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Introduction to International Trade Law

Note 2 of 13 Notes

Universiti Kebangsaan MalaysiaFaculty of Law Pursuing PHD Program in Law P58462Musbri MohamedDIL; ADIL ( ITM )MBL ( UKM )

State Responsibility andEnvironmental Regulation

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1. Introduction to State Responsibility a. Rights of individuals or businesses who enter a foreign country. 1) Traditional "law of nations" rule: the states of the world imposed on each other the requirement to respect each other's citizens. a) State responsibility for injuries to aliens is now a recognized rule of customary international law.2) The current debate: a) What is the responsibility?b) How it is to be enforced?

International Trade is Based on International Law Commerce cannot be totally emancipated from international law as a consequence of the cross-border relationships it engenders. Trade transactions are also irrevocably tied to regional law and various international provisions.

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A. STATE RESPONSIBILITY

1. Proof Requirements to establish that a state is responsible for an injury to an alien or foreign business: a. There must be "conduct consisting of an action or omission ... attributable to the state under international law."b. The conduct must "constitute . . . a breach of an international obligation of the state."

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2. Doctrine of Imputability

a. Defined: A state is only responsible for actions which are imputable or attributable to it. 1) Usual interpretation of this: A state is responsible for acts done by officials within their express and apparent authority. a) This includes: 1] Acts within the scope of an official's authority.2] Acts outside their scope of authority if the state provided the means or facilities to accomplish the act.Case 2-1. Youmans v. United Mexican States

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3. Non-imputable Acts a. States are not responsible for the acts of: 1) Private persons.2) Officials of other states.3) Officials of international organizations.4) Insurrectionaries.Case 2-2. Home Missionary Society Case

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4. Fault and Causation a. Fault: A state is responsible for injuries to aliens regardless of fault. 1) There is no requirement to show culpa (fault) by the state (either through knowledge or negligence).2) Reason for rule: It is too difficult to prove a lack of proper care by a state.b. Causation: Courts do look to see if a state or its officials actually caused the injury.Case 2-3. The Kummerow and Fulda Cases

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B. STANDARD OF CARE

1. Two Criteria for Determining How a State is Supposed to Act have been established by case law: a. The "national standard."b. The "international standard" (or sometimes the "international minimum standard").

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2. The National Standard a. Standard favored by Third World countries (especially the Latin-American countries before World War II and the Afro-Asian countries since).b. Defined: A state should treat an alien exactly as it treats its own nationals -- no more, no less.c. Criticisms: 1) There would be no protection for aliens if nationals are ill-treated.2) If the rule is carried to its extreme, it would mean that aliens should be given the same privileges (voting, health care, etc.) as nationals -- both absurdities.Case 2-4. Cantero Herrera v. Canevaro & Co.

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3. The International Standard a. Note: Standard of care favored by major Western countries.b. Defined: While states have no obligation to admit aliens to their territory, once they do so, they must treat them in a civilized manner. 1) Failure to do so can be classified as either a crime or a tort. a) Examples of crimes: Serious breaches of international peace that -- 1] deny peoples the right of self-determination,2] fail to safeguard human life and dignity, or3] injure the environment.

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b) Examples of torts: 1] Expropriation (or nationalization) of the property of aliens and foreign businesses, and2] Denial of justice.

4. Expropriation a. Defined: The taking of property of private persons by a state.b. The right of states to expropriate foreign property is universally recognized. 1) Analogous to the municipal law right of eminent domain.

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c. Western countries treat expropriation much as they treat eminent domain: It is proper so long as it is done for a legitimate public purpose and if the state pays prompt, adequate, and effective compensation (British Petroleum Case (Arbitration Tribunal 1974)). 1) Meaning of the public purpose element: It is only a requirement not to discriminate against a particular class of foreigners.2) Meaning of "prompt, adequate, and effective compensation." a) "Prompt compensation" means immediate payment in cash.b) "Adequate" compensation means "the value of the undertaking at the moment of dispossession, plus interest to the day of judgment."c) "Effective compensation" means that the recipient of the compensation must be able to make use of it.Case 2-5. ACSYNGO v. Compagnie de Saint-Gobain (France), SA

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d) View of some Third World states: 1] Adequate compensation should not mean full market value.2] Factors such as colonial domination should be taken into consideration.Case 2-6. Case Concerning Barcelona Traction, Light, and Power Company, Ltd. (Second Phase)

e) Final note: despite the Third World's objections, the western contries' interpretation of the meaning of expropriation is nearly uniformly followed.

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5. Denial of Justice a. Defined: "A denial, unwarranted delay or obstruction of access to courts, gross deficiency in the administration of judicial or remedial process, failure to provide those guarantees which are generally considered indispensable to the proper administration of justice, or a manifestly unjust judgment."b. Differing interpretations: 1) National standard advocates: Notions of justice are relative to each society. a) Whether or not there has been a denial of justice with respect to a particular case requires an understanding of the judicial system of the society where the case arose.2) International standard advocates: Justice is determined by principles common to all civilized states. a) Note: this view is nearly uniformly followed. Case 2-7. Chattin v. United Mexican States

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C. OBJECTIONS that states can raise when suits are brought against them:

1. Lack of Standing a. Defined: Because the plaintiff is a person who is not qualified to appear before the particular court, the case must be dismissed. 1) Note: In most international tribunals (e.g., the ICJ), only a state can file a complaint. a) Complaints filed by a private person or an NGO would be dismissed for lack of standing.

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b. States may sponsor suits on behalf of their nationals. 1) Rationale: The old Law of Nations idea that an injury to the citizen of a state is an injury to the state itself.2) Effect: The state has full control over the action. a) It can refuse to bring the complaint.b) It can abandon it.c) It can settle it adversely to the interests of its nationals.c. Effect of waiver by an injured person. 1) Calvo Clause: Requires an investor who seeks to establish a business operation in a foreign country to agree, in advance, that he, she, or it will not ask for the home state to intervene in any dispute with the host state.2) Legally an individual's waiver is ineffective.3) Practically an individual's waiver has some effect.

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2. Lack of Nationality

a. This is a corollary of the requirement of standing.b. Defined: A claim can be asserted by a state only on behalf of its own nationals. 1) Persons with a single nationality: May only have their cases sponsored by their national state.2) Stateless persons: Cannot be sponsored by any state.3) Persons with dual nationalities.

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a) Traditional rule:

1] Either state can complain as to a third state.2] Neither state can complain as to each other.b) Recent rule: The state of which the individual has the "master" nationality (i.e., the one with which he has the most links) is allowed to bring a complaint against the other.

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3. Lack of a Genuine Link a. Nationality must be based on a "genuine link" with the sponsoring state and not "bare" nationality.b. Companies must also have a genuine link with their sponsoring state. 1) Most common tests for corporate nationality: a) Place of incorporation (in common law countries),b) Siege social (in civil law countries).Case 2-8. Case Concerning Barcelona Traction, Light, and Power Company, Ltd. (Second Phase)

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4. Failure to Exhaust Remedies a. Defined: Before an individual or business firm can seek the help of its home state in supporting a complaint of mistreatment, the individual or firm must exhaust all of the remedies available to him or it within the foreign state. 1) Purpose of rule: To resolve problems at the lowest level and with the least use of the sovereign's time.b. Exceptions: 1) Adequate redress is clearly unavailable.2) The requirement has been waived by treaty.3) The injury was done directly to a state (rather than to a private person).4) There has been excessive delay.

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5. Other Objections a. Laches: A claim by the defendant state that a claimant delayed too long in bringing a claim.b. Dirty hands: That the claimant's own misconduct makes it ineligible for relief.

D. RELIEF

1. Several Kinds of Relief Can be Obtained from States for Injuring an Alien a. Restitution in kind.b. Satisfaction.c. Compensatory damages.Case 2-9. Re Letelier and Moffit

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E. INSURANCE 1. Kinds of insurance available to foreign investors: a. International property insurance.b. International casualty insurance.c. Insurance for overseas employees.d. "Political risk" ("noncommercial") insurance.

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2. Sources: a. Private insurers - primarily in France, Netherlands, UK, and US, such as: 1) Foreign Credit Insurance Association (in US).b. National governments (for political risk insurance), such as: 1) US Overseas Private Investment Corporation.c. Intergovernmental organizations (for political risk insurance): 1) Multilateral Investment Guaranty Agency.

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3. The United States Overseas Private Investment Corporation (OPIC). a. Mission: To "mobilize and facilitate the participation of US private capital and skills in the economic and social development of less developed friendly countries and areas."b. Programs run by OPIC: 1) Finance program. a) OPIC may participate as a medium- to long-term project lender.b) For small businesses involved in small projects, OPIC can participate as a direct lender.c) For larger investors involved in larger projects, OPIC can facilitate commercial lending by providing investment guarantees for commercial bank loans.

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2) Political risk insurance program. a) Risks covered: 1] Expropriation or confiscation.Case 2-10. In the Matter of Reverse Copper and Brass, Inc. and Overseas Private Investment Corporation 2] Currency inconvertibility or transfer risk.3] Various risks associated with political violence.

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4. Multilateral Investment Guaranty Agency (MIGA). a. Created in the mid-1980s by the World Bank.b. Opened for business in 1987.c. Functions similarly to national programs, such as OPIC. 1) Exception: It operates under the political oversight of both capital- exporting and capital-importing states.

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F. ENVIRONMENTAL REGULATION

1. Origins of international environmental protection laws. a. UN Conference on the Human Environment convened in 1972. 1) Stockholm Declaration is a list of principles, including Principle 21: "States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources pursuant to their own environmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other states or of areas beyond the limits of national jurisdiction."

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b. United Nations Environment Program (UNEP) established by General Assembly in 1972. 1) Activities of UNEP: a) Monitoring the earth’s environment. b) Drafting international and regional treaties. c) Adopting recommended principles and guidelines.

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c. UN Conference on the Environment and Development (UNCED) convened in Rio de Janeiro in 1992. 1) Rio Declaration on the Environment and Development adopted. a) Reaffirmed the principles of the Stockholm Declaration — especially Principle 21. b) Added new principles: 1] Principle 4: "In order to achieve sustainable development, environmental protection shall constitute an integral part of the development process and cannot be considered in isolation from it."

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2] Principle 15: States should follow a "Precautionary approach" in protecting the environment (i.e., where there are "threats of serious or irreversible damage," action to correct the problem should not be delayed merely because there is a "lack of scientific certainty" that injury will result). 2) Agenda 21 adopted. a) Establishes developmental and environmental goals for the international community. 1] Developmental goals: to promote sustainable and environmentally friendly growth. 2] Environmental goals: to prevent pollution and to conserve and protect the earth’s natural resources.

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2. Regulation of Pollution. a. Sectoral Regulations. 1) Marine Pollution. a) UN Convention on the Law of the Sea imposes on all states the obligation "to protect and preserve the marine environment."

b) Various conventions deal with more particular problems of ocean pollution. Case 2-11. Werkgroep Noordzee et al. v. Minister for Public Health And Environmental Matters

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2) Air Pollution. a) Most conventions relate to the regulation of ozone emissions.

b. Product Regulations.

1) Various conventions seek to regulate:a) Toxic waste.b) Nuclear materials.

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3. Protection of Natural Resources. a. World Charter for Nature adopted by General Assembly in 1982.

1) Only country that voted against the Charter: United States.

2) Basic principles: a) Principal 1: "Nature shall be respected and its essential processes shall not be impaired."b) Principal 10(a): "Living resources shall not be utilized in excess of their natural capacity for regeneration."c) Principal 11: States need to establish procedures to control "activities which might have an impact on nature.“

3) Several conventions that seek to implement the goals of the World Charter of Nature have been adopted.

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Environmental law revolves around a core theory that the earth has limited resources that must be jointly enjoyed and cared for, regardless of their physical presence in the territory of one State as opposed to another.

Environmental law attempts to bring states into agreement on issues such as desertification, sustainable development, biodiversity, endangered species, hazardous materials, climate change and trans-boundary pollution, all of which have been the subject of major international treaties, such as the United Nations Convention on Biological Diversity (CBD), the United Nations Convention to Combat Desertification, and the Convention on International Trade in Endangered Species.

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There are more than 500 international organizations that deal with a wide variety of topics requiring international cooperation, including diplomacy, trade, aviation, migration, development, and many, many others.

As with international law in general, these organizations are crucial to managing globalization, but are controversial because of their impact on state sovereignty.

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International law has traditionally been based on the notion of state sovereignty, but that concept has been breaking down because of the globalization.

Interactions between states have become more complicated, involving a wide array of issues that require them to give up some of their sovereignty in order to have effective relations with each other.

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International law has begun to deal with issues traditionally inside the borders of individual states, such as human rights. These developments have become very controversial, however. International law is often criticized for a lack of legitimacy. For example, the law is shaped to a large degree by politics within the international system. An action, though clearly illegal in terms of international law, may go unpunished due to overriding political considerations.

Since the UN Charter gives veto authority to five Security Council members, who would presumptively veto any measures to enforce international law against their own state, the legitimacy of an organization with such unequal application of the law must be questioned to a certain degree. When the most powerful players determine the rules of the game, how legitimate can these rules be? Furthermore, most of those countries are not democracies—China, Russia, and others routinely and clearly violate international human rights law, for example. Why are they allowed to help set what the law is?

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Unelected bodies wield significant power in the formulation of international law, from the UN Security Council to the dispute settlement body of the WTO. They make decisions and implement policy that can affect people around the world, but if those people are unhappy with these decisions, or if the choices made fail to reflect their interests, when the actors are in the international system, the people affected rarely have the power to hold them accountable. How can people trust international law and international organizations when there is no direct connection between them?

These questions are central to the question of whether the current rules of international law, the way they are made, and the way they are implemented, are a fair means of governing the world.

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The position of individuals under international law has evolved significantly during the last century. More commonly accepted than ever before is the idea that individuals have both rights and responsibilities under international law. Human rights law, for example, has tried to establish that every person around the world has certain basic rights that cannot be violated. At the same time, individual accountability under international law has been established, first at the Nuremburg trials and recently at the International Criminal Tribunal for Yugoslavia and the International Criminal Tribunal for Rwanda and the dawn of the International Criminal Court, the first permanent international institution to hold individuals responsible for violations of the laws of armed conflict.

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Non-governmental organizations (NGOs), also called “civil society” organizations, are groups formed by individuals working across national borders to affect public policy. Recent progress in technology, coupled with globalization’s emphasis on international cooperation, has allowed the effectiveness of these organizations to grow drastically. Individuals living in different countries can now network with one another, and the Internet has permitted NGOs to both obtain and publish information on an extensive level, previously only available to states.

NGOs have had significant impact on environmental affairs, such as Greenpeace’s advocacy work on climate change, Amnesty International’s advocacy of human rights, and the International Campaign to Ban Landmines, which won a Nobel Peace Prize for its work in shaping a global treaty to prohibit use of landmines.

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4. Liability for Environmental Damage. a. Very few conventions (with only a small number of parties) impose liability for environmental damage. 1) Convention on Civil Liability for Nuclear Damage of 1963.2) International Convention on Civil Liability for Oil Pollution Damage of 1969.

Jan. 2011….Continue to Part 3 …………….