International Economic Law dispute settlement, Essays (high school) of International Public Law

Download International Economic Law dispute settlement and more Essays (high school) International Public Law in PDF only on Docsity! The intertwining mechanisms of resolving disputes in international economic law (A close analysis of IMF, WTO, and ICSID) Elena Katherine Toscano III° anno Giurisprudenza Università Europea di Roma Settembre 2013 Corso di International Economic Law Prof. Borgia Word Count: ≈ 3,600 Elena Katherine Toscano International Economic Law Exam Paper The intertwining mechanisms of resolving disputes in international economic law Living in a global era, where nowadays the idea of nationality is hard to comprehend due to the massive connections that a single nation has, both virtual and actual, implicates a non-ending relationship with international subjects. The word relationship is key for the international community. International law strives for a pacific and transparent relationship between subjects of the international community in order to maintain a mutual and durable cooperation. Not surprisingly, this translates in the so called verification of law which is, by the way, one of the three functions of International Law (next to the general rules of international law1 and effectiveness2). This paper will analyze the verification of law, or better, the controls and dispute mechanisms that occur in specific subjects of international economic law. International economic law is the study of international economic relations between both organizations and nations, and so, falls into the domain of public international law. The institutions that I will take into account will be: IMF (International Monetary Fund), WTO (once GATT, now World Trade Organization), and finally ICSID (branch of the World Bank, International Center for Settlement of Investment Disputes). International law isn’t any other system that we may assimilate to such as common or civil law, since there isn’t a written global constitution nor the principle of stare decisis3 is always foreseeable in international settlements. Therefore, the close study of these different yet somewhat connected procedures are, on one hand very interesting and on the other very complicated, in that when dealing with many areas that encompass international economic relations we discover many legal gaps. There is a very fine line between what is considered economically incorrect (so, illegal) for instance, contrary to fair competition, and what is instead legal but needs to be continuously controlled because it may or may not negatively affect global economics. Considering this last scenario proves how hard it is for such organizations like WTO or IMF or ICSID to decide 2 1 According to the Statute of the International Court of Justice, Art. 38 2 Effectiveness must be intended as the third and last function of International law, as the means of obligating an international subject to undertake the decisions or rules of International law. 3 Pillar principle found in common law systems where the final decision by judge, on specific matter, will be the same decision in future cases in the same court or lower courts in that jurisdiction. Sparingly, the creation and regeneration of law is enacted by the judicial authorities. The IMF goes by its own charter known as the “Articles of Agreement” which encompass the main goals of the organization and rules by which it controls and may have limitation towards national economic policies. For example, it is forbidden, without prior consent by the IMF, to impose restrictions on current payments12 or on discriminatory currency practices13. Initially, the organization simply dealt with floating exchange rates. The new challenge it faces is promoting and implementing policies that reduce the frequency of crises among the emerging market countries, especially the middle-income countries that are open to massive capital outflows. Rather than maintaining a position of oversight of only exchange rates, their function became one of surveillance of the overall macroeconomic performance of its member countries. Their role became a lot more active because the IMF now manages economic policy instead of just exchange rates.14 An important clarification that arises through the articles of the IMF, is the distinction between restriction and control. Restrictions impose a direct limitation on the availability of foreign currencies, whereas, controls have a more limited impact and could consist of specific procedures to be followed or might obligate to provide information.15 This distinction serves to place the IMF as an organization which manipulates and limits national jurisdiction. But how does it do so? Through the regime of borrowing techniques16 along with the WTO regulation which implicitly gives a degree of participation in WTO dispute settlements whenever disputes concern: monetary reserves, balances of payments or foreign exchange arrangements17. Not only substantive monetary norms referred to in the GATT will be applied within WTO system, but the competence on their interpretation will remain within IMF organs.18 Basically the procedural link between IMF-WTO obligates WTO, in limited areas, firstly to consult the IMF as it may only assist as an expert, and secondly, the interpretation made by the Fund must be accepted by the counterparts. Though, efficiency in the IMF controversies may not be enforced. However, there are consequences to inconsistency with the IMF articles and are the usual effects present in any organization where a nation signs to be part of. So, the possible 5 12 article VIII.2 of the Articles of Agreement. See: http://www.imf.org/external/pubs/ft/aa/ 13 article VIII.3 of the Articles of Agreement. See footnote 12 for website. 14 http://en.wikipedia.org/wiki/International_Monetary_Fund 15 www.sielnet.org online proceedings -working paper No. 34/08 16 The binding nature of preexisting monetary treaty rules id confirmed through the insertion of a substantial link to the IMF regime. In this way, preexisting rules will not be subject to the operation of the lex posterior and lex specialitis principles. This results in the incorporation of the IMF rules in trade treaties: the IMF provisions allowing (in specific circumstances) the adoption of exchange restrictions will exert their effects also within the international trade system; they will exchange restrictions is hence “borrowed” by the trade system. See footnote n° 15 for source. 17 Art. XV.2, GATT. It must be addressed that the relationship between IMF-GATT remained unaltered by the Marrakesh Agreement which established the WTO. Therefore it explains the validation of an article from the GATT regulation. 18 See footnote n° 15. consequence is the suspension or loss of the vote, or ineligible to use the Fund’s general resources, and finally the possibility to be asked to withdraw from IMF membership. Money and Trade go hand-in-hand Going back to 1946, after the successful conference at Bretton Woods, the UN decided to convene another conference this time on trade and employment. Initially, it was meant to elaborate a Charter of International Trade Organization, also known as ITO, but the project failed. The common vision that the protagonists19 of the time had, persisted and led to the General Agreement on Tariffs and Trade (GATT). This collaboration between international organizations led onto a further step which provided a tight relationship with IMF jurisdiction that was elaborated in the previous section. Though, GATT was provisional and was substituted during the Marrakesh Agreement in 1994 with the WTO. Needless to say that the intertwining legal aspects between IMF-GATT remained with some slight modifications from the WTO system. The main change was that GATT had mainly dealt with the trade in goods, whereas the WTO and its agreements now cover trade in services, and in traded invention, creation and designs -intellectual property. The World Trade Organization deals with the rules of trade between nations at a global or near-global level. The main objective of the organization is liberalizing trade. It’s a forum for governments to negotiate trade agreements. It’s a place for them to settle trade disputes. It operates a system of trade rules.20 Therefore, its safe to say that whatever the WTO achieves is a result from negotiation. Again, we have the presence of the will of organizations and/or nations. The WTO’s dispute settlement is formally known as the “Understanding of the Rules and Procedures Governing the Settlement of Disputes” (DSU). Though, it is unclear whether this mechanism operates under a common or civil law model.21 However it is safe to say that it operates as a blend of both models: from the common law it extracts the possibility that panelists take into consideration previous similar cases, and the civil law model is incorporated by having a series of written rules by which the organization goes by when settling disputes. The procedure of the DSU aims for a non-tariff barrier that can be represented by any government policy or regulation that has the effect of making it more difficult or costly for foreign competitors to do business in a country. Therefore, the possibilities are infinite. As for the IMF with the specification of what restrictions and controls each mean, in the DSU its essential to analyze what ‘barrier’ stands for.22 Barriers may be allowed due to environmental, safety or other public policy goals but other than in these cases, it may represent an obstacle for foreign businesses. Once a barrier is considered to have crossed the line of ‘economically correct’, it may be brought to a dispute settlement upon the WTO. Again, the will represents a 6 19 meaning, IMF, IBRD and ITO 20 www.wto.org 21 www.commercialdiplomacy.org/manuals/wto_dispute.htm ; Part Two: WTO Dispute Settlement Jurisprudence 22 (insert - find website) requirement for the request of a negotiation. It happens to be an obligation of the counterpart that before requesting a panel for the formation of a settlement, it must consult up to 60 days with the apparently abusing country as a preliminary diplomatic negotiation before enduring such DSU process.23 Once a negotiation attempt does not bring to a common agreement, also known as the consultation, the following steps indicated by the DSU are: the panels, final panel report to parties, final report to WTO members, DSU adoption of the final report, then a possible appeal, followed by the DSU appeal report and the final DSU report appeal adoption. The approximate timing that occurs during this process is a year for the first report, and a 15 months if the appeal is requested. Because of the long process the DSU undertakes, there are other non-DSU WTO mechanisms that are available that are easier and quicker.24 Even if these mechanisms are quicker, they do require careful analysis of information, preparation, verification of facts. However, only the DSU is efficient in that there are significant measures of sanctioning. Lastly, the most significant transition that the WTO brought to the dispute settlement is that the losing country may not unilaterally block the adoption of the ruling -a possibility that occurred under the GATT procedure. This might seem minimal, but it is fundamental in guaranteeing the efficiency under the DSU mechanism. Money makes the world go around As the title of this section indicates, another fundamental aspect of economics is of course, the investments. International investments fall into the domain of the World Bank. When dealing with international controversies, there are three financially and legally independent agencies from the World Bank, where one deals specifically with the solution of international investment disputes: ICSID. The Investor-State dispute settlement (ISDS) is the form of resolution of disputes that encompass several procedural rules that may be chosen by the counterparts for the resolution such as: ICSID Convention and Rules, the ICSID Additional Facility Rules, the rules of the United Nations Commission on International Trade Law (UNICTRAL), or other arbitration rules.25 ICSID’s jurisdiction, however, does require: mutual consensus to abide to the ICSID rules, the desire to find a solution must be voluntary, the consensus must be in written form. ICSID is a fairly stable organization considering the United Nations was born in 1945 and ICSID in 1966. 156 States nowadays have signed and adopted to this institutional and procedural framework. This translates to the consensus of the counterparts to comply with 7 23 See footnote n° 21 24 These mechanisms include informal consultations, raising the matter in the meetings of the relevant WTO committee meetings such as the Sanitary and Phytosanitary Measures (SPS), Technical Barriers to Trade (TBT) or Agriculture Committees and using some of the dispute settlement tools in the specific agreements, such as the Subsides Agreement. 25 https://icsid.worldbank.org/ICSID/FrontServlet? requestType=ICSIDDocRH&actionVal=ShowDocument&icsidOverview=true&language=English ; 4. How does ICSID Facilitate the Settlement of Investment Disputes?