Efficient breach of international law: optimal remedies, "legalized noncompliance," and related issues.

• Author: Posner, Eric A.

In much of the scholarly literature on international law, there is a tendency to condemn violations of the law and to leave it at that. If all violations of international law were indeed undesirable, this tendency would be unobjectionable. We argue in this Article, however, that a variety of circumstances arise under which violations of international law are desirable from an economic standpoint. The reasons why are much the same as the reasons why nonperformance of private contracts is sometimes desirable-the concept of "efficient breach," familiar to modern students of contract law, has direct applicability to international law. As in the case of private contracts, it is important for international law to devise remedial or other mechanisms that encourage compliance where appropriate and facilitate noncompliance where appropriate. To this end, violators ideally should internalize the costs that violations impose on other nations, but should not be "punished" beyond this level. We show that the (limited) international law of remedies, both at a general level and in certain subfields of international law, can be understood to be consistent with this principle. We also consider other mechanisms that may serve to "legalize" efficient deviation from international rules, as well as the possibility that breach of international obligations may facilitate efficient evolution of the underlying substantive law.

TABLE OF CONTENTS INTRODUCTION I. A THEORY OF EFFICIENT NONCOMPLIANCE A. The Welfarist Perspective on International Law B. Scenarios for Efficient Noncompliance 1. Overview 2. Noncompliance for the Purpose of Retaliation 3. Efficient Breach and Legal Evolution C. Implications for Remedies D. Caveats and Objections 1. Self-Enforcement Measures Are Lawless Unilateralism 2. Self-Enforcement Measures Favor Powerful Countries 3. Countermeasures That Do Not Violate International Law Are Superior 4. Noncompliance with International Law Damages a Nation's "Reputation" 5. International Law Will Lose Its Legitimacy If Countries Violate It II. SOME ADDITIONAL EXAMPLES AND EXTENSIONS A. Remedies in International Law 1. General Principles 2. International Trade Law 3. International Investment Law 4. Jus in Bello and the Law of Reprisals B. Legalizing Efficient Deviation?: Reservations and Withdrawal Rights 1. Reservations 2. Withdrawal Rights C. Efficient Violation of Inefficient or Ineffective Law 1. Efficient Legal Evolution 2. The Efficient Response to Failed Cooperation CONCLUSION INTRODUCTION

The topic of remedies is one of the most undeveloped areas of international law. No treaty regime governs remedies. The topic receives no more than a few pages in the standard treatises and texts. (1) Very few international judicial or arbitration opinions outside trade and investment law address remedies, (2) and other authoritative sources are equally scarce. Members of the International Law Commission ("ILC") drafted a handful of articles addressing remedies--part of a larger project of describing the customary international law of state responsibility--but states never formally accepted them. (3)

This state of affairs is peculiar. In domestic law, it is a commonplace that one cannot understand a legal right without understanding the remedies for violating that fight; a substantial literature on domestic remedies exists, and entire law school courses are devoted to remedies. The topic of remedies in international law thus cries out for analysis. (4)

In our view, the dearth of attention to remedies reflects in large measure the fact that international law is largely self-enforcing, so that the typical "remedy" historically has been unilateral retaliatory action that was not subject to legal oversight. (5) Formal rules about remedies were largely lacking or meaningless given the absence of such oversight. But this situation has been changing, in part through the creation of the draft rules of the ILC and in part through the evolution of special remedial principles in areas such as trade and investment. We address these developments in detail and argue that they uniformly reflect (or can be interpreted to reflect) the underlying logic of "efficient breach"--the principle that compliance is not always efficient, and that deviation from international law should be possible at an appropriate price.

Closely related to the international law of remedies are a number of rules and practices that allow nations to deviate from or to avoid certain treaty commitments "legally." These include the rules and procedures for withdrawal from treaties (and perhaps from customary international law) and the rules governing reservations in treaties, both of which we discuss from an efficiency perspective.

Finally, we consider situations in which compliance with international law is inefficient either because the underlying body of law is inefficient or because the hope of self-enforcing cooperation is unrealistic. For the first category of cases, we will suggest how "efficient breach" may offer a route toward enhancing the efficiency of the underlying substantive law. For the second, we suggest that universal breach is inevitable and thus justifiable.

We view our analysis as both positive and normative. It is positive in its efforts to explain features of the more detailed remedial rules that have evolved in areas such as international trade and investment. It is normative where it suggests a rationale to deviate from the law in areas where remedial principles are underdeveloped, and where it offers a suggested interpretation of remedial principles that are on their surface somewhat vague (such as certain provisions of the draft ILC articles). Our underlying normative assumption is that it is socially desirable to increase the efficiency of cooperation among states. (6)

This Article proceeds as follows: Part I offers a general theory of "efficient noncompliance" with international law by illustrating key points with examples from various subfields. Along the way, we consider and reject several objections to our analysis. Part II discusses further illustrations from the law and state practice: we address general remedial principles contained in the draft ILC articles, common practices relating to withdrawal rights and treaty reservations, and the remedies for breach in international trade law, investment law, the law of armed conflict, the use of force, and the law of the sea.

1. A THEORY OF EFFICIENT NONCOMPLIANCE

   We proceed from a functionalist, economic view of international law. In our view, international law per se has no moral force. It is simply the product of negotiation among bureaucrats and politicians (treaties), or it is a description of empirical regularities in the behavior of nations (customary international law). In either case, an argument for compliance with international law cannot rest merely on its status as "law," but must rest on a belief that compliance serves some constructive function. In this regard, we adopt a welfarist approach and suggest that compliance with international law is justified only if compliance promotes national or global welfare, putting aside for the moment the choice between the two conceptions of welfare in the event that they conflict (and they sometimes do).

   Although economic analysis of international law is in its infancy outside the field of international trade, the limited work to date suggests two principal ways in which international law may promote welfare. (7) First, and most commonly, international law can orchestrate cooperation to ameliorate various international externality problems that arise when nations act unilaterally. Second, international law may serve to tie the hands of governments in their relations with domestic interest groups, disabling governments from engaging in certain politically expedient but economically wasteful behavior. We elaborate on these points below.

   To be sure, some bodies of international law may arise for other reasons and may lack a clear welfarist rationale. We see no reason why any nation should comply with such "law" absent some independent normative argument for compliance? Even when international law does have a welfarist rationale, it does not follow that compliance with the law is always desirable. This Part develops the reasons why and addresses various possible objections to them.

   We wish to be clear that the absence of a welfarist justification for compliance with international law does not necessarily imply that nations should act in a manner contrary to international law. The conduct required by international law may have independent justification of a moral, economic, or other nature. The conduct required by international law may also be required by domestic law. We are in no way advocating that nations disregard domestic law or act in a way that is morally unacceptable. Our point is a narrower one: in the absence of a welfarist justification for compliance with international law, international law becomes per se irrelevant to the question of how nations should act.

   1. The Welfarist Perspective on International Law

      Existing economic commentary suggests that most international law typically serves to promote global welfare by addressing various types of international "externalities." (9) The fundamental inefficiencies that arise from international externalities are the same across a wide range of policy areas. For example, imagine some policy sphere in which the policy choices of nations have consequences for the welfare of other nations. We assume that governments are responsive to the interests of their own constituents in formulating policy, but generally ignore the consequences of their policies for foreigners, who are unrepresented (or poorly represented) in the domestic political process. This is a standard assumption in the economic and political literature regarding international relations and institutions. (10) Under this...