European Yearbook of International Economic Law 2020

Table of Contents

1. Frontmatter

2. Rights and Obligations of Business Entities under International Economic Law

   1. Frontmatter

   2. The Changing Nature of Corporate Influence in the Making of International Economic Law: Towards “Multistakeholderism”

      Peter Muchlinski

      Abstract

      This contribution considers the influence of multinational enterprises (MNEs) in the development of international economic law (IEL) and the institutional contexts in which this is exercised. Economic globalisation has increasingly empowered MNEs as participants in the development of IEL. Greater corporate power has arisen from increasingly market-based state and intergovernmental organisation (IGO) policies, the expertise and technical knowledge possessed by firms and the concurrent development of transnational commercial and technical networks requiring new forms of regulation to operate successfully. MNEs have traditionally influenced IEL through lobbying and consultations before IGOs, within certain procedural boundaries based on the multilateral, state-focused, nature of IGOs. In more recent years, traditional IGO-based systems of influence have been complemented, and in some areas replaced, by multi-stakeholder initiatives (MSIs). Their core characteristic is the involvement of “stakeholders”, global actors who have a “stake” in an issue, who come together to work out a collaborative solution to issues of mutual concern. In MSIs the participants, including MNEs, have a direct capacity to create new regulatory norms independently of states and IGOs. MSIs will be examined through a series of illustrative examples taken from the field of corporate social responsibility. The implications of these developments for norm creation, and for effective and legitimate governance, will be considered. The contribution will end by briefly discussing the future challenges posed to MSIs given the uncertain future of global economic regulation amid the rise of assertive economic nationalism.

   3. Coming of Age: The System of OECD National Contact Points for Responsible Business Conduct in Its 20 Years

      Ondřej Svoboda

      Abstract

      The Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises are one of the most recognised international instruments within the universe of responsible business conduct (RBC) and business and human rights (BHR). To fully understand their role, and to critically discuss their implications and country practice, it is necessary to address a network of accountability mechanisms which ensure that corporate actors are socially responsible and respect human rights – National Contact Points (NCPs). NCPs are tasked with the implementation of the OECD Guidelines through promotional activities and by helping resolve ‘specific instances’ of alleged non-observance of the Guidelines. The number and visibility of cases submitted to NCPs is increasing along their ability to make a difference. The 20th anniversary of the NCPs as a grievance mechanism (2020), and the tenth anniversary of the last update of the Guidelines (2021), is an appropriate juncture to reflect on the achievements so far. It is also a time to consider possible revisions that may enhance the ability of the Guidelines and the NCP system to remain at the forefront of international RBC standards and are fit to address emerging challenges such as climate change.

   4. Towards a German Supply Chain Act? Comments from a Choice of Law and a Comparative Perspective

      Giesela Rühl

      Abstract

      The protection of human rights in global supply chains has become one of the most hotly debated issues in public and private (international) law. In a number of countries, including the United Kingdom, France and the Netherlands, these debates have led to the introduction of domestic human rights legislation. In other countries reform plans are under way. In Germany, for example, the federal government recently announced plans to adopt a German Supply Chain Act, which, if passed as suggested, will introduce both mandatory human rights due diligence obligations and mandatory corporate liability provisions. The following article takes this announcement as an opportunity to look at the idea of a German Supply Chain Act from both a choice of law and from a comparative perspective. It argues that that any such Act will necessarily be limited in both its spatial and in its substantive reach and, therefore, recommends that Germany refrains from passing national legislation—and supports the adoption of a European instrument instead.

   5. An International Economic Law Perspective on the United Nations Convention Against Corruption

      Cecily Rose

      Abstract

      Public international law regulates corruption as a part of transnational criminal law, rather than international economic law. Like other transnational criminal law treaties, the United Nations Convention against Corruption, as well as other regional and international anti-corruption instruments, seek to ensure that domestic anti-corruption laws are relatively harmonized, and that states can cooperate with each other in investigations, prosecutions, and asset recovery. Public international law thus approaches the subject of corruption from a predominantly criminal law perspective, which focuses, in good part, on the criminalization of corrupt conduct by public officials as well as private actors, such as business entities. In the 1970s, however, the problem of corruption was approached by states and other actors partly within the framework of international economic law. Had this approach to the subject of corruption prevailed in the 1970s, then international instruments might also detail the measures that business entities should put in place in order to prevent corruption, such as internal compliance programmes. But efforts to regulate corrupt conduct through both a code of conduct and a treaty failed, and the issue of corruption lay dormant at international organizations until the 1990s, when states concluded a spate of ant-corruption treaties that provide for criminalization and cooperation. Today, international economic law, in particular free trade agreements, deal with corruption largely by cross reference to this substantial body of transnational criminal law treaties governing corruption.

   6. State Responsibility for Corruption: A Return to Regular Order

      Aloysius P. Llamzon

      Abstract

      In its paradigmatic form in transnational investment and commerce, corruption is typically a bilateral act requiring the cooperation of both the private party and the State—the so-called “supply” and “demand” sides—and the specific offense committed is bribery. But that symbiotic relationship notwithstanding, both sides are not usually treated in the same way by international tribunals. In most cases, bribery results in far more severe consequences upon the claimant corporation than on the respondent State, with the State bearing few if any consequences for the participation of public officials in the bribery that occurred, regardless of whether those acts may (or should) have known to the State.

      Why this asymmetric treatment is so requires reflecting on whether a State bears any responsibility for the corruption of its public officials in the first place. This is a foundational issue: the ability of the State to invoke corruption as a complete defense is premised on the idea that a State is not responsible for the corruption its own public officials participated in. Put differently, no matter what the merits of the claimant’s claims might be and what breaches the State may have committed, the presence of corruption overrides all other considerations and will cause the dismissal of those claims, often for lack of jurisdiction or inadmissibility. Corruption trumps all other issues.

      But that is not how international law ordinarily works: under the ILC Articles on State Responsibility, it is no excuse for a State to say that its public officials were acting in excess of authority or contrary to instructions—under Article 7, ultra vires acts of public officials are always attributable to the State. In the absence of any significant case law discussing the ILC Articles within the context of bribery, commentators have begun to fill that lacuna with significantly divergent opinions. A significant number maintain that Article 7 applies to corruption as well, and that the public official’s participation (or sometimes initiation) of bribery is attributable to the host State. This is so because for the ILC Articles consider what matters to be the exercise of State authority, not its propriety.

      But if corruption is attributable to the State, what explains the case law’s hesitance to assign any consequences to the State? Some eminent scholars answer this question by pointing out that conduct attributable to the State must still meet a second basic element of the ILC Articles: that a breach of an international obligation of that State occurred (Article 2). They view lack of consequences as the product of doctrines specific to international anti-corruption law that affix the consequences of corruption decidedly on the side of the Claimant. These include “legality clauses”, transnational public policy, and the unclean hands doctrine and their Latin cognates.

      This article contests that view: when treaty and customary international law on the consequences of corruption are carefully considered, no specific rule of treaty or customary international law exists that can justify the implicit exemption of States from the consequences of bribery. Overall, it is hard to say that international law contains a rule requiring that the consequences of bribery or other forms of corruption be borne only by the private party. And just as well: a system that seeks to extract accountability from both the private investor and the State is, in the long run, probably a more durable way to enhance arbitration as a tool for preventing corruption in foreign investment.

   7. Human Rights in International Investment Law

      Barnali Choudhury

      Abstract

      Covid has highlighted the pre-existing weaknesses in the social structure that leave vulnerable members of society at risk. This has reinforced the importance of states being able to protect their nationals’ human rights. A state’s role in this regard has been recognized not only by society but by business as well. Yet while progress is being made in these areas, international investment law remains bereft of increased attention to matters of human rights. Indeed, reforms in this area remain primarily procedural in nature.

      This essay argues that issues of human rights must be given greater consideration in international investment treaties. Businesses are being asked to give greater attention to human rights matters in almost every area apart from international investment treaties. To ensure international investment law aligns with progress in other areas of the law, international investment law must delineate a role for human rights. This can be achieved, among other ways, through independent provisions on human rights, investor obligations, and carve-outs.

   8. Rights of Action of Business Entities in Regional Economic Systems

      Patricia Wiater

      Abstract

      Direct and state-independent rights of action of private business entities are still exceptional in international economic law and are limited to a small number of regional economic systems. Based on the examples of the European Union (EU), the European Economic Area (EEA), the East African Community (EAC), the Southern African Development Community (SADC), the Economic Community of West African States (ECOWAS) and the Caribbean Community (CARICOM), this article examines the status quo of the procedural empowerment of business entities on regional integration levels. It reveals that both the contracting states and the regional economic courts engaged in interpreting individual rights of action attribute different functions to the role of business entities as litigants: Understood as instruments of economic and legal participation and control, individual rights of action give companies the opportunity to actively contribute to shaping the effectiveness of law enforcement in the integration process by means of court proceedings. This functional understanding has to be complemented by a rule of law approach. In this approach, states and courts perceive business entities’ rights of action to the regional courts primarily as defensive instruments, guaranteeing freedom from burdensome state or Community law interventions in the legal or economic positions of a company. The understanding as defensive instruments prevails (with the exception of the historical European Court of Justice (ECJ) in interpreting the Treaty establishing the European Coal and Steel Community (ECSC Treaty)) in the European systems of individual legal protection and, in some regards, in the ECOWAS legal system. By contrast, a functional understanding can be found in the rest of the African systems and in the Caribbean Community.

   9. Can Current Regulation Effectively Manage PMC Conduct and Ensure Accountability?

      Katerina Galai

      Abstract

      There is no simple answer to how international law regulates private military companies (PMCs). The first challenge is to decipher what PMC regulation entails and who should be regulated. Today, PMCs dispose of vast resources, performing various security functions across the world, ranging from strategy and logistics to civilian detention and combat training. Treated differently under international law to states and individuals, these a priori legitimate companies often find themselves in close proximity to conflict or areas of heightened risk. PMCs are made up of individual contractors and directors; but, unlike mercenaries, they also exist as corporate structures. With the sole purpose of delivering a service on behalf of the client, PMCs perplex accountability mechanisms when gross violations occur. In that scenario who should be responsible and in what way: the contractor who fired the gun? The company that did not follow appropriate practices? Or the state that outsourced the support of military activities to a private entity? Although PMCs are regulated by the industry internationally and guided by performance standards, the effectiveness of PMC regulation is often questioned. This article examines the full landscape of PMC regulation, from setting the rules to its ability to enforce them and establish accountability in the event of misconduct. Based on identified challenges posed by PMCs and limitations of different bodies of law that attempt to regulate them, I propose possible ways in which the law could develop and be implemented at a level that is less likely to generate impunity.

   10. Dual-Use Export Control: Security and Human Rights Challenges to Multilateralism

       Machiko Kanetake

       Abstract

       International standard-setting in the field of export control has been shaped by the presence of non-binding multilateral regimes. Central to international regulatory harmonisation is the Wassenaar Arrangement concerning export controls for conventional arms as well as for dual-use goods and technologies. Institutionalised regulatory coordination through multilateral regimes is essential, in part because the multilateral trade regime accommodates apologetic security exceptions that flexibly allow each member’s own export control practices. Multilateralism in the context of dual-use export control has been subject to various political and normative challenges, however. Numerous attempts to circumvent the Wassenaar Arrangement have been based not only on national security narratives. The multilateral regime has also been fundamentally challenged by human rights narratives. This paper sheds light on these dual challenges through the analysis of export controls over digital and so-called emerging technologies.

3. Current Challenges, Development and Events in European and International Economic Law

   1. The New European Parliament and Its Role in EU Trade Policy: Reset or Repeat?

      Gijs Berends

      Abstract

      In May 2019, elections took place to elect Members of the European Parliament (MEP) for the ninth legislature (2019–2024). The elections produced a Parliament with new features. Against a turnout of more than 50%, voters elected a record number of politicians new to the European Parliament and a record number of female MEPs. The elections also marked the first time in the European Parliament’s electoral history that the European People’s Party (EPP) and the Progressive Alliance of Socialists and Democrats (S&D) did not win enough votes to form a majority and an obvious new ruling coalition has not yet revealed itself. This chapter will consider whether this new Parliament with these novel features will promote a revised trade policy or whether it will remain as supportive of trade policy as the eighth legislature. This chapter will first look at the formal and informal powers of the European Parliament for each of the instruments that together constitute EU trade policy. It then looks at whether the new legislature is likely to change trade policy by examining three questions: (a) has the new European Parliament gained institutional strength?; (b) has the numerical strength of a trade-friendly coalition changed?; (c) is it likely that new political ideas or priorities within the political groups lead to a revision of their views on trade policy?

   2. The WTO’s Crisis: Between a Rock and a Hard Place

      Jelena Bäumler

      Abstract

      The perception of the World Trade Organization (WTO) is currently one of an organization in crisis. Yet, appraisal varies regarding its extent and seriousness: Is it merely a rough time or are we standing on the edge of destruction? The article will trace developments inside as well as outside of the WTO in order to assess the magnitude of the crisis. It will be argued that while certain developments inside the Organization, when seen in accumulation would already warrant serious attention, only together with developments taking place outside of the WTO, the two strands of developments unfold their full potential for the crisis. The overall situation renders the WTO in a difficult position, as it is currently unable to adapt to these challenges, while keeping calm and carrying on might similarly lead to its dissolution. While States might improve and further develop their trade relations in bi- and plurilateral agreements, it is only the WTO that reflects and stands for the multilateral post (cold) war order, which may be gradually fading in the years to come.

   3. PPM-Based Trade Measures to Promote Sustainable Farming Systems? What the EU/EFTA-Mercosur Agreements Can Learn from the EFTA-Indonesian Agreement

      Elisabeth Bürgi Bonanomi, Theresa Tribaldos

      Abstract

      More sustainable systems of food production are urgently needed. The global community and all involved actors must go beyond focusing narrowly on quantities of food produced; they must simultaneously address interlinked issues of water scarcity, soil fertility loss, agrobiodiversity, climate impacts, equitable land access, labour standards, and other environmental and social issues. The farming systems of the global North and South are highly interdependent, and agricultural trade rules can significantly influence global structures of food production. In view of the increasingly apparent flaws of private sustainability-oriented certification schemes, there is a growing consensus that states can and should use trade-related policy levers to foster more sustainable food production. The present text explores ways of doing so. The approaches taken in the European Free Trade Association (EFTA)-Mercosur Trade Agreement are juxtaposed with those of the EFTA-Indonesian Trade Agreement. The latter agreement structure is argued for, based on its incorporation of tariff differentiation along the lines of process and production methods (PPMs). Accordingly, some thoughts are presented on the conformity of PPM-related trade measures with trade law. The primary concern that emerges regarding PPMs is not whether, but how these can be designed to avoid impinging on fundamental principles of international law, but rather to respect those. Finally, based on a look at the current state of farming systems in Brazil and Argentina, some recommendations are provided as to the optimal design of nuanced, sustainability-oriented trade rules.

   4. The Mercosur-EU FTA and the Obligation to Implement the Paris Agreement: An Analysis from the Brazilian Perspective

      Alberto do Amaral Jr, Marina Martins Martes

      Abstract

      Nowadays, the relation between trade and environment is widely recognized. Several trade agreements address environmental issues—including World Trade Organization (WTO) agreements, and there are extensive studies in this field as well as relevant international cases which have acknowledged the need to consider the environmental aspects of trade measures. The Free Trade Agreement (FTA) concluded between Mercosur and the European Union (EU) follows this tendency. It contains a Chapter on Trade and Sustainable Development, which comprises a provision establishing that the Parties shall effectively implement the United Nations Framework on Climate Change (UNFCC) and the Paris Agreement. In view of that, this paper explains the link between trade and climate change, analyses the obligations assumed by the Parties (particularly Brazil) under the Paris Agreement, and finally shows the consequences the inclusion of a provision on the implementation of an environmental commitment under a free trade agreement brings about. Based on that, this paper concludes that, although there may be no legal or trade consequences in case of an eventual breach of environmental obligations, this would certainly have serious political effects, which may impair the implementation of the FTA.

4. Book Reviews

   1. Frontmatter

   2. Rodrigo Polanco, The Return of the Home State to Investor-State Disputes: Bringing Back Diplomatic Protection?

      Cambridge University Press, 2019, ISBN 9781108628983 Andreas Kulick

      Abstract

      Is the past of investor-state dispute settlement (‘ISDS’) also its future? This is the question at the heart of Rodrigo Polanco’s new monograph The Return of the Home State to Investor-State Disputes: Bringing Back Diplomatic Protection? (Cambridge University Press 2019). The current dispute settlement regime, providing access for investors to institutional arbitral proceedings before an international tribunal based on international treaty norms, is a fairly recent phenomenon. The International Centre for Settlement of Investment Disputes (ICSID) Convention, providing the main procedural framework, entered into force in 1966, whereas the first investment treaty award was only decided in 1990, and ISDS only took off in the late 1990s or early 2000s. Before this, the protection of investments abroad was a matter for the investor’s home state, with diplomatic protection as the adequate legal mechanism for such intervention with the host state. Under the Vattelian paradigm the investor’s dispute with the host state, under international law, constituted actually a dispute between the home and the host state: violating the interest of investors of the home state meant violating the home state’s rights. Conversely, as its own rights were at issue (and not the investor’s), it was within the home state’s exclusive discretion whether or not to take up the matter with the host state. This is what ISDS fundamentally changed: The dispute became a matter between the investor and the host state, with the investor enjoying authority over the decision whether or not to pursue its (international treaty) rights on the international level before an international tribunal—and with the home state mostly out of the picture, not at least due to Article 27 of the ICSID Convention. Polanco’s book confronts us with the question whether we are about to enter an age—or have already reached it—in which diplomatic protection and the home state’s influence on the investment dispute again play a more prominent role.

   3. Constantinos Yiallourides, Maritime Disputes and International Law – Disputed Waters and Seabed Resources in Asia and Europe

      Routledge, 2019, ISBN 9780815375203 Joanna Dingwall

      Abstract

      Unresolved maritime boundaries pose one of the major causes of disputes between States. Less than half of the world’s maritime boundaries have been delimited formally. Tensions between adjacent or opposite States may arise due to overlapping entitlements to territorial seas, exclusive economic zones (EEZs) or continental shelves. These disputes may include competing historical claims to maritime features, like islands, rocks and low-tide elevations. Frequently, a dispute will be intensified by the discovery of natural resources in contested maritime areas, such as oil and natural gas. Other factors compounding a dispute may include the presence of valuable fisheries or perceived strategic and defence benefits of particular maritime entitlements. Many maritime boundary disputes are well-entrenched and difficult to resolve by political or legal channels.

   4. Martin Jarrett, Contributory Fault and Investor Misconduct in Investment Arbitration

      Cambridge University Press, 2019, ISBN 9781108630511 Markus P. Beham

      Abstract

      Contributory Fault and Investor Misconduct in Investment Arbitration is the outcome of a doctoral thesis defended at the University of Mannheim. The book consists of six chapters amounting to a total of 164 pages, not including tables of cases and materials, a bibliography, and an index. Chester Brown of the University of Sydney’s Law School contributed a foreword.

   5. Margaretha Wewerinke-Singh, State Responsibility, Climate Change and Human Rights Under International Law

      Hart Publishing, 2019, ISBN 9781509918447 Julian Scheu

      Abstract

      On 20 December 2019, the Dutch Supreme Court ordered the country’s government to take action against climate change by reducing Dutch greenhouse gas emissions by 25% by the end of 2020. Based on the European Convention on Human Rights (ECHR) and in view of a real and immediate risk to people’s lives and welfare, the Court concluded that The Netherlands were obliged to take suitable measures against the expected consequences of climate change. André Nollkaemper and Laura Burgers characterized the judgment in the Urgenda case as a landmark and a new classic in climate change litigation. Outside legal circles, the decision provoked worldwide news coverage and was inter alia described as “Strongest’ Climate Ruling Yet”. The ruling is indeed spectacular and illustrates that the need to take immediate and effective action against climate change is not only a matter of responsible policy, but also relevant to international human rights law.

   6. Prabhash Ranjan, India and Bilateral Investment Treaties. Refusal, Acceptance, Backlash

      Oxford University Press, 2019, ISBN 9780199493746 Silvia Steininger

      Abstract

      Is international investment law international? Prabhash Ranjan’s excellent book “India and Bilateral Investment Treaties. Refusal, Acceptance, Backlash” makes a compelling argument for a nuanced reading of the evolution of the international investment regime. By closely tracing India’s economic policy and treaty-making practices, Ranjan convincingly narrates how India’s approach to the international investment treaty regime evolved from Nehru’s pragmatic economic nationalism in 1947 to a period of booming engagement with bilateral treaty-making in the 1990s, and to a more critical approach nowadays, which ultimately was channeled in the 2016 Model BIT. His monograph on the Indian experience thus crucially complements insights on the historical evolution of international investment law from a non-Western perspective. Well-written and clearly structured, this book offers a comprehensive historical, ideological, doctrinal, and empirical overview of the Indian approach towards foreign direct investment. In the following, this book review will highlight and evaluate the four major perspectives in Ranjan’s analysis: its historical approach, ideological argumentation, doctrinal mapping, and empirical insights.

   7. Julien Fouret, Rémy Gerbay and Gloria M. Alvarez, The ICSID Convention, Regulations and Rules: A Practical Commentary

      Edward Elgar, 2019, ISBN 9781786435231 Christian J. Tams

      Abstract

      “In the beginning was the Word”, an old German lawyers’ adage has it, “but soon, it was followed by a Commentary”. The German legal tradition is peculiar in its reliance on article-by-article commentaries as authoritative guides to the law, but international law is catching up fast: from the Charter of the United Nations via the United Nations Convention on the Law of the Sea, human rights treaties and the agreements of the World Trade Organisation to the Statute of the International Court of Justice, a fast-growing patchwork of commentaries covers an ever larger part of the discipline‘s major texts. This growth attracts new players. While dedicated series by Oxford University Press and Hart/Beck/Nomos have so far been dominant, Edward Elgar has entered the field: its Practical Commentary to The ICSID Convention, Regulations and Rules, edited by Julien Fouret, Rémy Gerbay and Gloria M Alvarez (with Denis Parchajev), adds a genuine international law title to the Elgar Commentaries series. By all accounts and standards, this is an impressive book. On circa 1300 pages of text, it offers detail on the meaning of the 74 provisions of the International Convention on the Settlement of Investment Disputes (ICSID Convention), as well as (in more summarised form) the Administrative and Financial Regulations, the Institution Rules and the Arbitration Rules. The result is a compact, one-stop guide to the most relevant arbitral framework of investment arbitration.