The Hacking of Things: International Law’s Modern Challenge

Photo Credit: Rose Innes

 

By: Lauren Kelly-Jones

The Hacking of Things: International Law’s Modern Challenge In December, in a fully-booked luxury hotel in the Austrian Alps, guests went to their doors and couldn’t open them. Something was wrong. In the middle of winter, beside the cold Turracher lake the computers went dark.

It was the first weekend of ski season, and the entire door-key system of Romantik Seehotel Jägerwirt ( a 111-year-old hotel) had been taken down. Hackers demanded that the hotel hand over €1,500 (around $1,600, payable in bitcoin) to restore their systems. Because management felt as though they had no choice, they did so. Then – systems back up, doors unlocked – they went public, to warn others of the dangers of this kind of cybercrime: a modern twist on criminal blackmail.

“Ransomware” is in itself not a new concept: in a typical scenario, an entity’s data is encrypted and made unavailable until a payment is made. For instance, in California in February 2016, a hospital was forced to pay $17,000 in bitcoin to free its computers of a hacker’s virus. And yet, the Seehotel Jägerwirt attack is seemingly the first report of ransomware involving a physical device of this scale: the “Ransomware of Things,” or “jackware.” This kind of ransomware has the potential to control connected, intelligent objects in the real world. The risks are all too obvious: AT&T has highlighted the concept of a smart car being hacked with its ignition or brakes remotely controlled; in 2015, a hacker claimed to have taken over a plane’s engine controls; in Finland last year, a DDoS attack halted heating in two buildings in the middle of winter.

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Taiwan at the Crossroads: To Breathe in the Air of Global Sky, or the Air of Her Independence?

By Huan-Ting Wu, J.S.D. candidate, University of California, Berkeley

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Photo Credit: Huan-Ting Wu of Taipei 101

 

Once every three years the International Civil Aviation Organization (ICAO), a UN specialized agency, meets. The Assembly just finished having its 39th Session in Montreal with Taiwan knocking on the door outside for months but not getting any answer back nor permission to enter. It is a sharp contrast compared with the situation in 2013, when Taiwan participated as an invited guest of the then-ICAO Council President, to attend the 38th Session of the ICAO Assembly.

Although excluded from ICAO since 1971 when they lost their seat in the UN, Taiwan still voluntarily follows the Convention on International Civil Aviation (the Convention), which has been one of the significant pivots of air traffic in East Asia, as well as the world:

The Taipei Flight Information Region (FIR) covers 180,000 square nautical miles and borders four other FIRs. In 2015, Taiwan’s Civil Aeronautics Administration handled fifty-eight million incoming and outgoing passengers. In addition, Taiwan’s Taoyuan International Airport in 2015 ranked eleventh in the world in passenger volume and sixth for cargo. Seventy-four airlines operate passenger and cargo flights in and out of Taiwan following 301 scheduled routes that connect the country to 135 cities globally.

However, constrained by the fact that Article 1 of the Convention defines contracting States as those that have “complete and exclusive sovereignty over the airspace above its territory,” Taiwan’s international status after 1971 makes it hard for them to take part in this UN-colored organization as a contracting State.

Given these legal hurdles, what made Taiwan’s presence in the 38th Session of the ICAO Assembly in 2013 workable? First, the U.S. government played an important role in the process. A Taiwanese researcher describes the U.S. as a “facilitator” of Taiwan’s international participation. Following the U.S. Department of State’s policy of “encouraging Taiwan’s meaningful participation in international organizations where its membership is not possible,” U.S. President Barack Obama in July, 2013 signed into law H.R. 1151 to (1) develop a strategy to obtain observer status for Taiwan at the next ICAO Assembly in 2013; and (2) instruct the U.S. Mission to the ICAO to officially request observer status for Taiwan and urge ICAO member states to support Taiwan observer status and participation in the ICAO.

On the other hand, fearing that the island’s increasing global participation independent from the Mainland will be used to reinforce Taiwan’s push for de jure independence, China’s government complained in a statement that the Act has intervened with China’s “internal affairs” and seriously violated the one-China policy. This Chinese policy defines Taiwan as “part of [China’s] territory,” and that “The joining of international organizations like ICAO by Taiwan compatriots is a matter for the Chinese people.” However, this position did not preclude China’s support for Taiwan to take part in the Assembly in 2013. In fact, from China’s perspective, Taiwan’s success in the participation was solely because of China’s mediation (ICAO Council President González said he invited Taiwan because of China’s suggestion). China’s position is clear: Taiwan is allowed to join international events, but only after having consulted with China, and used China as the window representative to contact the world, thereby following the one-China frame work. Several Taiwanese international law scholars criticized the practice, arguing that Taiwan was invited as merely an auditing “guest” under the identification of “Chinese Taipei,” not as an “observer” who has permission to speak.

That brings us to 2016. Taiwanese officials, with U.S. Department of State’s support, bypassed “the window” and applied for attendance at the Assembly in early August. But this attempt was in vain. In fact, the surrounding circumstances have been different.

The political climate in Taiwan has had a landslide toward the Democratic Progressive Party (DPP), which calls for independence from China, in the 2016 Presidential Election in January. The leader of DPP, Tsai Ing-wen, was elected as Taiwan’s first female president, with DPP winning absolute majority in Taiwan’s Congress. The election shows the Taiwanese people’s doubts about predecessor Ma Ying-jeou’s pro-China policies, especially the inclination to the one-China framework. In fact, in Tsai’s inauguration speech, she reflected the people’s will by not mentioning the so-called “1992 consensus,” that is, the one-China principle. In response, China suspended diplomatic contact with Taiwan. As a result, the fundamental basis of Taiwan’s participation in ICAO was undermined. In addition, it is also worth noting that on August 1, 2015, Dr. Fang Liu of China was appointed as the new head of the Secretariat of ICAO, which is the office processing the application. Consequently, we can expect that the influence China can possibly exert is at least no less than it was in 2013.

It is not surprising that Taiwan’s direct application for participation as an observer, even with U.S. and other contracting States’ support, would fail. On the one hand, in 2013 Taiwan joined the Assembly as a guest of the President (if not China); therefore, without ex ante negotiation, there is no reason why China, now the window of both the “one-China frame” and the ICAO, would allow Taiwan to join the event, especially with an “upgrade” of status. China’s strategy to make Taiwan dependent and subordinate is clear: be ONLY China’s guest, or not invited at all. On the other hand, the ICAO is closely related to the UN, so China will not risk any possibility that Taiwan can stand in any international forum as an independent sovereign-like entity, and accordingly make accepted practice.

In response to China’s strong attitude and the failure to take part in the ICAO Assembly, Taiwanese President Tsai Ing-wen replied firmly by reiterating that “we will not succumb to pressure from China.” Given that President Tsai is willing to let the relationship between Taiwan and China chill, it may mean that Taiwan has chosen the air of independence, without the oxygen mask pressed on by China. This decision will either be beneficial to Taiwan’s future participation in global events, or hazardous to those practices Taiwan has established during President Ma’s incumbency. For instance, will this affect the practice of Taiwan joining the World Health Assembly (WHA), an annual event held by World Health Organization in May, as an observer since 2009? Maybe so, since China declared that the reason Taiwan was able to participate in the 2016 WHA was because of its goodwill.

The ICAO incident is just the prelude. We see Taiwanese people made their decision in the 2016 presidential election, and we also see how the Communist Party of China reacted. That being said, we can expect that in the future, it is highly possible that China will keep craning over its “window,” being nosy about Taiwan’s every attempt to cross the “Chinese wall” and expose herself to the air of the global sky. At the moment, we still hope that there could be more goodwill coming from both sides of the Taiwan Strait.

 

TTIP and ISDS, Are We Asking the Right Questions?

TTIP and ISDS, Are We Asking the Right Questions?

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By: Gabriel Simões

The System and Its Critiques

The Transatlantic Trade Investment Partnership (TTIP) is an international treaty that is being negotiated between the United States and the European Union (E.U.) to facilitate the trade of goods, services and investment. TTIP involves two of the biggest economic forces in the world, but the Treaty has been in the spotlight of international law primarily because of the Investment-State Dispute Settlement (ISDS) system.

ISDS refers to a mechanism through which an investor can initiate a claim against a given State for breach of a substantive legal protection. These protections include, but are not limited to, prohibitions on expropriation without compensation, and fair and equitable treatment. Backed by a multitude of Bilateral (BITs) or Multilateral Investment Treaties, arbitration has been the typical means of solving these kinds of disputes.

However, during recent years, the use of arbitration for solving these disputes has been severely criticized. News organizations, civil society groups, and academics have directed a wide range of indictments against investor-state arbitration. These critiques include lack of transparency, disproportionate power to investors, expansion of frivolous claims, freezing of State regulatory power, lack of arbitrator impartiality and independence and inconsistency of arbitral awards.

The E.U. Alternative

Due to these concerns, the European Commission made a proposal to change the ISDS mechanism to an Investment Court (IC). The proposed IC would be a permanent body comprised of a two instance tribunal. The first instance would be composed of five judges from the U.S., five judges from the E.U. and five judges from various other countries. The second instance, an appeals court, would be composed of two judges from the U.S., two from the E.U. and two from third-party countries. The judges would be elected amongst jurists of recognized competence, and would have to be proficient in international law.

Similar courts have already been established, such as a court between the E.U. and Canada, in the E.U. Canada Comprehensive Economic and Trade Agreement (CETA), as well as between the E.U. and Vietnam, in their Free Trade Agreement (FTA).

E.U. agreements in the CETA and FTA, as well as its proposal in the TTIP negotiation, show its commitment to enacting this new type of ISDS in its future trade agreements. Given the global significance of the E.U. market, this push for adopting an IC system begs the question whether this new form of ISDS would become the rule.

The preliminary factor in making this determination is examining whether the model is actually adopted in the TTIP. Although the E.U. itself is making a strong push for an IC system, other major economic forces have so far refused to do so.

The recent Transpacific Trade Partnership (TTP) concluded by the U.S. and several other states indicates that the American position would be contrary to that proposed by the European Commission. The TTP maintained a revamped version of investor-state arbitration as the elected mechanism for dispute settlement. It addressed some of the critiques to investor-state arbitration, for example, by providing for enhanced transparency, creating stricter ethical rules on arbitrators and numerous exceptions preserving State regulatory powers.

Another aspect to this negotiation is the historical reluctance of the U.S. to be bound by the judgements of international courts. Although the E.U. has a unique system that it could put in place to enforce the IC decisions on member States (despite some critiques as to its incompatibility with the E.U. rules), the U.S. has, in the past, accepted an agreement to form an international judicial body only to repudiate its jurisdiction later on.

The Problems With the Alternative

But the crucial matter is whether the IC system solves the problems attributed to investor-state arbitration. Although a court system can ameliorate the problem of lack of transparency, current arbitration institutions have already come a long way to address this issue. The International Center for Settlement of Investment Disputes (ICSID) keeps an extensive online database of its cases. The TTP model also demonstrates that transparency rules can be used in conjunction with arbitration mechanisms.

The matters regarding disproportionate power to investors, expansion of frivolous claims and freezing of State regulatory power, are all related to the substantial protections provided for the investors. These protections are not inherent to one dispute resolution mechanism, but can be addressed by including provisions allowing for prima facie dismissal of claims, counterclaims by the State and reservations for claims arising from State power to regulate.

The only critiques that are inherent to the current model of investor-state dispute resolution are the lack of arbitrator impartiality or independence and the inconsistency of arbitral awards. However, the fact that each treaty in the new IC model creates its own courts indicates that overall consistency of decisions would be a dubious achievement at best. And, impartiality and independence of the judges will depend entirely on the means of appointment as well as remuneration. Allowing states to nominate all judges is a way to guarantee a pro state tribunal. Having remuneration based on a case-by-case basis would enact incentives for judges to be friendlier to plaintiffs, as receiving more cases would generate higher compensation.

Nonetheless, these arguments do not begin to address the inherent problems of this IC system.

The Question

It seems, therefore, that IC and investor-state arbitration mechanisms, and especially their shortcomings, are not completely distinct. Corroborating this assumption is the fact that, ultimately, the critiques seem to remain the same for both instruments, and the ISDS system in general.

Having these facts in mind, it seems that whether a court system or an arbitration system is preferable is a subsidiary question. Maybe a better question would be if ISDS, in general, is the best way to solve international trade disputes between investors and states.

Gabriel Simões is an LL.M Candidate at Berkeley Law. He is a Student Contributor for Travaux.