This Day in International Law – October 30

On October 30, 1947, the General Agreement on Tariffs and Trade (GATT) was signed by 23 nations in Geneva. The Agreement contained tariff concessions and a set of rules designed to prevent the parties from subverting the agreement. At the time of its signing, it was the sole international instrument governing world trade.

Ironically, the GATT came about as a by-product of the failure of a larger coalition of nations to agree on a charter for the International Trade Organization (ITO). The ITO represented the grand vision of the UN Economic and Social Council following the end of World War II. Its founding charter was signed by 53 nations, but never ratified, so it never came into effect. But while the larger group of nations failed to ratify the provisions of the ITO, a smaller group implemented the GATT among themselves as an interim measure.

The GATT ultimately proved to have much better longevity than the ITO and it remained in effect until 1994, when it was updated by the GATT 1994. Most notably this update included the agreement that created the World Trade Organization (WTO), which subsequently replaced the GATT in regulating international trade.

The Trans-Pacific Partnership and the Advancement of Investor-State Regimes

The Trans-Pacific Partnership and the Advancement of Investor-State Regimes

By: Jessica Rose

8463683689_baa33ca431_z
Photo Credit: epSos .de

 

On October 5th of this year, the United States and eleven other nations in the Pacific Rim concluded negotiations on the largest regional trade agreement in history – the Trans-Pacific Partnership (the “TPP”). While the finalized version of the text has yet to be released, an outline of the agreement by the office of the United States Trade Representative includes an investment chapter that places the TPP squarely within the tradition of investor-state dispute settlement (ISDS) regimes. According to the outline, the TPP will include rules on expropriation and “provisions for expeditious, fair, and transparent investor-State dispute settlement subject to appropriate safeguards … [that] will protect the rights of the TPP countries to regulate in the public interest.”

The conclusion of TPP negotiations coincides with a significant but little-remarked event in the history of ISDS. A recent skirmish in August between foreign investors and the Polish Parliament suggests that foreign investors have found ways to use investor-state laws to influence governments even before those governments enact legislation, calling into question the right of TPP governments to “regulate in the public interest.”

The Background: Investor-State Dispute Settlement

ISDS treaties are designed to encourage the flow of investment, usually from developed to developing countries. One of the ways that these treaties try to attract foreign investment is by giving foreign investors, usually multinational corporations (“MNCs”), a mechanism to challenge the behavior of host states when that behavior negatively affects the value of their investment. MNCs can sue host governments through private arbitration – a system where ad hoc arbitrators, who are private citizens, act as judges. These arbitrators decide whether or not the host state’s behavior was sufficiently unfair to constitute expropriation– effectively taking the investor’s property. If so, the state must then compensate the MNC for its losses. In order to accommodate a range of claims against host governments, usually the ISDS regime will loosen the meaning of “expropriation” with words such as “tantamount to,” as in Chapter Eleven of North American Free Trade Agreement.

What does this look like in practice? In March of this year, an arbitration panel awarded Owens-Illinois Inc., an American MNC, $455 million because Venezuela, its host country, seized two of its glass-bottle plants back in 2010. This award is of the less-controversial variety, as Hugo Chavez spent much of his tenure nationalizing a significant portion of Venezuela’s economy. In cases like this, there are few concerns that a foreign investor was unfairly leveraging their powers under the ISDS regime to punish the host state for legitimate governing behaviour.

Why is ISDS controversial?

Objections to “interference” by foreign investors in the governance of host states are, however, common, because most ISDS regimes allow investors to object even if the action of a host state only indirectly affects the value of an MNC’s investment. Much discussion has focused on foreign investors’ ability to abuse that power.

For example, Elizabeth May, the leader of the Canadian Green Party, has repeatedly voiced objections to ISDS agreements Canada has entered into on this basis. She argues that governments are likely to avoid passing laws if they think a foreign investor will object on the basis that that law interferes with their investment. She says it is difficult to accurately assess the extent to which this “regulatory chill” is operating to shift the course of government action, since it probably comes up before proposed regulation even makes it into parliaments or congresses.

Quantitative research performed in 2014 analyzed empirical evidence to conclude that such regulatory chill is not, in fact, occurring. However, a political skirmish in Poland suggests that this conclusion may have been reached prematurely.

What Happened in Poland

On August 5th of this year, the lower chamber of the Polish parliament adopted a draft law on the restructuring of consumer mortgage loans denominated in foreign currency. The law mandated conversion of foreign currency mortgage loans into Polish zlotys at the exchange rate on the day of the granting of the loan. Banks were to bear 90% of the restructuring costs imposed by this law. Predictions about the net loss to the banking sector were estimated at five billion euro.

Before the higher chamber of parliament in Poland voted on the law, however, several foreign banks controlling the major Polish banks whose business would be affected by the law started a letter-writing campaign. Their message to Polish governmental authorities was that they would be bringing claims under the applicable ISDS treaty if the government voted the proposed bill into law. The Senate changed the loan restructuring terms by reducing the banks’ share of the costs to 50%. The law has since been sent back to the lower chamber of Parliament, where it may be completely retooled so as not to place any direct restructuring costs on banks.

While it would be unfair to presume that these changes were entirely a result of that intervention by the foreign banks, it would also be naïve to suggest that their actions played no role in the Polish Parliament’s change of heart. What this means, then, is that foreign actors managed to leverage the tools afforded them under an ISDS regime to influence the direction and shape of Polish legislation – instead of merely receiving compensation post-facto, when their investment had already been affected by those regulatory actions.

This example presents an interesting dilemma: the democratic process in Poland was arguably compromised by the intervention of foreign interests. However, the effects of a predicted 5 billion loss to the banking sector would likely have been so dire that it is easy to argue that the influence of those foreign interests, in this case at least, were a good thing.

Conclusion

The negotiations underpinning the biggest regional trade agreement in history have just concluded yet the landscape for ISDS regimes is still undergoing drastic shifts. The office of the United States Trade Representative assures that the TTP will include investor-State dispute settlement subject to appropriate safeguards that will protect the rights of the TPP countries to regulate in the public interest.

In this case, foreign corporations redirected the Polish State’s actions – but it is not clear whether it was at the expense of Poland’s sovereignty to regulate in the public interest. Regardless, clarity is necessary for an informed discussion to take place. The relationship between foreign investors and host states must be scrutinized to separate theory from practice, to ensure these agreements are entered into eyes-wide-open.

Jessica Rose is an LLM candidate at Berkeley Law. She is a student contributor for Travaux.

 

 

Toward a New UN Convention on the Rights of Older Persons?

By: Marijke De Pauw|

Population ageing constitutes one of the most significant demographic transformations of the twenty-first century and it is taking place at an unseen pace. Recent projections by the United Nations (UN) Department of Economic and Social Affairs show that by 2050, the global number of persons aged 60 years or over will more than double, from 841 million older persons in 2013 to more than 2 billion in 2050. On the one hand, an ageing population is undoubtedly a positive development, as it evinces increased longevity caused by medical advances and better living conditions. On the other hand, however, it is also raises significant challenges for the near future. The number of working-age adults per older persons – or “old-age support ratio” – will decrease significantly and is expected to have a serious impact on social security and health care systems worldwide. Considering their socio-economic consequences, population dynamics have since long been part of the international development agenda. Demographic changes were discussed extensively at the UN World Population Conferences and have been addressed by several instruments, such as the Programme of Action adopted at the International Conference on Population and Development in 1994.

An international human rights approach to ageing

The enormous increase in the number of older persons expected worldwide has also raised the question of how to ensure the well being of the elderly population. Over the last decades, the challenges facing older persons have become an important issue on the agenda of academics, NGOs, governments, and regional and international organizations. More so, it has developed into a global human rights movement advocating for a more effective human rights framework for older persons. In 1982, the first international instrument focusing specifically on the particular concerns and needs of the elderly population was adopted at the first World Assembly on Ageing; the Vienna International Plan of Action on Ageing. The Plan confirmed the full and undiminished application of the rights enshrined in the Universal Declaration of Human Rights to older persons. Since then, the UN has adopted a number of instruments focused on the elderly population, including the 1991 UN Principles for Older Persons, the 1992 Proclamation on Ageing, and the 2002 Madrid International Plan of Action on Ageing (MIPAA). MPIAA was adopted to respond to opportunities and challenges of population ageing in the twenty-first century and to further promote a society for all ages. It provides a large number of recommendations to member states, covering a very wide area of topics relating to the ageing population, including employment and participation in society, access to health-care, provision of enabling and supportive living environments, and the prevention of elder abuse. The outcome of the second review and appraisal of the MIPAA, however, showed that its implementation by member states has remained quite limited. Although the review noted overall progress in the implementation of MIPAA, it nonetheless noted significant gaps between policy and practice deriving from insufficient human and financial resources of member states.

UN Open-Ended Working Group on Ageing

In 2010, the UN Open-Ended Working Group on Ageing (OEWGA) was established with the task of assessing the existing international framework of the human rights of older persons, identifying possible gaps, and determining how best address the gaps. This included considering, as appropriate, the feasibility of further instruments and measures. It has since then concluded five working sessions, during which member states, UN representatives and civil society participated in panels and debates on the human rights situation of the elderly population. Several proposals were made, including the drafting of a new international binding instrument: a UN Convention on the Rights of Older Persons. Although there has been quite some disagreement on the need for such a convention, there was a consensus early on regarding the advantages of establishing a new special human rights mandate. Consequently, the Human Rights Council decided to appoint a UN Independent Expert on the enjoyment of all human rights by older persons for a term of three years. In May 2014, Ms. Rosa Kornfeld-Matte was appointed to take up the new mandate, which consists of assessing the implementation of existing international instruments, identifying best practices, raising awareness regarding the challenges older persons face in the enjoyment of their rights, and working with states to foster implementation of measures that contribute to the promotion and protection of older persons’ rights.

In 2012, the OEWGA’s mandate was altered by the General Assembly, which explicitly requested that OEWGA begin considering proposals for a new international legal instrument. The General Assembly requested that OWEGA present a proposal of the new instrument that contains the main elements that should be included therein. This is surprising considering the lack of agreement on the need for such a new convention. A large number of states, including the United States and a majority of the European Union countries, are still in favor of increasing efforts to implement the MIPAA and to mainstream older persons’ rights into existing monitoring mechanisms, such as the UN treaty bodies and the Universal Periodic Review. At the same time, the call for a new convention is gaining support from an increasing number of NGOs, UN agencies, and Latin American and African countries in particular.

The Pros and Cons of new UN Convention

The drafting of a new UN Convention on the Rights of Older Persons definitely raises a number of questions, and important arguments can be made both in favor and against such a measure. Those who argue in favor of a new UN convention on this issue frequently argue that there is a significant normative gap regarding older persons within the existing international human rights law framework. For example, age-based discrimination is rarely mentioned explicitly in the list of prohibited discrimination grounds, thus potentially rendering older persons invisible as a group with specific needs. Furthermore, the norms applicable to older persons are scattered over a large number of human rights treaties, rather than consolidated into one single binding instrument. If comprehensive treaties have been adopted for various other groups, most recently the UN Convention on the Rights of Persons with Disabilities, shouldn’t one exist for the elderly? It is also true that, contrary to the existing soft law norms enshrined in the MIPAA and UN Principles for Older Persons, a convention would create legally binding obligations for states parties. They would also be required to submit periodic reports to a treaty body, which would also receive individual communications regarding violations of the Convention. In other words, it would not only clarify the rights of older persons, but also create a system of state accountability, reporting, and data collection. Importantly, an international convention would be a useful human rights advocacy tool by raising awareness about the human rights of this particular group and making older person more visible as rights holders.

On the other hand, the entirety of existing human rights norms and standards is applicable to the elderly population. They are entitled to all the rights enshrined in the core human rights treaties. The main problem may therefore be an implementation gap, rather than a normative one. If more specific international guidance is required as regards their rights, it may be argued that a universal treaty is instead likely be drafted in broad and vague terms, potentially leading to a watered-down political compromise. Soft norms, such as the MIPAA are able to be as specific as they are because states are more likely to express their commitment due to the non-binding nature of MIPAA. In addition, regional norms and standards might be able to better take into account the specific social and cultural aspects that shape the ageing experience within a specific region. It should also be noted that treaty negotiations are a costly and time-consuming process, whereas the situation of the elderly population is an urgent issue that requires urgent measures. And even if a new Convention on the Rights of Older Persons were to be drafted, there is of course no guarantee of the number of states that will sign and ratify it. It is also difficult to anticipate the number of treaty reservations states may make and their effect on the implementation of the treaty and its objectives. Moreover, it can be argued that the identification of older persons as a vulnerable group in need of additional human rights protection holds the risk of reinforcing ageist stereotypes.

Conclusion

The debate on the need for a new UN Convention is most definitely a complicated one; valuable arguments can be made both in favor and against, making it very difficult for the OEWGA to find consensus and to move forward in its attempts to strengthen the human rights framework for the elderly population. If anything, however, the continuing discussions have drawn much needed attention to the many human rights violations that older persons are faced with worldwide, including age discrimination, elder abuse, and lack of adequate health care. The various expert opinions and studies in support of the OEWGA’s work have been crucial in identifying and recognizing these different obstacles. At the end of the fifth session, there is indeed no longer any discussion among member states regarding the need to address the issue in an urgent manner. That in itself can be considered a valuable contribution of the OEWGA. In addition, the work of the newly created position of Independent Expert is likely to shed more light on the different gaps within the existing framework and will thus provide an important contribution to the debate. In the meantime, it remains crucial that all options are fully explored and utilized, such as the mainstreaming of older persons in existing human rights frameworks and mechanisms, and that all actors involved continue to promote the full enjoyment by older persons of their fundamental rights.