European Yearbook of International Economic Law 2024

Table of Contents

1. Frontmatter

2. Distinguished Essay: International and European Economic Law—Moving Towards Integration?

   Ernst Ulrich Petersmann

   Abstract

   The EU Treaties remain integrated into worldwide (e.g. UN, GATT, WTO) and regional treaties of EU member states (like the ECHR) as integral parts of European integration. The geopolitical changes caused by authoritarian power politics, climate change, the digital revolution and the emergence of a multipolar world with “pluri-crises” have reinforced the EU’s internal integration; the EU’s external integration with third countries practising authoritarian or neoliberal policies are, however, confronted with disintegrating value conflicts: the more trading partners become geopolitical rivals and potential military adversaries, the more the EU prioritizes strategic autonomy by using the EU’s regulatory might (“Brussels effect”), “security exceptions” and unilateral countermeasures for de-risking global value chains, limiting economic integration and “decoupling” dependencies on authoritarian governments. This contribution describes disintegrating developments transforming the UN and WTO legal systems into a new geopolitical order. Europe’s multilevel republican, democratic and cosmopolitan constitutionalism has, so far, promoted constructive internal EU crises responses and external EU leadership for plurilateral UN and WTO sustainable development reforms. The constitutional diversity among authoritarian power monopolies, constitutional nationalism and Europe’s multilevel constitutionalism drives international legal policy competition, lawfare and regulatory rivalries requiring a new security system. Yet republican constitutionalism (like multilevel trade and investment adjudication) continues to promote sustainable development governance. It appears doubtful whether the UN, WTO and EU legal systems are fit for the “crises governance” and “EU strategic autonomy” necessary for protecting the sustainable development goals.

3. Moving Towards Integration: Trade

   1. Frontmatter

   2. Sustainable Development Within the Context of International Trade Law

      İlke Göçmen

      Abstract

      Sustainable development, widely acknowledged as an aim by the international community, entails a balanced approach across its economic, social, and environmental dimensions. International trade, as a means to achieve this aim, plays a pivotal role in the economic dimension and requires balancing with social and environmental dimensions.

      This research focuses on the legal mechanisms within international trade law that interact with or address sustainable development. For the purposes of this chapter, international trade law encompasses both global (WTO law) and regional (e.g. EU external trade law) levels, including the EU’s Generalised Scheme of Preferences (GSP) and Trade and Sustainable Development (TSD) Chapters in New Generation Free Trade Agreements (NGFTAs).

      International trade law, situated within the economic dimension of sustainable development, has evolved in two directions: reactively considering sustainable development concerns, namely environmental and social (labour) concerns, as exceptions to trade liberalisation rules and proactively contributing to sustainable development by regulating trade to benefit these concerns. This chapter employs legal methodology to scrutinise and establish connections between these mechanisms while assessing their adequacy in meeting the aim of sustainable development.

      On the reactive front, the adequacy of Article XX of GATT 1994 in meeting the aim of sustainable development is found to be partial, particularly due to its limited reflection of social (labour) and environmental considerations, warranting amendment. Conversely, on the proactive front, both at the WTO and EU levels, efforts have been made to create appropriate legal mechanisms. Among these, TSD Chapters emerge as a promising model for regulating trade to address social (labour) and environmental concerns.

   3. Technology Transfer Under the TRIPS Agreement: A Comeback to Address Global Crises

      Francisco Hernández Fernández

      Abstract

      The establishment of the World Trade Organization (WTO) after the Uruguay Round negotiations led to the adoption of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The agreement remains the keystone of the international intellectual property framework. One distinctive feature of the TRIPS Agreement is Article 66.2, which enshrined the legal obligation to developed WTO Members to provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country (LDC) Members to enable them to create a sound and viable technological base.

      The TRIPS Agreement includes other references to technology transfer: for example, Article 7 links the objective of protecting and enforcing intellectual property rights not only to the promotion of technological innovation but also to the transfer of technology. However, recent communications by delegations have underlined the importance of technology transfer and brought the topic back to the centre of the public debate, maintaining its full potential to address global crises. The issue of technology transfer is not new or exclusive to the TRIPS Agreement since several mentions can be found in international environmental treaties like the Paris Agreement or in the Pandemic Prevention, Preparedness and Response Accord (Pandemic Treaty), which is currently under negotiation at the World Health Organization. Indicating that transfer and dissemination of technology has proven vital in addressing global crises like climate change or achieving pandemic preparedness.

   4. Taking on a Life of Its Own? The Dynamic Institutional Architecture of the New Generation Trade Agreements of the EU

      Sophia Paulini

      Abstract

      An essential characteristic of the new generation trade agreements of the EU, such as the EU—Canada Comprehensive Economic and the Trade Agreement and EU—Japan Agreement for an Economic Partnership, is that they are dynamic or “living”. These agreements set up a comprehensive governance structure consisting of treaty bodies, so-called “Committees.” While the work of the Committees may appear technical, the discussions in this chapter shows that Committees under EU trade agreements deal with politically salient matters of public health and the environment, such as the regulation of pesticides. Their mandate is to implement, operationalise and further develop treaty text by cooperating, exchanging information, elaborating norms and creating new norms within the framework of their substantive scope. Committees therefore do not only undertake executive tasks but also legislative functions that go as far as supplementing or amending treaty rules. This chapter contrasts the high public interest in the EU’s new generation trade agreements with the operations of the Committees in EU trade agreements, which are largely closed off from the public due to the low transparency of and limited democratic reach over their operations and decision-making. It is concluded that the wide scope of the Committees’ mandates, ranging from executive to regulatory functions, is not supported by internal or external institutional mechanisms that would ensure the legitimacy and accountability of their operations.

   5. Human Rights and Global Supply Chains: European Trends and Developments

      Giesela Rühl

      Abstract

      Global supply chains are an integral part of a world that is based on the division of labour. However, as evidenced by catastrophes such as the collapse of the Rana Plaza factory building in Bangladesh in 2013, they do not always benefit everyone involved—the reason being that human rights are not always sufficiently protected in countries of the Global South. Over the past years legislatures and courts in Europe—and most recently the European legislature—have, therefore, established human rights due diligence obligations that require transnational companies to ensure respect for human rights in their supply chains. The following chapter takes this finding as an opportunity to shed light on the emerging European human rights landscape.

   6. Trade Prohibitions on Forced-Labour Products: A First Assessment of the Forthcoming EU’s Forced Labour Regulation

      Valentina Grado

      Abstract

      The continued existence of forced labour worldwide, on the one hand, and the risk for the Union market becoming the destination of products made with forced labour, on the other, illustrates the need for further EU measures (in addition to those focused on company behavior) to curb this practice. This chapter analyses the legislative process of a new EU Regulation finalised to prohibit the placing and making available on the Union market or exporting from the Union market products made with forced labour. Particularly, it discusses—first—the Commission’s Regulation proposal (adopted in September 2022) and the most significant amendments to it as included in the European Parliament’s negotiating position (of November 2023) and in the Council of Ministers’ negotiating mandate (of January 2024). Second, it examines the (final) text adopted by the European Parliament in April 2024 (on which is pending the formal Council approval expected in the second half of 2024). The chapter also analyses whether the new EU (unilateral) trade instrument addressing forced labour is WTO-compatible.

   7. Market Access Constitutionalism Through the Lens of Fundamental Economic Rights

      Rufat Babayev

      Abstract

      The market access principle underlying the EU internal market remains an elusive concept, particularly within the framework of the Treaty’s provisions on the free movement of persons. The Court’s expansive interpretation of these provisions pushes beyond traditional barriers to intra-Union movement, capturing a wide range of national policies related to pursuing economic activity. This broad scope brings them into close alignment with fundamental economic rights, specifically Articles 15 and 16 of the EU Charter of Fundamental Rights, which prompts the need for normative delineation of their respective spheres of application. This confluence is argued to generate a symbiotic exchange. The broad access-based framework of the provisions on the free movement of persons transforms them into constitutional guarantees of the right to pursue economic activity in other Member States that find their normative basis in the coalescence of Union citizenship and fundamental economic rights. Conversely, the individual-centric realignment of the free movement of persons provisions augments the sphere of applicability of the fundamental economic rights protected in the Charter as an integral aspect of preserving the rule of law in the EU.

   8. The EU ‘Governance Through Trade’ Regulatory Model for the Sustainable Production and Consumption of Deforestation-Risk Commodities (DRCs): The EU Deforestation Regulation (EUDR) and the Issues at Stake in Its Implementation Stage

      Concetta Maria Pontecorvo

      Abstract

      May 31, 2023 the EU legislators took a very courageous and important initiative towards reducing the Union’s global deforestation “footprint” by completing the legislative process for the Regulation EUDR 1115/2023—establishing a (trade-related) governance model for the sustainable production and consumption of deforestation-risk commodities and products and repealing Regulation EUTR 995/2010 on trade in timber and timber products—which entered into force on June 29, 2023. This chapter, drawing on the literature on unilateral (trade) measures with extraterritorial effects and on that on transnational forest governance, analyses the content of this relevant EU initiative and discusses its overall significance as a quite innovative regulatory model, both per se—within the EU framework on global deforestation—and in terms of the EU’s external (and extraterritorial) environmental action. It also identifies some shortcomings and intrinsic limits (of ambition and coherence) in the EU initiative that need to be accommodated (either through secondary legislation or the review mechanism) during the imminent implementation stage. This seems necessary not only to be fully in line with EU’s environmental (and human rights) ambitions and more coherent with the law of the WTO but also to be “well fit” for starting to walk down the road of its actual implementation.

   9. Policy Coherence for Development in the EU’s Multidimensional Toolbox Against Deforestation: Unilateral, Bilateral and Multilateral Efforts

      Saide Esra Akdogan, Francesco Cazzini

      Abstract

      The EU is committed to promoting values like environmental protection across all its policies, as mandated by its treaties. This study explores the EU’s comprehensive approach to combating deforestation through its multidimensional strategies, encompassing unilateral, bilateral, and multilateral efforts. At the unilateral level, it examines the EU Deforestation Regulation; bilaterally, it investigates forest management clauses in the Trade and Sustainable Development chapters of EU Free Trade Agreements; and multilaterally, it assesses the EU’s engagement in organizations and negotiations at multilateral fora.

      The study aims to establish how the EU integrates the principle of policy coherence for development (PCD), as stipulated in TFEU article 208, ensuring that its policies both support development objectives and minimize policy contradictions, especially in developing countries. By mapping and analysing these efforts, the study seeks to assess the EU’s policy coherence, particularly concerning its regulatory, trade, and environmental strategies to address deforestation. This includes a discussion of the Better Regulation Package and its relevance to key sustainability agendas, such as the 2030 Agenda, to provide a thorough view of the EU’s actions in this domain.

   10. ‘Alcohol Causes Cancer’: Objections to an Irish Labelling Law Reopen Old Debates About Trade and Non-Trade Issues and New Debates About Interaction of WTO and EU Law

       Benn McGrady, Elisabet Ruiz Cairó

       Abstract

       The Irish Public Health (Alcohol) Act and Public Health (Alcohol) (Labelling) Regulations require composition and health warning labels on all alcoholic beverages, including a warning that there is a direct link between alcohol and fatal cancers.

       In the WTO TBT Committee several Members have questioned the necessity of Ireland’s health warnings. The thrust of some interventions is that warnings are more trade restrictive than necessary because alcohol use does not cause cancer under all conditions, but only when drinking is “excessive”. If entertained in a dispute, this argument would place a WTO panel in the shoes of national regulators and extend WTO oversight through dispute settlement even deeper into national regulatory decision-making.

       A second argument raises questions about the relationship between WTO law and other international economic law. Some WTO Members have expressed concern that the Irish Regulations create a barrier to trade between EU Member States and therefore a barrier to international trade. Put simply, it has been suggested that the Irish Regulations create fragmentation within the EU internal market, which hinders the ability of non-EU WTO Members to trade with the EU as a bloc.

       Current discussions at the TBT Committee therefore raise fundamental questions about the functions of the WTO dispute settlement mechanism and the interaction between different bodies of international law.

   11. The Quest of Balancing Data Regulatory Autonomy with International Trade Commitments: Assessing the General Agreement on Trade in Services and the European Union — Vietnam Free Trade Agreement

       Ngo Nguyen Thao Vy, Nguyen Xuan My Hien

       Abstract

       In this globalization era, cross—border data flow regulations impact international trade in services regulated by the WTO’s General Agreement on Trade in Services (GATS). Upon the regulatory autonomy, the European Union (EU)‘s “adequacy” model emphasizes the role of its laws in setting global data transfer standards, while Vietnam’s recent legislation on personal data protection and cyber security introduces complexities in the name of public concerns.

       The cross—border data regulation autonomy is also highlighted in the European Union—Vietnam Free Trade Agreement (EVFTA), where Article 8.1(2) affirms each party’s right to legislate for legitimate policy goals. Thus, this situation could lead to inconsistent application of data transfer measures, potentially resulting in trade disputes or retaliatory measures from trade partners. For Vietnam, it may fail to secure EVFTA trade benefits due to not meeting EU adequacy requirements, turning the EVFTA into a Trojan horse that pressures Vietnam to adopt GDPR standards with its nascent data protection laws.

       Through an analysis of WTO principles and cases, along with a detailed examination of relevant EVFTA provisions, this chapter suggests that to maximize the benefits of their agreements, both member States must implement minimally restrictive trade measures and balance data regulatory autonomy and international trade commitments.

   12. Short-Circuiting Technological Sovereignty? Assessing the Governance of Semiconductor Supply Chain (Chokepoints) Through the Lens of Emerging Multilateral Export Control Regimes

       Anh Nguyen

       Abstract

       Against the background of increasing unilateral and extraterritorial imposition of export controls on advanced semiconductors, proposals have been made for a “multilateral export control regime” (MECR) on critical and emerging technologies. Proposals range from sector-based “mini-regimes” to broad economic and technological security frameworks. Since such regimes are predicated on the protection and promotion of (a bloc of) states’ economic and technological security, i.e. competitiveness, they could be fundamentally at odds with states’ obligations under the WTO framework. Given that such MECRs would go against the grain of the WTO ethos of trade liberalisation, elimination of barriers, and virtue of economic interconnectedness, such emerging MECRs on critical technologies should be viewed as part of the narrative of “re-globalisation.” They could be understood as a mode of governance over global supply chains with the aim of reconfiguring the sinews of economic interdependence and dynamics of market competition to guarantee that the supply of the most critical technologies for our digital society remain within the control of “the West” and “like-minded” partners.

4. Moving Towards Integration: Investment

   1. Frontmatter

   2. The Legalisation of Corporate Social Responsibility in International Investment Agreements

      Beichen Ding

      Abstract

      There is a novel practice of incorporating corporate social responsibility (CSR) provisions into international investment agreements (IIAs) that distinguish them from previously observed clauses pertaining to environmental and human rights. The chapter examines the legal nature and situation of CSR provisions in the investment regime. Based on an empirical analysis of existing IIAs with CSR language, the majority of CSR clauses found are classified as soft law due to their non-binding and advocacy-oriented language. However, certain countries have introduced stricter and more concrete requirements in their treaties. Additionally, reforms have been observed in dispute settlement clauses, including the establishment of joint administrative committees and the inclusion of CSR issues in arbitration or counterclaims. This ongoing reform increases the degree of legalisation of CSR requirements. The research identifies six typical party-based model provisions. These countries or regions include the EU, Canada, Brazil, Colombia, India, and Argentina. Referring to Kenneth W Abbott’s legalisation theory, the present chapter makes a horizontal comparison measuring these six model provisions. The measurement of the legalisation of CSR clauses helps to explain why and how such CSR clauses come into being with the advocation of certain groups of countries and the potential development of promoting CSR provisions.

   3. The Development of EU Investment Protection Policy Through the Member States: Challenges and Opportunities for the EU

      Eleftheria Asimakopoulou

      Abstract

      Since the entry into force of the Lisbon Treaty, the Member States of the European Union (EU) remain pivotal actors in international investment law despite transferring foreign direct investment (FDI) to the EU’s exclusive competence. This contribution highlights their role in shaping EU investment protection policy through treaty-making. The main argument it puts forward is that the Member States’ engagement in the “making” and “unmaking” of international investment agreements (IIA) has transformative effects on the EU as an international actor. In examining the domestic institutional framework within which the Member States exercise their treaty-making powers, we will demonstrate how far national institutions—legislature, executive, and judiciary—influence the EU’s investment policy and treaty practice from the bottom up. The analysis posits that the parallel treaty-making of the Member States and the EU may help to ensure that the EU investment policy and treaty practice is inspired and legitimised by the national base but perplexes, at the same time, the Union’s capacity to act coherently in international investment law, a symptom of the competence conundrum under EU law.

   4. Third-Party Claims Before the Multilateral Investment Court: Enhancing Third-Party Rights in Investment Treaty Arbitration

      Zamira Xhaferri, Jesús Robles

      Abstract

      Investment treaty arbitration has been criticized in the academic literature for undermining states’ regulatory capacity and for being an “asymmetric” legal system in which third parties affected by foreign investment are not able to hold investors liable before investment tribunals. The Investment Court System (ICS) introduced in the EU-Canada Comprehensive Economic and Trade Agreement (CETA) and the Multilateral Investment Court (MIC) being currently designed by the United Nations Commission on International Trade Law (UNCITRAL)’s Working Group III are reformed models of investment treaty arbitration. Our contribution argues that the ICS and the MIC may still not preserve the right of states to regulate and fail to provide third parties affected by a foreign investment a legal standing in investment disputes. We argue that those flaws could be mitigated by, first, including investor obligations in the future MIC in the form of Environmental and Social Governance (ESG) clauses, and second, by allowing third parties to bring a claim before the MIC when investors have breached ESG clauses. In doing so, we also provide some possible downsides of our proposal in terms of arbitration efficiency and discuss its limitations from the perspective of public international law.

   5. Fortiter In Re, Suaviter In Modo?—Are Legality Clauses the Better Investor Obligations in International Investment Agreements?

      Christian Daniel Hein

      Abstract

      This chapter concerns the question whether legality clauses are sufficient to ensure responsible business conduct by investors. Investor obligations are enforceable obligations contained in newer International Investment Agreements which require a certain conduct from the investor. While several categories of investor obligations can be distinguished, little light has been shed on the question which category is the more suitable one. This chapter will do so by, firstly, categorizing current investor obligations. Secondly, it will assess their suitability to ensure responsible business conduct and contribute to a more balanced investment law. Lastly, it will advance an enhanced legality clause as a counterproposal capable of solving previously outlined defects.

   6. Investors’ Human Rights Obligations Under International Investment Law: Current Practice

      Huyen Doan

      Abstract

      Foreign Direct Investment (FDI) have made significant contribution to the growth of developing countries. However, its recent trajectory has shown potential threats to the welfare of local communities. Numerous instances have been documented where large corporations have committed various infractions, such as tax evasion, corruption, environmental degradation, and the forceful eviction of local farmers for land acquisition. The lack of enforceable human rights obligations on investors, coupled with the inability of states to present claims/counterclaims when investors violate human rights, and the reluctance of arbitral tribunals in consideration of such claims/counterclaims, has led to asymmetry in international investment law. Nonetheless, recent advancements in this area are beginning to address these issues. Treaty reforms now impose investors’ substantive obligations, and there is a noticeable shifts in arbitrators’ views on investor responsibility, along with a growing acceptance of state counterclaims. Updates to national legal systems worldwide are also contributing to this shift. These changes are gradually balancing the scales, providing states with the flexibility to adopt and implement regulatory measures that protect the environment, public health, cultural preservation, and other crucial matters.

   7. Reserving Policy Space in Environmental Protection: Insights and Policy Implication from Investment Protection Agreements Between Vietnam and Its European Partners

      Huong Nguyen Thi Lan

      Abstract

      The recent trade and investment agreements between Vietnam and its European partners demonstrate a growing emphasis on balancing investment protection with sustainable development and the regulatory power of host states. Although these agreements incorporate familiar mechanisms from international trade-investment law, they represent a step towards establishing more sustainable investment frameworks. However, these mechanisms predominantly reflect the perspectives of Vietnam’s partners, leaving Vietnam’s specific concerns inadequately addressed. Consequently, assessing the agreements’ full impact on Vietnam remains challenging. This chapter evaluates the extent of policy space retained by Vietnam under its recent agreements with the European Union, the United Kingdom, and the European Free Trade Association. It further underscores the importance of Vietnam adhering to relevant regulations while maximising its regulatory authority. These findings are crucial for Vietnam in refining its foreign investment policies, strengthening investment management, and enhancing environmental regulations. Moreover, this analysis serves as a reference for other developing economies facing similar environmental challenges and the pressures of climate change that accompany rapid economic growth.

   8. Worlds Apart: The Fairness Dimension of Securitisation Narratives in the Climate Change and Foreign Investment Context

      Zaker Ahmad

      Abstract

      Narratives that designate a security concern and identify appropriate responses, i.e. securitisation, differ from one another. Some are limited to issues catalysing violent conflicts and suggest extraordinary response, whereas others prioritise risk mitigation in a cooperative manner. Through this lens, the current chapter explores the trend of increasing indirect securitisation of climate change-related industries, technologies and infrastructure in investment relations. It highlights that even though states’ national security motivated actions encroach upon the climate domain, they do not address climate change-induced security risks, and instead, propagate unfairness in international investment law. Using Thomas Franck’s theory of fairness, the chapter proposes a complementary narrative of climate securitisation—one that is fair and equitable, also better at addressing climate security risks both at home and abroad. Its conclusion underscores the need for cooperative strategies to address climate-induced insecurities rather than exacerbating geopolitical rivalries through restrictive security measures.

   9. Reassessing State Consent in Investment Arbitration Vis-À-Vis Security Issues

      Alexandros Bakos, Gautam Mohanty

      Abstract

      This chapter explores the extent to which investment treaty exceptions can limit a tribunal’s jurisdiction to review measures pursuing security goals. Two major developments in international investment law increase the prospect of arbitral tribunals increasingly lacking the competence to review measures taken to safeguard security interests in the future. One refers to the changing paradigm of investment treaty design, with security exceptions revealing ever-increasing instances of deferential language to the host state. The other turns on the first known dispute dealing with a self-judging exception, with the tribunal having recently rendered its award in the proceedings. In the context of such developments, the main argument that we make is that a reassessment of state consent in regard to measures pursuing security objectives becomes necessary. In particular, we caution against the orthodox view of conceptualising security measures as acts that do not show any specific characteristics different than those that the majority of measures affecting foreign investors display. We argue that a historically aware approach to the tension between investment protection and the pursuit of security interests can better explain why, and how, security exceptions can have a jurisdictional impact. Finally, we also discuss those aspects in the context of armed conflict.