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This book addresses concerns with the international trade and investment dispute settlement systems from a statist perspective, at a time when multilateralism is deeply questioned by the forces of mega-regionalism and political and economic contestation. In covering recent case law and theoretical discussions, the book’s contributors analyze the particularities of statehood and the limitations of the dispute settlement systems to judge sovereign actors as autonomous regulators.

From a democratic deficit coupled with a deficit of legitimacy in relation to the questionable professionalism, independence and impartiality of adjudicators to the lack of consistency of decisions challenging essential public policies, trade and investment disputes have proven controversial. These challenges call for a rethinking of why, how and what for, are States judged. Based on a “sovereignty modern” approach, which takes into account the latest evolutions of a globalized trade and investment law struggling to put people’s expectations at its core, the book provides a comprehensive framework and truly original perspective linking the various facets of “judicial activity” to the specific yet encompassing character of international law and the rule of law in international society. In doing so, it covers a large variety of issues such as global judicial capacity building and judicial professionalism from an international and domestic comparative angle, trade liberalisation and States' legitimate rights and expectations to protect societal values, the legal challenges of being a State claimant, the uses and misuses of imported legal concepts and principles in multidisciplinary adjudications and, lastly, the need to reunify international law on a (human) rights based approach.



Chapter 1. Introduction

Judging the State in International Trade and Investment Law – Why, How and What for?
Why, how and what for are States sued for breaches of their International trade and investment law obligations? At a time when multilateralism is deeply questioned by the forces of mega-regionalism as well as political and economic contestation, these essential interrogations have never been more pressing. Whether by a permanent court or an ad hoc body, the questioning of judging the State for breaches of its treaty obligations however remains at the core of today’s interrogations on the adequacy and legitimacy of trade and Investor States Dispute Settlement System. While rich and diverse in the way it addresses some fundamental issues in international trade and investment dispute settlement, our book does not claim to be exhaustive. Its analysis is voluntarily limited to trade and investment disputes settled at the international level by the World Trade Organisation (WTO) dispute settlement mechanism and international investor States disputes systems. But in this relatively restricted context, Judging the State in International Trade and Investment Law takes into account the latest evolutions of a globalized trade and investment regulation struggling to put people’s expectations at its core, and provides a comprehensive framework and truly original perspective linking the various facets of “judicial activity” to the specific yet encompassing character of international law and the rule of law in international society.
Leïla Choukroune

International Trade: The WTO and Beyond


Chapter 2. Judging the Judges or Judging the Members?

Pathways and Pitfalls in the Appellate Body Appointment Process
The politicization of the WTO Appellate Body selection process is undermining the Appellate Body’s legitimacy. Quasi-permanent seats, growing obstacles in the appointment and reappointment process, and the growing tendency of Members to appoint political as opposed to legal experts, are damaging the Appellate Body as an institution. Instead of choosing Appellate Body Members with strong legal backgrounds, Members are demonstrating a preference for judges with government experience, in particular ex-ambassadors. This development may erode respect for Appellate Body decisions. As Montesquieu noted, “there is no liberty, if the power of judging be not separated from the legislative and executive powers.” Members would be wise to remember this as they ponder Appellate Body appointments and reappointments.
Arthur E. Appleton

Chapter 3. WTO, State and Legal Capacity Building

An Indian Narrative
This chapter examines the background and the key WTO disputes which triggered a policy shift in India towards the State playing a more proactive role in encouraging the building of trade-related legal capacity. The chapter examines the features of the unique trade-related capacity model chosen by India and how it differs from the alternate models established by other major developing countries that have an active profile in WTO dispute settlement. The chapter explores how the Indian model is more geared towards hybrid policy making in contrast to alternative trade-related legal capacity models employed by other WTO Members.
James J. Nedumpara

Chapter 4. States’ Regulatory Autonomy to Protect Societal Values by Legitimate Regulatory Distinctions

Finding the Balance in the WTO Agreement on Technical Barriers to Trade Through Adjudication
Trade disputes in which public policy regulation is challenged have been among the most difficult and controversial of those before the adjudicatory bodies of the WTO. They have showcased the crucial role of adjudication in achieving an appropriate balance between the sovereign autonomy of States to regulate to protect important societal values on the one hand and trade liberalization on the other. Nowhere is this more clearly apparent than in the line of case law by the WTO Appellate Body, interpreting the non-discrimination obligation in Article 2.1 of the WTO Agreement on Technical Barriers to Trade (TBT Agreement). Despite its limited mandate, the Appellate Body has shouldered its responsibility to give appropriate meaning to this badly drafted provision. Thereby it has averted the risk of unacceptable limitations on the regulatory autonomy of States. However, since in order to do so, the Appellate Body has had to read into this provision a flexibility not apparent in its wording, no negotiated criteria for its availability exist. Thus, to ameliorate the risk of abuse of this new flexibility, the Appellate Body has itself established some criteria limiting its use. This contribution examines these legal developments against the background of the limited mandate of the adjudicatory bodies of the WTO. After sketching the new legal framework for technical regulations resulting from the Appellate Body’s case law on Article 2.1 of the TBT Agreement, it illustrates the dangers of such case law driven solutions to legal problems. It does so by focusing on one of the criteria laid down by the Appellate Body for the availability of the flexibility it has carved out of Article 2.1, namely the Appellate Body’s exclusion of cases of de jure discrimination from the possibility to use this flexibility. This exclusion is examined to determine whether it has the potential to close the door to legitimate public policy regulation. A way forward is then proposed.
Denise Prévost

Investment Litigation at a Crossroad


Chapter 5. Investor-State Arbitration Distorted

When the Claimant Is a State
Investments from emerging economies have increased since the beginning of the century and notably a large proportion of the flows of foreign direct investment (FDI) coming from emerging economies is executed by State-Owned Enterprises (SOEs) and Sovereign Wealth Funds (SWFs) both typical contemporary forms of State Controlled Entities (SCEs). Such trend that has been further reinforced since 2008/2009 and SCE’s investment activism has reflected into a systemic shift that has transformed State capitalism into a key feature of contemporary global economy. At the time, investment arbitration, which was designed to allow foreign private investors to sue sovereign States, has transformed since host States can now be judged at the initiative of another State owning enterprises making investments. The thesis of this chapter is that the international regime for foreign investment, which includes both substantive rules and arbitration principles, is gradually adjusting to the emergence of SCEs in the investment sphere. This adjustment implicitly means that the rules and practice of international investment are reshaped by actors, which were not initially at the center of the regime. Actually, and it is a great paradox, the regime for foreign investment, as designed in the last three decades, was intended to serve the interest of private investors, seen as the main driver of the global economy. Instead of excluding SCEs from its realm and favoring the emergence of different rules, the international investment regime is gradually absorbing State capitalism and allows foreign SCEs to sue host States before arbitration. This chapter provides a detailed analysis of the forces driving this transformation, of the flexibility of the international norms that apply to SCEs, of the rights that SCEs are acquiring, and, finally of the increased exposure of sovereign States to be judged by international tribunals at the initiative of other States. The chapter initially deals with the relevant norms of international economic law to understand which would best fit the need of SCEs in their transnational activities. Then the following section addresses the critical issue of the legal standing of SCEs under investment treaties since it determines the ability of SCEs to effectively benefit from the investment treaties protections through investor-State arbitration. In addition the chapter reviews a number of cases in which the legal standing of SCEs has been discussed. Finally, the chapter analyses the substantive rights which can benefit SCEs and which will drive the investment strategies of many SCEs in the coming years.
Julien Chaisse, Dini Sejko

Chapter 6. Claims and Counterclaims Under Asian Multilateral Investment Treaties

Asian States are in the spotlight of global foreign investment flows. They are increasingly entering into international investment agreements (“IIAs”) at both the bilateral and multilateral level to attract, protect and safeguard foreign investment. And yet, some Asian States have felt the need to reform or terminate their IIAs inter alia because of their disenchantment with investment arbitration. The perception that the State must be a “perpetual respondent”, always playing the defence has undermined the legitimacy of investment arbitration, a feeling which is growing in Asia. In these circumstances, it is useful to consider whether Asian States can vindicate their own claims within the existing investment arbitration system. Can Asian States start an arbitration (i.e., bring claims) or raise counterclaims against foreign investors? What are the factors necessary for doing so? Are there lessons to be learnt from the experiences of other States? These are precisely the questions that this contribution attempts to answer, with a focus on prominent multilateral investment treaties in the Asian region.
Trisha Mitra, Rahul Donde

Chapter 7. Determination of Indirect Expropriation and Doctrine of Police Power in International Investment Law

A Critical Appraisal
The chapter aims at examining the role of the doctrine of police powers in judging a claim of indirect expropriation against a host State. It seeks to answer if the ITA tribunals, while judging if a host State’s regulatory measures amount to indirect expropriation or not, have been able to develop and apply the police power doctrine in a uniform manner? The significance of the inquiry lies in understanding suitability of this doctrine as a benchmark to judge a host State’s regulatory measures. The methodology adopted includes the study of ITA cases where this doctrine has been invoked, followed by studying cases where the doctrine of police power was referred by the parties or used for disputes, related to indirect expropriation, by ITA tribunals and to see whether the approach of different arbitral tribunals was similar or different. The study concludes by observing that the actual scope and application of the police power doctrine remains unclear in ITA and thus its use as a benchmark to judge host State’s regulatory action is questionable.
Prabhash Ranjan, Pushkar Anand

International Law’s Local Experiments and Global Challenges


Chapter 8. Role of Indian Judiciary in the Realm of International Trade and Investment Law

Globalization is no longer a buzzword. It is a reality that has impacted almost every sphere of human life. Globalization, which envisages a borsubsidies for various sectors, derless world, has not only diluted the traditional concept of State sovereignty but has also added new dimensions to the relations amongst the States inter se, between the State and the citizens, and also between aliens and the State when they choose to deal with the host State. The sovereign States are no longer free to formulate their own policies concerning the economy, trade and business investment, agriculture, and subsidies, de hors the global scenario. Even the social and cultural values are not immune from the impact of globalization. The all-pervasive influence of globalization is now well accepted and acknowledged even by the national judiciary while construing the laws and the Constitution. India became party to several multilateral trade agreements in 1995. Being a Member of the WTO and being obliged to comply with various “covered” agreements, including the Agreement on Trade Related Investment Measures (TRIMs), India has updated all the concerned legislations in consonance with various provisions of the covered agreements under WTO. On the question of how far India has stood by its various international commitments, from a conspectus of actions taken by the executive and the legislature, it is evident that India has substantially complied with its obligations, and in certain circumstances, without even raising its legitimate concerns towards its domestic obligations. In India, the judiciary is independent of the executive and the legislature and it is so mandated under the Constitution. The judiciary has not only shown deference to India’s international commitments, it has gone a step further in giving effect to several international treaties and covenants through its pronouncements, even though in respect of many international treaties India has not been a signatory and, in some cases, the treaties had not been backed by legislations. The decision of the Supreme Court in the Vodafone case is an example of the court’s approach towards fostering various international treaties and practices even while interpreting national fiscal laws, which tend to impact international commercial transactions.
Amal K. Ganguli

Chapter 9. Human Rights in International Investment Disputes

Global Litigation as International Law Re-Unifier
Are human rights taken into consideration in international investment law and dispute settlement? The controversy surrounding this now tedious debate has largely been fuelled by political and economic interests rather than convincing legal arguments. Interestingly indeed, the apparent contradiction between norms could be easily resolved if a political and economic will to read the law from a holistic perspective making use of its many flexibilities could eventually manifest itself. Twenty years after the creation of the World Trade Organization (WTO) and the massive adoption of investment treaties promoting and protecting FDI, the complexities of today’s international economic law scene as well as the recent defiance of developing, but also developed countries, towards trade and investment instruments and dispute settlement in particular calls for a paradigm shift, that of the reconsideration of the State’s sovereign attributes and duty to regulate in the favour of the public interest and the protection of human rights. In relation to these changes, the rapid development of global mega investment cases (Bhopal, Chevron-Texaco v. Ecuador, Philipp Morris), which are litigated, often in parallel proceedings, at various jurisdictional levels and on the basis of a complex network of domestic and foreign norms dramatically modifies the way investment disputes are settled. In going far beyond the usually studied international investment arbitration cases, these disputes pose a global litigation challenge while responding, at the same time, to the question of international law reunification. In this context, this chapter proposes to revisit the now traditional international economic law approach of human rights in international investment arbitration in underlying the instrumental and artificial character of the presupposed normative contradiction (I) to then go beyond international investment dispute settlement (ISDS) and show why an alternative (human) rights-based perspective is needed to not only provide victims with essential remedies, but also participate in international law reunification (II).
Leïla Choukroune



Chapter 10. Sovereignty Modern

What is modernity in international trade and investment law when confronted with a never-ending inflation of norms and proliferation of dispute settlement mechanisms whose decisions are, if only known, sometimes incoherent and often inconsistent? Isn’t modern international economic law also driven by successive developments hence always on the move towards the integration (or not) of new protagonists and potential subjects, either public or private, which domains of action rest at the margin of its traditionally defined sphere of competence that is the regulation of trade and investment relations amongst nations. In this rather unstable environment, the rediscovery of sovereignty in the light of the emergence of a new State capitalism and the better voiced and framed expectations of an interrelated global civil society contributes to a form of stabilization, if not yet re-unification, of an international law now ritually denounced as fragmented. While it was not the purpose of this book to thoroughly assess the latest developments of sovereignty as a polymorphous, uncertain and so controversial concept in international trade and investment law, the question arose throughout all its contributions as in the statist perspective chosen to approach a variety of contemporary trade and investment disputes’ methods, actors and decisions. New challenges remain such as corporate nationality shopping aiming, as in the recent Phillip Morris case, to expand the scope of possible arbitration jurisdiction through better treaty protection. But here again, it is around the State that the question revolves. Hence, it is time for the State to reshape its approach of international trade and investment law-making so that it is eventually judged according to the standards he set on the basis of the very significance of sovereignty that is independence.
Leïla Choukroune
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