International trade law and international investment law: complexity and coherence.

Author:Hodgson, Melida

This panel was convened at 9:00 am, Friday, April 11, by its moderator, Andrew Mitchell of Melbourne Law School, who introduced the panelists: Melida Hodgson of Foley Hoag LLP; Juan Millan of the Office of the U.S. Trade Representative; Joost Pauwelyn of the Graduate Institute of International and Development Studies; and Debra Steger of the University of Ottawa. *


International trade law and international investment law share similar objectives. However, these two spheres of law are largely contained in separate but overlapping regimes, which some would argue leads to uncertainty, inefficiency, and unnecessary expenses for states and firms. The separate trajectories of international trade law and international investment law reflect their different economic and historical origins. But the economic, legal, and political environment has changed significantly in the last several decades.

From one perspective, the international trade and investment law dichotomy is beginning to look anachronistic and is showing signs of strain, for example, because of divergent interpretations of common obligations and the potential for conflicting rulings on the legality of particular government measures. The potential for substantive conflict arises from the fact that goods and services may be supplied by way of both trade and investment--meaning that both regimes may apply to the same activity/measure, but with different obligations and norms. A small number of overlapping trade and investment disputes has already arisen, for example, the series of disputes about sugar between Mexico and the United States involving claims by Mexico brought under NAFTA and WTO rules.

From another perspective, these regimes are maturing in a complementary fashion, and one cannot and should not expect them to converge, given the separate treaty obligations that give rise to each area of jurisprudence.

Is the complexity leading to uncertainty for states and businesses and undermining the objective of increasing national and global welfare? If so, what should be done about it? If not, should we expect greater coherence over time? Or will trade law and investment law continue to evolve in largely separate spheres?

([dagger]) Professor of Law, University of Melbourne Law School.


The question presented to this panel was essentially whether the international trade law and the international investment law regimes, which have largely operated in separate spheres, are converging, and if they are not, whether they should be, in the interest of protecting economic interests through consistent jurisprudence. My view is that the two spheres serve different economic and political interests, and that there is no need for convergence. Moreover, there is, thus far, no demonstrated conflicts between the two regimes.

The question has its origin principally in concerns expressed by academics studying the two regimes, who are concerned by the growth of arbitrations across the two spheres that arise out of the same factual circumstances. The concern is that there may be growing "uncertainty" or "inconsistency" arising from decisions of tribunals considering "common obligations" between the two regimes. To the extent that there is such growth and that it is creating inconsistency or uncertainty, this is largely due to creative practitioners interested in expanding the scope of provisions that can be litigated in either the trade regime or under investor-state dispute settlement provisions. But as the discussion on this admittedly legitimate question grows louder, this does not mean that changes should be made to the system of maintaining separate spheres.

Without a doubt, there is growing concern among states about the type of scorched-earth strategy pursued by some investors, exemplified by multinational tobacco manufacturer Phillip Morris, to stop regulations affecting their business interests. As governments around the world have responded to the clamor to regulate the sale of tobacco products, Phillip Morris has seemingly devised a global litigation strategy to stop, or at least control, these efforts, particularly "plain packaging" regulations. The effort involves not only investor-state suits against Uruguay and Australia, but also the fomentation of World Trade Organization (WTO) dispute settlement. (1) While academics have largely been the ones to sound the alarm on this issue, naturally there is concern among governments, even in decidedly "investor-friendly" countries, and civil society groups that the strategy will chill regulatory initiatives, so that countries with less regulation (and probably larger smoking populations) will think twice about adopting similar regulations. (2) In addition, there are fears that contradictory decisions by the WTO on the trade issues and investor-state tribunals on investment protection claims based on the same facts will weaken states' ability to regulate across various sectors.

But this would not be the first time that a joint trade/investment dispute settlement strategy has been pursued, and the system is built to withstand these kinds of claims. Investors, of course, may have claims under bilateral investment treaties that arise out of measures that their states may want to pursue for different reasons under the trade regime. Moreover, investor-state awards that have employed WTO jurisprudence in analyzing investors' claims have done no violence to WTO jurisprudence. (3)

So there is no real evidence of conflict meriting "convergence" of the trade and investment dispute settlement regimes. Moreover, there are clear historical, and legitimate, reasons for the separation of the...

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