Informal and political agreements as sources of obligation? Sketching a theory of international political normativity

• Author: Ilias Bantekas
• Position: Professor of Transnational Law, Hamad bin Khalifa University (Qatar Foundation) College of Law and Adjunct Professor of Law, Georgetown University, Edmund A Walsh School of Foreign Service
• Pages: 37-79

INFORMAL AND POLITICAL AGREEMENTS AS

SOURCES OF OBLIGATION? SKETCHING A THEORY

OF INTERNATIONAL POLITICAL NORMATIVITY

ILIAS BANTEKAS*

ABSTRACT

This Article argues that a particular trend is emerging whereby states and

intergovernmental organisations are relying less on treaties and contracts in

certain fields of regulation in favour of more flexible types of agreements. These

agreements, although predicated on language suggesting non-binding (or soft

law) obligations, are of a sui generis nature, which this article suggests give

rise to international political normativity. That is, while its protagonists main-

tain that they are not bound by the terms of their pledges and undertakings, in

fact the practice of participating states demonstrates a desire to set up elaborate

mechanisms that encompass complex webs of commitment to and with other

stakeholders. Participation in these complex mechanisms portrays a normative

character that cannot be explained by reference to treaties and contracts, nor by

reference to non-binding, soft law, agreements. This type of normativity is dis-

tinct from the similar term coined by political scientists, albeit many of its con-

notations strike a familiar chord.

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

II. MOU AS AN EMANATION OF INTERNATIONAL POLITICAL

NORMATIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

III. INDETERMINATE INTERNATIONAL AGREEMENTS . . . . . . . . . . . . . . . 51

A. Unilateral Pledges Under International Law . .. . . . . . . . . . 51

B. International Instruments with Unclear Legal Status . . . . . 55

IV. MOU AS INTERNATIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . 57

A. MoU in the Field of Environmental Financing . . . . . . . . . . 59

B. Administration Agreements for Environmental Funding

Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

V. MOU ADOPTED BY THE INTERNATIONAL MONETARY FUND . .. . . . . 64

A. IMF MoU with Distressed States in the Post-2008 Financial

Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

B. World Bank and U.N. Donor Agreements with States . . . . . . 72

VI. CONCLUSION . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

* Professor of Transnational Law, Hamad bin Khalifa University (Qatar Foundation) College

of Law and Adjunct Professor of Law, Georgetown University, Edmund A Walsh School of

Foreign Service. @ 2023, Ilias Bantekas.

37

I. INTRODUCTION

Memoranda of understanding (MoU) have appeared with much

force in both the domestic and international landscape since the early

1900s. The scholarship has mainly focused on the binary distinction

between agreements designated as MoU that were not intended to be

binding and those that assumed a normative character even if not

declared as such. Since the early 2000s, especially with the rise of mega-

projects requiring significant financing such as the Millennium

Development Goals (MDGs), this binary distinction gave way to a new

way of thinking about commitments encompassed within instruments

that were traditionally perceived as non-binding. As the section on

international political normativity will demonstrate, while the distinc-

tion between binding and non-binding agreements is still important,

states have realised that treaties are no longer the most optimum means

of expressing the broad notion of “commitment” and that they would

rather do away with the formality that comes with treaties and interna-

tional contracts. The Damocles “sword of obligation” is no longer

accepted by most states in their engagement with mega-financing proj-

ects. In fact, while states engage such projects with enthusiasm at the

political level, they are very much reluctant to create international legal

obligations. This gives rise to an important dilemma: Should form pre-

vail over substance?

Of course, this is not to say that all MoU provide the legal effect

expounded by the parties. What is at stake is whether an agreement,

irrespective of its form, entails concrete obligations for the parties, with

a common intention to fulfill and implement such obligations. By way

of illustration, the conditionalities set out in the post-2008 restructuring

of the Greek debt were contained in MoU, the aim of which was to

render any issues arising therefrom inadmissible from local or interna-

tional courts.

1

In addition, the authority of the administering authority

(the so-called troika) established by the MoU was exceptionally broad

and in practice could sanction any policy or law, even if not directly

related to the Greek debt-restructuring plan. On the basis of these MoU,

the International Monetary Fund (IMF), the European Central Bank

(ECB), as well as informal European Union (EU) institutions, such as the

EuroGroup, were granted powers to oversee Greek budgetary reforms as

1. It was only in Eugenia Florescu and Others v. Casa Jude ¸teana˘ de Pensii Sibiu and Others,

Case C-258/14 Judgment of the Court (Grand Chamber) of 13 June 2017, EU:C:2017:448, ¶ 36,

that the CJEU came to the conclusion that MoU concluded under EU financial assistance

mechanisms and balance-of-payment processes qualified as EU acts under art. 267(1)(b) TFEU,

and hence susceptible to interpretation by the Court.

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38 [Vol. 54

well as attendant laws. As a result, the powers conferred in these MoU

replaced the authority of the Greek government to adopt policy and laws

in a sovereign manner, even though the latter was found not to be ac-

countable under EU law.

2

In fact, no entity in the family of lenders,

including facilitating institutions, such as the EC Commission, retained

any kind of liability in its contractual or extra-contractual dealings with

borrower states.

3

As a result of these broad-ranging powers, the Court of

Justice of the EU (CJEU) emphasized that the EU Commission must

“refrain from signing an MoU whose consistency with EU law it doubts.”

4

In equal measure, there is growing case law by domestic courts who view

certain MoU as giving rise to concrete obligations.

5

In Angle World LLC (“Angle”) v. Jiangsu Beier Decoration Materials Co., Ltd. (“Jiangsu

Beier”) the parties had entered into an MoU containing an arbitration clause. CIETAC agreed

that the clause was valid and Angle applied to the Chinese Fourth Middle Court to set the award

aside on the ground that no valid arbitration clause can exist in a non-legally binding instrument.

The Chinese court disagreed, arguing that Parties concluded and amended agreements through

emails during their long-term business practice, and the MOU was also handled in such a

manner. Therefore, the Court inferred that Angle accepted the arbitration clause. The Court also

found that in fact both Parties had actually performed the terms of the MOU. Therefore, the

Court held that the MOU in question was in fact an agreement which had come into effect, and

the arbitration clause contained therein was valid and binding. Judgment (2019) Jing 04 Min Te

No.588. Interestingly enough, when the winning party attempted to enforce the award in the

United States, it was refused on the ground that there was no valid agreement to arbitrate. A

summary of this ruling is available at: https://www.transnational-dispute-management.com/

legal-and-regulatory-detail.asp?key=30237.

States assume international obligations in two ways, namely: (a) writ-

ten agreements demonstrating an intent to be bound (expressed

through treaties and contracts); and (b) practice, whether individual or

joint, coupled with an intention to be bound (expressed through

2. In Joined Cases C-105-109/15, Konstantinos Mallis and Others v. European Commission

and European Central Bank, EU:C:2016:702, ¶ 47 (Sept. 20, 2016), the CJEU found that the

Eurogroup is an informal grouping of the euro area finance ministers, and as a result its acts

could not be attributed to the Commission or the ECB. But see Joined Cases C-8-10/15P, Ledra

Advertising Ltd and Others v. European Commission and European Central Bank, EU:

C:2016:701 (Sept. 20, 2016), where the CJEU held that where the EC Commission is involved in

the signing of MoU within the framework of the European Stability Mechanism, it is acting within

the sphere of EU law. Therefore, it is bound to refrain from MoU that are inconsistent with EU

law, including the EU Charter of Fundamental Rights.

3. See Case T-531/14, Leı

¨monia Sotiropoulou and Others v. Council of the EU, EU:T:2017:297

(May 3, 2017) which entrenched the non-contractual liability of the EC Council concerning

Decisions adopted within the framework of arts 126 and 136 TFEU (Excessive Deficit Procedure).

4. Joined Cases C-8/15 P to C-10/15 P, Ledra Advertising and Others v European Central

Bank, ¶ 59 (Sept. 20, 2016). See Menelaos Markakis, Bailouts, the Legal Status of Memoranda of

Understanding, and the Scope of Application of the EU Charter: Florescu, 55 CML REV. 643 (2018).

5.

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