Junianto James Losari and Michael Ewing-Chow

Countermeasures in Int’l Trade Law and their

Illegality in Int’l Investment Law Cape Sounion, 31 August 2013

Background

2

US v. Mexico (Sugar War)

WTO Disputes

NAFTA Chapter 19

Investor-Arbitration Disputes

Countermeasures in Int’l Law

3

Criteria for lawful

Countermeasures

(ILC Articles)

Criteria under ILC Articles – Art. 22 Prior internationally wrongful act – Art. 49 (1)

Directed against the breaching state – Art. 49 (1)

Prior call and offer to negotiate - Art. 52 (1) (a) and (b)

Proportionate – Art. 51

Temporary – Art. 49 (2)

No impending dispute-Art. 52 (3)(b)

4

Countermeasures in Int’l Trade Law

Prior authorization from the DSB

Proper subject

Level of Countermeasures (equivalent)

Art. 22.3(a) DSU

Art. 22.4 DSU

Art. 3.7 & 22.2 DSU

Trade Countermeasures

Analysis by Investment Tribunals

5

ADM v. Mexico Cargill v. Mexico Corn Products v. Mexico

Availability of Countermeasures under Chapter 11

Yes No No

Reasons Art. 1131 (1) NAFTA

Investors have rights under Chapter 11

Conferral of procedural rights implies intention to confer substantive rights

Analysis

6

Criteria for lawful

Countermeasures

(ILC Articles)

Nature of Rights in Investment Agreements

Article 31 VCLT 1969

Derivative Theory

Analysis

7

Article 1102 NAFTA

“ Each Party shall accord to investors of another Party

treatment no less favorable than that it accords, in like

circumstances, to its own investors with respect to

establishment….”

Analysis

8

Article 3(1) Germany Model BIT (2008)

“Neither Contracting State shall in its territory subject

investments owned or controlled by investors of the other

Contracting State to treatment less favourable than it accords

to investments of its own investors or to investments of

investors of any third State”

Article 4(1) Germany Model BIT

Investments by investors of either Contracting State

shall enjoy full protection and security in the territory of

the other Contracting State.

Analysis

9

Derivative Theory

• Investors’ rights are not independent.

• Investors are beneficiaries of rights enjoyed by home states –

subject to the the parties, e.g. amendment, termination.

• Granted based on reciprocity between parties of IIAs not as the

non-reciprocal human right treaties.

Analysis

10

Concession Contract Int’l Investment Agreement

• Investor and State • Creates rights and obligations for the investor and the state.

• State and State • Creates rights and obligations for states.

Proposal

11

Joint-Interpretation

Amendment of IIAs

- NAFTA FTC

- FTAs with Investment Chapters

- BITs

- Article 31(3)(a) VCLT

Inclusion of a new clause:

“Nothing in this agreement shall prevent a Contracting Party from taking a trade

countermeasure that has been authorized by the Dispute Settlement Body of the

World Trade Organization against the other Contracting Party, despite the fact

that the countermeasures may have effects on investments of nationals or

companies of the other Contracting Party under this Agreement.”

Conclusions

12

Divergence on countermeasures in trade and investment regimes may pose issues to states

1

Understanding of nature of rights conferred in IIAs is critical.

2

Without the right to legitimate trade countermeasures in investment law, it may render the mechanism of

the WTO DSB ineffective. 3

13

Thanks for Your Attention

Junianto James Losari (ciljjl@nus.edu.sg)

Michael Ewing-Chow (lawmec@nus.edu.sg)

Website: WWW.CIL.NUS.EDU.SG