This panel was convened at 9:00 am, Friday, April 11, by its moderator, Barry Appleton of Appleton & Associates International Lawyers, and Robert Howse of New York University School of Law, who introduced the panelists: Jurgen Kurtz of Melbourne University Faculty of Law; Martins Paparinskis of University College London; Helene Ruiz-Fabri of Sorbonne Law School (University Paris 1 Pantheon-Sorbonne); and Jacob Werksman of the European Commission. *
WTO NORMS AS "RELEVANT" RULES OF INTERNATIONAL LAW IN INVESTOR-STATE ARBITRATION
By Jurgen Kurtz ([dagger])
There is an identifiable and troubling opposition to the use of WTO law in investor-state arbitration. Within the growing body of arbitral case law, that resistance reaches its apotheosis in the Methanex v. U.S award in which the Tribunal asserted that "the intent of the drafters [of NAFTA was] to create distinct regimes for trade and investment." (1) For the Methanex Tribunal (and its successors), there is simply no role for the law of the WTO to offer interpretative guidance in the adjudication of shared or similar norms in bilateral and regional investment treaties. At its heart, this opposition is based on an assumption of legal and institutional divergence between the two systems and a belief that they seek to achieve fundamentally different purposes.
Yet this rigid claim of separation between the two systems is deeply ahistorical. It portrays the legal divergence that took place in the few decades following the Second World War as an accurate representation of the long arc of treaty practice and relatedly, state intent. Measured against a longer chronology, it is merely exceptional. For centuries, market actors and states parties treated foreign trade and foreign investment as interchangeable and compatible modalities. Through treaties of Friendship, Commerce and Navigation in the late nineteenth and early twentieth centuries, states would simply commit to a broad guarantee of "freedom of commerce." (2) In adjudication too, international courts would sensibly recognize the breadth of operation of these treaties even in the absence of this type of textual instruction. (3) As we turn to contemporary state practice (as a predictor of the near future), we find the same strategic choices as negotiators increasingly bundle trade and investment commitments in bilateral and regional free trade agreements. The conceptual separation by which (often self-interested) actors will divide the two fields--by characterizing the WTO as an instrument of "trade liberalization" and thus an extension of market opportunities for foreign traders, while BITs are devoted simply and only to "investment protection"--does not withstand careful scrutiny. As Debra Steger has aptly stated, "[t]he goal of investment chapters in these [Preferential Trade Agreements] is not solely protection of investments but also market access." (4)
Contemporary treaty practice is driven by economic logic and reality. Economic actors do not treat cross-border trade and foreign investment as strict substitutes when it comes to penetrating markets. They are increasingly essential complements, especially in the construction of global supply chains. Foreign investors often adopt complex integration strategies in order to acquire efficiency gains whereby production processes are split into various activities and carried out in locations best suited to a particular activity (which is a strategy clearly reflected in the factual matrices of key arbitral disputes (5)). The product sold or service supplied by the foreign investor in the host state could then comprise the end-point in an integrated supply chain that stretches across multiple jurisdictions. (6) This is no minor or tangential economic fact. Approximately half of the world's trade today takes place between affiliates of multinational enterprises trading intermediate goods and services. (7) Indeed, the economic reality of globalization of production and distribution across supply chains is embedded in the very text of the WTO. The constraints on performance requirements (that states often seek to impose on foreign investors) in the WTO Agreement on Trade-Related Investment Measures are premised on the fundamental notion that such investment measures (like the obligation to source domestic content) can significantly affect market access for foreign goods. (8) Relatedly, foreign investment in the services sector is regulated extensively within the WTO, again contradicting the assumption of hermetic systemic separation. (9)
In this vital part of the global economy, there is naturally a common purpose that unites the two systems, namely the fundamental promise to extend and safeguard competitive opportunities to foreign traders, service providers, and investors. It is not the only goal achieved by each regime, but it is arguably the most significant and important from an economic perspective. The instrumental justification for liberal rules on international trade in goods has always been understood. More recently, some economists have argued that it should also act as a benchmark when assessing the contemporary justification of select investment disciplines. (10) Economic analysis only takes us so far, however. There remains the complex legal question of how to determine the appropriate limits on economically insensible state intervention against the various and myriad ways in which states regulate for legitimate public purposes.
Absent the unlikely possibility of consolidation in a...