defense and Deputy Prime Minister) and Javier Solana (former NATO Secretary General and EU High Representative for Common Foreign and Security Policy). Abstracts of up to 500 words should be sent to [email protected] by 29 September 2014. Further information is available at http://bcnwgg.net/. 

Is the Appellate Body Trying To Discourage DSU Article 11 Appeals?

I haven't crunched the numbers on this, but it certainly feels as though DSU Article 11 appeals have increased in recent years.  Yet almost all of them get rejected.  This seems like a strange state of affairs.  Why pursue a course that is virtually certain to fail?

In China - Rare Earths, the Appellate Body made a comment about Article 11 that makes me wonder if they are trying to move parties away from it:

5.227 ... an Article 11 claim must be clearly articulated and substantiated with specific arguments, including an explanation of why the alleged error has a bearing on the objectivity of the panel's assessment. This Article 11 claim raised by China does not meet these requirements and we therefore reject it.

5.228. We emphasize that, in so finding, we do not wish to suggest that participants should simply present more extensive argumentation in support of claims under Article 11 of the DSU. Rather, we wish to encourage appellants to consider carefully when and to what extent to challenge a panel's assessment of a matter pursuant to Article 11, bearing in mind that an allegation of violation of Article 11 is a very serious allegation. This is in keeping with the objective of the prompt settlement of disputes, and the requirement in Article 3.7 of the DSU that Members exercise judgement in deciding whether action under the WTO dispute settlement procedures would be fruitful.

Is the Appellate Body asking appellants to be a little more circumspect before alleging an Article 11 violation?  Or am I reading too much into this?

CETA, ISDS, and Religious Discrimination: The Burqa Ban

In the comments of this post, we talked about the scope of the "targeted discrimination" aspects of the fair and equitable treatment obligation in the leaked CETA investment chapter. The relevant language is as follows:

Article X.9: Treatment of Investors and of Covered Investments

...

2. A Party breaches the obligation of fair and equitable treatment referenced in paragraph 1 where a measure or series of measures constitutes:

...

(d) Targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief;

In the discussion there, I suggested that this obligation was vague and unclear.  Let me offer a possible real world example, to test the boundaries of how this provision might apply.

There has been controversy in recent years over the French ban on face covering, which has a particular impact on the wearing of burqas. A few weeks ago, the French law was found not to violate certain human rights obligations:

Judges at the European court of human rights (ECHR) have upheld France's burqa ban, accepting Paris's argument that it encouraged citizens to "live together".

The law, introduced in 2010, makes it illegal for anyone to cover their face in a public place. While it also covers balaclavas and hoods, the ban has been criticised as targeting Muslim women.

So let's say that after CETA comes into force, a Canadian muslim woman who wears a burqa invests in a business in France.  Does she have a good CETA investment claim against the French law, based on a view that she has been targeted under this law for her religious beliefs?

(There's also the exciting -- for international lawyers -- prospect of one international court having to take into account the decision of another international court).

Finally, in the comments on the earlier post, it was suggested that discrimination is covered even in the absence of this provision.  If the provision is deleted, can the same claim be brought on the more general basis that the law is not "fair and equitable"?

Legal Aspects of Domestic Economic Integration: Canadian Reform Proposals

This is from a paper by some Canadian business groups on promoting internal free trade within Canada through reform of Canada's Agreement on Internal Trade:

A more effective and efficient dispute resolution mechanism should include ... a domestic equivalent of investor-state dispute settlement, ... . 

Investor-state dispute settlement normally grants foreign investors the right to initiate dispute settlement proceedings against a foreign government. NAFTA contains such a provision, as will CETA once it comes into force. In the internal trade context, a domestic equivalent should at least provide businesses access to dispute resolution under the AIT (and could potentially be opened to individuals or other organizations). Currently, businesses and others must first go through their provincial government to resolve disputes under the AIT before initiating a dispute – an unnecessary and burdensome step.

Their general point seems to be that Canadian businesses should not have to go to their provincial government in order to initiate a dispute against another province related to perceived trade barriers. They should be able to enforce domestic free trade on their own, through a private right of action.  The report refers to ISDS, and says there should be a domestic equivalent.

Calling for a private right of action makes sense, but is ISDS the best parallel?  I would have thought the better comparison would be to the EU treaties or to U.S. constitutional law, where private actors can go directly to domestic courts where barriers exist.  Wouldn't constitutionalizing the process be the most effective way to promote the Canadian "single market," the free movement of goods, services, capital, and labor, and free trade generally?  Ad hoc trade panels seem less authoritative to me than constitutional courts.

It has been suggested that direct private action is already possible under Canadian constitutional law, at least for trade in goods, although the relevant provision seems to have been interpreted narrowly and may not work here.  Does Canada need a separate process for internal trade disputes, or could the existing constitutional system handle these matters?  It may need to be tweaked to cover modern trade issues, and provide for broader trade freedoms, but this might be an easier and more effective approach.

On the other hand, maybe legalizing these issues is too much of a challenge.  Perhaps it needs to be more of a political process.  If the provinces can agree to work together on issues such as mutual recognition, progress can be made; but if they can't, we are stuck with the existing situation.

APEC’s Complementarity to the WTO via Plurilateral Agreements

Now that the WTO members failed to adopt the protocol on the Trade Facilitation (TF) Agreement, APEC members try to fill in the gap.  APEC Leaders instructed their officials to work toward the APEC TF Agreement between APEC members and other WTO members.

The Chair of the APEC Committee on Trade and Investment, John Larkin, stated that

“Many elements of the [TF] agreement like single windows, authorized economic operators and the move from paper-based to electronic processes are objectives that APEC economies have long championed. We’re working to ensure that we take full advantage of them.”

Perhaps, this could be another contribution of APEC to the attainment of broader WTO goals after the “APEC List of Environmental Goods.”  In July 2014, fourteen WTO members launched negotiations on the Environmental Goods Agreement based on the list. 

Russia’s Account of Negotiation History: Reason for Deletion Further Explained

On the question raised in my last post – what was the reason for deleting from Russia’s accession protocol the sentence on non-derogation of its rights under the WTO Agreement – I have now located further explanation in Annex C-9 to the Panel Report in Rare Earths, INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE RUSSIAN FEDERATION. The answer was set out in paragraph 5 (underline added).

3. In China – Raw Materials the Appellate Body ruled that the provisions of the GATT Article XX are not available where there is no explicit reference to them in the commitment contained in the Protocol, and the absence of such a reference represents ‘the Members' common intention not to provide access to such defence.' These findings are a matter of serious concern for the Russian Federation.

 4. We would like to recall that the issue of the right of the new members to invoke the WTO Agreement exceptions in respect of the commitments contained in the Protocols of accession was repeatedly discussed in the course of Russia's accession to the WTO. In that context, Russia proposed to include specific language in its Protocol of accession, stating that "nothing in these commitments shall be understood to derogate from the rights of the Russian Federation under the WTO Agreement as applied between the Members of the WTO by the date of accession of the Russian Federation to the WTO". As discussed with Members this language was specifically designed to re-state the right of the Russian Federation, inter alia, to use defences provided for in the WTO Agreement, in particular in the GATT Articles XX and XXI and GATS Articles XIV and XIV bis, in respect of the commitments undertaken in its Protocol of accession. This language was reflected in the draft Accession Protocol as attached to the draft Working Party report (in the document WT/ACC/SPEC/RUS/25/Rev.3 of 15 October 2004).

 5. However, Russia was assured by Members that in accordance with well- established customary practices of the WTO and the understanding shared by the Members, this additional language is redundant as all Members have equal availability of defences under the WTO Agreement in the context of the whole integrity of all parts of the WTO Agreement, in particular Multilateral Trade Agreements and Protocols of accession, with or without specific reference to such defences in the Protocol of accession. Inclusion of such language in their view might have been interpreted as the opposite, thus undermining the rights of those Members whose Protocols of accession became effective before the accession of the Russian Federation and did not contain similar language. Eventually, conforming to this understanding of the Membership Russia agreed to delete the mentioned reference from the draft Protocol of accession and with such an understanding it concluded the Protocol.

 6. In this dispute we see that the same WTO Members deviate from their own previous statements and understanding expressed in the course of Russia's accession to the WTO. This is a matter of our systemic concern, as the multilateral trading system has no room for such double standards.

*The Russian Federation requested that its oral statement serve as the integrated executive summary.

Judging from the published record of this case, Russia’s account has not been contradicted by the US, EU, Japan, or any of the 15 other third parties in the case.

ADD: One of the readers has pointed out that the EU and the US did counter Russia’s account of this negotiation history in their responses to the Panel’s request for comment.

Some relevant parts of EU’s response:

the EU is not able to accede to Russia’s description of the negotiating history. What is true is that the question of Russia’s right to invoke general exceptions of the GATT 1994 as a justification for a departure from a commitment contained in the Protocol of Accession was repeatedly discussed in the course of Russia’s accession to the WTO …

the EU explicitly made known to Russia its view that and why the exceptions of the GATT 1994 should not be applicable (for instance for the gas price commitment, whose nature and negotiating background was related to the SCM Agreement, which also does not feature the exceptions of the GATT 1994). Thus, it is entirely inaccurate to posit that the EU would have assured the Russian Federation’s negotiators of the applicability of GATT exceptions to all accession commitments. 

The European Union further insisted that the language which Russia had proposed for a prominent location in its Accession Protocol, and which Russia now refers to40, was not only unprecedented language for an Accession Protocol, but could potentially have had the significantly more far-reaching effect of undermining any "WTO-plus" in Russia’s Protocol of Accession, by reducing all Russian obligations to the extent of WTO obligations that other WTO Members have. This was the reason why the EU refused to accept Russia’s proposed language.

The US response:

the language that the Russian Federation cites was not included in the Russian Federation’s Protocol of Accession, and the Panel should not give credence to one Member’s perception of why it was not included. The Russian Federation's oral statement selectively recites negotiating history and neglects the consistent objections by Members to the Russian Federation's proposed language.

These responses are published in the official websites of the EU and USTR, but do not seem to be part of the published record of this case. My thanks to the reader's tip. 

What Should the U.S. Judge in the Argentina Debt Case Have Done?

I'm still trying to sort out what I think should happen in the Argentina debt crisis case.  I gather that a lot of people are mad at the U.S. judge who prevented Argentina from making payments to those creditors who had agreed to restructure the debt, allowing a few holdouts to push Argentina into default.  The particular point at issue is the “equal treatment” guarantee in the contract, set out in a pari passu clause.  This basically means that everybody gets treated the same when it comes to investors’ rights.  Here, the U.S. judge said it means Argentina can't pay some bondholders (those who agreed to the restructuring) without paying others (the holdouts).  Because Argentina didn't want to pay the holdouts, it saw default as its only option.

The judge's ruling does seem to be the act that started the crisis.  But if the judge was just interpreting the contract as written, as I assume he was, I'm not sure what else he could have done.  I guess the argument is that he could have intepreted the contract terms differently, so that payments could go forward on the restructured debt without going to the holdouts as well.

But was there precedent that would have allowed him to do so?  I asked Todd Tucker, who has written about the case, this question, and he responded here.  He noted that:

The rival interpretations could be recast as to whether pari passu clauses guarantee equality of outcome (payment) or equality of opportunity (everyone given same procedural rights to make a deal).

He then referred to a couple non-U.S. court decisions that have addressed the matter, but it seems clear there isn't much precedent out there to guide the interpretation of these issues.

From what I can see, we are breaking new ground here, and the judge's interpretation was a reasonable one, even if it was not necessarily the best one.  The solution going forward, I think, is to take all of this into account in writing new bond contracts; and, for jurisdictions who are likely to hear such cases, legislate some contract law that deals with this situation in an appropriate way.

It's a shame that the current Argentina debt situation is such a mess, but I'm not sure the judge deserves all the blame.  When courts are faced with new situations and have little guidance, they are flying blind to some extent.  He may have bitten off more than he could chew in trying to force a sovereign government to make payments on its foreign debt, and I'm not convinced he will have much success, but the larger problem is that others put him in this situation.

Negotiation History and Interpretation of WTO Accession Protocols

As indicated in my previous post, South Korea, a third party in the Rare Earths appeal, advocated referencing negotiation history in the interpretation of Paragraph 11.3 of China’s Accession Protocol. Para. 2.7.7of the AB Report reads in part:

In Korea's view, the interpretation pursuant to Article 31 of the Vienna Convention "seems to leave the meaning of Paragraph 11.3 of China's Accession Protocol still ambiguous or obscure". Therefore, Korea argues, in answering the question of whether Article XX could be invoked as a defence to breaches of Paragraph 11.3, recourse to preparatory work of the accession negotiations, pursuant to Article 32 of the Vienna Convention, may assist in finding the "correct intention between the negotiating parties". (footnotes omitted)

Apparently there is no record of the negotiation history on this issue in the case of China. Nonetheless, Russia, also a third party in Rare Earths, provided a relevant account on the negotiating history of its own accession protocol. According to para. 2.240 of the AB Report: 

Russia submits that the Panel's finding that an explicit textual link between the GATT 1994 and Paragraph 11.3 of China's Accession Protocol is required for Article XX of the GATT to be available to justify a breach of the Protocol is of serious concern. Russia claims that, during its accession negotiations, upon assurance by the incumbent WTO Members that defences under the WTO agreements are equally available to all WTO Members, Russia agreed to delete the following statement from its Accession Protocol: "nothing in these commitments shall be understood to derogate from the rights of the Russian Federation under the WTO Agreement as applied between the Members of the WTO by the date of accession of the Russian Federation to the WTO."327 In Russia's view, the Panel's above finding means that the statement Russia agreed to delete should have been included in the accession protocols of all newly acceded WTO Members. Russia further maintains that the Panel's finding would apply to all other defences, including the security exceptions in Article XXI of the GATT 1994. For Russia, an acceding Member's intention to waive its right to protect important values such as life and health must be clearly and unambiguously explained. In this regard, Russia stresses its agreement with the views of the dissenting member of the Panel. (emphasis added)

327 Russia's opening statement at the oral hearing (quoting document WT/ACCSPEC/RUS/25/Rev.3, p. 243)

The document quoted by Russia (WT/ACC/SPEC/RUS/25/Rev.3, p. 243) is the 2004 draft protocol of accession of Russia, of which paragraph I.2 reads:

2. The WTO Agreement to which the Russian Federation accedes shall be the WTO Agreement as rectified, amended or otherwise modified by such legal instruments as may have entered into force before the date of accession. This Protocol, which shall include the commitments referred to in paragraph ... of the Working Party Report, shall be an integral part of the WTO Agreement, and nothing in these commitments shall be understood to derogate from the rights of the Russian Federation under the WTO Agreement as applied between the Members of the WTO by the date of accession of the Russian Federation to the WTO. (italics added)

It must be noted that the italicized statement above that was deleted from the Russia accession protocol could not have been included in China’s accession protocol or any other accession protocol that contains WTO-plus obligations. That is because a WTO-plus obligation, by definition, derogates from a right under the WTO agreements. For example, when China undertook to eliminate export duties, it consented to the derogation of its rights to use export duties under GATT articles II and XI. In such a case, the question becomes whether the policy exceptions prescribed by GATT XX and XXI should be equally available to the GATT-plus commitments. Now the AB has twice ruled that such policy exceptions are not automatically (or equally) available to the GATT-plus commitments. Instead, the acceding member has to prove, with respect to each accession commitment, that it has explicitly reserved the right to invoke the policy exceptions. In the light of the AB rulings, therefore, all acceding members that have agreed to special accession commitments should have insisted on including in their accession protocols a statement to this effect: “nothing in these commitments shall be understood to derogate from its right to invoke the public policy exceptions available under the WTO Agreement.”

That said, Russia’s account of its negotiating history is highly significant for our study of the relationship between the WTO agreements and accession protocols, a subject that remains as murky as before the AB’s decision in Rare Earths. Many questions come to mind. What is the significance of the deleted statement from the draft Russia protocol? Why was it deleted? Was it done because the statement was deemed superfluous, as Russia seemed to suggest (it was deleted “upon assurance of the incumbent Members that defences under the WTO agreements are equally available to all WTO Members”)? But what would be the harm of explicitly reassuring the acceding member of its rights? Is there any written record of such assurance? If there is no written record, what is the legal effect of the deletion? When the negotiating history shows the deletion of certain language, the intention can be interpreted both ways: it can be understood to mean that the parties saw the language as unnecessary because no one would disagree with its content, or it can be interpreted as the parties’ ultimate rejection of the language. In any event, the deletion would have to mean something. If the issue ever comes to dispute, how should the AB interpret the record of this deletion? In a sense, the question of how to interpret a deletion is similar to the question of how to interpret silence, the very issue at the core of the Rare Earths appeal. If the AB follows its nicely stated general principles of treaty interpretation in Rare Earths, what would be the result? This seems a fine topic for a research paper.

CETA, Investment Obligations, and Exceptions

With each attempt to clarify the "minimum standard of treatment" in investment obligations, the scope becomes less clear to me.  Here's what the leaked CETA text says (page 158):

Article X.9: Treatment of Investors and of Covered Investments

1. Each Party shall accord in its territory to covered investments of the other Party and to investors with respect to their covered investments fair and equitable treatment and full protection and security in accordance with paragraphs 2 to 6.

2. A Party breaches the obligation of fair and equitable treatment referenced in paragraph 1 where a measure or series of measures constitutes:

(a) Denial of justice in criminal, civil or administrative proceedings;

(b) Fundamental breach of due process, including a fundamental breach of transparency,
in judicial and administrative proceedings.

(c) Manifest arbitrariness;

(d) Targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief;

(e) Abusive treatment of investors, such as coercion, duress and harassment; or

(f) A breach of any further elements of the fair and equitable treatment obligation adopted by the Parties in accordance with paragraph 3 of this Article.

3. The Parties shall regularly, or upon request of a Party, review the content of the obligation to provide fair and equitable treatment. The Committee on Services and Investment may develop recommendations in this regard and submit them to the Trade Committee for decision.

4. When applying the above fair and equitable treatment obligation, a tribunal may take into account whether a Party made a specific representation to an investor to induce a covered investment, that created a legitimate expectation, and upon which the investor relied in deciding to make or maintain the covered investment, but that the Party subsequently frustrated. 

5. For greater certainty, ‘full protection and security’ refers to the Party’s obligations relating to physical security of investors and covered investments.

6. For greater certainty, a breach of another provision of this Agreement, or of a separate international Agreement, does not establish that there has been a breach of this Article.

It's interesting to note that there is a general exception in CETA that incorporates GATT Article XX (page 463):

Article X.02: General Exceptions

1. For the purposes of Chapters X through Y and Chapter Z (National Treatment and Market Access for Goods, Rules of Origin, Origin Procedures, Customs and Trade Facilitation, Wines and Spirits, Sanitary and Phytosanitary Measures, Investment Section 2 (Establishment of Investments) and Investment Section 3 (Non-discriminatory Treatment)), GATT 1994 Article XX is incorporated into and made part of this Agreement. The Parties understand that the measures referred to in GATT 1994 Article XX (b) include environmental measures necessary to protect human, animal or plant life or health. The Parties further understand that GATT 1994 Article XX (g) applies to measures for the conservation of living and non-living exhaustible natural resources.

However, only Section 3 of the investment section is covered, and Article X.9 (quoted above) is in Section 4.  In other trade agreements, by contrast, Canada has created an exception that applies to all investment obligations (see, e.g., Article 23.02, para. 3 of the Canada - Panama FTA).

There's also an explanatory note to Article X.02 which says:

Negotiators’ Note for legal scrubbing: The application of GATT Article XX to various CETA
chapters will need to be reviewed in light of the actual content of these chapters. ...

So it sounds like this may be an area where negotiating is still going on. 

CETA Dispute Settlement: Reference to WTO Jurisprudence

From Article 14.10 of the leaked CETA text (page 474):

5. The panel shall interpret the provisions referred to in Article 14.2 in accordance with customary rules of interpretation of public international law, including those set out in the Vienna Convention on the Law of Treaties. The panel shall also take into account relevant interpretations in reports of Panels and the Appellate Body adopted by the WTO DSB. ...

That second sentence is interesting.  How exactly should CETA panels "take into account" WTO panel and Appellate Body interpretations?  Cite to them, but feel free to go their own way?  Follow them as closely as possible?  What if the customary rules of interpretation lead the CETA panel to a different result than what the WTO panel/Appellate Body found?

And what happens when -- don't be shocked -- WTO panel and Appellate Body interpretations are a bit unclear?

CETA Text: The Treatment of Water

A fairly recent version of the CETA text has been leaked.  The document date is August 1, 2014.  No doubt there is some legal "scrubbing" still to do, and perhaps some actual negotiating as well, but this text seems pretty advanced, and thus ready for blogging.  I'm going to do a few posts in the coming days about specific provisions, not in any particular order, just flipping through and seeing what looks interesting.  I'll start with one on water rights.  Here's the CETA provision (from numbered page 14):

Article X.08: Rights and Obligations Relating to Water

1. The Parties recognize that water in its natural state, such as water in lakes, rivers, reservoirs, aquifers and water basins, is not a good or a product and therefore, except for Chapter XX – Trade and Environment and Chapter XX – Sustainable Development, is not subject to the terms of this Agreement.

2. Each Party has the right to protect and preserve its natural water resources and nothing in this Agreement obliges a Party to permit the commercial use of water for any purpose, including its withdrawal, extraction or diversion for export in bulk.

3. Where a Party permits the commercial use of a specific water source, it shall do so in a
manner consistent with the Agreement. 

Protection of water resources has been an issue raised by trade critics for a long time now.  But are there any actual threats to water resources from trade agreements?  What has people so worked up?  Is this one of those areas where some law firm wrote a memo once suggesting a possible challenge to a ban on development of water resources, and ever since there has been a perceived threat?

Generally speaking, I would think that, under all the existing trade rules I'm aware of, a government could declare a particular water resource off limits for commercial development, without violating its trade obligations.

On the other hand, if you are going to allow development, but not allow any exports, you need to have a better reason than simply favoring domestic producers by giving them cheaper inputs.  Export bans are probmematic, as several recent cases against China show.

So does the CETA language deal with what may or may not be an actual problem?  I'm not really sure that it does much of anything.  Paragraph 2 says governments are not "obliged" to permit "the commercial use of water."  But that doesn't change the current situation under trade agreements, does it?  What existing provisions would do this?

Paragraph 3 then says that if you do allow commercial use, you have to act consistently with the agreement, which again seems to reflect the current situation.

And then there's paragraph 1, which says that water in its "natural state" is not a "good or a product", and thus not subject to the agreement.  Does that really mean anything?  Once you start turning that "natural state" water into usable water, it is a good/product, and thus subject to the agreement.

Any further thoughts from people who have followed this issue more closely than I have?

Guest Post: Russian Sanctions, Polish Apples and the EU’s Litigation Strategy

This is a guest post from Boris Rigod, who has a Ph.D. from the EUI and is currently a law clerk at the Berlin Regional Court

Poland announced its intention to initiate WTO proceedings against Russia over its import prohibition on Polish apples. The ban is Russia’s reaction to a set of EU sanctions in the context of the Ukraine-crisis. Yet, formally it is justified on the basis of alleged health and hygiene concerns. If the Polish or, more accurately, the EU complaint will indeed result in an actual case before a WTO panel, many commentators assert that the “one million dollar question” will be whether Russia can successfully invoke national security as a defence. However, I do not believe that this is necessarily the case. As I sketch out in the following, everything depends on the litigation strategies of the parties and on how the EU presents its case.

Lets look at the complainants (Poland represented by the EU Commission) first and assume for a moment, quite realistically, that they prefer to avoid all questions of high-politics and simply strive to “win” the case. In order to satisfy both these demands, the EU would need a compelling case and a way out for the panel not to deal with matters of national security. To attain this end, the most effective move would be to frame the entire complaint as an SPS case without any reference to the GATT or the TBT. Given that Russia put forward health reasons in justification of the ban, the SPS would be prima facie applicable. And more importantly, by forgoing claims of GATT and TBT violations, the EU would pre-empt Russia from relying on “security” justifications as enshrined in these two agreements. Thus high-politics would not be discussed before the panel at all because the SPS does not mention “security” anywhere in the text.

If the EU only relied on the SPS to back its case, the sole questions a panel would have to decide upon were rather technical issues. The panel would have to evaluate whether the Russian ban is based on a risk assessment consistent with Article 5.1 SPS, whether the level of health protection as reflected in the ban is consistent with comparable other Russian measures (Art. 5.5 SPS), and whether the least trade restrictive means to attain the Russian health objective were deployed (Art. 5.6). Without knowing the Russian situation in-depth, it is pretty safe to assume on the basis of previous SPS cases that the EU would win the case. No WTO Member has so far succeeded in convincing the Appellate Body that its risk assessment is consistent with Art. 5.1 SPS. Accordingly, it is very doubtful that the last-minute Russian measures would live up to the extremely demanding standards developed by the Appellate Body.

What would be Russia’s best response? Probably trying to challenge the very foundations of the EU’s complaint. Instead of allowing the case to be a presented as a SPS case, Russia could assert that its measures had nothing to do with public health at all but were simply a reaction to Western sanctions. If Russia would succeed with this argument, the ban could not be considered under the SPS anymore. Then, the complaint would either be dismissed, or, if the EU made claims in the alternative based on other agreements, the benchmark would be the GATT (Articles XI and/or III:4) and, quite unlikely, the TBT. Whatever violations of these agreements a panel would find, Russia could then rely on the security-exception as a defence.

This would be a game changer. The GATT security-exception is widely perceived as a “self-judging” provision, leaving it to the party invoking it to evaluate whether its conditions are met. Moreover, it is even unclear whether WTO panels have jurisdiction to decide on Article XXI disputes. Hence, the result would probably be that Russia would win, as panels or the Appellate Body would be unwilling to meddle in matters of high-stake security politics.

Thus, assuming both parties would pursue their “best” strategies, the whole dispute would boil down to the quite technical question of whether the Russian ban on Polish apples is an SPS measure or not. Given that in previous cases the concept was interpreted very broadly – even budgetary laws can constitute SPS measures – and the fact that it would be a convenient way to avoid matters of high politics, it is safe to assume that almost regardless of the Russian defence, panels are quite likely to follow the EU argumentation.

To sum up, the EU can potentially have “both”. It can win the case and avoid discussing matters related to international security before a WTO panel. In any event, its “best” strategy is to rely solely on the SPS and not to invoke the GATT or the TBT. Under the latter two agreements the EU would probably lose anyways. Whereas by concentrating on the SPS, the EU will certainly avoid bringing international security issues before the WTO and has good chances of winning.

On the other hand, Russia’s best options are to either withdraw the ban (unlikely for political reasons) or to develop a convincing argumentation why a measure formally backed by health concerns was in fact a retaliatory measure based on ground of national security and support this claim by compelling evidence. Thereby Russia could undermine the very basis of the EU’s complaint, although its chances of succeeding with this line of defence are probably not too high. Be that as it may, under both parties’ “best” strategies the security exception is quite unlikely to be subject to review by a WTO panel. 

A Lost Opportunity: Thoughts on the Result of China’s Appeal in Rare Earths

China lost its appeal in Rare Earths last week. The main issue on appeal: the availability of GATT XX exceptions to paragraph 11.3 of China’s Accession Protocol (AP), which contains China’s WTO-plus commitment to eliminate export duties and does not refer to GATT XX exceptions. This may be a pure legal issue in WTO treaty interpretation, but it is also one of systemic import.

The AB decision was much anticipated, because the views on this issue were deeply divided: the Panel below ruled 2:1 on this issue, with two Panelists siding with the complainants (US, EU and Japan) and one dissenting Panelist supporting China’s position; of the eight third parties that expressed their views on this issue, four supported the position of China and the dissenting Panelist (Argentina, Brazil, Columbia, and Russia) and three opposed (Canada, Norway and Saudi), with one (Korea) believing that the AB should look into the negotiating history per VCLT Article 32. This close-to-even split among the participating Members is highly significant, considering that the AB had ruled on the same issue not long ago: in early 2012 the AB ruled in China–Raw Materials that GATT XX is not available to paragraph 11.3 of China AP on the ground that there is no explicit textual link between the two provisions. Since then, more people have come to realize that AB’s narrow textualist approach was seriously flawed. (In this regard, it is particularly interesting to observe how Columbia, as a third party first in Raw Materials and then in Rare Earths, has completely changed its view on this issue.) The Rare Earths appeal, therefore, was seen as an opportunity for the AB to revisit this systemic issue and come to a more carefully considered conclusion.

 In light of this background, one cannot help but feel thoroughly disappointed by the result of this appeal. It turns out that China did not wish to challenge AB’s previous ruling directly. Instead, China raised a number of new arguments to support its position that GATT XX should be available to its export duty commitments. Thus, para. 2.27 of the AB Report reads:

China reiterates that it is not seeking reversal of the Panel's finding that Article XX of the GATT 1994 is not available to justify a breach of Paragraph 11.3 of China's Accession Protocol. Moreover, China is not requesting the Appellate Body to depart from the same finding it made in China – Raw Materials. China expresses the view that the Appellate Body can, and should, find a way to endorse fully China's arguments in the present disputes "in a manner that stands in harmony with" the Appellate Body's decision in China – Raw Materials.

But was China expecting a miracle? How could the AB fully endorse China’s view without departing from its previous ruling?

China’s new arguments (“new” in the sense that they were not made in China-Raw Materials) focused on the relationship between the WTO agreements and the accession protocols. All of China’s arguments were rejected by the AB,some after detailed analysis, some out of hand without elaboration (see para. 5.70).   

 Having rejected China’s arguments, the AB did devote an entire subsection (5.1.3.4.) to discuss the relationship between China’s AP and the WTO Agreement (including the Multilateral Trade Agreements annexed to it). It first cited extensively its previous decisions in Argentina-Footwear and China-Publications, and then made this intriguing statement (para. 5.61):

Notably, under the approach adopted by the Appellate Body, express textual references, or the lack thereof, to a covered agreement (such as the GATT 1994), a provision thereof (such as Article VIII or Article XX of the GATT 1994, or “the WTO Agreement” in general, are not dispositive in and of themselves. (emphasis original)

Now, compare this statement to AB’s finding in Raw Materials (para. 306):

In the light of China’s explicit commitment contained in Paragraph 11.3 to eliminate export duties and the lack of any textual reference to Article XX of the GATT 1994 in that provision, we see no basis to find that Article XX of the GATT 1994 is applicable to export duties found to be inconsistent with Paragraph 11.3. (emphasis added)

The contrast between the two statements is clear. Yet, in the next three paragraphs, the AB went on to defend its record in Raw Materials, declaring that its conclusion in that case was reached “on the basis of a holistic analysis of all elements” and “was not limited to the text of Paragraph 11.3 alone.” (paras. 5.63; 5.65)

In the end, the AB made the following finding on the issue (para. 6.1.d):

[Q]uestions concerning the specific relationship between an individual provision in China's Accession Protocol and provisions of the Marrakesh Agreement and the Multilateral Trade Agreements annexed thereto, including whether exceptions under those agreements may apply to a breach of the Protocol provision, must be answered through a thorough analysis of the relevant provisions on the basis of the customary rules of treaty interpretation and the circumstances of the dispute. The analysis must start with the text of the relevant provision in China's Accession Protocol and take into account its context, including that provided by the Protocol itself and by relevant provisions of the Accession Working Party Report, and by the agreements within the WTO legal framework. The analysis must also take into account the overall architecture of the WTO system as a single package and any other relevant interpretative elements, and must be applied to the circumstances of each dispute, including the measure at issue and the nature of the alleged violation.

No one would disagree with these generally stated principles of treaty interpretation. The question remains however: Did the AB actually follow these principles and apply these elements in Raw Materials? Many would say “no”. But since China did not directly challenge AB’s ruling in Raw Materials, the AB “see[s] no reason to revisit” its ruling in Raw Materials. (para. 5.65) 

And in case you are wondering what happened to the dissenting Panelist’s opinion: the AB summarily dismissed it in footnote 504: “For these reasons, we also see no basis for the opinion of the dissenting panelist …” 

As mentioned in this Blog before, AB members are human beings and cannot be expected to be free from mistakes. The increasingly complex questions raised in appeals and the extremely short period of time imposed on the AB only work to increase the chance of errors. The trillion-dollar question is how AB’s mistakes should be dealt with. Given the lack of any effective mechanism under the DSU to review AB’s decisions, the burden falls on the AB itself to self-correct. In its 19-year history, however, the AB has never admitted committing any legal error (although some of its views have evolved which have led to inconsistent statements from time to time). Contrary to the assumption that DSB rulings are binding only between the parties to a particular dispute, the AB has practically turned its decisions into stare decisis. But even in the stare decisis system, the Supreme Court always has the power and ability to correct itself. Hence, sooner or later the AB will have to find the courage to correct itself openly. Such a move is not only desirable but also necessary in order to maintain the legitimacy of WTO dispute settlement. The willingness of the AB to reverse its own erroneous decisions is a matter of “constitutional” importance to the WTO system.

Because the issue on appeal in Rare Earths is sufficiently narrow and precise, and because the views on the issue are so split among the participating Members and the Panelists below, the Rare Earths appeal provided a great opportunity for the AB to set a new precedent: the AB can and is willing to revise or reverse itself by reconsidering all sound legal arguments, whether or not they have been made anew. The need to self-correct should be a “cogent reason” in itself for the AB to depart from its previous rulings. Yet, this great opportunity was completely lost.

Why did China choose not to challenge AB’s previous ruling directly? While only the insiders (MOFCOM officials and China’s legal counsel) can answer this question, it is not too hard to surmise the reason. China did not expect that AB would be willing to reverse itself directly. But it had hoped that its new arguments could serve as a face-saving mechanism via which the AB could effectively reverse itself without having to say so explicitly. It turns out to have been wishful thinking. One wonders what lessons Members might draw from this experience. 

Price Tags of WTO Disputes: Big and Small

Chad Brown and Kara Reynolds have released an interesting study on the trade stakes (dollar value) under the WTO dispute settlement system. (“WTO trade disputes, big and small”).  While their data confirms, intuitively, that WTO members are likely to litigate on big ticket items, such as the Boeing-Airbus dispute, the data also demonstrate, rather counterintuitively, that WTO members also litigate on such trades (exports/imports) of lot less dollar amounts.  According to them, “roughly 14% of the caseload involves trade in disputed products of less than $1 million per year.” 

 Another interesting observation on the litigation “cost.”

 The start-up cost of using the private sector to litigate even a relatively simple dispute through to a legal decision is estimated to range from $250,000 to $750,000, depending on the law firm involved. Nevertheless, some subsidised legal assistance is available, including through the highly utilised Advisory Centre on WTO Law. The WTO system’s chief publicly subsidised legal assistance program estimates charges to middle income developing country members at roughly $200,000 for the provision of work up to a legal decision (ACWL 2007), and progressively lower fees are available for poorer countries.

 Finally, here goes their conclusion.

 And clearly the trade that is directly at stake is only the tip of the dispute settlement iceberg. Jurisprudence resulting from these cases is likely to have an even longer reach via the ‘shadow of the law’ extending the indirect impact of WTO dispute settlement to hundreds of billions of dollars in trade each year.

 What do you think are real driving forces behind WTO members’ decision to litigate?  Economic, political and/or something else? 

GATT Article XX an an Exception to the TBT Agreement

I was struck by this sentence from para. 5.56 of yesterday's China - Rare Earths Appellate Body report (made in the context of discussing the relationship between China's Accession Protocol and the Marrakesh Agreement/Multilateral Trade Agreements): 

Article XX of the GATT 1994 has been found by the Appellate Body not to be available to
justify a breach of the Agreement on Technical Barriers to Trade (TBT Agreement).479

479 See Appellate Body Report, US – Clove Cigarettes, paras. 96 and 101.

I hadn't recalled such a finding, so I looked up the citations to Clove Cigarettes.  Here's para. 96:

96. The balance set out in the preamble of the TBT Agreement between, on the one hand, the desire to avoid creating unnecessary obstacles to international trade and, on the other hand, the recognition of Members' right to regulate, is not, in principle, different from the balance set out in the GATT 1994, where obligations such as national treatment in Article III are qualified by the general exceptions provision of Article XX.

And here's para. 101:

101. Finally, we observe that the TBT Agreement does not contain among its provisions a general exceptions clause. This may be contrasted with the GATT 1994, which contains a general exceptions clause in Article XX.

I don't read those paragraphs as saying that GATT Article XX cannot be used as an exception to TBT Agreement obligations.  Instead, I read them as saying, basically, that the TBT Agreement does not have an equivalent to Article XX.

In Clove Cigarettes, the U.S. did not invoke Article XX as an exception to the TBT claims, so the question of whether Article XX was available as an exception did not come up.

Not that I think the Appellate Body is likely to find that Article XX can be used an exception to the TBT Agreement.  I was just surprised by the declaration that it cannot, based on those Clove Cigarettes passages.

Any other opinions on this?  Am I mis-reading things?

The Russian Food Import Ban under the DSU

From the Washington Post:

Russia has aimed its latest cross-Atlantic swing at the American food industry.

On Thursday, the country announced the suspension of billions of dollars in food imports from a number of countries — including Norway, Canada, Australia, the United States and the 28-nation European Union — in retaliation for sanctions imposed on it by those nations over the past few weeks. The measure, which targets meat, fish, fruit, vegetable and milk products, and will last a year, is expected to hit food supplies and drive up Russian food prices. 

And here's the WSJ:

Russia's import ban on a list of Western foods may be peanuts on the scale of Europe's economy, but it is a blow for some producers—and a sign of deteriorating economic ties as Moscow and the West face off over Ukraine.

Russia gave details Thursday of its response to Western sanctions, banning the import of meat, fish, dairy products and some other agricultural goods from countries that have targeted Russia with their own economic boycotts.

Retaliation for Western sanctions imposed last week, which targeted Russia's banks, military and oil industry, was widely expected, European Union officials said.

(I don't have a link to the measure itself, but it's Decree No. 560 of August 6, 2014, if anyone wants to look).

There are plenty of WTO violations to look at here -- Russia might have been able to take action consistently with WTO rules, but they don't seem to have tried -- but let me focus on a systemic issue.  The media describes the Russian measures as "retaliation" for Western sanctions, and that is no doubt the case.  One question, then, is what DSU Article 23 has to say about such an action. The relevant portions state:

1. When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of this Understanding.

2. In such cases, Members shall:

(a) not make a determination to the effect that a violation has occurred, that benefits have been nullified or impaired or that the attainment of any objective of the covered agreements has been impeded, except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding, and shall make any such determination consistent with the findings contained in the panel or Appellate Body report adopted by the DSB or an arbitration award rendered under this Understanding;

Russia has talked about challenging the Western sanctions at the WTO, although I haven't see a WTO complaint yet.  Thus, Russia has suggested that the sanctions violate WTO obligations, and the food import ban could be taken as a "redress" of that alleged violation.  Does that mean the food import ban, as an improper attempt to respond to a WTO violation, constitutes a violation of Article 23?

ISDS in CETA: Some Ideas for a Compromise

The FT reports on how ISDS is holding up the CETA negotiations:

The EU struck a political agreement on a trade accord with Ottawa last year but the deal has become mired in negotiations over investors’ rights. Berlin fears that German standards of environmental and consumer protection could be undermined by investor protection clauses in the agreement with Canada.

Berlin could still reject the entire trade deal – which requires the approval of all 28 EU governments – if no compromise is reached. Sigmar Gabriel, Germany’s powerful economics minister, has led opposition to the clauses that give foreign companies access to arbitration proceedings that are a legal alternative to national courts.

Mr Gabriel warned this year: “Many people in Germany fear that through such arbitration, individual states could be pressurised and policy objectives circumvented by the threat of damages.”

European politicians are especially wary of investor-state dispute settlement (ISDS) clauses in the Canadian deal because they will be seen as a blueprint for the EU’s Transatlantic Trade and Investment Partnership with the US, potentially the world’s biggest trade accord, due for conclusion next year.

The German government expects the Canadian deal will be agreed at an EU-Canada summit in late September but believes that some changes could be ultimately needed in the final wording.

According to a German official familiar with the deal, Berlin is unlikely to reject the investment protection clauses wholesale, as this would sink the entire deal. Instead, negotiations are likely to focus on areas of particular concern to the German public, such as environmental protection.

Everyone knows how I feel about ISDS, but putting that aside, is there a compromise on this issue that can help get CETA done?  It's easy to imagine tweaks that could be made, such as the inclusion of a clear exception to investment obligations for environmental measures.  However, it could be difficult to find wording that satisfies all of the competing interest groups who will be weighing in.

But maybe there's another approach to this issue.  What about some kind of "trial" period for ISDS in CETA?  I have two possibilities in mind:

• There could be a requirement that the investment chapter be reauthorized in five years.  That would give everyone a chance to see how it is working in practice, and make changes as needed after the five year period.
• There could be an opt-out, under which either party -- and in the EU, any Member State -- could terminate the investment chapter on its own accord if it doesn't like how things are going.

I'm sure people can think of other variations on this same theme.

How the EU Influences WTO Jurisprudence

Following up on my blog post of earlier today, this is from Tilman Krueger:

the EU actively contributes to rule development in the WTO also as a litigant in the context of WTO dispute settlement and in addition to its immediate, case-specific interests. Two examples for such behaviour will now be illustrated.

...

Although initiated by its goal to eliminate zeroing, the EU’s strategic targeting of US dumping calculations as claimant and as third party, and its continued insistence on the precedential effects of the Appellate Body’s case law motivated the Appellate Body to assume a stronger role for itself. Together with US noncompliance, this provoked a showdown situation between a panel and the Appellate Body – over the legality of zeroing as well as over the status of adopted Appellate Body reports in the WTO’s legal system. With the adoption of the Appellate Body’s report in US – Stainless Steel (Mexico), the EU could then claim a double win with reference to both, its immediate, case-specific interests on zeroing as well as its long-term, systemic interests on the establishment of a stronger court system in the WTO.

His second example is opening AB hearings to the public.  

The passage is from a chapter, entitled "Shaping the WTO’s institutional evolution: the EU as a strategic litigant in the WTO," in this book: http://www.cambridge.org/de/academic/subjects/law/european-law/european-unions-shaping-international-legal-order

 

Are the U.S. and EU Dominating Appellate Body "Law-Making"?

Joost raises an important systemic issue in a new paper:

This contribution makes an empirical assessment of the role of precedent in WTO dispute settlement. As an imperfect proxy it counts cross-references between the 108 Appellate Body reports issued between 1996 and 2013. Using basic tools of network analysis it attempts to answer the following questions. Has the Appellate Body developed a practice of de facto rule of precedent? If so, as of when? Over time, is it influenced more or less by earlier reports? Have some Appellate Body reports been more influential than others? Conversely, are some Appellate Body reports relying on earlier decisions more extensively than others? Results confirm how important previous Appellate Body reports are for future WTO litigation. No one can successfully engage in WTO dispute settlement without knowing previous Appellate Body case law. 

This naturally leads to a second set of questions. If the Appellate Body is effectively engaged in rule refinement, if not rulemaking, with legal effects on all WTO members (not just the disputing parties), which WTO members are shaping this rule development? Are some WTO members more active in Appellate Body litigation than others? Are other WTO members completely outside of this norm-development process? Whereas the network of cross-references between Appellate Body reports is both large and dense (35.4%), with multiple cross-references between many of the 108 reports to date, the network of participants before the Appellate Body, in contrast, is small and sparse (0.8%), with literally two WTO members acting as central hubs or feeders of WTO Appellate Body jurisprudence, leaving all other WTO members well behind. 

All of this sounds right, but I think it's worth noting one additional point.  There are many people in the U.S. (not me!) who feel that the system is biased against them, and despite its active participation, the U.S. isn't getting what it bargained for (think "zeroing").  Is there a way to measure how effective individual governments have been at influencing the development of the jurisprudence in their preferred direction?  Clearly, all of those complaints against the U.S. and EU allow those Members to have disproportionate participation in the process.  But what if the result is jurisprudence they don't like?

The fallacy of the Jul 31 deadline in the WTO TFA:inventing a crisis and demonizing India's democracy

The failure to agree yesterday at the WTO on the adoption of the Bali Trade Facilitation Agreement is widely being misrepresented in the media as the collapse of Bali and a new or renewed crisis for the WTO system.  True to their venerable habits of ultimatum diplomacy and pushing around developing countries the old school masters of WTO diplomacy had presented a threat of crisis as a basis for pressuring India to put aside its concerns with lack of progress on a permanent food security deal and not hold up the TFA.  Having failed to learn their lesson from Bali, the practioners of old fashioned ultimatum diplomacy still believed that India would cave, rather than take the rap for tanking the WTO negotiating round. Now the old school has been hoisted by their own petard.  They do not realize that the distribution of global power and the vectors of legitimacy have changed since the Uruguay Round. 

I'm not a true technical expert on the TFA-on which my sometime co-author Antonia Eliason has written masterfully-but it does not take much experience in treaty interpretation to understand the absurdity of inflating the July 31 deadline into a nuclear event for the WTO system.  The clause in question merely states that the General Council is to meet by July 31 to adopt the TFA, and take related measures toward implementation.  Its plain language does not require that the action itself be taken on that day but only a meeting for those purposes be convened by then, This is consistent with the date for acceptances of the TFA by individual WTO Members being a year from now.  The fact that July 31 is  only specified as a deadline by which a meeting is to occur with a view to certain actions rather than when the actions themselves must have been completed, is consistent with the fact that nothing in the TFA specifies any legal consequences in the event that the actions in question remain incomplete by July 31. The French text also makes clear that it is the meeting that is to be convened at the latest by July 31.  Further, the deadline is not contained within the TFA itself (and that includes the 2015 deadline for acceptances).Extending the acceptances deadline  would simply require a new ministerial decision, and does not require opening up the heavily negotiated text of the TFA, which is annexed to the ministerial decision.  

In sum, the legal basis for declaring the TFA dead and the WTO in crisis is completely illusory-this is simply about punishing India for asserting the perceived interests of its people.   We also need to put the events of the last weeks in context.  India did not spring its concerns as a surprise at the Geneva meeting-it had been expressing worries about lack of progress on a permanent food security accord for some time.  More generally, whatever deadlines, artificial or real, may exist, implementing the TFA is a complicated process, that will involve many stages and different speeds for different countries, often depending on the promised capacity building assistance coming through.  The linkage to food security is not the only issue-there is also the question of how fast and how solidly the financing is being put into place.  The WTO itself doesn't have much institutional capacity in this role; it isn't use to coordinating with bilateral and multilateral donors this kind of operation.  The objectives of the TFA are meritorious; there is no legal or policy reason, not, in the words of Bob Dylan, to "keep on keepin' on." 

Is Yukos a Foreign Investment Dispute?

I haven't read any of the submissions or the opinion in the Yukos investment arbitration, which resulted in the biggest award ever -- $50 billion! -- and has been making headlines in the past week. But from the articles about the case, what struck me is that the claimaints were mostly Russians.  OK, technically, their ownership stake was held through a couple foreign companies, which is what gave them access to the Energy Charter Treaty.  But in reality, what we have here is some Russians suing Russia in an international tribunal.

If I'm right about that, and please feel free to correct me if I'm not, is this really a foreign investment dispute at all?  Or is it better thought of as outsourcing of constitutional law to an international court?

And how are the traditional arguments about "promoting" or "protecting" foreign investment affected by the application of these rules to domestic investors?

Michael Trebilcock's SIEL Lecture

This is a synopsis of Professor Michael Trebilcock's recent SIEL lecture (written by Michael):

In my recent Robert Hudec public lecture to the Society for International Economic Law at its biannual conference in Bern, Switzerland (“Between Theories of Trade and Development: The Future of the World Trading System,” http://ssrn.com/abstract=2473158), I focus on the role of developing countries in the multilateral trading system.  First, I briefly trace the legal status of developing countries in this system, beginning with the emergence of special and differential treatment on the import side in the 1950s (with respect to the protection of infant industries), and on the export side in the 1960s (with respect to non-reciprocal preferences granted by developed countries), to the single undertaking approach adopted in the Uruguay Round culminating in 1993, where all countries were essentially required to sign on to a broad range of commitments extending well beyond border measures to a variety of internal domestic regulatory policies, to the current Doha Round where a major fault-line has emerged between developed and developing countries with respect to multilateral commitments. 

I then trace a parallel set of shifts in thinking in development economics in the post-war period, beginning with big push, state-led theories of development and import substitution industrialization from the 1950s through to the 1970s, then the converse of these policies reflected in the Washington Consensus that prevailed in development circles throughout the 1980s and much of the 1990s, which emphasized the ubiquitous virtues of private markets and a limited role for government; then the currently prevailing New Development Economics, which emphasizes the shortcomings of both earlier schools of development economics in their commitment to universal or generalizable theories of development, and instead focuses on country- and context-specific impediments to development, recognizing that some of the most economically successful developing countries in the post-war period (including the East Asian and Chinese high-growth economies) have adopted highly eclectic and unorthodox policies that seem to have been effective in their particular contexts.  These shifts in thinking in development economics map closely the evolving role of developing countries in the multilateral trading system.

This evolution in thinking amongst development economists suggests that a one-size-fits-all multilateral trading system must be abandoned, as is already reflected in the dramatic proliferation of preferential trade agreements (PTAs) between developed and developing countries, and between and among developing countries themselves.  To reinvigorate and render sustainable the multilateral trading system, I argue that this system should provide more scope for plurilateral agreements amongst sub-sets of members (“coalitions of the willing”) and making provision for signatories to PTAs to designate, at their option, the WTO dispute settlement system as the dispute settlement regime for their PTAs, hence promoting stronger integration and coherence of international trade law.  In turn, I argue that developing countries, other than the least developed countries, should abandon claims for extreme forms of special and differential treatment, especially on the export side, and be prepared to bargain reciprocally with developed countries for improved market access.