Introduction to International Commercial Law (Trade and Investment)

1
Introduction to International Commercial Law
(Trade and Investment)

• Dr. Markus W. Gehring, MA (Cantab), LL.M. (Yale),
  Dr. jur. (Hamburg)
• Vice-Dean Research and Jean Monnet Chair ad
  personam
• in Sustainable Development Law

2
Introduction to International Trade Law

• Lecture Outline
• 1. GATT/International trade history
• 2. The World Trade Organization
• 3. The Institution
• 4. Key concepts Tariffs, Most Favourite Nation
  and National Treatment
• 5. Dispute Settlement
• 6. Reform Trade negotiations

3
- one of the oldest areas governed by
international rules- multi-layered trading
system bilateral, regional, intra-regional
and global- provisional set of rules -
originally 23 contracting parties - enacted 1
January 1948 - terminated 31 December 1995-
negotiated eight multilateral trade "rounds" -
reduced tariffs, attempted to reduce other
trade barriers - converted intl trade to a
rules-based system
1. The General Agreement on Tariffs and Trade
(GATT) / International trade history
4
- Objectives ?- Main functions
implementation, administration and operation
of the covered agreements
negotiation of trade agreements settlement
of trade disputes review of trade policies
fostering coherence in policy making-
Pillar structure GATT, GATS, TRIPS and
horizontal agreements DSU, TPRM and
plurilateral agreements
2. The World Trade Organization
5
3. The Institution
6
-Tariffs (reciprocal and mutually
advantageous basis) - Actual value tariffs-
Tariff schedules (Art. II GATT)- Tariffication
of other barriers to trade- Brussels Convention
on Tariff Classification- Harmonized system
of customs classification
4. Key Concepts - Tariffs
7
- Art. I GATT Any advantage, favour,
privilege, or immunity in negotiated
concessions extends to all WTO members.-
Unconditionally, like products, de facto
discrimination- Rationale of MFN - Important
exceptions Grandfathered preferences, Art.
XXIV creation of RTAs, Enabling clause,
waivers such as for the Cotonou Agreement.
4. Key Concepts Most Favoured Nation Principle
8
- Art. III GATT prohibits discrimination of
foreign producers vis-à-vis domestic producers
- Early GATT jurisprudence a formally origin
neutral taxation can violate Art. III2 GATT-
Centrality of likeness- Non-fiscal measures (Art
III4 GATT)- Relationship with Art. XX GATT
4. Key Concepts National Treatment
9
- Integrated dispute settlement system
based on Articles XXII and XXIII GATT and the
DSU- Function of the DSB- Coverage goods,
services and intellectual property -
Procedures strict time-limits - Adoption of
panel reports negative consensus principle -
Appellate Body Review - Non-compliance with
recommendations
5. Dispute Settlement
10
- Consultation phase - Panels (Art. 6-8 DSU)-
Panel process (Art. 12 DSU) - Panels time
periods (Appendix 3) - Appeals Process (Art. 17
pp. DSU)- Adoption of reports- Compliance -
(Cross)retaliation
5. Dispute Settlement
11
- Ministerial Conference ? between Green
rooms and NGO scrutiny- Consensus decision
making (Art. XI WTO) - Panels time periods
(Appendix 3) - Trade negotiation committee-
Doha-Round Agriculture as the most contested
issue (initially also competition and
investment)- Draft Hong Kong Ministerial
Declaration
6. Trade negotiations
12
2. Investment

• Trade Related Investment Measures (TRIMS)
• Physical and Portfolio Investment
• Bilateral Investment Treaties (BITs)
• Multilateral Attempts
• - OECD - MIA
• - WTO
• - New EU Competence?

13
Investment Law

• An Emerging Network of Intl Investment
  Agreements (IIAs)
• Current intl legal framework governing foreign
  investment is a vast network of over 2500 IIAs.
  
• In 2005, 1,891 (75.8 ) in force, 232 other IAs
  with investment provisions, other regionals.
• While other treaties and norms intersect and
  interact, IIAs are the primary public
  international law instruments that govern foreign
  investment.

14
Investment law

• IIAs seek to create favourable conditions or a
  stable framework for investment, for economic
  development, by impose binding obligations on
  States re treatment of foreign investment
• (i) a wide asset-based definition of investment
  
• (ii) guarantees of non-discrimination (national
  and most-favoured-nation treatment)
• (iii) a minimum standard of treatment often
  expressed as fair and equitable treatment
  coupled with an obligation not to impose
  arbitrary or discriminatory measures
• (iv) the right to transfer investments and
  profits out of the host state and
• (v) compensation for measures tantamount to
  expropriation.
• A smaller number of IIAs provide for rights of
  entry for foreign investment, prohibitions on
  performance requirements, and umbrella clauses
  under which a state agrees to observe its
  commitments to foreign investors.

15
Investment law

• In most IIAs, foreign investors enforce these
  rights through investor-state arbitration
  provisions under which the state provides its
  general consent to arbitrate claims under the
  IIA.
• As of December 2005, 135 IIAs claims had been
  brought before ICSID. Altogether by 2005, there
  were 229 known investment treaty arbitrations.
  Over two thirds of the claims were filed after
  2001.
• SD concerns were first raised in 4 controversial
  claims under Chapter Eleven of the North American
  Free Trade Agreement (NAFTA)
• - Ethyl v. Canada export and interprovincial
  trade ban prohibitions on MMT, a fuel additive
• - Azinian v. Mexico cancellation of a municipal
  waste concession
• - Metalclad v. Mexico closure of a hazardous
  waste site and
• - Methanex v. United States Californian ban on
  the use of MTBE, another fuel additive.

16
Trade Law and Sustainable Development

• Lecture Outline
• 1. Sustainable Development and Globalisation
• 2. Foundations Trade and Environment
• 3. Foundations Trade and Development
• 4. Integrated Trade Law and Policy-Making
• 5. Sustainable Development in WTO Disputes
• 6. Conclusion

17
1. Sustainable Development and Globalisation

• Building on the 1992 UN Conference on Environment
  and Development (Rio Earth Summit)
• Addressing economic interdependence in the 2002
  Johannesburg World Summit on Sustainable
  Development.
• Globalization offers opportunities and
  challenges for sustainable development. We
  recognize that globalization and interdependence
  are offering new opportunities to trade,
  investment and capital flows and advances in
  technology, including information technology, for
  the growth of the world economy, development and
  the improvement of living standards around the
  world. At the same time, there remain serious
  challenges, including serious financial crises,
  insecurity, poverty, exclusion and inequality
  within and among societies.

18
2. Foundations Rapid Evolution in Law and
Policy on Trade, Environment Development

• Physical links (impacts)
• - Complex relationships- Neither good nor bad
  (shades of grey)
• Legal links
• - Three distinct bodies of international law-
  Areas of intersection and integration
• Institutional links
• - WTO vis-à-vis MEA Secretariats and IGOs,
• - UNEP, UNDP
• - National and international NGOs

19
2. Foundations Different Perspectives

• The trade perspective
• Economic growth through trade will solve all
  environmental problems
• The environment perspective
• The environment is threatened by the status quo
• The development perspective
• Poverty needs first and foremost policy attention

20
2. Foundations Global Environmental Management

• Trade Measures
• - Trade ban
• - Protection provisions
• - Trade restrictions
• - Trade prohibition 3. Part
• - Cartagena Protocol GMO trade restriction
• - Kyoto Protocol Trade links
• New Generation
• - Trade restriction
• - Trade ban

• Principal MEAs
• Early Agreements
• - CITIES
• - UNCLOS
• - Basel Convention
• - Montreal Protocol
• Rio Agreements
• - CBD
• - Desertification
• - Climate Change
• New Generation
• - PICs
• - POPs

21
2. Foundation Relevant WTO Provisions

• Preamble Art. V. 2
• Art. III, XX GATT
• Art. 2.2, 2.6 TBT
• Art. 2.1, 5 SPS
• Art. XIV GATS
• Art. 7, 30 TRIPS

• WTO Agreement
• Trade in Goods
• GATT
• TBT
• SPS
• Trade in Services
• GATS
• Trade in IPRs
• TRIPS

• And Doha Negotiations

22
2. Foundations Trade and Development

• Growing membership of developing countries
• New Development Theory
• GATT Article XVIII
• GATT Part IV
• Enabling Clause
• The WTO Agreements

23
4. Integrated Trade Law and Policy-Making

• Development that can meet the needs of the
  present without compromising the needs of future
  generations (Brundtland Report)
• Reconciliation of development and environmental
  objectives (ICJ in Gabcikovo-Nagymaros Case)
• Balance / integration / mutual support between
  economic growth, social justice and environmental
  protection objectives (WTO AB Report from US
  Shrimp Dispute)

24
4. Integrated Trade Law and Policy-Making, cont.

• An integrated agenda for the Doha Development
  Round in the WTO and likely for future trade
  rounds as well
• - Procedural integration through consultations
  in CTE CTD, sustainability impact assessment
  (inc. human rights impact assessment),
  transparency participation, reform of dispute
  settlement procedures, etc.
• - Substantive integration in standards (TBT,
  SPS), agriculture, intellectual property rights,
  investment and other negotiations
• Innovations in regional (integration) processes
  such as the European Union, the SADC, the NAFTA /
  FTAA, Cotonou Agreement, ASEAN or bilateral free
  trade agreements

25

5. Sustainable Development in WTO Disputes

• US - Shrimp Turtle Case
• WTO Appellate Body We believe the objective
  of sustainable development must add colour,
  texture and shading to our interpretation of the
  agreements annexed to the WTO Agreement.
• EC - Tariff Preferences CaseAppellate Body
  rejected EC arguments that its tariff preferences
  were based on sustainable development objectives.

26
6. Conclusions

• Recent WTO negotiations and cases reflect that
  the objective of sustainable development has
  become an integral part of the world trading
  system.
• Legal arguments encompassing an integrated
  developmental and environmental approach have
  been made by the parties and accepted by the
  relevant trade dispute settlement organs.
• However, WTO dispute settlement organs will not
  lightly accept sustainable development as a trump
  card. A solid legal understanding of the
  objective and its underlying principles is
  required to make a successful sustainable
  development argument in world trade law.

27
Thank you.

• Markus W. Gehring
• mwg24_at_cam.ac.uk

28
Important GATT rules
29
Important WTO rules