International Economic Law and Policy Blog

Free Trade Within Canada: The Courts (Part 2)

Following up on the last post, this is from a recent report by Canada's Standing Senate Committee on Banking, Trade and Commerce, seeking to have the Canadian Supreme Court clarify the free trade provisions of the Canadian Constitution:

A. Overview

While the committee would prefer a renewed and effective AIT, it is possible that negotiations may continue for an unacceptably long period of time or that a renewed AIT would not have the six key characteristics identified earlier. In either of these cases, the federal government must have another course of action to pursue as it exercises a leadership role in breaking down the walls of internal trade barriers.

B. A Contingency Plan

With Confederation in 1867, attempts were being made to build a national economy while using the strengths of the various regions of the country and benefitting from interregional trade. To that end, section 121 of the Constitution Act, 1867 prohibits explicit barriers to trade and commerce between the provinces, stating: “All Articles of the Growth, Produce or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.”

At the same time, the committee is aware that Canadian federalism – in respect of which the division of powers are predominantly outlined in sections 91 and 92 of the Constitution Act, 1867 – was designed to respond to Canada’s diversity, with inevitable differences in specific social, economic and political arrangements. The federation provides a system of government that allows the expression of such differences.

Furthermore, trade in services was not a concept that was envisioned in 1867. Consequently, section 121 does not specifically refer to trade in services. Given the recent growth of trade in services, and the expectation that growth will continue, the committee believes that the Fathers of Confederation, if they were alive today, would amend section 121 such that it would clearly apply to internal barriers in relation to trade in services.

Given that the deadline for a renewed AIT has passed, and that the Committee on Internal Trade has not announced a new deadline, the committee believes that the federal government has a responsibility to plan, not only for the implementation of a renewed AIT, but also for the possibility that a renewed agreement may not be reached in a timely manner or may be inadequate.

C. Committee’s Recommendation

The federal government has a clear leadership role to play in ensuring that progress continues to be made in eliminating internal trade barriers, and – as required – should use the tools at its disposal to determine the way in which section 121 should be interpreted. For that reason, the committee recommends:

that, if a renewed Agreement on Internal Trade is not concluded by July 1st, 2017 or if the renewed agreement is inadequate, the federal government pursue – through the Governor in Council – a reference of section 121 of the Constitution Act, 1867 to the Supreme Court of Canada.

Any such reference should focus on two questions: whether sections 91 and 92 must be read in the context of section 121; and whether section 121 applies to internal trade in services.

Free Trade Within Canada: The Courts

Last month, a Canadian lower court ruled that the Canadian constitution does, in fact, guarantee free trade among the provinces. Here are the basic facts of the case, from the Toronto Globe and Mail:

In 2013, Gérard Comeau was caught in what is likely the lamest sting operation in Canadian police history. Mr. Comeau drove into Quebec, bought 14 cases of beer and three bottles of liquor, and headed home. The Mounties were waiting in ambush. They pulled him over, along with 17 other drivers, and fined him $292.50 under a clause in the New Brunswick Liquor Control Act that obliges New Brunswick residents to buy all their booze, with minor exceptions set out in regulations, from the provincial Liquor Corporation.

And here’s how the court ruled:

Mr. Comeau went to court and challenged the law on the basis of Section 121 of the Constitution: “All articles of the growth, produce or manufacture of any of the provinces shall, from and after the Union, be admitted free into each of the other provinces.”

The judge said Friday that the wording of Section 121 is clear, and that the provincial law violates its intention. The Fathers of Confederation wanted Canada to be one economic union, a mari usque ad mare. That’s why they wrote the clause.

If you are into these sort of things, I highly recommend reading the judge’s decision, which looks deeply into the historical background of the Canadian constitutional provision at issue. Here's an excerpt:

183. That historical context leads to only one conclusion: the Fathers of Confederation wanted to implement free trade as between the provinces of the newly formed Canada. They specifically rejected an American-style of government and adopted continuity with the British system of government at a time when free trade was actively implemented in Britain. Economic development was not only pursued, it was one of the foundational reasons for the pursuit of a union. The repeal of the Reciprocity Treaty with the United States, which was based on free trade, necessitated the search for alternatives. The proposed discussions between Nova Scotia, Prince Edward Island and New Brunswick in September 1864 about possible political and economic union opened up the possibility to replace the American free market with a made in Canada free market for all provinces. The Fathers of Confederation wanted to replace the lost free trade with the United States with free trade as between the proposed provinces of Canada.

I should mention that people who seem to know these things tell me that the decision is likely to be reversed on appeal.

Brexit Law

As always, when there are big, disruptive policy changes, lawyers are some of the biggest winners. In the case of Brexit, it looks like some of my trade lawyer friends will be among them:

The ripple effect of last week’s Brexit vote continues to be felt in Washington, where the city’s bevy of lawyers and lobbyists are working around the clock to advise corporations bracing for the fallout from Britain’s historic decision to exit the European Union.

Several large law firms set up Brexit task forces and hotlines to respond to the avalanche of calls from companies seeking clarity on whether to move operations out of the United Kingdom, whether to revise contracts and partnerships between U.S. and U.K. companies, and how to position themselves to influence U.S. and European officials as they prepare to structure yet-to-be-determined trade rules the U.K. will adhere to in the new world order.

“We’re really in uncharted territory with the breakup of the U.K. and the E.U.,” said Hal Shapiro, a trade attorney at Akin Gump and former lawyer at the Office of the U.S. Trade Representative. Akin Gump launched an internal Brexit task force last week and plans to publish a ”Beyond Brexit” blog this week as a resource for corporate clients.

What's the Answer to the Variable Geometry Test: BRITTIP?

OK, no sensible person who understood Brexit ever really wanted it.  And there are enough potential legal and institutional obstacles—including most importantly the need for British Parliamentary action—to make it possible that actual Brexit never happens, as thoughtful commentators like Gideon Rachman and Andrew Moravcsik have said.  So the real issue is what will be negotiated.  The rest of the EU has decided to begin the informal negotiations like some jilted lovers or spouses:  “get out and I never want to see you again.”  Some in the UK, on the other hand, are saying the UK would still like to be friends, and maybe even friends with benefits.  But the EU cannot be too easy on the UK, or else other exit fans in other states may be emboldened. 

So, what are the negotiating options?  First, there can be variable geometry within the EU.  Easiest is actually what some of the leading Brexiters wanted in the first place:  a negotiation to relax some of the more irksome aspects of EU membership:  free immigration to citizens of other EU states, and some of the human rights jurisprudence.  While it is easy for me to say that neither of these is much or a problem for the UK, and that as with all marriages, you take the “bad” with the good, the UK needs to save face and so will need to bring home some relaxation.  If that does not sufficiently appeal to the rest of the EU, which would have to decide unanimously to amend the treaties, the second variety of variable geometry would have the UK outside the EU, but replicate some of the EU arrangements, including free trade in goods.  Now this agreement could entail a customs union, and that would make a great deal of sense:  the UK would be like Turkey in the East, subject to the common external tariff of the EU, and having zero-tariff treatment on its own goods going to the EU.  Furthermore, the UK would not have to renegotiate its tariffs.  Other than disincentivizing further exits, what reason could the EU have for refusing to enter into a CU with the UK?  This customs union could be approved by qualified majority vote, unless it constitutes a mixed agreement under EU law.  But if the UK wanted to maintain its own commercial policy, or if the EU were spiteful, a simpler free trade agreement could be negotiated, along the lines of the EU’s many free trade agreements with other states.  In fact, the recent EU-Canada CETA, or even the proposed TTIP, could be a model.  Indeed, a TTIP that includes the UK might be just the ticket.  And while before the Brexit vote, President Obama suggested the UK would have to get to the back of the line for a trade deal with the US, perhaps associating with TTIP would soften his heart, or that of his successor.

While I am on the topic of President Obama's possible successor, note that although Trump applauds Brexit, there is no doubt that the Brexiters would like to have a deal with Europe just like TTIP or TPP.  So the Brexiters' position does not support Trump's. 

Trump on Trade Policy

Donald Trump just gave a speech on trade policy. It's full of nonsense, but honestly, it's not much different than you would hear from other politicians (many Democrats and some Republicans).

Here are his recommendations for change:

There is no way to “fix” the TPP. We need bilateral trade deals. We do not need to enter into another massive international agreement that ties us up and binds us down.

A Trump Administration will change our failed trade policy - quickly

Here are 7 steps I would pursue right away to bring back our jobs.

One: I am going to withdraw the United States from the Trans-Pacific Partnership, which has not yet been ratified.

Two: I'm going to appoint the toughest and smartest trade negotiators to fight on behalf of American workers.

Three: I'm going to direct the Secretary of Commerce to identify every violation of trade agreements a foreign country is currently using to harm our workers. I will then direct all appropriate agencies to use every tool under American and international law to end these abuses.

Four: I'm going tell our NAFTA partners that I intend to immediately renegotiate the terms of that agreement to get a better deal for our workers. And I don't mean just a little bit better, I mean a lot better. If they do not agree to a renegotiation, then I will submit notice under Article 2205 of the NAFTA agreement that America intends to withdraw from the deal.

Five: I am going to instruct my Treasury Secretary to label China a currency manipulator. Any country that devalues their currency in order to take advantage of the United States will be met with sharply.

Six: I am going to instruct the U.S. Trade Representative to bring trade cases against China, both in this country and at the WTO. China's unfair subsidy behavior is prohibited by the terms of its entrance to the WTO, and I intend to enforce those rules.

Seven: If China does not stop its illegal activities, including its theft of American trade secrets, I will use every lawful presidential power to remedy trade disputes, including the application of tariffs consistent with Section 201 and 301 of the Trade Act of 1974 and Section 232 of the Trade Expansion Act of 1962. 

So he's against the TPP, and wants to renegotiate NAFTA ... but he's pro-WTO and pro-bilateral deals.

Needless to say, none of this makes any sense. He is simply criticizing terms he thinks people don't like -- TPP and NAFTA -- and then proposing "better" trade deals, without explaining in what way they would be better. Much of what he says is just uninformed nonsense. (His renegotiated NAFTA will be "a lot" better, not just a "little bit better." Wow, I'm sold! "A lot" is more than "a little bit," so I definitely support his plan over the inferior plans of other people.) Other proposals are things we already do (WTO cases against China).

Overall, I think it's best not to get bogged down in what any of this means, because it doesn't mean much of anything. If Trump gets elected, there are much bigger problems to worry about than trade. And if he gets elected, regardless of what he previously said on trade, there is really no telling what he would actually do because he doesn't seem to have any idea what's in a trade agreement.

Pauwelyn, Guzman & Hillman: International Trade Law, 3rd ed. (2016) Now Out !

For people teaching WTO/international trade law, and still looking for a book to work with, the latest edition of my case book, International Trade Law, is now out.

The main addition, compared to the second edition (2012), is a third author: Jennifer A. Hillman, formerly a member of the WTO Appellate Body, US International Trade Commission and General Counsel at the Office of the US Trade Representative, and now a Visiting Professor at Georgetown University Law Center.

With Andrew Guzman becoming Dean Guzman at USC Gould School of Law, extra help was needed. Jennifer has been a tremendous help and source of inspiration in producing this third edition, in particular a revamp of the trade remedies chapters with new hands-on practical problems.

We have updated the book with reference especially to new WTO case law. The TBT Chapter, for example, is completely re-done as in the span of just a couple of years a rich TBT jurisprudence has developed thanks to essentially three cases: US — Clove Cigarettes, US — Tuna II and US — COOL. Also the traditional topic of national treatment needed a substantial re-work in the wake of the influential EC — Seals dispute.

Other post-2011 seminal cases included in this edition are: Canada — Feed-in Tariffs, China — Rare Earths and Peru — Agricultural Products. Other important developments incorporated in this third edition are renewed Trade Promotion Authority in the United States (granted in 2015), the conclusion of mega-regionals such as the Trans-Pacific Partnership and the 2014 WTO Trade Facilitation Agreement.

Once more, we tried our best to make all of these updates without making the book (much) longer. This means that we had to be selective and drop, or not include, certain issues or cases that some teachers may have liked to see included. This third edition also updates data and statistics on trade flows and other economic data (Chapters 1 and 20), dispute settlement (Chapter 5), trade remedy investigations and preferential trade agreements (Chapters 16 and 12), and country classifications (Chapter 22).

You can order the book here: http://www.aspenlawschool.com/books/Pauwelyn_TradeLaw/

An international (non-US) edition is available, in soft cover.  For teachers using the book in class, a special rate, depending on the country, is available. You should contact Aspen to that effect, or just send me an email.

I hope the book will be useful to teachers & students alike!

 

When Can the UK Negotiate Its Own Trade Agreements?

Prior to the vote, I wasn't paying much attention to Brexit. Like many people, I didn't think Leave would happen. I was wrong, and now I'm trying to play catch up on the issue!

I've seen it said that Article 3(1)(e) of Treaty on the Functioning of the European Union prevents the UK from negotiating trade agreements until it has worked out its exit from the EU. (For example, see the first comment here).

Here is the text of the treaty: 

Article 3

1. The Union shall have exclusive competence in the following areas:

...

(e) common commercial policy.

Under this provision, it is clear that an EU member state cannot negotiate with third states in relation to the common commercial policy. But once a member state has decided to leave the EU, and would like to begin negotiating its own commercial policy (i.e., its own trade agreements), does Article 3(1)(e) get in the way?

TransCanada Files a NAFTA Request for Arbitration

Bloomberg reports:

TransCanada Corp. is seeking to recoup $15 billion for the Obama administration’s rejection of the Keystone XL oil pipeline, in a legal claim that highlights how foreign companies can use trade deals to challenge U.S. policy.

The Calgary-based pipeline operator filed papers late Friday seeking arbitration under the North American Free Trade Agreement, arguing that TransCanada had every reason to believe it would win approval to build Keystone XL. Instead, President Barack Obama last November determined that the pipeline, which would have carried Canadian oil sands crude to the U.S. Gulf coast, wasn’t in the national interest. In response, TransCanada in January vowed to use arbitration provisions in Chapter 11 of Nafta to recover costs and damages.

The company said the U.S. spent seven years delaying a final decision on the project with multiple rounds of “arbitrary and contrived” analyses and justifications.

The request for arbitration is here. It is mostly factual background, and the legal argument is not elaborated.

It will take years for the legal claims to be resolved, but in the meantime, will there be an impact on the TPP debate?

Also note the strange Donald Trump position on Keystone:

Donald Trump's vow to resuscitate the Keystone XL oil pipeline in exchange for a share of its profits has a glaring problem: It risks running afoul of laws against government takings of private property. And even supporters of the project warn that it risks hurting relations with Canada, the nation's No. 1 oil supplier.

The presumptive Republican nominee has repeatedly pledged to revive the Canada-to-Texas pipeline, a long-standing cause for Republicans in Congress, but Trump has brought a twist. He wants U.S. taxpayers to get a slice of the project's revenue.

"I want it built, but I want a piece of the profits," Trump said May 26 before delivering an energy speech to an oil-industry audience in North Dakota. "That's how we're going to make our country rich again."

No doubt TransCanada stands poised to amend its filings, although perhaps this will not be necessary.

The AB Report On Colombia – Textiles: When Does “We Cannot Complete The Analysis” Become “You Failed To Discharge Your Burden Of Proof”?

The June 7 AB report in DS461, examining a Colombian import tariff imposed against Panama allegedly to combat money laundering, ends on a rather peculiar note.

The AB

1.    confirmed that Colombia’s “compound tariff” prima facie violates GATT Art. II;

2.    reversed the Panel’s finding that the tariff is not designed to combat money laundering under GATT Article XX(a)/(d);

3.    found, instead, that the tariff is so designed; but then

4.    concluded that due to “a lack of sufficient clarity with respect to several key aspects of the ‘necessity’ analysis concerning [Colombia’s] defence … a proper weighing and balancing that could yield a conclusion that the measure is ‘necessary’ could not be conducted” (paras. 5.116 & 5.149) so that, as a result,

5.    Colombia “has not demonstrated” that the tariff is “necessary” under either GATT Article XX(a) or (d) (paras. 5.117 & 5.150) and violates GATT Article II.

Bottom line: not enough clarity, so the respondent’s defense fails and the claimant wins (Colombia violates GATT Art. II).

Compare this to the AB Report just preceding this case, another complaint filed by Panama, against Argentina this time (DS453). There, the AB reversed the panel’s findings on “likeness” under GATS Articles II and XVII and then simply stopped, not “completing the analysis” (for one thing, because neither party explicitly requested it to do so). Similarly, in DS449, the so-called US – GPX case, the AB reversed the panel’s finding of compliance with GATT Article X but then (after 20 pages of trying to complete the analysis itself!) concludes that, for lack of clarity (facts, factual findings), it cannot complete the analysis.  

Bottom line in those cases: not enough clarity, so the analysis cannot be completed and the claimant fails (findings that Argentina violates GATS are moot; no finding on whether the US violates GATT Article X).

So, even though the factual situation seems to be similar, if not the same (lack of clarity), in one scenario (where a defense is at stake), the AB relies on burden of proof to reject Colombia’s defense; in the other scenario (where a claim is at stake), the AB relies on “not completing the analysis” to reject the claim.

Could/should the AB in DS461, instead, have concluded that “we cannot complete the analysis” under GATT Article XX?

What would have been the difference?

1. Presumably, since the analysis under GATT Article XX cannot be completed, the prima facie violation of GATT Article II cannot be confirmed; hence, Colombia wins (arguably, the same could have been true in case Colombia had simply asked for a reversal of the panel’s “not designed to” finding under GATT Article XX without asking for a subsequent “completion of the analysis”);
2. Since no conclusive finding would then be made under GATT Article XX (the way no finding was made on GATS “likeness” in DS453 or GATT Article X violation in DS449), Panama could potentially re-file the case, for a more complete analysis and ultimate finding under GATT Article II cum XX (today, instead, the AB did conclusively find that Colombia’s measure is not justified under GATT Article XX, even though the AB itself admitted that an Article XX necessity analysis "could not be conducted", and this ruling would seem to carry the force of res judicata).

In this context, how to draw the line between “we cannot complete the analysis” and “you failed to discharge your burden of proof”? Is the AB's approach biased against defendants (lack of clarity under claims, leads to no finding; lack of clarity under defences, leads to a default violation?).

Remember, crucially, that in the Colombia case the AB did not say that its analysis under GATT Article XX “necessity” led it to conclude that the measure was not necessary; rather the AB said that “a proper weighing and balancing … could not be conducted” in the first place.

Organic, Bottom-Up Evolution of the WTO Treaty? Canada’s June 22 DSB Proposal For an Informal Framework for Procedural Innovation in WTO Dispute Settlement

We all know how difficult it is to change or update the now more than 20 years old WTO treaty. What is true for substantive rules is also true for procedural, dispute settlement provisions. DSU reform requires consensus of all (162) WTO members. The formal DSU review process started almost 20 years ago. It is not going anywhere.

As Canada put it at yesterday’s DSB meeting, the WTO treaty “has limited the opportunity for the rules and procedures to evolve organically in response to experience, the changing nature of disputes, and the changing expectations of Members”.

Instead of WTO-wide DSU reform, we have witnessed case specific updates (on e.g. third party rights, appointment of experts, confidential information, preliminary rulings) including case specific (and inter se) deviations from explicit DSU provisions, for example, so as to open AB hearings to the public, sequence proceedings or extend deadlines.

These legal updates and innovations underscore that inter se deviations from the WTO treaty are possible and tolerated (subject to bilateral agreement, and as long as they do not affect third party rights), something that has not (yet) gained acceptance when it comes to substantive updates or innovations (see the recent AB Report on Peru – Agricultural Products which seems willing to tolerate inter se waiver of the procedural right to a WTO panel, but to close the door to substantive updates or inter se deviations from the WTO treaty).

At the same time, these ad hoc updates of the DSU are not predictably followed in all cases, lead to strategic posturing in specific disputes (there is always one party in a specific dispute that benefits from an innovation more than the other), and increase complexity for participants other than the 15 or so “frequent users”.

Yesterday, Canada proposed “an informal framework for the development of procedural innovation that can take place both outside the bilateral context of specific disputes, and outside the multilateral context of discussions of changes to the DSU that would be binding on all Members”.

This framework would allow for a sub-set of WTO members to commit (in varying degrees) to certain experimentation or innovations ex ante. WTO members not yet ready to opt-in would not be affected. Innovations that work could then be formally codified (for all or a sub-set of WTO members); those that do not work can be abandoned. The mechanism would also facilitate the exchange of good practices and bilateral agreements so as to enhance transparency and benefit WTO members not frequently involved in DSU disputes.

As someone who is concerned about keeping the WTO relevant and up to date, even where formal WTO amendments cannot be agreed upon, but always subject to the agreement of those members involved and with the fullest respect for WTO members not willing to change (third party rights), I think this is a great and very creative idea worth examining. It also reminds me of the “informal international lawmaking” that we witness in so many other international organizations, including in standard-setting bodies: new practices emerge bottom-up, where they work, they get organically adopted; where they fail, they almost automatically get put aside. It is reminiscent also of how the related field of international investment law emerged and continues to evolve, currently incorporating plenty of reforms.

Canada's DSB statement and documents relevant to this proposal are available here and with the Canadian Mission to the WTO, email: [email protected]

The WTO congratulates itself on panel diversity - unfortunately its math is wrong

In this news release, https://www.wto.org/english/news_e/news16_e/disp_21jun16_e.htm, the WTO announces that it has just appointed its 100th female dispute settlement panelist and compares itself favorably with other international tribunals, stating "[t]he WTO's dispute settlement system has fared somewhat better. Of the 209 WTO panels composed since 1995, 90 have included women panelists, representing about 43 per cent of the total panelists."  Unfortunately, that math is clearly incorrect.  The WTO data instead reflects that 43 percent of the panels have included at least one woman.  However, with the 100th female panelist just appointed, there have been 100 female panelists and 527 male panelists (assuming all panels have had three members), which works out to women representing about 16 percent of the total, not 43 percent.  The data is a bit worse when one takes into account the fact that some panelists have served more than once.  The WTO's own data, accessible by clicking "here" at the end of the press release, indicates that "[o]f the 277 individuals selected to serve as panelists since 1995, 39, or approximately 14 per cent of them, were women."  Worldtradelaw.net tracks this data as well: http://www.worldtradelaw.net/databases/panelistgender1.php.  Their charts reflect that in 2009 there were no female panelists at all, and in 2015 only 2 out of 24 panelists were women.  So while it is true the WTO does a bit better than some other international tribunals, I'm not convinced this self-congratulatory announcement was warranted.

 

 

Protecting Public Welfare Regulation through Joint Treaty Party Control

Anthea Roberts and Richard Braddock have a short Columbia FDI Perspectives piece that explains a procedure in the China - Australia FTA (ChAFTA) which allows the parties to the agreement to intervene when there is a dispute that involves public welfare regulation, in order to get the claim dismissed. Here's the whole thing (a Chinese version is here):

Protecting public welfare regulation through joint treaty party control: A ChAFTA innovation

If countries wish to protect legitimate and non-discriminatory public welfare regulation from investor-state claims, what options do they have? This Perspective highlights an innovative feature in the recent China-Australia Free Trade Agreement (ChAFTA) that goes well beyond existing safeguards for protecting the regulatory autonomy of states by providing a mechanism for joint treaty party control. In doing so, ChAFTA evidences a new and controversial step in efforts to recalibrate interpretive authority between arbitral tribunals and the treaty parties acting collectively.

Newer-style investment treaties often seek to protect countries’ regulatory autonomy by reaffirming the importance of public welfare regulation in the preamble; refining and clarifying core investment protections; and sometimes including general exceptions clauses. These approaches are useful but have limits. Preambular provisions are non-binding. Substantive clauses are binding, but states may not wish to allow arbitral tribunals to second-guess the permissibility of sensitive public welfare measures. Even if respondent states ultimately prevail, they are likely to expend considerable resources in time and money in defending claims.

Faced with these concerns, China and Australia broke new ground in ChAFTA by including a mechanism that protects public welfare measures through joint treaty party control. ChAFTA provides that, “Measures of a Party that are non-discriminatory and for the legitimate public welfare objectives of public health, safety, the environment, public morals or public order shall not be the subject of a claim” by an investor (Article 9.11.4). If an investor challenges a regulatory measure, the respondent state is permitted to issue a “public welfare notice” specifying why it believes that the measure falls within this exception. The arbitration proceedings are then suspended and a 90-day consultation period with the other treaty party is triggered (Article 9.11.5-9.11.6).

If the treaty parties agree that the challenged measure fits within the scope of the carve-out, the decision is binding on any investor-state tribunal and any decision or award issued by such a tribunal must be consistent with that decision (Article 9.18.3). Because the mechanism is triggered at an early stage of the process – the respondent state has 30 days to issue a notice after receiving a request for consultations from an investor – it may prevent an investor-state tribunal from being established at all. If the treaty parties are not able to agree on whether or not the measure falls within the carve-out during the 90-day consultation period, the matter falls to the investor-state tribunal to determine. The tribunal is not permitted to draw any adverse inference from the non-issuance of a public welfare notice by the respondent or from the absence of any decision between the treaty parties as to whether the measure falls within the scope of the exception (Article 9.11.8).

This ChAFTA mechanism represents a new step in a broader trend of states seeking to recalibrate the balance between investor protection and state sovereignty, and between the interpretive power of arbitral tribunals and treaty parties. Recent treaties evidence a rise in provisions that permit the treaty parties to provide an interpretation of the treaty that is binding on arbitral tribunals. The ChAFTA mechanism takes that a step further by allowing the treaty parties to reach an agreement on the application of their treaty that is binding on arbitral tribunals. This is consistent with the approach taken in some recent treaties with respect to joint treaty party control over matters relating to taxation and financial services, but the ChAFTA provision is considerably broader in scope (see, e.g, US Model BIT, Articles 20, 21; Canada-China FIPA, Articles 20(2), 33(3)).

By requiring a joint decision of the treaty parties, ChAFTA limits the ability of respondent states to abuse the mechanism, which would be a more significant risk if the clause were self-judging. However, some will object to the measure as repoliticizing investor-state disputes by leaving investors at the mercy of joint decisions of the treaty parties. The clause does not include references to the public welfare measures being necessary or proportionate. Time constraints mean that a joint agreement is only likely to be reached in relatively clear-cut cases. There is also a question of how the mechanism would work between unequal treaty parties: there is a risk that a stronger party might lean on a weaker party to reach an agreement that was not warranted; or a stronger party might ignore attempts by a weaker party to reach an agreement that was justified.

Ultimately, whether the ChAFTA mechanism works well in practice will depend on how home states internalize their dual interests as capital exporters (who are interested in protecting their investors’ rights) and capital importers (who are interested in protecting legitimate regulatory autonomy). If they get this balance right, the mechanism could provide an innovative modality for states wishing to protect legitimate and non-discriminatory public welfare measures through joint treaty control. If they get the balance wrong, however, the clause will engender controversy due to over-use or remain in obscurity due to under-use.

This procedure seems pretty useful and has the potential to rein in (what I see as) the excesses of the current system. It remains to be seen whether and how the parties will use it, but it's there if they want to do so. It will be interesting to see if other governments incorporate this innovation into their own agreements.

Trade Remedies vs. Trade Liberalization

Michael Punke and Tim Reif respond to an FT article about the Appellate Body reappointment controversy with a letter to the editor. I want to focus on their last paragraph, which is not about the Appellate Body:

A quick note on the use of trade remedy laws, for which the FT shows obvious disdain. Trade remedy laws — such as rules against dumping and subsidies — are an important part of the rules-based system of international trade. WTO members have agreed on the right to use these remedies as an appropriate response to illegal and unfair trade practices. Without them, support for trade liberalisation would disappear altogether.

Could there be a different view on this? Perhaps it could be argued that trade remedies are actually an impediment to trade liberalization. Let me explain.

Trade remedies have proliferated, and are now used widely by countries around the world, at all development levels. One possible impact of trade remedies on the culture of trade policy is that everybody thinks everybody else is cheating. The constant accusations of "unfair trade" have convinced domestic groups around the world that foreigners are cheating them in one nefarious way or another. That makes it really hard to reach trade liberalizing agreements, because everyone is so suspicious of each other.

Do trade remedies effectively address practices that are actually unfair?  As applied in practice, dumping calculations just gather numbers and put them into a statistical program, generating a figure for an amount of dumping and a corresponding tariff. They do not require looking for any actual unfair practice, such as predatory pricing.

Subsidies and other state interventions, by contrast, are a real problem, but CVDs do not necessarily aim at trying to fix those practices. Rather, they just maintain a balance of unfairness. Arguably, a multilateral solution would be more effective at eliminating these practices.

And note that there hasn't been much success with trade liberalization at the WTO level over the past 20 years even with the proliferation of trade remedies.  (And while there have been FTAs, much of their focus is on issues other than trade liberalization).

It may be the case that trade remedies help provide support for trade liberalization, although I don't know how you test this empirically. But I just wanted to raise the possibility that they may actually be having the opposite effect.

Adjudicating International Trade and Investment Disputes: Between Interaction and Isolation

On August 25-26, 2016, Pluricourts will hold a conference in Oslo on "Adjudicating International Trade and Investment Disputes: Between Interaction and Isolation." The program is here. Here is more:

This conference will focus on the relationship, interactions and comparisons between the international trade and investment regimes in the context of adjudication of disputes.

The conference will present research from the disciplines of law and political science relating to three themes:

1) the new mega-regionals

2) comparisons and practices

 3) cross-fertilization and learning

Historically, the global regulation of international trade and investment relations have been closely interrelated; but in the post-war period, international trade law and international investment law developed on largely divergent paths. While international trade regulation has culminated in a multilateral regime with a permanent dispute settlement mechanism, the international regulation of foreign direct investment is primarily governed by 3500 essentially bilateral treaty relationships calling for ad hoc investor – state arbitration potentially to be hosted by a variety of international institutions. Despite these seemingly distinct structures, there is a recent trend that some say signal a move towards regime convergence: most clearly seen in the rise of mega-regional free trade agreements (FTAs) with investment chapters.

This potential convergence may be deceiving, however. The investment chapters of FTAs remain separate from the rest of the agreements and provide for distinct rules and procedures on dispute settlement. Moreover, issues of overlap between trade chapters and investment chapters have not been resolved, which means that the same case could possibly be raised simultaneously in two separate disputes under the same FTA. Legal disputes based on investment chapters in FTAs to date (ie under the NAFTA and DR-CAFTA) appear to interpret the investment protection chapters as standalone agreements with little or no reference to other sections of the FTAs.

Despite the limitations to integration that this new generation of trade and investment agreements may represent, there are other areas of interaction between the trade and investment regimes that could provide better evidence of a gradual move towards cohesion. This conference will look at the development of the new mega-regionals, but also the ways (or lack thereof) that the trade and investment regimes share practices and cross-fertilize.

The whole program looks interesting, but I wanted to point out that my friend Lothar Ehring will be speaking on "The Appellate Body of the WTO: obiter dicta, judicial economy, interpretation and the ban on adding obligations or diminishing rights." I don't know exactly what he will be saying, but it sounds as though it could be relevant for the ongoing Appellate Body reappointment controversy.

Finally, There Is a U.S. Presidential Candidate Who Supports the TPP

This is from Libertarian VP candidate Bill Weld, and when he writes as "we" I am assuming he is speaking for Libertarian Presidential candidate Gary Johnson:

Unlike the Republican or Democratic presidential nominees, we are committed to free trade and vigorously support the pending Trans-Pacific Partnership, which would establish the United States as an economic counterweight to China in Asia.

The only “isolationists” competing for the US presidency today are those who reject the premise of free international trade in goods and services (both major parties) and, worse, those who make a mockery of our obligations under treaties and international law by threatening illegal unilateral sanctions on countries such as Mexico and China (the Republican presumptive nominee).

Asking the Appellate Body to Clarify

This is from the China - Publications Appellate Body report:

237. The United States expresses "some concerns" regarding the Panel's approach to analyzing the "necessity" of China's measures. The United States' concerns relate to a "two step" approach, allegedly taken by the Panel in examining, first, whether China had made a prima facie case that the measures at issue were "necessary" within the meaning of Article XX(a), and examining only subsequently whether reasonably available WTO-consistent alternatives had been identified. The Panel drew on a statement made by the Appellate Body in Brazil – Retreaded Tyres.  However, the United States submits, other Appellate Body reports, in particular US – Gambling and Korea – Various Measures on Beef, described a single process. Moreover, according to the United States, the text of Article XX(a) sets out a single criterion, "necessary", which also suggests a "single, integrated, yet multifaceted inquiry". The United States adds that the preliminary conclusion of the Panel that the State plan requirement is "necessary" to protect public morals "in the absence of reasonably available alternatives" introduces confusion, because the term "necessary" is used in a different sense in this intermediate finding, on the one hand, and in its ultimate finding—that the State plan requirement is not "necessary" in view of a reasonably available alternative—on the other hand.

238. In response to questioning at the oral hearing in this appeal, the United States clarified that it is not raising a claim of error with respect to the way in which the Panel applied the "necessity" test. Instead, the United States stated that it would welcome clarification from the Appellate Body that an Article XX analysis should be approached in an integrated fashion. The United States acknowledged that, in analyzing the "necessity" of a measure, a panel cannot simultaneously assess all relevant factors and undertake the necessary "weighing and balancing" with respect to the contested measure and proposed alternative measures. 

So was the U.S. asking the Appellate Body to weigh in on an issue that was beyond the scope of the appeal?  Isn't what the U.S. asked the Appellate Body to do in this case similar to what it has objected to in the context of the reappointment of Seung Wha Chang?  Or is this case different because a Member was asking the Appellate Body for a clarification, rather than the Appellate Body offering a clarification on its own?

All in all, I'm still not sure what rules could or should be established to constrain the Appellate Body on these kinds of issues. My instinct is that some things just need to be left to the discretion of the courts, but again, if someone has suggestions, I'd be happy to hear them.

Varying Conceptions of FET in Mesa

Here are some articulations of the FET standard in the Mesa NAFTA Chapter 11 award:

The claimant: 

484. ... For Mesa, Article 1105 consists of several components including the duty to act in good faith; fairness and reasonableness; treatment free from arbitrary conduct; transparency; protection against abuse of rights; procedural fairness; legitimate expectations; treatment free from political motivation; and treatment free from discriminatory conduct. 

The respondent:

488. ... According to the Respondent, the threshold for demonstrating a violation of Article 1105 is high. To breach Article 1105, the impugned state conduct must be “sufficiently egregious and shocking, such as a complete lack of due process, evident discrimination or a manifest lack of reasons.”

The majority opinion: 

502. On this basis, the Tribunal considers that the following components can be said to form part of Article 1105: arbitrariness; “gross” unfairness; discrimination; “complete” lack of transparency and candor in an administrative process; lack of due process “leading to an outcome which offends judicial propriety”; and “manifest failure” of natural justice in judicial proceedings. Further, the Tribunal shares the view held by a majority of NAFTA tribunals that the failure to respect an investor's legitimate expectations in and of itself does not constitute a breach of Article 1105, but is an element to take into account when assessing whether other components of the standard are breached.

Judge Brower's concurring/dissenting opinion:

3. I agree with the Award’s formulation of the applicable standard under NAFTA Article 1105. That formulation was set out by the tribunal in Waste Management II and has been adopted by a number of other tribunals, including most recently the Bilcon tribunal. It provides that:

the minimum standard of treatment of fair and equitable treatment is infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety – as might be the case with a manifest failure of natural justice in judicial proceedings or a complete lack of transparency and candour in an administrative process. In applying this standard it is relevant that the treatment is in breach of representations made by the host State which were reasonably relied on by the claimant.

Some questions:

-- How much of a distinction is there between the respondent's formulation and the others?

-- For governments who seem to be trying to narrow the scope of this obligation, what's a specific real world example of the behavior you would like to see captured here?

-- What percentage of government actions violate these standards?  For what percentage could a foreign investor bring a non-frivolous claim of violation?

Gary Johnson on the TPP

Here's Libertarian Party candidate Gary Johnson talking about the TPP with Glenn Thrush of Politico:

THRUSH: ... So the other thing I find fascinating about you, the other wildfire that's really striking in terms of the Trump thing is the free trade stuff. You have been on the record as saying you thought NAFTA was good for New Mexico. Do you support the TPP, and do you think that this backlash against trade is bullshit?

MR. JOHNSON: Well, first of all, NAFTA. Would I have signed it or not? My skepticism says that maybe I wouldn't have signed it, because these trade agreements are just laden with crony capitalism. Would I have signed or implemented the Trans-Pacific Partnership? I've got to tell you, I think it's laden with crony capitalism. Free market really is the answer. It's the answer to unifying the whole planet, in my opinion, and if China wants to subsidize the goods that it sells to the United States, who benefits from that? Well, we do. And at the end of the day, who pays for any sort of tariffs? We do.

So free trade, genuine free trade, that's another one of Trump's--you know, hey, he says "I'm all for free trade" but then, in the next sentence, he says, "I'm going to force Apple to make their iPads and their iPhones in the United States." Hm, that sounds really free trade to me. 

What I take from this is that he's a pure, unilateral free trader. As to what he thinks of trade agreements, as a general matter or with respect to specific agreements, I think we need some more follow-up questions to get a better sense of his views. The "crony capitalism" assertion is a bit vague.  Which provisions does he not like?  Which provisions, if any, does he like?

Does Canadian Law Provide Remedies Equivalent to NAFTA Chapter 11 Arbitration?

That's the title of a new paper by Armand de Mestral and Robin Morgan. Here's the abstract:

It is often alleged that the provisions for investor-state arbitration (ISA) are not needed in international trade agreements to protect the interests of foreign investors in developed democracies because these countries possess well-established judicial systems where justice is given on an impartial basis by impartial judges. It is alleged that if foreign investors were to go to domestic courts, they would find all the remedies they require. To test this hypothesis, this paper looks at the situation in Canada. All 35 North American Free Trade Agreement (NAFTA) claims against Canada are considered with a view to determining whether Canadian courts would be empowered to award the same damages that might be awarded by an ad hoc arbitral tribunal, were the claimant to be successful. Somewhat surprisingly, damages fully equivalent to those that might be awarded by a NAFTA tribunal would be available in only four cases. In many other cases, only administrative law remedies and no damages would be available. In some cases, no remedy would be available at all. This is due, in part, to the absence of property and contract guarantees in the Constitution of Canada. The result might well be different in other developed democracies.

And this is from the paper:

The conclusion based on the above findings is self-evident: Canadian law does not generally provide foreign investors with remedies equivalent to those provided for under Chapter 11. Indeed, only 8.6 percent of the Chapter 11 disputes would have an arguable remedy for damages equivalent to those under Chapter 11, while only a total of 17.2 percent of disputes would have an arguable case for any damages whatsoever, whether equivalent or partial. There are two primary reasons for these findings concerning remedies under Canadian law. First, both provincial and federal governments in Canada have broad powers to expropriate. Quite simply, if the government decides to expropriate without compensation, and makes this explicit in the expropriating act, it can do so. The second reason is a lack of constitutional protection for property rights, as well as the nonapplicability of equality and anti-discrimination safeguards to corporations under section 15 of the Canadian Charter. This, combined with the principle of parliamentary sovereignty, makes it such that legislative regimes challenged under Chapter 11 are perfectly valid under Canadian law unless they fall afoul of the separation of powers. Nevertheless, the analysis of Chapter 11 cases submitted against Canada indicates that in the great majority of cases there is no domestic remedy equivalent to one sought under Chapter 11.

This leads the authors to ask some good questions:

... Interestingly, the US model BIT includes a proviso that it does not give foreign investors more rights than they would have under domestic law. This is not language that Canada has adopted and this paper shows that foreign investors do in fact enjoy remedies under NAFTA Chapter 11 Part B that they would not enjoy in its absence. Should Canadians be concerned that their government has conceded special rights to foreign investors under Chapter 11, or should they be more concerned that their Constitution does not assure them the guarantees of property and contract enjoyed in the United States and Europe? ...

Doctoral Researcher Position in International Trade Law

From the Leuven Centre for Global Governance Studies:

The Leuven Centre for Global Governance Studies is an inter-faculty interdisciplinary research centre of excellence of the Humanities and Social Sciences at the University of Leuven which conducts research in relation to globalization, governance processes and multilateralism (www.globalgovernancestudies.eu). The Institute for International Law groups the teaching and research in public international law and the law of international organizations at the Faculty of Law of the University of Leuven (www.internationallaw.eu).

The Centre and the Institute are looking for an outstanding junior researcher to conduct research in the area of international economic law and trade law.

...

Our offer

We offer an employment as full-time doctoral researcher starting as soon as possible for 1 year, renewable up to 4 years in a dynamic interdisciplinary research environment.

Interested?

For more information about the job description, please contact Prof. Dr. Jan Wouters at [email protected]

Applications must be received no later than 30th June 2016.

KU Leuven carries out an equal opportunity and diversity policy.

How to apply?

Send a CV, detailed grading results, cover letter with personal motivation and the names of three referees to Mr. Thomas Goyvaerts [email protected]

What's at Stake with the Appellate Body Reappointment Controversy

Here are Manfred Elsig, Mark Pollack and Gregory Shaffer writing about the Appellate Body reappointment controversy for the Monkey Cage blog on the Washington Post website:

2) What’s at stake

What’s at stake here is not just the fate of Chang but the independence of the international judiciary, in the WTO and beyond. Social science and legal research has documented past episodes of the U.S. politicization of WTO judicial appointments, as well as examples of the politicization of international courts more generally.

Sure, many in the United States are accustomed to hearing political arguments about U.S. judicial appointments, particularly when a U.S. Supreme Court nomination is up for discussion. Elsewhere in the world, however, the process of judicial selection is generally less politicized.

At the WTO, selection of AB judges began in 1995 as a largely technocratic enterprise, but recent research makes clear that the WTO judicial appointment process has become progressively more politicized over the past two decades, with the United States playing the leading role in such politicization. Candidates for the Appellate Body have come under increasingly close scrutiny — and frequently are blocked if their previous writings appear problematic to the more powerful member states.

The politicization of WTO judicial appointments is aggravated by the fact that judges at the WTO (and most other international courts) do not enjoy life tenure but serve for short, renewable terms: nine years for judges at the International Court of Justice, six years for the European Court of Justice and a mere four years for the WTO’s AB judges. This means that most international court judges face the prospect of having their reappointments blocked, either by the states that nominated them (typically their home state) or by other states.

In 2011, the United States blocked the reappointment of Jennifer Hillman, a widely respected U.S. member of the AB, raising early concerns about the AB’s judicial independence. In 2013-2104, the the United States blocked consensus over James Gathii, a chaired law professor in Chicago who would have been the first and only black African on the Appellate Body. The WTO thus needed to restart the nomination process while the position lay vacant.

The U.S. action to block Chang’s reappointment is considered an escalation because for the first time it involves the reappointment of a non-U.S. judge. Over this period, the USTR even pressed to meet separately with AB judges who were up for renomination while the judge was sitting in cases in which the the United States was a party. WTO rules prohibit ex partemeetings, and the U.S. demands raised questions of legal ethics.

The very principle of judicial independence comes under attack when sitting judges are forced to contemplate the likely response of states with the power and the willingness to deny their reappointment at the end of a four-year term.

SIEL Conference in South Africa, July 7-9, 2016

From the SIEL:

The Society of International Economic Law (SIEL) is organising its fifth Biennial Global Conference – International Economic Law in a Diverse World – on 7-9 July 2016 at the University of Witwatersrand, in Johannesburg, South Africa.

SIEL is a membership organization aimed at academics and academically-minded practitioners and officials in the field of international economic law (IEL), in all parts of the world. Its broad goals and objectives include building links and networks between and among IEL academics and academically-minded practitioners and officials; fostering the development of local IEL expertise and IEL organizations where needed; and encouraging research, practice, service and teaching in the field of IEL.

In addition to 24 panel sessions, poster presentations and a roundtable discussion, the Conference programme includes three keynote addresses: (1) Prof James Thuo Gathii “Africa and the Disciplines of International Economic Law: Taking Stock and Moving Forward”; (2) Prof Donald McRae “International Trade Law and International Investment Law: Sub-sets of International Law or Self-contained Regime?”; and (3) Prof Laurence Boisson de Chazournes “Dispute Settlement in a Diverse World”.

You can find the current (draft) programme here SIEL 2016 Biennial DRAFT Conference Programme.pdf; to register for the conference please visit our website at http://www.sielnet.org/page-1824563 (the current registration rates will only be in effect until 15 June; thereafter a brief window of late registration may be possible but at higher registration fees).

More on the U.S. Objections to Certain Appellate Body Practice

Following up on my earlier post about U.S. allegations that the Appellate Body sometimes says more than it needs to say, here's another point the U.S. makes:

Second, in DS430, a dispute in which the United States was the complaining party and prevailed, we noted that the appellate report engaged in a lengthy abstract discussion of a provision of the SPS Agreement without ever tying that discussion to an issue on appeal, and even expressed “concerns” in that discussion on findings of the panel that were not raised by either party in the appeal. Furthermore, during the hearing, the Appellate Body devoted considerable time to an issue that the parties and the third parties agreed had not been raised on appeal, involving an item that was not on the record, that had not been raised by either party in its arguments, and had not been examined by the panel and was not the subject of any panel findings. The questioning was of such concern that the United States felt compelled to devote its entire closing statement to urging the Appellate Body not to opine on that non-appealed issue.

It is not the role of the Appellate Body to engage in abstract discussions or to divert an appeal away from the issues before it in order to employ resources on matters that are not presented in, and will not help resolve, a dispute.

The U.S. made reference to its earlier statement to the DSB about this case:

While we welcome these findings overall, the United States does have certain concerns with a portion of the Appellate Body report addressed to Article 6. The Article 6 analysis begins with a lengthy abstract discussion, before it reaches the issues on appeal and without tying that discussion to the issues on appeal.2 And the Appellate Body even expresses “concerns” in relation to certain findings by the Panel not raised in the appeal.3

In the view of the United States, issues not raised in the appeal are not on appeal, and a thorough, considered, and persuasive interpretation of the WTO Agreements is more likely to result where parties and third parties have engaged on the issues of legal interpretation actually at issue on appeal.

Moreover, particularly at a time when workload issues are increasingly affecting the timetable for the resolution of disputes, a focus on those issues that have been appealed, and on questions that need to be addressed in resolving arguments raised on appeal, would facilitate the efficient functioning of dispute settlement process

Focusing on the point about the Appellate Body expressing concerns in relation to Panel findings not raised on appeal, here are the paragraphs of the Appellate Body report that are at issue:

5.142. Before turning to the specific interpretative issue raised by India's appeal, we wish to express certain concerns as to whether some of the Panel's statements accord with our understanding of the content and structure of Article 6 of the SPS Agreement. We note, for example, that the Panel separately found that India's AI measures are inconsistent with each sentence of Article 6.1, and with each sentence of Article 6.2 of the SPS Agreement. Furthermore, the Panel seemed to consider that the second sentence of each of these paragraphs will inevitably be violated in situations where, respectively, no assessment of the SPS characteristics of a region has been conducted, and no specific determination has been made in respect of a specific area that is potentially pest or disease free or an area of low pest or disease prevalence.505 We note that these aspects of the Panel's analysis have not been appealed. Consequently, we neither endorse nor reject the Panel's understanding of Article 6 in this regard. However, we consider it important to emphasize that what constitutes an appropriate order of analysis and approach by a panel examining a claim under Article 6 may, at least in part, be a function of the nature of the claim and the circumstances of the case.

5.143. In addition, we observe that, while the Panel seems to have correctly understood the nexus between Articles 6.1 and 6.2 insofar as this was relevant in the context of the specific claims raised by the United States in this dispute, we are not persuaded that all of the statements made by the Panel would have the same resonance in every case. We recall, for example, that, in the Panel's view, "the 'adaptation' of a Member's SPS measures to the SPS characteristics of particular 'areas' presupposes that a Member has first 'recognized' the concept of such areas."506 To the extent that the Panel was suggesting that the obligation to ensure that a Member's SPS measures are "adapted" within the meaning of Article 6.1 always presupposes that a Member must have recognized the concepts mentioned in Article 6.2, we disagree. This is because, as explained above, we see pest- or disease-free areas and areas of low pest or disease prevalence as a subset of all the SPS characteristics of an area that may call for the adaptation of an SPS measure. In other words, "pest- or disease-free areas" and "areas of low pest or disease prevalence" are not the only SPS characteristics that are relevant for the adaptation obligation under Article 6.1. As a result, under certain circumstances, the SPS characteristics that are relevant in a specific case may not be related to the level of pest or disease prevalence in a particular area. In such circumstances, a panel assessing whether a Member has complied with the obligation to ensure that its SPS measures are adapted within the meaning of Article 6.1 may not need to inquire as to whether that Member has previously recognized the concepts contained in Article 6.2. In addition, we also question the Panel's statement that "adaptation" of an SPS measure "presupposes" that a Member has first "recognized" the concepts of such areas, inasmuch as such statement may suggest that recognition of the concepts must consist of an affirmative act that is distinct from and taken prior to the adoption of an SPS measure. In our view, this does not seem entirely consistent with the Panel's statement that there is no prescribed format for the recognition of the concepts and that it is the prerogative of Members to decide how to do so. Moreover, we question the Panel's statement to the extent that it may be read as excluding that recognition of the concepts could be done through and upon adoption of the very SPS measure that is adapted to the SPS characteristics of the relevant areas. 

Here are some questions that may be relevant: When there is an appeal related to a specific issue under a sub-provision of an Article of a WTO agreement, to what extent can and should the Appellate Body discuss the broader operation of that Article? Should there be constraints on such a practice? If so, what would these constraints look like?

If the Appellate Body had said, "before we get to this issue on appeal under the SPS Agreement we would like to talk about some issues under the AD Agreement that have been bothering us," the objection would be obvious. Here, it is much less clear that the Appellate Body exceeded its discretion. We are still under the same Article, so it doesn't seem to me that the Appellate Body was pushing too far past any boundaries, wherever those boundaries may be. But I'm opening to hearing any specific proposals on how precise boundaries could be set going forward.

16th Annual WTO Law Conference

The 16th Annual WTO Law conference is coming up next week. Formerly a BIICL/IIEL production in London, it has moved to Geneva this year and added the Graduate Institute and the SIEL as organizers. From the conference web page:

The Annual WTO Conference was originally established in 2000 through a partnership between the British Institute of International and Comparative Law (BIICL) and the Institute of International Economic Law (IIEL) at the Georgetown University Law Center. Now in its 16th year, the Annual Conference on WTO Law is currently organised jointly by BIICL, IIEL, the Graduate Institute's Centre for Trade and Economic Integration, and the Society of International Economic Law (SIEL). In 2016, the 16th Annual Conference on WTO Law will be held in Geneva.

Panels

• Panel 1: Legal Innovation in TPP and Other "Deep" FTAs: Towards a "Common Law" of FTAs or Substantive Fragmentation on "New Issues"?
• Panel 2: Interpreting "Old" Rules in a World of New FTAs and Other Norm Developments Outside the WTO Treaty
• Panel 3: Global Tax Reforms & Disputes at the Intersection of Trade and Direct Taxation of Multinationals
• Panel 4: The WTO Appellate Body: An Example to Shun or to Follow?
• Panel 5: WTO Negotiations Post-Nairobi: What? How? When?

Full program is here.

Should Cost-Benefit Analysis be a Factor in Deciding whether a Regulation is "Arbitrary"?

This is the abstract of a new paper by Cass Sunstein:

When an agency fails to engage in quantitative cost-benefit analysis, has it acted arbitrarily and hence in violation of the Administrative Procedure Act? At first glance, the question answers itself: Congress sometimes requires that form of analysis, but if it has not done so, then agencies have discretion to proceed as they see fit. But as recent decisions suggest, the underlying issues are far more complicated than they seem. The central reason is that for all its limitations, cost-benefit analysis is the best available method for testing whether regulations increase social welfare. Whenever a statute authorizes an agency to consider costs and benefits, its failure to quantify them, and to weigh them against each other, requires a non-arbitrary justification. Potential justifications include the technical difficulty of quantifying costs and benefits; the relevance of values such as equity, dignity, and fair distribution; and the existence of welfare effects that are not captured by monetized costs and benefits. These justifications will often be sufficient. But in some cases, they are not, and agencies should be found to have acted arbitrarily in failing to quantify costs and benefits and to show that the benefits justify the costs.

Here's a question related to ISDS: If a statute requires a cost-benefit analysis, but the agency does not conduct one and does not provide a justification for not doing so, is that an indicator that the regulation is "arbitrary" and thus the government's behavior is not "fair and equitable"?

ELSA WTO Moot Court Competition Next Week

From ELSA:

Press release

Final Oral Round - ELSA Moot Court Competition on WTO law

Between 7 and 12 June 2016, the Final Oral Round of the ELSA Moot Court Competition will take place in Geneva, Switzerland. Over 150 active students, their team coaches, renowned academics and practitioners from all around the globe will gather at the Headquarters of the World Trade Organization and the Graduate Institute for the concluding finals of the competition.

The ELSA Moot Court Competition (EMC2) is a simulation of a World Trade Organization (WTO) panel proceeding. It is designed to enhance students’ knowledge about international trade law and the WTO dispute settlement procedures, as well as to enhance the capacity for meaningful engagement in multilateral trade in the long term through the voices of next generation’s trade lawyers, negotiators and economists. The competition is an annual, student-run moot court competition organized by the European Law Students’ Association (ELSA) in co-operation with WTO.

The Final Oral Round of the EMC2 will be the culmination of the competition, during which the 20 best teams of the preceding Regional Rounds will be paired up and present their arguments in front of a panel of experts in WTO law, both as complainants and respondents in a fictive WTO law case. Students will be coming from far and wide, with teams representing Australia, Belgium, Canada, China, Colombia, Germany, Greece, India, Kenya, the Netherlands, South Africa, Switzerland, Taiwan, Ukraine and United States. This year the case focuses on future energy sources and environment.

The Final Oral Round itself will start with the opening ceremony on 7 June, led by the Appellate Body Member Professor Yuejiao Zhang. During the following three days, the teams will plead multiple times until the two best teams are selected for the Grand Final, which will take place on 11 June at the very WTO Headquarters and which will be chaired by the Appellate Body Member Mr Ricardo Ramírez-Hernández. The winners will be announced by Mr Karl Brauner, the Deputy Director-General of WTO, who will conclude the 14th edition of EMC2.

Best of luck to all the teams that have faced the global challenge!

For more information:
Website: http://emc2.elsa.org

Former Appellate Body Members Weigh in on the Recent U.S. Actions Related to the Appellate Body

Here is the main text of a letter to the DSB chair from all the living, former Appellate Body Members:

We write in the hope that we can be of some assistance to the Members of the World Trade Organization. As the thirteen living former Members of the WTO Appellate Body, we have followed closely and with some concern the recent deliberations of the Members of the WTO on the pending candidacy for reappointment of one of our successors on the Appellate Body. We recognize that this is a political decision that is reserved exclusively for the Members of the WTO in their role as the WTO Dispute Settlement Body. We recognize, too, that, because it includes the possibility of the reappointment of a Member of the Appellate Body to a second four-year term, the WTO Dispute Settlement Understanding contemplates also the possibility that a Member may not be reappointed.

This acknowledged, we think it urgent nonetheless to voice our consensus that this political decision by the Members of the WTO must never be made in such a way that could threaten to politicize WTO dispute settlement and imperil the impartial independence of every Member of the Appellate Body that is required by the WTO Rules of Conduct. The continued impartial independence of the WTO Appellate Body is essential to upholding the rule of law in international trade; moreover, we see it as a prerequisite to providing security and predictability for the rule-based multilateral trading system for the benefit of all of the Members of the WTO.

We emphasize that the concerns raised for us by the current reappointment process are wholly institutional. One Member of the Appellate Body has been singled out for criticism by one Member of the WTO by reference to rulings in certain appeals in which he was a Member of the division concerned. The criticisms that have been directed toward that one Appellate Body Member in the current process could just as easily have been directed toward any of the six other Appellate Body Members. As the six other Members of the Appellate Body have explained in a recent letter to the Members of the WTO, the rulings and the recommendations of the Appellate Body cannot be attributed solely to any one Appellate Body Member, because “our reports are reports of the Appellate Body.”

Throughout the first twenty years of the WTO and the Appellate Body, this has always been so. In always ruling, recommending, and reporting as one, the Members of the Appellate Body have maintained and mutually reinforced the strength of their individual commitments to impartiality and independence. But if, now, the fact that a Member of the Appellate Body joined in the consensus on the outcome on a particular legal issue or on a particular dispute becomes for the first time a factor in a decision on that Member’s reappointment, all of the accomplishments of the past generation in establishing the credibility of the WTO dispute settlement system can be put in jeopardy. This raises the possibility of inappropriate pressures by participants in the WTO trading system. There must be no opening whatsoever to the prospect of political interference in what must remain impartial legal judgments in the WTO’s rule-based system of adjudication.

As our revered late colleague Julio Lacarte once said of any action that might call into question the impartiality and the independence of the Appellate Body, “This is a Rubicon that must not be crossed.” The unquestioned impartiality and independence of the Members of the Appellate Body has been central to the success of the WTO dispute settlement system, which has in turn been central to the overall success of the WTO. Undermining the impartial independence of the Appellate Body now would not only call into question for the first time the integrity of the Appellate Body; it would also put the very future of the entire WTO trading system at risk. From time to time, one or more of the Members of the WTO may differ with a decision reached by the Appellate Body, but this does not necessarily mean that the Appellate Body has acted outside its mandate in reaching that decision. Such differences are unavoidable in a rule-based system that seeks to resolve international disputes between disputing parties that maintain conflicting views of the meaning of the rules. Indeed, such differences are intrinsic to the very process of legal interpretation – the core competency of the Appellate Body.

A decision on the reappointment of a Member of the Appellate Body should not be made on the basis of the decisions in which that Member has participated as a part of the divisions in particular appeals, lest the impartiality, the independence, and the integrity of that one Member, and, by implication, of the entire Appellate Body, be called into question. Nor should either appointment or reappointment to the Appellate Body be determined on the basis of doctrinal preference, lest the Appellate Body become a creature of political favor, and be reduced to a mere political instrument. Rather, as provided in Article 17.3 of the WTO Dispute Settlement Understanding, the standard for both appointment and reappointment should be whether the person in question is “of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally.”

Should WTO Members ever conclude that the Appellate Body has erred when clarifying a WTO obligation in WTO dispute settlement, the Marrakesh Agreement establishing the World Trade Organization spells out the appropriate remedial act. Article IX:2 of the Marrakesh Agreement, on “Decision-Making,” provides, “The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements” by a “three-fourths majority of the Members.” Any such legal interpretation would, of course, be binding in WTO dispute settlement. We observe that, to date, the Members of the WTO have not seen the need to take any such action.

Furthermore, and importantly, should WTO Members conclude now that they would like to do still more to help ensure the impartial independence of the Appellate Body, we suggest that the current system of reappointment be abolished. Instead of one four-year term, with the possibility of a second four-year term, we recommend a single, longer term for all Members of the Appellate Body. Mr. Chairman, we respectfully request that you circulate this letter to all the Members of the WTO. We ask also that you assure them that we remain, as always, eager to serve them in any way we can.

We thank you very much.