Multilateral Reform Research Articles

THE (IN)EFFECTIVENESS OF REQUIRING PRIOR EXHAUSTION OF LOCAL REMEDIES IN INVESTMENT ARBITRATION

The international investment-law regime continues to be mired in a legitimacy crisis that has given rise to important multilateral reform efforts through the United Nations Commission on International Trade Law. A key reform proposal is centred on the introduction of an exhaustion-of-local-remedies requirement. This article critically evaluates the exhaustion-of-local-remedies rule in the context of international investment law, and challenges its interpretation where such clauses already exist in contemporary investment law. The article concludes that investment tribunals have subverted these clauses in various ways, and considers the legal challenges states would need to address to best prevent the subversion of these clauses by investment tribunals in future.

Has process hijacked purpose? Outlook on food systems transformation in the global climate change processes

There has been growing interest in the Conference of Parties (COPs) meetings of the United Nations Framework Convention on Climate Change (UNFCCC) in food systems, which account for a third of global emissions and are heavily impacted by climate change. While there has been much rhetoric about the need for transformation at recent COPs, we examine whether this solely remains at the level of rhetoric and ambition or is likely to deliver the climate action that is needed. Based on literature, documentation of UNFCCC meetings, and our own participation, we observe that progress in the past on agriculture has been extremely slow and has led to limited action, while the recent verbiage on food systems has not been matched by significant progress in the negotiations. The urgent action needed is not realised through the UNFCCC processes. New and radically different ways to catalyse action are needed, and the UNFCCC process urgently needs reform as part of wider multilateral reforms. We propose that the scale of the COPs is reduced and that the focus shifts to the results delivered through rigorous evaluation, accountability and transparency, and a shift towards less consensus-based approaches to drive action and ambition.

Mapping the unjust global distribution of harmful fisheries subsidies

Harmful fisheries subsidies contribute to overfishing leading to environmental and societal impacts. If only fisheries and ecosystems within the subsidising nations’ jurisdiction were affected, then unilateral actions might be sufficient to help safeguard our ocean and the people reliant upon it. However, just as fish move between jurisdictions, so too do the subsidised fishing fleets that target them. As such, the impacts and solutions to subsidies-induced overfishing are often matters of international concern. Mapping the distribution and flows of harmful subsidies is therefore key to understanding these concerns, informing multilateral reform, and empowering impacted nations to strengthen the terms of access to their waters and resources. Here we quantify the amount of harmful fisheries subsidies that supports fishing in the high seas, domestic and foreign waters. We estimate that between 20% and 37% of all harmful fisheries subsidies support fishing in foreign waters or the high seas, that is outside the jurisdictions of the subsidising nations. We show that harmful subsidies primarily originate from nations with high-Human Development Index (HDI), strong fisheries management capacity and relatively sustainable fish stocks, yet disproportionately impact nations with low or very low-HDI, lower management capacity and more vulnerable fish stocks—40% of the harmful subsidies that support fishing in very low-HDI nations waters originate from high-HDI and very-high HDI nations. We show that Asia, Europe, and North America, are net subsidy sources; they provide more harmful subsidies to their fishing fleets than their respective ecosystems are impacted by; while Africa, South, Central America and Caribbean, and Oceania are net subsidy-sinks. This discrepancy between the source of harmful subsidies and the nations that are ultimately impacted is unsustainable and unjust. Prohibiting all harmful subsidies to distant-water fishing and fishing in the high seas—with narrow exceptions for Small Island Developing States—should be prioritised to support the advancement of sustainable and equitable fisheries worldwide.

THE APPLICATION OF MEDIATION INTO ISDS: FROM THE PERSPECTIVE OF CHINA

A crucial change in the recent reform of international investment agreements and investment laws is the introduction of mediation into ISDS de novo. It is found that mediation in the international investment dispute settlement mechanism has preliminary treaty basis and has unique practical value and good application space. Under the background of the increasing acceptance of the Singapore Convention on Mediation, the foundation has been laid for the reconstruction and development of the international investment mediation mechanism. Facing the development trend of the application of investor-state dispute settlement mechanism, China should create external conditions, accelerate internal supporting, improve the practical basis, increase the treaty norms and participate in multilateral reform.

The Dynamism of Trade Balance in Ghana

Developing economies have frequently employed macroeconomic factors such as the currency rate, inflation, investment, and so on to manage trade flow; yet, there are often chronic deficits in the balance of trade and payments due to a structural imbalance between the amounts of exports and imports. As most rich countries intentionally used the benefits of international trade to improve their trade balance position, many developing countries signed up for numerous unilateral and multilateral trade policy reforms that provided little to no economic benefit. As a result, this study employs cointegration and an error correction model based on the Autoregressive Distributed Lag (ARDL) framework to analyse and estimate the effect of macroeconomic factors on Ghana's trade balance and how Ghana's trade balance has changed from 2000 to 2018. Quarterly time series data covering a period of 19 years, from 2000 to 2019 was collected on all dependent and independent variables such as exchange rate, inflation rate, interest rate and GDP per capita. The results indicate that exchange rate and interest rate significantly affect trade balance while GDP per capita and inflation insignificantly affect trade balance. The study recommended that the government should put in more measures to stabilise the currency and local manufacturers should be motivated by giving subsidies and tax exceptions.

International involvement in (re-)building police forces: a comparison of US and UN police assistance programs around the world

ABSTRACT The US and UN are two of the largest patrons of police reform programs worldwide: between 2000 and 2020, the US provided approximately $160 billion in police assistance to more than 130 countries worldwide; simultaneously, the UN spent over $77 billion supplying police-oriented security sector reform to countries experiencing or having experienced armed conflict, doing so through the deployment of peacekeeping missions and within the offices of UN Police, the UN’s hub for police reform and training programs. Though these two providers seek the same overall objective, they often vary in their specific goals: the US often engages in foreign police reform to promote its own national security objectives by increasing institutional capacity, while the UN adopts police reform programs to promote institutional constraint. The two models have important implications for how we understand bilateral and multilateral reform programs, including activities performed and recipient countries targeted across both time and space. Using originally collected data on US security assistance programs as well as a careful analysis of original data on UN mandates, this article provides the first quantitative exploration of these two different modes of assistance, comparing and contrasting their objectives and where, when, and how they are provided.

Independence, accountability, and participation: the multilateral reform of international investment arbitration and China’s options

Independence, accountability, and participation: the multilateral reform of international investment arbitration and China’s options

UNCITRAL Working Group III and Multilateral Investment Court – Troubled Waters for EU Normative Power

This article analyses the European Union (EU)’s and its Member States’ activities in the multilateral reform of investors- state dispute settlement (ISDS) in the early stages of the United Nations Commission on International Trade Law (UNCITRAL) discussions with the ultimate goal of the establishment of a multilateral investment court. First, the article explains the EU’s approach to the reform and its ambitious proposal of a standing investment court. Then, it demonstrates how difficult it turned out to be for the EU to promote the reform proposal in multilateral negotiations at the UNCITRAL. Finally, the article explores how the EU employs several means, including internal mobilisation, or engagement of other stakeholders, in order to ensure that work of the UNCITRAL continues in a direction of systemic reform of ISDS. In conclusion, it offers a view of how the EU normative ambitions play out in the context of different approaches of third countries and how legal factors complement its political preferences.

The digital tax reform for Africa: customised or one-size-fits-all approach?

ABSTRACT We employ analytical, case study and economic analysis approaches to explore trends and potential outcomes of tax policy reforms addressing challenges of digital business transformation in Africa. We find the striking level of differences among the twenty-six examined African countries, in both their positions in global and regional economy, and in digital capacities of states and their tax administrations. The potential outcome of the discussion of multilateral reform at the Organisation for Economic Cooperation and Development (OECD) global governance level and unilateral reforms such as digital services taxes and its implications for African states are discussed in this context. Tax policy proposals are suggested for delineated groups of African states based on the idea of narrowly targeted digitally related policy for the leaders and broad cooperation between all the African states. Such an approach can ensure the economic potential of multilateral cooperation among developing countries and defend their economic and fiscal interests at the global tax governance level.

Recent Efforts to Curb Investment Treaty Shopping: How Effective Are They?

In recent years it can be observed that states increasingly introduce explicit limitations to the practice of treaty shopping in their investment agreements. Accordingly, substantive ratione personae requirements, denial of benefits clauses, and anti-circumvention clauses are often included in newly signed investment treaties. In addition to these new drafting trends, arbitral tribunals have developed an implicit limitation in the form of the abuse of process doctrine to sanction the most egregious forms of treaty shopping. While these drafting trends as well as arbitral practice can curb undesired treaty shopping to a certain extent, this article argues that only a multilateral reform effort is able to truly prevent this practice from occurring. Treaty Shopping, Nationality Planning, Corporate Structuring, ISDS Reform, UNCITRAL, Ratione Personae Requirements, Denial of Benefits Clauses, Abuse of Process

UNCITRAL Working Group III and Multilateral Investment Court – Troubled Waters for EU Normative Power

This article analyses the European Union (EU)’s and its Member States’ activities in the multilateral reform of investors-state dispute settlement (ISDS) in the early stages of the United Nations Commission on International Trade Law (UNCITRAL) discussions with the ultimate goal of the establishment of a multilateral investment court. First, the article explains the EU’s approach to the reform and its ambitious proposal of a standing investment court. Then, it demonstrates how difficult it turned out to be for the EU to promote the reform proposal in multilateral negotiations at the UNCITRAL. Finally, the article explores how the EU employs several means, including internal mobilisation, or engagement of other stakeholders, in order to ensure that work of the UNCITRAL continues in a direction of systemic reform of ISDS. In conclusion, it offers a view of how the EU normative ambitions play out in the context of different approaches of third countries and how legal factors complement its political preferences.

Backlash and Judicial Restraint: Evidence from the European Court of Human Rights

AbstractHow does backlash from consolidated democracies affect the behavior of liberal international institutions? We argue that liberal international institutions have incentives to appease their democratic critics. Liberal institutions rely on democratic support for their continued effectiveness and can accommodate democratic critics at a lower legitimacy cost than non-democratic challengers. We examine this theory in the context of the European Court of Human Rights using a new dataset of rulings until 2019 and a coding of government positions during multiple reform conferences. Combining matching and a difference-in-differences design, we find strong evidence that the Court exercises restraint towards consolidated democracies that have criticized the Court in multilateral reform conferences by rendering fewer violation judgments against these states. We find some evidence that governments have also recently appointed more deferential judges. The findings suggest that backlash can affect liberal international institutions even without membership exit.

Special Issue: UNCITRAL and Investment Arbitration Reform: Matching Concerns and Solutions

Abstract The ongoing ‘legitimacy crisis’ in investor-State dispute settlement (ISDS) has triggered a comprehensive attempt at multilateral reform. In 2017, Working Group III at the United Nations Commission on International Trade Law (UNCITRAL) was entrusted with a broad, open-ended and problem-driven mandate. The reform process aims to tackle particular concerns with ISDS: excessive costs and lengthy proceedings, inconsistent and incorrect decisions, and a lack of arbitral diversity and independence. The exclusion of substantive treaty reform has met critique but states are considering a wide range of procedural options from incremental reform to a multilateral court, appellate mechanism, and ISDS alternatives. In this article, we introduce the reform process and the seven articles that follow in this Special Issue of the Journal on World and Investment and Trade. In these contributions, ISDS Academic Forum members analyse the basis for each concern and the potential contribution of leading reform models.

Multilateral Reform of Investor–State Dispute Resolution Mechanism: A Balance between Public Legitimacy Management and Private Efficiency Refinement

Multilateral Reform of Investor–State Dispute Resolution Mechanism: A Balance between Public Legitimacy Management and Private Efficiency Refinement

Populism and Backlashes against International Courts

International courts, like domestic courts, protect liberal limits on majoritarianism. This sometimes puts these courts in a position to protect the property rights of the “corrupt elites” that are targeted by populists or the civil liberties of those who are targeted in domestic populist identity politics. Moreover, populism offers an ideology to attack the authority of a court rather than just its individual rulings. An empirical examination illustrates the plausibility of this argument. A large number of backlashes against international courts arise from judgments that reinforce local populist mobilization narratives. Populist backlashes against international courts are not just about sovereignty but often follow efforts to curb domestic courts, usually for similar reasons. Yet populist backlashes do not always succeed, either because populist leaders do not follow up on their exit threats or because populism is too thin an ideology for creating successful multilateral reform coalitions.

Rethinking International Investment Governance: Principles for the 21st Century

The objective of this book is to change the terms of the debate so that societal values and goals are at the center of discussions about each reform proposal and process. This book rethinks international investment law as a key system in global economic governance that should incorporate principles of transparency, participation, reciprocity, accountability, and subsidiarity. The book critically evaluates the current system of investment governance in light of those principles and goals. And finally, it proposes possible reforms – including multilateral reforms – that would realign the governance of international investment with 21st century goals including reduction of poverty and inequality, and protection of human dignity, the environment, and the planet.

Populism and Backlashes Against International Courts

International courts do not just constrain governments but they also protect liberal limits on majoritarianism. This sometimes puts these courts in a position to protect the property rights of the ‘corrupt elites’ that are targeted by populists or the civil liberties of those who are targeted in domestic populist identity politics. Moreover, populism offers an ideology to attack the authority of a court rather than just its individual rulings. An empirical examination illustrates the plausibility of this argument. A large number of backlashes against international courts arise from judgments that reinforce local populist mobilization narratives. Populist backlashes against international courts are not just about sovereignty but often follow efforts to curb domestic courts, usually for similar reasons. Yet, populist backlashes do not always succeed, either because populist leaders do not follow up on their exit threats or because populism is too thin an ideology for creating successful multilateral reform coalitions.

The Global Laboratory of Investment Law Reform Alternatives

There are two ways of thinking about institutional choice in the context of multilateral investment law reform. One starts from abstract principles, asking what policy goal investment law is supposed to achieve and what institutional choice most effectively advances that goal. The other one draws on practical experimentation, asking what institutional choices states are making and how these choices perform in real life. Sergio Puig and Gregory Shaffer present a compelling analytical framework for the former, top-down approach to investment law reform. In this essay, I will scrutinize their analysis and argue that the latter, bottom-up approach is more promising. First, I show that Puig and Shaffer’s framework is contingent on specifying investment law’s overarching policy goal as a common yardstick by which to compare institutional choices. Yet, as part of the current reform process, states are not only exploring new institutional alternatives, but are also redefining what investment law is about in the first place. I show empirically that investment treaties are more diverse today than they have ever been, in part, because many states, particularly in the developing world, have shifted from being rule-takers to rule-makers. The current investment regime thus resembles a global laboratory of investment law reform alternatives where states experiment with new policy goals and novel institutional designs. This diversity allows us to observe how a wide range of reform alternatives actually performs in practice. We should let this experimentation run its course in the short term to then distill best practices in the medium term that can guide multilateral reform of investment law from the bottom up.

Export Product Diversification and Public Revenue’s Dependence on Resource Revenue

ABSTRACTThis article tries to reconcile two major priorities for countries, notably resource-rich countries on the international development agenda: export product diversification with a view to helping them better integrate into the multilateral trading system and tax reforms with a view to reducing the dependence of total public revenue on resource revenue, and therefore developing a more sustainable stream of public revenue. The analysis therefore involves examining empirically the impact of export product diversification on countries’ overall public revenue dependence on resource revenue, this dependence being measured by the share of resource revenue in total public revenue. The empirical analysis shows that export product diversification exerts a negative and significant impact on resource revenue share of total public revenue, and therefore could help facilitate tax reforms towards lower resource revenue dependence. Hence, while tax policy is the main policy tool to conduct tax reforms, export product diversification would likely contribute to facilitating the implementation of these reforms.

POTENTIAL PARETO‐IMPROVING MOVE TOWARD MOST FAVORED NATION TARIFFS

We use a multicountry asymmetric oligopolistic framework for segmented markets to study the welfare effects of reducing tariff discriminations—which we call a move toward Most Favored Nation tariffs. In our basic framework initial tariffs are arbitrary, and we consider unilateral reforms without and with reciprocity/retaliation. We extend the basic framework to allow for revenue constraints, unemployment, and the case where the initial tariffs are at Nash‐optimal levels. We also consider multilateral reforms in the last scenario. Conditions under which such harmonizations are potentially Pareto‐improving are derived and results compared across scenarios. Each scenario makes a significant difference to qualitative results. (JEL F10, F11, F13, H21, H3, H41)