Global Regulatory Standards in Environmental and Health Disputes: Regulatory Coherence, Due Regard, and Due Diligence 0198810555, 9780198810551

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Global Regulatory Standards in Environmental and Health Disputes

Global Regulatory Standards in Environmental and Health Disputes Regulatory Coherence, Due Regard, and Due Diligence C A R O L I N E E . F O ST E R

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3 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Caroline E. Foster 2021 The moral rights of the author have been asserted First Edition published in 2021 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2021932330 ISBN 978–​0–​19–​881055–​1 DOI: 10.1093/​oso/​9780198810551.001.0001 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

For Rob, Catherine and Zoe

Foreword I am delighted to have been invited to write a foreword to this book by my friend and colleague, Dr Caroline Foster. Addressing the international legal principles which have arisen in transnational regulatory disputes, and the particular challenges facing international adjudicators in their interpretation and application, this is a timely and important contribution to a topic of enduring significance. The idea that transnational regulatory disputes might be subject to binding third party dispute resolution at the international level has become so familiar to international lawyers over the last three decades, that it is easy to lose sight of the uniqueness of the historical circumstances in which it has come about, and the novelty of the associated challenges. On one side is the much remarked upon judicialization of international relations in the post-​Cold War era, centrally including the emergence of international adjudication as a primary tool of economic diplomacy, as well as the emergence of a cadre of professional jurists –​practitioners, scholars, and others –​engaged in the practical task of building an organised body of rules and practices in response. On the other, there are the conditions which give rise to regulatory disputes themselves: the proliferation of diverse regulatory demands; the increased commercial salience of regulatory differences in conditions of intensified globalisation; and an increased awareness of the significance of regulation as a terrain of competition in global economic life. Together, these trends set the stage for the emergence, through international adjudication, of a new set of practices in the application of international law to domestic regulatory action. One of the immensely valuable functions that this book performs is to help us to look back over the last thirty years of attempts to resolve the difficulties associated with international law’s increasing occupation of the domestic regulatory space, and to assess in the round what has emerged as a result. It turns out not to have been an easy nut to crack, not by a long shot. The book focusses primarily on the role played by international courts and tribunals, to whom the task of authoritatively interpreting and applying international law governing domestic regulation has primarily fallen. This period is probably best understood as a period of adjudicatory experimentation and innovation –​though, interestingly and possibly importantly, one in which international adjudicators more often approached their quasi-​entrepreneurial role with some degree of awkwardness and uncertainty, rather than obvious hubris or heroism. There have been some triumphs, some mistakes, some jurisprudential dead ends, and some important paths not taken. But the result has a been a new body of international jurisprudence not quite like any

viii Foreword other. Critical reflection on this enterprise, as this book provides, seems particularly crucial now. Given the vastness of the jurisprudence, Dr Foster focusses her enquiries on a particular slice of it: disputes concerning States’ actions to protect the environment and public health. From this vantage point, she discerns three broad principles which have structured adjudicators’ understanding of the applicable international legal rules. She calls these regulatory coherence, due regard for the rights of others, and due diligence in the prevention of harm. ‘Regulatory coherence’ in this context refers to a range of tests, at times apparent on the face of the law, which focus on the relationship of the ends of a regulatory measure to the means used to achieve them. These include the design, proportionality, necessity and rationality tests which are familiar to international trade and investment lawyers in particular, and which have attracted so much commentary in the field. The principle of ‘due regard’ seeks to ensure a degree of outward-​lookingness on the part of regulatory actions, and an awareness of actual and potential impacts of regulatory actions on stakeholders outside the jurisdiction. ‘Due diligence’ primarily refers to what is required of states to prevent transboundary harm, a principle which has come to prominence primarily in international environmental law, but has much more general application. Foster’s second principle –​‘due regard’ –​is very significant, and indeed Foster herself notes its advantages as compared to potentially more intrusive regulatory coherence tests. As this book shows, while the content and boundaries of the ‘due regard’ principle still remain under-​defined, some of its key elements can already be clearly stated. It includes, for example: an emerging obligation on regulators to take into account the external impacts of their regulatory actions; an encouragement towards the adjustment of regulatory measures according to the different conditions pertaining in different countries; procedural requirements of consultation and notification in relation to external stakeholders; perhaps also a requirement of calibration to the nature and extent of the underlying risks addressed by regulatory action. In the coming years, the juridical development of these and other standards will be particularly pressing, given the increasing role that regulatory co-​ordination and co-​operation at the bilateral and subnational level, including recognition arrangements, play in structuring global economic life. None of these three principles emerged in a vacuum, of course. As the material covered in this book clearly illustrates, some were influenced by particular traditions of domestic public law, while others are now found in new rules and jurisprudence developed through projects of regional economic integration. They also clearly bear the imprint of the emergence from the 1980s onwards of a new body of regulatory policy expertise, which was generated as a field of expertise in its own right in the context of late 20th century transformations of the regulatory state. Nevertheless, borrowings have been creative, and one of the strengths of Foster’s account of the development of these principles is that it shows very clearly the particular meanings they took on, and the particular functions they performed, as

Foreword  ix they were picked up, and projected into different spaces of international regulation. They were, Foster tells us, in significant part a response to the special pressures faced by international adjudicators and the institutions in which they work –​institutions which sometimes suffer from a real legitimacy deficit, even as they have been entrusted with the difficult tasks of maintaining stable economic relations, and ensuring non-​regression in projects of economic integration. This question of legitimacy is, rightly, a key focus of Foster’s critical insight throughout this book. Her analysis shows that the ‘global regulatory standards’ that she identifies are fundamentally pluralist rather than constitutionalist in orientation –​they are designed as interface norms between different regulatory jurisdictions, taking the form of ‘meta-​regulatory’ principles. As a result, the legitimacy demands they face are different from those which attach to the substantive legal provisions themselves. Nevertheless, it is clear that a serious legitimacy deficit remains. Indeed, Foster claims, with good reason, that ‘the emerging global regulatory standards appear to do too little to enhance traditional substantive justifications for international law’s claim to legitimate authority’ and that they ‘contribute only partially to an ideal balancing of international interests’. This sanguine assessment is coupled with a realistic appraisal of the conditions under which judicial institutions must operate, constrained as they are not only by their narrow institutional mandates, but also by the practicalities of dispute resolution including the importance of the disputants’ pleadings. ‘More is not to be expected’, Foster notes, ‘from international adjudicatory bodies’ which ‘remain formally and socially constrained.’ Foster’s book reminds us that, because of this, adjudicatory bodies’ identification and application of regulatory standards that might better reinforce international law’s legitimacy claims from a substantive perspective would likely undermine these same claims from a procedural point of view. The picture which emerges from this book, then, is perhaps that there is something of a mismatch between the task at hand and the set of institutions we have to carry it out. At the same time, it may be the set of institutions we have available to us for at least some time. It is true, of course, that WTO dispute settlement has been seriously disrupted by the Appellate Body’s absence, and ISDS is also famously under fire from certain quarters. But is also true that international adjudication on trade and investment matters –​whether under next generational bilateral or regional agreements, or the multilateral panel process –​is very far from disappearing, and the incentives for political actors to delegate the resolution of such disputes to adjudicatory bodies remain strong. Furthermore, the structural conditions for regulatory disputes remain as powerful as they ever were. Indeed, to some extent, they may be stronger, if, as some argue, the global financial crisis and the pandemic have undermined the legitimacy and acceptability of convergence around international standards as a potential solution to global regulatory conflict. All of this makes the need for a book such as this more urgent, and its appearance even more timely. The three regulatory principles that Foster identifies are

x Foreword potentially hugely important, and her work in identifying them aids us immeasurably in determining and developing their appropriate contours. Foster must be right to say that, in this process of development, what is crucial is the transparent articulation of reasons by international adjudicators, combined with ‘ongoing reflective interactions between judges, practitioners and the broader scholarly community’. It is precisely this sort of interaction which is facilitated by this remarkable book, and I am delighted to commend it as a significant contribution to the field. Professor Andrew Lang Chair in International Law and Global Governance Edinburgh Law School University of Edinburgh

Acknowledgements There are many people to thank for the part they have played in the production of this book. The Royal Society of New Zealand’s Marsden Council funded the project from 2014 to 2020, with the University of Auckland’s Faculty of Law as the project’s institutional home. Colleagues at the Faculty took a valued interest in the work. For their engagement and comments at different stages I am grateful especially to An Hertogen, Janet McLean, Arie Rosen, Nicole Roughan, Paul Rishworth and Hanna Wilberg, as well as all those who participated in and offered their thoughts at the Faculty workshops that helped clarify the project’s focus, scope and arguments. Sandra Shaw was eternally patient in the help she provided in the early days and I am grateful to the Davis Law Library staff also for their ever-​cheerful assistance. A number of the Faculty’s current and former students provided valuable research assistance over the multi-​year period during which the project ran. Thank you particularly to Tim Conder, Grace Abbott, Emily Wright, Ana Lenard, Eleonora Paci, Daniel Brinkman, Rachel Buckman and Naushyn Janah, and especially to Hannah Reid for her excellent work on the manuscript. I am grateful also to the wider group of colleagues who supported and helped with the research on which the book is based in different ways, including by welcoming me to their own universities. The Lauterpacht Research Centre for International Law at the University of Cambridge offered the same warm welcome as ever during research visits in the initial and mid stages of the project. I was pleased also to take up an invitation to speak at a symposium at the Max Planck Institute for International, European and Regulatory Procedural Law in Luxembourg in the course of the project, and I thank Director Hélène Ruiz Fabri for her welcome on that visit. Gabrielle Marceau was a wonderful host in Geneva. Andrew Lang at the University of Edinburgh provided important practical support for the work, meeting with me in the course of its development, visiting New Zealand, and commenting on the first draft of the book. He has also graciously agreed to write the book’s foreword. In the final year of the research, the Pluricourts Centre at the University of Oslo and the Law Faculty at the University of Canterbury hosted invited presentations on the work and I thank Christina Voigt and Karen Scott for their company and their hospitality. Together with a number of unnamed individuals, I also thank for their help and support at different times over the multi-​year period of the project’s research and development Sir Kenneth Keith, Judge Joan Donoghue, Judge James Crawford, Sir Christopher Greenwood, Sir Franklin Berman, Vaughan Lowe, Pierre-​Marie Dupuy, Judge Albert Hoffman, Fred Soons, Georges Abi-​Saab, Peter

xii Acknowledgements van den Bossche, Thomas Cottier, Georgio Sacerdoti, Claus-​Dieter Ehlermann, James Bacchus, James Flett, Graham Cook, Lauro Locks, Gretchen Stanton, Mireille Cossy, Christiane Wolff, William Ehlers, Jan Bohannes, Frieder Roessler, Patricia Holmes, Christian Häberli, Nicolas Lamp, Anna Kirk, Robert Volterra, Chris Thomas, the late Johnny Veeder, Jorge Viñuales, Andrew Newcombe, Stephan Schill, Ingo Venzke, and Joshua Paine who commented on a full second draft of the book. At Oxford University Press Merel Alstein and Jack McNichol have been stalwart in their support and guidance and always a pleasure to communicate with, in person or by email. Selected portions of a parallel publication appear in the text of the present work by permission of the respective publishers: Caroline E Foster, ‘The Emergence of Global Regulatory Standards in International Courts and Tribunals: Whaling, Tobacco and Renewable Energy’ in Sam Bookman, Anna Crowe, Max Harris, Edward Willis and Hanna Wilberg (eds), Pragmatism, Principle, and Power in Common Law Constitutional Systems: Essays in Honour of Bruce Harris (Intersentia 2021). Finally, my family has been tolerant and kind in the time they have allowed me to develop and complete the work needed to produce this book and I thank them profoundly.

Table of Contents Table of Cases  List of Abbreviations 

xix xxix

PA RT I   I N T R O D U C T IO N

1. Introduction  2. Introducing Regulatory Standards 

3 19



A. Regulatory Standards in International Adjudicatory Practice 



B. The Origins and Nature of Regulatory Standards  C. Constitution Building or Ordering Plurality?  D. International Law’s Legitimate Authority 

33 36 41



E. Conclusion 

47





1. Introducing key standards  a) Regulatory coherence  i) Capability  ii) Necessity  iii) Reasonableness  iv) Rational relationships  v) Proportionality  b) Due regard  c) Due diligence  2. The influence of the abuse of rights doctrine and global administrative law 

1. Substantive and procedural justification of authority  2. The invisibility of governance reasons 

22 22 24 24 25 25 26 26 27 28 30

44 46

PA RT I I   T H E I N T E R NAT IO NA L C OU RT O F J U S T IC E , L AW O F T H E SE A D I SP U T E SE T T L E M E N T A N D T H E P E R M A N E N T C O U RT O F A R B I T R AT IO N

3. Regulatory Coherence 

A. Introduction  B. The International Court of Justice  C. Law of the Sea Dispute Settlement  D. The Permanent Court of Arbitration  E. Regulatory Standards Identified in the Disputes 



1. An overview  2. Regulatory coherence 

51

51 52 53 55 55 55 60

xiv  Table of Contents

a) Capability testing  i) Fisheries Jurisdiction (Spain v Canada)  ii) The Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation)  b) Self-​evident necessity  i) Right of Passage over Indian Territory (Portugal v India)  ii) Indus Waters Kishenganga Arbitration (Islamic Republic of Pakistan v Republic of India)  c) Reasonableness in relation to objectives  i) Dispute Concerning Filleting within the Gulf of St Lawrence (‘La Bretagne’) (Canada v France)  ii) Whaling in the Antarctic (Australia v Japan: New Zealand intervening)  d) More complex formulae  i) North Atlantic Coast Fisheries Case (Great Britain v the United States)  ii) The Iron Rhine (‘Ijzeren Rijn’) Railway (Kingdom of Belgium v Kingdom of the Netherlands)  iii) Dispute regarding Navigational and Related Rights (Costa Rica v Nicaragua)  iv) The Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) 







F. Conclusion 

4. Due Regard and Due Diligence 

A. Introduction  B. Due Regard and Due Diligence 





1. Due regard  a) Chagos Marine Protected Area Arbitration (Mauritius v United Kingdom)  b) Whaling in the Antarctic (Australia v Japan: New Zealand intervening)  2. Due diligence  a) Gabčikovo-​Nagymaros Project (Hungary v Slovakia)  b) Case concerning Pulp Mills (Argentina v Uruguay)  c) Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area (Advisory Opinion)  d) Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission (SRFC) (Advisory Opinion)  e) South China Sea Arbitration (Republic of the Philippines v People’s Republic of China)  f) The Environment and Human Rights (Advisory Opinion)  g) Conclusion 

C. Reflections on Regulatory Standards in the International Court of Justice, Law of the Sea Dispute Settlement and the Permanent Court of Arbitration 

60 60 63 69 69 70 72 72 74 78 80 81 82 85

85

89

89 89 89 90

96 99 104 105 107 113 121 126 128

129

Table of Contents  xv

PA RT I I I   WO R L D T R A D E O R G A N I Z AT IO N D I SP U T E SE T T L E M E N T

5. Necessity Testing 



A. Introduction  B. World Trade Organization Dispute Settlement  C. An Introduction to Relevant WTO Disciplines  D. Regulatory Standards in WTO Disputes  E. Introduction to Necessity Testing 

1. Necessity under Article XX of the GATT and Article XIV of the GATS  a) Article XX(d)—​‘necessary’ to secure compliance  b) Article XX(a)—​‘necessary’ to protect public morals  c) Article XX(b)—​‘necessary’ to protect human, animal or plant life or health  d) Article XX(j)—​‘essential’ to the acquisition or distribution of products in general or local short supply  2.  Necessity under Article 2.2 of the TBT Agreement  a) United States—​Measures Affecting the Production and Sale of Clove Cigarettes  b) Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products  3.  Necessity under Article 5.6 of the SPS Agreement 



F. Conclusion 

135

135 137 142 144 147 149 149 153 155 160 162 162 166 172

172

6. Rational Relationships 

175

1.  The general exceptions chapeau  2.  Article 2.1 of the TBT Agreement  3.  Articles 2.3 and 5.5 of the SPS Agreement  4.  Divergent policy objectives  a) Brazil—​Measures Affecting Imports of Retreaded Tyres  b) European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products  c) United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products (US—​Tuna II)  5.  ‘Stems exclusively’ from a legitimate regulatory distinction  a) United States—​Measures Affecting the Production and Sale of Clove Cigarettes  b) United States—​Certain Country of Origin Labelling (COOL) Requirements  6.  Even-​handedness 

179 183 184 186 187



A. Introduction to Rational Relationship Requirements 



B. Conclusion  C. Reflections on Regulatory Standards in WTO Dispute Settlement 

175

189 191 193 193 197 201

206 208

xvi  Table of Contents

PA RT I V   I N V E S T M E N T T R E AT Y A R B I T R AT IO N

7. Regulatory Coherence Requirements in Investment Treaty Arbitration 





A. Introduction  B. An Introduction to Investment Disciplines  C. Regulatory Coherence Requirements in Investment Treaty Arbitration 

1.  Fair and equitable treatment: arbitrary or unreasonable conduct: reasonable relationships to rational policies  a) Glamis Gold Ltd v United States  b) Mesa Power Group LLC v Canada  2. National treatment: a reasonable nexus to rational government policies  a) Apotex Holdings Inc and Apotex Inc v United States  b) Parkerings-​Compagniet AS v Republic of Lithuania  3. Expropriation: ‘for a public purpose’  a) Vestey Group Ltd v Venezuela  b) Philip Morris Brands Sàrl and ors v Uruguay 

D. Conclusion 

8. Proportionality in Investment Treaty Arbitration 

215 215 216

221 221 224 227 231 232 233 235 237 239

243

247



A. Introduction  B. Proportionality in the Practice of Investment Treaty Arbitration 



C. The Competing Interests in Investment Treaty Disputes  D. Refocusing Proportionality Analysis 

258 263



E. Conclusion  F. Reflections on Regulatory Standards in Investment Treaty Arbitration 

272



1. Expropriation  2. Fair and equitable treatment 

1. Proportionality in relation to regulatory purpose  2. Looking beyond individual burdens  3. Manifest disproportionality  a) European Union law  b) World Trade Organization law 

247 253 253 255 263 265 267 268 268

274

PA RT V   C R I T IC A L Q U E S T IO N S

9. Regulatory Standards, Legitimate Authority and the Adjudicatory Role 



A. Introduction  B. Regulatory Standards and International Law’s Claim to Legitimate Authority 

1. Procedural justification: accommodation of domestic decision-​making  2. Substantive justification: the challenge of balancing global interests  3. Attaining relative authority? 

279 279

281 282 283 284

Table of Contents  xvii







C. The Role of International Courts and Tribunals 

285

D. Conclusion 

301

1.  The strengths of international adjudicatory process  2.  The constraints on international adjudicatory process  a) Social constraints  b) Formal constraints  3.  The abuse of rights doctrine  4.  The absence of public deliberation 

10. Systemic Challenges and Opportunities 



A. Introduction  B. Systemic Challenges Associated with the Advent of Regulatory Standards 

1.  Sovereign freedom as conferred power  2.  The fragmentation of international law  3.  Developments in the status of private entities in international law 

286 288 288 290 293 299

305

305 307 307 310 320



C. Opportunities for Reconsideration 

323



D. Conclusion 

346



1.  Employing due regard standards in place of proportionality tests  a) Proportionality  b) Due regard  2.  International adjudication as judicial review?  a) Judicial review and standards of review  b) Deference and margin of appreciation 

323 323 327 337 337 342

11. Conclusion 

347

Bibliography  Index 

351 373

Table of Cases EUROPEAN COURT OF HUMAN RIGHTS Handyside v United Kingdom 1976 ECHR 5 ��������������������������������������������������151n.65, 344n.199 James and ors v UK 1986 ECHR 2�����������������������������������������������������������������������252n.26, 265–​66 Lithgow and ors v UK 1986 ECHR 8��������������������������������������������������������������������������������� 265n.94 The Sunday Times v UK 1979 ECHR 1����������������������������������������������������������������������������� 222n.25 INTER-​A MERICAN COURT OF HUMAN RIGHTS The Environment and Human Rights (State Obligations in Relation to the Environment in the Context of the Protection and Guarantee of the Rights to Life and Personal Integrity: Interpretation and Scope of Articles 4(1) and 5(1) in relation to Articles 1(1) and 2 of the American Convention on Human Rights), Advisory Opinion OC-​23/​17 (15 November 2017), Inter-​American Court of Human Rights Series A, No 23�������������������������������������������������������������������������������������������� 59–​60, 126–​28, 298n.70 INTERNATIONAL COURT OF JUSTICE Aegean Sea Continental Shelf (Greece v Turkey) Judgment of 19 December 1978 [1978] ICJ Rep 3������������������������������������������������������������������������������������������������������������������������62n.54 Anglo-​Iranian Oil Co (United Kingdom v Iran) Judgment of 22 July 1952 (Jurisdiction) [1952] ICJ Rep 93����������������������������������������������������������������������������������������������������������61n.53 Barcelona Traction, Light and Power Company, Limited (Belgium v Spain) Judgment of 5 February 1970 [1970] ICJ Rep 3��������������������������������������������������������������������������������������� 73 Case Concerning Elettronica Sicula S.p.A. (ELSI) (United States of America v Italy) Judgment of 20 July 1989 [1989] ICJ Rep 15���������������������������������������������221–​22, 296n.59 Pulp Mills on the River Uruguay (Argentina v Uruguay) Judgment of 20 April 2010 [2010] ICJ Rep 14�������������������������������������������������������������������� 28​–​30, 59–​60, 102–​3, 105–​7, 108–​9, 118–​19, 121, 124–​25, 129 Case Concerning the Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v Yugoslavia) Judgment of 26 February 2007 (Merits) [2007] ICJ Rep 43����������������������������������������������������������������� 101 Gabčikovo-​Nagymaros Project (Hungary v Slovakia) Judgment of 25 September 1997 [1997] ICJ Rep 7��������������������������������������������������������������������������28, 77–​78, 102, 104–​5, 314 Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v Nicaragua) and Construction of a Road in Costa Rica along the San Juan River (Nicaragua v Costa Rica) Judgment of 16 December 2015 [2015] ICJ Rep 665�������������������������������������������������������������������������������������������������������� 59–​60, 102–​3 Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v France) Judgment of 4 June 2008 [2008] ICJ Rep 177 ������������������������������������ 77–​78n.163, 296–​97 Dispute Over the Status and Use of the Waters of the Silala (Chile v Bolivia) (Application Instituting Proceedings, 6 June 2016)���������������������������������������������������103–​4 Dispute regarding Navigational and Related Rights (Costa Rica v Nicaragua) Judgment of 13 July 2009 [2009] ICJ Rep 213����������������������������������������������� 10, 25–​26, 27, 58, 76–​77, 77–​78n.163, 78–​80, 82–​85, 86–​87, 261, 264, 288–​89, 290–​91, 297–​98

xx  Table of Cases Fisheries Jurisdiction (Spain v Canada) Judgment of 4 December 1998 [1998] ICJ Rep 432���������������������������������������������������������������������������������������������������24, 56, 60–​63, 86 Fisheries Jurisdiction (United Kingdom of Great Britain and Northern Ireland v Iceland) Judgment of 25 July 1974 (Merits) [1974] ICJ Rep 3������������������ 89–​90, 329–​30 Fisheries Jurisdiction (Federal Republic of Germany v Iceland) Judgment of 25 July 1974 (Merits) [1974] ICJ Rep 175������������������������������������������������������������������ 89–​90, 329–​30 Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970) Advisory Opinion of 21 June 1971 [1971] ICJ Rep 16������������������������������������������� 314n.35 Right of Passage over Indian Territory (Portugal v India) Judgment of 12 April 1960 (Merits) [1960] ICJ Rep 6 ���������������������������������������������������������������������������������������56, 69–​70 South West Africa Cases (Liberia v South Africa; Ethiopia v South Africa) Judgment of 21 December 1962 (Preliminary Objections) [1962] ICJ Rep 319��������������������������������������������������������������������������������������������������292n.33, 296n.53 Legality of the Threat or Use of Nuclear Weapons Advisory Opinion of 8 July 1996 [1996] ICJ Rep 226��������������������������������������������������������� 100–​1, 102–​3, 292–​93 Whaling in the Antarctic (Australia v Japan: New Zealand intervening) Judgment of 31 March 2014 [2014] ICJ Rep 226����������������������������������������������������������������������������10, 22–​23, 25–​26, 56–​57, 58, 62, 72, 74–​79, 86–​87, 90, 96–​99, 130, 131, 243–​44, 246, 288–​89, 290–​91, 294, 295–​96, 309–​10, 335, 338–​39, 342, 343–​45 INTER-​S TATE ARBITRATION Arbitration Between the Republic of Croatia and the Republic of Slovenia (Final Award) (29 June 2007) PCA Case No 2012–04��������������������������������������������������������������������� 327n.97 Arbitration regarding the Iron Rhine (‘Ijzeren Rijn’) Railway between the Kingdom of Belgium and the Kingdom of the Netherlands (Award) (24 May 2005) PCA Case No 2003-​02 140 ILR 1 ���������������������������������� 25–​26, 55, 58, 78–​79, 81–​82, 86–​87, 297–​98 Dispute Concerning Filleting within the Gulf of St Lawrence (‘La Bretagne’) (Canada v France) (Award) (17 July 1986) 82 ILR 590���������������������� 57, 72–​74, 98, 314n.33, 321–​22 F. H. Neer and Pauline Neer (U.S.A.) v. United Mexican States (1926) 4 RIAA 60; 3 ILR 213�������������������������������������������������������������������������������������������������222, 225 Harza Engineering v Republic of Iran (Award) 30 December 1982, 1 Iran-​US CTR 499��������������������������������������������������������������������������������������������������� 237n.125 Indus Waters Kishenganga Arbitration (Islamic Republic Pakistan v Republic of India) (Partial Award) (18 February 2013) PCA Case No 2011-​01 154 ILR 1 ������������������ 55, 56, 69–​72, 82, 85–​86 Indus Waters Kishenganga Arbitration (Islamic Republic of Pakistan v Republic of India) (Final Award) (20 December 2013) PCA Case No 2011-​01 157 ILR 362���������� 55, 56, 69–​72, 82, 85–​86 Lake Lanoux Arbitration (France v Spain) (16 November 1957) 24 ILR 101���������������������������������������������������������������������������������������������������������90, 96–​97, 114 North Atlantic Coast Fisheries Case (Great Britain v United States) (7 September 1910) (1910) Scott Hague Court Rep 141������������������������25–​26, 55, 58, 73, 78–​79, 80–​81, 86–​87, 288–​89, 294, 298–​99 INVESTMENT ARBITRATION AES Summit Generation Limited and AES-​Tisza Erömü Kft v Hungary ICSID Case No ARB/​07/​22, Award, 23 September 2010 (Claus von Wobeser, J William Rowley and Brigitte Stern) ������������������������������������������ 217n.7, 223n.30, 223n.33, 223n.35

Table of Cases  xxi Al Tamimi v Oman ICSID Case No ARB/​11/​33, Award, 3 November 2015 (David A R Williams, Charles N Brower and J Christopher Thomas) �������������������������������255–​56 Álvarez y Marín Corporación SA and ors v Panama ICSID Case No ARB/​15/​14, Award, 12 September 2018 (Juan Fernández-​Armesto, Henri Alvarez and Horacio A. Grigera Naón)����������������������������������������������������������������������������������������� 262n.78 Apotex Holdings Inc and Apotex Inc v United States ICSID Case No ARB(AF)/​12/​1, Award, 25 August 2014 (V V Veeder, J William Rowley and John R Crook) �������232–​33 Azurix Corporation v Argentina ICSID Case No ARB/​01/​12, Award, 14 July 2006 (Andrés Rigo Sureda, Mark Lalonde and Daniel Hugo Martins)����������253–​54, 265n.92, 267n.103 BayWa r.e. Renewable Energy GmbH and BayWa re Asset Holding GmbH v Spain ICSID Case No ARB/​15/​16502, Decision on Jurisdiction: Liability and Directions on Quantum, 2 December 2019 (James Crawford, Horacio Grigera Naón and Loretta Malintoppi)��������������������������������������������������� 257n.54, 264n.87, 267–​68 Bear Creek Mining Corporation v Peru ICSID Case No ARB/​14/​21, Award, 30 November 2017 (Karl-​Heinz Böckstiegel, Michael Pryles and Philippe Sands)��������������������������������������������������������������������������������������������220n.15, 315n.41 Blusun SA and ors v Italy ICSID Case No ARB/​14/​3, Award, 27 December 2016 (James Crawford, Stanimir A Alexandrov and Pierre-​Marie Dupuy)���������������� 256n.49, 264n.87, 267–​68 CC/​Devas (Mauritius) Limited and ors v India PCA Case No 2013-​09, Award on Jurisdiction and Merits, 25 July 2016 (Marc Lalonde, David R Haigh and Anil Dev Singh)����������������������������������������������������������������������������������������������������������������� 332n.128 Charanne BV and Construction Investments SARL v Spain SCC Case No 062/​2012, Final Award, 21 January 2016 (Alexis Mourre, Guido Santiago Tawil and Claus von Wobeser)����������������������������������������������������������������������������������������������257n.55, 257n.57 Chevron Corporation and Texaco Petroleum Company v Ecuador PCA Case No 2009-​ 23, Second Partial Award on Track II, 30 August 2018 (V V Veeder, Vaughan Lowe and Horacio Grigera Naón) ��������������������������������������������������������������������������� 316n.49 Chemtura Corporation v Canada PCA Case No 2008-​01, Final Award, 2 August 2010 (Gabrielle Kaufmann-​Kohler, Charles N Brower and James R Crawford)������� 343n.194 Continental Casualty Company v Argentina ICSID Case No ARB/​03/​9, Award, 5 September 2008 (Giorgio Sacerdoti, V V Veeder and Michell Nader)����������������������������������������������������������������������������������������������253–​54, 263–​64 Cortec Mining Kenya Limited and ors v Kenya ICSID Case No ARB/​15/​29, Award, 22 October 2018 (Ian Binnie, Kanaga Dharmananda and Brigitte Stern)����������������������������������������������������������������������������������������������������� 262, 316n.49 Crystallex International Corporation v Venezuela ICSID Case No ARB(AF)/​11/​2, Award, 4 April 2016 (Laurent Lévy, John Y Gotanda and Laurence Boisson de Chazournes)������������������������������������������������������������������������������������������� 343n.196, 345n.209 David R Aven et al v Costa Rica ICSID Case No UNCT/​15/​3, Final Award, 18 September 2018 IIC 1472 (2018), 18 September 2018 (Eduardo Siqueiros T, Pedro Nikken and C Mark Baker) ��������������������������������������������������������������������������� 316n.49 EDF (Services) Ltd v Romania ICSID Case No ARB/​05/​13, Award, 8 October 2009 (Piero Bernadini, Arthur W Rovine and Yves Derains)������������ 222n.26, 265n.92, 266n.96 Eiser Infrastructure Limited and Energia Solar Luxembourg SARL v Spain ICSID Case No ARB/​13/​36, Award, 4 May 2017 (John R Crook, Stanimir A Alexandrov and Campbell McLachlan)����������������������������������������������������������������������������������������������� 257n.57 El Paso Energy International Company v Argentina ICSID Case No ARB/​03/​15, Award, 31 October 2011 (Lucius Caflisch, Piero Bernadini and Brigitte Stern)��������������������������������������������������������������������������������������������� 223n.31, 231, 237

xxii  Table of Cases Electrabel S.A. v Hungary ICSID Case No ARB/​07/​19, Award, 25 November 2015 (Gabrielle Kaufmann-​Kohler, Brigitte Stern and V V Veeder)����������������������������� 223n.33 Electrabel S.A. v Hungary ICSID Case No ARB/​07/​19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012 (V V Veeder, Brigitte Stern and Gabrielle Kaufmann-​Kohler)��������������������������������� 245n.172, 255–​56, 257n.58, 334n.136 Feldman Karpa v Mexico ICSID Case No ARB(AF)/​99/​1, Award and Dissenting Opinion, 16 December 2002 (Konstantinos Kerameus, Jorge Covarrubias Bravo and David Gantz)������������������������������������������������������������������������������������������������������� 232n.92 GAMI Investments, Incorporated v Mexico UNCITRAL, Final Award, 15 November 2004 (Jan Paulsson, W Michael Reisman and Julio Lacarte Muró) ��������������������� 231n.88 Genin and ors v Estonia ICSID Case No ARB/​99/​2, Award, 25 June 2001 (L Yves Fortier, Meir Heth and Albert Jan van den Berg)��������������������222n.23, 223n.32, 223n.36 Glamis Gold Ltd v United States UNCITRAL, Award, 8 June 2009 (Michael K Young, David R Caron and Kenneth D Hubbard)�����������������������������������������223–​27, 230–​31, 244, 259, 274–​75, 343n.194 Hydro Energy 1 S.à r.l. and Hydroxana Sweden AB v Spain ICSID Case No ARB/​15/​42, Decision on Jurisdiction, Liability and Directions on Quantum, 9 March 2020 (Lawrence Collins, Peter Rees and Rolf Knieper)������������������������������������������� 230n.84, 264 Kim and ors v Uzbekistan ICSID Case No ARB/​13/​6, Decision on Jurisdiction, 8 March 2017 (David D Caron, L Yves Fortier and Toby Landau)��������������� 262n.78, 262 Lauder v Czech Republic UNCITRAL, Final Award, 3 September 2001 (Robert Briner, Lloyd Cutler and Bohuslav Klein)������������������������������������������������� 221n.22 Les Laboratoires Servier, SAS and ors v Poland UNCITRAL, Final Award, 14 February 2012 (William W Park, Marc Lalonde and Bernard Hanotiau) ������������ 254, 274–​75, 343n.196 LG&E Energy Corp, LG&E Capital Corp, LG&E International INC v Argentine Republic ICSID Case No ARB/​02/​1, Decision on Liability, 3 October 2006 (Tatiana B de Maekelt, Francisco Rezek and Albert Jan van den Berg)������������ 236n.120, 253–​54, 263–​64, 267n.103, 331n.120, 333n.132 Marfin Investment Group v Cyprus ICSID Case No ARB/​13/​27, Award, 26 July 2018, (Bernard Hanotiau, David A O Edward and Daniel M Price) ����������������������������� 261n.76 Mesa Power Group, LLC v Canada PCA Case No 2012-​17, Award, 24 March 2016 (Gabrielle Kaufmann-​Kohler, Charles N Brower and Toby Landau)��������������������223–​24, 227–​31, 244, 343–​44 Metalclad Corporation v Mexico ICSID Case No ARB(AF)/​97/​1, Award, 30 August 2000 (Elihu Lauterpacht, Benjamin R Civiletti and José Luis Siqueiros)���������������332–​33 Methanex Corporation v United States UNCITRAL, Final Award on Jurisdiction and Merits, 3 August 2005 (J William Rowley, W Michael Reisman and V V Veeder)����������������������������������������������������������������������������235n.118, 333n.134, 345n.210 Micula and ors v Romania ICSID Case No ARB/​05/​20, Award and Separate Opinion, 11 December 2013 (Laurent Lévy, Stanimir A Alexandrov and Georges Abi-​Saab)���������������������������������������������������������������������������������������� 28n.34, 223n.35, 264n.89 Occidental Petroleum Corporation and Occidental Exploration and Production Company v Ecuador ICSID Case No ARB/​06/​11, Award, 5 October 2012 (L Yves Fortier, David A R Williams and Brigitte Stern)����������������������������������������������� 255 Occidental Petroleum Corporation and Occidental Exploration and Production Company v Ecuador ICSID Case No ARB/​06/​11, Decision on Annulment of the Award, 2 November 2015 (Juan Fernández-​Armesto, Florentino P Feliciano and Rodrigo Oreamuno Blanco)������������������������������������������������������������������������������������� 250n.12 OperaFund Eco-​Invest SICAV PLC and Schwab Holding AG v Spain ICSID Case No ARB/​15/​36, Award, 6 September 2019 (Karl-​Heinz Böckstiegel, August Reinisch, Philippe Sands)������������������������������������������������������������������������������������������������������������������� 256

Table of Cases  xxiii Parkerings-​Compagniet AS v Lithuania, ICSID Case No ARB/​05/​8, Award, 11 September 2007 (Julian Lew, Marc Lalonde and Laurent Lévy)���������������������������������������������������������������������������������������232n.95, 233–​35, 244 Perenco Ecuador Limited v Ecuador ICSID Case No ARB/​08/​6, Interim Decision on the Environmental Counterclaim, 11 August 2015 (Peter Tomka, Neil Kaplan and Christopher Thomas)����������������������������������������������������������������������������������������� 316n.49 Philip Morris Brands Sàrl and ors v Uruguay ICSID Case No ARB/​10/​7, Award, 8 July 2016 (Piero Bernardini, Gary Born and James Crawford) ��������6n.10, 216, 236, 239–​43, 244, 263–​64, 267n.104, 315–​16, 319–​20, 343n.195, 344n.198 The PV Investors v Spain PCA Case No 2012-​14, Award, 28 February 2020 (Gabrielle Kaufmann-​Kohler, Charles Brower and Bernardo Sepúlveda Amor)����������������� 257n.58 PL Holdings S.à.r.l. v Poland SCC Case No V 2014/​163, Partial Award, 28 June 2017 (George Bermann, Julian D M Lew and Michael E Schneider) �����������������������������252–​53 Pope & Talbot Incorporated v Canada UNCITRAL, Award on the Merits of Phase 2, 10 April 2001 (Lord Dervaird, Benjamin J Greenberg and Murray J Belman)����������������������������������������������������������������������222n.27, 232n.92, 233n.100 Quiborax SA and Non Metallic Minerals SA v Bolivia ICSID Case No ARB/​06/​2, Award, 16 September 2015 (Gabrielle Kaufmann-​Kohler, Marc Lalonde and Brigitte Stern)����������������������������������������������������������������������������������������������������������� 345n.208 Rockhopper Italia S.p.A., Rockhopper Mediterranean Ltd, and Rockhopper Exploration Plc v Italian Republic ICSID Case No ARB/​17/​14, Decision on the Intra-​EU Jurisdictional Objection, 26 June 2019 (Klaus Reichert, Charles Poncet and Pierre-​Marie Dupuy)����������������������������������������������������������������������������������������������������218n.8 RREEF Infrastructure (GP) Limited and RREEF Pan-​European Infrastructure Two Lux Sàrl v Spain ICSID Case No ARB/​13/​30, Decision on Responsibility and on the Principles of Quantum and Dissenting Opinion, 30 November 2018 (Alain Pellet, Pedro Nikken and Robert Volterra)������������������������������� 253n.31, 256n.49, 256–​57 RWE Innogy GmbH and RWE Innogy Aersa S.A.U. v Spain ICSID Case No ARB/​14/​ 34, Decision on Jurisdiction, Liability and Certain Issues of Quantum, 30 December 2019 (Anna Joubin-​Bret, Judd L Kessler and Samuel Wordsworth)�����������������������������������������������������������������������������������������������266–​68, 331n.123 Saluka Investments BV v Czech Republic PCA Case No 2001-​04, Partial Award, 17 March 2006 (Arthur Watts, L Yves Fortier and Peter Behrens)������������ 219, 223, 225n.46, 227n.65, 232n.92, 235n.118, 264n.88 SD Myers Incorporated v Canada UNCITRAL, First Partial Award on the Merits and Separate Opinion, 13 November 2000 (Bryan P Schwartz, Edward C Chiasson and J Martin Hunter)����������������������������������������������������������������������������� 333n.134, 345n.208 Serafín García Armas and Karina García Gruber v Venezuela PCA Case No 2013–3, Award, 26 April 2019 (Eduardo Grebler, Guido Santiago Tawil and Rodrigo Oreamuno Blanco)����������������������������������������������������������������������������������������������������� 231n.86 SolEs Badajoz GmbH v Spain ICSID Case No ARB/​15/​38, Award, 31 July 2019 (Joan E Donogue, Giorgio Sacerdoti and David A R Williams)����������������������������������������� 257n.55 South American Silver Limited v Bolivia PCA Case No 2013-​15, Award, 22 November 2018 (Eduardo Zuleta Jaramillo, Francisco Orrego Vicuña and Osvaldo César Guglielmino)������������������������������������������������������������������������������������������������������������� 236n.119 Stadtwerke München GmbH and ors v Spain ICSID Case No ARB/​15/​1, Award, 2 December 2019 (Jeswald W Salacuse, Kaj Hobér and Zachary Douglas)���������� 261n.75, 261n.76, 266n.96 Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v Argentina ICSID Case No ARB/​03/​19, Decision on Liability, 30 July 2010 (Jeswald W Salacuse, Gabrielle Kaufmann-​Kohler and Pedro Nikken)������������� 315n.41

xxiv  Table of Cases Técnicas Medioambientales Tecmed SA v Mexico ICSID Case No ARB(AF)/​00/​2, Award, 29 May 2003 (Horacio A Grigera Naón, José Carlos Fernández Rozas and Carlos Bernal Verea) ��������������������������������������������� 222n.28, 253–​54, 261, 263–​64, 265–​66 International Thunderbird Gaming Corporation v. Mexico, UNCITRAL, Award, 26 January 2006 (Agustín Portal Ariosa, Thomas W. Wälde, Albert Jan van den Berg)��������������������������������������������������������������������������������������������������� 226 Total S.A. v Argentina ICSID Case No ARB/​04/​1, Decision on Liability, 27 December 2010 (Giorgio Sacerdoti, Henri C Alvarez and Luis Herrera Marcano)���������������������� 255 Marion Unglaube and Reinhardt Unglaube v Costa Rica ICSID Case no ARB/​08/​1, ICSID Case no ARB/​09/​20, Award, 16 May 2012 (Judd Kessler, Franklin Berman and Bernardo Cremades) ������������������������������������������������������������������������������������������������� 223 Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v The Argentine Republic ICSID Case No ARB/​07/​26, Award, 8 December 2016 (Andreas Bucher, Campbell McLachlan and Pedro Martinez-​Fraga)����������������� 315n.41 Vestey Group Limited v Venezuela ICSID Case No ARB/​06/​4, Award, 1 5 April 2016 (Gabrielle Kaufmann Kohler, Horacio Grigera Naón and Pierre-​ Marie Dupuy�����������������������������������������������������������������������������������������������������������������237–​39 Waste Management, Inc. v. United Mexican States (‘Number 2’) ICSID Case No. ARB(AF)/​00/​3, Award, 30 April 2004 (James Crawford, Benjamin R. Civiletti and Eduardo Magallón Gómez)����������������������������������������������������������������220n.11, 229n.78 Watkins Holdings S.à r.l. and others v Spain ICSID Case No ARB/​15/​44, Award, 21 January 2020 (Cecil W M Abraham, Michael Pryles and Hélène Ruiz Fabri) ������������������������������������������������������������������������������230n.84, 256n.51 Westmoreland Coal Company v Canada ICSID Case No UNCT/​20/​3, Notice of Arbitration and Statement of Claim, 12 August 2019 ����������������������������������������������217n.5 Windstream Energy LLC v Canada PCA Case No 2013-​22, Award, 27 September 2016 (Veijo Heiskanen, R Doak Bishop and Bernardo Cremades)����������������������������� 345n.209 Yukos Universal Limited v Russian Federation PCA Case No 2005-​04/​AA 227, Final Award, 18 July 2014 (L Yves Fortier, Charles Poncet and Stephen M Schwebel)������������������������������������������������������������������������������������������������� 254n.38 Zelena NV and Energo-​Zelena doo Inđija v Serbia ICSID Case No ARB/​14/​27 ��������� 231n.88 PERMANENT COURT OF INTERNATIONAL JUSTICE Certain German Interests in Polish Upper (Germany v Poland) (Judgment of 25 May 1926) (Merits) PCIJ Rep Series A No 7 ������������������������������������������������������������������� 293n.40 Free Zones of Upper Savoy and the District of Gex (France v Switzerland) (Order of 6 December 1930) (1930) PCIJ Series A No 24������������������������������������� 293n.40 Free Zones of Upper Savoy and the District of Gex (France v Switzerland) (Judgment of 7 June 1932) (1932) PCIJ Series A/​B No 46������������������������������������� 293n.40 Territorial Jurisdiction of the International Commission of the River Oder (Judgment of 10 September 1929) PCIJ Series A No 23�������������������������������������������28n.32 UNITED NATIONS CONVENTION ON THE LAW OF THE SEA ‘ARA Libertad’ (Argentina v Ghana) (Order of 15 December 2012) ITLOS Reports 2012, 332���������������������������������������������������������������������������������������������������������������68–​69n.103 The Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) (Provisional Measures, Order of 22 November 2013) ITLOS Reports 2013, 230 ��������� 68–​69 The Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) (Award on the Merits) (14 August 2015) PCA Case No 2014-​02 171 ILR 1 ���������������� 24, 25n.21, 27, 56, 58, 60, 62–​69, 78–​80, 85, 86–​87, 288–​89, 290–​91, 297–​98

Table of Cases  xxv Chagos Marine Protected Area Arbitration (Republic of Mauritius v United Kingdom) (Award) (18 March 2015) PCA Case No 2011-​03 162 ILR 1����������� 10–​11, 27–​28, 58, 85, 90–​97, 131, 282, 283, 290–​91, 328, 335 M/​V ‘SAIGA’ (No. 2) (Saint Vincent and the Grenadines v Guinea) (Judgment of 1 July 1999) ITLOS Reports 1999, 10�������������������������������������������������������������������������������������66–​67 M/​V ‘Virginia G’ (Panama v Guinea-​Bissau) (Judgment of 14 April 2014) ITLOS Reports 2014, 4�������������������������������������������������������������������������������������������������� 62–​63, 66–​67 Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission (Advisory Opinion of 2 April 2014) ITLOS Reports 2015, 4�����������29–​30, 59–​60, 103–​4, 113–​21, 124–​25, 130, 290–​91 Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area (Advisory Opinion of 1 February 2011) ITLOS Reports 2011, 10��������������������������������������������� 29, 59–​60, 103–​4, 107–​13, 114, 117, 118–​19, 121, 124–​25, 130, 290–​91 South China Sea Arbitration (Republic of the Philippines v People’s Republic of China) (Award of 12 July 2016) PCA Case No 2013-​19 170 ILR 1 ����������� 30n.41, 59–​60, 80–​81, 103–​4, 121–​26, 314 Southern Bluefin Tuna Cases (New Zealand v Japan; Australia v Japan) (Provisional Measures, Order of 27 August 1999) ITLOS Reports 1999, 280������������ 116, 125n.250, 314n.36 WORLD TRADE ORGANIZATION Argentina—​Safeguard Measures on Imports of Footwear, Report of the Appellate Body (14 December 1999) WT/​DS121/​AB/​R, DSR 2000:I, 515����������������������������������� 331n.118 Australia—​Measures Affecting the Importation of Apples from New Zealand, Report of the Appellate Body (29 November 2010) WT/​DS367/​AB/​R, DSR 2010:V, 2175 ��������������������������������������������������������������������������������������������������������������� 77n.156 Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products, Reports of the Panels (28 June 2018) WT/​DS435/​R, WT/​DS441/​R WT/​DS458/​R, WT/​DS467/​R ��������������������������������������������������32n.53, 158, 166–​71, 178, 271, 317, 318–​19 Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products, Reports of the Appellate Body (9 June 2020) WT/​DS435/​AB/​R, WT/​DS441/​AB/​R ������������������ 158, 166–​71, 318–​19 Australia—​Measures Affecting Importation of Salmon, Report of the Panel (12 June 1998) WT/​DS18/​R, WT/​DS18/​R/​Corr.1, DSR 1998:VIII, 3407��������������������������� 186n.57 Australia—​Measures Affecting Importation of Salmon, Report of the Appellate Body (20 October 1998) WT/​DS18/​AB/​R, DSR 1998:VIII, 3327 �������������������� 172n.222, 184n.47, 186n.57 Brazil—​Certain Measures Concerning Taxation and Charges, Reports of the Panel (30 August 2017) WT/​DS472/​R, WT/​DS497/​R�����������������������149, 155, 205–​6n.162, 317 Brazil—​Certain Measures Concerning Taxation and Charges, Reports of the Appellate Body (13 December 2018) WT/​DS472/​AB/​R, WT/​DS497/​AB/​R������������������������������� 155 Brazil—​Measures Affecting Imports of Retreaded Tyres, Report of the Appellate Body (3 December 2007) WT/​DS332/​AB/​R, DSR 2007:IV, 1527 �������������������148–​49, 152–​53, 153n.80, 155–​58, 162, 163n.151, 166, 168n.189, 170, 172–​73, 176, 178n.18, 178, 179n.21, 180n.26, 182, 186–​87 Canada—​Continued Suspension of Obligations in the EC—​Hormones Dispute, Report of the Appellate Body (16 October 2008) WT/​DS321/​AB/​R, DSR 2008:XIV��������������������������������������������������������������������������������������������77n.156, 340n.172

xxvi  Table of Cases China—​Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, Reports of the Panel (26 March 2014) WT/​DS431/​R, WT/​DS431/​R/​Add.1, WT/​DS432/​R, WT/​DS432/​R/​Add.1, WT/​DS433/​R, DSR 2014:IV, 1127�������������������������������������������������������������������������������������������������������179–​81 China—​Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, Reports of the Appellate Body (7 August 2014) WT/​DS431/​AB/​R, WT/​DS432/​AB/​R, WT/​DS433/​AB/​R, DSR 2014:III, 805���������������� 179–​81, 205–​6n.162 China—​Measures Related to the Exportation of Various Raw Materials, Reports of the Panel (5 July 2011) WT/​DS394/​R, WT/​DS395/​R, WT/​DS398/​R, DSR 2012:VII, 3501�����������������������������������������������������������������������������������179–​80, 345n.207 China—​Measures Related to the Exportation of Various Raw Materials, Reports of the Appellate Body (30 January 2012) WT/​DS394/​AB/​R, WT/​DS395/​AB/​R, WT/​ DS398/​AB/​R, DSR 2012:VII, 3295�����������������������������������������������������������������������������179–​80 China—​Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, Report of the Appellate Body (21 December 2009) WT/​DS363/​AB/​R, DSR 2010:I, 3������������ 153n.76, 153n.78, 153n.80 European Communities—​Measures Concerning Meat and Meat Products (Hormones), Report of the Appellate Body (16 January 1998) WT/​DS26/​AB/​R, WT/​DS48/​ AB/​R, DSR 1998:I, 135�������������������������������������������������������������������������������������������������153–​54 European Communities—​Measures Affecting the Approval and Marketing of Biotech Products, Reports of the Panel (29 September 2006) WT/​DS291/​R, WT/​DS292/​ R, WT/​DS293/​R��������������������������������������������������������������������������������������������������������� 320n.66 European Communities—​Measures Affecting Asbestos and Asbestos Containing Products, Report of the Appellate Body (12 March 2001) WT/​DS135/​AB/​R, DSR 2001:VII, 3243����������������������������������������������������������142n.45, 153n.77, 163n.151, 269 European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products, Reports of the Panel (25 November 2013) WT/​DS400/​R, WT/​DS401/​R, DSR 2014:II, 365������������������������������������������� 157–​58, 163, 186–​87, 189–​91 European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products, Reports of the Appellate Body (22 May 2014) WT/​DS400/​AB/​R, WT/​ DS401/​AB/​R, DSR 2014:I, 7�����������������������������������������154n.81, 157–​58, 186–​87, 189–​91, 192, 319–​20, 330n.113 India—​Measures Concerning the Importation of Certain Agricultural Products, Report of the Panel (14 October 2014) WT/​DS430/​R, DSR 2015:V, 2663�������������������� 172n.222, 184n.48, 185 India—​Measures Concerning the Importation of Certain Agricultural Products, Report of the Appellate Body (4 June 2015) WT/​DS430/​AB/​R, DSR 2015:V, 2459 ������� 184n.48 India—​Certain Measures Relating to Solar Cells and Solar Modules, Report of the Appellate Body (16 September 2016) WT/​DS456/​AB/​R, DSR 2016:IV, 1827�����������������������������������������145n.48, 147n.50, 152n.73, 160–​61, 317–​18 Indonesia—​Measures Concerning the Importation of Chicken Meat and Chicken Products, Report of the Panel (17 October 2017) WT/​DS484/​R, WT/​DS484/​R/​ Add.1, DSR 2017:VIII, 3769��������������������������������������������������������������������������������������������� 158 Japan—​Taxes on Alcoholic Beverages, Report of the Appellate Body (4 October 1996) WT/​DS8/​AB/​R, WT/​DS10/​AB/​R, WT/​DS11/​AB/​R, DSR 1996:I, 97���������������� 78n.169, 136n.4, 191n.82 Japan—​Measures Affecting the Importation of Apples, Report of the Panel (15 July 2003) WT/​DS245/​R, DSR 2003:IX, 4481 �����������������������������������������������267n.106, 269–​70 Japan—​Measures Affecting the Importation of Apples, Report of the Appellate Body (26 November 2003) WT/​DS245/​AB/​R, DSR 2003:IX, 4391���������������������������������269–​70

Table of Cases  xxvii Korea—​Import Bans, and Testing and Certification Requirements for Radionuclides, Report of the Panel (22 February 2018) WT/​DS495/​R �����������������������������������������172, 184 Korea—​Import Bans, and Testing and Certification Requirements for Radionuclides, Report of the Appellate Body (11 April 2019) WT/​DS495/​AB/​R��������������������������������� 172 Korea—​Measures Affecting Imports of Fresh, Chilled and Frozen Beef, Report of the Panel (31 July 2000) WT/​DS161/​R, WT/​DS169/​R, DSR 2001:I, 59�������������� 149–​50, 269 Korea—​Measures Affecting Imports of Fresh, Chilled and Frozen Beef, Report of the Appellate Body (11 December 2000) WT/​DS161/​AB/​R, WT/​DS169/​AB/​R, DSR 2001:I, 5������������������������������������������������������������������������������������������������ 145, 149–​53, 269 Russia—​Measures Concerning Traffic in Transit, Report of the Panel (5 April 2019) WT/​DS512/​R ����������������������������������������������������������������������������������������������������������� 345n.204 Russian Federation—​Measures on the Importation of Live Pigs, Pork and Other Pig Products from the European Union, Report of the Panel (19 August 2016) WT/​DS475/​R, DSR 2017:II, 361����������������������������������������������������������������������������� 170n.204 Thailand—​Restrictions on the Importation of and Internal Taxes on Cigarettes, Report of the Panel (7 November 1990) DS10/​R-​37S/​200������������������������������������ 319n.63 United States—​Certain Measures Affecting Imports of Poultry from China, Report of the Panel (29 September 2010) WT/​DS392/​R, DSR 2010:V, 1909���������������������185–​86 United States—​Continued Suspension of Obligations in the EC—​Hormones Dispute, Report of the Appellate Body (16 October 2008) WT/​DS320/​AB/​R, DSR 2008:X, 3507��������������������������������������������������������������������������������������77n.156, 340n.172 United States—​Certain Country of Origin Labelling (COOL) Requirements, Reports of the Panel (18 November 2011) WT/​DS384/​R, WT/​DS386/​R, DSR 2012:VI, 2745���������������������������������������������������������������������������������������������������� 197–​201 United States—​Certain Country of Origin Labelling (COOL) Requirements, Reports of the Appellate Body (29 June 2012) WT/​DS384/​AB/​R, WT/​DS386/​AB/​R, DSR 2012:V, 2449 ���������������������������������165n.161, 165n.163, 183n.45, 193, 195n.105, 197–​202 United States—​Certain Country of Origin Labelling (COOL) Requirements, Recourse to Article 21.5 of the DSU by Canada and Mexico, Reports of the Panel (20 October 2014) WT/​DS384/​RW, WT/​DS386/​RW, DSR 2015:IV, 2019���������������� 197–​201 United States—​Certain Country of Origin Labelling (COOL) Requirements, Recourse to Article 21.5 of the DSU by Canada and Mexico, Reports of the Appellate Body (18 May 2015) WT/​DS384/​AB/​RW, WT/​DS386/​AB/​RW, DSR 2015:IV, 1725�������������������������������������������������������������������������165n.166, 165n.167, 166n.171, 166n.172, 183n.45, 197–​201, 270–​71 United States—​Import Prohibition of Certain Shrimp and Shrimp Products, Report of the Appellate Body (12 October 1998) WT/​DS58/​AB/​R, DSR 1998:VII, 2755 ���������� 28, 56–​57, 176n.7, 176n.11, 177–​78, 179, 181–​82, 186–​87, 205–​6n.162, 268–​69, 297, 316–​17, 330n.113, 331 United States—​Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia, Report of the Panel (15 June 2001) WT/​ DS58/​RW, DSR 2001:XIII, 6529������������������������������������������������������������������������������� 182n.37 United States—​Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia, Report of the Appellate Body (22 October 2001) WT/​DS58/​AB/​RW, DSR 2001:XIII, 6481������������������������������� 182n.37 United States—​Measures Affecting the Cross-​Border Supply of Gambling and Betting Services, Report of the Panel (10 November 2004) WT/​DS285/​R, DSR 2005:XII, 5797�����������������������������������������������������������������������������������������������153n.78, 153–​54 United States—​Measures Affecting the Cross-​Border Supply of Gambling and Betting Services, Report of the Appellate Body (7 April 2005) WT/​DS285/​ABR, DSR 2005:XII, 5663�����������������������������������������������������������������������������������������28n.33, 152–​54, 155

xxviii  Table of Cases United States—​Measures Affecting the Importation of Animals, Meat and Other Animal Products from Argentina, Report of the Panel (24 July 2015) WT/​DS447/​R, DSR 2015:VIII, 4085����������������������������������������������������������������������������������������������������������� 185n.52 United States—​Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Panel (2 September 2011) WT/​DS406/​R, DSR 2012:XI, 5865������������������ 153n.77, 162–​66, 178n.17, 188–​89, 193–​97, 270n.125, 318–​19 United States—​Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Appellate Body (22 March 2012) WT/​DS406/​AB/​R, DSR 2012:XI, 5751��������������162–​66, 193–​97, 198, 200n.126, 201n.132, 205–​6, 207n.169 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Report of the Panel (15 September 2011) WT/​DS381/​R, DSR 2012:IV, 2013�������������������������������������������������������������������������������������������������������������������201–​5 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Report of the Appellate Body (16 May 2012) WT/​DS381/​SB/​R, DSR 2012:IV, 1837�������������153n.79, 165n.161, 165n.162, 165n.164, 186–​87, 198, 201–​5 United States—​Measures concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Recourse to Article 21.5 of the DSU by Mexico, Report of the Panel (14 April 2015) WT/​DS381/​RW, DSR 2015:XI, 5653 �������������������������������������201–​5 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Recourse to Article 21.5 of the DSU by Mexico, Report of the Appellate Body (20 November 2015) WT/​DS381/​AB/​RW, DSR 2015:X, 5133 ������������������������� 183n.44, 183n.45, 184n.46, 186–​87, 191–​92, 199–​200, 201–​5, 330n.111 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Reports of the Panels (26 October 2017) WT/​DS381/​RW/​USA, WT/​DS381/​RW2�����������������������������������201–​5 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Report of the Appellate Body (14 December 2018) WTDS381/​AB/​RW/​USA, WT/​DS381/​AB/​RW2�������������� 183n.44, 183n.45, 193n.95, 196n.109, 200, 201–​5 United States—​Section 337 of the Tariff Act of 1930, (16 January 1989) BISD 36S/​345152n.74 United States—​Standards for Reformulated and Conventional Gasoline, Report of the Appellate Body (29 April 1996) WT/​DS2/​AB/​R, WT/​DS4/​AB/​R, DSR 1996:I, 3������������������������������������������������������������������������������������157n.104, 168n.189, 175–​76, 176n.9, 177n.16, 179n.21, 181–​82 OTHER Review Panel established under the Convention on the Conservation and Management of High Seas Fishery Resources in the South Pacific Ocean with regard to the Objection by the Republic of Ecuador to a Decision of the Commission of the South Pacific Regional Fisheries Management Organisation (CMM 01-​2018) (Findings and Recommendations of the Review Panel) (5 June 2018) PCA Case No 2018-​13��������������������������������������������������������������������������������������������������������������������������� 98

List of Abbreviations Anti-​Dumping Agreement Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 BIT bilateral investment treaty CETA Canada-​European Union Comprehensive Economic and Trade Agreement CITES Convention on International Trade in Endangered Species of Wild Fauna and Flora CPTPP Comprehensive and Progressive Agreement for Trans-​Pacific Partnership DSB Dispute Settlement Body DSU Dispute Settlement Understanding ECJ European Court of Justice EEZ Exclusive Economic Zone ETP Eastern Tropical Pacific Ocean EU European Union FCTC Framework Convention on Tobacco Control FDA Food and Drug Administration FIT programme feed-​in tariff programme GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GEIA Green Energy Investment Agreement ICJ International Court of Justice ICRW International Convention on the Regulation of Whaling ILC International Law Commission ISA International Seabed Authority ITLOS International Tribunal for the Law of the Sea IUU fishing illegal, unreported and unregulated fishing JARPA II Second Phase of the Japanese Whale Research Programme under Special Permit in the Antarctic MCA Convention Convention on the Determination of the Minimal Conditions for Access and Exploitation of Marine Resources within the Maritime Areas under Jurisdiction of the Member States of the Sub Regional Fisheries Commission MERCOSUR Mercado Común del Sur NAFO North Atlantic Fisheries Organisation NAFTA North American Free Trade Agreement PCA Permanent Court of Arbitration SBDC Seabed Disputes Chamber SPR Single presentation requirement

xxx  List of Abbreviations SPS Agreement SRFC TBT Agreement TRIMS TRIPS TTIP UK UNCLOS US USMCA WHO WTO

Agreement on the Application of Sanitary and Phytosanitary Measures Sub-​Regional Fisheries Commission Agreement on Technical Barriers to Trade Agreement on Trade-​Related Investment Measures Agreement on Trade-​Related Aspects of Intellectual Property Rights Transatlantic Trade and Investment Partnership United Kingdom United Nations Convention on the Law of the Sea United States Agreement between the United States of America, the United Mexican States, and Canada World Health Organization World Trade Organization

PART I

IN T RODU C T ION

1

Introduction The early decades of the 21st century have brought a continued expansion in international legal requirements geared towards addressing common problems and pursuing common interests in an interdependent world.1 With globalisation has come a continuous rise in international legal and administrative requirements across a wide range of fields, including in the spheres of environmental protection, the fight against climate change, development, security, trade in goods and services, banking and finance, telecommunications and e-​commerce, movement of people, labour standards and public health.2 As this body of law continues to grow, disputes about its meaning and application naturally arise more frequently. Consequently, the scope of States’ regulatory freedom and obligations under international law is subject to ongoing elaboration through international adjudication.3 Predictably perhaps, as the on-​flow of all this heightened international legal activity, the reasoning of international adjudicatory bodies in regulatory disputes is gradually producing the rudiments of an emerging set of general constraints on States’ regulatory activity. Potentially global regulatory standards for the exercise of States’ regulatory freedom and obligations are emerging. The book enquires into the legitimacy of the resulting standards-​enriched international law, the appropriateness of the part played by international courts and tribunals in its articulation, and systemic challenges arising. Regulatory disputes in the environmental and health spheres are the book’s main focus, including oceans-​related disputes. Environmental and health policy is central to States’ regulatory functions and these are areas where pressures and difficulties for international tribunals are palpable, and where adjudicatory reasoning has been diversifying in response. The term ‘regulatory’ is used in a broad sense throughout the book, with regulatory freedoms and obligations understood as including freedoms and obligations both to establish rules and policies, and to monitor and enforce them.4 Disputes over activities affecting shared watercourses and the rights and obligations of riparian States feature centrally, as seen in the 1 Paul Craig, UK, EU and Global Administrative Law: Foundations and Challenges (CUP 2015). 2 Benedict Kingsbury, Nico Krisch and Richard B Stewart, ‘The Emergence of Global Administrative Law’ (2005) 68 LCP 15, 16. 3 JHH Weiler, ‘The Geology of International Law—​Governance, Democracy and Legitimacy’ (2004) 64 ZaöRV 547, 549–​551. 4 Peter Cane, ‘A Framework for Historical Comparison of Control of National, Supranational and Transnational Public Power’ in Susan Rose-​Ackerman, Peter L Lindseth and Blake Emerson (eds), Comparative Administrative Law (2nd edn, Edward Elgar 2017) 601.

Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0001

4 Introduction International Court of Justice (ICJ) and in inter-​State arbitration. Similarly, judicial and arbitral rulings have been needed to help define the balance between the freedoms of the high seas and national measures to protect fisheries and other resources in disputes arising under the United Nations Convention on the Law of the Sea (UNCLOS). In the World Trade Organization (WTO), Members’ common legal interests in free trade and their interests in the protection of human health, biodiversity and other important regulatory goals are reconciled through interpretations of WTO treaties that have evolved through dispute settlement under the WTO general exceptions clauses and relevant provisions in the WTO agreements governing technical barriers to trade and the application of sanitary and phytosanitary measures. An ample complement of tests for the acceptability of domestic regulatory activity is being produced in investment treaty arbitration in disputes where host State regulatory interests and investment protection diverge. Although there are many differences and distinctions between the adjudicatory processes and cases, there are marked commonalities in the regulatory standards articulated in disputes concerning the environment and health. Most notably there is a call for coherence in domestic regulatory decision-​making, requiring certain relationships between regulatory measures and their objectives often based on interrelated concepts of rationality, reasonableness and necessity. The development of such requirements appears to be a natural result of the deepening overlap between international and domestic regulatory requirements. This is borne out by the book’s empirical studies, which demonstrate that these standards are emerging by virtue of interpretive processes employing common sense and intuition or logic in light of the aims and purposes of the rules and regimes in question. The principles of contextualism and effectiveness are frequently employed, even though this may not always be readily apparent. Overall, three emerging ‘global regulatory standards’ are prominent. First, the standard most consistently emerging is arguably the requirement for ‘regulatory coherence’ between States’ domestic measures and their legitimate objectives, as just mentioned. Second, there are growing requirements for domestic administrative processes to take into account the interests of those in other States who will be affected by regulatory decision-​making, in the form of ‘due regard’ formulae. Third, States are increasingly expected to exercise ‘due diligence’ in the prevention of harm to others, including through a certain level of control over private actors in areas beyond national jurisdiction. These three standards—​requirements for regulatory coherence, due regard and due diligence—​together offer a parcel of disciplines on States that will help strengthen public international law and fit it for purpose in the next decades. As international law gains in range and develops a combined need for greater flexibility and detail it is to be expected that we should see a range of standards emerge from the folds of diverse international legal provisions. The nature of these regulatory ‘standards’ can be understood by adopting from general legal literature

Introduction  5 the distinction sometimes made between rules and standards.5 Any given law or legal provision may incorporate both rules and standards. The content of a rule is generally well specified. The content of a standard is not, and may require to be determined through judicial or administrative processes.6 The authoritative articulation of the standards embedded in the various legal provisions helps capture the balance of legal interests embodied in these provisions, and render the provisions more amenable to consistent application. The more broadly international law seeks to govern domestic regulatory decision-​making, the more likely disputes will arise requiring specificity in the extent to which it does so, prompting the articulation of the necessary regulatory standards. Unelaborated standards are found across international and domestic law, and within international law they may be found both in treaty provisions and in customary international law. International adjudicatory bodies’ contribution is to identify the indeterminate standards in the relevant international provisions and rules, whatever the subfield of international law in which they operate. The formal elaboration of these standards can be expected to help facilitate the consistent application of international law in diverse circumstances, although they may be articulated differently through different ‘tests’ in different contexts. In some situations standards and tests may be identifiable on the face of the relevant treaty provisions but require adjudicatory elaboration. For instance writers in the investment field use the term ‘standard’ to describe investment treaty disciplines of particularly indeterminate content such as the guarantee of fair and equitable treatment,7 and WTO lawyers may think in terms of the standards apparent on the face of WTO law, such as necessity tests. In other situations standards are articulated when international courts and tribunals read them into the relevant provisions in order to make these provisions function. Suggesting that the relevant formulae currently identified by diverse international adjudicatory bodies in regulatory disputes represent standards in an established sense would arguably be premature. A degree of iteration and a certain level of acceptance will be needed for the regulatory standards and tests to ensconce themselves in international law. There is, after all, no doctrine of precedent in international law and adjudicatory decisions are binding only between the parties and in respect of the particular case. Advisory opinions remain advisory, although advisory opinions are often encompassed in this book’s references to international ‘adjudicatory’ proceedings—​employing the terms ‘adjudication’ and ‘adjudicatory’

5 Neil MacCormick, Rhetoric and the Rule of Law: A Theory of Legal Reasoning (OUP 2005) 170; see also HLA Hart, The Concept of Law (Clarendon Press 1961) 127–​128. 6 Duncan Kennedy, ‘Form and Substance in Private Law Adjudication’ (1976) 89(8) Harv.L.Rev. 1685; Pierre Schlag, ‘Rules and Standards’ (1985) 33(2) UCLA L.Rev. 379. 7 E.g. N Jansen Calamita, ‘International Human Rights and the Interpretation of International Investment Treaties: Constitutional Considerations’ in Freya Baetens (ed), Investment Law within International Law: Integrationist Perspectives (CUP 2013) 164, 169–​174.

6 Introduction with licence. However, international courts’ and tribunals’ pronouncements enjoy a special status among material sources of international law,8 and have the potential to modify how legal rules are perceived.9 In the WTO, Appellate Body decisions have been understood as giving rise to a jurisprudence constante, and the same concept has been referenced in investment treaty arbitration.10 Further, the content of what may be the core emerging global regulatory standards may be expected increasingly to stabilise as commonalities in their articulation in different fields of international law become increasingly apparent. This has already been seen to a certain extent in the case of the due diligence standard attaching to preventive obligations. The developments we are seeing in the international adjudicatory space do not represent the full story of the development of global regulatory standards. These developments are complemented by the inclusion of innovative formulae governing the exercise of States’ regulatory freedom in negotiated instruments.11 A requirement for certain forms of coherence between regulatory measures and their objectives often features in negotiated treaty provisions, as seen in a range of recently concluded investment protection treaties and regional free trade agreements.12 Concepts of due diligence and due regard will naturally have a certain bearing also in contexts such as the fulfilment of the Paris Agreement, where the acuity of the climate change challenge acts as a particular catalyst,13 and further afield in spheres such as the exploration and exploitation of the deep seabed,14 and the protection of biological diversity in areas beyond national 8 Statute of the International Court of Justice (adopted 26 June 1945, entered into force 24 October 1945), art 38(1)(d); Gerald G Fitzmaurice, ‘Some Problems Regarding the Formal Sources of International Law’ in Frederick Mari van Asbek (ed), Symbolae Verzijl: présentées au professeur J. H. W. Verzijl à l’occasion de son LXXX-​ième anniversaire (Martinus Nijhoff 1958) 153, 172. 9 Gleider I Hernández, The International Court of Justice and the Judicial Function (OUP 2014) 292, 928. 10 Isabelle Van Damme, Treaty Interpretation by the WTO Appellate Body (OUP 2014) 198; Philip Morris v Uruguay ICSID Case No ARB/​1017, Decision on Jurisdiction (Piero Bernardini, Gary Born and James Crawford), 2 July 2013, [204]. 11 Benedict Kingsbury and others (eds), Megaregulation Contested: Global Economic Ordering After TPP (OUP 2019). 12 For instance see Comprehensive and Progressive Agreement for Trans-​ Pacific Partnership (CPTPP) (signed 8 March 2018, entered into force 30 December 2018), Annex 9-​B (Expropriation), art 3(b) stating that non-​discriminatory regulatory actions designed and applied to protect legitimate public welfare objectives will not constitute indirect expropriations, except in rare circumstances. Emphasis added. 13 Paris Agreement under the United Nations Framework Convention on Climate Change (signed 22 April 2016, entered into force 4 November 2016); ‘Decision 1/​CP.21’ Framework Convention on Climate Change Conference of the Parties (29 January 2016) FCCC/​CP/​2015/​10/​Add.1, [102]–​[103]. 14 Consider the ‘Decision of the Assembly of the International Seabed Authority relating to the Regulations on Prospecting and Exploration for Cobalt-​rich Ferromanganese Crusts in the Area’ International Seabed Authority Assembly (22 October 2012) ISBA/​18/​A/​11, Annex; ‘Decision of the Assembly of the International Seabed Authority relating to the regulations on prospecting and exploration for polymetallic sulphides in the Area’ International Seabed Authority Assembly (15 November 2010) ISBA/​16/​A/​12/​Rev.1; and ‘Draft Regulations on Exploitation of Mineral Resources in the Area’ International Seabed Authority (8 August 2017) ISBA/​23/​LTC/​CRP.3*.

Introduction  7 jurisdiction.15 The overall picture is dynamic and complex as these various distinct legal discussions contribute respectively to the gradual development of more sophisticated international legal requirements in regard to regulatory activity. Amidst all this activity, the part being played in the development of the international legal order by international courts and tribunals remains constant, justifying a thorough consideration of the contribution they are making. It is also to be remembered that, although the reasoning of international courts and tribunals is guided by a range of considerations in addition to the pleadings of the parties, governments are key actors in the adjudicatory setting. As international law gradually settles itself it is likely that greater convergence between international adjudicatory understandings of existing texts and the content of newly negotiated provisions will emerge. The apparent transition to a ‘standards-​enriched’ international law prompts us to ask about its legitimacy. Global administrative law scholars have been contending with the proper conditions for regulatory activity with an international reach for some time. The global administrative law project addresses the exercise of administrative power internationally with an emphasis on how the activities of international organisations may be governed, while also addressing the activities of States which are the subject of this book.16 In the investment treaty field especially, comparative public law thinking has made a complementary contribution.17 As a result in part of these influences, reference to standards and tests like some of those addressed in this book as standards ‘of review’ has become commonplace. Yet the book doubts that global regulatory standards are necessarily best understood as distinct standards ‘of review’. The book emphasises instead how regulatory standards emanate directly from and are an embodiment of States’ substantive commitments under various legal provisions. Global administrative law as it presently stands may not directly assist with the question of the legitimacy of public international law and the justifiability of international law’s enrichment through the admixture of global regulatory standards in the course of international adjudication. Global administrative law does not attempt to provide a normative foundation for the guidance it offers on achieving good administration.18 Indeed, it is said that global administrative law serves 15 See the negotiations initiated under ‘International legally binding instrument under the United Nations Convention on the Law of the Sea on the conservation and sustainable use of marine biological diversity of areas beyond national jurisdiction’ UNGA Res 72/​249 (24 December 2017) UN Doc A/​ RES/​72/​249. 16 Benedict Kingsbury, Nico Krisch and Richard B Stewart, ‘The Emergence of Global Administrative Law’ (2005) 68 LCP 15; Richard B Stewart, ‘Global Standards for National Societies’ in Sabino Cassese (ed), Research Handbook on Global Administrative Law (Edward Elgar 2016) 175. 17 Stephan W Schill (ed), International Investment Law and Comparative Public Law (OUP 2010). 18 Benedict Kingsbury, Megan Donaldson and Rodrigo Vallejo, ‘Global Administrative Law and Deliberative Democracy’ in Anne Orford and Florian Hoffmann (eds), Oxford Handbook of International Legal Theory (OUP 2016) 526; Benedict Kingsbury and Megan Donaldson, ‘From Bilateralism to Publicness in International Law’ in Ulrich Fastenrath and others (eds), From Bilateralism

8 Introduction primarily as an inspiration for reflection on administration globally and an attempt to expand the available intellectual and practical resources.19 Therefore, although this book may make a contribution to global administrative law scholarship, the book looks beyond global administrative law writings for insight into the question of legitimacy, turning to jurisprudential theory on legitimate authority. Specifically, the book is informed by normative theory on legitimate authority in plural or concurrently operating legal orders. Here these plural orders are domestic legal orders and the international legal order. Drawing in part but not exclusively on the work of Joseph Raz, prevailing normative theory on legitimate authority in circumstances of legal plurality suggests a concept of ‘relative authority’ requiring consideration of both substantive and procedural justifications for authority as well as a relativity that will affect these justifications and may require the co-​ordinated exercise of authority.20 Taking into account these considerations, the book poses and responds to three questions about the change in international law that may be brought about through the regulatory standards emerging from international dispute settlement and international courts’ and tribunals’ advisory opinions. Firstly, how effective are the regulatory standards elaborated by international courts and tribunals in preserving or enhancing international law’s claim to legitimate authority? Secondly, how appropriate is it to rely on international adjudicatory processes as one of the main avenues through which to create a ‘standards-​enriched’ international law? Thirdly, what are the opportunities, challenges and dilemmas arising in the course of this process of transition to a standards-​enriched international law? This approach rests on the view that the articulation of global regulatory standards by international courts and tribunals represents a managing of the relationships between domestic and international legal systems, and an ordering of plurality. However, we are prompted also to ask about the extent to which the emergence of regulatory standards might be understood as a constitutional process. What we are seeing looks distinctly like a taming of sovereignty, and a form of constitutionalisation. Indeed, the empirical studies on which the analyses in the book are based reveal that in the search for a stronger doctrinal foundation for the standards identified, international courts and tribunals appear tacitly to be drawing on certain aspects of the international law abuse of rights doctrine previously connected mainly with the concept of the misuse of power. The regulatory freedom of States is in effect treated as akin to conferred power. Regulatory standards thus infer a conceptualisation of the concept of sovereignty in international to Community Interest: Essays in Honour of Judge Bruno Simma (OUP 2011) 79; Carol Harlow, ‘Global Administrative Law: The Quest for Principles and Values’ (2006) 17 EJIL 187. 19 Nico Krisch, ‘Global Administrative Law and the Constitutional Ambition’ in Petra Dobner and Martin Loughlin (eds), The Twilight of Constitutionalism? (OUP 2010) 245, 246, 256–​257. 20 Nicole Roughan, Authorities: Conflicts, Cooperation and Transnational Legal Theory (OUP 2013) (hereafter Roughan, Authorities). Though see Chapter 9, section B 3, 285.

Introduction  9 law in which it becomes a degree more analogous with sovereignty as commonly understood today in domestic constitutional law, and subject to similar forms of constitutional containment in certain instances. Such a metamorphosis in the understanding of sovereignty undoubtedly follows from the adoption of the great multilateral treaties of the 20th century, but the transmutation in its nature that now becomes apparent is a new stage, an emergence from a chrysalis, a culmination in development, and, from a practical perspective, a profound transition. Nevertheless, the recognition of inherent limitations on sovereign regulatory freedom through the global regulatory standards elaborated in international courts and tribunals constitutionalises international legal relations only by degree. Revision in the concept of sovereignty and other significant changes within legal systems are alluded to in the theory on relative authority in co-​existing plural legal orders drawn upon in this book, but greater consolidation of these orders will not always follow. However, it may be that certain conceptual and structural developments within legal orders are to be expected in a search for relative authority in any legal setting, including for instance in relations between State authority and that of indigenous peoples.21

The Book’s Methodology and Structure The book is closely based on analysis of environmental and health disputes, supported by reference to relevant literature. Valuable insights gained from a series of interviews with present and former adjudicators, lawyers, legal advisors, registrars and secretariat staff have helped sensitise the work to the lived realities of international adjudication, and are referred to in the book’s discussions although individuals must remain unidentified due to ethical commitments. The book is divided into five parts. Part I of the book explains the scope and thrust of the work, going on to familiarise the reader more closely with the concept of regulatory standards and the book’s conceptual framing. Parts II, III and IV of the book engage in the analyses of health and environmental jurisprudence on which the book is founded. They address regulatory disputes in three clusters of international courts and tribunals. Part II enquires into the developments in the ICJ and in dispute settlement under UNCLOS, as well as inter-​State arbitration administered by the Permanent Court of Arbitration (PCA). Part III looks at the reports of WTO panels and the Appellate Body, incorporating a perspective on the latter’s appointments crisis and subsequent paralysis. Part IV considers the decisions of tribunals appointed to determine investor claims against host States under the many investment protection treaties now in existence worldwide, taking into



21

Ibid, 215–​246.

10 Introduction account current moves towards the establishment of an international investment court or appeals mechanism. Drawing on the analyses conducted in Parts II, III and IV, Part V of the book returns to address the book’s overarching enquiries in greater depth, together with associated issues. As discussed in Part II of the book, in the ICJ and under the law of the sea there are relatively few regulatory cases. However, the regulatory standards elaborated in these cases may as a group be the most significant ones. They relate both to States’ regulatory freedom and to their regulatory obligations, whereas the latter are less visible in WTO dispute settlement, where the emphasis lies on the elimination of trade restrictions, and investment treaty arbitration. As to disputes involving a need to determine the extent of States’ regulatory obligations, the standard that stands out most strongly in the environmental decisions of the ICJ and under the law of the sea is the standard of due diligence that is read into international legal rules and provisions on the prevention of transboundary harm and harm to common spaces and resources and interests. In the longer term the ICJ’s reasoning and dicta concerning constraints on States’ regulatory authority in the Dispute regarding Navigational and Related Rights (Costa Rica v Nicaragua) and Whaling in the Antarctic (Australia v Japan: New Zealand intervening) may also prove particularly significant in so far as disputes concerning constraints on States’ regulatory freedoms are concerned. The breadth of the formula for domestic regulatory coherence elaborated in Navigational Rights is notable. Meantime the ICJ’s requirement in Whaling in the Antarctic that the design and implementation of Japan’s scientific whaling programme be reasonable in relation to achieving its stated objectives in order to qualify as a programme for purposes of scientific research appears further to mark the ICJ’s endorsement of the trend towards the development of an international standard that looks to regulatory coherence. Together with the UNCLOS Annex VII Tribunal’s decision in the Chagos Marine Protected Area Arbitration (Republic of Mauritius v United Kingdom), the judgment in Whaling in the Antarctic also importantly advances international thinking on the significance, scope and modes of due regard required of States in respect of others’ interests. By virtue of its institutional context WTO dispute settlement, discussed in Part III, has carried the flag in terms of demonstrating how international dispute settlement can identify tests that give life and effect to bare treaty provisions. An ongoing series of diverse regulatory disputes arising since the adoption of the WTO’s Dispute Settlement Understanding in 1995 has impelled panels and the Appellate Body into elaborating a range of tests for regulatory coherence which, though still evolving, have bedded themselves down in WTO jurisprudence. Understanding the dynamics of the production of these tests in the trade context in the light of the broader analyses provided in this book and more widely may be particularly important for sensitising governments whose concerns about practice in the WTO have pushed the appellate system into disoperation. Current calls for reform in the WTO need to be informed by a stronger appreciation of why it is that WTO dispute

Introduction  11 settlement in regulatory disputes has necessarily had to be creative in the clarification of WTO law, while remaining conservative and accommodating towards WTO Members. There are important differences between the bodies studied in Parts II and III of the book and investment treaty arbitration addressed in Part IV. Investment treaty arbitration is the most flexible form of international adjudication studied in this book, conducted ad hoc through small tribunals appointed specifically for the purpose of each case arising under a wide range of different investment treaties, and presently still lacking an appeal mechanism. Successive tribunals, and individual tribunal members themselves, often express different and contrasting perspectives, as evident in majority decisions and dissents. A particular responsiveness to the parties can be seen, in part due to the appointments process as well as to the arbitral traditions strongly characterising this form of dispute settlement and the presence of private complainants. The book bases its enquiry on developments in health and environmental cases in all these international courts and tribunals as well as further inter-​State arbitrations of relevance. Considerable similarity between emerging regulatory standards and the standards identified in this book could be predicted in many other fields, with differences depending on the characteristics of the field. Resource limitations have precluded extending the research into additional fora, or into areas beyond environmental and health disputes. Important work beyond the scope of this project could be carried out for instance by examining decisions in international and regional human rights courts.22 It would be necessary to contend with the argument that the character of human rights norms as primarily inward-​looking distinguishes that body of law from the areas addressed in this study where regulatory standards are key to establishing a concrete balance of interests between States.23 However, this point is open to challenge, and increased international recognition of a right to a healthy environment will further bring into question this conception of human rights, with its fulfilment resting heavily on appropriate domestic regulation across all jurisdictions.24 Dispute resolution under regional free trade agreements could also be the subject of future study. The book’s focus falls squarely within public international law broadly speaking, although certain European Union cases are referred to where helpful to the book’s analysis. The emergence of regulatory standards in areas such as tax or competition, the regulation of 22 See for instance Johannes Hendrik Fahner, Judicial Deference in International Adjudication (Hart 2020) 30–​58. 23 For discussion, Yuval Shany, ‘Toward a General Margin of Appreciation Doctrine in International Law?’ (2005) 16(5) EJIL 907, 919–​921. On international investment law as the balancing of interests between States see Chapter Eight, section C. 24 Particularly if the right to a healthy environment were oriented around environmental protection as a global public good, as proposed by Catherine Redgwell and Alan Boyle, ‘From Anthropocentric to Ecocentric Rights’, (Human Rights for the Planet, High Level Conference on Human Rights and Environmental Protection, Webinar, 5 October 2020).

12 Introduction particular markets such as the energy market, or specific areas such as government procurement may also merit investigation.

The Book’s Three Questions Based on the analyses carried out on cases in the fora identified above, how effective are the regulatory standards elaborated in international courts and tribunals in preserving or enhancing international law’s claim to legitimate authority? From a procedural perspective, the emergence of the regulatory standards identified in this study appears on its face to help sustain this claim. Their consistent accommodation of domestic legal authority should help ensure that domestic decision-​making in democratic States is not blocked. From a substantive perspective, the standards also appear in certain measure to help sustain international law’s claim to legitimate authority. The standards help generate greater certainty in relation to how relatively indeterminate international legal rules and provisions will operate and thus contribute to the better operation of international legal regimes. However, the standards’ indulgence of domestic authority limits their contribution to the development of international law’s capacity to achieve the balancing of international interests in ways better calibrated to global substantive needs and to an appropriate co-​ordination of domestic and international legal authority, which weakens the authority claim. This may be disappointing, but to understand the situation better we need to turn to the book’s second question. How appropriate is it to rely on international adjudicatory processes in the development of regulatory standards in international law? International adjudicatory bodies’ skills and institutional practices incorporate many elements going to the strength of international adjudication as a means for the production of regulatory standards. Yet, while the expertise of international courts and tribunals is high, the international adjudicatory process remains constrained both formally and socially. Formally, international courts and tribunals must generally work within the bounds of accepted legal procedures. Socially they must be responsive to their immediate audiences, especially litigants and their institutional constituencies,25 and the studies in this book demonstrate that the influence of the pleadings on the standards identified by international courts and tribunals is significant. Both types of constraint explain why we should not expect the elaboration of standards and tests that might serve to co-​ordinate domestic and international legal authority more optimally. Indeed, it would arguably be inappropriate for international courts and tribunals to go it alone in developing, for instance, regulatory coherence tests requiring 25 Karen J Alter, Laurence R Helfer and Mikael Rask Madsen (eds), International Court Authority (OUP 2018).

Introduction  13 proportionality stricto sensu between regulatory measures and their aims. International adjudication is a relatively closed process. Little communal deliberation informs the generation of regulatory standards through international dispute settlement. Yet the emerging global regulatory standards will have an effect for all. These circumstances pose a difficulty in relation to the procedural justification for the authority of the standards-​enriched international law that is being produced through adjudicatory proceedings, as these developments are insufficiently paralleled in discussions elsewhere, including in multilateral fora. The difficulty is most acute in relation to proportionality testing as compared with tests based on rationality and reasonableness. This is because of the way in which proportionality testing formally elevates responsibility for value judgements onto the international plane (references to ‘proportionality’ here and throughout the book are intended as references to proportionality stricto sensu unless otherwise indicated).26 International courts’ and tribunals’ contribution to the development of global regulatory standards may be the best and most appropriate that can be achieved in international adjudicatory fora in the light of these considerations concerning legitimacy. A standard for regulatory coherence that relies on rational and reasonable connections between regulatory measures and their effects is a serviceable standard, as are standards that call for due regard and due diligence. The interpretive processes through which the standards are elaborated are supportable, and depending on the circumstances this may assist with procedural justification. Accordingly, the book defends the part necessarily and constructively played by international courts and tribunals in the elaboration of these regulatory standards, while also calling for greater attention from the international community to the choices to be made in the development of regulatory standards and greater deployment of political efforts in order to address the deficit. This may require greater transparency and public involvement in international legal negotiations. What are the broader opportunities, challenges and dilemmas arising in the course of international adjudicatory participation in the global transition to a ‘standards-​enriched’ international law? In addition to changes in the understanding of sovereignty, the book considers here the importance of integration rather than fragmentation within international law, and the changing status of private actors. As to the fragmentation problem, the difficulty is that the adjudication of regulatory disputes using certain forms of standard may constrain efforts better to integrate international law. Effort will be needed to ensure that the verticalised perception of international law’s interaction with domestic law that may be engendered by the adoption of common standards in the regulatory space does not reinforce the silo effect that presently tends to segment international law into its various institutional areas such as international trade law, international



26

Chapter Eight; Chapter Ten, section C 1.

14 Introduction environmental law, international human rights law and international investment law. The need for an integrated international law calls for an active response, setting out to find methods by which it can more concretely be assured that recognition is given to the ways in which international law broadly speaking does and must infuse States’ regulatory actions. Identifying opportunities for syntheses between social, environmental and economic law and policy under the emerging new global regulatory standards will be important here. There may be potential for international law to embrace new ideas to help achieve appropriate effects as part and parcel of the application of regulatory standards. For instance, it is possible to envisage a requirement that domestic decision-​makers take into account, as mandatory relevant considerations, legal issues arising in flanking subfields of international law, perhaps as part of States’ due regard for the interests of other States as seen in domestic public law in a number of jurisdictions. Attention must also be devoted to the changing status of private actors within public international law, and their future standing and influence across the public international law field.27 The proper place for private interests in global law, and especially of non-​natural persons in the form of incorporated entities, requires careful and ongoing consideration. The influence of private actors in global law will continue to grow. Through an expanding body of transnational law, public and private actors together progress the rules governing much of the commercial and economic activity around the world.28 Business’s contributions to global regulation may be inevitable and indeed invaluable as the private sector outpaces government capacity in a wide range of areas. Focusing on the transparency and accountability of private action will be important for the future. Traversing these opportunities and challenges are further considerations concerning the appropriateness of regulatory standards that would rely on the notion of proportionality stricto sensu to determine the legality of regulatory measures. Proportionality might possibly enable international law better to serve its subjects’ needs by overcoming domestic biases and producing decisions more aligned with a grounded balancing of international interests and improved co-​ordination of domestic and international authority. This may explain the extent to which proportionality is hailed as a principle of distinct importance for the constitutionalisation of the global legal order, including in the context of investment treaty arbitration. However, as indicated, in principle it is not for international courts and tribunals to institute proportionality testing. International law’s legitimacy would not be enhanced by the addition of a regulatory coherence test of such substantive significance for the balancing of global interests without more representative processes.

27 Neil Walker, Intimations of Global Law (CUP 2015) 180. 28 Philip C Jessup, Transnational Law (Yale University Press 1956); Harold Hongju Koh, ‘Transnational Legal Process’ (1996) 75 Neb.L.Rev. 181; Terence C Halliday and Gregory Shaffer, Transnational Legal Orders (CUP 2015).

Introduction  15 In addition there are associated concrete concerns which international courts and tribunals may not be best placed to address. Depending on how it is articulated, the concept of proportionality could raise the status of private actors as rights-​holders on the public international plane to new levels, providing a platform for increased claims to expanded legal subjecthood while elevating economic commercial and financial corporate interests to the level of fundamental rights on a par with basic human rights. The part to be played by international courts and tribunals in the proportionality debate must be a limited one and needs to be appreciated in terms of a contribution to an ongoing exchange between multiple actors. There is an alternative, at least for the interim while such matters are given the consideration they require. The alternative lies in the identification of requirements for due regard as a more appropriate exercise of the international adjudicatory function than the espousal of a principle of proportionality. Due regard tests most obviously fall to be articulated under UNCLOS, which contains a number of provisions explicitly requiring States party to have due regard for the interests of other States party. However, it is possible to envisage due regard standards being found within the law in a range of international legal contexts, both alone and at the same time as applying other regulatory standards such as rational relationship requirements. We can see indications of this both in the WTO and in investment treaty arbitration. In comparison with proportionality testing, due regard tests have greater potential to generate positive new pathways for the analysis of States’ compliance with their regulatory obligations, and to ameliorate concerns arising in relation to the retention of sovereignty, the integration of international law and the status of private actors. The evolution of sophisticated due regard tests offers considerable promise for the co-​ordination of global and domestic legal orders, enabling with time the development of the political will for experimentation with stronger interest-​balancing and co-​ordinating mechanisms as needed. The book concludes by reiterating the view that the regulatory standards emerging through international dispute settlement represent primarily an ordering of the relationship between domestic and international law rather than its constitutionalisation in a grander sense. However, as seen in the WTO, regulatory standards are likely to be susceptible to processes through which they may become embedded in international and domestic law, and they may be predicated on the perception of commonalities between constitutionally conferred domestic sovereign power and sovereign powers on the international plane, with potentially far-​ reaching effects. Meantime, States’ regulatory responses to events such as the arrival of the COVID-​19 pandemic in 2020 can be expected to have an effect on the dynamics producing global regulatory standards. Even while States reorient their economic policies in order to try and future-​proof against such crises, requirements for regulatory coherence are implicated, with challenges potentially arising in many fora in respect of allegedly insufficiently calibrated governmental responses to the

16 Introduction pandemic.29 International scrutiny has fallen also on the due diligence of origin States and States with high levels of subsequent infections, and the obligations of due regard for other States and their populations that might be read into applicable international legal obligations, together giving substance to international legal obligations of co-​operation. The conclusions reached in this study should further be set in the context of the work of international courts and tribunals as it relates to international law rules on matters including international criminal matters, national security and international organisations’ membership and operation. Although the focus in this book is with the regulatory freedom and obligations of States, the standards articulated may also apply in various ways to the actions of international organisations, and this calls for ongoing research in alliance with the global administrative law agenda. Parallel international legal developments regarding the conduct of States and that of international organisations have been seen already in the fields of treaty law and the law on responsibility. Although international organisations differ fundamentally from States, and their present and future regulatory operation will be governed by specific provisions according to context, there will be parallels also in regard to regulatory standards. For instance, the International Health Regulations 2005 require the Director-​General of the World Health Organization, when issuing recommendations responding to a public health emergency of international concern, to consider health measures that are not more restrictive or intrusive than reasonably available alternatives.30

Conclusion Viewing international dispute settlement in terms drawn from administrative law, there is much that will seem familiar in the emergence of regulatory standards. There may even be a sense that we already know a great deal of what we are being told by international courts and tribunals. Such standards may be known from domestic settings, and often appear to arise from a logic internal to the relevant rules, provisions and regimes, spliced with an element of common sense or pragmatism. Argument is to be expected in relation to whether administrative law precepts are exogenous to international law, or may in contemporary international law lay claim to endogeneity. Argument is to be expected particularly, too, in relation to

29 See inter alia World Health Organization International Health Regulations (2005), (3rd edn. Geneva: World Health Organization, 2016), including art 43, governing health measures taken by States additional to those recommended by the World Health Organization (hereafter International Health Regulations (2005)). E.g. Caroline Foster ‘Justified Border Closures do not violate the International Health Regulations 2005’ (EJIL:Talk!, 11 June 2020) accessed 15 August 2020. 30 International Health Regulations (2005) (n 29), art 17(d).

Introduction  17 the enhancement of the international adjudicatory role occasioned by an engagement in the development of regulatory standards. Previously we may have believed international courts’ and tribunals’ contribution to the development of international law through international courts and tribunals to be a slow and moderately static process, proceeding in bursts or in piecemeal fashion. The possibility of a particular judgment or decision making a significant contribution was always present, but it could have been expected the effects would be likely to relate to individual areas of the law.31 In the light of the studies presented in this book, it becomes apparent that through proceedings in multiple international dispute settlement bodies common systemic international legal developments may be taking place across a highly diverse range of regulatory fields. Reflection on the institutional design of international adjudicatory bodies and dispute settlement processes appears more essential than ever.32

31 E.g. see contributions to Christian J Tams and James Sloan (eds), The Development of International Law by the International Court of Justice (OUP 2013). 32 Chapter Nine, section C 4.

2

Introducing Regulatory Standards Adjudication has become an established mode of international legal dispute settlement, as well as a practical necessity for global economic co-​ordination.1 The International Court of Justice (ICJ) is now complemented with a range of adjudicatory bodies endowed with compulsory jurisdiction in the spheres of law of the sea, trade and investment.2 Conclusion of the United Nations Convention on the Law of the Sea (UNCLOS) in 1982 ensured the availability of arbitration and adjudication for oceans-​related disputes. In the mid 1990s, the adoption of the Dispute Settlement Understanding (DSU) at the birth of the World Trade Organization (WTO) built on prior dispute settlement processes to create a compulsory adjudicatory system putting international trading relations on a new legal footing.3 Although the 2019 Appellate Body appointments crisis has stymied the system’s operation, together with panels the Multi-​Party Interim Appeal Arbitration Arrangement established among participating WTO Members can be expected to carry forward the various understandings of WTO law established over the previous 25 years.4 The meteoric rise in investment treaty arbitration since 2000 has meantime produced what many regard as a further highly successful new form of international adjudication, and scholars have urged its inclusion in practical and theory-​based studies on the work of international courts and tribunals.5 More recently the advent of the mega-​regional trade agreements has set the scene 1 Georges Abi-​ Saab, ‘The Normalization of International Adjudication: Convergence and Divergencies’ (2010) 43 N.Y.U.J.Int’l Law & Pol. 1; Mikael Rask Masden, ‘Judicial Globalization: The Proliferation of International Courts’ in Sabino Cassese (ed), Research Handbook on Global Administrative Law (Edward Elgar 2016) 282. 2 Cesare PR Romano, ‘Progress in International Adjudication: Revisiting Hudson’s Assessment of the Future of International Courts’ in Russel A Miller and Rebecca M Bratspies (eds), Progress in International Law (Martinus Nijhoff Publishers 2008) 433, 440. 3 Hélène Ruiz Fabri, ‘Dispute Settlement in the WTO: On the Trail of a Court’ in Steve Charnovitz, Debra P Steger and Peter Van den Bossche (eds), Law in the Service of Human Dignity: Essays in Honour of Florentino Feliciano (CUP 2005) 136; Giorgio Sacerdoti, ‘The Dispute Settlement System of the WTO in Action: A Perspective on the First Ten Years’ in Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes (eds), The WTO at Ten: The Contribution of the Dispute Settlement System (CUP 2006) 45; Benedict Kingsbury, ‘International Courts: Uneven Judicialization in Global Order’ in James Crawford and Martti Koskenniemi (eds), The Cambridge Companion to International Law (CUP 2012) 203, 209 (hereafter Kingsbury, ‘International Courts’). 4 WTO (Dispute Settlement Body), ‘Statement on a Mechanism for Developing, Documenting and Sharing Practices and Procedures in the Conduct of WTO Disputes’ (30 April 2020) JOB/​DSB/​1/​ Add.12, Addendum. 5 Gary Born, ‘A New Generation of International Adjudication’ (2012) 61 Duke L.J. 775; Kingsbury, ‘International Courts’ (n 3) 209; and see Slowakische Republic v Achmea BV [2017] ECLI:EU:C:2017:699, paras 84–​131.

Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0002

20 Introduction for a new era in regional dispute settlement, and the prospect of an international investment court or appeals mechanism sits on the near horizon.6 All the while State-​to-​State arbitration continues as an important form of international adjudication in the broad sense.7 Progressing this book’s inquiry into these international courts’ and tribunals’ elaboration of global regulatory standards, this chapter begins with an investigation into the standards that have been emerging. The chapter starts by introducing the three regulatory standards seen in the disputes studied in this book and identifies the main characteristics of these standards. These comprise a regulatory coherence standard calling for coherent relationships between regulatory measures and their purposes, a standard requiring that a regulating State has demonstrated due regard for the interests of other States and a standard requiring the exercise of due diligence in the exercise of States’ obligations to prevent transboundary harm. These three core regulatory standards consistently characterise the environmental and health disputes on which this book has focused, and they appear to be gaining status as global regulatory standards for the future. The regulatory standards identified are developing in part under the influence of the international law abuse of rights doctrine, as well as the global administrative law movement. This endows them with features prompting consideration of the extent to which the development of global regulatory standards represents a constitutionalisation of international law. The chapter concludes however that the emergence of these regulatory standards may better be understood primarily as an ordering of the relationship between domestic and international legal systems. By helping specify the extent of States’ regulatory freedom and obligations, the standards order the relationship between domestic and international law. They tell us whether international or domestic legal authority will govern any particular situation. Ideally, the regulatory standards adopted in the international community will enhance the authority of both national and international law. The chapter therefore brings to bear theory on relative authority from normative jurisprudence as a means for gaining insight into the claim to legitimate authority of a ‘standards-​ enriched’ international law. Regulatory standards emanate from and embody States’ substantive commitments under applicable legal provisions. They are elaborated in the course of international adjudicatory processes due to the practical need for international courts and tribunals to deploy reasoning that will enable decisions giving effect to the balance of legal interests among the parties that is written into the relevant international legal provisions or rules. This may often be a balance between

6 Chapter Seven, section A. 7 Cesare PR Romano, Karen J Alter and Yuval Shany, ‘Mapping International Adjudicative Bodies, the Issues, and Players’ in Cesare PR Romano, Karen J Alter and Yuval Shany (eds), The Oxford Handbook of International Adjudication (OUP 2014) 3, 5.

Introducing Regulatory Standards  21 States’ economic interests and their common environmental interests, for instance. Importantly it is the balance between the legal interests of those subject to the relevant rules that is defined through such standards, rather than a balance between the various interests of the disputing parties in a given case. In terms of the argument heard by an adjudicatory body, a disputing party’s interests in a given case may appear to align with one set of interests more closely than with another. However, together with those not involved in the proceedings, disputants may in fact have longer term strategic interests on both or all sides of the balance. The dicta and formulae articulated in international courts’ and tribunals’ decisions contribute to a broader sequence of developments. Governments’ increasingly sophisticated responses to the need for regulatory standards are producing a diverse range of new treaty provisions governing regulatory activity in the health and environmental sphere and beyond.8 Compared with older treaties, these instruments frequently seek a greater calibration of provisions governing States’ regulatory freedom and obligations, and a more particular reconciliation of States’ interests.9 The most specific provisions in regard to regulatory practice appear to be those found in the Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP).10 The definition of ‘regulatory coherence’, adopted in the CPTPP for the purposes of applying the relevant provisions in that agreement, is a particularly broad definition embracing many different aspects of good regulatory practice.11 The Agreement’s provisions call for regulatory impact assessments that explicitly assess the need for regulation, examine feasible alternatives and explain the grounds for selecting the measure chosen, with measures to be reviewed at appropriate intervals. The CPTPP also establishes a Committee on Regulatory Coherence which will serve as a forum for the development of ongoing understandings around best regulatory practice.12 Contrastingly, the Canada-​European Union Comprehensive Economic and Trade Agreement (CETA) and envisaged Transatlantic Trade and Investment Partnership (TTIP) more exclusively pursue 8 Consider the Canada-​European Union (EU) Comprehensive Economic and Trade Agreement (CETA), which contains general exceptions, a specific provision restricting understandings of indirect expropriation in the investment context, and distinct chapters on trade and sustainable development, and trade and environment, as well as trade and labour. Canada-​European Union (EU) Comprehensive Economic and Trade Agreement (CETA) (signed 30 October 2016, entered into force provisionally 21 September 2017), Chapters 22, 23, 24, 28 and Annex 8-​A (Expropriation), art 3 (hereafter Canada-​ European Union Comprehensive Economic and Trade Agreement). 9 N Jansen Calamita, ‘International Human Rights and the Interpretation of International Investment Treaties: Constitutional Considerations’ in Freya Baetens (ed), Investment Law within International Law: Integrationist Perspectives (CUP 2013) 164, 183–​184. 10 Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP) (signed 8 March 2018, entered into force 30 December 2018), Chapter 25 (hereafter Comprehensive and Progressive Agreement for Trans-​Pacific Partnership). 11 Ibid, art 25.2.1: ‘the use of good regulatory practices in the process of planning, designing, issuing, implementing and reviewing regulatory measures in order to facilitate achievement of domestic policy objectives, and in efforts across governments to enhance regulatory co-​operation in order to further those objectives and promote international trade and investment, economic growth and employment’. 12 Ibid, art 25.6.

22 Introduction the related ideas of regulatory transparency and regulatory co-​operation, also establishing a Regulatory Co-​operation Forum.13 Yet even as a growing patchwork of new treaty texts comes into being, international courts and tribunals must continue their work, determining the questions before them based on the treaties and provisions applicable in the cases before them, which may frequently involve the application of older treaty texts. Further, even as the level of specificity in international treaty provisions increases, international courts and tribunals will undoubtedly continue to have to ascertain and elaborate the regulatory tests needed to apply these provisions.

A.  Regulatory Standards in International Adjudicatory Practice 1.  Introducing key standards Looking across the international courts and tribunals whose decisions in the regulatory cases are considered in the chapters of this book, three golden threads appear to run through the practice, as indicated just above. The first golden thread is the growing emphasis on achieving regulatory coherence. Specifically, international courts and tribunals are elaborating tests or formulae giving effect to the requirement that domestic regulation be internally coherent, by making the international legality of regulatory measures contingent on the existence of an appropriate relationship between measures and their objectives. The second golden thread is a new focus on processual requirements for consideration of the legal rights and interests of other States and their populations, or ‘due regard’ requirements. In future it is possible that these two key threads in the jurisprudence may increasingly be brought together. For instance, the case of Whaling in the Antarctic (Australia v Japan: New Zealand intervening) provides precedent for the idea that a State’s failure to give analytical consideration to certain points in designing a regulatory measure, including in that case recommendations of the International Whaling Commission, may feed into a finding that the measure’s design and implementation are not reasonable in relation to achieving the stated objective.14 Finally, in

13 Canada-​European Union Comprehensive Economic and Trade Agreement, Chapters 12, 21; ‘The Transatlantic Trade and Investment Partnership (TTIP) List of documents updated on 28 November 2016’ 5, 6, 13–​16, 19, 22. See also the work of the OECD on good regulatory practices. accessed 30 September 2020; Andrew D Mitchell and Elizabeth Sheargold, ‘Regulatory Coherence in Future Free Trade Agreements and the Idea of the Embedded Liberalism Compromise’ in Gillian Moon and Lisa Toohey (eds), The Future of International Economic Integration (CUP 2018) 137. 14 Whaling in the Antarctic (Australia v Japan: New Zealand intervening) (Judgment) [2014] ICJ Rep 226 (hereafter Whaling in the Antarctic). Chapter Three, section E 2 c) (ii).

Introducing Regulatory Standards  23 addition to these two golden threads we see a third, in the form of requirements for due diligence in the prevention of transboundary harm. When it comes to standards calling for regulatory coherence, the relationship that is required between regulatory measures and their objectives varies according to institutional and legal context. The applicable legal rules and provisions set the basic parameters. As an illustration, measures may merely have to be designed for a certain purpose, with this requirement potentially elaborated by an international adjudicatory body to require that they be capable of contributing to the objective. Alternatively or additionally legal provisions or rules may call for measures to be necessary to achieve their objective and an international court or tribunal will then elaborate what is to be understood by the concept of necessity in the relevant legal context. For instance in WTO health and environment cases ‘necessity’ has come to have a multi-​stranded meaning as discussed in Chapter Five. Alternatively again, measures may have to bear a reasonable or rational relationship to their objectives. Rational relationship requirements are for example central to the non-​ discrimination disciplines of the WTO general exceptions jurisprudence, and to multiple investment treaty disciplines as seen in Chapter Seven. As an alternative to testing for a rational relationship between regulatory measures and their objectives we also see an increasing but distinctly controversial interest on the part of some international adjudicatory bodies in looking specifically for proportionality stricto sensu. This would potentially involve a requirement that a measure be proportionate to its objectives, or at least not manifestly disproportionate. However, as will be discussed in Chapters Eight and Nine, arguably it is not essential to turn to the concept of proportionality. Tests elaborating concepts of ‘due regard’, as seen most obviously under UNCLOS, but also elsewhere, have the potential to help achieve similar outcomes by imposing more procedural requirements on decision-​making. Requirements for due regard may apply alongside tests requiring reasonableness and rationality in the relationship between measures and their objectives. Alternatively, reasonableness and rationality tests might potentially even be understood as calling for decision-​makers to incorporate internal balancing processes manifesting regard for the international legal rights of populations beyond the immediate jurisdiction. As mentioned in Chapter One, references to proportionality in this book should be understood as references only to proportionality stricto sensu unless it is clear from the context that a more extended proportionality analysis is being discussed. Classic conceptions of extended proportionality analysis, like those seen in European Union (EU) and German law, incorporate capability tests (viewed in terms of a measure’s suitability for purpose) and necessity tests (understood in terms of the availability of alternatives) as well as requirements for proportionality stricto sensu (though a court or tribunal may not need to address this issue if the matter can be resolved at an earlier stage in the analysis). This form of analysis is regarded by some as ‘global best practice’ for dealing with certain types of normative

24 Introduction conflict.15 However, such extended proportionality analysis does not presently form an established or accepted part of the international law at issue in the disputes addressed in this book. Following an empirical methodology, this book introduces and analyses separately the various tests that do appear to be emerging in the cases, evaluating them as embodiments of potential global regulatory standards applicable alone or together depending on the legal setting. This methodology follows a pattern seen in global administrative law scholarship of separating out various potential substantive regulatory requirements,16 which may be independent, alternative or cumulative.

a)  Regulatory coherence The emerging requirement for regulatory coherence in domestic administrative decision-​making takes a range of forms, introduced in turn below. These include requirements that regulatory measures be potentially capable of achieving their ends, that measures be necessary to achieve their purposes, that they be reasonable in light of their objectives, that they bear a rational relationship to the purposes at hand, as well as the possible requirement that they be strictly proportionate to these objectives. Each of these can be considered individually. i)  Capability There are various occasions on which international courts and tribunals have looked at the design of regulatory measures in order to determine their legality simply by assessing whether a measure is capable of contributing to the stated purpose from a practical point of view. Capability tests have been employed in the general exceptions jurisprudence in WTO dispute settlement17 as well as in the ICJ in Fisheries Jurisdiction (Spain v Canada),18 and as the basis of the UNCLOS Annex VII Tribunal’s decision in the Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation).19 Capability tests are also of potential relevance in investment treaty arbitration, particularly in situations where a host State may defend itself against allegations that it has expropriated an investment by using arguments that the relevant action has been taken in the exercise of the governmental function of regulating the general welfare, being ‘for’ a public purpose.20 15 Alec Stone Sweet, ‘Investor-​State Arbitration: Proportionality’s New Frontier’ (2010) 4(1) Law & Ethics of Human Rights 48, 49. 16 E.g. Benedict Kingsbury, Nico Krisch and Richard B Stewart, ‘The Emergence of Global Administrative Law’ (2005) 68 Law and Contemporary Problems 15, 40, referring separately for instance to means-​ends rationality, avoidance of unnecessarily restrictive means and proportionality (hereafter Kingsbury, Krisch and Stewart, ‘The Emergence of Global Administrative Law’. 17 Chapter Five, section D. 18 Fisheries Jurisdiction (Spain v Canada) (Judgment) [1998] ICJ Rep 432 (hereafter Fisheries Jurisdiction). 19 The Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) (Award on Merits) (2016) 55 ILM 5 (hereafter Arctic Sunrise). 20 Chapter Seven, section C 3.

Introducing Regulatory Standards  25 ii)  Necessity Tests giving effect to requirements that regulatory action be ‘necessary’ to achieve certain objectives arise in a variety of contexts. In the WTO, necessity requirements are written clearly into provisions in many of the covered agreements, including notably a number of the subparagraphs of the general exceptions to the General Agreement on Tariffs and Trade (GATT) and General Agreement on Trade in Services (GATS) as well as provisions in the WTO Agreement on Technical Barriers to Trade (TBT Agreement) and the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement). Consequently, it is in the WTO that well-​developed tests have been established for determining when a measure is to be considered necessary in a given situation. The concept of necessity has featured also in ICJ and law of the sea jurisprudence, having been invoked as a factor that may condition the exercise of regulatory freedom. In the law of the sea jurisprudence necessity has been referred to as a potential test for the appropriateness of action taken by coastal States to prevent infringement of their sovereign rights.21 However, in investment treaty arbitration the concept has tended to arise in situations of national crisis, raising considerations that are distinct from the factors conditioning regulatory authority day-​to-​day. The relevant cases, including the suite of cases arising following the Argentine financial crisis, are largely omitted from this study but are well addressed in the literature. iii)  Reasonableness Requirements for reasonableness in the adoption and implementation of regulatory decisions place a different qualification on States’ regulatory capacity. Provisions and rules that clearly on their face require reasonable conduct, or reasonable action relative to a State’s regulatory objectives, are seldom to be found. Rather, requirements of this type are often read into the law, at times in connection with the concept of good faith. However, in the ICJ the concept of reasonableness was brought into the reasoning in the Whaling in the Antarctic judgment,22 and reasonableness has been invoked as a factor that may condition the exercise of a sovereign State’s regulatory freedom both in fisheries management as seen in the North Atlantic Coast Fisheries Case (Great Britain v the United States)23 and in the context of transit rights as seen in the Iron Rhine (‘Ijzeren Rijn’) Railway (Kingdom of Belgium v Kingdom of the Netherlands) arbitration and the Dispute regarding Navigational and Related Rights (Costa Rica v Nicaragua).24 In investment treaty law, host States are considered to have failed to afford investors fair and equitable treatment in circumstances where host State conduct has been arbitrary or 21 Arctic Sunrise (n 19); Chapter Three, section E 2 a) (ii). 22 Whaling in the Antarctic (n 14). 23 North Atlantic Coast Fisheries Case (Great Britain v United States) (2010) 11 RIAA 167. 24 Dispute regarding Navigational and Related Rights (Costa Rica v Nicaragua) (Judgment) [2009] ICJ Rep 213.

26 Introduction unreasonable, while certain investment treaties include freestanding guarantees that investors will not be subjected to such treatment. Further, investment law has required regulatory measures and decisions to bear a reasonable relationship to rational policies. The same has been sought in ascertaining whether a host State may have breached guarantees of national treatment and treated an investor in a discriminatory fashion. Arbitral tribunals dealing with investment disputes will also look to see if regulatory or administrative action is unreasonable in relation to its objectives when they seek to determine whether it may constitute indirect expropriation. Like circles within circles, more specific tests are then developed to assist in identifying the presence of reasonableness.25 iv)  Rational relationships Requirements for rational relationships between measures and their objectives are seen in both trade and investment law where they play a particularly important role in the application of the non-​discrimination disciplines. In the WTO, the requirement for such rational relationships has been central to the application of the introductory paragraph or ‘chapeau’ to general exceptions provisions outlawing the application of measures in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade, as well as under provisions on discriminatory treatment under Article 2.1 of the TBT Agreement. This has posed challenges where WTO Members may be pursuing more than one legitimate objective simultaneously.26 v)  Proportionality Although there is from time to time an adjudicatory reliance on tests for regulatory coherence oriented around the idea of proportionality stricto sensu, as yet international courts and tribunals have demonstrated a well-​founded hesitance to adopt proportionality testing. While it can be difficult to pinpoint precisely the reasons for caution, the initial difficulty with proportionality testing is that it elevates judgements about the value of regulatory action to the international level, opening them up for challenge and enabling international courts and tribunals to rule that regulatory action is inconsistent with a State’s international legal obligations on this basis. Under a proportionality test an international court or tribunal is asked to weigh the relative value of the legal interests at issue. As compared with regulatory coherence tests based on capability, necessity, reasonableness or rational relationships, proportionality testing would presuppose a different relationship

25 Suggesting that the concept of reasonableness can be regarded as something of an accordion, requiring at base that a State’s regulatory measures be rationally defensible Johannes Hendrik Fahner, Judicial Deference in International Adjudication (Hart 2020) 136. 26 Chapter Six, section A 4.

Introducing Regulatory Standards  27 between international and domestic legal orders, with distinct implications for international law’s claim to legitimate authority. Where there is an openness on the part of adjudicatory bodies towards the concept of proportionality this tends towards an acceptance only of the idea that obvious, manifest or gross disproportionality may indicate that legal requirements are not fulfilled. For instance the ICJ did not employ the terms proportionality or disproportionality in its dicta on regulatory freedom in the Navigational Rights case, stating rather that the requirement that regulatory action not be unreasonable encompassed the requirement that its negative impact on the exercise of navigational rights not be manifestly excessive. There has been only a mild engagement with the concept of proportionality in the regulatory context under UNCLOS, most obviously where the Arctic Sunrise Tribunal referred to the concept together with reasonableness and necessity as potentially conditioning coastal State rights, consistent with the Netherlands’ pleadings.

b) Due regard Due regard standards are distinct in character from regulatory coherence standards, although likewise recognisable for a domestic public law resonance.27 Well known to law of the sea scholars, the term ‘due regard’ is a recognised pivot for the reconciliation of competing international legal interests under UNCLOS. Notably UNCLOS requires that coastal States exercising their rights and performing their duties in the exclusive economic zone have due regard to the rights and duties of other States,28 and that flag States likewise have due regard to coastal State rights and duties.29 Equally on the high seas States are to exercise their freedoms with due regard for the interests of other States in their exercise of the freedom of the high seas, and also with due regard for rights with respect to activities in the Area.30 The outline of a test setting out what may be required by the notion of due regard on the part of a coastal State in its exclusive economic zone can be seen in the decision of the UNCLOS Annex VII Tribunal in the Chagos Marine Protected Area Arbitration (Republic of Mauritius v United Kingdom). While the requirements entailed by the obligation of due regard would depend on the circumstances, relevant factors were said to include the nature and importance of the other party’s rights, the extent of anticipated impairment, the nature and importance of the activities contemplated by the coastal State and the availability of alternative approaches. Consultation with the other party would be necessary in the majority of cases and in the Chagos Marine Protected Area case it was expected that an exploration of potentially less restrictive alternatives would have taken place in the course of this 27 Interview 25 June 2018. 28 United Nations Convention on the Law of the Sea (opened for signature 10 December 1982, entered into force 16 November 1994) 1833 UNTS 307, art 56(2) (hereafter UNCLOS). 29 Ibid, art 56(2), 58(3). 30 Ibid, art 87(2).

28 Introduction engagement. Consultation was to be complemented by the conduct of an internal balancing process consciously considering the other party’s interests. Ultimately an explanation to the other party of the need for the chosen measure might be expected.31 A requirement for reasonable regard for the interests of the other party appears to have been contemplated by the ICJ as a feature of the riparian States’ community of interest in the river Danube in the case concerning the Gabčikovo-​Nagymaros Project (Hungary v Slovakia).32 As to concern for regard for the interests of others in the WTO, an example of this is seen in the Panel and Appellate Body emphasis in United States—​Import Prohibition of Certain Shrimp and Shrimp Products on the importance of across-​the-​board diplomacy and negotiations on sea turtle conservation techniques, failure to engage in which had produced unjustifiably discriminatory impacts in this case, inconsistent with the chapeau to the Article XX GATT general exceptions provision.33 In the investment context at least one tribunal has suggested that: ‘[f]‌or a state’s conduct to be reasonable, it is not sufficient that it be related to a rational policy; it is also necessary that, in the implementation of that policy, the state’s acts have been appropriately tailored to the pursuit of that rational policy with due regard for the consequences imposed on investors . . . ’.34

c) Due diligence Articulations of due diligence embody a third important regulatory standard identified and developed by international adjudicatory bodies for the balancing of States’ competing interests under the relevant international legal rules and provisions. Often these are States’ material interests in the protection of the global commons and their common interests in freedom from demanding, possibly unachievable obligations to control private actors operating beyond their borders. The idea that international legal obligations relating to the prevention of harm to the environment must be exercised to a standard of due diligence has arguably

31 Chagos Marine Protected Area Arbitration (Republic of Mauritius v United Kingdom) (Award) (2015) 162 ILR 1. 32 Consider Case Concerning the Gabčikovo-​Nagymaros Project (Hungary v Slovakia) (Judgment) [1997] ICJ Rep 7 [85], recalling Territorial Jurisdiction of the International Commission of the River Oder (Judgment of 10 September 1929) PCIJ Series A No 23. 33 United States—​Import Prohibition of Certain Shrimp and Shrimp Products, India and ors v United States, Report of the Appellate Body (12 October 1998) WT/​DS58/​AB/​R, DSR 1998:VII, 2755, [166]–​ [167], [172], [176]. Importantly, though, in US—​Gambling the Appellate Body overruled the Panel’s finding that, in order for a measure to be considered ‘necessary’ under art XIV(a) of GATS the US would have to demonstrate that it had consulted with the complainant with a view to arriving at an alternative, negotiated arrangement. The results of such negotiations are uncertain, and the option of negotiation itself cannot be considered a reasonably available alternative measure. United States—​Measures Affecting the Cross-​Border Supply of Gambling and Betting Services, Report of the Appellate Body (7 April 2005) WT/​DS285/​ABR, DSR 2005:XII, 5663, [315]–​[317], [326]–​[327]. 34 Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v Romania, ICSID Case No ARB/​05/​20, Award (Laurent Lévy, Stanimir A Alexandrov, Georges Abi-​Saab), 11 December 2013, [525].

Introducing Regulatory Standards  29 already entrenched itself as a key feature of contemporary international environmental law and the law on prevention of transboundary harm more generally. The idea has deep roots, with the ICJ recording in the case concerning Pulp Mills on the River Uruguay (Argentina v Uruguay) that it is the due diligence required of States in their territories that has given rise to the customary international law principle of prevention of harm rather than vice versa.35 As well as playing a pivotal role in the emergence of the notion that obligations to prevent transboundary harm require due diligence, international courts and tribunals have given various indications of what due diligence may generally entail. The Seabed Disputes Chamber (SBDC) of the International Tribunal for the Law of the Sea (ITLOS) indicated in its Advisory Opinion on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area that due diligence was a variable concept changing over time in response to developments in scientific or technical knowledge and in light of the risks associated with an activity.36 What may be required in the exercise of due diligence will depend also on the specific legal context. In Pulp Mills on the River Uruguay the ICJ indicated that due diligence in the execution of the parties’ pollution prevention obligation under Article 41 of the Statute of the River Uruguay required not only the adoption of appropriate rules and measures, but also a certain level of vigilance in their enforcement and the exercise of administrative control applicable to public and private operators, such as the monitoring of activities undertaken by such operators.37 In the Advisory Opinion on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area the SBDC identified that due diligence in the exercise of sponsoring States’ obligations to ensure compliance by contractors with UNCLOS obligations required measures that were ‘reasonably appropriate’,38 and that to be appropriate measures would have to be ‘agreeable to reason and not arbitrary’.39 Reasonableness and non-​arbitrariness were to remain the hallmarks of sponsoring State action.40 Although these remarks come across as protective of private actors rather than of other States’ interests in the protection of the deep seabed, they may be of importance in helping contain sponsoring State action over time. Subsequently in the Request for an Advisory Opinion Submitted by the Sub-​ Regional Fisheries Commission concerning illegal, unreported and unregulated fishing (IUU fishing) in exclusive economic zones, the full bench of the ITLOS identified clearly an obligation for flag States to take the necessary measures to 35 Pulp Mills on the River Uruguay (Argentina v Uruguay) (Judgment) [2010] ICJ Rep 14, [101] (hereafter Pulp Mills). 36 Responsibilities and Obligations of States with Respect to Activities in the Area (Advisory Opinion of 1 February 2011) ITLOS Reports 2011, 10 (hereafter Seabed Advisory Opinion). 37 Pulp Mills (n 35) [197]. 38 Seabed Advisory Opinion (n 36) [118]–​[120], [242(3)]. 39 Ibid, [228]. 40 Ibid, [230].

30 Introduction ensure their nationals and vessels are not engaged in IUU fishing, and that this obligation is to be fulfilled through the exercise of due diligence. The Tribunal quoted the remarks of the Court in Pulp Mills on the River Uruguay and considered accordingly that flag States’ laws, regulations and measures had to include enforcement mechanisms to monitor and secure compliance and sanctions sufficient to deter violations and to deprive offenders of the benefits accruing from violations.41 ‘Necessity’ is employed in the due diligence context in a way that is distinct from its use in regulatory coherence testing. As a regulatory coherence test, ‘necessity’ conditions States’ regulatory freedom, permitting only measures that are necessary. In contrast, as an aspect of due diligence ‘necessity’ contours States’ regulatory obligations, requiring measures to the extent necessary. We can expect necessity to be differently understood and crafted over time in these two settings, although there may be a degree of correlation. The due diligence standard has captured the attention of practitioners and scholars. As the world comes to terms with the intense high-​impact problem of climate change, the standard can be expected to play an important part in the understanding of States’ obligations under the Paris Agreement,42 potentially coming together with due regard requirements as an important component of over-​arching obligations of co-​operation in this field and beyond. The idea that due diligence could be considered a general principle of law seems doubtful, including in light of differences in its content and function across various areas of international law beyond the environmental field.43 Yet it is clear that alongside emerging global regulatory standards requiring regulatory coherence and due regard for the legal interests of others, the due diligence standard is an important contribution to global administrative law.

2.  The influence of the abuse of rights doctrine and global administrative law The regulatory standards introduced in the previous section have been developed in the light of broader understandings of the function of law and the containment of power. The empirical analyses in the central chapters of this book, below, indicate that aspects of the abuse of rights doctrine play an influential but frequently unacknowledged part in international courts’ and tribunals’ engagement with the

41 Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission (Advisory Opinion of 2 April 2014) ITLOS Reports 2015, 4, [138]. See also South China Sea Arbitration (Republic of the Philippines v People’s Republic of China) (Merits) (2016) 170 ILR 1, [755]–​[756], [964]. 42 Christina Voigt and Felipe Ferreira, ‘Differentiation in the Paris Agreement’ (2016) 6 Climate Law 58, 72–​73. 43 Anne Peters, ‘Keynote Address: The Rise of Due Diligence as a Structural Change of the International Legal Order’ (Cambridge International Law Conference Webinar Series, 30 April 2020).

Introducing Regulatory Standards  31 development of regulatory standards. This is not surprising, given the role played by the emerging regulatory standards in balancing States’ international legal interests in a context of ever closer and more interdependent relationships between States. Almost a century ago it was observed in abuse of rights scholarship that absolutist conceptions of States’ independence of legal regulation could not be sustained in the light of the growing integration of the international community.44 The communal international life to which States’ international interests have committed themselves calls for moderation of States’ subjective rights, and the balancing of their interests.45 As their interdependence increasingly generates a rising volume of international legal obligations for members of the international community, the rights of these community members must become more restricted. Increasingly they have to be regarded as relative rather than absolute rights.46 States’ conflicting interests require continuous adjustment, and mechanisms that can help provide a regulating function are needed, with the principle of good faith playing a central role.47 Good faith requires a right to be exercised reasonably,48 and such an exercise of the right is considered to be one that is appropriate and necessary for the purpose of the right; that is to say it is in furtherance of the interests which the right is intended to protect.49 This is all consistent with the abuse of rights doctrine in its most familiar incarnation. On a classical understanding, abuse of rights offers a way to discipline the enjoyment of international legal rights to ensure their exercise does not hinder another State in the enjoyment of its own rights, causing injury.50 Yet the influence of the abuse of rights doctrine in the regulatory disputes where regulatory standards are beginning to emerge relates to another aspect of the doctrine. International courts and tribunals are not drawing so much on the aspect of the doctrine which indicates that the exercise by one State of its rights must be moderated where this unduly infringes the rights of another. Instead the aspect of

44 Hersch Lauterpacht, The Function of Law in the International Community (Clarendon Press 1933) ch. XIV. 45 Robert Kolb, ‘La Bonne Foi en Droit International Public’ (1998) 2 Revue Belge de Droit International 661, 721–​722 (hereafter Kolb, ‘La Bonne Foi’). 46 Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (CUP 2006) 131 (hereafter Cheng, General Principles of Law). 47 Georg Schwarzenberger, ‘The Principle of Good Faith’ in Collected Courses of the Hague Academy of International Law, Vol 87 (Nijhoff 1955) 291, 294 (hereafter Schwarzenberger, ‘The Principle of Good Faith’). 48 Ibid, 320–​324. 49 Cheng, General Principles of Law (n 46) 125, 131; GDS Taylor, ‘The Content of the Rule against Abuse of Rights in International Law’ (1972) 46 B.Y.B.I.L. 323, 351–​352 by analogy with English administrative law (hereafter Taylor, ‘The Content of the Rule’). 50 Alexandre Kiss, ‘Abuse of Rights’ in Encyclopedia of Public International Law, Vol I (North-​Holland 1984) 4, 5; Alexandre Kiss, ‘Abuse of Rights’ in Max Planck Encyclopedia of Public International Law (2006) [4]; Kolb, ‘La Bonne Foi’ (n 45) 721.

32 Introduction the abuse of rights doctrine that appears to be having more influence is the idea of the misuse of power.51 Misuse of power or détournement de pouvoir is understood to take place where a right is exercised for an end that is different to the purpose for which the right has been created. This aspect of the abuse of rights doctrine could hitherto have been expected to be seen more exclusively in the context of the exercise of conferred powers by international organisations, rather than in relation to the exercise of States’ regulatory freedom. Applied in relation to the powers of States, misuse of powers arguments infer that sovereignty under international law, too, is a form of conferred power. However, the inferred source of the powers enjoyed by States must differ from that of the powers possessed by international organisations. The inference is that international law regards States’ international legal sovereignty as similar to the constitutionally conferred powers that the state is often considered to possess under domestic law.52 The emergence of the increasingly widely applicable regulatory standards introduced above also sits well with tenets of global administrative law. Global administrative law suggests that there are globally shared perspectives on how regulation and administration should be conducted and that we can articulate principles to guide accountability in administrative decision-​making. The global administrative law approach emphasises and looks to the adoption of certain basic administrative procedural disciplines within administration globally, at both international and national levels. Fundamental principles include transparency, due process, participation and reason giving. Global administrative law refers us specifically also to administrative concepts including means-​ends rationality, and avoidance of unnecessarily restrictive means as well as proportionality.53 Global administrative law thinking is further concerned to overcome the problems of disregard generated in a world where governmental decision-​makers accountable to a certain constituency may not hear or take into account the views of others affected by a decision.54 Drawing on global administrative law principles may contribute to reinforcing international legal reasoning, requiring good administrative procedures to be followed by administrators within governments as well as in intergovernmental organisations.55

51 Janne E Nijman and André Nollkaemper, ‘Introduction’ in Janne E Nijman and André Nollkaemper (eds), New Perspectives on the Divide Between National and International Law (OUP 2007) 1, 9, discussing the work of Georges Scelle, ‘La Doctrine de Duguit et les Fondements du Droit des Gens’ (1932) 1–​2 Archives de Philosophie du Droit de de Sociologie Juridique (Sirey Paris) 108. 52 Chapter Ten, section B 1; Chapter Nine, section C 3. 53 Kingsbury, Krisch and Stewart, ‘The Emergence of Global Administrative Law’ (n 16) 40. 54 Benedict Kingsbury, ‘Frontiers of Global Administrative Law in the 2020s’ in Jason NE Varuhas and Shona Wilson Stark (eds), The Frontiers of Public Law (Hart Publishing 2019) 41, 56. 55 Although See BS Chimni, ‘Co-​option and Resistance: Two Faces of Global Administrative Law’ (2005) 37(4) N.Y.U.J.Int’l Law & Pol. 799.

Introducing Regulatory Standards  33 The influence of administrative law thinking is apparent in the work of international courts and tribunals in regulatory disputes and, with time, their dicta and decisions will contribute to bringing aspects of this thinking into accepted law. The fact that standards developed and employed by international courts and tribunals in regulatory disputes often draw on familiar concepts renders them more appealing and increases the likelihood that they may become an entrenched feature of general international law. Criteria of rationality, reasonableness and proportionality have a particular hold on the legal mind; in many traditions they are infused into our thinking at the most formative stages of legal training. Ideologically they generate a sense of unity and community of values, even while in reality the international legal order remains distinctly decentralised.56

B.  The Origins and Nature of Regulatory Standards Formally speaking, where do the regulatory or ‘global governance’ standards emerging in the work of international adjudicatory bodies come from?57 The standards present more or less as coming from within the substantive law. Yet often the reasoning supporting the articulation of an interest-​ balancing standard relies only partly on the most well-​known interpretive methodologies, such as the search for the ‘ordinary meaning’ of a word or phrase. The reasoning draws simultaneously on a deeper logic grounded in the matrices of rules, provisions and regimes involved. This is nonetheless interpretive reasoning. Regulatory standards do not emanate from international courts’ and tribunals’ inherent powers as international adjudicatory bodies in relation to the procedural handling of international disputes,58 and it would be incorrect to view their emergence in international law as the secretion of substance within procedure.59 Their interplay with procedural rules including the allocation of the burden of proof and the handling of expert evidence is significant,60 but

56 Olivier Corten, ‘The Notion of “Reasonable” in International Law: Legal Discourse, Reason and Contradictions’ (1999) 48(3) ICLQ 613, 617–​618. 57 Anthea Roberts, ‘The Next Battleground: Standards of Review in Investment Treaty Arbitration’ in Albert Jan Van Den Berg (ed), Arbitration—​The Next Fifty Years (Kluwer Law International 2012) 170, 177. 58 C.f. Yuval Shany, ‘Towards a General Margin of Appreciation Doctrine in International Law?’ (2005) 16 EJIL 907, 909–​911, 913 (hereafter Shany, ‘Towards a General Margin of Appreciation Doctrine’). 59 C.f. Henry Sumner Maine, Dissertations on Early Law and Custom (originally published by Henry Holt 1886, new edn published by Spottswoode and Co. 1891), referring to perceptions of common law rights depending for their recognition on the availability in the courts of a suitable action and remedy. See FW Maitland, The Forms of Action at Common Law: A Course of Lectures (CUP 1936) VIII, 63. 60 Caroline E Foster, Science and the Precautionary Principle in International Courts and Tribunals: Expert Evidence, Burden of Proof and Finality (CUP 2011) 14–​17. See also Chapter Ten, section B 1.

34 Introduction they are in a distinct category due to their character as an aspect of substantive law.61 At the same time, regulatory standards of the sort addressed in this book have a unique quality in that they are latent in the relevant sets of rules and provisions; they are in a certain sense ‘interstitial’.62 The best way to understand the emergence of regulatory standards may be to come back to understandings of law, more prevalent in some jurisdictions than others, as comprising a blend of ‘rules’ and ‘standards’ respectively. Standards can be distinguished from rules in that the content of rules is sufficiently specific as to be knowable in advance, whereas the import of a standard requires to be ascertained by a process subsequent to the adoption of the relevant law or provision.63 The formulae that international courts and tribunals read into the law in successive regulatory disputes gradually elaborate the ‘standards’ inherent in some of the less determinate aspects of relevant international legal provisions. Such judicially articulated standards may undergo ongoing refinement over time through interactive reasoning, further reducing the indeterminacy of the governing rules as they settle and crystallise.64 Standards are distinct from principles, although principles may be articulated via standards.65 Naturally, international judges and arbitrators will bring to bear a range of ideas and conceptions of principle when articulating the standards they view as implicit in international legal provisions and rules. International judges’ and arbitrators’ sense of what makes for good governance generally is also likely to play an important part in their determinations. This will be founded in turn on various premises concerning human nature and the law.66 Standards may express both recognised principles and principles of value in the minds of adjudicators. 61 Martin Shapiro, Courts: A Comparative and Political Analysis (University of Chicago Press 1981) 28; Vaughan Lowe, ‘The Politics of Law-​Making: Are the Method and Character of Norm Creation Changing?’ in Michael Byers (ed), The Role of Law in International Politics: Essays in International Relations and International Law (OUP 2000) 207. 62 ‘Interstitial’ meaning ‘[p]‌ertaining to, existing in, or occupying interstices’, with ‘interstices’ referring to ‘[a]n intervening space (usually, empty); esp. a relatively small or narrow space, between things or the parts of a body (frequently in plural, the minute spaces between the ultimate parts of matter); a narrow opening, chink, or crevice’ or, in Physics: ‘The space between adjacent atoms or ions in a crystal lattice’. ‘Interstitial’ (Oxford English Dictionary) accessed 29 October 2020. See also Duncan Kennedy, ‘Form and Substance in Private Law Adjudication’ (1976) 89(8) Harv.L.Rev. 1685, 1965 (hereafter Kennedy, ‘Form and Substance’); Martin Shapiro, Courts: A Comparative and Political Analysis (University of Chicago Press 1981) 28; and see especially Vaughan Lowe, ‘The Politics of Law-​ Making: Are the Method and Character of Norm Creation Changing?’ in Michael Byers (ed), The Role of Law in International Politics: Essays in International Relations and International Law (OUP 2000) 207. 63 Chapter One. Neil MacCormick, Rhetoric and the Rule of Law: A Theory of Legal Reasoning (OUP 2005) 170; see also HLA Hart, The Concept of Law (Clarendon Press 1961) 127–​128. Kennedy, ‘Form and Substance’ (n 62); Pierre Schlag, ‘Rules and Standards’ (1985) 33(2) U.C.L.A.L.Rev. 379. 64 José E Alvarez, International Organizations as Law-​Makers (OUP 2005) 555. 65 Daniel Bodansky and others, ‘New Directions in International Environmental Law’ (2004) 98 ASIL PROC 275, 277. For instance the principle of equity is articulated through the standard of common but differentiated responsibilities. 66 Although even at its most creative the discourse can be expected to remain positivist. Ronald Dworkin, Taking Rights Seriously (Bloomsbury Publishing PLC 2013) 29–​64, including at 39.

Introducing Regulatory Standards  35 However, as seen in the standards addressed in this work, standards frequently articulate obligations. The distinction between principles and obligations does not map onto the distinction between standards and rules. Understanding the elaboration of regulatory standards thus asks us to view the judicial function as a vital link in the chain of the rule of law, adopting the idea that international law may secure its completion in part through international adjudication.67 While in time this will be supplemented through intergovernmental adoption and ongoing refinement of international legal rules, in the interim tribunals may find themselves filling in the detail of the law,68 and exercising considerable influence on the content of the law as well as on the nature of governance in their subfields.69 International courts’ and tribunals’ contribution to the development of regulatory standards involves them in supplementing States’ rule-​making activity, consistent with understandings that international law permits judicial institutions to play ‘une fonction de suppléance législative’.70 Their pronouncements may not instantly or directly create international law, but as authoritative interpretations of international legal rules they can be expected to have a close bearing on the standards that come to be accepted.71 As global interdependence grows and international law increasingly evinces the potential to develop from a law of coexistence into a law of co-​operation, regulatory standards will give effect to shared understandings concerning the character of the international legal system.72 Regulatory standards may also need to reflect understandings concerning the basis for private institutions’ involvement in international regulatory and administrative activity, and its entwinement with regulation in the traditional public sense. The extent to which, and mechanisms by which, regulatory standards may be applied to transnational legal activity will demand ongoing consideration.73

67 Gleider I Hernández, The International Court of Justice and the Judicial Function (OUP 2014) 245, 252–​253 (hereafter Hernández, The International Court); Sir Hersch Lauterpacht, The Development of International Law by the International Court (Stevens 1958). 68 José E Alvarez, International Organizations as Law-​Makers (OUP 2005) 534, 523–​524, 545–​566. 69 Alec Stone Sweet and Thomas L Brunell, ‘Trustee Courts and the Judicialization of International Regimes’ (2013) 1(1) Journal of Law and Courts 61; Alec Stone Sweet, ‘Judicialization and the Construction of Governance’ (1999) 32 Comp.Pol.Stud. 147; Elisa D’Alterio, ‘Judicial Regulation in the Global Space’ in Sabino Cassese (ed), Research Handbook on Global Administrative Law (Edward Elgar 2016) 303, 304. 70 Hernández, The International Court (n 67) 292, 1; Prosper Weil ‘Le droit international en quête de son identité: Cours général de droit international public’ (1992-​VI) 237 Recueil des cours 9, 142. 71 Hernández, The International Court (n 67) 282. 72 Ibid, 15; Wolfgang Friedmann, The Changing Structure of International Law (Columbia University Press 1964) 60–​62. 73 Terence C Halliday and Gregory Shaffer, ‘Transnational Legal Orders’ in Terrence C Halliday and Gregory Shaffer (eds), Transnational Legal Orders (CUP 2015) 3; Benedict Kingsbury, ‘Sovereignty and Inequality’ (1998) 9(4) EJIL 599; Benedict Kingsbury, ‘International Law as Inter-​Public Law’ in HR Richardson and MS Williams (eds), Nomos XLIX: Moral Universalism and Pluralism (New York University Press 2009) 167.

36 Introduction The emergence of regulatory standards in environmental, health, oceans, trade and investment disputes is important functionally. These standards will help enable States to moderate their exercise of sovereign power and freedom in order to give effect to their international obligations in concordance with longstanding ideas of a public policy or public order system for the world community.74 The standards are a new response to the now decades-​old need for ways better to balance competing interests in a globalising world, potentially substituting for alternatives contemplated in earlier literature, including the development of an international law of tort.75 Writing in the 1930s, Sir Hersch Lauterpacht famously went so far as to propose the judicial manufacture of a new tort creating protection from injurious interference, as incarnated for some in the Trail Smelter arbitral decision.76 Nearly a century on, however, the increasingly complex situations arising internationally, particularly in light of urgent contemporary environmental concerns, appear to call first and foremost for the broader, more nuanced and often preventive handling to which the development of regulatory standards attempts to cater by drawing out the standards inherent in the applicable law. International law appears to be developing organically with a view to satisfying changing needs, at least in part, as workable understandings of how international law should operate are found within existing international legal rules.

C.  Constitution Building or Ordering Plurality? The development of potentially global regulatory standards, through the work of international courts and tribunals and more widely, appears to form part of a broader evolution in law globally. The commonalities among the regulatory standards emerging, and the way in which the abuse of rights doctrine becomes influential as a counter to the misuse of powers, together with the conceptualisation of sovereignty that this infers, all suggest that a process of constitutionalisation is underway, potentially leading to greater consolidation of domestic and international law based on certain precepts. Is international law gradually in some measure reorienting itself around or embracing core commitments that will sit at the heart of requirements for the exercise of regulatory freedom and the fulfilment of regulatory obligations through domestic law? Is law at the international and domestic level melding or becoming a degree more solidified, at least in certain areas of international law? Are these multiple legal systems increasingly one system? Or 74 C Wilfred Jenks, The Prospects of International Adjudication (Oceana Publications 1964) 514 (hereafter Jenks, The Prospects of International Adjudication). 75 Ibid, 515–​546. 76 Lauterpacht, The Function of Law (n 44) 297, 300; Trail Smelter (US v Canada) Award II, 11 March 1941, 3 UNRIAA 1905; Taylor, ‘The Content of the Rule’ (n 49); c.f. Bin Cheng, General Principles of Law (n 46) 130–​132.

Introducing Regulatory Standards  37 does the situation remain one in which plural domestic and international legal systems essentially continue to operate on their own terms, side-​by-​side? The idea of constitutionalisation on the global scale has taken on a new energy since the turn of the millennium.77 By the final decades of the 20th century the long-​standing distinction between the monist idea that all law, domestic and international, is part of one legal system, and the dualist idea that domestic and international law may occupy their own spheres and constitute distinct legal systems, had come increasingly into question.78 The European experience provided a particular prompt,79 but the forces of globalisation created the broader context in which the characterisation of the developments taking place around us has called for revisitation.80 Public and constitutional legal theorists have turned their minds to articulating and developing theories of law beyond the State. Building into monist conceptions of law, global constitutionalism, at its broadest, views domestic and international law as holding the potential to be united within an overarching legal order.81 Constitutionalism seeks the identification of fundamental values uniting a community or polity,82 and a set of basic legal norms comprehensively regulating its social and political life.83 Frequently enumerated as the desired constitutional elements of an international legal community are containment of political power; rule of law; fundamental rights protection; accountability, democracy or proxies for democracy including inclusiveness,

77 Bardo Fassbender, The United Nations Charter as the Constitution of The International Community (Martinus Nijhoff Publishers 2009); Ronald St. John MacDonald and Douglas M Johnston (eds), Towards World Constitutionalism: Issues in the Legal Ordering of the World Community (Brill 2005); Jan Klabbers, Anne Peters and Geir Ulfstein, The Constitutionalisation of International Law (OUP 2009). See previously Alfred Verdross, Die Verfassung der Völkerrechtsgemeinschaft (Springer 1926). 78 Neil MacCormick, ‘Beyond the Sovereign State’ (1993) 56(1) MLR 1; Hans Kelsen, Pure Theory of Law (tr M Knight, University of California Press 1967) s 43, 348; and in contrast HLA Hart, The Concept of Law (3rd edn, OUP 2012) 213. 79 JHH Weiler, The Constitution of Europe: ‘Do the New Clothes Have an Emperor’ and Other Essays on European Integration (CUP 1999). Neil Walker, ‘Taking Constitutionalism Beyond the State’ (2008) 56(3) Pol.Stud. 519, 533. 80 Janne E Nijman and André Nollkaemper, ‘Introduction’ in Janne E Nijman and André Nollkaemper (eds), New Perspectives on the Divide Between National and International Law (OUP 2007) 1, 10–​11. 81 For discussion, Martin Loughlin, ‘What is Constitutionalisation?’ in Petra Dobner and Martin Loughlin (eds), The Twilight of Constitutionalism? (OUP 2010) 47, 66; Erika de Wet, ‘The International Constitutional Order’ (2006) 55 ICLQ 51 (hereafter de Wet, ‘The International Constitutional Order’); Thomas Cottier and Maya Hertig, ‘The Prospects of 21st Century Constitutionalism’ (2003) 7 Max Planck Yrbk UN L 261; Andreas L Paulus, ‘The International Legal System as a Constitution’ in Jeffrey L Dunoff and Joel P Trachtman (eds), Ruling the World? Constitutionalism, International Law, and Global Governance (CUP 2009) 69, 71, 75 (hereafter Paulus, ‘The International Legal System’); Andreas L Paulus, Die Internationale Gemeinschat im Völkerrecht (Beck 2001); Jurgen Habermas, ‘Does the Constitutionalization of International Law Still Have a Chance?’ in Ciaran Cronin (tr), The Divided West (Polity Press 2006) 115. 82 de Wet, ‘The International Constitutional Order’ (n 81). 83 Anne Peters, ‘Compensatory Constitutionalism: The Function and Potential of Fundamental International Norms and Structures’ (2006) 19 LJIL 579, 581, 583 (hereafter Peters, ‘Compensatory Constitutionalism’).

38 Introduction participation, deliberation and transparency in public decision-​making; and concepts of solidarity.84 Many emphasise the recognition of individual rights.85 The force of constitutionalist ideology and its impact on the conceptualisation of sovereignty are extremely powerful, as we have seen in national constitutional development,86 but the intellectual and practical challenges faced at the global level have diluted its impact. At the same time, care must be taken not to overstate the constitutionalist agenda. When we look more closely into its components and dynamics we see that the constitutionalist conversation about global legal relations is often understood as a process,87 as a way of identifying challenges and trends in international law and opening ground for new argument and insight.88 Theorists admit constitutionalism’s idealistic character and the absence of the international political will, power structures and sanctions needed for its realisation.89 There has been the suggestion that possibly we are best to see constitutionalism as a mindset or sensibility relevant for participation in international law.90 Even within this mindset there are competing currents and paradoxes. The values of freedom and private autonomy may pull in a pluralist direction while the ideals of equality, rule of law and universality pull towards unity or hierarchy.91 By these lights, the emergence of regulatory standards could be viewed as constitutional in character, albeit as a small but potentially significant aspect of a highly diverse and ever-​changing pattern of international legal developments rather than the product of a grand design.92 There is a further sense, too, in which the currently unfolding phenomena addressed in this book can be viewed as constitutional, and this is through the lens of what has been described as constitutional 84 de Wet, ‘The International Constitutional Order’ (n 81); Anne Peters, ‘Fragmentation and Constitutionalisation’ in Anne Orford and Florian Hoffmann (eds) with Martin Clark, The Oxford Handbook of the Theory of International Law (1st edn, OUP 2016) 1011, 1016. 85 Paulus, ‘The International Legal System’ (n 81) 69, 72, 91. 86 Neil Walker, ‘Sovereignty and Beyond: The Double Edge of External Constitutionalism’ (2018) 57(3) Va.J.Int. Law 801 (hereafter Walker, ‘Sovereignty and Beyond’). 87 Jan Klabbers, ‘Setting the Scene’ in Jan Klabbers, Anne Peters and Geir Ulfstein (eds), The Constitutionalization of International Law (OUP 2009) 1, 10. 88 Anne Peters, ‘Conclusion’ in Jan Klabbers, Anne Peters and Geir Ulfstein (eds), The Constitutionalization of International Law (OUP 2009) 342, 342–​343, 352; Mattias Kumm, ‘The Cosmopolitan Turn in Constitutionalism: On the Relationship between Constitutionalism in and beyond the State’ in Jeffrey L Dunoff and Joel P Trachtman (eds), Ruling the World? Constitutionalism, International Law, and Global Governance (CUP 2009) 258, 259 (hereafter Kumm, ‘The Cosmopolitan Turn’). 89 Peters, ‘Compensatory Constitutionalism’ (n 83) 608. 90 Martti Koskenniemi, ‘Constitutionalism as Mindset: Reflections on Kantian Themes about International Law and Globalization’ (2007) 8 Theo.Inq.L. 9; Paulus, ‘The International Legal System’ (n 81) 69, 71–​72, 109. 91 Miguel Poiares Maduro, ‘The Three Claims of Constitutional Pluralism’ in Matej Avbelj and Jan Komárek (eds), Constitutional Pluralism in the European Union and Beyond (Hart 2012) 67, 80, 84 (hereafter Maduro, ‘The Three Claims’). 92 Consider Nico Krisch, ‘Constitutionalism and Pluralism: A Reply to Alec Stone Sweet’ (2013) 11(2) ICON 501.

Introducing Regulatory Standards  39 pluralism.93 On this view, the development of the relationships between normative systems such as domestic and international law is inherently constitutional,94 the dichotomy between constitutionalism and pluralism is false, and a constitutional jurisprudence of plurality is expected gradually to emerge.95 The perspectives of constitutional pluralists are influenced quite distinctly by the European experience and also tend to place a strong emphasis on basic rights including ius cogens norms, as well as access to justice and due process.96 However, despite its constitutional dynamics the situation under analysis in this book is arguably still most accurately understood as an ad hoc ordering of the plural international and domestic legal orders concurrently governing regulatory decision-​making around the world.97 Although there are marked commonalities, the current diversity of context and practice in the disputes, particularly in the ICJ and in law of the sea dispute settlement tends to undermine the idea that what we are seeing is a process of constitutionalisation. The strongest, most increasingly well-​established standards have emerged from the institutionalised dispute settlement processes of the WTO, due in part to the volume of disputes arising. Elsewhere, practice is less consistent. The standards and concepts referred to by international courts and tribunals differ according to the dispute, as well as the level of the development of the relevant international legal regime and its dispute settlement machinery. The dynamic is better understood as pluralistic, rather than constitutionalising, and consistent with a vision in which the international legal order and domestic legal orders continue to operate as autonomous though overlapping legal systems.98 The empirical work carried out for the purposes of this book highlights the conservative character of international adjudicatory bodies’ contribution to the development of formulae for the ordering of plurality: the tests that are being articulated

93 Neil Walker, ‘The Idea of Constitutional Pluralism’ (2002) 65(3) MLR 317. 94 Jeffrey L Dunoff and Joel P Trachtman, ‘A Functional Approach to International Constitutionalization’ in Jeffrey L Dunoff and Joel P Trachtman (eds), Ruling the World? Constitutionalism, International Law and Global Governance (CUP 2009) 3, 19–​20; Alec Stone Sweet, ‘Constitutionalism, Legal Pluralism, and International Regimes’ (2009) 16(2) Ind.J.Global Legal Studies 621. 95 Alec Stone Sweet, ‘The Structure of Constitutional Pluralism: Review of Nico Krisch, Beyond Constitutionalism: The Pluralist Structure of Post-​National Law’ (2013) 11(2) ICON 491. 96 Ernst-​Ulrich Petersmann, International Economic Law in the 21st Century: Constitutional Pluralism and Multilevel Governance of Interdependent Public Goods (Hart 2012) 32, 75; Thomas Cottier, ‘The Prospects of 21st Century Constitutionalism: Towards a Five Storey House’ in Christian Joerges and Ernst-​Ulrich Petersmann (eds), Constitutionalism, Multilevel Trade Governance and Social Regulation (Hart 2011) 495; Daniel Halberstam, ‘Local, Global and Plural Constitutionalism: Europe Meets the World’ in Gráinne de Búrca and JHH Weiler (eds), The Worlds of European Constitutionalism (CUP 2012) 150, 172–​173. 97 Janne E Nijman and André Nollkaemper, ‘Beyond the Divide’ in Janne E Nijman and André Nollkaemper (eds), New Perspectives on the Divide Between National and International Law (OUP 2007) 341, 359. 98 James Crawford, Brownlie’s Principles of Public International Law (9th edn, OUP 2019) 47. See also Kingsbury, Krisch and Stewart, ‘The Emergence of Global Administrative Law’ (n 16) 43.

40 Introduction respond accommodatingly to the authority of the domestic legal order through their allowance for value judgements on substantive matters to be taken at the domestic level. As seen in subsequent chapters, the value-​content of the regulatory standards that are evolving to manage the interface with domestic law is generally low. The emphasis lies clearly on regulatory coherence, together, increasingly, with consideration of the interests of affected persons and populations. Certain regulatory coherence tests, notably proportionality tests, may embody a more obviously constitutionalist dynamic by potentially shifting the locus of value-​based decision-​ making to the international level. But proportionality tests have not been widely adopted in international dispute settlement, with international courts and tribunals adopting a cautious attitude in this respect. The conclusion that we are at the present time still dealing with a piecemeal ordering of the relations between domestic and international legal systems is borne out in consultation with individuals working at the coalface. Onlookers should not read into international courts’ and tribunals’ decisions an adjudicatory intention to build a body of practice leading in a new direction.99 A court or tribunal’s attention will be fixed on the case before it, and cases are unique. A court or tribunal may even deliberately refrain from indicating that a formula it has articulated could have application beyond the circumstances of the case, and underline that it sees no universal rule of conduct in its analysis. The guiding ethos will generally be a minimalist one—​to determine only that which is needed to decide the case at hand.100 At the same time, a court or tribunal needs to make the applicable norms function in the circumstances it is dealing with,101 and the court or tribunal must consider fully the parties’ pleadings,102 and provide reasoned decisions acceptable to the parties as can be seen in the chapters that follow.103 It seems inevitable that standards of conduct implicit in the relevant legal rules and provisions will need to be set out and that in some situations concepts like reasonableness will come to play a part.104 Much scholarly thinking about plural legal systems revolves around identifying the means by which legal orders may accommodate one another, including various ‘interface’ norms and institutions.105 Mechanisms that have been observed in use 99 Interview 28 June 2018; Interview 29 June 2018. 100 Interview 21 June 2018. 101 Idem. 102 Idem; Interview 29 June 2018. 103 Interview 21 June 2018; Interview 22 June 2018; Interview 29 June 2018. 104 Interview 21 June 2018. 105 Nico Krisch, Beyond Constitutionalism: The Pluralist Structure of Postnational Law (OUP 2010) 263–​264, 285–​296 ( hereafter Krisch, Beyond Constitutionalism). See also André Nollkaemper, ‘Inside or Out: Two Types of International Legal Pluralism’ in Jan Klabbers and Touko Piiparinen (eds), Normative Pluralism and International Law: Exploring Global Governance (CUP 2013) 94, 135 (hereafter Nollkaemper, ‘Inside or Out’). See also, promoting a soft ordering of these plural legal systems that is accepting of complexity, Mireille Delmas-​Marty, Ordering Pluralism: A Conceptual Framework for Understanding the Transnational Legal World (tr Naomi Norberg, Hart Publishing 2009) 155.

Introducing Regulatory Standards  41 in different communities include dialectical legal interactions, including between national courts and international tribunals; the margin of appreciation doctrine applied by the European Court of Human Rights; schemes based on subsidiarity more generally; regimes for the autonomy of minorities and indigenous communities; hybridisation of decision-​making processes such as the mixed domestic international criminal court; mutual recognition schemes; and safe harbour agreements softening regulatory demands on foreign businesses in return for compliance with specified standards.106 Domestic orders’ recognition of international law is, too, a vital part of the dynamics of plurality. There has been reference to practices whereby national courts and authorities take into account international obligations, for instance in accordance with the views of the European Court of Human Rights; and to options based on one order’s conditional recognition of decisions from another legal order.107 These latter have been distinguished from more content-​based approaches like the ordre public reservation in conflict of laws doctrine. It is clear that international courts and tribunals also make an important contribution through their identification of regulatory standards. The part played by international courts and tribunals in the development of regulatory standards is sensibly addressed in light of a fundamental underlying question about how the interaction of these plural legal systems is being handled, and would most appropriately be managed.

D.  International Law’s Legitimate Authority Ideally, the ordering of the relationship between domestic legal systems and international law would stabilise, strengthen or otherwise contribute to international law’s claim to objectively legitimate authority. Turning to theories of legitimate authority is therefore one way of casting greater light on, and evaluating, the emergence of regulatory standards as seen in the work of international courts and tribunals. Specifically, it is theory relevant to the normative legitimacy of international law that will be drawn upon in this work.108 At the same time it is important to appreciate that the legitimacy of international law may alternatively or additionally be addressed with reference to its sociological legitimacy, in terms of 106 Paul Schiff Berman, Global Legal Pluralism: A Jurisprudence of Law Beyond Borders (CUP 2012) 152–​182. See also Von Daniels’ identification of ‘linkage rules’, as a category of rules additional to primary and secondary rules. Detlef von Daniels, The Concept of Law from a Transnational Perspective (Ashgate 2010) 160–​161. 107 As seen in the German Constitutional Court’s ‘Solange’ jurisprudence. Krisch, Beyond Constitutionalism (n 105) 286–​288. 108 Normative theory on legitimate authority has seldom been applied in relation to the law emerging from regulatory disputes, though see Oisin Shuttle ‘Reasons, Institutions, Authorities: Three Models of Exceptions in WTO Law’ in Lorand Bartels and Federica Paddeu (eds), Exceptions and Defences in International Law (OUP 2020) 375. Relatedly, Nollkaemper, ‘Inside or Out’ (n 105) 111.

42 Introduction perceptions and beliefs concerning the legitimacy of the power that is being exercised through the law.109 Sociological and normative legitimacy remain dependent upon one another.110 They can also come into tension with one another. Together with other factors, legal institutions’ social and institutional responsiveness to disputing parties and the wider international legal community contribute to their legitimacy from a sociological perspective. Yet international courts’ and tribunals’ responsiveness will not necessarily always produce results enhancing a normative claim, and could even undermine it. This is important to bear in mind in considering the extent to which the part played by international adjudicatory processes in the elaboration of global regulatory standards assists international law’s claim to legitimate authority. For instance an over-​responsiveness to pleadings could lead to interpretations of international legal provisions that do not best serve the legal system more broadly. As introduced in Chapter One the theory on normative legitimacy applied in this book is referred to throughout as the theory of ‘relative authority’. The theory seeks to provide an explanation of the potential for coexisting authority, applying where plural legal orders subsist alongside one another. International and domestic law provide a classic example of plural legal orders, as do EU law and the domestic legal systems of EU Member States. According to the theory of relative authority it is possible for legal authorities with overlapping domains simultaneously to enjoy legitimate authority in a normative sense.111 However, legitimate authority in plural legal orders will inherently be subject to certain conditions. The idea underpinning the theory of relative authority is that the authority of coexisting legal authorities can only ever be relative. This is because the authority of each is interdependent and co-​constitutive. This may apply in respect of coexisting legal orders as it may in respect of coexisting legal institutions, agencies and loci of legal power. The present book addresses the legitimate authority of international law as a legal order or a legal system.112 This orientation towards international law as a legal order has been adopted in light of the systemic nature of the developments analysed, which occur across multiple subfields of international law. At the same time, the institutional design and

109 Harlan Grant Cohen and others, ‘Legitimacy and International Courts—​A Framework’ in Nienke Grossman and others (eds), Legitimacy and International Courts (CUP 2018) 1. 110 Nicole Roughan, ‘From Authority to Authorities: Bridging the Social/​Normative Divide’ in Roger Cotterrell and Maksymilian Del Mar (eds), Authority in Transnational Legal Theory: Theorising Across Disciplines (Edward Elgar Publishing 2016) 280. 111 Nicole Roughan, Authorities: Conflicts, Cooperation and Transnational Legal Theory (OUP 2013) (hereafter Roughan, Authorities). 112 Contrasting with scholarship focused on the legitimacy of international institutions. Nienke Grossman and others (eds), Legitimacy and International Courts (CUP 2018); Allen Buchanan, ‘The Legitimacy of International Law’ in Samantha Besson and John Tasioulas (eds), The Philosophy of International Law (OUP 2010) 79; Allen Buchanan and Robert Keohane, ‘The Legitimacy of Global Governance Institutions’ (2006) 20(4) Ethics & International Affairs 405.

Introducing Regulatory Standards  43 operation of international courts and tribunals will remain important within the overall analysis.113 The theory of relative authority sits alongside a number of theories according to which legitimate authority acquires a relational dimension in a world of overlapping legal domains.114 However, among the relational approaches the theory of relative authority is distinctly persuasive and arguably remains the prevailing theory of legitimate authority in plural legal orders.115 The terms on which plural legal orders, and the authorities within them will relate to one another, are largely set by official actors, including courts.116 In the relationship between domestic and international law in a judicial context, the co-​ordinating mechanisms that first come to mind are often private international law jurisdictional rules relating to whether domestic or international courts or tribunals may hear given cases, including requirements for the exhaustion of domestic remedies, the principle of complementarity in international criminal law, and the rules on sovereign immunity in domestic and international law.117 Less attention has been devoted to international courts’ and tribunals’ engagement in the development of regulatory standards balancing competing international regulatory interests, and the significant contribution made by these standards in the relationship between domestic and international legal authority. In appreciating the operation of the theory of relative authority, and indeed theories of legitimate authority in general, it is important to set to one side the idea that international law’s legitimate authority might rest exclusively on the consent of States to various sets of international legal rules.118 While the consent of States remains in many situations the primary indicator of a legal norm’s formal validity,119 113 Daniel Bodansky, ‘Legitimacy’ in Daniel Bodansky, Jutta Brunnée and Ellen Hey (eds), The Oxford Handbook of International Environmental Law (OUP 2008) 704, 709. Chapter Nine, section D. 114 Neil Walker, ‘Postnational Constitutionalism and the Problem of Translation’ in JHH Weiler and Marlene Wind (eds), European Constitutionalism Beyond the State (CUP 2003) 27, 54; Neil MacCormick, ‘Beyond the Sovereign State’ (1993) 56(1) MLR 1, 18; Allen Buchanan, ‘The Legitimacy of International Law’ in Samantha Besson and John Tasioulas (eds), The Philosophy of International Law (OUP 2010) 79, 83–​85; Samantha Besson, ‘The Authority of International Law—​Lifting the State Veil’ (2009) 31 Syd.L.R. 343 (hereafter Besson, ‘The Authority of International Law’). 115 Although for issues requiring further theorizing see Chapter Nine, section B 3. 116 Consistent with Maduro’s constitutionally pluralist emphasis on mutual engagement. Maduro, ‘The Three Claims’ (n 91) 67, 82; consider also Kumm, ‘The Cosmopolitan Turn’ (n 88) 289. 117 Yuval Shany, Regulating Jurisdictional Relations between National and International Courts (OUP 2007). 118 John Tasioulas, ‘The Legitimacy of International Law’ in Samantha Besson and John Tasioulas (eds), The Philosophy of International Law (OUP 2010) 97, 114 (hereafter Tasioulas, ‘The Legitimacy of International Law’); Nicole Roughan, ‘Mind the Gaps: Authority and Legality in International Law’ (2016) 27(2) EJIL 329, 341–​342; Nico Krisch, ‘The Decay of Consent: International Law in an Age of Global Public Goods’ (2014) 108(1) AJIL 1. C.f. Richard Collins, ‘Consent, Obligation and the Legitimate Authority of International Law’ in Patrick Capps and Henrik Palmer Olsen (eds), Legal Authority Beyond the State (CUP 2018) 206; Matthew Lister, ‘The Legitimating Role of Consent in International Law’ (2011) 11(2) Chi.J.Int’lL. 663. 119 Christopher A Thomas, ‘The Uses and Abuses of Legitimacy in International Law’ (2014) 34(4) OJLS 729, 734.

44 Introduction there are many reasons to reject the concept as continuing to bear all or almost all of the weight required to establish legitimacy.120 Formal validity and legitimacy will not always be twinned. The value of State consent may be undermined where law is generated through international organisations or emerges from complex processes involving actors of multiple types,121 and formal consent may not fully represent free choice in the context of economic globalisation,122 while important challenges to traditional positivist and statist understandings about the underpinnings of international law continue to mount.123 For several decades now, consent’s utility as a reliable indicator of international law’s legitimacy has increasingly been coming into question.124

1.  Substantive and procedural justification of authority Like certain constitutionalist theories of legitimacy in plural legal orders,125 the theory of relative authority requires a conjunctive blend of traditional substantive and procedural justifications of authority, operating with a relativity appropriate to the context.126 As to substantive justification, the theory of relative authority applies the widely employed service conception of authority developed by Joseph Raz. On the service conception’s normal justification thesis, legitimate authority is found where, in general, as a result of trying to follow the law its subjects will better conform with the diverse reasons applying to them. When law provides this service then, all other necessary conditions being met, a moral duty to comply with the law arises.127 The service conception does not seek to specify the content of these reasons. It is merely a theory that looks to a certain relationship between the law and the reasons applying to its subjects. The reasons involved are objective reasons, in the sense that they concern what the subject’s goals should be, rather than what they are.128 The law does not gain in legitimacy by virtue of 120 JHH Weiler, ‘The Geology of International Law—​Governance, Democracy and Legitimacy’ (2004) 64 ZaöRV 547, 557–​558. 121 Mattias Kumm, ‘Sovereignty and the Right to be Left Alone: Subsidiarity, Justice-​Sensitive Externalities, and the Proper Domain of the Consent Requirement in International Law’ (2016) 79 LCP 239, 243; Krisch, Beyond Constitutionalism (n 105) 13, 297. 122 Eyal Benvenisti, The Law of Global Governance (Brill 2014) 208–​210; Besson, ‘The Authority of International Law’ (n 114) 371. 123 Benedict Kingsbury, ‘The International Legal Order’ in Peter Cane and Mark Tushnet (eds), The Oxford Handbook of Legal Studies (OUP 2003) 271. 124 E.g. Philip Allott, ‘Power Sharing in the Law of the Sea’ (1983) 77(1) AJIL 1, 25. 125 Mattias Kumm, ‘The Legitimacy of International Law: A Constitutionalist Framework of Analysis’ (2004) 15(5) EJIL 907; Kumm, ‘The Cosmopolitan Turn’ (n 88) 290–​299. 126 C.f. Besson, ‘The Authority of International Law’ (n 114), drawing on Raz to theorise international law’s legitimacy based on substantive justification. 127 Joseph Raz, ‘The Problem of Authority: Revisiting the Service Conception’ (2006) 90 Minn.L.Rev. 1003, 1014. For Raz’ original formulation see Joseph Raz, The Morality of Freedom (Clarendon Press 1986) ch. 3. 128 Tasioulas, ‘The Legitimacy of International Law’ (n 118) 97, 100.

Introducing Regulatory Standards  45 rules according better with individual or subjective views on the rightness of their content. As to procedural justification, this is traditionally sought in reliance on forms of decision-​making characterised by participation and accountability such as that seen in the operation of democratic States.129 As well as established processes for the selection of representatives, one expects a strong degree of transparency, practices facilitating the justification of decision-​making and acceptance by subjects that there exists substantive justification for the authority or legal order in question.130 The theory of relative authority hinges on the central notion of the need for relativity that arises where there are overlapping plural legal authorities or orders. According to the theory, authority will be relative where there is a need for co-​ordination between authorities or legal orders in order to produce outcomes serving as the basis for the substantive justification of their respective claims to legitimate authority.131 Authority will also be relative where relations between authorities or legal orders constrain the procedural justification of their claims to legitimate authority.132 There are situations where it may become necessary to to determine whether decision-​making authority should be recognised as lying within one or the other legal order. Scholars of global governance, including constitutional pluralists, may address the gap specifically by reference to ideas of subsidiarity.133 The theory of relative authority addresses the same problem in a more general way by reference to what are described as ‘governance reasons’. The need to take into account governance reasons arises in light of an appreciation that the moral standing of a legitimate authority does not extend to an authority to interfere with another legitimate authority. Accordingly it becomes important to determine whether the relationship between authorities or legal orders needs to be co-​ordinated or should merely be one of toleration. If co-​ordination is needed, the institutional mode and form that this should take has to be decided, and governance reasons will come into play, suggesting for instance whether a more centralised or more pluralised arrangement should be favoured, or whether a dialogical, hierarchical or other mode of inter-​authority interaction is best. This is to be determined based on the values, advantages and disadvantages of the various options.134 129 Daniel Bodansky, ‘Legitimacy’ in Daniel Bodansky, Jutta Brunnée and Ellen Hey (eds), The Oxford Handbook of International Environmental Law (OUP 2008) 705, 715, 717. 130 Jeremy Waldron, ‘Can There Be a Democratic Jurisprudence?’ (2009) 58(3) Emory L.J. 675, 684. 131 Described as ‘substantive relativity’. Roughan, Authorities (n 111) 139. 132 Described as ‘procedural relativity’. Ibid, 140. 133 Markus Jachtenfuchs and Nico Krisch, ‘Subsidiarity in Global Governance’ (2016) 79(1) LCP 1. See, drawing on four principles of legality, subsidiarity, adequate participation and accountability, and the achievement of reasonable outcomes not violative of fundamental rights, Mattias Kumm, ‘Democratic Constitutionalism Encounters International Law: Terms of Engagement’ in Sujit Choudhry (ed), The Migration of Constitutional Ideas (CUP 2007) 256, 261–​262, 264–​268. See also Fahner providing an overview of selected writings on subsidiarity. Johannes Hendrik Fahner, Judicial Deference in International Adjudication (Hart 2020) 174–​177 (hereafter Fahner, Judicial Deference). 134 Roughan, Authorities (n 111) 130, 141–​142.

46 Introduction The need to consider ‘governance reasons’ must be layered in with an appreciation of the strength of the procedural justifications traditionally relied upon.

2.  The invisibility of governance reasons The development of regulatory standards by international courts and tribunals caters insufficiently for the potential significance of governance reasons. Where internationally shared interests in common public goods are on the line, it would seem that indeed co-​ordination between domestic and international legal authority will often be needed. This is the case in relation to most if not all of the legal rules and regimes applying in the regulatory disputes addressed in this book. Depending on the standards that are read into the law, the centralisation of authority required may be greater or lesser, and the modes by which it is given effect will vary. However, the empirical analyses in this book support the view that international adjudication is not set up appropriately, and may not by nature constitute the right type of process, at least on its own, for satisfactory determinations in relation to governance reasons. Specifically, international adjudicatory processes are socially and formally constrained in ways that feed a strong respect for the more traditionally recognised procedural justifications of legitimate authority claims. The social and formal constraints on international adjudication favour the indulgence of domestic authority over the head of governance considerations. As a result, international courts and tribunals are opting for a body of standards that appear in general to intrude less rather than more into domestic legal authority; and the standards adopted tend to be susceptible of application in ways that will accommodate domestic legal and administrative policy or value judgements. This recognises that in many domestic jurisdictions regulatory decision-​making is carried out through processes and institutions that are democratic or meet basic justificatory procedural requirements for authority. Indeed, it is significant that the effects of such decision-​making, where it does take place, are not blocked. However, as discussed further in Chapter Nine, this may leave the need for a co-​ordinated exercise of domestic and international authority insufficiently addressed.135 The more demanding standards which could be indicated by reference to governance reasons, including perhaps requirements for proportionality stricto

135 Shany, ‘Towards a General Margin of Appreciation Doctrine’ (n 58) 919–​921. For discussion on the significance of democracy, Fahner, Judicial Deference (n 133) 161–​171. On whether standards should be selected differently depending on a particular regulating State’s democratic credentials, Başak Çalı, ‘International Judicial Review’ in Anthony F Lang and Antje Wiener (eds), Handbook on Global Constitutionalism (Edward Elgar Publishing 2017) 291, 300. Consider also Tasioulas ‘The Legitimacy of International Law’ (n 118) 112; and see Armin von Bogdandy and Ingo Venzke, In Whose Name? A Public Law Theory of International Adjudication (OUP 2014).

Introducing Regulatory Standards  47 sensu, cannot appropriately be developed through contemporary international adjudicatory processes, or at least not by these processes alone. International adjudicatory process does have certain characteristics fitting it moderately well as a mechanism for the identification of regulatory standards. Yet the absence of popular discussion on the content and collective effect of these regulatory standards and of representation for the public interest in these matters is problematic per se in terms of procedural justification of the claim to legitimate authority of a standards-​enriched international law. This concern is most acute in relation to the contemplated adoption of proportionality testing, which would tend to centralise authority in international rather than domestic law.136 Facilitation of community discussion on the emergence of global regulatory standards, whatever their content, is to be encouraged, and for this a greater diffusion of accurate information on the issues at stake will be needed.137 However, even with increased popular deliberation on the issues, the relatively closed nature of proceedings in international courts and tribunals is likely to undermine the procedural justification of the claim to legitimate authority of a standards-​ enriched international law produced predominantly through such proceedings. Accordingly it appears that the main value of international adjudicatory decisions must lie in the contribution they make to a broader dialogue and debate.

E. Conclusion This chapter has identified that, as the depth and complexity of international law’s reach into the domestic regulatory sphere increases, international courts and tribunals are impelled into the articulation of regulatory standards due to the indeterminacy of the applicable rules and provisions on their face and the need to decide the cases that come before them. In order to decide these disputes, international adjudicatory bodies develop various tests embodying formulae for determining the balance of legal interests inherent in the applicable international legal rules and provisions. The chapter has introduced the global regulatory standards and tests most frequently appearing in the regulatory disputes relating to environmental and health matters in the ICJ, under the law of the sea, in the WTO, in investment treaty arbitration and inter-​State arbitration, and various tests through which these standards are given effect.

136 Chapter Eight; Chapter Nine, section D; Chapter Ten, section C 1. 137 This is broadly consistent with theories emphasising the need for social participation in the production of new international legal norms. Jutta Brunnée and Stephen J Toope, Legitimacy and Legality in International Law: An Interactional Account (Cambridge Studies in International and Comparative Law) (CUP 2010). See also Jutta Brunnée and Stephen J Toope, ‘Interactional Legal Theory, the International Rule of Law and Global Constitutionalism’ in Anthony F Lang Jr and Antje Wiener (eds), Handbook on Global Constitutionalism (Edward Elgar 2017) 170, 170–​171.

48 Introduction Global administrative law scholarship continues to contribute importantly in establishing an intellectual setting for the development of such regulatory standards, and international courts and tribunals may draw at times on comparative public law. The appearance of regulatory standards in international adjudicatory decisions remains best understood for the present as an aspect of the functioning of the plural world legal order rather than as constitutionalisation of this order in a stronger sense, even though patterns are beginning to emerge. Nevertheless this fundamental shift draws our attention to the significance of the emergence of regulatory standards and prompts us to consider the legitimacy of a standards-​ enriched international law as it emerges from international adjudicatory processes. The regulatory standards and tests elaborated by international courts and tribunals are serviceable in certain measure. However, based on the theory of relative authority, it appears that the social and formal constraints applying in international adjudicatory process undermine the propriety of relying on international adjudicatory process as an exclusive medium for the production of global regulatory standards. The chapters that follow in Parts II, III and IV of this book analyse and compare the emergence of regulatory standards in the selected international courts and tribunals, providing a basis on which, in Part V, to explore this observation further and respond more broadly to the questions that were introduced in the book’s first chapter. How effective are the regulatory standards produced by international courts and tribunals in preserving or enhancing international law’s claim to legitimate authority? How appropriate is it to rely on international adjudicatory processes as one of the main avenues through which there is coming into being a standards-​enriched international law? And how are we to confront the opportunities, challenges and dilemmas arising in the course of the transition to a standards-​ enriched international law incorporating global regulatory standards?

PART II

THE IN T E R NAT IONA L C OU RT OF JUST IC E , L AW OF T H E SE A DISPUT E SET T L E M E NT A ND THE PE R MA N E N T C OU RT OF A R BIT R ATION

3

Regulatory Coherence A. Introduction Progressing the inquiry established in Part I of this book, this part of the book, Part II, investigates the delineation of States’ regulatory powers and obligations through the articulation and application of regulatory standards in decisions, awards and advisory opinions rendered by the International Court of Justice (ICJ), the International Tribunal for the Law of the Sea (ITLOS) and arbitral tribunals operating under Annex VII of the United Nations Convention on the Law of the Sea (UNCLOS), as well as other Permanent Court of Arbitration (PCA) cases apart from investment treaty arbitrations, which are dealt with in Part IV. The present chapter, Chapter Three, deals with cases where the extent of States’ regulatory freedom falls to be considered, while Chapter Four addresses cases where the extent of States’ regulatory obligations must be assessed. Chapter Three focuses on international courts’ and tribunals’ identification of tests for regulatory coherence, while Chapter Four focuses on the emergence of the due diligence standard, as well as cases’ requirements that States exercise due regard for the interests of others. The cases addressed range from disputes over transit rights, to disputes over the sharing of resources and competing interests on the high seas. Waterways and railways, halibut and whales and protest at sea: all of these topics arise. The chapters embrace decisions in both contentious and advisory proceedings, taking into account the important differences between the two forms of proceeding. Chapter Three begins by introducing each of the international courts and tribunals whose work is addressed in this part of the book. This introduction is followed by an overview of the regulatory standards that have been emerging in the environmental cases considered by these courts and tribunals, and the tests in which they are embodied. The chapter then analyses in closer detail the appearance of these regulatory coherence tests in cases handled by the ICJ, in law of the sea dispute settlement and in the PCA. Chapter Four considers similarly standards helping establish how States can give due regard to the rights of others and the emergence of the due diligence standard conditioning States’ exercise of obligations to prevent transboundary harm and harm to common spaces.

Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0003

52  The ICJ, Law of the Sea and Court of Arbitration The analyses in Chapters Three and Four provide valuable insights for addressing the core questions raised in Part I. As foreshadowed earlier, the courts and tribunals studied in these chapters make use of a broad range of interpretive methodologies to produce the emerging global regulatory standards, including reliance on the inbuilt logic of the regulatory schemes they are applying. This evidences the extent to which regulatory standards are an inherent aspect of law in the regulatory sphere. The standards as articulated make relatively minimal demands on domestic legal systems compared with more demanding standards that could have been developed. In this respect the standards appear to enhance traditional procedural justifications for international law’s claim to legitimate authority, as foreshadowed in Part I. The standards enable international legal respect for domestic decision-​making and allow international law to interfere with domestic action only in limited circumstances. The emergence of these accommodating standards is largely a result of the social and formal constraints at work in international adjudicatory proceedings. Inter alia, as the analyses in these chapters demonstrate, disputants’ pleadings feed significantly into the reasoning in these cases. Although international adjudicatory processes are in many respects well suited as a laboratory for the trial and testing of workable regulatory standards, overall however these insights create a picture of a process that appears tilted towards litigating parties. The process is, naturally enough, focused on dispute resolution, rather than on the identification of regulatory standards that may help attain balances of interest more attuned to the needs of the subjects of international law more generally and the better co-​ordination of international and domestic authority.

B.  The International Court of Justice As principal judicial organ of the United Nations, the ICJ has always operated in an awareness of its political context. In the early years of the 21st century this context embraces the interdependence and collective duties of States, the potential for transformation in the nature and function of the State and new conceptions of sovereignty and its limitations.1 The Court exercises both its contentious and its advisory jurisdiction with an appreciation of these developments and the possibility that its own decisions may play a part in them. The cases heard by the Court range greatly in content and focus. Each in its own way is demanding. The complexity and multiplicity of issues that the Court is asked to determine at one time is a marked feature of practice since the late 1980s or early 1990s. Cases today, in addition to relying on often bulky volumes of technical 1 Malcolm N Shaw, Rosenne’s Law and Practice and Practice of the International Court 1920–​2015 (5th edn, Brill/​Nijhoff 2016) 3 (hereafter Shaw, Rosenne’s Law and Practice) 6–​8.

Regulatory Coherence  53 and scientific evidence, may be less amenable to straightforward judgment compared with certain of the Court’s historical decisions.2 Situations coming before the Court may also be more value-​laden and also more open to alternative potential findings.3 In its application of international law the Court must necessarily adapt to new circumstances, which may require reading in certain standards according to the context of the case.4 In doing so, the Court approaches each case on its own terms and keeps an open mind to standards or practices employed in other legal fields that could be adapted as appropriate.5 The practices followed by the Court in the course of its deliberation, including the preparation at an early stage of a written note by each sitting judge, ensure the full range of the views on the merits of a case to be canvassed.6

C.  Law of the Sea Dispute Settlement Creation of the dispute resolution system under UNCLOS in 1982 was regarded as one of the most significant developments in international legal dispute settlement.7 In contrast with the ICJ, which is a court of general jurisdiction, the dispute settlement organs operating under UNCLOS are tasked effectively with ensuring the functionability of the specific regime under which they are established. UNCLOS embodies complex and hard-​fought trade-​offs between the political interests of States in widely varying geographical and economic circumstances.8 From early in the Third United Nations Conference on the Law of the Sea it was understood that the Convention’s dispute settlement provisions would be ‘the pivot upon which the delicate equilibrium of the compromise must be balanced’.9 As well as serving as the cement that is expected to help hold together the edifice that is the Convention,10 practice has shown that the law of the sea dispute settlement machinery has to assist the system in discovering the points of flexibility upon which States’ mutual accommodation of one another’s legal interests will turn. Tribunals

2 Interview 22 June 2018. 3 Idem. 4 Interview 30 November 2018. 5 Interview 22 June 2018. 6 Shaw, Rosenne’s Law and Practice (n 1) 1573–​1577. 7 Natalie Klein, Dispute Settlement in the UN Convention on the Law of the Sea (CUP 2005) 2 (hereafter Klein, Dispute Settlement). 8 Robin Churchill and Vaughan Lowe, The Law of the Sea (3rd edn, Juris Publishing, Manchester University Press 1999) 13–​22. 9 Klein, Dispute Settlement (n 7) 2 quoting ‘Memorandum by the President of the Conference on document A/​CONF.62/​WP.9’ 5 Third United Nations Conference on the Law of the Sea, Fourth Session (New York 15 March–​7 May 1976) (31 March 1976) UN Doc A/​CONF.62/​WP.9/​Add.1, [6]‌. 10 Alan E Boyle, ‘Dispute Settlement and the Law of the Sea Convention: Problems of Fragmentation and Jurisdiction’ (1997) 46 ICLQ 37, 38.

54  The ICJ, Law of the Sea and Court of Arbitration charged with determining environmental law of the sea cases often find themselves dealing with aspects of a multilateral treaty in need of further elaboration. Their pronouncements are necessarily a communication to the world at large of a vision for the future operation of the law of the sea regime. As in other international adjudicatory fora, in dispute settlement under the law of the sea the core focus is on the task of helping settle the parties’ dispute, accompanied by the awareness that meaningful contributions to the law may also be made.11 Although law of the sea arbitration is conducted by tribunals appointed ad hoc under Annex VII of the Convention such panels may and do include ITLOS judges, and even taking into account ITLOS’ special institutional responsibility under the Convention, in contentious cases there appear substantively in many respects to be few distinctions between the judicial function of ITLOS and the arbitral function of Annex VII tribunals.12 So far as advisory proceedings are concerned, the jurisdiction of the ITLOS Seabed Disputes Chamber is set down in the Convention.13 ITLOS has established, as reflected in its rules of procedure, that it also possesses an advisory competence as a full court.14 This enables ITLOS to respond to legal questions properly put before it, and on occasion clarification on additional issues may also emerge.15 There is a place for judicial wisdom in both contentious and advisory law of the sea proceedings, based on an understanding of the purposes of the relevant international law.16 At the same time, judges and arbitrators alike are conscious of the importance of the pleadings. Excellent cases are presented and tribunals must take note of matters that are extensively addressed by the parties in the pleadings.17 As in the ICJ, before deliberation the ITLOS judges may each prepare and circulate individual notes.18 This assists the President in preparing a list of the issues requiring discussion, and also creates the potential for views originating with individual judges on specific points to feature in the decision eventually adopted.19 For Annex VII tribunals, where the PCA is the administering body there is the advantage also of secretariat support from lawyers who may be familiar with prior cases, which may assist with procedural matters.20

11 Interview 29 June 2018. 12 Idem; Interview 4 July 2018; Interview 30 November 2018. 13 Rules of the Tribunal (ITLOS/​8), as adopted on 28 October 1997 and amended on 15 March 2001, 21 September 2001, 17 March 2009, 25 September 2018 and 25 September 2020, arts 159(10), 191. 14 Responsibilities and Obligations of States with Respect to Activities in the Area (Advisory Opinion of 1 February 2011) ITLOS Reports 2011, 10, 37–​69 (hereafter Seabed Advisory Opinion). 15 Interview 29 June 2018. 16 Interview 21 June 2018. 17 Interview 29 June 2018. 18 ITLOS Resolution, ‘Resolution on the Internal Judicial Practice of the Tribunal Adopted on 31 October 1997’ (27 April 2005) ITLOS/​10. 19 Interview 29 June 2018. 20 Interview 4 July 2018.

Regulatory Coherence  55

D.  The Permanent Court of Arbitration The PCA, created by the Hague Peace Conference of 1899 and seated together with the ICJ at the Peace Palace in The Hague, is often described as neither a court nor permanent.21 The Court was established as an institution for arbitration conducted by arbitrators selected by disputants from the panel of persons named by the States party to the 1899 Hague Convention for the Pacific Settlement of Disputes which enjoyed its heyday in the pre-​war years. Inter-​State arbitration became less common in the period that followed, but since the mid 1990s the PCA has reinstalled itself as a central feature of the international arbitral scene. States and private parties are making more frequent use of its facilities, including for investment treaty arbitration.22 Several such cases are addressed below, including the North Atlantic Coast Fisheries Case (Great Britain v the United States) of 1910,23 the Indus Waters Kishenganga Arbitration (Islamic Republic Pakistan v Republic of India)24 and the Iron Rhine (‘Ijzeren Rijn’) Railway (Kingdom of Belgium v Kingdom of the Netherlands) arbitration.25 An increasing environmental caseload can be expected in the PCA.26

E.  Regulatory Standards Identified in the Disputes 1.  An overview The indications of potential global regulatory standards seen in the disputes addressed in these two chapters coalesce around regulatory coherence, due regard and due diligence. Regulatory coherence calls for an appropriate relationship 21 John Collier and Vaughan Lowe, The Settlement of Disputes in International Law: Institutions and Procedures (OUP 1999) 35. 22 Cesare PR Romano, ‘Trial and Error in International Judicialization’ in Cesare PR Romano, Karen J Alter and Yuval Shany (eds), The Oxford Handbook of International Adjudication (OUP 2013) 111, 1s21. 23 North Atlantic Coast Fisheries Case (Great Britain v the United States) (1910) Scott Hague Court Rep 141 (hereafter North Atlantic Coast Fisheries). 24 Indus Waters Kishenganga Arbitration (Islamic Republic Pakistan v Republic of India) (Partial Award) (2013) 154 ILR 1 (hereafter Kishenganga (Partial Award)); Indus Waters Kishenganga Arbitration (Islamic Republic of Pakistan v Republic of India) (Final Award) (2013) 157 ILR 362 (hereafter Kishenganga (Final Award)). 25 Arbitration Regarding the Iron Rhine (‘Ijzeren Rijn’) Railway between the Kingdom of Belgium and the Kingdom of the Netherlands (Award) (2005) 140 ILR 1 (hereafter Iron Rhine). 26 Note the adoption of the Optional Rules for Arbitration of Disputes Relating to Natural Resources and/​or the Environment (adopted by the Permanent Court of Arbitration 19 June 2001), arts 8, 27 (hereafter ‘Environmental Rules’) and the specialised panel of arbitrators established pursuant thereto; United Nations Framework Convention on Climate Change (UNFCCC) (adopted 9 May 1992, entered into force 21 March 1994), art 14; Kyoto Protocol to the United Nations Framework Convention on Climate Change (Kyoto Protocol) (adopted 11 December 1997, entered into force 16 February 2005), art 19; Paris Agreement under the United Nations Framework Convention on Climate Change (Paris Agreement) (signed 22 April 2016, entered into force 4 November 2016), art 24.

56  The ICJ, Law of the Sea and Court of Arbitration between regulatory measures and their objectives. Regulatory coherence requirements are seen in the form of capability tests, tests of self-​evident necessity and ideas of reasonableness together with necessity and proportionality. These same requirements may serve simultaneously as elements of possible formulae for the exercise of due regard for other States’ legal interests and emerging understandings of what is required to fulfil standards of due diligence in the prevention of transboundary harm or harm to common spaces and resources. Turning first to regulatory coherence, we find that capability tests have been important in several of the decisions in the courts and tribunals addressed in this part of the book in what make an eclectic set of cases. These include the ICJ’s decision on jurisdiction in the Fisheries Jurisdiction (Spain v Canada) case in 199827 and the Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) under Annex VII of UNCLOS in 2014.28 In the Fisheries Jurisdiction case, for instance, Canada’s arrest of Spanish vessel the Estai was accepted as arising out of or concerning Canadian fisheries conservation and management measures on the basis of the technical characteristics or design of the relevant Canadian legislation and regulation. There is a strong similarity between the relevant ICJ and law of the sea cases and situations in the World Trade Organization (WTO) where the pivotal question is whether, based on an assessment of its design, a regulatory measure is capable of contributing to its stated objectives. Self-​evident necessity testing as seen in this chapter is in a sense the inverse of capability testing. A regulatory measure may be objectively, evidently necessary where it is clear that the measure or action is required in order to bring about the regulatory objective in question. We could refer here to the Kishenganga arbitration where it was determined that the difference in elevation between the respective tributaries of the Indus rendered necessary the diversion of water between them in order for India to generate hydroelectric power.29 In that case the parties’ bilateral treaty expressly permitted diversion when necessary, subject to certain provisos. Contrastingly in the earlier Right of Passage over Indian Territory (Portugal v India) case the ICJ read into the Portuguese right of passage over Indian territory an allowance for India to restrict this passage when necessary, in this instance to protect order and security.30 The Court appeared to find this self-​evident on the facts of the case. In Whaling in the Antarctic (Australia v Japan: New Zealand intervening) the ICJ elaborated a requirement for the reasonableness of a decision or measure in

27 Fisheries Jurisdiction (Spain v Canada) (Judgment) [1998] ICJ Rep 432 (hereafter Fisheries Jurisdiction). 28 The Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) (Award on the Merits) (2015) 171 ILR 1 (hereafter Arctic Sunrise). 29 Kishenganga (Partial Award) (n 24); Kishenganga (Final Award) (n 24). 30 Right of Passage over Indian Territory (Portugal v India) (Merits) [1960] ICJ Rep 6 (hereafter Right of Passage).

Regulatory Coherence  57 relation to its objectives in the ICJ.31 Like capability testing, this test enabled an adjudicatory decision based on objective indices of regulatory coherence, while specifically recognising that an adjudicatory body has a role in evaluating the reasonableness of the correlation between a measure’s design and its aims. The Court assessed the reasonableness of Japan’s permitting decision by considering the design and implementation of the Japanese whaling programme in the light of its stated objectives. Japan’s scientific whaling programme failed the test. As we shall see, the pleadings in this case drew closely on Appellate Body determinations under the requirement in the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) for trade measures to be based on risk assessments. A similar approach is seen under Article XX (g) of the General Agreement on Tariffs and Trade (GATT) allowing WTO Members to adopt and maintain trade-​inhibiting measures relating to the conservation of exhaustible natural resources under certain conditions. In the words of the Appellate Body in United States—​Import Prohibition of Certain Shrimp and Shrimp Products, such measures are expected to be ‘reasonably related’ to their ends.32 More significantly, the requirement for a rational relationship between trade measures’ potentially discriminatory aspects and their policy objectives is called for in the WTO general exceptions jurisprudence and under Article 2.1 of the Agreement on Technical Barriers to Trade (TBT Agreement). We see the same idea resonating yet again in investment treaty arbitration in the application of the core disciplines of investment treaty law. The ICJ’s espousal of a reasonableness test for regulatory coherence in Whaling in the Antarctic marks an important moment in the development of international law, even though the adoption of this test was a response to the particular circumstances of the case. With the wide range of international courts and tribunals now applying similar regulatory coherence tests, reasonable relationship requirements can be expected to implant themselves across international law and, although competing with rational relationship tests, might well achieve recognition as the primary articulation of the global regulatory coherence standard.33 Among the historical forerunners of the decision in Whaling in the Antarctic is the award in the Dispute Concerning Filleting within the Gulf of St Lawrence (‘La Bretagne’) (Canada v France) in which Canada’s prohibition on fish filleting by French trawlers from St Pierre and Miquelon in the Gulf of Saint Lawrence was subjected to a requirement of reasonableness.34

31 Whaling in the Antarctic (Australia v Japan: New Zealand intervening) (Judgment) [2014] ICJ Rep 226 (hereafter Whaling in the Antarctic). 32 United States—​Import Prohibition of Certain Shrimp and Shrimp Products, Report of the Appellate Body (12 October 1998) WT/​DS58/​AB/​R, DSR 1998:VII, 2755 [141]. 33 Chapter Two, section A 1; Chapter Six; Chapter Seven. 34 Dispute Concerning Filleting within the Gulf of St Lawrence (‘La Bretagne’) (Canada v France) (Award) 82 ILR 590 (hereafter La Bretagne (Award)).

58  The ICJ, Law of the Sea and Court of Arbitration In a number of further cases addressed in this chapter we then see more complex formulae for regulatory coherence drawing on concepts of reasonableness together with necessity and proportionality. The cases here include the North Atlantic Coast Fisheries Case (Great Britain v the United States),35 the award in the Iron Rhine dispute,36 the ICJ proceedings in the Dispute regarding Navigational and Related Rights (Costa Rica v Nicaragua)37 and the Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation).38 All of these cases have concerned activities in the territory of the respondent State, or else, as in the case of the UNCLOS Annex VII Arctic Sunrise Arbitration, the claim has been that the conduct giving rise to the dispute was for the protection of the sovereign rights of the respondent State. In the Navigational Rights case a sophisticated test was elaborated to the effect that States’ regulatory freedom must in general be exercised for legitimate purposes, in a reasonable and non-​discriminatory fashion and without a manifestly excessive negative impact on competing legal rights. This formula has the potential for broader adoption and evolution. This brings us to two standards of a slightly different character in the form of due regard and due diligence requirements. Particularly of especial significance may be the articulation in the Chagos Marine Protected Area (Republic of Mauritius v United Kingdom) arbitration of elements of a standard through which a State can be expected to exercise due regard for the interests of another State or States as required under UNCLOS.39 In the Chagos Marine Protected Area arbitration, the exercise of due regard required consideration to be given to ‘the nature of the rights held by Mauritius, their importance, the extent of the anticipated impairment, the nature and importance of the activities contemplated by the United Kingdom, and the availability of alternative approaches’. The Annex VII Tribunal’s decision rested on a finding that the United Kingdom had acted inconsistently with these expectations. In Whaling in the Antarctic the Court found that the obligation of parties to the International Convention on the Regulation of Whaling (ICRW) to give due regard to the recommendations of the International Whaling Commission (IWC) entailed the conduct of sufficient analysis of the necessity of lethal whaling said to be for scientific purposes. Looking to the future, there is scope to read due regard requirements and standards into many international legal rules and provisions as an aspect of sound regulatory practice. Like regulatory coherence, due regard, too, may become a global regulatory standard.

35 North Atlantic Coast Fisheries Case (n 23). 36 Iron Rhine (n 25). 37 Dispute regarding Navigational Rights (Costa Rica v Nicaragua) (Judgment) [2009] ICJ Rep 213 (hereafter Navigational Rights). 38 Arctic Sunrise (n 28). 39 Chagos Marine Protected Area Arbitration (Republic of Mauritius v United Kingdom) (Award) (2015) 162 ILR (hereafter Chagos Marine Protected Area Arbitration).

Regulatory Coherence  59 We have seen so far that decisions of the ICJ, PCA and Annex VII tribunals have involved the identification of potential global regulatory standards together with diverse more specific tests delineating States’ regulatory freedom. Regulatory disputes in these fora have also given life to ascendant standards delineating States’ regulatory obligations under the law on the prevention of transboundary harm in the form of due diligence requirements, addressed in Chapter Four. In particular requirements for due diligence in the prevention of transboundary harm have been elaborated through a series of decisions beginning with the judgment of the ICJ in the case concerning Pulp Mills on the River Uruguay (Argentina v Uruguay) in 2010,40 followed by the 2011 Advisory Opinion on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area,41 the 2015 Advisory Opinion of ITLOS in response to the Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission, 2015 ICJ decision in Certain Activities Carried out by Nicaragua in the Border Area (Costa Rica v Nicaragua) and Construction of a Road in Costa Rica along the San Juan River (Nicaragua v Costa Rica) (Joined Cases),42 and the South China Sea Arbitration (Republic of the Philippines v People’s Republic of China).43 The 2017 Advisory Opinion of the Inter-​American Court of Human Rights on The Environment and Human Rights (State Obligations in Relation to the Environment in the Context of the Protection and Guarantee of the Rights to Life and Personal Integrity: Interpretation and Scope of Articles 4(1) and 5(1) in Relation to Articles 1(1) and 2 of the American Convention on Human Rights) took up the concept of due diligence and applied it specifically to States’ obligations in the human rights sphere in respect of transboundary harm caused by transnational corporate actors.44 Further light may be cast on due diligence when the ICJ gives judgment in the current proceedings in the Dispute over the Status and Use of the Waters of the Silala (Chile v Bolivia).45 Like other standards addressed in this book, due diligence standards potentially apply in diverse health and environmental contexts as well as beyond. For instance, due diligence is potentially an important operational concept in relation to prevention

40 Pulp Mills on the River Uruguay (Argentina v Uruguay) (Judgment) [2010] ICJ Rep 14 (hereafter Pulp Mills). 41 Seabed Advisory Opinion (n 14). 42 Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v Nicaragua) and Construction of a Road in Costa Rica along the San Juan River (Nicaragua v Costa Rica) (Judgment) [2015] ICJ Rep 665. 43 South China Sea Arbitration (Republic of the Philippines v People’s Republic of China) (Merits) (2016) 170 ILR 1 (hereafter South China Sea). 44 The Environment and Human Rights (State Obligations in Relation to the Environment in the Context of the Protection and Guarantee of the Rights to Life and Personal Integrity: Interpretation and Scope of Articles 4(1) and 5(1) in relation to Articles 1(1) and 2 of the American Convention on Human Rights), Advisory Opinion OC-​23/​17, Inter-​American Court of Human Rights Series A No 23 (15 November 2017). 45 Dispute Over the Status and Use of the Waters of the Silala (Chile v Bolivia) (Application Instituting Proceedings, 6 June 2016).

60  The ICJ, Law of the Sea and Court of Arbitration of transboundary harm in the health field, as seen in early discussions around the international transmission of the novel coronavirus COVID-​19 in 2020.46 Occurrences of these standards will be analysed in greater depth in the following section of this chapter and in the subsequent chapter. In relation to each, these chapters seek to probe the interpretive methods employed in identifying the standard, the extent to which the standard accommodates domestic legal authority and the influence of the pleadings, together with other factors relevant to the book’s inquiries.

2.  Regulatory coherence As indicated earlier, the requirement for regulatory coherence presently takes a variety of forms according to context.

a)  Capability testing Capability testing or variants thereof are found in at least two instances in the international courts and tribunals addressed in this chapter. In the ICJ’s decision on jurisdiction in the Fisheries Jurisdiction (Spain v Canada) case, Canada’s Article 36(2) optional clause declaration carve out for disputes relating to fisheries conservation and management measures was found to exclude the Court’s jurisdiction on the basis that Canada’s measures, based on their design, could be considered conservation and management measures.47 Contrastingly, though in an altogether distinct legal setting, in the Arctic Sunrise case the Tribunal ruled that Russia’s boarding, seizure and detention of the Dutch flagged Greenpeace vessel the Arctic Sunrise was inconsistent with Russia’s obligations under UNCLOS because given the lengthy delay before action was taken, the prevention of interference with its sovereign rights could not have provided a basis for Russia’s action.48 That is to say, it was incapable of having done so. i) Fisheries Jurisdiction (Spain v Canada) The Fisheries Jurisdiction (Spain v Canada) case concerned Canada’s boarding of the Spanish vessel the Estai on the high seas outside the Canadian Exclusive Economic Zone (EEZ) in the North Atlantic Fisheries Organisation Regulatory Area (NAFO) under amendments to the Canadian Coastal Fisheries Protection Act and its regulations.49 Canada was concerned to protect Greenland halibut, a 46 Antonio Coco and Talita de Souza Dias, ‘Due Diligence and COVID-​19: States’ Duties to Prevent and Halt the Coronavirus Outbreak’ (EJIL:Talk!, 24 March 2020) accessed 15 August 2020. 47 Fisheries Jurisdiction (n 27) [84]–​[85]. 48 Arctic Sunrise (n 28) [332]. 49 Fisheries Jurisdiction (n 27).

Regulatory Coherence  61 straddling stock threatened by commercial extinction in the face of the European Union (EU)’s unilateral setting of a quota for Spain, and Portuguese fleets many times greater than the proposed NAFO quota.50 Spain instituted proceedings in the ICJ challenging the Canadian actions, but Canada’s challenge to the jurisdiction of the ICJ was upheld. The ICJ held that the Canadian action came within the terms of the Canadian reservation to its 1994 Article 36(2) optional clause declaration, which excluded jurisdiction over: ‘disputes arising out of or concerning conservation and management measures taken by Canada with respect to vessels fishing in the NAFO Regulatory Area . . . and the enforcement of such measures’. Specifically, the ICJ found that in order to qualify as a conservation and management measure it was sufficient that the purpose of a Canadian measure be to conserve and manage living resources ‘and that, to this end, it satisfies various technical requirements’. The Court said that this was what States both understood and practised. Typically, States’ enactments and administrative acts described such measures with reference to scientific and factual criteria.51 The Court did not find it necessary, in determining whether the Canadian measures were ‘conservation and management’ measures, to consider whether Canada was entitled as a matter of international law to adopt such measures or enforce them on the high seas.52 Applying the test it had articulated, the relevant amendments to Canadian coastal fisheries protection legislation and regulations were found to constitute ‘conservation and management measures’. Boarding, inspection, arrest and minimum use of force were all contained within the concept of enforcement of conservation and management measures, on a ‘natural and reasonable’ interpretation. Such measures were by nature capable of contributing to the stated purpose of conservation. The Court’s approach to the question of its own jurisdiction and its reliance on this capability test meant that the merits, which would have been politically challenging, were not reached. The Court noted that declarations accepting the Court’s jurisdiction are unilateral acts of sovereignty and the rules on the interpretation of treaties are only to be applied by analogy and to the extent compatible with the sui generis character of such declarations. Interpretation is to have ‘regard to the words actually used’ and the Court ‘must seek an interpretation which is in harmony with a natural and reasonable way of reading the text’.53 Special account is to be taken of the declarant State’s intention, given that a declaration is a unilateral instrument, and this intention may be ascertained by examining contemporaneous evidence, here comprising Canadian ministerial statements, parliamentary debates and 50 Louise de La Fayette, ‘The Fisheries Jurisdiction Case (Spain v. Canada) Judgment on Jurisdiction of 4 December 1998’ (1999) 48(3) ICLQ 664, 665. 51 Fisheries Jurisdiction (n 27) [70]. 52 Ibid, [54]. 53 Ibid, [46], [47] citing Anglo-​Iranian Oil Co (United Kingdom v Iran) (Jurisdiction) [1952] ICJ Rep 93, [104]–​[105].

62  The ICJ, Law of the Sea and Court of Arbitration news releases.54 Further, applying the principle of effectiveness, a declaration was to be interpreted ‘in a manner compatible with the effect sought by the reserving State’. The Court took into account that a State’s reasons for making a carve out could be precisely that the State felt its policy or position might be vulnerable to legal challenge.55 Capability testing allows an indulgence for regulatory States under international law. However, the result of applying ‘capability’ testing as seen in this case, like the requirement for a measure’s reasonableness in relation to its objectives seen later in this chapter in Whaling in the Antarctic, is likely to be that the provision or obligation under construction is not fully interpreted and applied. In the Fisheries Jurisdiction case it remained troubling that applying a capability test in this case meant that the Court did not engage further with the idea that the legality of conservation and management measures under international law could undermine a declarant State’s claims as to their character. Judge Bedjaoui in his Dissenting Opinion was greatly concerned that Canadian measures relating to the high seas should not be interpreted based on Canada’s own internal legal order, and that the notion of ‘conservation and management’ measures should not be given an essentially technical meaning. His concern was that the Court’s judgment could not be considered to legitimate unilateral coastal State fisheries enforcement on the high seas by accepting at face value that Canada’s measures were what they were stated to be: ‘the Court appears to be saying that the Canadian measures are routine technical measures which are accepted and adopted worldwide’.56 In the view of Judge Bedjaoui, the Court gave an ‘incomplete and partial definition of conservation and management measures’ that was inconsistent even with State practice.57 This should have been regarded as an ‘international concept’, informed by the many new international instruments and developments in the fisheries field.58 However, the Court preferred the narrower approach, consistent with the way in which Canada had pleaded the case. Canada had emphasised that the character of conservation management measures was a factual question, and could be resolved by establishing the need for conservation and that the management measures taken were appropriate to that need.59 The second case effectively involving capability testing that will be discussed in this chapter is a decision of an Annex VII UNCLOS Tribunal in the Arctic Sunrise 54 Ibid, [48]–​[49], citing Aegean Sea Continental Shelf (Greece v Turkey) (Judgment) [1978] ICJ Rep 3, [69]. 55 Ibid, [52], [54]. 56 Dissenting Opinion of Judge Bedjaoui [92]. 57 Dissenting Opinion of Judge Bedjaoui [93]. 58 Dissenting Opinion of Judge Bedjaoui [62]–​[97]. Emphasis original. See also Dissenting Opinion of Vice-​President Weeramantry; Dissenting Opinion of Judge Ranjeva; Dissenting Opinion of Judge Vereshchetin; Dissenting Opinion of Judge Ad Hoc Torres Bernárdez. 59 Case Concerning Fisheries Jurisdiction (Spain v Canada) Verbatim Record (Original Language, 17 June 1998 at 10am), 14, 37.

Regulatory Coherence  63 Arbitration (Kingdom of the Netherlands v Russian Federation).60 Together with the decisions in other law of the sea arbitrations, the Annex VII Tribunal here made an important contribution to understandings of how the law of the sea regime is to function. In addition, note might be made of the M/​V ‘Virginia G’ Case (Panama v Guinea Bissau) in which ITLOS held that coastal States are entitled to regulate foreign fisheries vessels’ bunkering in their EEZs. ITLOS relied on the connection to fishing activity to reason that this qualified as a measure for the conservation and management of their marine living resources under Article 56 of UNCLOS, read with Article 62(4).61 ii) The Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) The capability test applied in the UNCLOS Annex VII arbitration in the Arctic Sunrise arbitration served as the pivot on which the case was to turn.62 The 2014 Arctic Sunrise case concerned the Russian authorities’ boarding, seizure and detention of a Greenpeace vessel and its crew. Russia was found in breach of its obligations to the Netherlands as flag State with exclusive jurisdiction over the Arctic Sunrise in the Russian EEZ.63 Russia was also found to have breached its obligations in failing promptly to release the Arctic Sunrise and enable the crew to leave its territory in accordance with an ITLOS provisional measures order of 2013.64 The Arctic Sunrise Annex VII decision incorporated an assessment of the limits to coastal State action for the prevention of interference with sovereign rights in non-​living resources in the EEZ. Specifically, the case concerned Russia’s response to Greenpeace protest activity in the Russian EEZ on and around the Prirazlomnaya oil platform operated by Gazprom in the only oil field under development in the Russian Arctic, the Prizlomnoye oilfield. Greenpeace’s ‘Save the Arctic’ campaign targeted the platform in 2012 and again in 2013.65 On the second occasion Russian authorities arrested the vessel and crew. The crew, comprising nationals of some 19 States including two Dutch nationals and four Russian nationals, were charged with the offence of hooliganism.66 Greenpeace had alerted the Russian authorities in advance to its plans to scale the Prirazlomnaya and establish camp there in a survival capsule. From the Arctic Sunrise, located more than 500 metres distant, were launched five rigid-​hulled inflatable boats (RHIBs), which headed towards the platform, initially with the 60 Arctic Sunrise (n 28). 61 M/​V ‘Virginia G’ (Panama v Guinea-​Bissau) (Judgment), ITLOS Reports 2014, 4, [215]–​[217] (hereafter M/​V ‘Virginia G’). 62 Arctic Sunrise (n 28). 63 Ibid, [333], [401(C)]. 64 Ibid, [360], [401(D)]. 65 Ibid, [80]; Richard Caddell, ‘Platforms, Protestors and Provisional Measures: The Arctic Sunrise Dispute and Environmental Activism at Sea’ (2015) 45 NYIL 359 (hereafter Caddell, ‘Platforms’). 66 Arctic Sunrise (n 28) [124].

64  The ICJ, Law of the Sea and Court of Arbitration capsule in tow until the towline snapped and the capsule was retrieved by the Arctic Sunrise in a brief foray closer to the Prirazlomnaya.67 Activists on the Greenpeace RHIBs successfully attached a line to the platform—​which was speedily removed by Russian authorities on board two RHIBS launched by the Russian coastguard vessel the Ladoga. Two individuals attempted to climb a rope attached to a mooring line but abandoned the attempt under the spray of Russian water cannons and the danger created by persons on the Prirazlomnaya raising and dropping the mooring line. The protest action ended within two hours and the five Greenpeace RHIBs returned to the Arctic Sunrise.68 The Ladoga immediately ordered the Arctic Sunrise to stop and admit a boarding party. The Arctic Sunrise refused, asserting its freedom of navigation. Over the ensuing three hours the order was repeated. The Ladoga signalled that it would open fire, but did not do so, the Arctic Sunrise having advised that there were petroleum stores on the stern of the ship.69 Evening saw the Arctic Sunrise circling the Prirazlomnaya at a distance of four nautical miles, with the Ladoga in position between the two. This continued for some 24 hours. The Arctic Sunrise was then boarded by helicopter and towed by the Ladoga to Murmansk.70 Proceedings before the Annex VII Tribunal convened to hear the merits of the case turned in large measure on the Tribunal’s determination of the balance of rights between Russia, the coastal State, and the Netherlands as flag State. Flag States retain exclusive jurisdiction over a vessel in the EEZ under Articles 92(1) and 58(2) of UNCLOS. Coastal States have exclusive jurisdiction with regard to the establishment and use of artificial islands, installations and structures in the EEZ.71 That coastal States may establish reasonable safety zones to a distance of 500 metres around such islands, installations and structures is clear.72 Based on the evidence, the Tribunal proceeded on the assumption Russia had done so, finding also that Russia had good reason to believe the Greenpeace RHIBs had violated the zone and the Russian laws and regulations applying in the zone.73 Yet this did not provide a legal basis for boarding, seizure and detention because the requirements of hot pursuit were not satisfied. The Tribunal was ready to apply the doctrine of constructive presence, ready to accept that an order to stop could be given by VHF radio, and ready, also, to find that Russia had satisfied itself that one or more of the RHIBs was within the 500-​metre safety zone when the Arctic Sunrise was signalled to stop. However, there had been no continuous pursuit of the Arctic Sunrise. Rather, the Ladoga had unloaded its gun mounts, and ceased issuing orders to the 67 Ibid, [84], [85]–​[86]. 68 Ibid, [87]–​[93]. 69 Ibid, [93]–​[94]. 70 Ibid, [97], [100]–​[101]. 71 United Nations Convention on the Law of the Sea (opened for signature 10 December 1982, entered into force 16 November 1994) 1833 UNTS 307, art 56 and 60 (hereafter UNCLOS). 72 Ibid, art 60(4) and (5). 73 Arctic Sunrise (n 28) [248]–​[249], [250]–​[251].

Regulatory Coherence  65 Arctic Sunrise, and for some 35 hours had simply shadowed that vessel in its continuous circling of the Prirazlomnaya, awaiting further instructions.74 The arbitration therefore potentially revolved instead around the question of a coastal State’s entitlement to prevent interference with its sovereign rights in relation to the exploration and exploitation of non-​living resources in the EEZ. Thus the Annex VII Tribunal found itself exploring and explaining the powers associated with sovereign rights under UNCLOS.75 The Tribunal stated at the beginning of its analysis that States have the right to take appropriate measures to prevent interference with their sovereign rights.76 The Tribunal also stated that it considered the protection of coastal States’ sovereign rights to be a legitimate aim or purpose for a coastal State to pursue.77 The Tribunal said it would be reasonable for a coastal State to take action to prevent: (i) violations of its laws adopted in conformity with the Convention; (ii) dangerous situations that can result in injuries to persons and damage to equipment and installations; (iii) negative environmental consequences; and (iv) delay or interruption in essential operations. These all constituted legitimate interests of coastal States.78 At the same time there was no suggestion that this was necessarily a closed list. The Tribunal was clear that coastal States would have to be prepared to tolerate a degree of nuisance not amounting to interference with the exercise of their sovereign rights, however, and they were required to have due regard to other States’ rights.79 The Annex VII Tribunal thus invested thought and time in considering and sketching out its views on the shape of coastal State rights in relation to protest at sea in connection with non-​living resource use. However, the Tribunal provides little in the way of reasoning to support the various statements it made here about coastal States’ regulatory powers.80 In reaching the conclusions that it did here the Tribunal appears to have taken into account the views of the parties as seen in the Netherlands’ submissions. For instance the Netherlands conceded that it saw as potentially constituting a ‘legitimate aim’ the enforcement of Russian national legislation consistent with UNCLOS to protect safety and public order and the interests of the operator of the installation.81 As to the protection of the environment, it can perhaps be inferred that the parties considered this a legitimate aim, with the Russian Federation having observed that the actions of the Arctic Sunrise could be interpreted only as 74 Ibid, [252]–​[267], [269]–​[275]. 75 Ibid, [324]–​[332]. 76 Ibid, [324]. 77 Ibid, [326]. 78 Ibid, [327]. 79 Ibid, [328]. 80 As noted in Joanna Mossop, ‘Protests against Oil Exploration at Sea: Lessons from the Arctic Sunrise Arbitration’ (2016) 31 IJMCL 60, 80. Mossop observes that ‘the absence of any express statement to this effect in the LOSC did not weigh on the Tribunal. Rather, these considerations flow from the existence of the sovereign right.’ 81 Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) Memorial of the Kingdom of the Netherlands (31 August 2014), [240], [246]–​[248].

66  The ICJ, Law of the Sea and Court of Arbitration a provocation, which exposed the Arctic region to the threat of ‘an ecological disaster with unimaginable consequences’,82 and the Netherlands taking the contrary view on the facts.83 The respect shown here for States’ determinations of regulatory priorities is in line with deferential understandings of the law in other international legal settings including WTO dispute settlement and investment treaty arbitration. However, the Tribunal observed that Russia had not given the prevention of resumed protest action as the reason for boarding, seizure and detection of the Arctic Sunrise—​though the Tribunal noted that Russia’s action might have been so designed. Pivotally, the vessel was, when boarded, no longer engaged in actions that could potentially interfere with Russia’s exercise of its sovereign rights as a coastal State. The Tribunal concluded that the prevention of interference with its sovereign rights could not have provided a basis for Russia’s action.84 Article 78 of the Convention provides that coastal States’ exercise of their rights over the continental shelf must not infringe or unjustifiably interfere with the flag State’s navigation and other rights and freedoms. Boarding and seizure constituted an infringement of and unjustifiable interference with these rights. The Annex VII Tribunal went on to conclude that Russia’s boarding, seizure and detention did not comply with Russia’s obligations to the Netherlands as flag State of the Arctic Sunrise under Articles 56(2), 58(1), 58(2), 87(1)(a) and 92(1) of UNCLOS.85 Thus it can be seen that the case turned on the point that, in essence, Russia’s action was not capable of preventing an interference with Russia’s sovereign rights, as there was no threat to these rights at the time the action was taken. There is a further aspect of the Arctic Sunrise arbitration that is also important and is taken up later in this chapter. In the passages discussed above, the Tribunal set out the view that it would be reasonable to take preventive action in the four types of circumstance identified, but how we are to assess the acceptability of the action taken is a distinct question. The Annex VII Tribunal identified reasonableness, necessity and proportionality as tests for the appropriateness of coastal State measures to protect sovereign rights.86 The Tribunal observed expressly that there was no need to consider the application of these tests in this case.87 The Tribunal perhaps incorporated reference to these considerations in order to impress upon readers that had Russia decided to take action to board the Arctic Sunrise there would still have been restrictions on Russia’s entitlement to do so. ITLOS had observed previously that the principle of reasonableness applies to enforcement measures necessary to ensure compliance with coastal State laws and regulations under 82 Ibid, [312] citing Russia’s Note Verbale of 18 September 2013, Annex N-​5. See also Questions Posed by the Arbitral Tribunal to the Netherlands (28 November 2014), 3. 83 Second Supplemental Written Pleadings of the Kingdom of the Netherlands (12 January 2015), 14–​15. 84 Arctic Sunrise (n 28) [329]–​[330], [332]. 85 Ibid, [333], [401(C)] 86 ‘Such measures must fulfil the tests of reasonableness, necessity and proportionality.’ Ibid, [326]. 87 Ibid, [333].

Regulatory Coherence  67 Article 73 of the Convention. In The M/​V ‘Virginia G’ Case ITLOS had observed that the principle of reasonableness generally applied in respect of Article 73 enforcement measures, with due regard to be paid to the particular circumstances of the case as well as the gravity of the violation concerned.88 In the M/​V ‘Saiga’ (No. 2) (Saint Vincent and the Grenadines v Guinea) case the Tribunal had further said that the use of force was to be avoided as far as possible; and, where unavoidable, was not to go beyond what was reasonable and necessary in the circumstances. Considerations of humanity also applied.89 The Netherlands believed the principle of reasonableness to encompass the principle of proportionality. The Arctic Sunrise Annex VII Tribunal considered also that general international law on the use of force might be relevant; and took the view that force was to be avoided as far as possible, and confined to what was reasonable and necessary in the circumstances.90 The Tribunal’s incorporation of references to necessity and proportionality may have been a response to the Netherlands’ pleadings. The Netherlands had grounded relevant parts of its pleadings in a human rights standard, emphasising the rights to freedom of expression and assembly, found also in the International Covenant on Civil and Political Rights. According to the Netherlands restrictions on these rights had to be prescribed by law, adopted in order to pursue a legitimate aim, and had to be necessary and proportionate for the achievement of that aim.91 For the Netherlands, these factors conditioned a State’s margin of appreciation in the implementation of the rights, at least under the European Convention on Human Rights.92 Necessity and proportionality had previously been applied by the Dutch courts in litigation concerning protests at sea by Greenpeace.93 The Tribunal also found during a consideration of the applicable law that general international law in relation to human rights might be considered in interpreting and applying UNCLOS, specifically in determining whether enforcement action was reasonable and proportionate.94 The Annex VII Tribunal noted that after release the crew had filed individual applications with the European Convention on Human Rights asserting violation of their rights under Articles 5 and 10 of the European Convention.95 The Tribunal did not consider it necessary to make a determination on the extent to which coastal States may actually enforce laws and regulations relating to 88 M/​V ‘Virginia G’ (n 61) [270]; Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) Memorial of the Kingdom of the Netherlands (31 August 2014), [240]. 89 Hearing Transcript (10 February 2015), 18–​19. 90 Arctic Sunrise (n 28) [191] citing M/​V ‘SAIGA’ (No 2) (Saint Vincent and the Grenadines v Guinea) (Judgment) ITLOS Reports 1999, 10 [155]. 91 Memorial of the Kingdom of the Netherlands (31 August 2014), [221]–​[222]. 92 Memorial of the Kingdom of the Netherlands (31 August 2014), [223]. 93 Hearing Transcript (10 February 2015), 45–​48. The Dutch courts had issued an injunction against proposed Greenpeace protest action against a Gazprom freighter due to the absence of necessity and proportionality. See also Arctic Sunrise (n 28) [325]. 94 Arctic Sunrise (n 28) [197]–​[198]. 95 Ibid, [134].

68  The ICJ, Law of the Sea and Court of Arbitration non-​living resources, as there was no evidence that Russian laws had been violated in this respect. However, the Tribunal considered it clear that a right of enforcement existed in relation to exploitation of non-​living resources.96 The Tribunal observed that, when working on the Geneva Convention on the Continental Shelf, the International Law Commission had considered that the words of the provision that subsequently became Article 77 of UNCLOS: leave no doubt that the rights conferred upon the coastal State cover all rights necessary for and connected with the exploration and exploitation of the resources of the continental shelf. Such rights include jurisdiction in connection with the prevention and punishment of violations of the law.97

The Tribunal was not deterred by the absence of a provision in UNCLOS paralleling Article 73(1) which provided for enforcement of coastal States’ laws and regulations in relation to living resources,98 or by the non-​acceptance during negotiations of proposals to specify such enforcement powers with respect to non-​living resources.99 Before moving on it may be observed that the ITLOS provisional measures order in the Arctic Sunrise case is also seen as circumscribing coastal States’ regulatory freedom.100 The provisional measures order in effect allowed the provision of an instrument of financial security in substitute for coastal States’ application of criminal enforcement procedures. Vessel and crew were to be released on provision of a bank guarantee for €3,600,000 as financial security for Dutch compliance with any monetary order that might be made against the Netherlands by the Annex VII Tribunal or with any agreement between the parties.101 The provisional measures decision was seen by some as treading unduly on coastal States’ regulatory freedom.102 Judge Jesus noted that a bond or financial guarantee might not preserve the rights of a detaining State where the criminal penalties in question might involve imprisonment terms not convertible to monetary penalties.103 Judge Kulyk 96 Ibid, [284]. 97 Ibid, [283] citing ILC, ‘Articles Concerning the Law of the Sea with Commentaries’ (1956) II U.N.Y.B.I.L.C. 265, 297. 98 UNCLOS (n 71) art 73(1) reads: The coastal State may, in the exercise of its sovereign rights to explore, exploit, conserve and manage the living resources in the exclusive economic zone, take such measures, including boarding, inspection, arrest and judicial proceedings, as may be necessary to ensure compliance with the laws and regulations adopted by it in conformity with this Convention. 99 Arctic Sunrise (n 28) [280]–​[289]. 100 The Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) (Provisional Measures, Order of 22 November 2013) ITLOS Reports 2013, 230 (hereafter Arctic Sunrise (Provisional Measures)). 101 Arctic Sunrise (Provisional Measures) (n 100) [93]–​[97], [105(1)(a)]. 102 For discussion Caddell, ‘Platforms’ (n 50) 373–​374. 103 Arctic Sunrise (Provisional Measures) (n 100) Separate Opinion of Judge Jesus [11]; Dissenting Opinion of Judge Kulyk [14]. Judge Jesus would have preferred release on the grounds that the rights of the parties to be preserved in this case included the freedom of navigation. He recognised that this

Regulatory Coherence  69 also registered his reservations about the use of a bond or financial guarantee where coastal State penalties included imprisonment.104 For his part, Judge Golitsyn considered it ‘utterly incomprehensible how ITLOS could prescribe the release of the crew, including most astoundingly the Russian nationals among them’. In his opinion, in ordering the release of vessel and crew, ITLOS had completely disregarded the rights of the Russian Federation to enforce its criminal law in relation to activities in safety zones and on continental shelf installations.105 More generally we might note that ITLOS has, through a series of cases, identified how it may be determined whether a bond or other financial security is reasonable as required by Article 292(1) of the Convention.106 ITLOS has approached reasonableness in this context in light of the balance between coastal State interests in taking appropriate measures to ensure compliance with fisheries regulations under Article 73 and flag State interests in securing prompt release of their vessels and crews under Article 292.107 Further consideration of the prompt release cases lies beyond the scope of the present book, but is addressed elsewhere in the literature.

b) Self-​evident necessity Capability testing can be set against instances at the other end of the spectrum where international courts and tribunals assess the coherence of regulatory action with regard to its self-​evident necessity. This will be the case where the objective in question could not be accomplished without the measures taken. Two contrasting instances of self-​evident necessity can be seen in the cases. The consideration of measures’ self-​evident necessity is, in the latter case especially, more a matter of common sense than an embodiment of the requirement for regulatory coherence. i) Right of Passage over Indian Territory (Portugal v India) A first instance of self-​evident necessity is found in the judgment of the ICJ in the Right of Passage case.108 Although this is not a case concerning the environment or public health it is included here for contrast with the Kishenganga arbitration addressed immediately below.109 In the Right of Passage case the self-​evident necessity of exercising regulatory power was based on the need to ensure law and order in circumstances where this was under challenge. The dispute in this case arose when would have involved entering into the substance of the dispute. Separate Opinion of Judge Jesus [12]–​ [15], [17], citing ‘ARA Libertad’ (Argentina v Ghana) (Order of 15 December 2012) ITLOS Reports 2012, 332. 104 Dissenting Opinion of Judge Kulyk [14]. 105 Dissenting Opinion of Judge Golitsyn [45]–​[46]; see also Separate Opinion of Judge Jesus [18]–​[20]. 106 Johannes Hendrik Fahner, Judicial Deference in International Adjudication (Hart 2020) 84–​86. 107 Tullio Treves, ‘The International Tribunal for the Law of the Sea: Applicable Law and Interpretation’ in Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes (eds), The WTO at Ten: The Contribution of the Dispute Settlement System (CUP 2006) 490, 499. 108 Right of Passage (n 30). 109 Kishenganga (Partial Award) (n 24); Kishenganga (Final Award) (n 24).

70  The ICJ, Law of the Sea and Court of Arbitration Portugal challenged India’s suspension of passage through its territory for persons, officials and goods travelling from the Portuguese coastal territory of Daman to the Portuguese enclaves in India. The Court reasoned that Portuguese rights of passage had always been subject to the full recognition of Indian sovereignty, and it was in the exercise of this sovereignty that India had suspended passage following the overthrow of Portuguese authority in 1954 in Dadra, in light of the strong feelings and tensions this had created in the surrounding Indian district. The Court found that India had not breached an obligation to allow free passage through its territory for persons, officials and goods travelling to the Portuguese enclaves. ii) Indus Waters Kishenganga Arbitration (Islamic Republic of Pakistan v Republic of India) The second of the two cases concerns physical necessity. In the Kishenganga arbitration the PCA affirmed the legality under the 1960 bilateral Indus Waters Treaty of India’s diversion of water between the tributaries of the Indus, subject to certain restrictions, resting this on the necessity of the diversion for the generation of hydroelectric power at the Kishenganga Hydro-​Electric Project.110 The criterion of necessity was found in the Treaty; what is of interest is how the Court understood the term. The Treaty provided that: (iii) Where a Plant is located on a Tributary of the Jhelum on which Pakistan has any Agricultural use or hydro-​electric use, the water released below the Plant may be delivered, if necessary, into another Tributary but only to the extent that the then existing Agricultural Use or hydro-​electric use by Pakistan on the former Tributary would not be adversely affected.111

The Court reasoned that India’s diversion was necessary, because the diversion enabled India to make use of the difference in elevation between the two tributaries. The diversion was, objectively, required for generating hydroelectric power on the scale contemplated.112 The Court based its understanding of what was meant by ‘necessary’ on the ordinary meaning of the term, referencing in support the Oxford English Dictionary which defined the term as ‘required to be done, achieved or present; needed’ and the new Oxford American Dictionary. The relevant action for which necessity was to be determined was the delivery of water, and necessity was to be determined with reference to the purpose for which the water was to be delivered into another tributary, here the generation of hydroelectric power.113 110 Indus Waters Treaty 1960 between India, Pakistan and International Bank for Reconstruction and Development (signed 19 September 1960, entered into force 12 January 1961) 419 UNTS 126 (hereafter Indus Waters Treaty). 111 Ibid, Annexure D, [15]. Emphasis added, capitalisation original. 112 Kishenganga (Partial Award) (n 24) [398]. 113 Ibid, [396]–​[397].

Regulatory Coherence  71 The Court recalled how the term ‘necessary’ had come to be included in the Treaty and reached the conclusion that it had been introduced as a qualification on India’s entitlement to divert waters, to indicate that this was not an absolute entitlement but had to be justified by the exigencies of a particular situation. An earlier draft had been formulated more negatively, reading: ‘. . . the water released below the Plant may not be delivered into another Tributary if the then existing Agricultural Use or hydro-​electric use by Pakistan on the former Tributary would be adversely affected’.114 The Court saw no need to associate the term ‘necessity’ with indispensability or emergency action as Pakistan had argued. The Court considered inapposite concepts of necessity developed in international trade law, investment law and other special areas. Neither was it appropriate to import the understanding of necessity as a circumstance precluding wrongfulness in the law on State responsibility.115 Adverse effects downstream did not enter into the question of necessity as they might have where necessity was invoked as a circumstance precluding wrongfulness as a matter of proportionality vis-​à-​vis the rights and interests of States whose legal rights were overridden by the invocation of necessity. Necessity in the ordinary sense lacked this connotation: ‘As a matter of common sense, it is apparent that certain actions may be necessary to accomplish even very modest purposes and that such actions do not become any less necessary to their intended purpose if it happens that they also inflict ancillary harm.’116 Also important in discerning the parties’ respective rights under the bilateral Indus Waters Treaty of 1960 in the Kishenganga arbitration was the notion of equipoise or balance. The PCA decided that the relevant provision was properly interpreted so as to protect Pakistan’s interests not only at the time when India established the Kishenganga Hydro-​Electric Project but also subsequently.117 The Court was ‘guided by the need to reflect the equipoise which the treaty sets out’ between Pakistan’s right to the agricultural and hydroelectric use of the waters of the Western Rivers and India’s right to their use for hydroelectric generation. The idea of balance came into play also in the Court’s determination as to the quantity of water to be retained in the Kishenganga/​Neelum tributary downstream of the Project, such that adverse effects to Pakistan would be mitigated and India’s rights preserved, while giving due regard to customary international law requirements to avoid or mitigate transboundary harm and reconcile economic development with environmental protection.118 The Court did not consider it appropriate for it to assume the role of policymaker and determine the balance between acceptable environmental harm and other priorities, but rather saw its task in terms of mitigating significant environmental harm. Having made these points, the Court fixed

114

Ibid, [391], [395]. Capitalisation original. Ibid, [397]. 116 Ibid, [399]. 117 Ibid, [433]–​[436]. 118 Kishenganga (Final Award) (n 24) [87], and see [112]. 115

72  The ICJ, Law of the Sea and Court of Arbitration a minimum flow of 9 cumecs, referring back to ‘the need to balance power generation with environmental and other downstream uses’.119

c) Reasonableness in relation to objectives While capability testing and self-​evident necessity tests fall at either end of the scale, the middle ground is occupied by more advanced regulatory coherence tests, including the idea of requiring a measure to be reasonable in relation to its objectives together with a range of potentially more complex formulae as indicated earlier. Reasonableness and rationality arguably form the central plank of the regulatory coherence standard gradually emerging in international adjudication. The requirement for measures to be reasonable in relation to their objectives is seen not only in ICJ decision-​making but also in WTO dispute settlement under Article XX(g). A close cousin is found in WTO jurisprudence in the form of the requirement that there be a rational relationship between measures’ discriminatory aspects and their policy objectives, under the general exceptions chapeau in the GATT and General Agreement on Trade in Services (GATS) and under Article 2.1 of the TBT Agreement. Both reasonableness and rationality requirements feature in investment treaty arbitration. In Whaling in the Antarctic the Court positioned itself in relation to this jurisprudence. The earlier case of the Dispute Concerning Filleting within the Gulf of St Lawrence should also be considered, as the award in this case required reasonableness in the exercise of Canadian regulatory powers. i) Dispute Concerning Filleting within the Gulf of St Lawrence (‘La Bretagne’) (Canada v France) Canada and France submitted the Dispute Concerning Filleting within the Gulf of St Lawrence to arbitration by joint agreement after the Canadian authorities modified a fishing licence to a French trawler La Bretagne registered in the nearby French islands of Saint Pierre and Miquelon.120 The trawler was equipped with on-​board fish filleting equipment and thus possessed far greater fishing capacity than traditional trawlers. The Canadian modification to the trawler’s licence sought to prevent use of this equipment. A 1972 agreement between France and Canada provided for access to the Canadian fishing zone of vessels registered in Saint Pierre and Miquelon, establishing that they were to be treated on an equal footing with Canadian vessels under Article 6 of the agreement that Canadian fishing regulations were to be applied to these vessels. Canada allowed other European trawlers to use on-​ board filleting equipment because this was necessitated by the length of the return journey home, but prohibited filleting on Canadian vessels. The Tribunal was cognisant that factory freezer vessels from Saint Pierre and Miquelon might replace wetfish trawlers being phased out from the metropolitan French fleet under the

119

120

Ibid, [116]–​[117]. La Bretagne (Award) (n 34).

Regulatory Coherence  73 1972 agreement and of the potential this created for an increased take in the Gulf. However, the Tribunal found by majority for France. The majority considered to begin with that the Canadian prohibition on filleting vessels was a discretionary policy rather than a regulation, and this meant that it was not covered by Article 6. For present purposes what is of interest is that in addressing whether Canada could in the future adopt and apply regulations implementing a filleting prohibition, the Tribunal found that Canada was permitted to regulate further to protect the fishery resources in its exclusive fishery zone, but that Canadian regulatory powers were subject to a requirement of reasonableness. This appeared to be a matter of logic for the Tribunal, stemming from its understanding of the inherent nature of regulation and supported by reference to a previous dictum of the ICJ. The Tribunal stated ‘like the exercise of any authority, the exercise of a regulatory authority is always subject to the rule of reasonableness invoked by the International Court of Justice in the Barcelona Traction case, as follows: “The Court considers that, in the field of diplomatic protection as in all of the fields of international law, it is necessary that the law be applied reasonably”.’121 The principle of reasonableness had been laid down in the 1910 North Atlantic Coast Fisheries case, the Tribunal observed, viewing the formula articulated in that case as a guide to the reasonableness of regulation.122 In considering what might be required by considerations of reasonableness in practice in the dispute at hand, the Tribunal considered it necessary that a filleting prohibition not render French fishing impossible.123 However, the Tribunal held also that the right to fish that had been granted to trawlers from St Pierre and Miquelon under the 1972 agreement had to be exercised with reasonable regard for the concerns of Canada, which bore sole responsibility for conservation, protection and management of the fishing resources in its fishing zone. This implied that development in the fishing capacity of French vessels must not infringe the commitments and assurances that had been given by France to Canada in respect of their vessels’ operation and respect for Canadian fishing quota.124 This appears to reflect the practical realities of the arrangement reflected in the parties’ 1972 agreement, as an arrangement between States whose activities interlocked and required ongoing collaboration between these States. The Tribunal referred earlier in its decision to the concept of ‘voisinage’ which might reflect not only geographical proximity as in this case but also a juridical proximity of this nature, observing that the same notion would apply in relation to situations where States might be affected for instance by pollution from another state or in a shared river basin.125 The 121 Ibid, 631 quoting Barcelona Traction, Light and Power Company, Ltd (Belgium v Spain) (Judgment) [1970] ICJ Rep 3, 48, [93]. 122 See similarly Dissenting Opinion of Donat Pharand 658. 123 La Bretagne (Award) (n 34) 631. 124 Ibid, 638. 125 Ibid, 613.

74  The ICJ, Law of the Sea and Court of Arbitration Tribunal explained the restraint and moderation of conduct required in a situation of voisinage and emphasised the importance for mutual relations in the future of reasonableness in the exercise of each party’s rights. The Tribunal also considered that the condition of reasonableness applying to the exercise of any regulatory authority required behaviour to be ‘proportional to the aim legally pursued, with due regard to the rights and freedoms granted by another State’.126 ii) Whaling in the Antarctic (Australia v Japan: New Zealand intervening) The decision in the Whaling in the Antarctic case, like the Dispute Concerning Filleting within the Gulf of St. Lawrence, was oriented around the concept of reasonableness. There are also parallels between the two cases in that France allowed in the Dispute Concerning Filleting that Canada possessed regulatory power in respect of the fishery resources in its exclusive zone under Article 6 of the parties’ bilateral agreement but was concerned that Canada not use its power for other purposes.127 Correspondingly in the Whaling in the Antarctic case it was accepted by all that States party to the ICRW 1946 were entitled to grant whaling permits to their nationals for the purposes of scientific research, but the question was whether Japan’s permitting of whaling was indeed for purposes of scientific research. In echo of the Dispute Concerning Filleting, the Whaling in the Antarctic case turned on the ICJ’s identification of a requirement that Japan’s decision to permit scientific whaling be reasonable in relation to its objectives. In the Whaling in the Antarctic case the ICJ found that special permits granted for the second phase of the Japanese Whale Research Programme under Special Permit in the Antarctic (JARPA II) did not fall within the scientific whaling provisions of Article VIII(1) of the ICRW.128 Accordingly, the obligations in the Convention’s schedule to refrain from taking whales in the Southern Ocean Whale Sanctuary, to observe a zero catch limit on commercial whaling and to comply with a factory ship moratorium applied. In permitting JARPA II’s scientific whaling Japan had not acted in conformity with these obligations.129 The Court reached the conclusion that JARPA II was not covered by Article VIII(1) by applying a test oriented around certain objective characteristics of the measure’s design. The Court viewed the research programme’s stated objectives as the foundation of its



126

Ibid, 631. Ibid, 612. 128 Whaling in the Antarctic (n 31) [247(2)]. Art VIII(1) states: Notwithstanding anything contained in this Convention any Contracting Government may grant to any of its nationals a special permit authorizing that national to kill, take and treat whales for purposes of scientific research subject to such restrictions as to number and subject to such other conditions as the Contracting Government thinks fit, and the killing, taking, and treating of whales in accordance with the provisions of this Article shall be exempt from the operation of this Convention . . . 129 Ibid, [247(3)]–​[247(5)]. 127

Regulatory Coherence  75 design,130 consistent with Australia’s pleadings.131 Japan had, too, discussed JARPA II’s operational design in defending it as a scientific whaling programme.132 Specifically, in order to ascertain whether Japan’s programme was ‘for purposes of scientific research’ the Court considered whether ‘in the use of lethal methods, the programme’s design and implementation are reasonable in relation to achieving its stated objectives’.133 The Court remarked that this ‘standard of review’ was an objective one.134 The Court found that JARPA II failed the test.135 The four main reasons included Japan’s failure to have analysed the availability of non-​lethal sampling methods in the light of advances over the past 20 years136 and the scale of lethal sampling,137 as well as the way in which Japan had determined sample sizes138 and the difference between planned sample sizes and actual take.139 Additional factors included the programme’s open-​ended timeframe, its limited scientific output and the low level of co-​operation with other research institutions.140 The Court based its final conclusion on the view that ‘[t]‌aken as a whole . . . the evidence does not establish that the programme’s design and implementation are reasonable in relation to its stated objectives.’141 On one point the Court found in favour of Japan, holding that Japan had complied with its obligations under paragraph 30 of the Schedule to the Convention to notify the IWC Secretary of proposed permits to enable review and comment by the Scientific Committee.142 Onlookers might have expected the decision in this case to hinge more closely on the interpretation of Article VIII.143 For instance, the Court could have hinged its decision on the interpretation of Article VIII, including the term ‘scientific purposes’ in the context of the provision and the Convention. However, the Court attended with a relatively light touch to the process of attempting to interpret the Whaling Convention.144 The Court indicated that Article VIII would be read in context and in light of the Convention’s object and purpose,145 while noting the 130 Ibid, [247(3)]–​[247(5)]. 131 Memorial of Australia (9 May 2011), 206, 215. 132 Verbatim Record (Original Language, 4 July 2013 at 3pm), 22, 25–​88, Professor Iwasawa discussing the programme’s use of random sampling, investment of effort in non-​lethal methods, and vessel tracklines. 133 Whaling in the Antarctic (n 31) [67], [88]. 134 Ibid, [67]. 135 Ibid, [98]–​[227]. 136 Ibid, [128]–​[144]. 137 Ibid, [145]–​[156]. 138 Ibid, [157]–​[198]. 139 Ibid, [199]–​[212]. 140 Ibid, [213]–​[222]. 141 Ibid, [227]. 142 Ibid, [247(6)]. 143 For commentary see inter alia Malgosia Fitzmaurice and Dai Tamada (eds), Whaling in the Antarctic: Significance and Implications of the ICJ Judgment (Brill/​Nijhoff 2016). 144 Margaret A Young and Sebastián Rioseco Sullivan, ‘Evolution through the Duty to Cooperate: Implications of the Whaling Case at the International Court of Justice’ (2015) 16(2) MJIL 311, 332. 145 Whaling in the Antarctic (n 31) [55].

76  The ICJ, Law of the Sea and Court of Arbitration parties’ disagreement on whether conservation or sustainable exploitation were the purposes to be emphasised.146 The Court’s interpretive process essentially halted here, and the judgment turned almost directly to the test it intended to apply in reviewing Japan’s permitting, addressing this under a subheading of ‘standard of review’.147 Various of the Separate and Dissenting Opinions criticise the Court for insufficient attention to the interpretation and application of the relevant treaty provisions.148 A number of judges considered that there was scope for recognition within an interpretive process of shifts in attributes and societal values concerning the use of lethal methods in whale research and in favour of conservation, within the Convention and more widely.149 The Court’s methodological approach was the subject of differing views within the Court. Judge Keith endorsed the approach. He underlined that together with other features of the case the contracting parties’ common interest in the Convention in his view indicated real limits on the Article VIII permitting power, though he would have reformulated the Court’s task to ask whether a contracting government’s decision to award a special permit was objectively justifiable in the sense that the decision was supported by coherent scientific reasoning.150 Judge Abraham had difficulty following the Court’s reasoning.151 Judge Yusuf considered the Court’s test an extraneous and undefined, obscure and debatable ‘standard of review’,152 resort to which was unexplained and which appeared ungrounded in law and in the practice of the Court.153 The Court’s reasoning assessing the legality of Japan’s scientific research programme responded to the pleadings in the case in a variety of ways. On the core matter of the reasonableness test applied by the Court, the judgment referenced Japan’s espousal during pleadings of the idea that a decision should have to be ‘supported by coherent reasoning and respectable scientific evidence and to be in this sense objectively justifiable’.154 This test was drawn directly from the WTO test for assessing whether a WTO Member’s sanitary or phytosanitary measures are based

146 Ibid, [56]–​[58]. 147 Ibid, [62]. 148 Dissenting Opinion of Judge Yusuf [3]‌–[​4]; Dissenting Opinion of Judge Bennouna 1, 3, 5; Dissenting Opinion of Judge Owada [4]–​[12]. 149 Dissenting Opinion of Judge Yusuf [25]–​[28], [46]–​[47] and [60]; Separate Opinion of Judge Xue [2]‌; Separate Opinion of Judge Ad Hoc Charlesworth [3]–​[5], see also [6]–​[10] on the reinforcing influence of the precautionary approach; Separate Opinion of Judge Cançado Trindade [24]–​[71]. 150 Declaration of Judge Keith [8]‌. 151 Dissenting Opinion of Judge Abraham [32]–​[33]. 152 Dissenting Opinion of Judge Yusuf [3]‌–​[4], [24], [27]–​[28]. 153 Dissenting Opinion of Judge Yusuf [12]–​[16]. 154 Whaling in the Antarctic (n 31) [66]; Verbatim Record (Original Language, 15 July 2013 at 3pm), 60, Mr Lowe for Japan. See also formulation in Declaration of Judge Keith [8]‌, who would have articulated the test as requiring the Contracting Government’s decision to award a special permit to be objectively justifiable in the sense that the decision is supported by coherent scientific reasoning, and Separate Opinion of Judge Xue [16].

Regulatory Coherence  77 on a risk assessment under the SPS Agreement,155 where the jurisprudence requires a rational or objective relationship between the scientific evidence, the risk assessment and the defending State’s trade measures.156 Japan perhaps did not expect the Court to employ the notion of reasonableness in quite the way that it did. Japan had initially emphasised its discretion under Article VIII,157 even referring to the Court’s remarks in Navigational Rights that a Court examining the reasonableness of a regulation or a regulatory decision must recognise the primary responsibility of the regulating State for assessing the need for the regulation and the most appropriate measure.158 Accordingly Japan had emphasised that in its view the Court might assess the reasonableness of Japan’s permitting decision in terms of its having been made in good faith, and being neither arbitrary nor capricious,159 nor manifestly unreasonable.160 Judge Owada considered the Court to have taken Japan’s remarks out of context and grossly to have misrepresented what the parties were prepared to accept as common ground.161 Australia had from the beginning emphasised that compliance with the ICRW in good faith implied reasonableness, requiring the exercise of a right in a way that was appropriate and necessary for the purpose of the right, this being the furtherance of the interests which the right was intended to protect.162 Good faith obliged the parties to apply treaty provisions in a reasonable way and such that their purposes could be realised. This had been recognised in the case concerning the Gabčikovo-​Nagymaros Project.163 As mentioned, Australia considered the design 155 See Caroline E Foster, ‘International Adjudication—​ Standard of Review and Burden of Proof: Australia-​Apples and Whaling in the Antarctic’ (2012) 21(2) RECIEL 80. 156 United States—​Continued Suspension of Obligations in the EC—​Hormones Dispute, European Communities v United States, Report of the Appellate Body (16 October 2008) WT/​DS320/​AB/​R, DSR 2008:X, 3507, [590]; Canada—​Continued Suspension of Obligations in the EC—​Hormones Dispute, Report of the Appellate Body (16 October 2008) WT/​DS321/​AB/​R, DSR 2008:XIV [590]. Australia—​ Measures Affecting the Importation of Apples from New Zealand, Report of the Appellate Body (29 November 2010) WT/​DS367/​AB/​R, DSR 2010:V, 2175, [204]–​[231], [249]–​[262]. 157 Counter-​Memorial of Japan (9 March 2012), 18, 21, 324–​325, 340, 346–​348, 351, 416–​418. 158 Written Observations of Japan on New Zealand’s Written Observations (in English, 31 May 2013), 28, quoting Navigational Rights (n 37) [100]–​[101]. 159 Whaling in the Antarctic (n 31) [65]; Counter-​Memorial of Japan (in English, 9 March 2012), 411–​ 412; Verbatim Record (Original Language, 4 July 2013 at 10am), 17–​18, Mr Lowe for Japan. 160 Whaling in the Antarctic (n 31) [65]; and see e.g. Verbatim Record (Original Language, 15 July 2013 at 10am), 24, Mr Akhavan for Japan. 161 Dissenting Opinion of Judge Owada [29]–​[38]. 162 Memorial of Australia (9 May 2011), 163. See also Written Observations of New Zealand (in English, 4 April 2013), 23–​24. 163 Verbatim Record (Original Language, 26 June 2013 at 3pm), 31, Professor Crawford for Australia, citing Gabčikovo-​Nagymaros Project (Hungary v Slovakia) (Judgment) [1997] ICJ Rep 7, [142]. See also Verbatim Record (Original Language, 8 July 2013 at 10am), 21, Mr Finlayson for New Zealand, and at 41–​42 Dr Ridings for New Zealand invoking the Court’s remarks in Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v France) (Judgment) [2008] ICJ Rep 177, 229 as well as Navigational Rights (n 37) 213 to the effect that a discretion must be exercised in good faith and according to the specific purpose for which it is given. New Zealand referred also to the views of Bin Cheng on discretionary powers: ‘Where the right confers upon its owner a discretionary power, this must be exercised honestly, sincerely, reasonably, in conformity with the spirit of the law and with due regard to the interests of others.’ Written Observations of New Zealand (in English, 4 April 2013), 38,

78  The ICJ, Law of the Sea and Court of Arbitration and implementation of the whaling programme was driven by non-​scientific purposes and urged the Court to consider a number of ways in which this was so.164 Australia directed much of this argument to the idea that, due to its characteristics, Japan’s whaling could not be considered ‘scientific’.165 New Zealand for its part as intervenor had urged the possibility and importance of employing an objective approach in assessing permitting decisions to see whether they constituted a proper exercise of the Article VIII discretion.166 New Zealand discussed the idea that the Court could evaluate a permitting decision with reference to a programme’s objective features, including by examining its methodology, design and characteristics.167 Relevant aspects of a programme included its scale, structure, the manner in which it was conducted and its results.168 New Zealand referred to WTO Appellate Body guidance on how an objective determination could be made of whether a trade-​inhibiting measure was being applied so as to afford domestic economic protection and specifically outlined how this could be applied in the context of Article VIII.169 Although the Whaling in the Antarctic case could have been decided on other grounds, the Court elected to rely on a requirement for regulatory coherence that appeared, to the majority of the Court at least, to be built into Article VIII(1). The Court tied this choice directly to what it believed to be common ground in the disputing parties’ submissions. Despite its links back to the pleadings, the Court’s espousal of the requirement that a regulatory decision be reasonable in relation to its objective as applied in Whaling in the Antarctic, together with the Court’s dicta in Navigational Rights constitute important moments in the evolution of regulatory standards globally, given the Court’s standing.

d) More complex formulae The concept of necessity may appear on its own, as seen in the decision in Rights of Passage which turned on the objective necessity of India’s exercise of regulatory citing Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Grotius Publications Ltd 1987) 36. 164 Memorial of Australia (9 May 2011), 3, 77–​86, 113–​114, 206–​252, 257–​259, 261–​270. See also Verbatim Record (Original Language, 26 June 2013 at 3pm), 53, Professor Crawford for Australia; Verbatim Record (Original Language, 27 June 2013 at 3pm), 41, 48–​49, 53–​55, Professor Crawford for Australia. 165 E.g. Memorial of Australia (in English, 9 May 2011), 206–​243. 166 Declaration of Intervention by New Zealand (20 November 2012), 16; Written Observations of New Zealand (4 April 2013), 28–​30. See also e.g. Memorial of Australia (9 May 2011), 152. 167 Declaration of Intervention by New Zealand (20 November 2012), 16–​18; Written Observations of New Zealand (4 April 2013), 2, 28–​30, 33–​35, 63, 65. 168 Written Observations of New Zealand (in English, 4 April 2013), 35, 63, 65; Verbatim Record (Original Language, 8 July 2013 at 10am), 48, Dr Ridings for New Zealand. 169 Written Observations of New Zealand (in English, 4 April 2013), 33–​34 quoting Japan—​Taxes on Alcoholic Beverages, Report of the Appellate Body (4 October 1996) WT/​DS8/​AB/​R, WT/​DS10/​AB/​R, WT/​DS11/​AB/​R, DSR 1996:I, 97. See also Verbatim Record (Original Language, 8 July 2013 at 10am), 30, Mr Finlayson for New Zealand.

Regulatory Coherence  79 authority. The concept of reasonableness may also appear on its own, as seen in Whaling in the Antarctic. Alternatively necessity and reasonableness may appear together in various formulations, at times also incorporating reference to non-​ discrimination. Such formulae are seen in the North Atlantic Coast Fisheries arbitration and the Iron Rhine case. In the Iron Rhine case the Tribunal was comfortable to find the Netherlands’ non-​discriminatory application of its national health and environmental law and its own territory not unreasonable. In the North Atlantic Coast Fisheries arbitration the Tribunal specified that regulations would be reasonable if they were appropriate or necessary for the protection and preservation of the fisheries; or desirable or necessary on grounds of public order and morals without unnecessarily interfering with the fishery itself; and in either case equitable and fair as between local and American fishermen.170 In the Navigational Rights case the ICJ expressed the view that Nicaraguan regulation should not render impossible or substantially impede the exercise of the right of free navigation; and that it have a legitimate purpose, such as safety of navigation, crime prevention and public safety and border control; that it not be discriminatory; and that it not be unreasonable, which the Court said would mean that its negative impact on the exercise of the right in question must not be manifestly excessive.171 As noted earlier, the UNCLOS Annex VII Tribunal dealing with the Arctic Sunrise dispute also considered carefully the purposes for which regulatory power might be exercised, and went on to endorse reasonableness, necessity and proportionality as tests for the appropriateness of coastal State measures to protect sovereign rights.172 In both the Navigational Rights and Arctic Sunrise cases requirements for reasonableness appear to have formed part of a multifaceted regulatory coherence test, holding that States’ regulatory freedom must in general be exercised for legitimate purposes, in a reasonable and non-​discriminatory fashion and without a manifestly excessive negative impact on competing legal rights. This far-​reaching style of formulation could be seen as the basis of a relatively ample broad potential future global regulatory standard. At the same time the remarks made by the Court in Navigational Rights and by the Arctic Sunrise Annex VII Tribunal can be seen in terms of engagement with the parties’ pleadings, which were well developed on these issues and may have demanded a certain level of response.173 While it may not be surprising that an international adjudicatory body should be responsive to disputants’ arguments, this dynamic contributes to a growing tension between the general character of dicta like that seen in Navigational Rights and the

170 North Atlantic Coast Fisheries (n 23) 171. ‘Special Agreement for the Submission of Questions Relating to Fisheries on The North Atlantic Coast under the General Treaty of Arbitration Concluded between the United States and Great Britain on the 4th day of April, 1908’ (1909) 3(2) AJIL 168, 169–​ 170 (hereafter ‘Special Agreement’). 171 Navigational Rights (n 37). 172 Chapter Three, section E 2 d) (iv). 173 Although as discussed earlier the decision in the Arctic Sunrise did not turn on these points.

80  The ICJ, Law of the Sea and Court of Arbitration absence of broader participation in the proceedings through which such formulae may emerge. i) North Atlantic Coast Fisheries Case (Great Britain v the United States) The North Atlantic Coast Fisheries arbitration of 1910174 addressed a dispute over the extent of British regulatory authority over fisheries off the coast of Canada and Newfoundland, in which the parties’ bilateral treaty of 1818 had provided that ‘the inhabitants of the United States shall have forever, in common with the subjects of His Britannic Majesty, the liberty to take fish of every kind’.175 To begin with the Tribunal was clear that both the liberty to fish and the right to make regulations for these fisheries, without the consent of the US, was inherent to the sovereignty of Great Britain, although the exercise of this regulatory power was limited by the parties’ bilateral treaty. On a natural reading, the words of the provision indicated the intention that American fishers were to share with British subjects both a common right to fish and a common subjection to regulations. The Tribunal held accordingly that the treaty grant of fishing rights by the United Kingdom to US fishermen was understood to subject them to the fisheries regulation of Great Britain, Canada or Newfoundland. This holding was subject to the British obligation to execute the obligation in good faith, which required these regulations to be reasonable in order to be considered consistent with the treaty. The Tribunal considered that regulations would be reasonable if they were appropriate or necessary for the protection and preservation of the fisheries; or desirable or necessary on grounds of public order and morals without unnecessarily interfering with the fishery itself; and in either case equitable and fair as between local and American fishermen.176 These requirements were not based on the treaty’s text, and indeed were not truly the product of what we might consider the interpretation of the treaty. Rather, they were presented as an expression of what the Tribunal believed the execution of the treaty in good faith to require, taking into account specific concessions in these terms made by Great Britain in the parties’ special agreement and in the presentation of its case.177 The Tribunal rejected the US contention that regulations were required to be appropriate and necessary for protection and preservation of ‘common rights’ in such fisheries and that their appropriateness, necessity, reasonableness and fairness be determined ‘by common accord’ between the United States and Great Britain with

174 North Atlantic Coast Fisheries (n 23). Permanent Court of Arbitration, North Atlantic Coast Fisheries Tribunal of Arbitration constituted under a Special Agreement signed at Washington, January 27th, 1909, between the United States of America and Great Britain. 175 Convention Respecting Fisheries, Boundary, and the Restoration of Slaves (United Kingdom of Great Britain and Ireland–​United States of America) (signed 20 October 1818, entered into force 30 January 1819) 8 Stat 248, TS 112, art 1. 176 North Atlantic Coast Fisheries (n 23) 171. 177 Ibid, 143, 171. ‘Special Agreement’ (n 174) 169–​170.

Regulatory Coherence  81 US concurrence in its enforcement.178 It is interesting to see, some decades later, echoes of similar thinking in the decision of the UNCLOS Annex VII Tribunal in the South China Sea case holding that respect for the vested traditional or artesanal fishing rights of foreign nationals would not restrict coastal States from reasonable regulation,179 and that regulation might be ‘necessary for conservation and to restrict environmentally harmful practices’.180 ii) The Iron Rhine (‘Ijzeren Rijn’) Railway (Kingdom of Belgium v Kingdom of the Netherlands) Like the North Atlantic Coast Fisheries Tribunal, the Iron Rhine Tribunal applied a concept of reasonableness in determining the acceptability of regulation by the territorial sovereign, here Belgium.181 Belgium derived a right of transit across the Netherlands, and the Iron Rhine Railway had originally been constructed, under the 1839 Treaty Between Belgium and the Netherlands Relative to the Separation of their Respective Territories.182 Could the Netherlands now apply its environmental and noise abatement law in respect of the reactivation of the Belgian railway line running through the Netherlands? The Tribunal considered that it was open to the Netherlands to apply its national law in a non-​discriminatory fashion unless this would amount to a denial of Belgium’s transit right or render its exercise unreasonably difficult.183 The measures required by the Netherlands did not amount to a denial or unreasonable restriction. The Treaty made clear the sovereignty of the Netherlands over its territory, stating that Belgium’s rights were ‘without prejudice to the exclusive rights of sovereignty over the territory which would be crossed by the road or canal in question’, the Tribunal having observed earlier in its Award that the Netherlands had ‘forfeited no more sovereignty than that which was necessary for the track to be built and to operate to allow a commercial connection from Belgium to Germany’ across Dutch territory and retained the power to establish health and safety standards and environmental standards in the case.184 The Netherlands was not obliged to consult Belgium when designating a national park or nature reserve, although it might have been desirable on the basis of good neighbourliness to consult with Belgium at the time of designation had the Netherlands had reason to assume Belgium would propose a reactivation.185

178 For a deeper understanding of the political context see Robert Lansing, ‘The North Atlantic Coast Fisheries Arbitration’ (1911) 5(1) AJIL 1. 179 South China Sea (n 43) [414], [809] citing North Atlantic Coast Fisheries (n 23). 180 Ibid, [809]. 181 Iron Rhine (n 25). 182 1839 Treaty Between Belgium and the Netherlands Relative to the Separation of their Respective Territories (Belgium–​Netherlands) (signed 19 April 1839) 88 CTS 427. 183 Iron Rhine (n 25) [204]. 184 Ibid, [87]. 185 Ibid, [95].

82  The ICJ, Law of the Sea and Court of Arbitration Like the Kishenganga Tribunal, the Iron Rhine Tribunal also relied on the balance or equipoise inherent in the parties’ treaty. Asked about how the costs of the railway’s reactivation should be shared, the tribunal decided that the costs should be allocated in a way reflecting the ‘balance’ between the parties inherent in the 1839 Treaty.186 In broad terms, the Netherlands was to cover the costs of the economic and other benefits it would derive from reactivation of the railway and the remainder was to be covered by Belgium. An expensive feature of the reactivation was likely to be the requirement for a tunnel to be built in the Meinweg Area, which had been designated as a national park by the responsible Netherlands minister, and as a ‘silent area’ by the Province of Limburg. Here the Tribunal required the parties to share equally in the costs of constructing the tunnel as the need for this special environmental measure could be attributed to the past conduct of both parties. The Tribunal did not clearly convey how the principle of balance had been derived from Article XII of the Treaty of Separation. It appears that the parties had informally agreed, prior to the dispute, that the costs of reactivation were to be subject to careful balancing rather than being born by either party on its own, as a reflection ‘of their equally legitimate needs’.187 iii) Dispute regarding Navigational and Related Rights (Costa Rica v Nicaragua) As mentioned just above, the ICJ outlined a relatively extensive formula describing the characteristics required of Nicaraguan regulation in the Navigational Rights case.188 As in the North Atlantic Coast Fisheries arbitration, this formula drew on elements of the parties’ pleadings, but the way in which the ICJ chose to phrase its description of the applicability of these regulatory requirements could be read as conveying an expectation that such requirements had a legal source and a legal force independent of the judgment. Aspects of the Court’s remarks track thinking in the North Atlantic Coast Fisheries and Iron Rhine arbitrations, particularly reliance on the concept of the reasonableness of sovereign action, and in addition the Navigational Rights case specifically identifies also a need for a legitimate regulatory purpose. In this case Costa Rica asserted navigational rights on the San Juan River, which lay in its entirety within Nicaraguan territory in accordance with Article VI of the parties’ Treaty of Limits 1858, which provided that: The Republic of Nicaragua shall have exclusive dominium and imperium over the waters of the San Juan River from its origin in the lake to its mouth at the Atlantic 186 Ibid, [221], [243]. 187 Freya Baetens, ‘The Iron Rhine Case: On the Right Track to Sustainable Development?’ in Marie-​ Claire Cordonier Segger and HE Judge CG Weeramantry (eds), Sustainable Development Principles in the Decisions of International Courts and Tribunals 1992–​2012 (Routledge Research in International Environmental Law 2017) 297, 313. 188 Navigational Rights (n 37).

Regulatory Coherence  83 Ocean; the Republic of Costa Rica shall however have a perpetual right of free navigation on the said waters between the mouth of the river and a point located three English miles below Castillo Viejo, [con objetos de comercio] . . 189

Along this 140-​kilometre section of the river the right bank lay in Costa Rican territory.190 The dispute centred on the interpretation of the phrase ‘con objectos de comercio’ in Article VI as this would largely determine the extent of Costa Rica’s navigational rights, and on whether challenged Nicaraguan measures fell within Nicaragua’s powers to regulate the exercise of those rights. The Court determined that Costa Rica had the right of free navigation for purposes of commerce including transport of passengers, including tourists,191 and that there were certain additional navigational rights in relation to the essential needs of Costa Ricans living on the Nicaraguan side of the river.192 Nicaragua had acted inconsistently with the 1858 Treaty in requiring persons on board Costa Rican vessels to obtain Nicaraguan visas and to purchase Nicaraguan tourist cards, and in requiring vessel operators to pay charges for departure clearance certificates.193 However, the Court concluded that Nicaragua had the right to issue departure clearance certificates as well as to require vessels and passengers to stop at the first and last Nicaraguan posts on their route and to require persons to carry a passport or identity document.194 Nicaragua was also permitted to impose night-​time navigational restrictions and require vessels to display the Nicaraguan flag.195 Costa Rica lacked the right of navigation for vessels carrying out police functions and for the purpose of exchange of personnel at and resupply of police border posts.196 There was a customary right for Costa Rican riparians, numbering about 225 people, to engage in subsistence fishing from the bank.197 The Court concluded that Nicaragua had the power to regulate the exercise by Costa Rica of its right to freedom of navigation under the 1858 Treaty, provided that Nicaragua’s regulation was to meet certain requirements. The Court identified requirements that Nicaraguan regulation not render impossible or substantially impede the exercise of the right of free navigation; and that it have a legitimate purpose, such as safety of navigation, crime prevention and public safety and border control; that it not be discriminatory; and that it not be unreasonable, which the Court said would mean that its negative impact on the exercise of the right in 189 Ibid, [44], Court’s translation of the authoritative Spanish text. Treaty of Limits between Costa Rica and Nicaragua (Cañas-​Jerez Treaty) (Costa Rica–​Nicaragua) (signed 15 April 1858). 190 Ibid, [98]. 191 Ibid, [156(1)(a)]–​[156(1)(c)]. 192 Ibid, [156(1)(f)]–​[156(1)(g)]. 193 Ibid, [156(4)]. Putting the point in terms of Costa Rica’s right of free navigation see also [156(1) (d)], [156(1)(e)], [156(2)(c)]. 194 Ibid, [156(2)(a)]–​[156(2)(c)]. 195 Ibid, [156(2)(d)]–​[156(2)(e)]. 196 Ibid, [156(1)(h)]–​[156(1)(i)]. 197 Ibid, [98], [156(3)].

84  The ICJ, Law of the Sea and Court of Arbitration question must not be manifestly excessive.198 In setting out these requirements, the Court noted Costa Rica had stated, and it had been accepted by Nicaragua, that the regulations were to be ‘lawful, public, reasonable, non-​arbitrary and non-​ discriminatory and adopted to fulfil a legitimate public purpose’.199 A formula close to this is found in the oral pleadings,200 and is deduced by Professor Caflisch for Costa Rica from certain of the texts concerning the rights of riparian States.201 There are also multiple acknowledgements throughout the written and oral pleadings for Nicaragua that regulation is to be reasonable, non-​discriminatory and in furtherance of legitimate sovereign or public interests,202 as well as non-​arbitrary.203 The Navigational Rights formula comprises an elaborate set of requirements. Their identification and application appears to have been inspired by the views of the parties. Yet the Court’s language stating that a regulation in the present case ‘is to have’ these characteristics, together with the preceding sentence, seems to imply that there was legal force to the expectation that Nicaraguan regulation would possess these features. However, especially so far as legitimate purpose, non-​discrimination and non-​unreasonableness are concerned, an explanation for this, either implicit or explicit, is lacking in the judgment. The same is true when we come to the Court’s recognition of Costa Rican riparians’ fishing rights, which are simply stated to be subject to Nicaragua’s powers to regulate for proper purposes, particularly resource and environmental protection.204 The Court did not draw closely on its description of the stated requirements when making its various findings in favour of Costa Rica and Nicaragua respectively on the range of restrictions and requirements that had been imposed by

198

Ibid, [87]. Para 87 states: For essentially the reasons given by the Parties, the Court concludes that Nicaragua has the power to regulate the exercise by Costa Rica of its right to freedom of navigation under the 1858 Treaty. That power is not unlimited, being tempered by the rights and obligations of the Parties. A regulation in the present case is to have the following characteristics: (1) it must only subject the activity to certain rules without rendering impossible or substantially impeding the exercise of the right of free navigation; (2) it must be consistent with the terms of the Treaty, such as the prohibition on the unilateral imposition of certain taxes in Article VI; (3) it must have a legitimate purpose, such as safety of navigation, crime prevention and public safety and border control; (4) it must not be discriminatory and in matters such as timetabling must apply to Nicaraguan vessels if it applies to Costa Rican ones; (5) it must not be unreasonable, which means that its negative impact on the exercise of the right in question must not be manifestly excessive. 199 Ibid, [86]. 200 Verbatim Record (Original Language, 9 March 2009 at 10am), 49. 201 Verbatim Record (Original Language, 9 March 2009 at 10am), 42. 202 Rejoinder of Nicaragua (15 July 2008), Volume I, 159–​161, 172; Verbatim Record (Original Language, 6 March 2009 at 10am), 8–​20; Verbatim Record (Original Language, 12 March 2009 at 10am), 9, 37, 46. 203 Verbatim Record (Original Language, 6 March 2009 at 10am), 8–​20; Verbatim Record (Original Language, 12 March 2009 at 10am), 37, 46. 204 Navigational Rights (n 37) [141].

Regulatory Coherence  85 Nicaragua on Costa Rican freedom of navigation. However, at times the Court appeared partially to be relying on considerations of the types it had previously outlined.205 In addition, the Court rested its determinations that Nicaragua had an obligation to notify Costa Rica of regulations regarding the navigational regime on the San Juan inter alia on its own judicial reasoning about ‘the very nature of regulation’: ‘If the regulation is to subject the activity in question to rules, those undertaking that activity must be informed of those rules.’206 iv) The Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) As discussed above, the Annex VII UNCLOS Tribunal deciding the Arctic Sunrise case referred to criteria that it envisaged would govern the appropriateness of the exercise of coastal State regulatory powers to protect sovereign rights.207 Specifically, the Tribunal referred to reasonableness, necessity and proportionality, though there was no call to apply these criteria in the circumstances of the case.

F. Conclusion The studies carried out in this chapter on the judgments, advisory opinions and awards of the ICJ, the ITLOS and UNCLOS Annex VII tribunals as well as other PCA tribunals confirm that the circumstances of regulatory disputes are challenging ones. These international courts and tribunals are relying on diverse standards and tests in deciding such cases and determining the balance of legal rights and interests among States subject to the applicable international legal rules. At this stage in the evolution of the jurisprudence the dicta and remarks in these cases frequently articulate only potential elements of possible future regulatory coherence tests, as seen for instance in the Arctic Sunrise case. However, with time there is potential for formulae like that elaborated by the ICJ in the Navigational Rights case, or by the Annex VII UNCLOS Tribunal in the Chagos Islands case to be seen as embodying global regulatory standards. Will the regulatory standards that we see emerging in the cases enhance the legitimacy of international law? To begin with, we should set aside cases involving the self-​evident necessity of regulatory activity. The necessity of administrative decisions taken by India in both the Kishenganga dispute and the earlier Rights of Passage case was self-​evident and there was no need to consider the articulation of a standard, indulgent or otherwise, in order to determine their necessity. Leaving 205 Ibid, [106]–​[107] concerning the requirement for vessels to stop and passengers to provide identification; [109] concerning departure clearance certificates; [116] and [118] concerning visas and tourist cards; and [125]–​[128] concerning timetabling. 206 Ibid, [96]. 207 Arctic Sunrise (n 28).

86  The ICJ, Law of the Sea and Court of Arbitration behind those cases, a few remarks may then be made concerning the operation of the standards seen in this chapter in terms of traditional procedural justifications for international law’s relative authority claims, while reserving for later in the book a deeper discussion concerning regulatory standards’ effects on substantive justification and the co-​ordination of domestic and international authority. As described in Part I, of particular interest in relation to procedural justifications is the way in which regulatory standards often accommodate or allow considerable room for the operation of domestic legal authority. This might enhance traditional procedural justification for the claim to legitimate authority of a standards-​enriched international law by enabling decisions made by representative governments to prevail. The degree to which the tests identified or adumbrated in the cases studied in this chapter can be considered as accommodating of domestic legal authority varies. Standards requiring merely that a regulatory measure be ‘capable of ’ contributing to its objective could in principle be regarded as indulgent of domestic legal authority because the demands they pose of regulatory measures are low. This said, it can be acknowledged that in the two cases where these tests have served as the hinge-​point of decision-​making in the present chapter this is arguably not the case. The 1998 Fisheries Jurisdiction (Spain v Canada) case turned on the question of whether the Court had jurisdiction to hear the case in circumstances where the respondent argued against this, relying on a carve-​out to its Article 36(2) optional clause declaration. In such cases the Court can be expected to respect the foundational understanding that submission to the Court’s jurisdiction is voluntary and needs to be clearly apparent. Given the sensitivities attaching to questions of the Court’s jurisdiction it was unsurprising that the ICJ adopted an approach under which Canadian fisheries enforcement action could readily be deemed a ‘conservation and management measure’. In the 2015 Arctic Sunrise case the facts largely spoke for themselves, as it was apparent that in any event the Arctic Sunrise at the time of arrest posed no immediate challenge to Russian sovereign rights. However, regardless of the particular facts of the cases or the particular reasons why capability testing was applied, capability standards themselves remain essentially generous towards domestic regulatory action. In comparison, the more complex regulatory coherence tests seen in the North Atlantic Coast Fisheries arbitration, the Iron Rhine arbitration and Navigational Rights, and indicated in the Arctic Sunrise case, are arguably less accommodating of regulating States’ authority as they impose multiple cumulative requirements on regulating States. Contrastingly, the regulatory coherence test applied in Whaling in the Antarctic was arguably distinctly generous towards permitting States relying on Article VIII of the ICRW. Most certainly, a notable certain level of responsiveness to and accommodation of domestic legal authority is clearly involved in the due diligence cases, as discussed in the next chapter. This indulgence merits attention as it embodies an international legal admission of limited ambition concerning the extent to which States can be expected to control private actors

Regulatory Coherence  87 operating internationally compared with the level of control to which States aspire within domestic jurisdictions. Importantly, the parties in health and environmental cases have often addressed or alluded to potentially applicable standards and tests in their pleadings. Instances where courts and tribunals have relied closely on or taken views consistent with the pleadings include Whaling, Arctic Sunrise and Navigational Rights. This was most apparent in Whaling in the Antarctic, where the ICJ’s decision rested on the determination that the design and implementation of Japan’s whaling programme was not reasonable in relation to achieving its stated objectives, referencing Japan’s oral submissions as well as Australia’s submissions. The identification of the test relied upon appears to have been in large measure due to the commonalities emerging in the parties’ pleadings during the hearings and the need to find a legal solution to the case that had the potential to help settle the dispute. The Arctic Sunrise arbitration was marked by Russia’s non-​appearance, but the Tribunal’s views on the circumstances in which coastal State action to prevent interference with their sovereign rights in the exclusive economic zone, expressed obiter dictum, were consonant with points made in the Netherlands’ submissions including reference by the Netherlands to considerations of necessity and proportionality. Looking back to the ICJ’s decision in the Navigational Rights case in 2009, the complex formula for permissible exercise of Nicaraguan regulatory authority over navigation on the San Juan River incorporated elements identified in their pleadings by both disputing parties. Regulatory standards are thus emerging from situations where the disputing parties have significant influence over their articulation, and yet they will go on to reverberate through international law. The Court’s espousal of the Navigational Rights formula may well achieve impact beyond that particular case; for instance in Whaling in the Antarctic Japan framed aspects of its pleadings with reference to the Navigational Rights decision.208 Responsiveness to the parties is an accepted aspect of international dispute settlement. However, its compatibility with the role of international adjudicatory bodies in elaborating what may become global regulatory standards raises important issues. In sum, the cases in this chapter have cast a varied light on the question of how appropriate it may be to rely on international courts and tribunals as fora in which regulatory standards are elaborated.

208 Whaling in the Antarctic (n 31), Written Observations of Japan on New Zealand’s Written Observations (in English, 31 May 2013), 28, quoting Navigational Rights (n 37) [100]–​[101].

4

Due Regard and Due Diligence A. Introduction The previous chapter has addressed the emergence of requirements for regulatory coherence in a wide range of different contexts, looking at regulatory coherence tests as seen in the International Court of Justice (ICJ), the International Tribunal for the Law of the Sea (ITLOS), United Nations Convention on the Law of the Sea (UNCLOS) Annex VII tribunals and Permanent Court of Arbitration (PCA) cases. The appearance of a further two forms of regulatory standard in the same cluster of international courts and tribunals is now analysed: firstly the requirement that States have due regard for one another’s rights and interests, and secondly the requirement that States exercise due diligence in the control of transboundary activity with the potential to cause harm to others, or to common spaces, resources and interests. Interpretive methods employed in the cases addressed here, a good proportion of which are advisory opinions, continue to merit attention. Logic, inference and intuition appear to play an important part. More formally, principles of contextualism and effectiveness are seen at work, although this is generally not made explicit in the decisions. This interpretive pattern highlights the way in which regulatory standards can be understood as inhering in the relevant rules and provisions, waiting to be drawn out as circumstance increasingly requires.

B.  Due Regard and Due Diligence 1.  Due regard The notion of due regard has a particular history in the law of the sea context. In 1974 the ICJ observed in the Fisheries Jurisdiction (United Kingdom of Great Britain and Northern Ireland v Iceland) (Federal Republic of Germany v Iceland) cases how, as a result of the intensification of fishing, a ‘duty to have due regard to the rights of other States and the needs of conservation for the benefit of all’ had replaced the former ‘laissez-​faire’ treatment of the living resources of the high seas.1 With 1 Fisheries Jurisdiction (United Kingdom v Iceland) (Merits) [1974] ICJ Rep 3, [72]; Fisheries Jurisdiction (Federal Republic of Germany v Iceland) (Merits) [1974] ICJ Rep 175, [64], taking into account ‘the principle of reasonable regard for the interests of other States enshrined in Article 2 of the Geneva Convention on the High Seas of 1958’.

Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0004

90  The ICJ, Law of the Sea and Court of Arbitration UNCLOS expressly requiring due regard in a number of provisions, it remains most obviously in the law of the sea context that the concept of States’ having due regard for the interests of others is applicable.2 However, the concept of due regard is potentially of considerably broader application as an international legal standard conditioning States’ regulatory freedom, and has already been employed beyond the law of the sea context on more than one occasion. The concept was applied in relation to States’ obligations as members of a multilateral scheme for the protection of common interests in the case of Whaling in the Antarctic (Australia v Japan: New Zealand intervening).3 The concept has an important history, too, in riparian law. Although finding for France in 1957 in a dispute under the bilateral Treaty of Bayonne over the French use of the waters of Lake Lanoux in the Pyrenees, it is notable that the Tribunal took as a starting point that: ‘according to the rules of good faith, the upstream State is under the obligation to take into consideration the various interests involved, to seek to give them every satisfaction compatible with the pursuit of its own interests, and to show that in this regard it is genuinely concerned to reconcile the interests of the other riparian State with its own’.4 Read into international law more widely, due regard standards could make an important contribution to international legal relations and could take the pressure off debate over the call for substantive proportionality testing as discussed in Chapter Ten.

a) Chagos Marine Protected Area Arbitration (Mauritius v United Kingdom) Concepts of good faith, due regard for the rights and duties of other States and obligations to refrain from unjustifiable interference with other States’ activities are explored in the Chagos Marine Protected Area Arbitration (Mauritius v United Kingdom) in the context of the provisions of UNCLOS applying to coastal State rights in the Exclusive Economic Zone (EEZ).5 The Republic of Mauritius, previously a British colony, instituted arbitral proceedings concerning the establishment by the United Kingdom of a Marine Protected Area around the Chagos Archipelago on 20 December 2010. The Chagos Marine Protected Area dispute revolved around a set of British undertakings to Mauritius in 1965, three years prior to Mauritian independence in 1968. The ‘Lancaster House Undertakings’ and related exchanges set down the conditions on which Mauritius agreed to the detachment from the colony of the Chagos Islands dependency, which would remain under British sovereignty.6 The Chagos Islands were wanted by the British for the purposes 2 Chapter Two, section A 1 b). 3 Whaling in the Antarctic (Australia v Japan: New Zealand intervening) (Judgment) [2014] ICJ Rep 226 (hereafter Whaling in the Antarctic). 4 Lake Lanoux Arbitration (France v Spain) (1957) 24 ILR 101, [22] (hereafter Lake Lanoux Arbitration). 5 Chagos Marine Protected Area (Republic of Mauritius v United Kingdom) (Award) (2015) 162 ILR 1 (hereafter Chagos Marine Protected Area (Award)). 6 Ibid, [77]–​[85].

Due Regard and Due Diligence  91 of defence collaboration with the United States including the establishment of a United States military base on Diego Garcia. The Lancaster House Undertakings ensured compensation for Mauritius and for landowners, and resettlement, but also incorporated the commitment to return the islands to Mauritius if the need for the facilities on the islands disappeared. The package included a number of trade, economic and security commitments. Although there was no intention to permit prospecting, the benefit of any minerals or oil discovered in or near the Chagos Archipelago was to revert to Mauritius.7 As to fishing—​which was the activity directly and immediately impacted by the United Kingdom’s proclamation of a marine protected area in 2010—​the British Government undertook to use their good offices with the United States government to ensure that fishing rights would remain available as far as practicable.8 The Tribunal’s decision on the merits rested on findings that the content of the three undertakings on return of the islands, minerals and oil and fishing was internationally legally binding.9 The Tribunal found that the parties’ intent in 1965 had been to create a package deal employing the language of intent to be bound and involving at the least a firm commitment on the part of the United Kingdom to the undertakings secured by the colony of Mauritius in return for the detachment of the Chagos Islands.10 On the independence of Mauritius in 1968 the commitment was elevated to the international plane and became an international agreement.11 The United Kingdom’s subsequent repetition and reaffirmation of its undertakings, together with Mauritius’ reliance on this, estopped the United Kingdom from denying the binding effects of its commitments on the return of the islands, minerals and oil and fishing rights. The Tribunal decided it would regard these commitments as binding on the United Kingdom.12 In the view of the majority, repetition of the undertakings and reliance thereon resolved any concern about defects in Mauritian consent to detachment in 1965.13 In the light of these findings, the Chagos Marine Protected Area Tribunal held that the United Kingdom had failed to give effect to several obligations under UNCLOS conditioning the approach that it ought to have adopted to developing a proposal for a new marine protected area around the Chagos Islands—​an archipelago in the Indian Ocean. The 200 nautical mile Chagos Marine Protected Area was established just five days before the calling of the 2010 British elections and the decision to proceed took place with rapidity following the closure of public 7 Ibid, [77]; see also [22(vii)], [22(viii)]. 8 Ibid, [22(vi)(6)]. 9 Ibid, [547(B)]. 10 Ibid, [421]–​[423]. 11 Ibid, [424]–​[428]. 12 Ibid, [448]. C.f. Dissenting and Concurring Opinion of Judge James Kateka and Judge Rüdiger Wolfrum [83]–​[84]. 13 Ibid, [428]. C.f. Dissenting and Concurring Opinion of Judge James Kateka and Judge Rüdiger Wolfrum [74]–​[77].

92  The ICJ, Law of the Sea and Court of Arbitration consultations on the matter.14 Only minimal discussion with Mauritius had taken place.15 The Tribunal emphasised that its concern was with the overall manner in which the Chagos Marine Protected Area had been established, rather than its quality or environmental importance.16 The merits of the case revolved around a number of ‘procedural constraints on State action’. The Tribunal emphasised the importance of such procedural rules, which could equal and even outflank that of substantive standards.17 The Tribunal found that the United Kingdom had failed to live up to its obligations under Articles 2(3),18 56(2)19 and 194(4)20 of UNCLOS. Article 2(3) of UNCLOS requires that sovereignty over the territorial sea be exercised subject to other rules of international law.21 Article 56(2) requires coastal States exercising their rights and performing their duties in the exclusive economic zone to have due regard to the rights and duties of other States.22 Article 194(4) requires States that are taking measures to prevent, reduce or control pollution of the marine environment—​ including measures protecting habitat and ecosystems—​ to refrain from unjustifiable interference with activities carried out by other States in the exercise of their rights and pursuance of their duties in conformity with the Convention.23 The Tribunal considered the United Kingdom had a general international legal obligation to act in good faith in its relations with Mauritius under Article 2(3).24 The United Kingdom’s due regard obligation under Article 56(2) was, for all intents and purposes, equivalent with the United Kingdom’s Article 2(3) obligation to exercise good faith with respect to Mauritius’ rights in the territorial

14 Ibid, [5]‌, [131]–​[154]. 15 Ibid, [126]–​[153]. 16 Ibid, [544]. 17 Ibid, [322]. 18 Ibid, [536], [547(B)]. 19 Ibid, [536], [547(B)]. 20 Ibid, [541], [547(B)]. 21 Art 2(3) of the Convention provides as follows: ‘Article 2: Legal status of the territorial sea, of the air space over the territorial sea and of its bed and subsoil . . . 3. The sovereignty over the territorial sea is exercised subject to this Convention and to other rules of international law.’ 22 Chagos Marine Protected Area (Award) (n 5) [470]. Art 56(2) of the Convention provides as follows: ‘Rights, jurisdiction and duties of the coastal State in the exclusive economic zone . . . 2. In exercising its rights and performing its duties under this Convention in the exclusive economic zone, the coastal State shall have due regard to the rights and duties of other States and shall act in a manner compatible with the provisions of this Convention.’ 23 Ibid, [481]. Art 194 of the Convention provides as follows: ‘Measures to prevent, reduce and control pollution of the marine environment [ . . . ] 4. In taking measures to prevent, reduce or control pollution of the marine environment, States shall refrain from unjustifiable interference with activities carried out by other States in the exercise of their rights and in pursuance of their duties in conformity with this Convention.’ 24 Ibid, [517].

Due Regard and Due Diligence  93 sea.25 Neither had been fulfilled.26 The United Kingdom’s Article 194(4) obligation to refrain from unjustifiable interference was in turn functionally equivalent to the good faith and due regard obligations.27 The United Kingdom had failed to give effect to Article 194(4) in relation to Mauritius’ fishing activities in the territorial sea.28 Each of these provisions may be examined further, beginning with the Article 2(3) good faith obligation. Although Article 2(3) imposed no direct obligation of compliance with the Lancaster House undertakings, Article 2(3) created a discrete obligation for parties to UNCLOS to comply with other rules of international law. The Tribunal analysed the text in English and in other authentic language versions, in context, in the light of the Convention’s object and purpose, and confirmed its reading with reference to the drafting history.29 The Article 2(3) obligation involved a requirement to exercise sovereignty subject to the general rules of international law. This analysis revolved around evidence from 1956 of the International Law Commission’s intent in formulating the provision that was to become Article 2(3), there being no basis to assume this intent was not shared by the parties to UNCLOS on its adoption in 1982.30 General international law required the United Kingdom to act in good faith in its relations with Mauritius, including in respect of these undertakings.31 The Tribunal applied Article 2(3) simultaneously with Article 56(2), considering as mentioned that equivalent requirements were imposed by the United Kingdom’s Article 2(3) good faith obligations in relation to Mauritius’ rights in the territorial sea and the United Kingdom’s Article 56(2) due regard obligations in relation to Mauritius’ rights in the EEZ.32 Given the undertaking eventually to return the Archipelago, Mauritius’ rights in the EEZ were significant. Such rights merited a corresponding degree of regard both under the Convention and as a matter of good faith.33 As to Article 56(2) and its due regard requirement, the Chagos Marine Protected Area Tribunal oriented its remarks around the ordinary meaning of due regard. The ordinary meaning of ‘due regard’ called for the United Kingdom ‘to have such regard for the rights of Mauritius as is called for by the circumstances and by the nature of those rights’.34 The Tribunal declined to find any ‘universal rule of conduct’ or uniform obligation in this formulation, but identified clearly certain factors influencing the regard required in this case. These included ‘the nature of the 25 Ibid, [520]. 26 Ibid, [536]. 27 Ibid, [540]. 28 Ibid, [540]–​[541]. 29 Ibid, [499]–​[514]. 30 Ibid, [515]–​[516]. See Dissenting and Concurring Opinion of Judge James Kateka and Judge Rüdiger Wolfrum [92]–​[94] reading the legislative history differently. 31 Ibid, [517]. 32 Ibid, [520]. 33 Ibid, [521]. 34 Ibid, [519].

94  The ICJ, Law of the Sea and Court of Arbitration rights held by Mauritius, their importance, the extent of the anticipated impairment, the nature and importance of the activities contemplated by the United Kingdom, and the availability of alternative approaches’.35 The Tribunal did not seek to justify its elaboration of these factors. Their identification is a product, it seems, of the Tribunal’s sense of logic, intuition and overall appreciation of the role of Article 56(2) taking into account the situation before it. The Tribunal added that making an assessment of the regard appropriately to be accorded to the rights of other parties would necessitate at least some consultation with the right-​holding State in the majority of cases.36 This observation seems to be based on the Tribunal’s practical understanding that the views of the affected party and a consultative interaction with that party would cast a necessary light on the situation. Indeed, the Tribunal considered that the United Kingdom’s good faith and due regard obligations both entailed at the least both consultation and a balancing exercise with its own rights and interests.37 Neither was sufficiently evidenced. Prior consultation was inadequate in several respects.38 Mauritius had first learnt of the marine protected area through a newspaper article published in The Independent in February 2009.39 Bilateral consultations began only in July and comprised a single meeting, contrasting starkly with the more timely United Kingdom consultations with the United States.40 Given the lack of information provided to Mauritius and the absence of a reasoned exchange between Mauritius and the United Kingdom, the Tribunal did not accept that the basic purpose of consultation had been fulfilled vis-​à-​vis Mauritius. More had remained to be done. The Tribunal would have expected significant further engagement with Mauritius when the public consultation was over.41 The absence of justifiable rationale for the haste with which the marine protected area was declared was ‘difficult to reconcile with the spirit of negotiation and consultation or with the need to balance the interests at stake in the waters of the Archipelago’, and exacerbated the inadequacy of consultation.42 Such haste stood ‘in sharp contrast’ to the absence of implementing measures after the declaration.43 In addition the Tribunal commented that the United Kingdom had created and then frustrated reasonable expectations on the part of Mauritius as to further opportunities to exchange views on the proposed marine protected area.44 35 Ibid, [519]. 36 Ibid, [519]. 37 Ibid, [534]. 38 Ibid, [533]. 39 Ibid, [523]. 40 Ibid, [524], [525], [527], [530]. 41 Ibid, [525(c)]–​[525(e)], [530]–​[534]. 42 Ibid, [532], [533]. 43 Ibid, [533]. 44 Ibid, [531], [534]. See also [532]. See also Dissenting and Concurring Opinion of Judge James Kateka and Judge Rüdiger Wolfrum [88].

Due Regard and Due Diligence  95 Neither had the United Kingdom properly balanced its own rights and interests with the rights arising for Mauritius under the Lancaster House Undertakings.45 This contrasted with the UK approach regarding US rights and interests. There the record demonstrated ‘a conscious balancing of rights and interests’ and that the United Kingdom ‘was internally concerned’ with reaching a balance.46 The record demonstrated also ‘suggestions of compromise and a willingness to offer assurances’ as well as ‘an understanding of US concerns’.47 All this provided ‘a practical example of due regard’ and a ‘yardstick against which the United Kingdom’s communications with Mauritius could be measured’.48 The Tribunal does not explain why it looked for evidence of a conscious internal balancing of interests. UK pleadings appear to have adopted the observation in the Virginia Commentary that Article 56(2)’s significance is that ‘it balances the rights, jurisdiction and duties of the coastal State with the rights and duties of other States in the exclusive economic zone’.49 Perhaps it is logical to expect the mechanisms for this to include a balancing exercise on the part of the State in question, combined with consultation as required in the circumstances. A little further light may be cast on the matter through reference to the Tribunal’s remarks in relation to Article 194(4). As mentioned, the Tribunal considered the Article 194(4) obligation to refrain from unjustifiable interference with other States’ activities to be functionally equivalent to the Article 56(2) due regard obligation or the Article 2(3) good faith obligation, adding that: Like these provisions, Article 194(4) requires a balancing act between competing rights, based upon an evaluation of the extent of the interference, the availability of alternatives, and the importance of the rights and policies at issue.50

Mauritius’ rights were largely prospective, except for fishing rights. The Tribunal concluded that the declaration of the marine protected area was incompatible with Mauritian fishing activities in the territorial sea and with Article 194(4). Importantly, the Tribunal underlined the possibility that environmental considerations could potentially justify infringing Mauritius’ fishing rights.51 The Tribunal considered such justification would require significant engagement with Mauritius, involving an explanation to Mauritius of the need for the measure



45 46 47 48 49 50 51

Ibid, [535]. Ibid, [535], [538]. Ibid, [535]. Ibid, [538]. Ibid, [476]. Ibid, [540]. Ibid, [540], [541].

96  The ICJ, Law of the Sea and Court of Arbitration and an exploration of less restrictive alternatives through this engagement with Mauritius.52 There had been no such engagement.53

b) Whaling in the Antarctic (Australia v Japan: New Zealand intervening) The concept of due regard features also in the Whaling in the Antarctic judgment.54 This time the concept appears in the context of the relationship between States party to a multilateral convention and the recommendations of the International Whaling Commission (IWC) established under that treaty. Specifically the Court considered that States party to the International Convention on the Regulation of Whaling (ICRW) had an obligation to give ‘due regard’ to Commission recommendations calling for assessment of the feasibility of non-​lethal scientific research methods, founded on a duty to co-​operate with the Commission and its Scientific Committee.55 The concept of due regard for the views of the IWC had been floated by Australia.56 Australia considered that due regard was required as a matter of good faith and flowed from the duty to co-​operate in achieving the object and purpose of the ICRW.57 The Court recorded that Japan had accepted that there was a duty to give due consideration to the relevant recommendations while emphasising that they were not binding.58 The Court reasoned that due regard implied that a permitting State will have carried out analysis to ascertain that lethal sampling was not being used more than necessary in relation to achieving the programme’s stated research objectives.59 The unexplained lack of such analysis and the difficulty in reconciling this with Japan’s due regard obligations constituted one of the main reasons why the Court concluded that the Japanese Whale Research Programme under Special Permit in the Antarctic (JARPA II)’s design and implementation were not reasonable in light of its stated research objectives and thus that the programme was not



52

Ibid, [541]: The Tribunal does not exclude the possibility that environmental considerations could potentially justify, for the purposes of Article 194(4), the infringement of Mauritian fishing rights in the territorial sea. Such justification, however, would require significant engagement with Mauritius to explain the need for the measure and to explore less restrictive alternatives. 53 Chagos Marine Protected Area (Award) (n 4) [541]. For discussion David D Caron and Stephen Minas, ‘Conservation or Claim? The Motivations for Recent Marine Protected Areas’ (2016) King’s College London Law School Research Paper 2016-​40 accessed 16 August 2020; Peter Harris, ‘Why Law and Politics Matter for Marine Conservation: The Case of the Chagos Marine Protected Area’ (2015) 45(5) E.P.& L. 204–​207. 54 Whaling in the Antarctic (n 3). 55 Ibid, [83]. 56 Memorial of Australia (in English, 9 May 2011), 255. 57 Verbatim Record (Original Language, 26 June 2013 at 3pm), 53–​54, Professor Crawford for Australia. 58 Whaling in the Antarctic (n 3) [80]. See for instance Counter-​Memorial of Japan (in English, 9 March 2012), 375, 413. The Court added that this does not establish a requirement that lethal methods be used only when other methods were unavailable. Ibid, [83]. 59 Ibid, [137].

Due Regard and Due Diligence  97 ‘for purposes of scientific research’.60 It is significant that the Court looked for evidence of such analysis from Japan, as the Chagos Marine Protected Area Tribunal was to do from the United Kingdom in 2015. The inferred requirement is reminiscent of the obligation to take adverse interests into consideration when engaged in good faith negotiation, as identified in the Lake Lanoux Arbitration (France v Spain) arbitration.61 Dissenting judges were concerned that the Court’s approach might be considered to have converted non-​binding IWC recommendations into obligations.62 However, this does not seem to be the case, as the pivotal point in the Court’s decision against Japan was not the use of lethal methods per se but the absence of analysis supporting the decision to employ them and of an explanation for this.63 The Court observed that a duty of co-​operation by States party with the IWC and its Scientific Committee was recognised by all parties to the dispute in Whaling in the Antarctic.64 The importance of meaningful co-​operation, incorporating a commitment to take into account the views of others and potentially to modify one’s own approach, was emphasised by New Zealand.65 The Court referred to the duty of co-​operation both as the foundation of the due regard obligation to analyse the necessary extent of lethal sampling and also subsequently as the basis for its remark that a party would demonstrate co-​operation with the Scientific Committee by considering revising for further review the original decision of a research programme when its implementation differed significantly from original expectations.66 The idea of an obligation to give ‘due regard’ to the decisions of an international body such as the IWC, and a broader duty of co-​operation with such a body,67 tie into a conception of the regime in the ICRW as an ‘international regulatory system’ which featured in several of the Separate and Dissenting Opinions.68 The Convention describes itself as ‘a system of international regulation’69 and the parties viewed the Convention in this light, as representing ‘a decision by its parties 60 Ibid, [138]–​[141], [144], [212]. 61 Lake Lanoux Arbitration (n 4) 141, as cited in Whaling in the Antarctic (Australia v Japan) Verbatim Record (Original Language, 8 July 2013 at 10am), 45–​46, Dr Ridings for New Zealand. 24 ILR 101 195. 62 Whaling in the Antarctic (n 3), Dissenting Opinion of Judge Abraham [38]; and Dissenting Opinion of Judge Bennouna [3]‌. 63 Ibid, [135], [137], [141]. 64 Ibid, [240]. 65 Written Observations of New Zealand (in English, 4 April 2013), 53, 55, 61, 62; Verbatim Record (Original Language, 8 July 2013 at 10am), 43–​47, Dr Ridings for New Zealand. 66 Whaling in the Antarctic (n 3) [240]. 67 As explained in the Separate Opinion of Judge Ad Hoc Charlesworth [13]. See further below. 68 Separate Opinion of Judge Xue [5]‌–​[9]; Separate Opinion of Judge Sebutinde [3]–​[5]; Separate Opinion of Judge Ad Hoc Charlesworth [12]–​[13]; Separate Opinion of Judge Cançado Trindade [9]–​ [12], [87]; and Dissenting Opinion of Judge Owada [19]. Judge Owada suggests it is somewhat comparable to the self-​contained system of an intergovernmental international organisation with its own administrative autonomy. Dissenting Opinion of Judge Owada [14]. 69 International Convention for the Regulation of Whaling (opened for signature 2 December 1946, entered into force 10 November 1948) 161 UNTS 72, Preamble, [6]‌, referred to in Separate Opinion of Judge Ad Hoc Charlesworth [13].

98  The ICJ, Law of the Sea and Court of Arbitration to replace unregulated whaling with a system of collective regulation’.70 Individual judges described the purpose of the system as being to protect States’ common, shared or collective interests, achieve their common goals, and exercise their collective responsibility.71 Notification requirements within the Convention’s system and the monitoring functioning of the Scientific Committee and the Commission can be seen as attributes of such a regulatory system72 or at least of States’ duties of co-​operation with the IWC.73 At the same time, it is to be expected that international regulatory bodies will give due consideration to the proposals and interests of member States.74 Deliberative and specific discussion on the interests of certain States, in this instance developing States, was recommended by the Review Panel established under Article 17 and Annex II of the Convention on the Conservation and Management of High Seas Fishery Resources in the South Pacific Ocean in 2018.75 Arguably, both the Whaling in the Antarctic case and the 2018 proceedings under the Convention on the Conservation and Management of High Seas Fishery Resources in the South Pacific Ocean put into a contemporary and institutionalised, plurilateral context the idea seen in the Dispute Concerning Filleting within the Gulf of St Lawrence (Canada v France) that States with shared interests and resources may find themselves in relations of voisinage calling for reasonable or due regard to the interests of others.76

70 Memorial of Australia (9 May 2011), 16, 341–​342; Counter-​Memorial of Japan (in English, 9 March 2012), 58, 71, 308; Declaration of Intervention by New Zealand (20 November 2012), 12, 16, 18, 32. 71 Separate Opinion of Judge Sebutinde [3]‌; Separate Opinion of Judge Ad Hoc Charlesworth [13]; and Separate Opinion of Judge Cançado Trindade [9]–​[12], [87]. See Written responses of New Zealand to the questions put by Judge Cançado Trindade at the end of the public sitting held on 8 July 2013 at 10am (12 July 2013), 6–​9, [1]–​[4], cited in Separate Opinion of Judge Cançado Trindade [9]. 72 Separate Opinion of Judge Sebutinde [16]–​ [17]; and Separate Opinion of Judge Ad Hoc Charlesworth [12]–​[15]. 73 See also Separate Opinion of Judge Bhandari [7]‌–[​ 11]. The Court’s tacit acceptance of Australia’s standing to bring proceedings against Japan in Whaling in the Antarctic may be read as an understanding that the Whaling Convention protects collective interests of the parties, whether in conservation or resource management. For discussion, Hironobu Sakai, ‘After the Whaling in the Antarctic Judgment: Its Lessons and Prospects from a Japanese Perspective’ in Malgosia Fitzmaurice and Dai Tamada (eds), Whaling in the Antarctic: Significance and Implications of the ICJ Judgment (Brill/​ Nijhoff 2016) 308, 314–​320; Christian J Tams ‘Roads Not Taken, Opportunities Missed: Procedural and Jurisdictional Questions Sidestepped in the Whaling Judgment’ in Malgosia Fitzmaurice and Dai Tamada (eds), Whaling in the Antarctic: Significance and Implications of the ICJ Judgment (Brill/​Nijhoff 2016) 193, 201–​211. 74 As envisaged by New Zealand in Proceedings conducted by the Review Panel established under the Convention on the Conservation and Management of High Seas Fishery Resources in the South Pacific Ocean with regard to the Objection by the Republic of Ecuador to a Decision of the Commission of the South Pacific Regional Fisheries Management Organisation (CMM 01-​2018) (Findings and Recommendations of the Review Panel) (5 June 2018) PCA Case No 2018-​13, [75] (hereafter Review Panel established under the Convention on the Conservation and Management of High Seas Fishery Resources in the South Pacific Ocean). 75 Ibid, [124], [125] recording other States’ confidence that Ecuador’s aspirations could be accommodated, provided Ecuador engaged sufficiently in the process. 76 Dispute Concerning Filleting within the Gulf of St Lawrence (‘La Bretagne’) (Canada v France) (Award) 82 ILR 590 (hereafter La Bretagne (Award)). Chapter 3, section E 2 c).

Due Regard and Due Diligence  99 These cases demonstrate that the due regard standard, which may take various forms, potentially operates as an important discipline on State regulatory freedom. In law of the sea disputes, the text of UNCLOS may point tribunals directly to the need to elaborate this standard, while in a context such as the Whaling in the Antarctic case they may be encouraged to do so through submissions. Due regard tests impose only procedural requirements on States, though it may be admitted that in some circumstances assessing compliance could involve an element of judgement on substantive matters.

2.  Due diligence Judicial reasoning and dicta in environmental cases have been central to the international momentum towards embracing the concept of due diligence in the prevention of international environmental harm. The work of international courts and tribunals has breathed life into the understanding that a standard of due diligence is applicable in the fulfilment of the principle of prevention of harm to the environment, and given shape to this understanding. This judicial work layers onto that of the International Law Commission advancing the relevance and utility of the concept of due diligence in determining the scope of States’ obligations to prevent transboundary or environmental harm, first in the Commission’s Draft Articles on the Non-​Navigational Uses of Watercourses and subsequently in the Commission’s Draft Articles on Prevention of Transboundary Harm from Hazardous Activities.77 The latter build on the recognition of the duty to prevent transboundary harm in Principle 21 of the Stockholm Declaration, mirrored in Principle 2 of the Rio Declaration.78 Article 3 of the Draft Articles on Prevention sets out that ‘The State of origin shall take all appropriate measures to prevent significant transboundary 77 ILC, ‘Draft Articles on Prevention of Transboundary Harm from Hazardous Activities’ (2001) II(2) U.N.Y.B.I.L.C. 148, see alternatively Report of the ILC on the work of its fifty-​third session (1 June 2001, 2 July 2001–​10 August 2001) UN Doc A/​56/​10 (hereafter ILC, ‘Draft Articles on Prevention of Transboundary Harm from Hazardous Activities’). 78 ‘Declaration of the United Nations Conference on the Human Environment’ UN Conference on the Human Environment (Stockholm 5–​16 June 1972) (16 June 1972) UN Doc A/​CONF.48/​14, Principle 21: States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources pursuant to their own environmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction. ‘Rio Declaration on Environment and Development’ UN Conference on Environment and Development (Rio de Janeiro 3-​14 June 1992) UN Doc A/​CONF.151/​26, Principle 2: States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources pursuant to their own environmental and developmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction.

100  The ICJ, Law of the Sea and Court of Arbitration harm or at any event to minimize the risk thereof.’79 The Commission explains that this obligation ‘is one of due diligence’ which ‘is not intended to guarantee that significant harm be totally prevented, if it is not possible to do so’, in which case the State is to exert its best possible efforts to minimise the risk.80 The Commission observes that the measures to be taken are those ‘ generally considered to be appropriate and proportional to the degree of risk of transboundary harm’, also using the term ‘a reasonable standard of care’.81 Due diligence is similarly envisaged in the International Law Commission’s work on protection of the atmosphere.82 For many international lawyers the idea of identifying a standard for the fulfilment of preventive obligations may follow intuitively from the categorisation of these obligations as obligations of result. The classical distinction between obligations of conduct and obligations of result may be more familiar, though, to those trained in the civil law tradition than to common lawyers.83 For many European lawyers the distinction is axiomatic.84 The obligation of conduct is understood as ‘une obligation de s’efforcer’, to strive or endeavour to realise a certain result. This is by nature a flexible type of obligation, and that characteristic has made the idea of obligations of conduct attractive in the rapid development of international environmental law. Obligations of conduct are seen in the institutional context of regulatory regimes for the management and protection of rivers and in the development of multilateral international environmental law including in the law of the sea.85 The International Law Commission’s Articles on State Responsibility drew the distinction between obligations of conduct and obligations of result at the time of their first reading in 1980. However, although the distinction remained for many years it was not reflected in the final version of the Articles, which refrain from addressing the content of primary rules of international law.86 The ICJ later 79 ILC, ‘Draft Articles on Prevention of Transboundary Harm from Hazardous Activities’ (n 77) art 3. 80 Ibid, Commentary to art 3, 154 at [7]‌. 81 Ibid, Commentary to art 3, 154 at [11]. 82 ‘Text of the draft guidelines on the protection of the atmosphere, together with preamble, adopted by the Commission on first reading’, Guideline 3, ILC, ‘Report of the International Law Commission on the Work of its 70th Session’ (30 April–​1 June and 2 July–​10 August 2018) UN Doc A/​73/​10, 159, 174–​ 177; see also ILC, ‘Draft Articles on the Law of Transboundary Aquifers’ (2008) II(2) U.N.Y.B.I.L.C. 22, 35; alternatively Report of the ILC on the work of its sixtieth session (5 May–​6 June and 7 July–​8 August 2008) UN Doc A/​63/​10. 83 Pierre-​Marie Dupuy, ‘Reviewing the Difficulties of Codification: On Ago’s Classification of Obligations of Means and Obligations of Result in relation to State Responsibility’ (1999) 10(2) EJIL 371, 375 (hereafter Dupuy, ‘Reviewing the Difficulties of Codification’). 84 Interview 22 June 2018. 85 Dupuy, ‘Reviewing the Difficulties of Codification’ (n 83) 375, 381. 86 ‘The International Law Commission’s Draft Articles on Responsibility of States for Internationally Wrongful Acts’ in James Crawford, The International Law Commission’s Articles on State Responsibility: Introduction, Text and Commentaries (CUP 2002); Rüdiger Wolfrum, ‘General International Law (Principles, Rules, and Standards)’ (Max Planck Encyclopedia of Public International Law, updated December 2010) accessed 16 August 2020. See also Timo Koivurova, ‘Due Diligence’ (Max Planck Encyclopedia of Public International Law, updated February 2010) accessed 16 August 2020.

Due Regard and Due Diligence  101 drew a clear distinction between obligations of conduct and obligations of result in its Advisory Opinion on the Legality of the Threat or Use of Nuclear Weapons.87 Having reached the view that it could not conclude definitively whether the threat or use of nuclear weapons would be lawful or unlawful in an extreme circumstance of self-​defence, in which the very survival of a State would be at stake,88 the Court went on unanimously to find that there existed an obligation to pursue in good faith and conclude negotiations leading to nuclear disarmament,89 emphasising that this ‘remains, without any doubt, an objective of vital importance to the whole of the international community today’.90 The Court observed that the obligation went beyond a ‘mere obligation of conduct’. It was ‘an obligation to achieve a precise result by adopting a particular course of conduct’.91 This contrasts for instance with obligations of peaceful dispute settlement under Article 33 of the UN Charter, which have been understood only as obligations of conduct.92 The Court drew the distinction again in the Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v Serbia and Montenegro) with the undertaking to prevent genocide found in Article 1 of the Genocide Convention viewed clearly as an obligation of conduct.93 The Court reasoned that a State could not be under an obligation to succeed in preventing genocide whatever the circumstances. Referencing the concept of due diligence, the Court made clear that the obligation required a State to use all reasonably available means to prevent genocide as far as possible.94 The same was true of the obligations arising under the Court’s provisional measures order of 8 April 1993 to ensure that organisations and persons subject to the Serbian government’s influence did not commit acts of genocide.95 Yet for common lawyers the distinction between obligations of conduct and obligations of result is not so intuitive, although concepts of due diligence that attach themselves to what are said to be obligations of conduct connect into common law traditions. At times, we see obligations calling for implementation in compliance with standards of due diligence described without great emphasis on the idea

87 The Legality of the Threat or Use of Nuclear Weapons (Advisory Opinion) [1996] ICJ Rep 226 (hereafter Nuclear Weapons Advisory Opinion). 88 Ibid, [105(1)(E)]. 89 Ibid, [105(1)(9)(F)]. 90 Ibid, [103]. 91 Ibid, [99]. 92 Alain Pellet, ‘Peaceful Settlement of International Disputes’ (Max Planck Encyclopedia of Public International Law, updated August 2013) accessed 16 August 2020. 93 Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v Serbia and Montenegro) (Judgment) [2007] ICJ Rep 43 (hereafter Application of the Genocide Convention). 94 Ibid, [430]. 95 Ibid, [451]–​[456], [471(7)].

102  The ICJ, Law of the Sea and Court of Arbitration that they might be obligations of conduct.96 These obligations are sometimes just termed ‘due diligence obligations’, as for instance in the Written Submission of the Kingdom of the Netherlands to the Seabed Disputes Chamber of the International Tribunal for the Law of the Sea.97 The United Kingdom appears ambivalent, having used the terms ‘conduct-​based’ obligations and ‘result-​based’ obligations in place of ‘obligations of conduct’ and ‘obligations of result’. The United Kingdom has also pointed out the problem that it could be difficult to determine ex ante whether a State is in compliance with ‘conduct-​based’ obligations of a continuing character.98 The concept of due diligence has taken hold in international judicial and arbitral practice only over time. As we shall see below, the concept was not picked up by the ICJ in its decision in the case concerning the Gabčikovo-​Nagymaros Project (Hungary v Slovakia)99 and indeed went relatively under-​elaborated in the case concerning Pulp Mills on the River Uruguay (Argentina v Uruguay).100 In the latter case the institutional setting, specifically the existence and operation of the Administrative Commission of the River Uruguay, provided a baseline of operational requirements and reference points which may have alleviated the need for further remarks. Article 36 of the Statute of the River Uruguay required States ‘to adopt regulatory or administrative measures either individually or jointly and to enforce them’, and the Court called upon the parties to exercise due diligence in acting through the Commission to this end.101 The Statute’s Article 41 pollution prevention obligation was ‘an obligation to act with due diligence in respect of all activities which take place under the jurisdiction and control of each party’, entailing ‘not only the adoption of appropriate rules and measures, but also a certain level of vigilance in their enforcement and the exercise of administrative control applicable to public and private operators, such as the monitoring of activities undertaken by such operators’.102 As discussed earlier, CARU’s rules provided benchmarks against which to measure the parties’ own domestic legal rules and measures and any harmful effects that might be generated.103 The Court’s articulation of States’ overarching commitment to the prevention of transboundary environmental harm in Pulp Mills, iterating past jurisprudence

96 E.g. Responsibilities and Obligations of States with Respect to Activities in the Area (Advisory Opinion) ITLOS Reports 2011, 11 (hereafter Seabed Advisory Opinion); Written Statement of the Kingdom of the Netherlands (11 August 2010), 8–​9; Verbatim Record (15 September 2010 at 10 am), 8–​9, Ms Lijnzaad for the Netherlands. 97 Written Statement of the Kingdom of the Netherlands (11 August 2010), 8–​9; Verbatim Record (15 September 2010 at 10am), 8–​9, Ms Lijnzaad for the Netherlands. 98 Verbatim Record (16 September 2010 at 10 am), 49–​50, Mr Wood for the United Kingdom. 99 Case Concerning the Gabčikovo-​Nagymaros Project (Hungary v Slovakia) (Judgment) [1997] ICJ Rep 7 (hereafter Gabčikovo-​Nagymaros Project). 100 Pulp Mills on the River Uruguay (Argentina v Uruguay) (Judgment) [2010] ICJ Rep 14 (hereafter Pulp Mills). 101 Ibid, [187]. 102 Ibid, [197]. 103 Ibid, [200].

Due Regard and Due Diligence  103 from the Advisory Opinion on the Legality of the Threat or Use of Nuclear Weapons set the overall bar relatively high, at least in regard to harm likely to be caused in the territory of another state: ‘[a]‌State is . . . obliged to use all the means at its disposal in order to avoid activities which take place in its territory, or in any area under its jurisdiction, causing significant damage to the environment of another State’.104 The same point was made again in Certain Activities Carried out by Nicaragua in the Border Area (Costa Rica v Nicaragua); Construction of a Road in Costa Rica along the San Juan river (Nicaragua v Costa Rica), although the Court concluded that the available evidence did not show that Nicaraguan dredging had breached this obligation.105 Neither had Nicaragua proved that Costa Rica’s construction of the road actually caused significant transboundary harm.106 Later cases under UNCLOS led to greater international adjudicatory involvement in the elaboration of due diligence standards. In Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area (Advisory Opinion) Seabed Advisory Opinion the Seabed Disputes Chamber (SBDC) of ITLOS identified that due diligence was a ‘variable concept’, changing over time in light of new scientific or technical knowledge and the risks involved in an activity. The Article 139(1) ‘obligation to ensure’ that activities in the Area were carried out in conformity with Part XI of UNCLOS required measures that were ‘reasonably appropriate’ and certain of States’ direct obligations provided additional specific indications of the required content of these measures, including their enforcement,107 while compliance with direct obligations was also relevant for meeting due diligence standards.108 ITLOS’ response to the Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission (SRFC) elaborated a relatively high standard of due diligence oriented around requirements for States to take the ‘necessary measures’ in relation to illegal, unreported and unregulated fishing (IUU fishing) under UNCLOS. Addressing the question of the obligations of the flag State in cases where IUU fishing activities are conducted within the EEZ of third party States, the Tribunal advised that flag States are obliged to take the necessary measures to ensure that their nationals and their vessels do not engage in illegal, unreported and unregulated fishing in coastal States’ EEZs, requiring due diligence in the fulfilment of this obligation.109 The concept was again applied in the Annex VII Tribunal’s decision in the South China Sea Arbitration (Republic of 104 Ibid, [101]; See also Nuclear Weapons Advisory Opinion (n 87) 241–​242, [29]. Emphasis added. 105 Certain Activities carried out by Nicaragua in the Border Area (Costa Rica v Nicaragua) and Construction of a Road along the San Juan River (Nicaragua v Costa Rica) (Judgment) [2015] ICJ Rep 665, [118]–​[120] (hereafter Certain Activities in the Border Area and Construction of a Road). 106 Certain Activities in the Border Area and Construction of a Road (n 105) [180]–​[217]. 107 Seabed Advisory Opinion (n 96) [117], [118]–​[120], [242(3)]. 108 Ibid, [123]. 109 Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission (Advisory Opinion of 2 April 2014) ITLOS Reports 2015, 4, [124], [125] (hereafter Sub-​Regional Fisheries Commission Advisory Opinion).

104  The ICJ, Law of the Sea and Court of Arbitration the Philippines v People’s Republic of China). The ICJ may make further pronouncements on the subject of due diligence in the prevention and control of pollution and other forms of harm in the Dispute over the Status and Use of the Waters of the Silala (Chile v Bolivia).110 The decisions of the various international courts and tribunals featured in this chapter have brought about a heightened understanding of what will be required by due diligence in relevant contexts. Their findings provide the basis for a global understanding of due diligence, already perceived in many quarters as an established though variable regulatory standard. As with the other types of regulatory standards seen in regulatory disputes, a due diligence standard is of practical importance because it will provide an international court or tribunal with a pathway for reasoning through the case it is dealing with. Building on the bare bones of applicable provisions, the idea of due diligence helps elaborate States’ preventive obligations, in effect embodying a specific balancing of the international legal interests involved in those obligations. Due diligence considerably indulges regulating States’ domestic legal determinations of the extent to which they consider it appropriate to regulate those subject to their jurisdiction and control. Treaty provisions binding States to ‘ensure’ prevention of particular events or outcomes have frequently been understood as requiring only best efforts. This may be as far as the relevant international courts and tribunals feel they can go in terms of the sensitivities of States. However, considerable substantive ground has been gained through the way in which due diligence standards have been elaborated, and it is unlikely that the international adjudicatory bodies who have dealt with these cases saw scope to go further in terms of their relationship with the constituencies served by the relevant rules and regimes.

a) Gabčikovo-​Nagymaros Project (Hungary v Slovakia) Due diligence was not initially the subject of great attention from adjudicators. In the case concerning the Gabčikovo-​Nagymaros Project, the Court explained that the parties’ bilateral treaty for the construction and operation of a system of dams and locks on the River Danube was designed to serve various objectives including the production of energy, and improvement in the Danube’s navigability, flood control and protection of the natural environment—​and that in order to achieve these objectives the parties had accepted obligations of conduct and obligations of result.111 The Court stated that treaty provisions relevant to the river’s environmental 110 Dispute Over the Status and Use of the Waters of the Silala (Chile v Bolivia) (Application Instituting Proceedings, 6 June 2016). 111 Gabčikovo-​Nagymaros Project (n 99) [135]. These concepts can be traced in the pleadings. See Counter-​Memorial submitted by the Slovak Republic (5 December 1994), 3, 265–​270, 339–​344; Counter-​Memorial of the Republic of Hungary (5 December 1994), 219, 223–​226; Reply submitted by the Slovak Republic (20 June 1995), 151, 152–​154; Verbatim Record (Original Language, 10 April 1997 at 10am), 57–​59, Mr Sands for Hungary.

Due Regard and Due Diligence  105 management did ‘not contain specific obligations of performance’, although they did impose a joint responsibility on the parties in relation to the execution of their project, requiring them to take new environmental norms into consideration.112 The Court did not address specifically the extent to which developments in international environmental law might incorporate due diligence requirements, presumably because this was not necessary in order to decide the case. Both parties had in fact addressed due diligence in their pleadings.113 Indeed, citing the 1994 International Law Commission Draft Articles on the Law of the Non-​Navigational Uses of International Watercourses, Slovakia appeared to accept that general obligations on watercourse States to exercise due diligence to utilise an international watercourse in such a way as not to cause significant harm to other watercourse States formed part of the customary international law on watercourses. Slovakia maintained, though, that no significant harm was caused by Variant C, and that Czechoslovakia and Slovakia had exercised due diligence.114 The International Law Commission had observed that undue hardship could be caused if due diligence were understood to require a watercourse State of origin immediately to abate existing pollution.115 Watercourse law required only reduction and control of existing pollution, entailing best efforts to reduce pollution to a mutually acceptable level. There would be undue hardship if detriment to the watercourse State of origin was grossly disproportionate to the benefit to the State experiencing the harm.116 Both parties observed that the International Law Commission had recently highlighted the character of the obligation as involving a requirement to exercise due diligence, and as an obligation of conduct, making it clear that a watercourse State did not guarantee that another State would not suffer harm.117

b) Case concerning Pulp Mills (Argentina v Uruguay) Contrastingly in the case concerning Pulp Mills the Court expressly identified Articles 36 and 41 of the Statute of the River Uruguay as incorporating obligations of conduct requiring due diligence in their execution,118 including when 112 Ibid, [112]. The obligations in these Articles were by definition general and would have to be transformed into specific obligations of performance through a process of consultation and negotiation requiring a mutual willingness for discussion in good faith of actual and potential environmental risks. 113 Counter-​Memorial submitted by the Slovak Republic (5 December 1994), 265–​267, 342–​344; Counter-​Memorial of the Republic of Hungary (5 December 1994), 224–​226. 114 Counter-​Memorial submitted by the Slovak Republic (5 December 1994), 340–​344; Reply submitted by the Slovak Republic (20 June 1995), 152–​153. 115 Counter-​Memorial submitted by the Slovak Republic (5 December 1994), 269. 116 Counter-​Memorial submitted by the Slovak Republic (5 December 1994), 269. 117 Counter-​Memorial of the Republic of Hungary (5 December 1994), 224–​226; Reply submitted by the Slovak Republic (20 June 1995), 151. 118 In accordance with the Uruguayan pleadings. Pulp Mills (n 100), Counter-​Memorial of Uruguay (20 July 2007), 55–​56, 282–​285; Rejoinder of Uruguay (29 July 2008), 18, 279, 280–​282, 301–​302; Verbatim Record (Original Language, 9 June 2006 at 4.30pm), 1, Mr Boyle for Uruguay; Verbatim Record (Original Language, 23 September 2009 at 10am), 16–​17, Mr Boyle for Uruguay. C.f. Memorial of Argentina (in English, 15 January 2007), 113, 122, 132; Reply of Argentina (29 January 2008), 55–​57,

106  The ICJ, Law of the Sea and Court of Arbitration carrying out environmental impact assessment119 and the selection of production technology.120 Article 36 required the parties to ‘co-​ordinate, through the Administrative Commission of the River Uruguay, the necessary measures to avoid any change in the ecological balance and to control pests and other harmful factors in the river and the areas affected by it’, while Article 41(a) set out the parties’ general obligation ‘[t]‌o protect and preserve the aquatic environment and, in particular, to prevent its pollution, by prescribing appropriate rules and measures in accordance with applicable international agreements and in keeping, where relevant, with the guidelines and recommended actions of international technical bodies.’ Though the Court did not say so, it seems likely based on its terms that the Court would have regarded Article 35 also as imposing an obligation of conduct.121 Article 35 required the parties ‘to adopt the necessary measures to ensure that the management of the soil and woodland and the use of groundwater and the waters of the tributaries of the river do not cause changes which may significantly impair the regime of the river or the quality of its waters’. The ICJ remarked early in its judgment that as a rule of customary international law the principle of prevention had its origins in the due diligence required of States in their territories.122 As an obligation ‘to adopt regulatory or administrative measures either individually or jointly and to enforce them’, Article 36 was an obligation of conduct.123 The parties were called upon to exercise due diligence in acting through the Commission to this end accordingly.124 The Court also identified the Article 41 pollution prevention obligation as ‘an obligation to act with due diligence in respect of all activities which take place under the jurisdiction and control of each party’, entailing ‘not only the adoption of appropriate rules and measures, but also a certain level of vigilance in their enforcement and the exercise of administrative control applicable to public and private operators, such as the monitoring of activities undertaken by such operators’.125 Inter alia, due diligence

372–​373, 443–​444; Verbatim Record (Original Language, 16 September 2009 at 10am), 57–​58, Mr Sands for Argentina. 119 Ibid, [205], [209], [265]. 120 Ibid, [223]. 121 Reply of Argentina (29 January 2008), 56–​57. 122 Pulp Mills (n 100) [101]. 123 Ibid, [187]. C.f. Separate Opinion of Judge Cançado Trindade [174], expressing scepticism concerning such distinctions between obligations in domains of protection including environmental protection. 124 Ibid, [187]. 125 Ibid, [197]. Art 41(a) set out the parties’ general obligation: [t]‌o protect and preserve the aquatic environment and, in particular, to prevent its pollution, by prescribing appropriate rules and measures in accordance with applicable international agreements and in keeping, where relevant, with the guidelines and recommended actions of international technical bodies.

Due Regard and Due Diligence  107 required environmental impact assessment, and environmental impact assessment had to be conducted with due diligence.126 Argentina was unsuccessful in its arguments under both Article 36 and Article 41. The Court found no conclusive evidence that Uruguay had not acted with the requisite degree of due diligence. The Court also found there to be no conclusive evidence that the discharge from the Orion plant had ‘had deleterious effects or caused harm to living resources or to the quality of the water or the ecological balance of the river’.127 The Court took the view that Argentina had not convincingly demonstrated that Uruguay had refused to engage in Article 36 coordination nor that Uruguay had failed to fulfil its Article 41 obligations to prevent pollution and preserve the aquatic environment.128

c) Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area (Advisory Opinion) In the Advisory Opinion on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area the SBDC picked up the ball from the ICJ and broke important new ground in relation to due diligence obligations elaborating various features of the due diligence required in the implementation of the deep seabed provisions of UNCLOS. The Chamber responded to three questions posed by the International Seabed Authority (ISA) concerning the obligations and liability of States sponsoring mining-​related activities on the deep seabed under UNCLOS. The ISA’s request for an Advisory Opinion was prompted by applications it had received from the two small Pacific Island developing States, Nauru and Tonga, and a concern about the liabilities of sponsorship given their limited financial capacities.129 The three questions put to the Chamber were: 1. What are the legal responsibilities and obligations of States Parties to the Convention with respect to the sponsorship of activities in the Area in accordance with the Convention, in particular Part XI, and the 1994 Agreement relating to the Implementation of Part XI of the United Nations Convention on the Law of the Sea of 10 December 1982? 2. What is the extent of liability of a State Party for any failure to comply with the provisions of the Convention, in particular Part XI, and the 1994 Agreement, by an entity whom it has sponsored under Article 153, paragraph 2(b), of the Convention?

126 Ibid, [204], [209]. 127 Ibid, [265]. 128 Ibid, [189], [265]. 129 David Freestone, ‘Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area’ (2011) 105(4) AJIL 755.

108  The ICJ, Law of the Sea and Court of Arbitration 3. What are the necessary and appropriate measures that a sponsoring State must take in order to fulfil its responsibility under the Convention, in particular Article 139 and Annex III, and the 1994 Agreement? The task facing the Chamber in responding to the first question required more than a classical legal analysis. The interwoven provisions of the Convention and multiple language versions of the text called for an approach that took a systemic perspective. The Chamber clearly bore in mind both the environmental imperatives driving the relevant aspects of the Convention’s mining regime and the practicalities of exercising State control over mining entities.130 The result is a powerful one, persuasive precisely because these forms of reasoning drove the outcome rather than a more purely textual analysis. The interpretive techniques employed in responding to the first question included deductions from differences between Convention provisions,131 inferences based on the listing of activities in provisions concerning protection of the marine environment,132 a decision to view the Convention as predominant over regulations adopted by the ISA133 and reference to the general obligations of Convention parties to protect and preserve the marine environment.134 The Chamber identified two forms of obligation on the part of sponsoring States: obligations to ensure compliance by contractors with obligations in the Convention and related instruments, and the ‘direct obligations’ of sponsoring States.135 So far as the obligation to ensure compliance by contractors was concerned the Chamber, recalling the decision of the ICJ in the case concerning Pulp Mills, identified an obligation on the part of sponsoring States to ensure contractors acted consistently with relevant Convention provisions. The Chamber qualified sponsoring States’ ‘obligation to ensure’ contractors’ compliance as an obligation of conduct under which a sponsoring State was ‘bound to make best possible efforts to secure compliance by the sponsored contractors’.136 The standard of due diligence applied.137 The ‘obligation to ensure’ contractors’ compliance was grounded in Article 139(1) of the Convention as informed by Article 153(4) and Annex III, Article 4(4).138 The rules with which a contractor was obliged to comply included 130 Zhang observes that it was apparent from submissions that many States considered an obligation of result was not practical. Hui Zhang, ‘The Sponsoring State’s “Obligation to Ensure” in the Development of the International Seabed Area’ (2013) 28(4) IJMCL 681, 685, 688 (hereafter Zhang, ‘The Sponsoring State’s “Obligation to Ensure” ’). 131 Seabed Advisory Opinion (n 96) [84]. 132 Ibid, [86]–​[88]. 133 Ibid, [89]–​[94]. 134 Ibid, [97]. 135 Ibid, [99]–​[140], [242(3)]. 136 Ibid, [110], [242(3)]. 137 Ibid, [242(3)]. 138 Art 139, paragraph 1: States Parties shall have the responsibility to ensure that activities in the Area, whether carried out by States Parties, or State enterprises or natural or juridical persons which possess

Due Regard and Due Diligence  109 the rules, regulations and procedures of the ISA, contracts or plans of work for exploration and exploitation, and relevant provisions of the Convention’s Part XI, Annex III on basic conditions of prospecting, exploration and exploitation, and Annex IV.139 Contractors’ failure to meet their obligations would not necessarily give rise to liability on the part of a sponsoring State, that could only be the case where the State had failed to fulfil its obligation of conduct.140 In part, the Chamber drew on the views of the International Law Commission on the law of transboundary harm, that a State of origin was to ‘take all appropriate measures to prevent significant transboundary harm or at any event to minimize the risk thereof ’.141 The Chamber asserted that the expression ‘to ensure’ was often used in international legal instruments to refer to obligations in respect of which it was not reasonable to make States liable for every failure of private individuals, but where their action often could not be attributed to the State.142 The Commission had explained that ‘the duty of due diligence was not intended to guarantee that significant harm be totally prevented, if it was not possible to do so . . . In that eventuality, the State of origin is required . . . to exert its best possible efforts to minimize the risk. In this sense, it does not guarantee that the harm would not occur.’143 In part, too, the Chamber relied on a comparison of the equally authentic French, Spanish, Arabic, Chinese and Russian texts of the phrase ‘to ensure’ in the Convention,144 and statements from relevant States concerning their meaning.145 the nationality of States Parties or are effectively controlled by them or their nationals, shall be carried out in conformity with this Part. The same responsibility applies to international organizations for activities in the Area carried out by such organizations. Art 153, paragraph 4: The Authority shall exercise such control over activities in the Area as is necessary for the purpose of securing compliance with the relevant provisions of this Part and the Annexes relating thereto, and the rules, regulations and procedures of the Authority, and the plans of work approved in accordance with paragraph 3. States Parties shall assist the Authority by taking all measures necessary to ensure such compliance in accordance with Article 139. Annex III, art 4, paragraph 4: The sponsoring State or States shall, pursuant to Article 139, have the responsibility to ensure, within their legal systems, that a contractor so sponsored shall carry out activities in the Area in conformity with the terms of its contract and its obligations under this Convention. A sponsoring State shall not, however, be liable for damage caused by any failure of a contractor sponsored by it to comply with its obligations if that State Party has adopted laws and regulations and taken administrative measures which are, within the framework of its legal system, reasonably appropriate for securing compliance by persons under its jurisdiction. 139 Seabed Advisory Opinion (n 96) [103]–​[106]. 140 Ibid, [109]. 141 Ibid, [116], quoting ‘Draft Articles on Prevention of Transboundary Harm from Hazardous Activities’ (2001) II(2) U.N.Y.B.I.L.C. 148, art 3. 142 Ibid, [112]. See Stockholm Declaration, Principle 21 (n). 143 Commentary to art 3, at [7]‌. ‘Draft Articles on Prevention of Transboundary Harm from Hazardous Activities’ (2001) II(2) U.N.Y.B.I.L.C. 148, 154. 144 Seabed Advisory Opinion (n 96) [114]. 145 Zhang, ‘The Sponsoring State’s “Obligation to Ensure” ’ (n 130).

110  The ICJ, Law of the Sea and Court of Arbitration The Chamber went on to consider the content of the ‘obligation to ensure’, explaining further its views on how the due diligence standard might be met. The Chamber reached the logical insight that due diligence was a ‘variable concept’, changing over time in light of new scientific or technical knowledge and the risks involved in an activity.146 The Chamber also relied on a combined reading of Convention provisions. By inference, States’ Article 153(4) obligations to assist the ISA by taking all measures necessary to ensure compliance informed the ‘obligation to ensure’ in Article 139(1), and Annex III Article 4(4) indicated that this required measures that were ‘reasonably appropriate’.147 Relying further on the natural or logical connection between different rules and provisions, the Chamber found that certain of States’ direct obligations provided additional specific indications of the required content of these measures, including their enforcement, and compliance with direct obligations was relevant for meeting due diligence standards.148 This included implementation of a precautionary approach,149 adoption of best environmental practices150 and environmental impact assessment.151 The Chamber’s identification and description of States’ ‘direct’ obligations, with which States were obliged to comply independently of their obligation to ensure certain behaviour by sponsored contractors, rested on a variety of interpretive and analytical techniques.152 The second question posed by the ISA asked the Chamber for advice on liability for States’ failure to comply with both their direct obligations and ‘obligations to ensure’ contractors’ compliance. Liability is understood here to refer to State responsibility.153 Much of the Chamber’s response appeared to flow from the text. The Chamber held that under Article 139(2), Article 153(4) and Annex III Article 4(4), sponsoring States were exempt from liability where they had taken all necessary and appropriate measures to secure effective compliance.154 Consistently with 146

Seabed Advisory Opinion (n 96) [117]. Ibid, [118]–​[120], [242(3)]. 148 Ibid, [120], [123]. 149 Ibid, [125]–​[135], [131]–​[132]. 150 Ibid, [136]–​[137]. 151 Ibid, [141]–​[150]. 152 Ibid, [122]. States’ direct obligations included: . . . the obligation to assist the Authority in the exercise of control over activities in the Area; the obligation to apply a precautionary approach; the obligation to apply best environmental practices; the obligation to take measures to ensure the provision of guarantees in the event of an emergency order by the Authority for protection of the marine environment; the obligation to ensure the availability of recourse for compensation in respect of damage caused by pollution; and the obligation to conduct environmental impact assessments. 153 Ibid, [70]. 154 Ibid, [186], [242(4)]. Art 139(2) reads: Without prejudice to the rules of international law and Annex III, Article 22, damage caused by the failure of a State Party or international organization to carry out its responsibilities under this Part shall entail liability; States Parties or international organizations acting together shall bear joint and several liability. A State Party shall not however be liable for damage caused by any failure to comply with this Part by a person whom it has sponsored under Article 153,

147

Due Regard and Due Diligence  111 the International Law Commission’s Articles on State Responsibility, reparation for the actual amount of damage would be required, with the form of reparation depending on the actual damage and the technical feasibility of restoring the situation to the status quo ante.155 The Chamber also put forward several important points of guidance that seem to reflect the Chamber’s views on the ways in which the deep seabed mining regime would best operate and the advisability of setting out a reasonably comprehensive view of this. Firstly, the Chamber seems to have read Article 139(2) of the Convention as requiring material damage to occur before liability would arise, which would be a departure from the usual rules of State responsibility, as the Chamber notes, which do not require material damage.156 The alternative reading seems better to reflect the text. Secondly, the Chamber addresses the matter of which entities would be entitled to invoke responsibility for the breach of the international obligations discussed. Consistent with Article 48 of the International Law Commission’s Articles on State Responsibility the Chamber points out that even uninjured States may be able to do so, and additionally indicates the view that the ISA may implicitly be entitled to do so acting in its capacity ‘on behalf ’ of mankind.157 Thirdly, the Chamber reads into the Convention the requirements naturally flowing from the law on State responsibility for there to be a causal link between the damage in a given case and the sponsoring State’s failure to live up to its obligations of conduct.158 This is consistent with basic principles. The Chamber adds that the causal link must be proved and cannot be presumed.159 Finally, the Chamber is clear in the view that States incur no residual liability where they have discharged all their obligations of conduct and result but damage nonetheless occurs or there is no causal link between any failure to do so and any damage.160 The Chamber recommends considering establishing a Trust Fund to provide assistance in such a case.161 The divergence of views on residual liability among States party is recorded by the Chamber.162 The ISA’s third question asked the Chamber to identify the necessary and appropriate measures that a sponsoring State must take in order to fulfil its responsibilities under the Convention. Here the Chamber made a potentially significant contribution to the elaboration of international legal requirements of domestic regulation. The Chamber held that sponsoring States were required to adopt laws, paragraph 2(b), if the State Party has taken all necessary and appropriate measures to secure effective compliance under Article 153, paragraph 4, and Annex III, Article 4, paragraph 4.

155

Ibid, [194]–​[197]. Ibid, [178]. 157 Ibid, [180]. 158 Ibid, [181]. 159 Ibid, [182], [184], [242(4)]. 160 Ibid, [203]–​[204], [209]–​[210], [242(4)]. 161 Ibid, [205], [209], [242(4)]. 162 Ibid, [203]. 156

112  The ICJ, Law of the Sea and Court of Arbitration regulations and administrative measures in good faith and taking into account the various options in a manner that was reasonable, relevant and conducive to the benefit of mankind as a whole.163 The Chamber identified these considerations by reasoning through what the Convention seems to the Chamber to require. The Chamber began with clear recognition that the Convention leaves it to the sponsoring State to make the ‘policy choices’ involved in determining the measures that will enable it to discharge its responsibilities.164 The Chamber considered it would be out of keeping with its judicial character to render specific advice on a sponsoring State’s necessary and appropriate measures. The Chamber deemed it more appropriate to indicate some general considerations.165 The Chamber identified specifically that ‘[t]‌he appropriateness of the measures taken may be justified only if they are agreeable to reason and not arbitrary.’166 The requirement that the State’s laws, regulations and measures be reasonably appropriate for securing compliance was found in the text of Annex III, Article 4(4); the Chamber added, seemingly propio motu, that, to be appropriate, measures had to be ‘agreeable to reason and not arbitrary’.167 Reasonableness and non-​arbitrariness were to remain the hallmarks of sponsoring State action.168 The Chamber alluded also to the need for analysis of the type required under due regard obligations. The State’s obligation to assist the ISA, which was acting on behalf of mankind as a whole, meant that the State ‘must take into account, objectively, the relevant options in a manner that is reasonable, relevant and conducive to the benefit of mankind as a whole’.169 The State was further required to act in good faith, as underlined in Articles 157(4) and 300, ‘especially when its action is likely to affect prejudicially the interests of mankind as a whole’.170 The sponsoring State might find it necessary to include provisions in its domestic law concerning contractors, financial liability and technical capacity, conditions for the issue of sponsorship certificates and penalties for contractors’ non-​compliance, as well as provision for the enforceability of the Chamber’s decisions.171 States’ direct obligations also indicated the requisite laws, regulations and measures.172 Contractors’ contractual obligations to the ISA had to be made enforceable under sponsoring States’ domestic law.173 Sponsoring States remained free to adopt within their legal systems rules, regulations and procedures



163

Ibid, [230], [242(5)]. Ibid, [227], [229]. 165 Ibid, [227], [228]. 166 Ibid, [228]. 167 Ibid, [228]. 168 Ibid, [230] emphasis added. 169 Ibid, [230]. 170 Ibid, [230]. 171 Ibid, [235], [236]. 172 Ibid, [236]. 173 Ibid, [238]–​[239]. 164

Due Regard and Due Diligence  113 applying more stringent environmental and other standards than those required under the Convention.174 The Chamber’s achievement in this Advisory Opinion provides an excellent example of the judicial skill and perspectives needed to articulate regulatory standards. Perhaps the most remarkable feature of the Advisory Opinion on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area is the range of interpretive techniques employed by the Chamber to excavate its version of what is required by UNCLOS. Although the Chamber did not say so in as many words, principles of contextualism and effectiveness underpinned much of its reasoning. The result is distinctly credible. The obvious need of the parties to UNCLOS for an authoritative elaboration of the standards implicit in the Convention is also a strong driver behind general acceptance of the Chamber’s rulings.

d) Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission (SRFC) (Advisory Opinion) The Request for an Advisory Opinion Submitted by the Sub-​ Regional Fisheries 175 Commission responded to the major challenges faced by West African coastal States in combatting illegal foreign fishing in their waters. Coastal State regulation, monitoring and enforcement are inadequate to protect their fish stocks, related marine ecosystems, coastal community livelihood and wider economic interests.176 The question of complementary flag State responsibilities for fishing in the EEZs that was addressed in the Opinion is central for addressing this problem. The Sub-​Regional Fisheries Commission (SRFC) was established in 1985 to work on harmonising members’ policies for preservation and management of their fisheries resources and strengthen co-​operation.177 In 2015 the seven parties were Cape Verde, Gambia, Guinea Bissau, Mauritania, Senegal, Guinea and Sierra Leone. The SRFC was authorised to seek an advisory opinion from the Tribunal under the Convention on the Determination of the Minimal Conditions for Access and Exploitation of Marine Resources within the Maritime Areas under Jurisdiction of the Member States of the Sub Regional Fisheries Commission 2012 (the MCA Convention).178 174 Ibid, [231]–​[232], [240]–​[241]. See UNCLOS Annex III, art 21(3). 175 Sub-​Regional Fisheries Commission (Advisory Opinion) (n 109). 176 Günther Handl, ‘Flag State Responsibility for Illegal, Unreported and Unregulated Fishing in Foreign EEZs’ (2014) 44(1–​2) E.P.& L. 158, 159 (hereafter Handl, ‘Flag State Responsibility’); Valentin Schatz, ‘Fishing for Interpretation: The ITLOS Advisory Opinion on Flag State Responsibility for Illegal Fishing in the EEZ’ (2016) 47(4) O.D. and I.L. 327, 327–​328 (hereafter Schatz, ‘Fishing for Interpretation’); R Rajesh Babu, ‘State Responsibility for Illegal, Unreported and Unrelated Fishing and Sustainable Fisheries in the EEZ: Some Reflections on the ITLOS Advisory Opinion of 2015’ (2015) 55(2) I.J.I.L. 239, 252 (hereafter Babu, ‘State Responsibility’). 177 Agreement Establishing a Sub-​Regional Fisheries Commission (adopted 29 March 1985, entered into force 12 February 1989), art 2. 178 Convention on the Determination of the Minimal Conditions for Access and Exploitation of Marine Resources within the Maritime Areas under Jurisdiction of the Member States of the Sub

114  The ICJ, Law of the Sea and Court of Arbitration Despite an element of contention over the assertion of advisory jurisdiction by the full Tribunal,179 the Tribunal set out to answer four questions posed by the SRFC. The SRFC asked the Tribunal firstly to pronounce on the obligations of the flag State in cases where IUU fishing activities are conducted within the EEZ of third party States. Secondly the Tribunal was asked about the extent to which a flag State is to be held liable for IUU fishing activities conducted by vessels sailing under its flag. Thirdly, the ISA asked, where a fishing licence is issued to a vessel within the framework of an international agreement with the flag State or with an international agency, was the State or international agency to be held liable for the violation of the fisheries legislation of the coastal State by the vessel in question? Fourthly, what were the rights and obligations of the coastal State in ensuring the sustainable management of shared stocks and stocks of common interest, especially small pelagic species and tuna? This chapter’s discussion focuses on the Tribunal’s response to the first question, concerning flag State obligations, with limited remarks also on the Tribunal’s response to the fourth question. The Tribunal’s response to the second question referred back to flag States’ due diligence obligations as explained in response to the first question. On that first question, the Tribunal advised that flag States are obliged to take the necessary measures to ensure that their nationals and their vessels do not engage in illegal, unreported and unregulated fishing in coastal States’ EEZs, as a due diligence obligation.180 The Tribunal read these conclusions into UNCLOS in ways that have been subject to some criticism and discussion.181 However, the techniques employed arguably produced a persuasive outcome in light of the policy imperatives in the case before the Tribunal and in the wider context internationally. In particular, the Tribunal’s emphasis on flag State obligations to take ‘all necessary measures’ is welcome in light of concerns that the bar for environmental protection would in an ideal world be higher than that reflected in the Advisory Opinion on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area.182 In relation to the first question the Tribunal concluded that a flag State had three central obligations, all of which involved the exercise of due diligence. Firstly the flag State had the obligation to take necessary measures, including those of Regional Fisheries Commission (opened for signature on 8 June 2012, entered into force 16 September 2012) UNTS, art 33. 179 Sub-​Regional Fisheries Commission Advisory Opinion (n 109) [37]–​[69]. For discussion see inter alia Yoshifumi Tanaka, ‘Reflections on the Advisory Jurisdiction of ITLOS as a Full Court: The ITLOS Advisory Opinion of 2015’ (2015) 14(2) LPICT 318. 180 Sub-​Regional Fisheries Commission Advisory Opinion (n 109) [124], [125] [219 (3)]. 181 Jianjun Gao, ‘The ITLOS Advisory Opinion for the SRFC’ (2015) 14(4) Chinese JIL 735 (hereafter Gao, ‘The ITLOS Advisory Opinion’); Schatz, ‘Fishing for Interpretation’ (n 176). 182 Caroline E Foster, ‘Diminished Ambitions? Public International Legal Authority in the Transnational Economic Era’ (2014) 17(2) J Intl Econ L 355, 361–​ 365; Sub-​Regional Fisheries Commission Advisory Opinion (n 109) [129].

Due Regard and Due Diligence  115 enforcement, to ensure compliance by vessels flying its flag with the laws and regulations enacted by the SRFC Member States concerning marine living resources within their exclusive economic zones for purposes of conservation and management of these resources. Secondly the flag State was under an obligation, in light of the provisions of Article 58, paragraph 3, Article 62, paragraph 4, and Article 192 of the Convention, to take the necessary measures to ensure that vessels flying its flag are not engaged in IUU fishing activities as defined in the MCA Convention within the exclusive economic zones of the SRFC Member States. Thirdly the flag State, in fulfilment of its obligation to effectively exercise jurisdiction and control in administrative matters under Article 94 of the Convention, had the obligation to adopt the necessary administrative measures to ensure that fishing vessels flying its flag are not involved in activities in the exclusive economic zones of the SRFC Member States which undermine the flag State’s responsibility under Article 192 of the Convention for protecting and preserving the marine environment and conserving the marine living resources which are an integral element of the marine environment. The flag State and the SRFC Member States are also under an obligation to co-​operate in cases related to IUU fishing by vessels of the flag State in the exclusive economic zones of the SRFC Member States concerned. Further, a flag State receiving a report from an SRFC Member State alleging that a vessel flying its flag has been involved in IUU fishing within the SRFC Member State’s EEZ is obliged to investigate the matter, take action necessary to remedy the situation and inform the SRFC Member State of this action.183 How did the Tribunal reach the view that a flag State was obliged to take all necessary measures in regard to IUU fishing in another State’s EEZ? The Tribunal found first that the primary responsibility to take measures necessary to prevent, deter and eliminate IUU fishing lies with the coastal State under UNCLOS.184 Turning to flag State responsibility, as we shall see, the Tribunal read UNCLOS in such a way that obligations became apparent that were not readily clear to all from the text. This was not done through a classical, step by step approach of the usual rules on interpretation but through a form of logical reasoning based on the text and bearing in mind the realities that had prompted the request for an advisory opinion. The starting point was that flag State responsibility for IUU fishing was simply not directly addressed in the Convention. The Tribunal instead had to examine the matter ‘in the light of general and specific obligations of flag States under the Convention for the conservation and management of marine living resources’, specified also in fisheries access agreements, the MCA Convention and other agreements concluded by the SRFC States.185

183

Sub-​Regional Fisheries Commission Advisory Opinion (n 109) [219(3)]. Ibid, [106]. 185 Ibid, [110]–​[114]. 184

116  The ICJ, Law of the Sea and Court of Arbitration General obligations included those in Articles 91, 92, 94, 192 and 193 of UNCLOS.186 Article 91 provided for the nationality of ships while Article 92 recognised the exclusive jurisdiction of the flag State on the high seas. Article 94 set out the duties of the flag State, with Article 94(1) providing that every State was to ‘effectively exercise its jurisdiction and control in administrative, technical and social matters over ships flying its flag’ and Article 94(2) providing that ‘in particular’ every State was to ‘assume jurisdiction under its internal law over each ship flying its flag, and its master, officers and crew in respect of administrative, technical and social matters concerning the ship’. The remaining paragraphs set out respects in which flag State jurisdiction and control was to be exercised, including in relation to safety at sea. The Tribunal determined that the list of measures referred to in these paragraphs was not all-​inclusive187 and considered that it followed from Article 94’s provisions that, in fulfilment of the responsibility to exercise effective jurisdiction and control in administrative matters, the flag State was obliged to ensure that fishing vessels flying its flag were not ‘involved in activities which will undermine the flag State’s responsibilities under the Convention in respect of the conservation and management of marine living resources’.188 The flag State was obliged to investigate and take appropriate action in cases where violations were reported by other States.189 Article 192 required all States to protect and preserve the marine environment; referred to also in Article 193 and understood in the Southern Bluefin Tuna Cases (New Zealand v Japan; Australia v Japan) to incorporate the duty to conserve the living resources of the sea.190 Specific obligations included Article 58(3) which provided that, in exercising their rights and duties in the EEZ of a coastal State, States were to have due regard to the rights and duties of the coastal State and comply with its laws and regulations.191 Article 62(4) added that ‘[n]‌ationals of other States fishing in the exclusive economic zone shall comply with the conservation measures and with the other terms and conditions established in the laws and regulations of the coastal State’.192 The Tribunal took the view that Article 62(4) imposed an obligation requiring States ‘to ensure that their nationals engaged in fishing activities within another State’s EEZ complied with its conservation measures and the terms and conditions established in the coastal State’s laws and regulations’.193 Altogether, it followed 186 Ibid, [111], [115]–​[120]. 187 Ibid, [117]. 188 Ibid, [119]. Emphasis added. 189 Ibid, [119], [139]. 190 Ibid, [120], citing Southern Bluefin Tuna Cases (New Zealand v Japan; Australia v Japan) (Provisional Measures, Order of 27 August 1999) ITLOS Reports 1999, 280, [70] (hereafter Southern Bluefin Tuna Cases (Provisional Measures, Order of 27 August 1999)). 191 Ibid, [121]. 192 Ibid, [122]. 193 Ibid, [123].

Due Regard and Due Diligence  117 from Article 58(3), Article 62(4) and also Article 192 that flag States were ‘obliged to take the necessary measures to ensure that their nationals and vessels flying their flag are not engaged in IUU fishing activities’.194 The conclusion that flag States were obliged to take all necessary measures in regard to IUU fishing would appear to be one that is inferred. Some would take issue with the conclusion by considering each of the UNCLOS Articles cited.195 However, it is notable that in this case the content of the various provisions together generated the view that flag States were obliged to take the necessary measures. This seems to be a form of reasoning that combines the practical import of a number of rules found within a given framework, here UNCLOS, and sees an overall picture which appears to reflect the existence of a broader obligation.196 We might perhaps ask, though, whether if the Tribunal had dedicated more time to articulating the reasoning behind the conclusions it reached it might have referred perhaps to the notion of context in the international law of treaty interpretation, as well as to the State of affairs on the ground in terms of the major problems faced in controlling IUU fishing in exclusive economic zones. The legal findings were clearly propelled in part by the real needs which they would address. The Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission made it clear that flag State responsibility to ensure vessel compliance is a due diligence obligation. The Tribunal went on to explain that the flag State ‘responsibility to ensure’ vessel compliance with coastal State conservation laws and regulations was an obligation of conduct rather than an obligation of result.197 Flag States were obliged not necessarily to achieve the specified outcome, and literally to ensure vessel compliance, but rather to exercise due diligence in fulfilling their obligation. Although the relationship between flag States and their vessels was not entirely comparable with the relationship between sponsoring States and contractors, as the case of the Responsibilities and Obligations of States with Respect to Activities in the Area the obligation ‘to ensure’ compliance was an obligation ‘to deploy adequate means, to exercise best possible efforts, to do the utmost’ to obtain the result.198 The due diligence requirement was thus, as Handl has described it, ‘a contextually determined standard of care’ with reference to which the obligation to ensure compliance was to be fulfilled.199

194 Ibid, [124]. See also [134]–​[138]. 195 Particularly Gao, ‘The ITLOS Advisory Opinion’ (n 181) 753. See also Schatz, ‘Fishing for Interpretation’ (n 176). 196 Babu, ‘State Responsibility’ (n 176) 258; Victor Alencar Mayer Feitosa Ventura, ‘Tackling Illegal, Unregulated and Unreported Fishing: The ITLOS Advisory Opinion on Flag State Responsibility for IUU Fishing and the Principle of Due Diligence’ (2015) 12(1) Brazilian Journal of International Law 50, 61 (hereafter Ventura, ‘Tackling Illegal, Unregulated and Unreported Fishing’). 197 Sub-​Regional Fisheries Commission Advisory Opinion (n 109) [129]. 198 Ibid, [128]–​[129], quoting from the Seabed Advisory Opinion (n 96) [110]–​[112] including the remarks of the ICJ in Pulp Mills (n 100) [187]. 199 Handl, ‘Flag State Responsibility’ (n 176) 162.

118  The ICJ, Law of the Sea and Court of Arbitration Iterating that flag States were to take all ‘necessary measures’ to ensure vessel compliance and prevent IUU fishing,200 the Tribunal went on to address further what due diligence might require. The Tribunal quoted the remarks of the Court in the case concerning Pulp Mills.201 The Tribunal considered accordingly that, while the nature of the laws, regulations and measures that it would adopt was to be determined by each flag State in accordance with its legal system, the flag State nevertheless had the obligation to include enforcement mechanisms to monitor and secure compliance with these laws and regulations and sufficient sanctions to deter violations and deprive offenders of the benefits accruing from IUU fishing.202 These remarks reinforcing the requirement for due diligence have been described as a remarkable development that gives teeth to UNCLOS.203 The Tribunal’s insertion of repeated reference to the flag State obligation to take the ‘necessary measures’ to ensure vessel compliance and prevent IUU fishing is important for the increasingly concrete form it gives the ‘obligation to ensure’. Its importance is buttressed by the Tribunal’s finding, in response to the second question asked of it, that the flag State will not be liable for IUU fishing activities conducted by vessels sailing under its flag where it has taken all necessary and appropriate measures.204 States may now begin to focus on what measures are necessary in pursuit of these aims, and necessity itself may become a pivot point in subsequent disputes as it has in the WTO. Where, though, did the language of ‘necessary measures’ come from? The language of ‘necessary measures’ is lacking from most of the provisions of UNCLOS relied upon in the Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission, though both Articles 117 and 118 refer to States taking the measures necessary for the conservation of the high seas and their living resources, and Article 194(2), of the Convention says that ‘States shall take all measures necessary to ensure that activities under their jurisdiction or control are so conducted as not to cause damage by pollution to other States and their environment . . .’. Contrastingly, such language is found in the provisions at issue in the Advisory Opinion on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area and was relevant for the Chamber’s response to the first question before it in that case.205 Indeed, as we have seen, the 200 Sub-​Regional Fisheries Commission Advisory Opinion (n 109) [129], as above. This ‘necessary measures’ language is used again in [134]–​[136] and in the dispositif at [219(3)]. 201 Ibid, [131], quoting Pulp Mills (n 100) [197]. Chapter Four, section B 2 b). 202 Ibid, [138]. 203 Ventura, ‘Tackling Illegal, Unregulated and Unreported Fishing’ (n 196) 62; Michael A Becker, ‘Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission (SRFC). Case No 21’ (2015) 109 AJIL 851, 857. 204 Sub-​Regional Fisheries Commission Advisory Opinion (n 109) [219(4)], [148]. See also, in the context of the third question asked of the Tribunal, [155]. 205 Art 153(4) provides that: The Authority shall exercise such control over activities in the Area as is necessary for the purpose of securing compliance with the relevant provisions of this Part and the Annexes relating

Due Regard and Due Diligence  119 third question asked of the Chamber in that case was ‘What are the necessary and appropriate measures that a sponsoring State must take in order to fulfil its responsibility under the Convention, in particular Article 139 and Annex III, and the 1994 Agreement?’ There is also ‘necessary measures’ language in the Statute of the River Uruguay, which was accordingly captured in the ICJ’s formulation of due diligence by the ICJ in the case concerning Pulp Mills: ‘An obligation to adopt regulatory or administrative measures . . . and to enforce them is an obligation of conduct. Both parties are therefore called upon, under Article 36 [of the Statute of the River Uruguay], to exercise due diligence in acting through the [Uruguay River] Commission for the necessary measures to preserve the ecological balance of the river.’206 There are however certain prior references to ‘necessary measures’ in the fisheries conservation context. As Somalia pointed out in its submission to the Tribunal, Article 18(1) of the United Nations Agreement for the Implementation of the Provisions of the United Nations Convention on the Law of the Sea of 10 December 1982 relating to the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks imposes an obligation on States whose vessels fish on the high seas to ‘take such measures as may be necessary to ensure that vessels flying its flag comply with subregional and regional conservation and management measures and that such vessels do not engage in any activity which undermines the effectiveness of such measures’. Somalia cited also Article III (1)(a)of the FAO Agreement to Promote Compliance with International Conservation and Management Measures by Fishing Vessels on the High Seas which requires that each Party ‘take such measures as may be necessary to ensure that fishing vessels entitled to fly its flag do not engage in any activity that undermines the effectiveness of international conservation and management measures’. Somalia further asserted that these provisions on flag

thereto, and the rules, regulations and procedures of the Authority, and the plans of work approved in accordance with paragraph 3. States Parties shall assist the Authority by taking all measures necessary to ensure such compliance in accordance with Article 139. The Chamber reasoned that ‘[n]‌ecessary measures are required and these must be adopted within the legal system of the sponsoring State.’ Seabed Advisory Opinion (n 96) [118]. Article 139(2) provided that a sponsoring State would not be liable for damage caused by a sponsored entity’s failure to comply with the Convention if it had taken ‘all necessary and appropriate measures to secure effective compliance under Article 153, paragraph 4, and Annex III, Article 4, paragraph 4’. Annex III, Article 4, paragraph 4 stated that: A sponsoring State shall not, however, be liable for damage caused by any failure of a contractor sponsored by it to comply with its obligations if that State Party has adopted laws and regulations and taken administrative measures which are, within the framework of its legal system, reasonably appropriate for securing compliance by persons under its jurisdiction. This provision required the sponsoring State to adopt ‘laws and regulations’ and to take ‘administrative measures which are, within the framework of its legal system, reasonably appropriate for securing compliance by persons under its jurisdiction’. Seabed Advisory Opinion (n 96) [119].

206

Pulp Mills (n 100) [187].

120  The ICJ, Law of the Sea and Court of Arbitration State duties were so widely accepted internationally that they could be regarded as generally accepted.207 As to further precedent for ‘necessary measures’ language in the fisheries context, Handl has noted that in early bilateral fisheries access agreements flag States typically undertook to ‘take all necessary measures’ to: ensure the following actions or restraint by its vessels: refrain from fishing except as authorised under the terms of the agreement; prominently display their authorising permits; report their position; install and maintain appropriate position-​fixing and identification equipment as determined by the coastal State; comply with the provisions of coastal State permits; not exceed the total allocation for any fishery; respect conservation areas and areas closed to fishing; comply with coastal-​State fish-​size and mesh limitations; refrain from harassing, hunting, capturing or killing, or attempting to harass, hunt, capture or kill any marine mammal in fishery conservation zones, unless specifically exempted; allow and assist boarding and inspection by coastal-​State law-​enforcement officials; and be ‘fully insured against all risks and liabilities’.208

Additionally, reference to ‘the necessary legislative, administrative or other action including the establishment of suitable monitoring mechanisms’ is found in the International Law Commission’s Draft Articles on Prevention of Transboundary Harm from Hazardous Activities,209 together with an emphasis on co-​operation between States. Draft Article 3 is said in the Commission’s commentary to refer to a State’s ‘duty to take all necessary measures to prevent significant transboundary harm . . .’.210 In responding to the SRFC’s fourth question the Tribunal had to address the rights and obligations of the coastal State in ensuring the sustainable management of shared stocks and stocks of common interest. It will be recalled that the Tribunal had emphasised in response to the first question that coastal States bore primary responsibility for taking the necessary measures to prevent, deter and eliminate IUU fishing,211 consistent with the coastal State’s responsibility under the Convention for the conservation and management of living resources in the exclusive economic zone. Responding to question four, the Tribunal elucidated first that 207 Written Statement of the Federal Republic of Somalia (27 November 2013), [7]‌; Verbatim Record (2 September 2014 at 3pm), 14–​15, Ms Beyé Traoré for the Sub-​Regional Fisheries Commission. Japan, Chile, the EU and the Netherlands also highlighted in their written submissions the language of these agreements and of the Convention on the Conservation and Management of High Seas Fishery Resources in the South Pacific Ocean (opened for signature 14 November 2009, entered into force 24 August 2012) 2899 UNTS 211, art 25(1)(a). 208 Handl, ‘Flag State Responsibility’ (n 176) 160. Footnotes omitted. 209 ILC, ‘Draft Articles on Prevention of Transboundary Harm from Hazardous Activities’ (n 77) art 5. 210 Ibid, Commentary to art 3, 155 at [14]. 211 Sub-​Regional Fisheries Commission Advisory Opinion (n 109) [106].

Due Regard and Due Diligence  121 the term ‘sustainable management’ as used in question four was directed ultimately at the conservation and development of fish stocks, as referred to in Articles 61 and 63 of the Convention, as a viable and sustainable resource.212 Then the Tribunal set out coastal States’ rights and obligations in relation to straddling stocks and highly migratory species in the SRFC Members’ EEZs at some length.213 Relevant provisions of the Convention included Articles 61, 62, 73, 192 and 193.214 These will not be traversed in full here. However, it may be noted that coastal State obligations regarding co-​operation with one another included commitments requiring due diligence, specifically (a) the obligation under Article 63(1) to seek to agree with one another on the measures necessary to co-​ordinate and ensure the conservation and development of straddling stocks and (b) the obligation under Article 64(1) to co-​operate with fishing States with a view to ensuring conservation and promoting the optimum utilisation of highly migratory species.215 States were required inter alia to consult with one another in good faith as referred to in Article 300, and meaningfully.216 The Tribunal was clear that coastal States remained obliged to take effective measures aimed at preventing over-​exploitation of shared stocks within their individual EEZs.217 The combined effect of the case concerning Pulp Mills, the Advisory Opinion on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area and the Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission has left international law considerably better placed than previously as a tool to encourage States’ control over private actors causing transboundary harm or harm to common spaces or resources. This can be seen for instance in the South China Sea arbitration, introduced below. The case concerning the application of UNCLOS in certain areas of the South China Sea claimed by more than one State.

e) South China Sea Arbitration (Republic of the Philippines v People’s Republic of China) Disputes over title to the islands in the South China Sea are ongoing, including the Spratly Islands off the coast of the Philippines and the Paracel Islands near Vietnam and China.218 China has been active in the reclamation of land and the construction of airstrips and military facilities on various of the maritime features in the 212 Ibid, [187]–​[191]. 213 Ibid, [175]–​[218], [219(6)]. 214 Ibid, [180]. 215 Ibid, [210], [219(6)]. 216 Ibid, [210], [219(6)]. 217 Ibid, [201]–​[211], [219(6)]. 218 South China Sea Arbitration (Republic of the Philippines v People’s Republic of China) (Merits) (2016) 170 ILR 1 (hereafter South China Sea Arbitration (Merits)). For background, Stefan Talmon and Bing Bing Jia (eds), The South China Sea Arbitration: A Chinese Perspective (Hart Publishing 2014) Introduction.

122  The ICJ, Law of the Sea and Court of Arbitration region, host to a significant proportion of global shipping and trade and thought to harbour valuable energy reserves. As the Tribunal observed, ‘the South China Sea is a crucial shipping land, a rich fishing ground, home to a highly biodiverse coral reef ecosystem, and believed to have substantial oil and gas resources’.219 China lays claim to rights220 in almost the entire South China Sea, having set out on its maps a notional line (the ‘nine-​dash line’) encompassing the bulk of the maritime territory.221 Proceedings before an UNCLOS Annex VII Tribunal were launched following events at Scarborough Shoal, off the coast of the Philippines in 2012.222 China did not accept the Tribunal’s jurisdiction but made clear its views on the law in a 2014 position paper.223 Importantly, the Philippines did not seek a ruling on sovereignty over land territory, aware that UNCLOS does not govern these matters.224 Nor did it seek the delimitation of maritime boundaries, which China had excluded from compulsory dispute settlement in 2006 consistent with the Convention.225 The Philippines asked the Tribunal to address essentially four sets of issues as the Tribunal saw it. It is in relation to the prevention of transboundary harm that the Annex VII Tribunal’s contribution on due diligence is found, but the prior issues are traversed here for context. Firstly, the Philippines asked the Tribunal to declare that China’s rights and entitlements in the South China Sea were governed by the Convention and that rights claimed by China within the ‘nine-​dash line’ were without lawful effect to the extent they exceeded rights permissible under the Convention.226 The Tribunal ruled in favour of the Philippines. Secondly, the Philippines requested a declaration that none of the features claimed by China in the Spratly Islands, nor Scarborough Shoal, generated an entitlement to an exclusive economic zone or continental shelf, being only submerged banks, low-​tide elevations or ‘rocks which cannot sustain human habitation or economic life of their own’.227 The Tribunal found a number of those features were low tide elevations incapable of generating entitlements to a territorial sea, exclusive economic zone or continental shelf and incapable of appropriation;228 while others including Scarborough Shoal were rocks or high tide features that cannot sustain human habitation or economic life of their own and 219 South China Sea Arbitration (n 218) [3]‌. 220 Ibid, [205]–​[214], [228]. 221 Ibid, [181]–​[187], [200]–​[201]. 222 Ibid, [764]–​[770], [835]–​[844], [1044]–​[1059]. 223 ‘Position Paper of the Government of the People’s Republic of China on the Matter of Jurisdiction in the South China Sea Arbitration Initiated by the Republic of the Philippines’ (Ministry of Foreign Affairs, the People’s Republic of China, 7 December 2014) accessed 16 August 2020, previously at accessed 23 January 2020. 224 South China Sea Arbitration (n 218) [5]‌. See also Award on Jurisdiction and Admissibility (29 October 2015) [153]. 225 Ibid, [6]‌, [170], [204]. 226 Ibid, [7]‌. 227 Ibid, [8]‌. 228 Ibid, [277]–​[278], [1203(B)(1)]–​[1203(B)(2)].

Due Regard and Due Diligence  123 likewise generated no entitlement to an exclusive economic zone or continental shelf.229 Accordingly no feature claimed by China in the Spratly Islands generated an EEZ or continental shelf that would overlap with the Philippines’ entitlements in the area of Mischief Reef and Second Thomas Shoal, which lay within the Philippines’ EEZ and continental shelf.230 Thirdly, the Philippines sought declarations that various of China’s actions in the South China Sea were in violation of the Convention.231 The Tribunal found this to be the case. China had breached obligations under Article 77 of the Convention with respect to the Philippines’ sovereign rights over the non-​living resources of its continental shelf through the operation of marine surveillance vessels.232 China had breached obligations under Article 56 with respect to the Philippines’ sovereign rights over the living resources of its exclusive economic zone by promulgating a 2012 moratorium on fishing in the South China Sea without excepting areas fully within the Philippines’ EEZ or vessels not flagged to China.233 China had breached obligations under Article 58(3) with respect to the operation of Chinese flagged fishing vessels in the Philippines EEZ at Mischief Reef and Second Thomas Shoal, the awareness and tolerance of this by China’s marine surveillance vessels and China’s failure to exercise due diligence to prevent it amounting to a failure to exhibit due regard for the Philippines’ sovereign rights with respect to fisheries in its EEZ.234 Additionally China had through the operation of its official vessels from May 2012 unlawfully prevented Philippines fishermen from engaging in traditional fishing at Scarborough Shoal.235 The Philippines included here also certain assertions concerning the protection and preservation of the marine environment. The Tribunal held that China had breached Articles 192 and 194(5) of the Convention as Chinese flagged vessels had engaged in the harvesting of endangered species on a significant scale and in the harvesting of giant clams in a manner severely destructive of the coral reef ecosystem, and China had been aware of, tolerated, protected and failed to prevent these activities.236 Further, China had breached obligations under Articles 123, 192, 194(1), 194(5), 197 and 206 by causing severe, irreparable harm to the coral reef system in the course of certain land reclamation and construction of artificial islands, installations and structures in the South China Sea by failing to co-​operate or coordinate concerning such activities on the protection and preservation of the marine environment with the other States bordering the South China Sea, and by failing to communicate an assessment of the potential effects of such activities on

229

Ibid, [626], [1203(B)(6)]–​[1203(B)(7)]. Ibid, [626], [1203(B)(6)]–​[1203(B)(7)]. 231 Ibid, [9]‌. 232 Ibid, [708], [716], [1203(B)(8)]. 233 Ibid, [712], [716], [1203(B)(9)]. 234 Ibid, [753]–​[757], [1203(B)(10)]. 235 Ibid, [814], [1203(B)(11)]. 236 Ibid, [964], [966], [1203(B)(12)]. 230

124  The ICJ, Law of the Sea and Court of Arbitration the marine environment within the meaning of Article 206.237 China had through the construction of artificial islands, installations and structures at Mischief Reef without the authorisation of the Philippines breached Articles 60 and 80 of the Convention with respect to the Philippines’ sovereign rights in its EEZ and continental shelf.238 In addition China had created serious risk of collision and danger to Philippine ships and personnel and had violated the rules of the Convention on the International Regulations for Preventing Collisions at Sea 1972 in the operation of its law enforcement vessels in the vicinity of Scarborough Shoal in April and May 2012.239 Fourthly, the Philippines asked the Tribunal to find that China had aggravated and extended the parties’ disputes during the course of the arbitration in a number of ways.240 The Tribunal found that during the time the proceedings were ongoing China had built a large artificial island on Mischief Reef, had by land reclamation and construction of artificial islands, installations and structures at specified locations caused severe, irreparable harm to the coral reef ecosystem, and had in this way permanently destroyed evidence of the natural condition of the reefs.241 China had aggravated the parties’ dispute concerning the status of maritime features in the Spratly Islands and also specifically concerning the parties’ respective rights and entitlements in the area of Mischief Reef and the protection and preservation of the environment at Mischief Reef, extending that dispute to the specified locations mentioned above: Cuarteron Reef, Fiery Cross Reef, Gaven Reef (North), Johnson Reef, Hughes Reef and Subi Reef. Thus China had breached obligations under Articles 279, 296 and 300 of the Convention as well as general international law.242 As to duties to prevent environmental harm, the South China Sea Tribunal found that Article 192 of UNCLOS imposed on States a general obligation of protection and preservation which entailed both a positive duty ‘to take active measures to protect and preserve the marine environment’ and ‘by logical implication’ a ‘negative obligation not to degrade the marine environment’.243 Article 192’s general obligation was further detailed in subsequent Part XII provisions including Article 194 and by reference to specific obligations in other agreements as per Article 237. The Tribunal recalled that Article 192 and 194 obligations related not only to States’ own activities but to activities within their jurisdiction and control.244 The Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission had



237

Ibid, [983], [991]–​[993], [1203(B)(13)]. Ibid, [1038], [1043], [1203(B)(14)]. 239 Ibid, [1109], [1203(B)(15)]. 240 Ibid, [10]. 241 Ibid, [1203(B)(16)]. 242 Ibid, [1177]–​[1178], [1181], [1203(B)(16)]. 243 Ibid, [941]. 244 Ibid, [942], [944]. 238

Due Regard and Due Diligence  125 cast light on flag State responsibilities and had noted that obligations ‘to ensure’ are obligations of conduct, drawing on the judgment in the case concerning Pulp Mills and the Advisory Opinion on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area. An obligation ‘to ensure’ required ‘due diligence’ in the adoption of appropriate rules and measures and also a ‘certain level of vigilance in their enforcement and the exercise of administrative control’.245 Article 197 required co-​operation between States, as did Article 123 for semi-​enclosed seas.246 Articles 204–​206 required monitoring and environmental impact assessment.247 In applying Articles 192 and 194 of UNCLOS to allegations of harmful fishing practices and harvesting of endangered species, the South China Sea Tribunal referenced the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), to which both China and the Philippines were party.248 The Tribunal identified sea turtle species listed under CITES’ Appendix I as species threatened with extinction and giant clam species listed in Appendix II as ‘unequivocally threatened’.249 Giant clams could grow to over 300 kilogrammes and played a significant role in reef structure and health. The Tribunal viewed CITES as part of the ‘general corpus of international law that informs the content of Articles 192 and 194(5) of the Convention’. It had been recognised that Article 192’s obligation to ‘protect and preserve the marine environment’ applied in respect of the living resources of the sea.250 Read against the background of other applicable law, Article 192 also incorporated more specifically the obligation ‘to prevent the harvesting of species that are recognised internationally as being at risk of extinction and requiring international protection’.251 This preventive obligation required due diligence.252 The preventive obligation was given particular shape in the context of Article 194(5) which required States to take those measures ‘necessary to protect and preserve rare or fragile ecosystems as well as the habitat of depleted, threatened or endangered species and other forms of marine life’.253 Therefore the Article 192 preventive obligations also extended to harm affecting such species through the destruction of their habitat, as in the case of the harvesting of corals and giant clams, while the harvesting of sea turtles constituted a harm to

245 Ibid, [944], quoting Sub-​Regional Fisheries Commission Advisory Opinion (n 109) [131], quoting Pulp Mills (n 100) [197]. 246 Ibid, [946]. 247 Ibid, [947]–​[948]. 248 Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) 993 UNTS 243; 12 ILM 1085 (1973). 249 South China Sea Arbitration (n 218) [956], [957]. 250 Ibid, [956] citing Southern Bluefin Tuna Cases (Provisional Measures, Order of 27 August 1999) (n 190) [70]. 251 Ibid, [956]. See also [959]. 252 Ibid, [956], [959]. 253 Ibid, [959]. See also [942], [945].

126  The ICJ, Law of the Sea and Court of Arbitration the environment in itself.254 Failure to prevent these practices breached Articles 192 and 194(5), and the Tribunal found China responsible for this breach.255 Even though China had adopted protective legislation, the adoption of appropriate rules and procedures was only one component of due diligence obligations.256 On the evidence, China must have known of and deliberately tolerated the harmful acts, and had failed to take the necessary preventive measures. Indeed, China had not merely turned a blind eye to the poaching of endangered species, it had sent armed government vessels to protect fishing boats.257 Further, China was fully aware of highly destructive harvesting practices using vessels’ propellers to chop into coral reefs to obtain giant clams, which had caused an estimated 70 square kilometres of coral reef damage and destruction, again in breach of China’s obligation to protect and preserve the marine environment.258 The reach of due diligence standards is further demonstrated with reference to the 2017 Advisory Opinion of the Inter-​American Court of Human Rights on the Environment and Human Rights (State Obligations in Relation to the Environment in the Context of the Protection and Guarantee of the Rights to Life and Personal Integrity) concerning States’ human rights obligations in respect of the transboundary activities of private actors.259 Although the jurisprudence of the international and regional human rights bodies is not comprehensively addressed in this book, this case is included for its significance to the question of due diligence in relation to the prevention of transboundary harm.

f) The Environment and Human Rights (Advisory Opinion) The Advisory Opinion of the Inter-​American Court of Human Rights on The Environment and Human Rights is included in this chapter because it imported a recognition of general environmental law relating to transboundary harm into the American Convention on Human Rights, including specifically the duty of prevention and due diligence. The Inter-​American Court took the view that States’ obligations in relation to the right to life, as found in Article 4, and the right to physical, mental and moral integrity, as found in the

254 Ibid, [959], [960]. Coral harvesting and trade violated both the Convention on International Trade in Endangered Species of Wild Fauna and Flora (n 248) and the Convention on Biological Diversity, the Philippines recalled. [962]. Convention on Biological Diversity 1760 UNTS 79, 31 ILM 818 (1992). 255 South China Sea Arbitration (n 218) [960], [964]. 256 Ibid, [963]–​[964]. 257 Ibid, [964]. 258 Ibid, [965], [958], [966]. 259 The Environment and Human Rights (State Obligations in Relation to the Environment in the Context of the Protection and Guarantee of the Rights to Life and Personal Integrity: Interpretation and Scope of Articles 4(1) and 5(1) in relation to Articles 1(1) and 2 of the American Convention on Human Rights), Advisory Opinion OC-​23/​17, Inter-​American Court of Human Rights Series A No 23 (15 November 2017), [242], [244(5)]–​[244(8)] (hereafter Environment and Human Rights Advisory Opinion).

Due Regard and Due Diligence  127 Convention’s Article 5(1), were potentially at issue in cases involving harm to the environment.260 Importantly also, the Court determined that the group of individuals in respect of whom States’ obligations under the Convention will apply is not limited to individuals within State parties’ own territories. States’ obligations apply also in respect of individuals who stand to be adversely affected by harmful activities where the State party has jurisdiction, authority or effective control over the persons carrying out such activities,261 provided there is a causal link between harm caused and the effect on individuals’ human rights.262 Individuals affected in this way were considered persons subject to State parties’ jurisdiction for the purposes of Article 1 of the Convention. Thus States could owe obligations in respect of individuals physically located beyond their own territory.263 The Court considered closely the nature and extent of the rights to life and integrity in the environmental context. The Court first parsed States’ Convention obligations. The Court made a distinction between the obligation undertaken by States party ‘to respect’ the rights and freedoms recognised in the Convention and their obligation ‘to ensure’ to all persons subject to their jurisdiction the free and full exercise of those rights and freedoms.264 It is the Convention’s remarks concerning the latter that are of interest to us here. The duty to ‘ensure’ the exercise of Convention rights was considered to imply that States would adopt all appropriate measures to protect and preserve the right to life and the right to personal integrity. This was a duty of prevention of harm. This duty of prevention of harm extended to the duty to prevent third parties from infringing these rights, and to the requirement for judicial, political and administrative measures to promote the safeguarding of the rights. The duty of prevention was an obligation of conduct, rather than result. The Court explained its concern that States party not be made automatically responsible for environmental damage caused internationally by private actors operating from within its jurisdiction, and that it was important to interpret the Convention in such a way that it would not impose an impossible or disproportionate burden on States. According to the Court, this meant that responsibility 260 Ibid, [66], [105]–​[122]. American Convention on Human Rights; ‘Pact of San José, Costa Rica’ (adopted 22 November 1969, entered into force 18 July 1978) 1144 UNTS 123. 261 Environment and Human Rights Advisory Opinion (n 259) [102], [104(e)], [244(2)]. 262 Ibid, [104(h)], [244(4)]. 263 See, also employing an ‘authority or effective control’ test, ‘Maastricht Principles on Extraterritorial Obligations of States in the Area of Economic, Social and Cultural Rights’ (Maastricht University, 28 September 2011), [9(a)] (hereafter ‘Maastricht Principles’). See further [9(b)], [9(c)] employing the additional tests including foreseeability of extraterritorial effects and States’ capacity to exercise decisive influence towards the realisation of rights. See also [25]–​[26]. 264 Both rights are found in art 1(1), which reads: The States Parties to this Convention undertake to respect the rights and freedoms recognized herein and to ensure to all persons subject to their jurisdiction the free and full exercise of those rights and freedoms, without any discrimination for reasons of race, color, sex, language, religion, political or other opinion, national or social origin, economic status, birth, or any other social condition.

128  The ICJ, Law of the Sea and Court of Arbitration would not arise unless a State’s authorities had known of a real or immediate risk and had failed to take the necessary measures within the ambit of what could be reasonably expected to prevent or avoid the risk.265 States’ obligations under the Convention were due diligence obligations.266 The Court set out in considerable detail an overview of the body of international environmental law thereby incorporated into Articles 4 and 5(1),267 beginning by breaking down the idea of a duty of prevention of international environmental harm into component parts. The obligation of prevention comprised duties to: regulate, supervise, require and approve environmental impact assessments, establish contingency plans, and mitigate harm in case of the occurrence of environmental harm.268 Beginning with the duty to regulate, each of these duties was then addressed in turn.269

g) Conclusion The concept of due diligence has established itself in international law, regardless of whether the civil law distinction between obligations of conduct and obligations of result is accepted. Connections between the work of the International Law Commission and that of international courts and tribunals have clearly been a vital part of the process through which the due diligence standard has developed, with the Commission providing authoritative expert views on which international adjudicatory bodies have been able to rely. For the purposes of the present study, the emergence of due diligence standards is distinctive because of the way in which diverse international adjudicatory bodies have participated closely in this development, contributing to a situation where due diligence standards now apply across the field of international environmental law and where their content is increasingly subject to elaboration. Interpretive principles of contextualism and effectiveness have been brought to bear in the due diligence cases. Articulation of the due diligence standard in diverse international regulatory contexts has been informed by interpretive reasoning specific to the regime in question on each occasion, as international adjudicatory bodies have sought to give meaning to States’ obligations to control private actors. At the same time, the social constraints that operate in respect of international courts and tribunals have meant that these bodies are at all times aware of the limits to political tolerance of their determinations. A responsiveness to States party to the relevant treaties has undoubtedly played into the way that international courts and tribunals have applied the principle of effectiveness and prevented findings that could have overstretched the confidence that has been placed in them.

265

Environment and Human Rights Advisory Opinion (n 259) [118]–​[120]. Ibid, [123]–​[124]. 267 Ibid, [242], [244(5)]–​[244(8)]. 268 Ibid, [145], [156]–​[170], [242(b)], [244(5)]. 269 Ibid, [146]–​[151]. C.f. ‘Maastricht Principles’ (n 263) [24], [25], ‘Obligation to Regulate’. 266

Due Regard and Due Diligence  129 One further feature of the processes that have produced due diligence standards must be highlighted. Three of the six cases addressed have been advisory opinions, and together with the Pulp Mills case it is in these opinions that the real work has been done. Regulatory standards brought into existence or endorsed and articulated in advisory proceedings may perhaps be more likely to gain recognition as embodying standards inhering in relevant legal rules and provisions. The types of circumstances in which requests for advisory opinions will arise are by nature those in which multiple States have an interest, and it will be in multilateral settings that we find international courts and tribunals exercising an advisory jurisdiction, as seen in the UN in the case of the ICJ and under UNCLOS in the case of the SBDC of ITLOS and the full bench of ITLOS. This means that the outcomes of proceedings come with a recognised status among a broad audience. At the same time, the advisory process offers certain advantages in comparison with contentious proceedings for the production of standards that may become regulatory standards.270 The right to make submissions is not restricted to disputants and accepted third parties, and the range of points put to an international court or tribunal should be correspondingly broad. Neither must a court or tribunal strive to ensure that its reasoning is suitable to help settle a particular dispute. Rather, an advisory opinion will be delivered directly in the service of the regime in question with the intention of helping ensure it can work appropriately as designed vis-​à-​vis the particular question and situation at hand. This said, the reputational stakes for an international court or tribunal may be especially high, particularly where this might be the first time the body has delivered an advisory opinion, or where the issues are critical for the success of the regime as well as being of wider international legal importance. All these factors were at play in the advisory opinions seen in this chapter and were navigated with relative success to produce enduring outcomes in relation to the concept of due diligence.

C.  Reflections on Regulatory Standards in the International Court of Justice, Law of the Sea Dispute Settlement and the Permanent Court of Arbitration Part II of this book has addressed standards arising in environmental cases from a range of international courts and tribunals including the ICJ, as well as ITLOS, and the SBDC. These bodies, like those whose work is addressed in subsequent parts of the book, are sensitive to the needs arising under the treaties they are asked to interpret and apply. Frequently their interpretations derive a persuasive quality both from the inherent regulatory logic of the provisions they are interpreting and from



270

Chapter Nine, section C 1.

130  The ICJ, Law of the Sea and Court of Arbitration the way in which these interpretations give effect to the particular regime in question. The attentiveness, skill and perspective seen in their work helps produce what are often highly effective outcomes from the dispute settlement perspective. The development of the regulatory standards seen in Chapters Three and Four has required interpretive flexibility. In many cases a court or tribunal works from a blend of textual references, logical inference, principle and its perceptions of the legal needs of the regime within which it is operating. All interpretive resources are fully deployed in the effort to provide an appropriate judgment, award or opinion. For instance, contextual perspectives infused strongly the SBDC’s conclusions in 2011 on the legal responsibilities and obligations of UNCLOS States parties sponsoring activities in the Area, and the actions they were required to take, with the Chamber deducing the existence and content of due diligence requirements from combined textual, inferential and common-​sense reasoning. In the Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission of 2015 ITLOS again relied on logical and real-​world contextual reasoning under concurrently applicable provisions in finding that flag States were obliged to take the necessary measures to ensure that vessels and nationals were not engaged in IUU fishing, going on to characterise these as a due diligence obligation. In this case the Tribunal’s conclusion was buttressed by diverse precedents specifically calling for all necessary measures drawn from the context of international fisheries law. This interpretive work underlines the active part played by international courts and tribunals in the articulation of regulatory standards. The analyses in Chapters Three and Four cast light on this book’s core enquiries in multiple ways. The standards seen in these cases are often accommodating of domestic authority, and this is particularly so when it comes to determining the extent of States’ regulatory obligations, as seen in the due diligence cases. Here domestic authority is significantly accommodated in that treaty obligations for States to ensure certain private conduct and prevent transboundary harm are understood only as obligations of conduct or limited due diligence obligations rather than as obligations successfully to bring about environmental protection as a matter of fact. The room allowed in the cases for substantive policy decisions to be made through domestic legal systems appears to help enhance traditional procedural justifications for international law’s claim to legitimate authority. However, this accommodation of domestic legal authority tends to leave international law less equipped to mandate action from States in terms promising greater fulfilment of States’ combined substantive needs. The difficulty is arguably reflected in the Whaling in the Antarctic case. The ICJ’s decision to decide the case based on a requirement for regulatory coherence meant that the Court made no statement on a range of broader considerations that could also be determinative as a matter of international law for ascertaining whether a whaling programme was ‘for purposes of scientific research’.

Due Regard and Due Diligence  131 The studies in Chapters Three and Four reflect the significance of the social and formal constraints at work in the proceedings of international courts and tribunals. The courts and tribunals involved frequently respond directly to disputants’ pleadings and may base their elaboration of regulatory standards on the points made in those pleadings, at times with direct reference to the parties’ agreement on certain matters. This is most demonstrable in the contentious proceedings addressed in Chapter Three. Inevitably this raises questions about whether international adjudicatory proceedings and indeed international dispute settlement are the processes through which such standards ought primarily to be elaborated if they are to have important and ongoing effect beyond the cases at hand. Could more representative political processes be employed instead? Generally, international negotiations will be focused on addressing concrete concerns, and any upgrades in regulatory standards are likely to be a by-​product rather than a core focus. This is arguably the case in relation to the negotiations presently taking place on biological diversity in areas beyond national jurisdiction.271 This is the case, too, in relation to the work of the International Seabed Authority on regulations governing the exploration and exploitation of the deep seabed.272 We may see greater engagement when relevant concepts are more central. For instance under the Paris Agreement pivotal requirements in the setting and implementation of Nationally Determined Contributions for carbon emissions reduction may invite the application of developing global regulatory standards.273 Governments’ executive branches may be particularly active in this sphere, but national court rulings could also play an important part in the emergence of relevant standards. Nevertheless, from among the international decisions addressed in Chapters Three and Four emerge several potential global regulatory standards. The requirement for regulatory coherence is one such standard, applied in the Whaling in the Antarctic case by testing for a reasonable relationship to a measure’s objectives. Requirements for States to have due regard to the interests of others is another. The third standard, that of due diligence, has come already to be understood as an established feature of international environmental law and the law on transboundary harm more generally. The specific test for due regard articulated by the UNCLOS Annex VII Tribunal in the Chagos Marine Protected Area Arbitration may prove particularly influential, and is discussed further in Chapter Ten below.

271 Chapter One. 272 Ibid. 273 Paris Agreement under the United Nations Framework Convention on Climate Change (Paris Agreement) (signed 22 April 2016, entered into force 4 November 2016), art 4(3).

PART III

WORLD T R A DE ORGA NI Z AT ION DISPU T E SET T LE M E NT

5

Necessity Testing A. Introduction This part of the book, Part III, focuses on the regulatory coherence standard, analysing the development of two distinct regulatory coherence tests in World Trade Organization (WTO) dispute settlement. Chapter Five looks at the formula for necessity that has been developed in cases under the subparagraphs of the general exceptions provisions in the General Agreement on Tariffs and Trade (GATT)1 and General Agreement on Trade in Services (GATS).2 Chapter Six considers the evolution of the test developed under the general exceptions chapeau to determine when regulatory measures can be considered to be being applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail. This takes the form of a test to see whether there is a rational relationship between the measure’s detrimental effects and its objectives. The reach of these and other regulatory coherence tests developed in the WTO has been extended through provisions in new bilateral and regional free trade agreements such as the Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP) and the Canada-​European Union Comprehensive Economic and Trade Agreement (CETA), where the WTO general exceptions provisions have been adopted or adapted.3 The settlement of disputes under these agreements will in due course contribute to the further development of the regulatory coherence standard. The institutional setting within which dispute settlement takes place in the WTO and the dispute settlement system’s high volume caseload have afforded opportunities for WTO Members to demonstrate their post hoc acceptance or rejection of the regulatory coherence tests identified, through statements in the Dispute Settlement Body (DSB) and to an extent through their pleadings in subsequent 1 General Agreement on Tariffs and Trade (opened for signature 30 October 1947, entered into force 1 January 1948) 55 UNTS 187; General Agreement on Tariffs and Trade (opened for signature 15 April 1994, entered into force 1 January 1995) 1867 UNTS 190. 2 General Agreement on Trade in Services (opened for signature 15 April 1994, entered into force 1 January 1995) 1869 UNTS 183. 3 Comprehensive and Progressive Agreement for Trans-​ Pacific Partnership (CPTPP) (signed 8 March 2018, entered into force 30 December 2018), see Chapter 29, and in regard to investment Chapter 9, arts 9.10(3)(d), 9.16 and Annex 9-​B (Expropriation), art 3(a) and (b); Canada-​European Union (EU) Comprehensive Economic and Trade Agreement (CETA) (signed 30 October 2016, entered into force provisionally 21 September 2017), see Chapter 28, and in regard to investment see Annex 8-​A (Expropriation), art 3.

Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0005

136  World Trade Organization Dispute Settlement cases.4 Path dependence has undoubtedly played a part,5 but the general tenor is one of acceptance. Overall, WTO dispute settlement panels and the Appellate Body, until it was put out of action at the end of 2019, had been satisfying the needs of the Membership. The WTO dispute settlement machinery had by and large been doing a capable job of reconciling competing needs and interests in the environmental cases.6 The recurrence of proceedings relying on the same or similar provisions had enabled the Appellate Body to continue to adjust evolving regulatory coherence tests as needed to moderate unsatisfactory elements over time. WTO Members’ ongoing practice is understood to have been broadly influenced by the tests adopted.7 The concept of a standard has a strong hold on how international trade law is understood by many WTO lawyers. The development of regulatory coherence tests may be seen, from a law and economics perspective, as part of a process of contract completion, with the distinction between rules and standards well established in law and economics literature.8 From this perspective, these WTO treaties are understood as incorporating provisions that are dependent for their application on the further clarification that takes place in part through WTO dispute settlement. Panels and the Appellate Body play an important part in helping complete the incomplete contracts said to be embodied in these treaties.9 Regulatory standards of the type on which this book is focused are distinct from the technical standards set internationally and relied upon for the harmonisation of WTO Members’ law

4 Although the Appellate Body has said that the Dispute Settlement Body’s adoption of dispute settlement reports is not an espousal of the interpretations they may contain. Japan—​Taxes on Alcoholic Beverages, Report of the Appellate Body (4 October 1996) WT/​DS8/​AB/​R, WT/​DS10/​AB/​R, WT/​ DS11/​AB/​R, DSR 1996:I, 97, 13. 5 Miguel Poiares Maduro, ‘Courts and Pluralism: Essay on a Theory of Judicial Adjudication in the Context of Legal and Constitutional Pluralism’ in Jeffrey L Dunoff and Joel P Trachtman (eds), Ruling the World? Constitutionalism, International Law and Global Governance (CUP 2009) 356, 365; Alec Stone Sweet, ‘Judicialization and the Construction of Governance’ (1999) 32 Comp.Pol.Stud. 147, 179–​180. 6 Robert Howse, ‘The World Trade Organization 20 Years On: Global Governance by Judiciary’ (2016) 27(4) EJIL 9; Joost Pauwelyn, ‘The WTO 20 Years On: “Global Governance by Judiciary” or, Rather, Member-​driven Settlement of (Some) Trade Disputes between (Some) WTO Members?’ (2016) 27(4) EJIL 1119. 7 Petros C Mavroidis, ‘Last Mile for Tuna (to a Safe Harbour): What is the TBT Agreement All About?’ (2019) 30(1) EJIL 279, 282. 8 Louis Kaplow, ‘Rules Versus Standards: An Economic Analysis’ (1992) 42(3) Duke L.J. 557; Barbara Luppi and Francesco Parisi, ‘Rules versus Standards’ in Gerrit De Geest (ed), Encyclopaedia of Law and Economics, vol 7 (2nd edn, Edward Elgar 2011). In the investment law context see Anne van Aaken, ‘International Investment Law Between Commitment and Flexibility: A Contract Analysis’ (2009) 12(2) J Intl Econ L 507. 9 Joel P Trachtman, ‘The Domain of WTO Dispute Resolution’ (1999) 40 Harv.Int’l L.J. 333, 364; Petros C Mavroidis, ‘Legal Eagles? The WTO Appellate Body’s First Ten Years’ in Merit E Janow, Victoria Donaldson and Alan Yanovich (eds), The WTO: Governance, Dispute Settlement & Developing Countries (Juris Publishing Inc 2008) 345; Judith L Goldstein and Richard H Steinberg, ‘Regulatory Shift: The Rise of Judicial Liberalization at the WTO’ in Walter Mattli and Ngaire Woods (eds), The Politics of Global Regulation (Princeton University Press 2009) 211, 231; Gregory Shaffer and Joel Trachtman, ‘Interpretation and Institutional Choice at the WTO’ (2011) 52(1) Va.J.Int’l L. 103, 110–​112.

Necessity Testing  137 and policy under agreements including the Agreement on Technical Barriers to Trade (TBT Agreement)10 and the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement).11

B.  World Trade Organization Dispute Settlement Adjudication in the WTO is unique in that the adjudication of trade disputes takes place in a context oriented around negotiation and implementation of trade concessions and agreements.12 Further, the political framework of the WTO has itself been the subject of public protest reflecting concerns that the multinational international trade regime insufficiently or ineptly addresses pressing developmental and social needs, human rights and sustainability demands,13 and requires reorientation if it is to fulfil its original promise.14 Only since 1995 when the WTO itself was established at the end of the Uruguay Round has there existed the apparatus for ‘judging’ international trade disputes on a clearly international legal footing.15 Prior to this, a more informal panel-​based system operated without an appellate mechanism, and without the obligation to employ international legal interpretive rules in its understandings of the GATT and associated text. There was a greater emphasis on applying the principles of the Vienna Convention on the Law of Treaties from the mid 1980s, particularly following the establishment of the Office of Legal Affairs in the GATT Secretariat, but the major shift came with the adoption of the Dispute Settlement Understanding (DSU) and creation of the Appellate Body, a permanent body comprising seven members of recognised authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally. The achievements of the dispute settlement system have been considerable, and have prompted much reflection including specifically on the adjudicatory

10 Agreement on Technical Barriers to Trade (opened for signature 12 April 1979, entered into force 1 January 1980) 1186 UNTS 276 (hereafter TBT Agreement). 11 Joost Pauwelyn, ‘Rule-​Based Trade 2.0? The Rise of Informal Rules and International Standards and How They May Outcompete WTO Treaties’ (2014) 17(4) J Int’l Econ L 739; Agreement on the Application of Sanitary and Phytosanitary Measures (opened for signature 15 April 1994, entered into force 1 January 1995) 1867 UNTS 493 (hereafter SPS Agreement). 12 Interview 17 September 2015. 13 See Robert Howse, ‘The Legitimacy of the World Trade Organization’ in Jean-​Marc Coicaud and Veijo Heiskanen (eds), The Legitimacy of International Organizations (United Nations University Press 2001) 355; Sarah Joseph, Blame it on the WTO? A Human Rights Critique (OUP 2011). 14 Andrew Lang, World Trade Law after Neoliberalism: Reimagining the Global Economic Order (OUP 2011); Gillian Moon and Lisa Toohey (eds), The Future of International Economic Integration: The Embedded Liberalism Compromise Revisited (CUP 2018) 15 For insights into the history before and since, Gabrielle Marceau (ed), A History of Law and Lawyers in the GATT/​WTO: The Development of the Rule of Law in the Multilateral Trading System (CUP 2015); Giorgio Sacerdoti, Alan Yanovich and Jan Bohanes (eds), The WTO at Ten: The Contribution of the Dispute Settlement System (CUP 2006).

138  World Trade Organization Dispute Settlement processes and role of the Appellate Body. The Appellate Body was always well aware of the balance of power in the WTO and since the outset manifested the determination to gain ‘credibility, acceptability and legitimacy’.16 Conscious of its role within that system the Appellate Body sought to promote legal certainty through a consistent and predictable jurisprudence. Over time, the Appellate Body became more confident in its judicial function, as well as its role in relation to the trade system.17 However, certain sensitivities gradually intensified, with proposals for the reform of the DSU embracing a push from some WTO Members to increase ‘Members’ control’ over WTO dispute settlement. Eventually in December 2019, the wheels of appeal in the WTO came to a halt with the refusal of the United States to allow the appointment of new Appellate Body members effectively putting the Appellate Body out of action. Concern over the functioning of the Appellate Body has most overwhelmingly been voiced by the United States.18 US reactions to appellate decisions have been most negative in relation to trade remedies cases,19 though concerns have been raised by the United States also in relation to the certain cases addressed in this book in relation to the appropriate extent of adjudicatory controls on WTO Members’ regulatory decision-​making.20 As a result of its concerns about WTO dispute settlement, certain Appellate Body appointments were blocked by the United States in 2016 and 2017,21 with the United States making it clear that approval of appointments was contingent on system reform.22 The United States emphasised concerns that Appellate Body interpretations had added to or 16 Claus-​Dieter Ehlermann, ‘Reflections on the Appellate Body of the WTO’ (2003) 6(3) J Intl Econ L 695, 696. 17 Isabelle Van Damme, Treaty Interpretation by the WTO Appellate Body (OUP 2014) 195, 210 (hereafter Van Damme, Treaty Interpretation). 18 Chang-​fa Lo, Junji Nakagawa and Tsai-​fang Chen, ‘Let the Jewel in the Crown Shine Again’ in Chang-​fa Lo, Junji Nakagawa and Tsai-​fang Chen (eds), The Appellate Body of the WTO and Its Reform (Springer 2020) 3. 19 Pieter Jan Kuijper, ‘The US Attack on the WTO Appellate Body’ (2018) 45 L.I.E.I. 1, 5–​7 (hereafter Kuijper, ‘The US Attack’); Markus Wagner, ‘The Impending Demise of the WTO Appellate Body: From Centrepiece to Historical Relic?’ in Chang-​fa Lo, Junji Nakagawa and Tsai-​fang Chen (eds), The Appellate Body of the WTO and Its Reform (Singapore 2020) 67. 20 Weihuan Zhou and Henry Gao, ‘ “Overreaching” or “Overreacting”? Reflections on the Judicial Function and Approaches of WTO Appellate Body’ (2019) 53 JWT 951, 962–​970 (hereafter Zhou and Gao, ‘ “Overreaching” or “Overreacting”?’, considering that US allegations of judicial overreach in TBT cases are unfounded and that the real tensions may relate to the practical impact of decisions (958, 963, 970). 21 Kuijper, ‘The US Attack’ (n 19) 1–​4. 22 ‘Statements by the United States at the Meeting of the WTO Dispute Settlement Body’ (US Mission to International Organizations in Geneva, 22 July 2019) 30–​31 accessed 19 August 2020. For the US’ full outline of its concerns as discussed in this paragraph, see ‘2018 Trade Policy Agenda and 2017 Annual Report’ (United States Trade Representative, 2018) Chapter I, 22–​28 accessed 19 August 2020. C.f. ‘Concept Paper: WTO Modernisation’ (European Commission, September 2018) accessed 19 August 2020.

Necessity Testing  139 diminished Members’ rights and obligations under the WTO agreements, and that the Appellate Body had engaged in making findings that were not necessary to resolve the particular disputes at hand.23 The United States also identified certain procedural concerns, including the authority of Appellate Body members to complete appeals after their terms had expired, and the 90-​day limit on appellate proceedings, which had in practice proved increasingly unrealistic given the complexity of many appeals.24 Further, the United States criticised the Appellate Body for involvement in reviewing panels’ findings of fact, and took the view that a doctrine of precedent had undesirably come into being in the WTO.25 The paralysis of the appellate system provoked by the US refusal to endorse new Appellate Body appointments has been a shock to the Membership, and to all who recognise States’ dependence on the multilateral WTO trade rules. The Appellate Body’s political demise marks a significant moment in the history of international dispute settlement and constitutes a loss to security and the rule of law in international trade. The consequences remain to be realised, and the value of the Appellate Body’s carefully built jurisprudence will be appreciated with time. It may be hoped that this jurisprudence will closely guide both decision-​making at panel level and the arbitration of appeals, including through the Multiparty Interim Appeal-​Arbitration Arrangement (MPIA) operating under Article 25 of the WTO Dispute Settlement Undertaking.26 Concern about the proper role of the WTO dispute settlement panels and the Appellate Body was perhaps foreseeable given the challenges that legal and economic integration have posed since the conclusion of the Uruguay Round. Contemporary disputes concern measures taken behind the border far more frequently than previously. Rather than focusing on trade policy in relation to measures applied at the border, we have for some time now been talking about Members’ policy space for regulatory action behind the border. Disputes arising in relation to regulatory action in the environmental, health or even foreign policy fields draw a new level of attention, alongside trade remedies cases. Non-​discrimination disciplines have taken on a stronger profile. Yet the task of producing the standards and the detail in the law needed to enable the accommodation of competing interests has been left to the dispute settlement system.27 There are various reasons why 23 For analysis, R Rajesh Babu, ‘WTO Appellate Body Overreach and the Crisis in the Making: A View from the South’ in Chang-​fa Lo, Junji Nakagawa and Tsai-​fang Chen (eds), The Appellate Body of the WTO and Its Reform (Singapore 2020) 91. 24 Robert McDougall, ‘The Crisis in WTO Dispute Settlement: Fixing Birth Defects to Restore Balance’ (2018) 52 JWT 867, 892 (hereafter McDougall, ‘The Crisis in WTO Dispute Settlement’). 25 For a critique of the US position on this point, Yuka Fukunaga, ‘Interpretative Authority of the Appellate Body: Replies to the Criticism by the United States’ in Chang-​fa Lo, Junji Nakagawa and Tsai-​ fang Chen (eds), The Appellate Body of the WTO and Its Reform (Singapore 2020) 167. 26 See previously Geraldo Vidigal, ‘Living Without the Appellate Body: Multilateral, Bilateral and Plurilateral Solutions to the WTO Dispute Settlement Crisis’ (2019) 20 JWIT 862. For comment, and alternative scenarios, Joost Pauwelyn, ‘WTO Dispute Settlement Post 2019: What to Expect?’ (2019) 22 J Intl Econ L 297. 27 José E Alvarez, International Organizations as Law-​Makers (OUP 2005) 533.

140  World Trade Organization Dispute Settlement WTO Members might individually and collectively have made this choice to relinquish power and leave such delicate and demanding work to its dispute settlement arm. These reasons include the inexperience of the WTO political machinery in the development of the types of legal rules required, the potential political costs of taking public positions in negotiations, or of breaking consensus, and the lower transaction costs of judicial decision-​making.28 This left WTO panels and the Appellate Body in a position where they had simply to get on and decide the disputes coming before them,29 and yet do so on the basis of textual provisions that are open to alternative constructions and through which incommensurable interests such as those in the trade and environment cases may have to be aligned.30 WTO Members have made multiple proposals for reform of the dispute settlement system as mandated in 2001 in the agenda for the slow-​moving and troubled Doha round of trade negotiations.31 There has naturally been a sensitivity to the need to respond to US concerns, and at the same time a number of Members share an understanding that changes in the operation of the dispute settlement system, and specifically in Appellate Body practice, are desirable.32 Proposals to create a forum for exchange and consultation on an annual basis between the Membership and Appellate Body, if resurrected, may have merit, and a wide range of options for reform of the appeal process in WTO dispute settlement remain on the table. These include further proposals to institute political checks and balances on the products of appellate decision-​making,33 and to provide more specific guidance to panels and the Appellate Body concerning their adjudicatory mandate and its priorities.34 A degree of dejudicialisation in WTO dispute settlement may be inevitable.35 28 Tomer Broude, International Governance in the WTO: Judicial Boundaries and Political Capitulation (Cameron May 2004) 315–​320. 29 Interview 17 September 2015; Interview 23 September 2015. 30 Interview 16 September 2015. Joel P Trachtman, ‘Trade and . . . Problems, Cost-​Benefit Analysis and Subsidiarity’ (1998) 9 EJIL 32, 59 (hereafter Trachtman, ‘Trade and . . . Problems’), describing how trade-​off devices have been ‘judicially cultivated on a relatively stark textual basis’, to fill gaps that require filling in order to decide cases. 31 E.g. as discussed by Joshua Paine, ‘The WTO’s Dispute Settlement Body as a Voice Mechanism’ (2019) 20 JWIT 820, 849–​850. 32 Matteo Fiorini and others ‘WTO Dispute Settlement and the Appellate Body Crisis: Insider Perceptions and Members’ Revealed Preferences’ (2019) European University Institute Working Paper RSCAS 2019/​95 accessed 19 August 2020 (hereafter Fiorini and others, ‘WTO Dispute Settlement’). 33 See EC Concept Paper (n 22); Mitsuo Matsushita, ‘Reforming the Appellate Body’ in Chang-​fa Lo, Junji Nakagawa and Tsai-​fang Chen (eds), The Appellate Body of the WTO and Its Reform (Singapore 2020) 43; McDougall, ‘The Crisis in WTO Dispute Settlement’ (n 24); Zhou and Gao, ‘ “Overreaching” or “Overreacting”?’ (n 20); and see earlier Lorand Bartels, ‘The Separation of Powers in the WTO: How to Avoid Judicial Activism’ (2004) 53 ICLQ 861. 34 McDougall, ‘The Crisis in WTO Dispute Settlement’ (n 24) 889–​890; Yuka Fukunaga, ‘The Appellate Body’s Power to Interpret the WTO Agreements and WTO Members’ Power to Disagree with the Appellate Body’ (2019) 20 JWIT 792. 35 Consider Richard H Steinberg, ‘The Impending Dejudicialization of the WTO Dispute Settlement System?’ (2018) 112 Proceedings of the ASIL Annual Meeting 316. Trachtman observes that the adjudicatory production of standards like the regulatory standards seen in this chapter and in Chapter Six can be expected to prompt greater legislative engagement and accountability. Joel P Trachtman,

Necessity Testing  141 The objective of dispute settlement in the WTO as reflected in the DSU is to help provide stability and predictability to the multilateral trading system.36 Article 3.2 expressly recognises that recommendations and rulings of the DSB ‘cannot add to or diminish the rights and obligations provided in the covered agreements’. Yet the dispute settlement system is described as serving to preserve the rights and obligations of Members under the covered agreements, and to ‘clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law’.37 Members recognise in this provision that the dispute settlement system serves to clarify the existing provisions of the covered agreements. Clarification is mandated and will be important to the functioning of the covered agreements. Although it is perhaps only in the WTO that a specific clarificatory mandate is expressed, the underlying need for this type of engagement with the legal rules is not unique to the WTO dispute settlement system as can be seen from the studies of regulatory disputes in other international courts and tribunals in this book. Proposals to excise the clarificatory mandate from the DSU arguably fail to appreciate the inherent demands of international adjudicatory process in the WTO and beyond.38 Individuals familiar with the inner workings of WTO dispute settlement have noted that initially after the adoption of the DSU post 1995 there was a sense of hesitancy about the idea that through this dispute settlement system rulings would be made embodying determinations concerning what is good for sovereign States, and what is not.39 However, it seems clear that WTO Members rapidly adjusted to the new dispute settlement system, formulating their domestic policies compatibly with the requirements of the WTO agreements as interpreted in the course of dispute settlement.40 There appears to have been general acceptance that the development of a body of regulatory coherence tests is to be expected as the application of relevant parts of the WTO covered agreements takes place in the course of dispute settlement. Further, though WTO Members including the ‘Global Commercial Constitutionalization: The World Trade Organization’ in Anthony F Lang and Antje Wiener (eds), Handbook on Global Constitutionalism (Edward Elgar Publishing 2017) 395. 36 Marrakesh Agreement Establishing the World Trade Organization (signed 15 April 1994, entered into force 1 January 1995) 1869 UNTS 401, Annex 2: Understanding on Rules and Procedure Governing the Settlement of Disputes (hereafter Dispute Settlement Understanding). 37 Dispute Settlement Understanding (n 36) art 3.2 reads: The dispute settlement system of the WTO is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. Recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements. 38 Fiorini and others, ‘WTO Dispute Settlement’ (n 32) 13; Zhou and Gao, ‘ “Overreaching” or “Overreacting”?’ (n 20). On one view, States knowingly buy into this aspect of adjudicators’ interpretive role when negotiators generate treaty text in need of clarification. Interview 16 September 2015. 39 Interview 23 September 2015. 40 Idem.

142  World Trade Organization Dispute Settlement United States retain different views on aspects and elements of the approaches and formulae involved, the diverse tests actually elaborated by the Appellate Body in the course of applying the covered agreements also seem in general to have met with tacit acceptance.41 Further, an objective onlooker might conceivably suggest that the case law since the end of the Uruguay Round has been friendly towards the adoption and defence of trade-​inhibiting regulatory measures, and possibly even criticise it for granting them too much leeway.42 It would seem above all to be US sensitivity in relation to rulings concerning its anti-​dumping duties that has generated the animosities bringing the system to its current impasse. The Appellate Body’s performance in the environment and health fields has been carefully calibrated, and its development and deployment of regulatory standards, demanded by the legal provisions that it is required to apply, has been generous towards regulating States.

C.  An Introduction to Relevant WTO Disciplines WTO law and prior to this the GATT have rested foundationally on the prohibition of trade bans and quantitative restrictions, together with the rolling back of tariffs. Non-​discrimination is often identified as the central discipline in contemporary international trade law, as reflected first and foremost in Articles I and III of the GATT. The non-​discrimination requirement permeates the WTO agreements as a whole including the GATS, the TBT Agreement and the SPS Agreement.43 Non-​discrimination is central also to the Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS).44 Non-​discrimination provisions require that like products and services are treated no less favourably than one another. Regulatory purpose is not relevant either to likeness,45 or to the existence of less favourable treatment, which is determined by examining whether a regulatory measure detrimentally modifies conditions of competition. Historically it was thought that in determining the likeness of products for the purposes of 41 Though writing very early after the conclusion of the Uruguay Round, Trachtman described how the various trade-​off devices being employed in WTO dispute settlement had met with political acquiescence and in some cases political approval. Trachtman, ‘Trade and . . . Problems’ (n 30) 59. Discussing possible reasons for continued subsequent acquiescence and approval, JHH Weiler, ‘Brazil—​Measures Affecting Imported Tyres (DS322)’ (2009) 8 World T.R. 137, 141–​144. Weiler noted that the absence of concern about the regulatory standards applied to regulatory measures may be due to the fact that the real-​life gravity of specific decisions is usually slight and relevant domestic agencies may be reconciled to the possibility of adverse findings (143–​144). 42 Interview 27 September 2015; Interview 29 September 2015. 43 SPS Agreement (n 11). 44 Agreement on Trade-​Related Aspects of Intellectual Property Rights, opened for signature 15 April 1994, entered into force 1 January 1995) 1869 UNTS 299 (hereafter TRIPS Agreement). 45 Except indirectly, as per European Communities—​ Measures Affecting Asbestos and Asbestos Containing Products, Report of the Appellate Body (12 March 2001) WT/​DS135/​AB/​R, DSR 2001:VII, 3243 (hereafter EC—​Asbestos, Appellate Body Report).

Necessity Testing  143 ascertaining whether discrimination was taking place the intentions lying behind the differential treatment could be taken into account. This ‘aims and effects’ test was ruled inappropriate by the Appellate Body at an early stage. Some have advocated for regulatory purpose to be considered in the course of analysing the existence of less favourable treatment.46 A specific focus in many of the regulatory disputes arising in the WTO is, as indicated, the need for WTO Members to be able to regulate in pursuit of the public interest in situations where maintaining consistency with these basic WTO principles will come second to other considerations. If a public interest measure contravenes the GATT or the GATS a WTO Member may have to rely on the general exceptions provisions in Article XX of the GATT, in the case of goods, and XIV of the GATS, in the case of services, in order to justify the measure. If relying on the GATT or the GATS general exceptions the Member will have to establish that relevant subparagraphs of these provisions apply, for instance that a measure is necessary to protect public morals, as seen in subparagraph (a) of Articles XX and XIV or that a measure is necessary to protect human, animal or plant life or health, as seen in subparagraph (b). The Member will have to establish that the measure is consistent also with the chapeau to the general exceptions provisions, which is designed to try and ensure that the general exceptions in these provisions are not abused. The chapeau is identical in the GATT and the GATS, and requires that measures to be justified under the general exceptions are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade. The TBT and SPS Agreements omit the general exceptions seen in the GATT and the GATS. If the measure in question is a technical barrier to trade the regulating Member will need to be able to defend it under the regime in Article 2.2 of the TBT Agreement which recognises that trade barriers may be acceptable so long as they are no more trade restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-​fulfilment would create. Legitimate objectives are specified as including inter alia national security requirements, the prevention of deceptive practices and the protection of human health or safety, animal or plant life or health or the environment. A measure will also have to be consistent with the non-​discrimination provision in Article 2.1 of the TBT Agreement which requires that imported products be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country. As discussed below, Article 2.1 has been read in the light of Article 2.2 and the TBT Agreement’s preamble so as to allow measures that stem exclusively from legitimate regulatory objectives. The SPS 46 Andrew D Mitchell, David Heaton and Caroline Henckels, Non-​Discrimination and the Role of Regulatory Purpose in International Trade and Investment Law (Edward Elgar 2016).

144  World Trade Organization Dispute Settlement Agreement requires in Article 2.2 that WTO Members ensure that SPS measures are applied only to the extent necessary to protect human, animal or plant life and health, and in Article 5.6 that Members ensure measures are not more trade restrictive than required to achieve their appropriate level of sanitary or phytosanitary protection. The SPS Agreement has its own specific non-​discrimination requirements in Articles 2.3 and 5.5.

D.  Regulatory Standards in WTO Disputes Through WTO dispute settlement a variety of tests have been identified for determining whether regulatory and other actions cutting across Members’ free trade are inconsistent with their legal obligations. Two core tests will be analysed in depth in this and the subsequent chapter: necessity tests, and tests that look for a rational relationship between a measure’s detrimental impacts and its legitimate objectives. Both types of test have emerged from jurisprudence under the general exceptions found in Article XX of the GATT and Article XIV of the GATS respectively. Although WTO lawyers may not conceive of these tests in this broader light, both are embodiments of an overarching requirement for regulatory coherence. Both tests require measures and their effects to correlate appropriately with the measures’ purposes. In addition it should be noted that WTO adjudicators have developed a form of ‘capability testing’ in order to demonstrate the applicability of many of the subparagraphs of Article XX of the GATT and XIV of the GATS, requiring consideration of a regulatory measure’s design as a basis for determinations that regulatory action is directed to the purposes recognised in the subparagraphs. There is not the space in this book to include a full analysis of WTO capability testing. Like necessity and rational relationship tests, the capability test has been generated through the application of natural logic in contemplating the text of the subparagraphs, rather than more classical interpretive techniques. In essence it has been held that it is by looking at a measure’s ‘content, structure and expected operation’ that it can be determined that a measure has been adopted ‘to protect’ public morals or ‘to protect’ human, animal and plant life or health under subparagraphs (a) or (b). A measure’s content, structure and expected operation may tell us whether a measure is by nature capable of achieving its objective, or at least is not incapable of contributing to this. Similarly, capability tests are employed under other subparagraphs including under subparagraph (g) of Article XX of the GATT in ascertaining whether measures are measures ‘relating to’ the conservation of exhaustible natural resources and subparagraph (j) to determine that measures are ‘essential to the acquisition or distribution of products in general or local short supply’. In any event, a measure that passes a capability test will go on to be assessed for its

Necessity Testing  145 consistency with the relevant WTO provisions as a whole. In many cases this will involve applying necessity and rational relationship testing as discussed in this chapter and Chapter Six. This chapter considers the test that has been adopted in order to determine whether a trade-​inhibiting measure is ‘necessary’ for pursuing or achieving a Member’s regulatory purpose under the subparagraphs of Articles XX and XIV. The idea of necessity is inherently elastic, and a multifaceted formula has been articulated for assessing the necessity of the measure for the relevant purpose in the light of alternatives. The method by which the formula was established blended highly orthodox semantic interpretive method with creative contextual reasoning to produce an analytical standard that has demonstrated real staying power. As originally articulated in Korea—​Measures Affecting Imports of Fresh, Chilled and Frozen Beef the necessity formula involves a process of weighing and balancing a series of factors in order to determine whether there are any reasonably available alternative measures. These factors include the contribution made by the measure to the relevant purpose, the importance of the common interests or values protected and the accompanying impact of the law or regulation on imports or exports.47 It is important to emphasise that the evaluation of these factors was intended as part of the analysis of the reasonable availability to a WTO Member of alternative measures.48 This sets the WTO Korea—​Beef necessity test apart from proportionality testing as such a weighing and balancing process will not override a Member’s determination on the appropriate level of protection against harm. Reasonably available alternatives can only qualify as such if, like a challenged measure, they provide the level of protection sought by the WTO Member. Additionally the necessity test’s multifactorial character means that the dispute settlement system will often be saved from having to make potentially uncomfortable findings and scope for international legal intrusion into domestic policy judgements is contained.49 Necessity is a key concept also in the TBT and SPS Agreements as discussed in this chapter. Chapter Six pulls us back from the application of the general exceptions subparagraphs and looks at aspects of how compliance with the chapeau to Articles XX and XIV is to be assessed. The chapeau provides that if a Member is to rely on the general exceptions in these provisions the measure that it is defending must not be applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail,

47 Korea—​Measures Affecting Imports of Fresh, Chilled and Frozen Beef, Report of the Appellate Body (11 December 2000) WT/​DS161/​AB/​R, DSR 2001:I, 5, [164] (hereafter Korea—​Various Measures on Beef, Appellate Body Report). 48 Ibid, [166]. See also India—​Certain Measures Relating to Solar Cells and Solar Modules, Report of the Appellate Body (16 September 2016) WT/​DS456/​AB/​R, DSR 2016:IV, 1827, [5.59] (hereafter India—​Solar Cells, Appellate Body Report). 49 Interview 16 September 2015.

146  World Trade Organization Dispute Settlement or a disguised restriction on international trade. As mentioned, the chapeau is intended to ensure the integrity of Members’ invocation of Articles XX and XIV and that the availability of the general exceptions in these provisions is not abused. In applying the chapeau, the Appellate Body has viewed the determination of whether discrimination is arbitrary or unjustifiable as requiring an analysis oriented around the rationale for discrimination in light of the objective of the Member’s regulatory measure. The analysis has focused on whether there is a rational connection or rational relationship between the discrimination caused by the measure and the objective at hand. The same idea has infused the application of the non-​ discrimination provision in Article 2.1 of the TBT Agreement, read in the light of the sixth preambular paragraph to the TBT Agreement, referencing the understanding that WTO Members may adopt trade inhibiting measures necessary to fulfil legitimate objectives subject to the same proviso that is seen in the Article XX and XIV chapeau. The jurisprudence under the Article XX and XIV chapeau and the jurisprudence under Article 2.1 have developed in tandem. In the context of the TBT Agreement, rational relationship testing has been employed to determine specifically whether differential treatment can be said to ‘stem exclusively’ from a legitimate regulatory distinction, a limitation that has been read into Article 2.1 drawing on both the sixth preambular paragraph to the TBT Agreement as mentioned just above and Article 2.2 of the Agreement. The understanding that differential treatment must stem exclusively from a legitimate regulatory distinction is viewed as requiring a rational relationship between a measure’s regulatory distinctions and its objective: in essence a measure must be possessed of internal rationality. Measures may need to be calibrated to different risk levels such that the treatment of products from different countries is even-​handed; assessing calibration is a means of determining the existence of a rational relationship between a measure’s regulatory distinctions and its objectives. Developed largely through instinct and logic, rational relationship testing serves to balance the competing interests of WTO Members in free trade and freedom of regulation. So long as it is employed as a way to test for measures’ internal rationality, rational relationship testing is a mechanism that will generally allow for trade law to have minimal impact on domestic regulatory authority, and ongoing developments have worked to help ensure this. In the relatively short period since it was established the rational relationship test has had to evolve, softening by a degree in order to accommodate situations where a WTO Member’s regulatory measure may be directed to or crafted around the pursuit of more than one objective, where these objectives are in tension with one another. On this softer approach, discrimination that will pass the chapeau test must at least be reconcilable with Members’ acceptable policy objectives, taking into account the particular circumstances of the case.

Necessity Testing  147

E.  Introduction to Necessity Testing The concept of necessity is commonly used in the WTO as a criterion for determining whether there is a ‘sufficient nexus’ between a State’s regulatory action and recognised interests to be protected or advanced through this action.50 The concept is seen not only in WTO law and dispute settlement but additionally in disputes concerning the extent of States’ regulatory powers and obligation in inter-​ State arbitration, including under the United Nations Convention on the Law of the Sea as well as in the International Court of Justice.51 However, it is in the WTO that most energy has been invested in elaborating what may be meant by necessity. In the WTO, necessity testing is probably the most developed under the general exceptions in Articles XX of the GATT and XIV of the GATS, and it is necessity testing under these provisions into which this chapter firstly enquires. Necessity in the WTO general exceptions provisions is considered with reference to an established formula which varies according to context. The necessity formula, generically applied, balances the economic interests of all WTO Members in the multilateral trade system with the general interest of all WTO Members in maintaining appropriate room to manoeuvre in non-​economic policy spheres in fields such as health, the environment and public morals. As elaborated in later Appellate Body jurisprudence, necessity operates in a similar way under Article 2.2 of the TBT Agreement, although rather than constituting an exception Article 2.2 sets down an obligation to refrain from measures creating unnecessary trade obstacles. Also incorporating an obligation rather than an exception, Article VI (4) of GATS expressly leaves to the Council for Trade in Services the task of establishing or developing disciplines with a view to ensuring that technical standards, licensing requirements and qualification requirements and procedures do not constitute unnecessary barriers to trade in services.52 The necessity formula as it has been derived in the course of WTO dispute settlement is multifactorial, incorporating an assemblage of the variables relevant to ascertaining the need for a given measure. Applying this series of considerations has created an effective yet flexible discipline on regulatory activity, helping the dispute resolution process determine whether a specific instance of regulation can be considered compatible with WTO law. The scope for conservative application of the necessity formula is demonstrated consistently in practice. Decisions resting on the reasonable availability of alternative measures incorporate a weighing and balancing of a measure’s contribution to the relevant objective, the importance of 50 India—​Solar Cells, Appellate Body Report (n 48) [5.57]. 51 Chapter Three. 52 For a discussion on the issues and developments under this provision, Panagiotis Delimatsis, International Trade in Services and Domestic Regulations: Necessity, Transparency and Regulatory Diversity (OUP 2007) 202–​211, 248–​254. WTO Members’ submissions are canvassed at 237–​248, with a critique of the 2001 EU espousal of a proportionality test at 238–​242.

148  World Trade Organization Dispute Settlement the values and interests protected, and the trade impact only within certain parameters, consistent with the Appellate Body’s expressed expectation that this weighing and balancing take place as part of determining the reasonable availability to a WTO Member of alternative measures. There has as yet been no decision where it was found that a measure’s trade restrictiveness outweighed its contribution to its objective.53 The important question of whether weighing and balancing might be employed in ways detracting from WTO Members’ rights to set their own level of protection against risks to human health and the environment has not at this point translated into concrete cause for concern.54 However, not all WTO Members support the inclusion of reference to weighing and balancing in the necessity formula. This was a focus of discussion in the literature when initially articulated, including specifically with reference to the question whether weighing and balancing was compatible with the international adjudicatory function.55 It is interesting to note that although the Appellate Body has consistently referred to ‘weighing and balancing’,56 the Appellate Body has also spoken more softly of the ‘consideration’ of the relevant factors.57 However, the most significant point remains that the Appellate Body has intended weighing and balancing to take place in the case of determining the reasonable availability of alternative regulatory measures. This distinguishes WTO general exceptions necessity testing from tests applied by other bodies requiring proportionality stricto sensu between regulatory measures and their objectives, and should contain the

53 Discussed later in this chapter, such a weighing and balancing was distinctly absent in the Panel Report in Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products, Reports of the Panels (28 June 2018) WT/​DS435/​R, WT/​DS441/​R WT/​DS458/​R, WT/​DS467/​R, [7.1731]–​[7.1732] (hereafter Australia—​Tobacco Plain Packaging, Panel Reports). Inversely in Brazil—​Retreaded Tyres the Appellate Body saw the Panel as having determined that the contribution to its objective of Brazil’s ban on the import of retreaded tyres outweighed its trade restrictiveness, and the Appellate Body did not consider this finding erroneous. ‘It appears from the Panel’s reasoning that it considered that, in the light of the importance of the interests protected by the objective of the Import Ban, the contribution of the Import Ban to the achievement of its objective outweighs its trade restrictiveness. This finding of the Panel does not appear erroneous to us.’ Brazil—​Measures Affecting Imports of Retreaded Tyres, Report of the Appellate Body (3 December 2007) WT/​DS332/​AB/​R, DSR 2007:IV, 1527, [179] footnotes omitted (hereafter Brazil—​Retreaded Tyres, Appellate Body Report). For discussion, Chad P Bown and Joel P Trachtman, ‘Brazil—​Measures Affecting Imports of Retreaded Tyres: A Balancing Act’ (2009) 8(1) World T.R. 85, 138. 54 JHH Weiler, ‘Brazil—​Measures Affecting Imported Tyres (DS322)’ (2009) 8 World T.R. 137; Donald H Regan, ‘The Meaning of “Necessary” in GATT Article XX and GATS Article XIV: The Myth of Cost-​Benefit Balancing’ (2007) 6(3) World T.R. 347). 55 Gabrielle Marceau and Joel P Trachtman, ‘The Technical Barriers to Trade Agreement, the Sanitary and Phytosanitary Measures Agreement and the General Agreement on Tariffs and Trade: A Map of the World Trade Organization Law of Domestic Regulation of Goods’ (2002) 36(5) JWT 811, 825, 851–​853; Trachtman, ‘Trade and . . . Problems’ (n 30); Joel P Trachtman, The Economic Structure of International Law (Harvard University Press 2008) 208–​248, discussing further at 221ff a taxonomy of trade-​off devices identified in Trachtman, ‘Trade and . . . Problems’ 35. 56 E.g. Brazil—​Retreaded Tyres, Appellate Body Report (n 53) [140]–​[143], [176]. 57 Ibid, [178], [182].

Necessity Testing  149 necessity test to avoid situations where weighing and balancing cuts into WTO Members’ right to set their own level of protection. Part of the value of the necessity formulae seen under the GATT and GATS general exceptions and Article 2.2 of the TBT Agreement lies in their susceptibility to sophisticated application and ongoing adaptation.58 Developments in understandings of necessity in the WTO demonstrate well regulatory standards’ capacity for evolution. For instance, the necessity formula as now understood appreciates that long term risks only realise and reveal themselves gradually over time, and appreciates the utility of multifaceted policies to address complex and challenging health and environmental challenges. Measures’ contribution to their objectives is to be gauged with these factors in mind. The necessity formula has been adapted in TBT cases to embrace the question of how Members may go about ‘taking into account the risks that non-​fulfillment of Members’ health and environmental measures’ as required when assessing the necessity of a trade-​inhibiting measure under Article 2.2.59 We turn now to see how the necessity formula has been developed and applied in the cases arising under the relevant WTO provisions. The necessity of a trade-​ inhibiting measure may fall to be considered under various of the subparagraphs of the general exceptions to the GATT and GATS.

1.  Necessity under Article XX of the GATT and Article XIV of the GATS a) Article XX(d)—​‘necessary’ to secure compliance Article XX(d) of the GATT is considered first in this chapter because this is where we find the origins of the general exceptions necessity formula. The Article XX necessity formula was developed in the context of Korea’s attempt to rely on Article XX(d) in the Korea—​Beef case which allows for measures ‘necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, 58 Brazil—​Certain Measures Concerning Taxation and Charges, Panel Reports (30 August 2017) WT/​ DS472/​R, WT/​DS497/​R, [7.524] (hereafter Brazil—​Taxation, Panel Reports). 59 Art 2.2 reads: Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-​restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-​fulfilment would create. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-​uses of products.

150  World Trade Organization Dispute Settlement the protection of patents, trademarks and copyrights, and the prevention of deceptive practices’. The corresponding provision in the GATS is Article XX(c). The Appellate Body upheld the Panel’s rejection of Korea’s assertion that its dual retail system requiring domestic and imported beef to be sold in separate stores was necessary in order to combat the fraudulent and deceptive practice of passing off domestic beef as imported beef in order to secure higher prices. The Panel found, and the Appellate Body agreed, that Korea could instead have adopted targeted control mechanisms employing routine investigation and enforcement practices.60 The elaboration of the necessity test in Korea—​Beef can be understood as a product of interaction between interpretive principles of contextualism and effectiveness, viewing the Appellate Body’s approach as an exercise in which the Appellate Body drew on and gave effect to WTO treaty values, as it understood them to be.61 The Appellate Body’s initial reasoning on necessity in Korea—​Beef was couched in terms of a contextualised ordinary meaning,62 referring to possible different plain text meanings of the term ‘necessary’ and considering its meaning in the particular context of Article XX(d). As with other points in its report, the Appellate Body’s reasoning encased itself in the language of a classic interpretation: ‘we look first to the ordinary meaning of the word “necessary”, in its context and in the light of the object and purpose of Article XX, in accordance with Article 31(1) of the Vienna Convention’. The New Shorter Oxford English Dictionary suggested that the word ‘necessary’ normally denoted something ‘that cannot be dispensed with or done without, requisite, essential, needful’.63 However, a standard law dictionary cautioned that the word ‘necessary’ had to be considered in the connection in which it was used, that it was a word susceptible of various meanings. It might import absolute physical necessity or inevitability, or it might import that which was only convenient, useful, appropriate, suitable, proper or conducive to the end sought. It was an adjective expressing degrees, and might express ‘mere convenience or that which is indispensable or an absolute physical necessity’.64 The Appellate Body reached the view that, as used in the context of Article XX(d), the reach of the word ‘necessary’ was not limited to that which was ‘indispensable’ 60 Korea—​Various Measures on Beef, Appellate Body Report (n 47) [180], [185], [186(f)]; Korea—​ Measures Affecting Imports of Fresh, Chilled and Frozen Beef, Report of the Panel (31 July 2000) WT/​ DS161/​R, WT/​DS169/​R, DSR 2001:I, 59, [660]-​[674] (hereafter Korea—​Various Measures on Beef, Panel Report). 61 Van Damme, Treaty Interpretation (n 17) 298. One commentator describes this in terms of how the Appellate Body, having consulted the New Shorter Oxford English Dictionary, and one other, then rejected the definitions found there and ‘came up with its own shot at the meaning’, Ingo Venzke, How Interpretation Makes International Law: On Semantic Change and Normative Twists (OUP 2012) 184. 62 Van Damme, Treaty Interpretation (n 17) 230. 63 Korea—​Various Measures on Beef, Appellate Body Report (n 47) [159]–​[160] citing The New Shorter Oxford English Dictionary, vol II (Clarendon Press, 1993) 1895. 64 Ibid, [160] citing Black’s Law Dictionary (West Publishing 1995) 1029 citing Black’s Law Dictionary (West Publishing 1995) 1029.

Necessity Testing  151 or ‘of absolute necessity’ or ‘inevitable’. Rather it referred to a range of degrees of necessity. At one end of the continuum lay ‘necessary’ in the sense of ‘indispensability’ while at the other end ‘necessity’ was to be understood as ‘making a contribution to’.65 The Appellate Body went on to reason that, under Article XX(d), ‘necessity’ was significantly closer to ‘indispensability’ than to the opposite pole of simply ‘making a contribution to’.66 Article XX(d) protected measures that were necessary to ensure compliance with a potentially wide variety of laws and regulations. Giving further thought to this context, the Appellate Body commented that in respect of Article XX(d) a treaty interpreter might in appropriate cases take into account the relative importance of the interests or values that the law or regulation to be enforced was intended to protect: ‘The more vital or important those common interests or values are, the easier it would be to accept as “necessary” a measure designed as an enforcement instrument.’67 The Appellate Body reasoned that further aspects of an enforcement measure needing to be considered in evaluating the necessity of the measure included the extent to which the measure contributes to the realisation of the end pursued, that is the securing of compliance with the law or regulation at issue. The more the measure contributed to this end, the more easily might the measure be considered ‘necessary’.68 Recalling the preamble to the GATT 1994,69 the Appellate Body observed that it was important also to consider the extent to which the compliance measure produced restrictive effects on international commerce—​in a case like the present one, restrictive effects on imported goods that were inconsistent with Article III:4.70 A less restrictive measure with a relatively slight impact might more easily be considered as ‘necessary’ than a measure with intense or broader restrictive effects.71 65 C.f. Handyside v United Kingdom 1976 ECHR 5, para 48, leaving it to national authorities, in the context of the protection of public morals to assess, initially at least, ‘the reality of the pressing social need implied by the notion of “necessity” ’. 66 Korea—​Various Measures on Beef, Appellate Body Report (n 47) [161]: We believe that, as used in the context of Article XX(d), the reach of the word ‘necessary’ is not limited to that which is ‘indispensable’ or ‘of absolute necessity’ or ‘inevitable’. Measures which are indispensable or of absolute necessity or inevitable to secure compliance certainly fulfil the requirements of Article XX(d). But other measures, too, may fall within the ambit of this exception. As used in Article XX(d), the term ‘necessary’ refers, in our view, to a range of degrees of necessity. At one end of this continuum lies ‘necessary’ understood as ‘indispensable’; at the other end, is ‘necessary’ taken to mean as ‘making a contribution to.’ We consider that a ‘necessary’ measure is, in this continuum, located significantly closer to the pole of ‘indispensable’ than to the opposite pole of simply ‘making a contribution to’. 67 Ibid, [162]. 68 Ibid, [163]. 69 The last paragraph of the Preamble of the GATT of 1994 (n 1) reads as follows: ‘Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce.’ Emphasis original. 70 Korea—​Various Measures on Beef, Appellate Body Report (n 47) [163]. 71 Ibid, [163].

152  World Trade Organization Dispute Settlement Combining the above, the Appellate Body now set out the Article XX(d) necessity ‘formula’. In sum, determination of whether a measure, which is not ‘indispensable’, may nevertheless be ‘necessary’ within the contemplation of Article XX(d), involves in every case a process of weighing and balancing a series of factors which prominently include the contribution made by the compliance measure to the enforcement of the law or regulation at issue, the importance of the common interests or values protected by that law or regulation, and the accompanying impact of the law or regulation on imports or exports.72

Importantly and as referred to earlier in this chapter, the Appellate Body stated clearly that the process outlined here was comprehended in the determination of the reasonable availability of alternative measures that a WTO Member could reasonably be expected to employ,73 seen in pre-​WTO GATT Article XX(d) dispute settlement.74 Together, we can recognise the set of analytical requirements described here by the Appellate Body as the necessity ‘formula’. The development of the necessity formula in Korea—​Beef marked an important moment in the history of international courts’ and tribunals’ elaboration of standards for determining the extent of States’ regulatory powers and obligations. The overall formula is elaborate in comparison with the simple textual references to necessity that are under construction and comes across as a considered response to the need of the WTO system for a mechanism to achieve a more fine-​grained appreciation of the legality of regulatory measures in specific circumstances. Disputants in subsequent Article XX cases appear in general to have accepted with relative comfort the idea of the necessity test set down by the Appellate Body. Following Korea—​Beef, subsequent cases and appeals were argued in reliance on the criteria established by the Appellate Body. All the elements of the Korea—​Beef necessity formula are represented similarly in later embodiments of the formula articulated under other relevant WTO provisions, including the public morals cases considered under Article XX(a) of the GATT and Article XIV(a) of GATS, and the human, animal and plant life or health cases considered under Article XX(b) of the GATT and Article XIV(b) of GATS. The formula was referred to in relation to public morals in the application of Article XIV(a) of GATS in United States—​ Measures Affecting the Cross-​Border Supply of Gambling and Betting Services and in relation to human, animal or plant life and health as protected by Article XX(b) of the GATT in Brazil—​Measures Affecting Imports of Retreaded Tyres. On each 72 Ibid, [164]. 73 Ibid, [166]. See also India—​Solar Cells, Appellate Body Report (n 48) [5.59]. Peter Van den Bossche, ‘Looking for Proportionality in WTO Law’ (2008) 35(3) L.I.E.I. 283. 74 United States—​Section 337 of the Tariff Act of 1930, (16 January 1989) BISD 36S/​345, [5.26], footnote 69; and Korea—​Various Measures on Beef, Panel Report (n 60) [652], [659], [665].

Necessity Testing  153 occasion the Appellate Body re-​articulated the same considerations,75 as the Appellate Body itself has underlined.76 In the actual application of the formula, the preservation of human life and health has been identified as vital and important in the highest degree.77 The same has been said in relation to matters of public morality.78 Naturally, an evaluation of the reasonable availability of alternatives may not be necessary where it is found that a measure is not trade restrictive, or alternatively that a measure makes no contribution to the objective at hand. In such cases these factors may be determinative on their own.79 Otherwise, though, the weighing and balancing described in the necessity formula forms part of the process for assessing the reasonable availability of alternative measures and the various parts of the analysis, while being considered in a logical sequence, will ultimately all be considered together.80 The Appellate Body’s idea that necessity is a flexible concept, requiring application on the facts of each case, is consistent with everyday understandings that ‘necessity’ may mean different things in different situations. However, by virtue of the fact it sets out a method for determining necessity the necessity formula introduces a degree of stability into this flexibility. In the paragraphs that follow, readers will see that the necessity formula as articulated and applied in different contexts under the Article XX subparagraphs serves in effect as an algorithm representing the balance of WTO Members’ different types of interest under these provisions.

b) Article XX(a)—​’necessary’ to protect public morals Article XX(a) of the GATT allows for measures necessary to protect public morals. Article XIV(a) is the corresponding provision in GATS. The necessity formula as 75 United States—​Measures Affecting the Cross-​Border Supply of Gambling and Betting Services, Report of the Appellate Body (7 April 2005) WT/​DS285/​ABR, DSR 2005:XII, 5663, [304]–​[311] (hereafter US—​Gambling, Appellate Body Report). 76 China—​Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, Report of the Appellate Body (21 December 2009) WT/​DS363/​ AB/​R, DSR 2010:I, 3, [239] (hereafter China—​Publications and Audiovisual Products, Appellate Body Report). 77 EC—​Asbestos, Appellate Body Report (n 45) [172]; Brazil—​Retreaded Tyres, Appellate Body Report (n 53) [144]; United States—​Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Panel (2 September 2011) WT/​DS406/​R, DSR 2012:XI, 5865, [7.747] (hereafter US—​Clove Cigarettes, Panel Report); and Australia—​Tobacco Plain Packaging, Panel Reports (n 53) [7.1310]–​[7.1311]. 78 United States—​Measures Affecting the Cross-​Border Supply of Gambling and Betting Services, Report of the Panel (10 November 2004) WT/​DS285/​R, DSR 2005:XII, 5797, [6.492] (hereafter US—​Gambling, Panel Report); China—​ Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, Report of the Panel (12 August 2009) WT/​ DS363/​R, DSR 2010:II, 261, [7.816]–​[7.817]. For discussion, Caroline E Foster, ‘The Problem with Public Morals’ (2019) 10(4) JIDS 622. 79 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Report of the Appellate Body (16 May 2012) WT/​DS381/​SB/​R, DSR 2012:IV, 1837, [321], footnote 647 (hereafter US—​Tuna II, Appellate Body Report). 80 Brazil—​Retreaded Tyres, Appellate Body Report (n 53) [182]; China—​Publications and Audiovisual Products, Appellate Body Report (n 76) [237]–​[249].

154  World Trade Organization Dispute Settlement it operates under Article XX(a) is set out by the Appellate Body in Colombia—​ Measures Relating to the Importation of Textiles, Apparel and Footwear and follows the pattern introduced above.81 In the public morals cases the importance of a measure’s objective may come through strongly. For instance, we might consider the US—​Gambling case.82 In US—​Gambling Antigua and Barbados alleged that the United States had acted inconsistently with the GATS by prohibiting cross-​border supply of gambling and betting services.83 Antigua was home to an internet-​based gaming industry built up since the 1990s as part of its economic development strategy. The industry was regulated by the Antiguan government, employing fraud-​prevention techniques and anti-​money-​laundering safeguards.84 However, the United States argued that its prohibition was justified under Article XIV(a) of GATS. The Panel accepted that the US prohibition dealt with a matter of public morality, with reference to associated problems including to the societal effects of gambling and money laundering, organised crime, fraud, underage gambling and pathological gambling.85 The US—​Gambling Panel also found that the US internet gambling policy specifically served very important societal interests that could be characterised as vital and important in the highest degree.86 Having considered the importance of a measure’s objective, panels will assess a measure’s contribution to its objective, its trade restrictiveness and reasonably available alternatives. For instance in US—​Gambling the Panel reasoned that prohibitions on remote supply of gambling and betting services contributed to US aims, though there was a significant trade impact.87 As to whether the United States had explored and exhausted reasonably available WTO-​consistent alternatives, the Panel noted that the United States had declined to engage in consultations or negotiations with Antigua and others to determine whether there was a way of addressing its concerns in a WTO-​consistent manner.88 Weighing and balancing these points, the Panel found that the United States had failed to establish the necessity under Article XIV(a) of its restrictions on remote gambling, although the Appellate Body considered this analysis flawed on the basis that engagement in consultations would not itself have constituted an alternative measure.89 81 Colombia—​Measures Relating to the Importation of Textiles, Apparel and Footwear, Report of the Appellate Body (7 June 2016) WT/​DS461/​AB/​R, DSR 2016:III, 1131, [5.71]–​[5.74]. See also European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products, Reports of the Appellate Body (22 May 2014) WT/​DS400/​AB/​R, WT/​DS401/​AB/​R, DSR 2014:I, 7, [5.214] (hereafter EC—​Seal Products, Appellate Body Reports). 82 US—​Gambling, Panel Report (n 78). 83 Ibid, [6.2]. 84 Ibid, [3.2],[3.5], [3.14], [3.6]. 85 Ibid, [6.484]–​[6.485]. The United States relied also on art XIV(c) of GATS which, like art XX(d) of the GATT 1994, allows for measures necessary to secure compliance with a Member’s other WTO-​ consistent laws and regulations, which in this case included laws related to organised crime. 86 Ibid, [6.492]. 87 Ibid, [6.494]–​[6.495]. 88 Ibid, [6.531]. 89 Ibid, [6.532]–​[6.535]; US—​Gambling, Appellate Body Report (n 75) [317].

Necessity Testing  155 Taking a further example, in Brazil—​Certain Measures Concerning Taxation and Charges the Panel observed that Brazil had been unable to show that the incentivisation of domestic production of digital television transmission equipment would lead or would be apt to lead to increased social inclusion and access to information.90 At the same time the measure was trade restrictive and would have a material effect on imports.91 Brazil had failed to show that alternatives identified by the complainant which the Panel considered likely to make a greater contribution to bridging the digital divide and promoting social inclusion, such as greater reliance on imports, were not reasonably available.92 Accordingly, the Panel found that Brazil had failed to establish the necessity under Article XX(a) of the support programmes maintained in its information communication technology sector, which remained in breach of Article III of the GATT 1994 and Article 2.1 of the Agreement on Trade-​Related Investment Measures (TRIMS) Agreement.93 Brazil did not re-​raise the Article XX defences on appeal.94

c) Article XX(b)—​‘necessary’ to protect human, animal or plant life or health Articles XX(b) of the GATT and XIV(b) of the GATS provide for measures necessary to protect human, animal or plant life or health. In the health cases the necessity test entrenches itself and begins to evolve and become more sophisticated. To begin with the Brazil—​Retreaded Tyres Appellate Body report incorporated a formulation of the necessity test for Article XX(b) GATT, re-​expressing the same considerations originally seen in Korea—​Beef. Significantly, the Appellate Body’s starting point was to accept the formula as articulated in Korea—​Beef and refined in US—​Gambling rather than refer to plain or dictionary meanings or to the principles of treaty interpretation.95 The Brazil—​Retreaded Tyres case concerned restrictions on the importation of retreaded tyres into Brazil, greatly reducing European countries’ exports to Brazil and allegedly benefiting the Brazilian retreading industry. The Brazilian measures constituted quantitative restrictions in breach of Article XI:1 of the GATT. Brazil claimed its measures were justified under Article XX(b) of the GATT, being necessary to protect human, animal and plant life and health. Brazil’s stated aim was to reduce the number of used retreaded tyres in the country. These tyres accumulated as waste, providing mosquito breeding grounds and contributing to the problem of mosquito-​borne diseases including dengue fever, yellow fever and malaria. The understanding was that tyres which had already been retreaded were the worst 90 Brazil—​Taxation, Panel Reports (n 58) [7.602]. 91 Ibid, [7.607]. 92 Ibid, [7.620]–​[7.621]. 93 Ibid, [7.622], [8.5], [8.16]. 94 Brazil—​Certain Measures Concerning Taxation and Charges, Reports of the Appellate Body (13 December 2018) WT/​DS472/​AB/​R, WT/​DS497/​AB/​R. 95 Van Damme, Treaty Interpretation (n 17) 230 citing Brazil—​Retreaded Tyres, Appellate Body Report (n 53) [141]–​[143].

156  World Trade Organization Dispute Settlement type of tyre for Brazil to import, because their expected useful road life would be so much shorter than for new tyres whose life could be extended by retreading. Disposal of tyres by burning created toxic emissions. Therefore Brazil had restricted imports. As mentioned, risks to human life or health are taken particularly seriously in WTO law. The Brazil—​Retreaded Tyres case was no exception. Considering the matter of the measure’s contribution to Brazil’s health objectives, the fascinating thing about Brazil—​Retreaded Tyres was the preparedness of the Panel and the Appellate Body to indulge Brazilian determinations concerning how the measure would contribute to protection of health. This manifested itself in a number of ways, including notably in tolerance for the fact that Brazil’s measure could only indirectly achieve the stated aims. Brazil was banning imports of retreaded tyres in order directly to prevent their stockpiling as waste when in due course their useful life on Brazilian roads was over.96 This would, indirectly, reduce Brazil’s exposure to the risks associated with stockpiles. Further, the Panel determined that there was no need to actually quantify the import ban’s contribution to reduction in the number of wasted tyres.97 The Appellate Body endorsed this view, although observing that an import ban making only a ‘marginal or insignificant contribution’ to reducing risk exposure could not be considered necessary merely because a Member’s aim was to reduce that exposure to the maximum extent.98 The Appellate Body took the view that the selection of a methodology to assess the contribution made by a measure was a function of the nature of the risk, the objective pursued and the level of protection being sought, and it depended also on the evidence available.99 Importantly, the Appellate Body reasoned that demonstration of a contribution did not have to be based on evidence or data pertaining to the past or present.100 A contribution did not need to be immediately observable.101 While the Appellate Body thought that it would have been very useful if the Panel had estimated quantitatively the reduction in tyres that would result from the ban, or the time horizon for this, and that this would have strengthened the Panel’s findings, the Appellate Body did not consider it erroneous to have concluded simply that fewer waste tyres would be generated with the Brazilian import ban in place. It was permissible for the Panel to have rested its findings on the hypotheses 96 Isabelle Van Damme, ‘Appellate Body Report, Brazil: Measures Affecting Imports of Retreaded Tyres, Adopted on 17 December 2007’ (2008) 57(3) ICLQ 710, 713 (hereafter Van Damme, ‘Appellate Body Report, Brazil’). 97 Brazil—​Measures Affecting Imports of Retreaded Tyres, European Communities v Brazil, Report of the Panel (12 June 2007) WT/​DS332/​R, [7.118]. 98 Brazil—​Retreaded Tyres, Appellate Body Report (n 53) [146]–​[147], [150]. 99 Ibid, [145]. This dovetails in with the Appellate Body’s understandings in relation to what is required under art 2.2 of the TBT Agreement when taking account of the risks that non-​fulfilment of a Member’s objective would create. 100 ‘This demonstration could consist of quantitative projections in the future, or qualitative reasoning based on a set of hypotheses that are tested and supported by sufficient evidence.’ Ibid, [151]. 101 Ibid, [151].

Necessity Testing  157 it had made and tested, which supported the logic that banning imported retreads would make a difference, given their shorter road life.102 The Appellate Body was also prepared to accept that in a case like this one a panel might only have been able to satisfy itself that a measure was apt to make a material contribution to its objective.103 The Appellate Body explained its recognition that certain complex public health or environmental problems might be able to be tackled only with ‘a comprehensive policy comprising a multiplicity of interacting measures’, and that it could prove difficult in the short-​term to isolate the contribution to public health or environmental objectives of one specific measure forming part of a more comprehensive policy. Further, the results might manifest themselves and be susceptible to evaluation only with time. This could be the case in relation to measures such as those adopted to attenuate global warming and climate change, as in the case of disease-​prevention measures.104 The Appellate Body considered that Brazil’s ban was indeed likely to produce a material contribution to achieving the objective of reducing risk exposure from accumulated waste tyres.105 The Appellate Body’s report underscored that Brazil’s ban needed to be viewed in the broader context of Brazil’s comprehensive strategy for dealing with waste tyres, which also included an import ban on used tyres and a mandatory collection and disposal scheme, as well as measures to encourage domestic retreading and improve domestic tyres’ retreadability.106 Interestingly, the Appellate Body viewed the ban as a key element of Brazil’s comprehensive strategy because it was apt to induce sustainable change, and it was as a key element of the strategy that the ban was likely to bring a material contribution to achieving the objective.107 The Appellate Body’s references to a measure being apt to make a material contribution were understood by many to have introduced a new requirement of ‘material’ contribution into the necessity test, including by the Panel in European Communities—​ Measures Prohibiting the Importation and Marketing of Seal Products.108 The standard of materiality was criticised by commentators following Brazil—​Retreaded Tyres for being unnecessarily vague, and for leading the concept of necessity to become more unpredictable. However, in EC—​Seal Products the Appellate Body found that the Panel had erred in that case to the extent it relied on such a standard. The Appellate Body emphasised that its reference to a measure 102 Ibid, [153]. 103 Ibid, [150]–​[152], [154]. 104 Ibid, [151], citing United States—​Standards for Reformulated and Conventional Gasoline, Report of the Appellate Body (29 April 1996) WT/​DS2/​AB/​R, WT/​DS4/​AB/​R, DSR 1996:I, 3, 21 (hereafter US—​Gasoline, Appellate Body Report). 105 Ibid, [155]. 106 Ibid, [154]; Van Damme, ‘Appellate Body Report, Brazil’ (n 96) 716. 107 Ibid, [154], [155]. Emphasis added. 108 European Communities—​ Measures Prohibiting the Importation and Marketing of Seal Products, Reports of the Panel (25 November 2013) WT/​DS400/​R, WT/​DS401/​R, DSR 2014:II, 365, [7.633]–​[7.637].

158  World Trade Organization Dispute Settlement being apt to make a material contribution in Brazil—​Retreaded Tyres had been made in relation to a measure that was quite particular in forming part of a comprehensive public health and environmental policy the results of which would require time to assess, and that that measure’s contribution to its objective was only one element of a holistic analysis.109 The Panel and the Appellate Body agreed that Brazil’s measure was ‘necessary’ under subparagraph XX(b), although Brazil’s defence failed for inconsistency with the Article XX chapeau because it was applied in a manner constituting a means of arbitrary and unjustifiable discrimination. The Brazil—​Retreaded Tyres insight into how certain measures might be understood as contributions to a comprehensive public health policy fed through into the Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products case.110 In other cases there have been findings that it was likely that discriminatory and materially trade-​restrictive aspects of a government measure would not make much contribution to a WTO Member’s objectives, as seen in Brazil—​Taxation,111 and that insofar as a measure was broader than required it made no contribution to a WTO Member’s objectives, as seen in Indonesia—​Measures Concerning the Importation of Chicken Meat and Chicken Products.112 The Panel in Indonesia—​Chicken Products found fault with how Indonesia’s measure, designed to reduce the risks associated with thawing chickens at tropical temperatures, prevented the sale of frozen chicken in traditional markets, including chicken being kept frozen in cold storage. In traditional markets, Indonesia’s measure operated as a trade restriction in the highest degree.113 Given that the less trade-​restrictive alternative of imposing a cold storage requirement was available to Indonesia the Panel found the challenged measure not to be necessary to protect human life and health.114 In the Brazil—​Taxation case Brazil invoked both Article XX(b) and Article XX(g) to justify the tax reductions the government had established under its ‘INOVAR-​AUTO’ programme in relation to the sale of motor vehicles produced in Brazil inconsistently with Article III:2 and III:4 of the GATT 1994. In respect of Article XX(b) Brazil argued that its programme aimed to improve vehicle safety, reduce accidents and reduce emissions of carbon dioxide and other pollutants,

109 EC—​Seal Products, Appellate Body Reports (n 81) [5.216]. 110 Australia—​ Tobacco Plain Packaging, Panel Reports (n 53); Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products, Reports of the Appellate Body (9 June 2020) WT/​DS435/​AB/​R, WT/​DS441/​AB/​R. Chapter Five, section E 2 b). 111 Brazil—​Taxation, Panel Reports (n 58) [7.921]. 112 Indonesia—​Measures Concerning the Importation of Chicken Meat and Chicken Products, Report of the Panel (17 October 2017) WT/​DS484/​R, WT/​DS484/​R/​Add.1, DSR 2017:VIII, 3769, [7.228] (hereafter Indonesia—​Chicken, Panel Report). 113 Ibid, [7.227]. 114 Ibid, [7.239].

Necessity Testing  159 contributing to public health in both respects.115 Brazil’s stated objectives were considered to fall within the scope of subparagraph (b).116 Brazil also argued that encouraging the development of its domestic motor vehicle industry was a means of bringing about better vehicle safety and energy efficiency. The Panel found this to be conceivable, if for instance the domestic industry could become more competitive, positioning it for technological development that would lead to improved vehicle safety and reduced emissions.117 Accordingly the Panel found Brazil’s measure was not incapable of contributing to these Article XX(b) objectives and could potentially do so and the Panel went on to apply the necessity formula.118 Road safety was clearly a major public health concern, particularly for Brazil which ranked fifth in the world for deadly vehicle accidents. The importance of this issue was reflected in World Health Organisation (WHO) campaigning to reduce road traffic deaths and the WHO Global Plan for the Decade of Action for Road Safety 2011–​2020.119 Equally the importance of reducing carbon dioxide emissions was high.120 However, the Panel was not persuaded that the discriminatory aspects of the programme would lead to an increase in vehicle safety or efficiency, despite the possibility that they could in theory do so. It was likely they would not make much, if any, contribution to Brazil’s Article XX(b) objectives. Indeed, allowing imports subject to appropriate safety and emissions standards might make a better contribution towards meeting Brazil’s stated objectives.121 The Panel judged the programme’s impact on trade to be material.122 The Panel went on to find that there were more effective and WTO consistent ways to achieve the stated objectives, including the use of non-​discriminatory subsidies and the lowering of import barriers for vehicles that specified safety and efficiency requirements.123 The Panel’s conclusion was that although Brazil’s measure was not incapable of contributing to the stated objectives Brazil had failed to make out the necessity of its measure under Article XX(b).124 The measure was not justified under Article XX(b),125 and the Panel found it unnecessary to continue the analysis and make findings under the chapeau to Article XX.126 Brazil’s Article XX(g) case also failed.127 Under Article XX(g) Brazil argued successfully that its INOVAR-​AUTO programme contributed to the conservation of

115

Brazil—​Taxation, Panel Reports (n 58) [7.864]–​[7.869]. Ibid, [7.870]–​[7.881]. 117 Ibid, [7.904]. See also in respect of art XX(g) [7.995]. 118 Ibid, [7.905], [7.907]. 119 Ibid, [7.913], [7.192]. 120 Ibid, [7.196]. 121 Ibid, [7.920]–​[7.921]. 122 Ibid, [7.924], [7.928]–​[7.929]. 123 Ibid, [7.930]–​[7.960]. 124 Ibid, [7.961]. 125 Ibid, [7.965], [8.6(f)], [8.17(g)]. 126 Ibid, [7.964]. 127 Ibid, [8.6(f)], [8.17(g]). 116

160  World Trade Organization Dispute Settlement petroleum, a finite and exhaustible natural resource. The parties did not dispute that petroleum was an exhaustible natural resource.128 However, the Panel found that Brazil had failed to demonstrate a close and genuine relationship of ends and means between the discriminatory aspects of its measure and the objective of petroleum conservation, and so had not established that the programme’s discriminatory aspects related to the conservation of exhaustible natural resources, even though domestic restrictions pursuing this objective were in place.129 Accordingly, Article XX(g) could not be applied, and the Panel held that the measure was not justified under Article XX(g),130 again finding it unnecessary to consider the requirements of the chapeau.131

d) Article XX(j)—​‘essential’ to the acquisition or distribution of products in general or local short supply The necessity formula has even been adapted for use also in the related context of Article XX(j) of the GATT 1994.132 In India—​Certain Measures Relating to Solar Cells and Solar Modules the Appellate Body took the view that the weighing and balancing process seen in the necessity formula was relevant in assessing whether a measure was ‘essential’ to the acquisition or distribution of products in general or local short supply under Article XX(j). The Appellate Body noted that the word ‘essential’ was defined as ‘[a]‌bsolutely indispensable or necessary’.133 The Appellate Body suggested accordingly that on the continuum of meaning associated with the general concept of necessity the word ‘essential’ was at least as close to the poll of indispensability as the word ‘necessity’. The same weighing and balancing process seen in the necessity test would be relevant. Reproducing the elements of the necessity formula, the Appellate Body indicated that determining whether a measure was essential under Article XX(j) would involve assessing the extent of the measure’s contribution to the acquisition or distribution of products in general or local short supply, the relative importance of the societal interests or values



128

Ibid, [7.983], [7.986]. Ibid, [7.996], [7.1006]. 130 Ibid, [7.1007], [7.1011], [8.6(f)], [8.17(g)]. 131 Ibid, [7.1010]. 132 Art XX(j) reads: Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: (j) essential to the acquisition or distribution of products in general or local short supply; Provided that any such measures shall be consistent with the principle that all contracting parties are entitled to an equitable share of the international supply of such products, and that any such measures, which are inconsistent with the other provisions of the Agreement shall be discontinued as soon as the conditions giving rise to them have ceased to exist. 133 India—​Solar Cells, Appellate Body Report (n 48) [5.62], citing WR Trumbull and A Stevenson (eds), Shorter Oxford English Dictionary, vol I (6th edn, OUP 2007) 865. 129

Necessity Testing  161 that the measure is intended to protect and the challenged measure’s trade restrictiveness. A comparison with reasonably available alternative measures would be undertaken in most cases.134 Arguably it was open to the Appellate Body to have adopted a narrower interpretation under which measures’ ‘essentiality’ to acquisition or distribution was determined with reference to more logistical considerations without reference to the underlying reasons for addressing short supply. In taking a broad necessity-​based approach the Appellate Body, and more obliquely the Panel, seem to have responded favourably at least to certain of India’s arguments. India had argued that the understanding of when a measure was ‘essential’ should be informed by the reasons why short supply was problematic in India, specifically the importance as policy objectives of energy security and sustainable development, and ecologically sustainable growth while addressing the challenges of climate change.135 While the EU expressed sympathy with the idea that Article XX analyses should reflect the significance of a WTO Member’s broader objectives,136 the United States and Japan rejected India’s argument.137 However, while expressing its understanding the argument that India was exposed to risks inherent to continued dependence on imports,138 the Appellate Body reined in the debate on the relevance of Members’ underlying reasons for redressing short supply in the course of determining whether solar cells and modules were in ‘short supply’ in India. Policy considerations like those invoked by India might inform the nature and extent of supply and demand, but the Appellate Body emphasised that a responding party still had to demonstrate that imported products were not ‘available’ to meet demand and that the products at issue were in ‘short supply’.139 Relevant factors might include the stability and accessibility of international supply, and the reliability of transnational supply chains. Developing countries’ particular vulnerability to disruption in supply might also be relevant depending on the situation.140 The analyses above demonstrate how necessity testing, like a biological organism, has replicated itself with modification as needed for effective application under the general exceptions paragraphs. Under the TBT Agreement the necessity formula likewise has come to play an important role.

134 Ibid, [5.62]–​[5.63]. 135 Ibid, [5.78]; and Addendum, WT/​DS456/​AB/​R/​Add.1, Annex B-​1, Executive Summary of India’s Appellant’s Submission, [17]–​[19]. 136 Ibid, Addendum, WT/​DS456/​AB/​R/​Add.1, Annex C-​2, Executive Summary of the European Union’s Third Participant’s Submission, [12]. 137 Ibid, Addendum, WT/​DS456/​AB/​R/​Add.1, Annex B-​2, Executive Summary of the United States’ Appellee’s Submission, [14]; and Annex C-​3, Executive Summary of Japan’s Third Participant’s Submission, [5]‌. 138 Ibid, [5.76]. 139 Ibid, [5.79]. 140 Ibid, [5.71]–​[5.72].

162  World Trade Organization Dispute Settlement

2.  Necessity under Article 2.2 of the TBT Agreement. Article 2.2 of the TBT Agreement requires that technical regulations be no more trade restrictive than necessary, and there is widespread acceptance that the necessity formula developed under Article XX of the GATT applies also under Article 2.2 of the TBT Agreement.141 The necessity jurisprudence under Article 2.2 of the TBT Agreement dovetails in with the general exceptions jurisprudence, extending and developing further the necessity formula as seen under the GATT and the GATS. The formula has been adapted to embrace consideration of the risks of non-​fulfilment of a WTO Member’s regulatory objectives as specified in the TBT Agreement. The sophistication marking the formula’s evolution in the Brazil—​Retreaded Tyres case is carried forward in the report of the Australia—​ Plain Packaging Panel, appreciating the importance of comprehensive multifaceted policies to counter complex health and environmental risks in the medium to long term. The formula’s conservative aspect is apparent particularly in the Australia—​ Plain Packaging case, where the Panel formulated its findings in favour of Australia under Article 2.2 without explicitly weighing and balancing the importance of Australia’s public health objectives against the value of trademark protection under Article 2.2 of the TBT Agreement or Article 20 of TRIPS.

a) United States—​Measures Affecting the Production and Sale of Clove Cigarettes The United States—​Measures Affecting the Production and Sale of Clove Cigarettes case provides a good initial insight into how the necessity formula may operate under Article 2.2 of the TBT Agreement.142 The US—​Clove Cigarettes Panel was the first Panel to deal with Article 2.2. The US—​Clove Cigarettes dispute concerned the United States’ restriction on the sale of clove cigarettes and other flavoured cigarettes. Section 907(a)(1)(A) of the United States Federal Food, Drug and Cosmetic Act, inserted in that Act by the Family Smoking Prevention and Tobacco Control Act 2009, provided that a cigarette shall not contain artificial or natural flavours (other than tobacco or menthol) including strawberry, grape, orange, clove, cinnamon, pineapple, vanilla, coconut, liquorice, cocoa, chocolate, cherry or coffee.143 This technical regulation was intended to make flavoured cigarettes unavailable, to youth especially, who often used them as a ‘starter cigarette’.144 141 As evidenced for instance in the pleadings of geographically diverse WTO Members in Australia—​Tobacco Plain Packaging, Panel Reports (n 53) Addendum. 142 US—​Clove Cigarettes, Panel Report (n 77); United States—​Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Appellate Body (22 March 2012) WT/​DS406/​AB/​R, DSR 2012:XI, 5751 (hereafter US—​Clove Cigarettes, Appellate Body Report). 143 US—​Clove Cigarettes, Panel Report (n 77) [2.4]–​[2.8], [7.35]; US—​Clove Cigarettes, Appellate Body Report (n 142) [77], [78]. 144 US—​Clove Cigarettes, Panel Report (n 77) [7.56], quoting First Written Submission of the United States of America (16 November 2010) [146]. The objectives of the amendment and of the Family Smoking Prevention and Tobacco Control Act overall were set out in a report of the House Energy and

Necessity Testing  163 Menthol flavoured cigarettes were not included in the ban. Together with regular cigarettes, menthol cigarettes were smoked regularly by tens of millions of people in the adult population.145 Explaining this, the United States argued that ‘precipitously banning tobacco and menthol cigarettes would risk producing negative consequences for the smokers, the U.S. healthcare system, or society as a whole through an expansion of the black market for cigarettes’.146 The public health effects of such a move had ‘not been sufficiently evaluated to justify a ban’.147 On the other hand, Indonesia argued that the real reasons why the United States had not banned menthol cigarettes were because Philip Morris opposed this, and because menthol had to be excluded to attain political compromise and get a deal on the Family Smoking Prevention and Tobacco Control Act in Congress by avoiding the potential loss of jobs that would accompany a ban on menthol cigarettes in the United States.148 The US measure was found to be inconsistent with Article 2.2 of the TBT Agreement, and this was upheld on appeal. The Panel found that the US objective had been correctly identified, as agreed between the parties, as ‘reducing youth smoking’.149 The Panel went on to consider whether the objective was legitimate, and here turned, as in EC—​Seal Products and Australia—​Plain Packaging, to the language of Article 2.2 of the TBT Agreement listing ‘legitimate’ objectives including ‘national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment’.150 It was self-​evident that measures to reduce smoking were aimed at the protection of human health, a listed objective and a value that was ‘both vital and important in the highest degree’. The legitimacy of the ban’s objective was accepted.151 Continuing on in order to assess whether the US regulation was more trade restrictive than necessary, the Panel addressed the second part of the requirements Commerce Committee in terms of ‘reducing the number of children and adolescents who smoke cigarettes’. US—​Clove Cigarettes, Appellate Body Report (n 142) [79]; US—​Clove Cigarettes, Panel Report (n 77) [2.7] quoting HR Rep No 111–​158, Pt 1 (2009) 37, included in US and Indonesian exhibits. 145 US—​Clove Cigarettes, Panel Report (n 77) [7.57]; First Written Submission of the United States of America (16 November 2010) [150]. 146 US—​Clove Cigarettes, Panel Report (n 77) [7.57]; First Written Submission of the United States of America (16 November 2010) [22]; Answers of the United States of America to the Second Set of Questions from the Panel to the Parties (3 March 2011) 7–​10, Panel Question 89. 147 US—​Clove Cigarettes, Panel Report (n 77) [7.57]; First Written Submission of the United States of America (16 November 2010) [150]. 148 US—​Clove Cigarettes, Panel Report (n 77) [7.313], [7.345], quoting Indonesia’s Second Written Submission [118]; Indonesia’s Response to Panel Questions, Panel Question 99, [37]; Indonesia’s Oral Statement at the Second Substantive Meeting of the Panel [79]. 149 US—​Clove Cigarettes, Panel Report (n 77) [7.336]–​[7.338] citing HR Rep No 111-​58, Pt 1 (2009) and the Guidance for Industry and FDA Staff issued by the US government. US—​Clove Cigarettes, Appellate Body Report (n 142) [80]. 150 US—​Clove Cigarettes, Panel Report (n 77) [7.344]. 151 Ibid, [7.347], [7.350], citing EC—​Asbestos, Appellate Body Report (n 45) [172] and Brazil—​ Retreaded Tyres, Appellate Body Report (n 53) [144].

164  World Trade Organization Dispute Settlement of Article 2.2, pausing to reach a view on the relevance of Article XX jurisprudence as referred to by Indonesia in pleadings. The Panel considered Article XX(b) jurisprudence was relevant in considering how to determine whether a measure was no more trade restrictive than necessary under Article 2.2 and decided to look to it for guidance.152 In reaching this decision the Panel looked carefully at the wording, context and objective of Article 2.2.153 The Panel took into account that the TBT Agreement had been considered a development of Article XX,154 and took into account the sixth recital in the TBT preamble, essentially reproducing the language of Article XX.155 Considering Indonesia’s Article 2.2 case, the Panel took the view that the evidence ‘basically speaks for itself ’ concerning the measure’s contribution to its objective.156 The US measure reflected the majority view in the scientific community, and potentially the unanimous view, that banning flavoured cigarettes would help deter youth from smoking.157 Considering the question whether less restrictive alternatives might be available, the Panel held that Indonesia had failed to demonstrate that there were reasonably available alternatives.158 Indonesia listed some two dozen possible alternative measures, a number of which were already being applied by the United States, but simply listing these measures was insufficient to establish a prima facie case. This did not show whether they would make an equivalent contribution to achieving the US objective, and Indonesia had not specified whether it was contemplated that the alternatives would be applied singularly or combination.159 Overall, Indonesia had failed to demonstrate inconsistency with Article 2.2.160 This finding was not appealed. The Appellate Body has since elaborated further how the necessity formula will operate under Article 2.2 of the TBT Agreement. Overall Article 2.2 is said to be concerned with restrictions on international trade ‘that exceed what is necessary to achieve the degree of contribution that a technical regulation makes to the





152

Ibid, [7.368], [7.431]. Ibid, [7.357]–​[7.367]. 154 Ibid, [7.360]. 155 Ibid, [7.359]. The sixth recital of the preamble to the TBT Agreement reads: Recognizing that no country should be prevented from taking measures necessary to ensure the quality of its exports, or for the protection of human, animal or plant life or health, of the environment, or for the prevention of deceptive practices, at the levels it considers appropriate, subject to the requirement that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade, and are otherwise in accordance with the provisions of this Agreement; 156 Ibid, [7.415]. 157 Ibid, [7.401], [7.415]. 158 Ibid, [7.428]. 159 Ibid, [7.422]–​[7.423]. 160 Ibid, [7.432]. 153

Necessity Testing  165 achievement of a legitimate objective’.161 To gauge necessity there is to be a ‘relational analysis’162 of a regulation’s trade restrictiveness, its degree of contribution to a legitimate objective, and the risks non-​fulfilment would create and the gravity of the consequences. There will then be a comparative analysis of reasonably available alternative measures in terms of their trade restrictiveness and contribution to the objective, taking into account the risks non-​fulfilment would create.163 As seen in the general exceptions jurisprudence, in a few cases this comparative analysis may not be needed, for instance where a measure is not trade restrictive, or if a measure is trade restrictive but makes no contribution to its objective.164 Article 2.2 specifies that a measure is to be no more trade restrictive than necessary ‘taking into account . . . the risks non-​fulfilment will create’, and as can be seen above the Appellate Body has read this as indicating a further element to the formula under the TBT Agreement. The comparison of a challenged measure with a possible alternative measure should be made in the light of the nature of the risks at issue and the gravity of the consequences that would arise from non-​fulfilment of the legitimate objective.165 The Appellate Body has remarked that the nature of the risk and the gravity of the consequences may inform the margin of appreciation inherent in the assessment of whether a proposed alternative measure would achieve an equivalent degree of protection to a challenged measure.166 The Appellate Body has emphasised that, as under Article XX, the weighing and balancing exercise required under Article 2.2 allows for a certain flexibility as to the sequence and order of analysis.167 The methodology employed may vary according to the claims, measures, facts and arguments at issue.168 The risks non-​fulfilment would create may not be susceptible to quantification, and this should not prevent an assessment of a measure’s necessity.169 However, the consequences will need to be identified in order to ensure that the nature of the risks and the gravity of the consequences arising from non-​fulfilment are considered.170 The Appellate Body has recognised that panels must involve themselves in consideration of the risks

161 US—​Tuna II, Appellate Body Report (n 79) [319]; United States—​Certain Country of Origin Labelling (COOL) Requirements, Reports of the Appellate Body (29 June 2012) WT/​DS384/​AB/​R, WT/​ DS386/​AB/​R, DSR 2012:V, 2449, [375] (hereafter US—​COOL, Appellate Body Reports). 162 US—​Tuna II, Appellate Body Report (n 79) [318]. 163 Ibid, [322]; US—​COOL, Appellate Body Reports (n 161) [374]–​[376], [461]. 164 US—​Tuna II, Appellate Body Report (n 79) [322]. 165 Ibid, [321]–​[322]. See also Australia—​Tobacco Plain Packaging, Panel Reports (n 53) [7.1258]. 166 United States—​Certain Country of Origin Labelling (COOL) Requirements, Recourse to Article 21.5 of the DSU by Canada and Mexico—​Appellate Body Reports (18 May 2015) WT/​DS384/​AB/​RW, WT/​DS386/​AB/​RW, DSR 2015:IV, 1725, [5.254]; see also [5.125], [5.218], [5.269], [5.31] (hereafter US—​COOL, Recourse to Article 21.5 of the DSU by Canada and Mexico, Appellate Body Reports). See further Australia—​Tobacco Plain Packaging, Panel Reports (n 53) [7.1257], [7.1369], [7.1371], [7.1722]. 167 US—​COOL, Recourse to Article 21.5 of the DSU by Canada and Mexico, Appellate Body Reports (n 166) [5.198] [5.202]–​[5.206], [5.211], [5.218], [5.227]–​[5.229], [5.235]. 168 Ibid, [5.205]. 169 Ibid, [5.208]–​[5.211], [5.218], [5.290]–​[5.297]. 170 Ibid, [5.127]. See also Australia—​Tobacco Plain Packaging, Panel Reports (n 53) [7.1259].

166  World Trade Organization Dispute Settlement that non-​fulfilment would create, despite arguments that this could require subjective judgement on sensitive matters where societal preferences, cultural considerations and domestic conditions might all have a part to play.171 Disputants are concerned that the relative importance of the objectives pursued might come into play in a new and distinct way in the course of considering the risks that non-​ fulfilment would create.172 The Appellate Body has further accepted that seeking to pursue a quantitative assessment of the risks may not be appropriate.173 In some cases panels may have to assess these risks by looking conjunctively at the nature of the risks and the gravity, in qualitative terms, of non-​fulfilment of a measure’s objective.174 The Appellate Body has also observed that although there is no textual basis in this phrase for taking into account the importance of an objective as a separate factor this does not necessarily mean it is irrelevant in an Article 2.2 analysis.175

b) Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products We can see the ongoing development of the necessity test in the Panel’s Article 2.2 reasoning in Australia—​Plain Packaging.176 Various of the ideas from the Appellate Body report in the Brazil—​Retreaded Tyres Article XX analysis had important effects in this case, reflecting WTO adjudicators’ understanding of the need to take a long view of policy impacts and appreciate that some regulatory policies involve complex interrelated sets of measures all targeted to a given aim. The Australia—​Plain Packaging case involved complaints by Honduras, the Dominican Republic, Cuba and Indonesia about requirements for plain packaging of tobacco products found in Australia’s Tobacco Plain Packaging Act 2011, accompanying regulations and amendments to the Australian trademarks legislation. As set down in the Act, the measure’s objective was to improve public health by discouraging people from taking up smoking or using tobacco products, encouraging people to give up smoking and to stop using tobacco products, discouraging people who had given up smoking or stopped using tobacco products from relapsing, and

171 C.f. US arguments US—​COOL, Recourse to Article 21.5 of the DSU by Canada and Mexico, Appellate Body Reports (n 166) [2.26]–​[2.28], [2.189] (the United States suggesting that instead Members should be required to complete internal processes), countered by Canada [2.67]–​[2.70], and Mexico [2.97]–​[2.100]. 172 See further US argument in US—​COOL, ibid, [2.190]–​[2.193]. See also China’s points at [2.212], Australia’s warning against a discourse around relative importance at [2.207] and the EU’s rejection of the idea that the TBT Agreement is based on a hierarchy of objectives at [2.225]. 173 Ibid, [5.272], [5.275], [5.288]–​[5.297]. 174 Ibid, [5.295]. 175 Ibid, [5.277], [5.280]. 176 Australia—​Tobacco Plain Packaging, Panel Reports (n 53); Australia—​Tobacco Plain Packaging, Appellate Body Reports (n 110).

Necessity Testing  167 reducing people’s exposure to smoke from tobacco products.177 Tobacco products were to comply with the Act’s retail packaging requirements, which envisaged uniform plain packaging in a drab dark brown colour, Pantone 448C. Brand names and company names were to appear in a specified location and orientation, printed in a specified font, typeface and colour, Pantone Cool Gray 2C. With this exception, the appearance of trademarks was generally prohibited. The appearance of tobacco products themselves was also regulated and requirements set down for cigars as well as cigarettes. Especially when combined with an increase in the size of graphic health warnings, the visual effect was dramatic.178 The Australia—​Plain Packaging complainants asserted unsuccessfully that Australia’s measures were inconsistent with its WTO commitments, including centrally Australia’s obligations under Articles 2.1 and 2.2 of the TBT Agreement and Articles 16.1 and 20 of the TRIPS Agreement.179 The Appellate Body rejected appeals by Honduras and the Dominican Republic.180 Under Article 2.2 of the TBT Agreement, the Panel found that the objective of Australia’s plain packaging measures was the legitimate objective of improving public health by reducing the use of, and exposure to, tobacco products. Accordingly, the Australia—​Plain Packaging Panel set out to conduct a relational analysis of the public health contribution made by the Australian plain packaging regime, the measure’s trade restrictiveness and the nature of the risks at issue together with the gravity of the consequences that would arise from Australia’s non-​ fulfilment of the regime’s objective.181 This informed the comparative analysis of possible reasonably available less trade-​restrictive alternatives that would potentially have made an equivalent contribution. The Panel moved first to assess the extent to which the measures contributed to this objective, beginning with a general review of the scientific literature relating to the effectiveness of plain packaging, which stood up well to complainants’ critiques.182 In assessing the measure’s contribution to its objective the Panel firstly set about examining the Australian measure’s design, structure and intended operation with reference to the three mechanisms through which the legislation stated that it sought to achieve the intended outcome: reducing the appeal of tobacco products to consumers, increasing the effectiveness of health warnings located on the retail packaging of tobacco products, and reducing the tobacco packaging’s ability to mislead consumers about the health risks of smoking.183 Proceeding in 177 Tobacco Plain Packaging Act 2011 (Cth), s 3(1). Australia—​Tobacco Plain Packaging, Panel Reports (n 53) [2.15]. 178 For images, Australia—​Tobacco Plain Packaging, Panel Reports (n 53) [2.20]–​[2.32]. 179 Ibid, [8.1]. 180 Australia—​Tobacco Plain Packaging, Appellate Body Reports (n 110) [7.14]–​[7.15]. 181 Australia—​ Tobacco Plain Packaging, Panel Reports (n 53) [7.31]–​ [7.32], [7.184]–​ [7.185], [7.1724]; as endorsed by the Appellate Body in Australia—​Tobacco Plain Packaging, Appellate Body Reports (n 110) [6.157]. 182 Ibid, [7.423], [7.541]–​[7.645]. 183 Ibid, [7.646]–​[7.928]; Tobacco Plain Packaging Act 2011 (Cth), s 3(2).

168  World Trade Organization Dispute Settlement this way, the Panel established, in effect, a ‘floor’ to the Australian case: looking at the evidence, the Panel was unpersuaded by arguments from the complainants that the measures would be incapable of contributing to Australia’s objective.184 The Panel added that the literature largely converged towards a conclusion that tobacco plain packaging had the capacity to operate through all three of the identified mechanisms.185 It appeared reasonable to hypothesise a correlation between the measure’s removal of packaging features and reduced product appeal, taking into account that packaging features provided the only opportunity—​in light of Australia’s wide restrictions on other forms of tobacco advertising—​to convey a positive perception of tobacco products.186 The Panel came then to evidence relating to the application of the measures. This was not straightforward as Australia had put in place requirements for enlarged graphic health warnings at the same time as its plain packaging requirements. Nevertheless the evidence was consistent with the hypothesis that Australia’s plain packaging measures had had an impact on actual smoking behaviours, even though some of the outcomes sought could only be expected to manifest themselves over a longer period of time.187 Indeed, the evidence on the application of Australia’s measures suggested that the introduction of tobacco plain packaging had, in combination with enlarged graphic health warnings, in fact reduced the appeal of tobacco products and had some impact on the effectiveness of graphic health warnings. Evidence of actual smoking behaviours in the three years following the introduction of plain packaging was consistent with a finding that the measures had contributed to a reduction in the use of tobacco products.188 In reaching these conclusions, the Panel was mindful of the possibility that the effects of certain measures might manifest themselves over longer time periods in the future. Measures based on behavioural responses to expected changes in beliefs and attitudes might take some time to materialise fully or be perceptible in the relevant data. As Australia had argued, the measures would gradually take effect for future generations who had not been exposed to any form of tobacco branding. For current smokers, repeated attempts to quit over several years might take place before achieving success.189 Overall, on the matter of the Australian measure’s contribution to their objectives the Panel found that the evidence in its totality supported the view that the plain packaging measures, in combination with other tobacco-​control measures maintained by Australia, were apt to and did in fact contribute meaningfully to

184 Ibid, [7.929]–​[7.1034]. 185 Ibid, [7.1026]. 186 Ibid, [7.1034]. 187 Ibid, [7.932]–​[7.986]. 188 Ibid, [7.1036]–​[7.1037]. 189 Ibid, [7.938]–​[7.939] citing US—​Gasoline, Appellate Body Report (n 104) 20, 21; and Brazil—​ Retreaded Tyres, Appellate Body Report (n 53) [153], footnote 243.

Necessity Testing  169 Australia’s objective of reducing the use of, and exposure to, tobacco products. In making this determination, the Panel remained mindful that the impact of the Australian measures might evolve over time.190 The Appellate Body rejected challenges to this finding.191 The Panel came now to the Australian measure’s trade restrictiveness, and the nature and gravity of the risks that would be generated by non-​fulfilment of Australia’s health objectives. The Panel concluded that insofar as Australia’s measures reduced the volume of imported tobacco products on the market they had a limiting effect on trade, and that they might in fact future reduce the value of imported tobacco products.192 The Appellate Body later rejected a challenge on this point.193 The Panel set about identifying the nature and gravity of the risks that would arise from the non-​fulfilment of the Australian health objectives.194 The nature of the risk was that public health would not be improved, entailing a public health problem.195 Reviewing the statistics on morbidity and mortality associated with tobacco use, the Panel found the gravity of the public health consequences of use of and exposure to tobacco ‘particularly grave’196 with especially grave consequences for youth.197 It had gone undisputed that there was no safe level of tobacco use or exposure to secondhand tobacco smoke, and Australia considered the interests at stake to be of the utmost importance.198 Turning to the possibility that there might be reasonably available less trade-​ restrictive alternatives, the Panel assessed four proposed alternative measures. The Panel found that the complainants had not demonstrated that any of these alternatives would make a contribution to Australia’s objective that was equivalent to that made by the Australian plain packaging measures as part of Australia’s regulatory framework for tobacco control, even if they were less trade restrictive, of which the Panel remained unpersuaded. Neither would they do so if combined.199 The four proposed alternatives comprised: an increase in the minimum legal age for smoking,200 increased taxation of tobacco products,201 making more use of social marketing campaigns202 and a system that would pre-​vet all proposed tobacco product packaging individually.203 190 Ibid, [7.1025], [7.1043], [7.1725], [7.1044]. 191 Australia—​Tobacco Plain Packaging, Appellate Body Reports (n 110) [7.2]. 192 Australia—​Tobacco Plain Packaging, Panel Reports (n 53) [7.1255], [7.1207]–​[7.1208], [7.1725]. 193 Australia—​Tobacco Plain Packaging, Appellate Body Reports (n 110) [7.3]. 194 Australia—​Tobacco Plain Packaging, Panel Reports (n 53) [7.1259]–​[7.1261]. 195 Ibid, [7.1287], [7.1297], [7.1322], [7.1725]. 196 Ibid, [7.1310], [7.1322], [7.1725]. 197 Ibid, [7.1317], noting also Australian remarks concerning the disproportionate effects of tobacco use on Aboriginal and Torres Strait Islander peoples [7.1318]. 198 Ibid, [7.1319]. 199 Ibid, [7.1721], [7.1725], [7.1726]. 200 Ibid, [7.1468]–​[7.1471]. 201 Ibid, [7.1542]–​[7.1545]. 202 Ibid, [7.1620]–​[7.1624]. 203 Ibid, [7.1713]–​[7.1716].

170  World Trade Organization Dispute Settlement In reaching the conclusion that there were no reasonably available less trade-​ restrictive alternatives that would make an equivalent contribution to Australia’s objective, the Panel took into account the risks non-​fulfilment would create, Australia’s chosen level of protection and the part that the plain packaging measures had been designed to play as one element in a comprehensive tobacco control policy.204 We can see that the Panel registered clearly Australia’s argument that the comparison of alternatives should be carried out with the understanding that the measure at issue was part of a ‘complex suite of measures directed at the same objective’.205 For Australia, this meant that the first three of the four proposed alternative measures were not true alternatives. With a problem like tobacco, where a comprehensive and dynamic response was required, such measures each played a distinct and complementary role and could not substitute for the plain packaging measure.206 The Panel noted the Appellate Body’s finding in Brazil—​Retreaded Tyres that replacing one element of Brazil’s comprehensive policy with another would weaken the policy by reducing the synergies between its components, as well as its total effect.207 This point was emphasised in the Panel’s conclusions on the minimum age for smoking and the taxation of tobacco products,208 as well as in the Panel’s discussion of the complainants’ arguments for the combined application of alternative measures.209 Such understandings infused strongly the Panel’s final conclusion that the complainants had failed to establish a case under Article 2.2.210 The Appellate Body upheld this conclusion.211 The Australia—​Plain Packaging Panel refrained from any ultimate weighing and balancing of the interests at play within the necessity formula under the TBT Agreement.212 The Panel simply reiterated its conclusions that, although they were trade restrictive to the extent they resulted in a reduction in total volume of imports, plain packaging requirements made a meaningful contribution to Australia’s public health objectives, the consequences of non-​fulfilment of Australia’s objective were particularly grave and none of the proposed alternative measures had been shown to constitute a less trade-​restrictive alternative that would make an equivalent contribution to Australia’s objective.213 The Panel emphasised that, as 204 Ibid, [7.1371]–​[7.1723]. 205 Ibid, [7.1376]. 206 Ibid, [7.1377]–​[7.1378]. 207 Ibid, [7.1381], [7.1384] citing Brazil—​Retreaded Tyres, Appellate Body Report (n 53) [172]. 208 Ibid, [7.1470], [7.1544]. 209 Ibid, [7.1722]. 210 Ibid, [7.1724]–​[7.1732]. 211 Australia—​Tobacco Plain Packaging, Appellate Body Reports (n 110) [7.6] although finding that the Panel had erred in its analysis concerning the equivalence of the contribution made by alternative measures by finding a lack of equivalence on the basis the alternatives failed to address the design features of tobacco packaging. [6.496]–​[6.505], [7.4]. 212 Australia—​Tobacco Plain Packaging, Panel Reports (n 53) [7.1724]–​[7.1732]. 213 Ibid, [7.1725]–​[7.1726].

Necessity Testing  171 reflected in the sixth recital of the TBT Agreement, no WTO Member should be prevented from taking measures necessary for the protection of human, animal or plant life or health or the environment.214 The formula later articulated by the Panel for determining whether plain packaging requirements constituted an unjustifiable encumbrance on trademark use under Article 20 of TRIPS was akin to the necessity formula and was applied in a way that mirrored the Panel’s analysis under Article 2.2 of the TBT Agreement, although the Panel may have come a little closer, in its TRIPS analysis, to the weighing and balancing of competing interests. The Panel framed its task as assessing the public health concerns underlying the plain packaging rules against their implications for trademark use.215 The undisputed and exceptionally grave domestic and global health problem involved in tobacco use was again noted by the Panel.216 The fact that Australia’s measures did in fact contribute to addressing Australia’s objective of improving public health by reducing use of and exposure to tobacco products suggested that the encumbrances on trademarks involved were sufficiently supported.217 The Panel’s overall conclusion was that it was not persuaded that the complainant had demonstrated that Australia had acted beyond the bounds of its latitude under Article 20 of TRIPS to choose an appropriate policy intervention to address its public health aims.218 The Appellate Body found no error in the Panel’s conclusion or its statement that a determination of whether the use of a trademark was being unjustifiably encumbered involved consideration of the nature and extent of the special requirements imposed, the reasons for these requirements including any societal interests they were intended to safeguard and whether those reasons provided sufficient support for the encumbrance.219 The Appellate Body added that the existence of less encumbering alternative measures could call into question the justifiability of encumbrances but that this was not a necessary inquiry under Article 20 of the TRIPS Agreement.220 Under Article 20 of the TRIPS Agreement weighing and balancing appears to become detached from the question of the reasonable availability to a Member of alternative measures. WTO Members’ entitlement to choose the appropriate level of protection against risks will still need to be respected, however.



214

Ibid, [1731]. Ibid, [7.2591]. 216 Ibid, [7.2592]. 217 Ibid, [7.2592], [7.2604]. 218 Ibid, [7.2592]. 219 Australia—​Tobacco Plain Packaging, Appellate Body Reports (n 110) [7.12]–​[7.13]. 220 Ibid, [7.11]. 215

172  World Trade Organization Dispute Settlement

3.  Necessity under Article 5.6 of the SPS Agreement Article 5.6 specifies that SPS measures may not be more trade restrictive than required to achieve a Member’s appropriate level of protection. This is understood as a specific application of the requirement in Article 2.2 that Members shall ensure that any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal or plant life or health.221 The footnote to Article 5.6 specifies that a measure will only be more trade restrictive than required if there is another reasonably available alternative measure that would achieve the appropriate level of protection. Alternative measures must be significantly less restrictive to trade as well as technically and economically feasible. For instance in Korea—​Import Bans, and Testing and Certification Requirements for Radionuclides the Panel found Korea’s restrictions on Japanese imports following the Fukushima nuclear plant disaster contrary to Article 5.6 on this basis.222

F. Conclusion The WTO necessity formula embodies an important test for regulatory coherence. The formula makes a distinct contribution to the WTO system’s accommodation of the various types of trade and non-​trade interest competing within the WTO agreements by providing a standard for determining the legality of WTO Members’ measures under the general exceptions subparagraphs and especially also under Article 2.2 of the TBT Agreement. It sets Members’ expectations as to where the balance between competing interests may lie and provides a framework for governments to work through when they are in the process of creating new regulatory measures. Based on the developments studied in this chapter, the WTO adjudicatory bodies appear to have been doing well in protecting scope for the traditional procedural justification of international law’s relative authority claim on grounds 221 C.f. Hanna Schebesta and Dominique Sinopoli, ‘The Potency of the SPS Agreement’s Excessivity Test: The Impact of Article 5.6 on Trade Liberalization and the Regulatory Power of WTO Members to take Sanitary and Phytosanitary Measures’ (2018) 21(1) J Intl Econ L 123, 125, 144–​146, arguing that the art 5.6 test is not a regular necessity test but an exclusivity test with the potential for future development. 222 Korea—​Import Bans, and Testing and Certification Requirements for Radionuclides, Report of the Panel (22 February 2018) WT/​DS495/​R, [7.253]–​[7.256], [8.2(b)]–​[8.2(e)], Panel Report). This was overturned on appeal on the basis the Panel should have considered qualitative as well as quantitative aspects of the level of protection adopted by Korea against the relevant risks. Korea—​Import Bans, and Testing and Certification Requirements for Radionuclides, Report of the Appellate Body (11 April 2019) WT/​DS495/​AB/​R. See also India—​Measures Concerning the Importation of Certain Agricultural Products, Report of the Panel (14 October 2014) WT/​DS430/​R, DSR 2015:V, 2663, [7.521]–​[7.525], [7.526]–​[7.597] where the Panel found India’s measures against avian influenza were inconsistent with art 5.6. See previously Australia—​Measures Affecting Importation of Salmon, Report of the Appellate Body (20 October 1998) WT/​DS18/​AB/​R, DSR 1998:VIII, 3327, [194].

Necessity Testing  173 respecting domestic decision-​ making through democratic processes. As a multipronged formula, the necessity test leaves broad scope for determinations of legality to be made in relation to particular regulatory measures without major intrusion by international trade law into the regulatory domain. Although scrutiny of the availability of alternative measures may be intense, Members’ entitlement to choose their level of protection against a risk is still at present fully respected. There is vital scope for acknowledgement and recognition of the importance to WTO Members of long-​term non-​economic interests requiring a multifaceted policy response, as seen in Brazil—​Retreaded Tyres and Australia—​Plain Packaging. All this has been achieved through reliance on particular interpretive principles and techniques among those available to WTO panels and the Appellate Body under international law consistent with Article 3.2 of the WTO DSU. A holistic approach is adopted, employing multiple interpretative rules and principles together simultaneously, though the Appellate Body does not always explain every step in its reasoning.223 The Appellate Body has attended carefully to text, and to the object and purpose of the treaties it applies, but also frequently employs interpretative principles of effectiveness and contextual interpretation. The principle of effective interpretation is said to be recognised and emphasised by the Appellate Body as an ‘underlying justification’ for many of its interpretations’ and the Appellate Body’s exposition on the meaning of ‘necessary’ in Article XX(d) of the Korea—​Beef case has been cited as a specific instance of this form of interpretive reasoning.224 In accordance with the principle of effectiveness it is said, Appellate Body practice has given effect to values of the WTO system as it has understood them, including those expressly recognised in the WTO agreements. These include systemic values such as enforcement, progressive liberalisation and the effectiveness of the dispute settlement system.225 At the same time, panels and the Appellate Body have carried out their roles under the DSU in a moderated fashion, with care and caution, aware that they bear a unique responsibility for the long-​term success of the WTO dispute settlement system.226 The prompts for the WTO’s 2019 dispute settlement crisis can be ascribed in large part to individual national sensitivities. However, the call for review and reform in the WTO appellate system reflects also a growing realisation of the systemic issues inevitably arising in relation to the emergence of regulatory standards as discussed in Part V below. Concern about the possibility that a WTO panel might conceivably weigh and balance the interests or values protected or advanced by a regulatory measure and its impact on trade in a way that undermined



223

Van Damme, Treaty Interpretation (n 17) lxv, 292, 382, 33, 49, 381. Ibid, 282, 298. 225 Ibid, 294, 295, 296, 300–​301. 226 Interview 22 September 2015. 224

174  World Trade Organization Dispute Settlement Members’ entitlement to choose their level of protection has led certain Members towards the development of new approaches in the drafting of relevant provisions in regional trade agreements.227 Meantime, rational relationship testing in WTO non-​discrimination jurisprudence has continued to evolve, as discussed in Chapter Six.



227

E.g. Chapter Eight, section D 1. See also the introduction to Chapter Two.

6

Rational Relationships A.  Introduction to Rational Relationship Requirements This chapter examines the development and application of ‘rational relationship’ requirements in World Trade Organization (WTO) law under the introductory chapeau to the general exceptions provisions in Article XX of the General Agreement on Tariffs and Trade (GATT)1 and Article XIV of the General Agreement on Trade in Services (GATS)2 and under the Agreement on Technical Barriers to Trade (TBT Agreement).3 Rational relationship tests, like necessity tests, are an application of the emerging global regulatory standard of regulatory coherence, calling for a certain relationship between trade measures and their objectives. Specifically WTO jurisprudence looks for a rational relationship between a regulatory measure’s otherwise discriminatory aspects and the measure’s policy objectives. Practical questions in relation to how to apply the chapeau have increasingly been exposed as the general exceptions provisions are invoked with growing frequency to justify actions and policies inconsistent with core WTO disciplines including the national treatment requirements in Article III of GATT. The type of discrimination that is considered unacceptable under the Article XX chapeau naturally differs from that found in Article III:1 and III:4 GATT.4 The Article XX chapeau requires that when relying on the general exceptions measures falling within the Article XX paragraphs not be ‘applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade’.5 For 1 General Agreement on Tariffs and Trade (opened for signature 30 October 1947, entered into force 1 January 1948) 55 UNTS 187; General Agreement on Tariffs and Trade (opened for signature 15 April 1994, entered into force 1 January 1995) 1867 UNTS 190. 2 General Agreement on Trade in Services (opened for signature 15 April 1994, entered into force 1 January 1995) 1869 UNTS 183. 3 Agreement on Technical Barriers to Trade (opened for signature 12 April 1979, entered into force 1 January 1980) 1186 UNTS 276. 4 United States—​Standards for Reformulated and Conventional Gasoline, Report of the Appellate Body (29 April 1996) WT/​DS2/​AB/​R, WT/​DS4/​AB/​R, DSR 1996:I, 3, [23] (hereafter US—​Gasoline, Appellate Body Report). 5 The chapeau to arts XX of GATT and XIV of the GATS reads: General Exceptions Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this

Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0006

176  World Trade Organization Dispute Settlement instance, applying the chapeau in United States—​Standards for Reformulated and Conventional Gasoline the Appellate Body found that the discrimination against foreign oil refineries generated by the application of US clean air rules was unjustifiable, as well as a disguised restriction on international trade. The United States had not sufficiently pursued the possibility of co-​operative arrangements with the complainants, Venezuela and Brazil, to deal with the practicalities of verification and enforcement of appropriate baselines for foreign oil refineries. Accordingly the US measure could not be protected under Article XX.6 The chapeau has been considered as an expression of the principle of good faith.7 Referencing the drafting history of Article XX, the Appellate Body underscored that the purpose and object of the introductory clauses of Article XX is generally the prevention of abuse of the exceptions specified in Article XX’s subparagraphs.8 The Appellate Body also sought to capture the nature of the chapeau’s requirements by explaining that the chapeau ‘is animated by the principle that while the exceptions of Article XX may be invoked as a matter of legal right, they should not be so applied as to frustrate or defeat the legal obligations of the holder of the right under the substantive rules of the General Agreement’.9 As the Appellate Body explained in Brazil—​Measures Affecting Imports of Retreaded Tyres, the chapeau’s requirements to avoid arbitrary or unjustifiable discrimination and disguised restrictions on international trade serve ‘to ensure that Members’ rights to avail themselves of exceptions are exercised in good faith to protect interests considered legitimate under Article XX, not as a means to circumvent one Member’s obligations towards other WTO Members’.10 However, the Appellate Body emphasised that its task was to interpret the language of the chapeau, ‘seeking additional interpretive guidance, as appropriate, from the general principles of international law’, including the good faith principle.11 The Appellate Body understood that the abuse of rights doctrine is one application of the good faith principle, enjoining that whenever the assertion of a right impinges on the field covered by a treaty obligation, the right must be exercised bona fide, that is to say, reasonably.12 Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures . . . 6 US—​Gasoline, Appellate Body Report (n 4) [29]. 7 United States—​Import Prohibition of Certain Shrimp and Shrimp Products, Report of the Appellate Body (12 October 1998) WT/​DS58/​AB/​R, DSR 1998:VII, 2755, [158] (hereafter US—​Shrimp, Appellate Body Report). 8 Ibid, [156]. 9 US—​Gasoline, Appellate Body Report (n 4) 22. 10 Brazil—​Measures Affecting Imports of Retreaded Tyres, Report of the Appellate Body (3 December 2007) WT/​DS332/​AB/​R, DSR 2007:IV, 1527, [215] (hereafter Brazil—​Retreaded Tyres, Appellate Body Report). 11 US—​Shrimp, Appellate Body Report (n 7) [158], referring to Vienna Convention on the Law of Treaties (opened for signature 23 May 1969, entered into force 27 January 1980) 1155 UNTS 331, art 31(3)(c). 12 Ibid, [158], Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Stevens and Sons, Ltd. 1953) ch 4, 125.

Rational Relationships  177 Since the United States—​Import Prohibition of Certain Shrimp and Shrimp Products case the abuse of rights doctrine has maintained a low profile. References to good faith and abuse of rights may carry an unnecessary inference that a regulating Member might be displaying bad faith or improper motivation. This invites complaining parties to capitalise rhetorically on the idea that a regulating Member might have abused Article XX, even gravely.13 Such a dynamic is unhelpful in the search for an appropriate balance between economic and environmental interests in WTO law. The underlying idea that the chapeau is there to mark out and ensure an equilibrium of rights among WTO Members, articulated in the early days of Appellate Body jurisprudence, does not carry the same implications and has been at least as influential.14 The concept of the line of equilibrium captures well the function served both by rational relationship requirements and by various of the other regulatory standards employed in the WTO. As with necessity tests, rational relationship requirements for arbitrary and unjustifiable discrimination serve to delineate the balance between different types of interest in WTO law, particularly WTO Members’ common interests in free trade and their common interests in the right to regulate. Both these standards provide generic mechanisms that operate together with other mechanisms and rules to generate this delineation. Their application will depend on the circumstances at hand. The Appellate Body has explained that ‘[t]‌he location of the line of equilibrium, as expressed in the chapeau, is not fixed and unchanging; the line moves as the kind and the shape of the measures at stake vary and as the facts making up specific cases differ.’15 In setting out the purpose and role of the chapeau the Appellate Body also invoked concepts of reasonableness and due regard reminiscent of international legal developments beyond the WTO, saying that if the Article XX exceptions are not to be abused or misused, measures falling within them must be applied reasonably, with due regard both to the legal duties of the party claiming the exception and the legal rights of the other parties concerned.16 The concept of reasonableness was used by the United States in its defence in US—​Shrimp. The US argued for an understanding of the Article XX chapeau based on what the US saw as the ordinary meaning of ‘unjustifiable discrimination’. Justifiability could be examined 13

See e.g. US—​Shrimp, Appellate Body Report (n 7) [40]. As the Appellate Body suggested in US—​Shrimp and has reiterated since: The task of interpreting and applying the chapeau is . . . essentially the delicate one of locating and marking out a line of equilibrium between the right of a Member to invoke an exception under Article XX and the rights of the other Members under varying substantive provisions (e.g., Article XI) of the GATT 1994, so that neither of the competing rights will cancel out the other and thereby distort and nullify or impair the balance of rights and obligations constructed by the Members themselves in that Agreement. Ibid, [159]. The Appellate Body has also referred to a balance of rights and obligations. Ibid, [156], see also [182]. 15 Ibid, [159]. 16 US—​Gasoline, Appellate Body Report (n 4) 22, emphasis added. US—​Shrimp, Appellate Body Report (n 7) [150]—​[151].

14

178  World Trade Organization Dispute Settlement by considering the reasonableness or justifiability of differentiation in light of a measure’s rationale.17 The United States also built up the idea that differentiation that was ‘legitimately connected’ with the policy of an Article XX exception would not constitute an abuse of the exception.18 This introduces the idea of assessing a measure’s discriminatory aspects by examining their relationship to the measure’s policy objectives. Similar thinking underpins the rational relationship requirement. Bad faith will be extraneous to both analyses. Today it is understood that WTO adjudicators will look for a rational relationship between a measure and the measure’s policy objectives in order to assess whether a measure is discriminatory such that it becomes inconsistent with the chapeau to the general exceptions provisions in Articles XX GATT and XIV GATS. Tests grounded on the idea of a rational connection with a measure’s objectives are also used to assess whether conduct may be discriminatory under Article 2.1 of the TBT Agreement. Rational connection tests help determine, too, whether sanitary and phytosanitary measures may be discriminatory under Articles 2.3 and 5.5 of the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement). A rational connection between the encumbrances imposed on a trademark and the reason for their imposition was further found by the Panel to be relevant but not necessarily conclusive under Article 20 of the Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS) in Australia—​ Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products.19 Like the necessity formula, rational relationship tests emanate from the judgment of panels and the Appellate Body as to how WTO law is to be understood and applied. Pivoting on the concept of rationality, rational relationship requirements 17 US—​Shrimp, Appellate Body Report (n 7) [11], [14], [20]. The United States has also subsequently suggested that if a respondent provides a rationale for a measure that is not capricious, random or indefensible this will satisfy the chapeau prohibition on arbitrary or unjustifiable discrimination. United States—​Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Panel (2 September 2011) WT/​DS406/​R, DSR 2012:XI, 5865 Addendum, Annex A-​2, Executive Summary of the First Written Submission of the United States, [44] (hereafter US—​Clove Cigarettes, Panel Report). 18 US—​Shrimp, Appellate Body Report (n 7) [20]. C.f. Australian views [59]. The EU observed that art XX measures should be ‘directly connected’ to their objectives and should not go beyond what was required to limit environmental damage [73]. In Brazil—​Retreaded Tyres, Appellate Body Report the EC further observed that what is arbitrary or should be determined in the light of a measure’s stated objectives. Brazil—​Retreaded Tyres, Appellate Body Report (n 10) [28], [40], [244]. The EC argued that a measure would not be ‘arbitrary’ if it appeared as reasonable, predictable and foreseeable in the light of its objective (as opposed to unreasonable and contradictory), [30], [31], [220], [222], but rejected the idea that an assessment should be made in relation to a measure’s objective [64]. 19 Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products, Reports of the Panels (28 June 2018) WT/​ DS435/​R, WT/​DS441/​R WT/​DS458/​R, WT/​DS467/​R, [7.2422] [7.2430], [7.2529], [7.2598] (hereafter Australia—​Tobacco Plain Packaging, Panel Reports). The Panel relied instead on an approach more akin to necessity testing—​it was the Panel’s finding that Australian policies were sufficiently supported by reference to the societal interests they were intended to safeguard, bearing in mind the nature and extent of the encumbrance and possible alternatives, that grounded its decision that they could not be considered ‘unjustifiable encumbrances’ under art 20. Ibid, [7.2430], [7.2529], [7.2598].

Rational Relationships  179 provide a relatively objective mechanism for determining regulatory measures’ WTO consistency. Rational relationship testing has been modified and adjusted over time to bring about improvements. In the case of the rational relationship test there have been particular difficulties in situations where regulatory measures may be directed to more than one regulatory objective. It became apparent that relying on a simple test seeking a rational relationship between a measure’s discriminatory effects and its policy objectives was too blunt for purpose, especially in situations where a measure pursues divergent policy objectives; as a result the jurisprudence evolved to soften the rational relationships test.20 Importantly, as in the case of necessity tests, rational relationship testing lends itself to application in a way that accommodates decision-​making at the domestic level on matters requiring important value judgements. There is considerable scope to apply rational relationship testing in ways that are respectful of and operate to maintain States’ regulatory authority. This is important, given the potential for rational relationship testing to become perhaps the most accepted embodiment of the overarching regulatory coherence standard applying across international law.

1.  The general exceptions chapeau Central to determinations of whether discrimination is arbitrary or unjustifiable will usually be an analysis relating to the cause or rationale for the discrimination in the light of the objective of the measure as accepted under the applicable subparagraph of Article XX.21 In practice this means that adjudicators will seek evidence of a rational connection between discriminatory treatment and the objective of the discriminatory measure. We can see for instance the remark by the Appellate Body in its early days in US—​Shrimp that it found difficult to reconcile with the United States’ declared policy objective of protecting and conserving sea turtles the US exclusion from its market of shrimp caught in other countries using methods identical to those used in the United States solely on the basis that the importing countries had not obtained certification from the United States.22 A more contemporary and relatively straightforward instance of the Article XX rational connection requirement in operation is seen in the China—​Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum case.23 In 20 Weiler suggests that textual imprecision, together with tensions between policy and text that led to a process of ‘honing, self-​correcting, and at times even changing course’ over the years to develop a coherent jurisprudence. JHH Weiler, ‘Brazil—​Measures Affecting Imported Tyres (DS322)’ (2009) 8 World T.R. 137, 138. 21 Brazil—​Retreaded Tyres, Appellate Body Report (n 10) [225]—​[226], [246], setting out the findings in US—​Shrimp, Appellate Body Report (n 7) and US—​Gasoline, Appellate Body Report (n 4). 22 US—​Shrimp, Appellate Body Report (n 7) [165]. 23 China—​Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, Reports of the Panel (26 March 2014) WT/​DS431/​R, WT/​DS431/​R/​Add.1, WT/​DS432/​R, WT/​DS432/​R/​Add.1, WT/​DS433/​R, DSR 2014:IV, 1127 (hereafter China—​Rare Earths, Panel Reports); China—​Measures

180  World Trade Organization Dispute Settlement both the China—​Rare Earths and China—​Measures Related to the Exportation of Various Raw Materials cases,24 China’s export restrictions were ultimately found to be inconsistent with China’s legal obligations under the GATT 1994 and under China’s Protocol of Accession to the WTO. The China—​Rare Earths case concerned export restrictions on minerals known as ‘rare earths’, essential in the production of high-​tech goods including mobile phones, together with forms of tungsten and molybdenum. Trade partners place high importance on the unimpeded flow of these mineral exports from China at a time when China’s increasing and rapid industrialisation also places demands on the resource base. A major portion of the world’s geological rare earth resources is located in China, and China is the main source of their supply. China continues to bear the high environmental cost of extracting and producing rare earths, which in certain cases are highly polluting and pose human health risks. In China—​Rare Earths, China invoked Article XX(b) of GATT 1994, alongside Article XX(g), seeking to rely on Article XX(b) with the argument that the measures were ‘necessary for the protection of human, animal or plant life or health’. Although Panel analysis demonstrated that in any event China’s arguments under these subparagraphs of Article XX were not strong enough to have succeeded, the Panel also held that China had failed to demonstrate that its export quotas on rare earths, tungsten and molybdenum met the requirements of the chapeau, which required that they not be applied in a manner constituting arbitrary or unjustifiable discrimination or a disguised restriction on international trade. The complainants argued that China’s policy advantaged Chinese industry, and that this discrimination served no conservation-​related purpose and was arbitrary and unjustifiable.25 Applying the rational connection requirement, the Panel observed that discrimination would be arbitrary or unjustifiable when the reasons given for the discrimination bore no rational connection to the relevant Article XX subparagraph objective, or would go against that objective.26 Reviewing the various aspects of China’s rare earths export quota, including its structure, design and operation, the Panel found the quota to ‘disfavour and discriminate against foreign users’.27 China’s policy allowed stockpiling for domestic Related to the Exportation of Rare Earths, Tungsten, and Molybdenum, Reports of the Appellate Body (7 August 2014) WT/​DS431/​AB/​R, WT/​DS432/​AB/​R, WT/​DS433/​AB/​R, DSR 2014:III, 805 (hereafter China—​Rare Earths, Appellate Body Reports). 24 China—​Measures Related to the Exportation of Various Raw Materials, Reports of the Panel (5 July 2011) WT/​DS394/​R, WT/​DS395/​R, WT/​DS398/​R, DSR 2012:VII, 3501 (hereafter China—​Raw Materials, Panel Reports); China—​Measures Related to the Exportation of Various Raw Materials, Reports of the Appellate Body (30 January 2012) WT/​DS394/​AB/​R, WT/​DS395/​AB/​R, WT/​DS398/​ AB/​R, DSR 2012:VII, 3295 (hereafter China—​Raw Materials, Appellate Body Reports). 25 China—​Rare Earths, Panel Reports (n 23) [7.618] citing Second Written Submission of the United States of America (25 April 2013) [299]; Japan’s Second Written Submission [167]–​[175]. 26 Ibid, [7.352], [7.658] citing Brazil—​Retreaded Tyres, Appellate Body Report (n 10) [227]. 27 Ibid, [7.657].

Rational Relationships  181 use while not allowing exporters to build up stocks for export by exchanging their unused quota among themselves. This restricted access to rare earths in a discriminatory way.28 The Panel proceeded to assess whether the rationale for such discrimination was concerned with conservation. China had not demonstrated this. Rather, the discrimination seemed to result from industrial policy considerations. For example, this could be seen in relation to Chinese policy requiring unused export quota to be returned to the authorities for resale into the domestic market.29 The Panel also had difficulty understanding the link to conservation in respect of the Chinese policy that downstream products were subject to export quota but not to production quota.30 Looking into the origins of the rational connection test, we find that the test has been developed largely, it would seem, by instinct and logic. In the early Article XX case United States—​Standards for Reformulated and Conventional Gasoline the Appellate Body in its analysis of the chapeau observed that: the chapeau ‘prohibits such application of a measure at issue (otherwise falling within the scope of Article XX(g)) as would constitute (a) “arbitrary discrimination” (between countries where the same conditions prevail); (b) “unjustifiable discrimination” (between countries where the same conditions prevail); or (c) “a disguised restriction” on international trade’.31 ‘Arbitrary discrimination’, ‘unjustifiable discrimination’ and ‘disguised restriction’ on international trade were to be read side-​by-​side; imparting meaning to one another.32 A ‘disguised restriction’ was to be understood as referring not only to a concealed or unannounced restriction or discrimination in international trade but also as embracing restrictions amounting to arbitrary or unjustifiable discrimination in international trade taken under the guise of a measure formally within the terms of an exception listed in Article XX. The fundamental theme was the purpose and object of avoiding abuse or illegitimate use of the exceptions to substantive rules.33 In the event there was, as we know, more than one alternative course of action available to the United States in the circumstances of the US—​Gasoline case,34 and the Appellate Body considered that the US choice was incompatible with its chapeau obligations. In US—​Shrimp the Appellate Body again examined the ordinary meaning of the words of the chapeau, parsing the chapeau’s phrasing as it had done in US—​ Gasoline. The Appellate Body discussed the preamble to the WTO Agreement negotiated at the end of the Uruguay Round and its reference to sustainable



28

Ibid, [7.656]. Ibid, [7.658]–​[7.677] 30 Ibid, [7.659]. 31 US—​Gasoline, Appellate Body Report (n 4) 23. 32 Ibid, 25. 33 Ibid, 25. 34 Ibid, 25. 29

182  World Trade Organization Dispute Settlement development, believing this added colour, texture and shading to the interpretation of the GATT and other annexed agreements. Relevant also was the establishment of the WTO’s Committee on Trade and Environment.35 These observations played into the Appellate Body’s determination that the chapeau embodied WTO Members’ recognition of the need to maintain a balance of rights and obligations between Members’ rights to invoke the exceptions and the substantive rights of other Members as intended by the drafters.36 Against these interpretive considerations, the Appellate Body turned to the meaning of ‘unjustifiable discrimination’. In the US—​Shrimp case, the unjustifiability of US discrimination was most apparent in the US failure to pursue negotiations to establish internationally agreed means for protecting turtles, while its unjustifiable character was seen in the rigidity of US requirements which remained the same regardless of the prevailing conditions in exporting countries, and aspects of US certification processes.37 It was in the subsequent Brazil—​Measures Affecting Imports of Retreaded Tyres case that the rational relationship requirement came to be clearly identified. The European Communities emphasised in pleadings the need to take into account whether a measure appeared reasonable, predictable and foreseeable in light of its objective.38 In the view of the EC, a measure such as the exemption to MERCOSUR countries from Brazil’s import ban on retreaded tyres, which had the potential to undermine Brazil’s stated objectives, had to be regarded as unreasonable, contradictory and thus arbitrary.39 The Appellate Body observed that the reports in US—​Gasoline and US—​Shrimp demonstrated that an analysis of whether a measure’s application resulted in arbitrary or unjustifiable discrimination should focus on the cause of the discrimination or the rationale that had been put forward to explain it.40 In the view of the Appellate Body, still taking into account the function of the chapeau in preventing abuse of the general exceptions to the GATT, there would be arbitrary or unjustifiable discrimination where a measure was applied in a discriminatory manner and the reasons given for this bore no rational connection to the relevant objective/​s under the Article XX subparagraphs, or would go against those objectives.41

35 US—​Shrimp, Appellate Body Report (n 7) [144]—​[155]. 36 Ibid, [156]–​[157]. 37 Ibid, [161]–​[176], [177]–​[184]. See also United States—​Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia, Report of the Panel (15 June 2001) WT/​DS58/​RW, DSR 2001:XIII, 6529, [5.24]–​[5.143], [6.1], [7.1]; and United States—​Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia, Report of the Appellate Body (22 October 2001) WT/​DS58/​AB/​RW, DSR 2001:XIII, 6481, [111]–​[154]. 38 Brazil—​Retreaded Tyres, Appellate Body Report (n 10) [29]–​[30], [40], [220]. 39 Ibid, [31]. 40 Ibid, [225]–​[227]. 41 Ibid, [215], [224], [227].

Rational Relationships  183

2.  Article 2.1 of the TBT Agreement The jurisprudence under the non-​discrimination provision in Article 2.1 of the TBT Agreement has built on and developed the jurisprudence under the general exceptions chapeau.42 Like the Article XX chapeau, the preamble to the TBT Agreement contains reference to avoiding arbitrary or unjustifiable discrimination between countries where the same conditions prevail, and this has been taken into account in interpreting and applying Article 2.1.43 In this context the Appellate Body has suggested that ‘so long as the similarities and differences between Article 2.1 of the TBT Agreement and Article XX of the GATT 1994 are taken into account, it may be permissible to rely on reasoning developed in the context of one Agreement for purposes of conducting an analysis under the other’.44 Demonstrating that a measure is applied in a manner constituting arbitrary or unjustifiable discrimination will be one way to establish for the purposes of Article 2.1 of the TBT Agreement that differential treatment does not stem exclusively from a legitimate regulatory distinction, as discussed further below.45 At the same time it is important to bear in mind that the chapeau to Article XX centres specifically on the prohibition of arbitrary or unjustifiable discrimination and disguised restrictions on international trade, while Article 2.1 of the TBT Agreement remains broader. A panel should not turn too quickly to the possibility of relying 42 Art 2.1 TBT Agreement: ‘Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country.’ 43 Preamble to the TBT Agreement, sixth recital: Recognizing that no country should be prevented from taking measures necessary to ensure the quality of its exports, or for the protection of human, animal or plant life or health, of the environment, or for the prevention of deceptive practices, at the levels it considers appropriate, subject to the requirement that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade, and are otherwise in accordance with the provisions of this Agreement; 44 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Recourse to Article 21.5 of the DSU by Mexico, Report of the Appellate Body (20 November 2015) WT/​DS381/​AB/​RW, DSR 2015:X, 5133, [7.345], [7.347] (hereafter US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report). See also [7.8]. See further United States—​ Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Report of the Appellate Body (14 December 2018) WTDS381/​AB/​RW/​USA, WT/​DS381/​AB/​RW2, [7.12] (hereafter US—​Tuna II, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report). 45 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [7.31]; United States—​Certain Country of Origin Labelling (COOL) Requirements, Reports of the Appellate Body (29 June 2012) WT/​DS384/​AB/​R, WT/​DS386/​AB/​R, DSR 2012:V, 2449, [271] (hereafter US—​ COOL, Appellate Body Reports); and United States—​Certain Country of Origin Labelling (COOL) Requirements, Recourse to Article 21.5 of the DSU by Canada and Mexico, Appellate Body Reports (18 May 2015) WT/​DS384/​AB/​RW, WT/​DS386/​AB/​RW, DSR 2015:IV, 1725, [5.94] (hereafter US—​COOL, Appellate Body Reports Recourse to Article 21.5 of the DSU by Canada and Mexico, Appellate Body Reports) all cited in US—​Tuna II, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [6.10].

184  World Trade Organization Dispute Settlement on jurisprudence under Article XX of GATT and the ‘rational connection’ test in interpreting Article 2.1.46

3.  Articles 2.3 and 5.5 of the SPS Agreement As to the SPS Agreement, the Article 2.3 provision on discrimination incorporates Article XX chapeau language.47 It has been suggested that this language in Article 2.3 of the SPS Agreement be understood in a similar manner to the Article XX chapeau language.48 Understandings of ‘arbitrary or unjustifiable’ in Article 2.3 have accordingly been developed by referring to the application of this phrase under Article XX. For instance, based on the evidence in Korea—​ Import Bans, and Testing and Certification Requirements for Radionuclides the Panel could not see a rational connection between Korea’s absolute import bans and their stated purpose in protecting Korean consumers against the presence of radionuclides in food.49 Accordingly the Panel found the bans amounted to arbitrary or unjustifiable discrimination.50 Likewise the Panel found no rational connection between Korea’s additional testing requirements for Japanese food and the measure’s objectives, which also amounted to arbitrary and unjustifiable discrimination.51

46 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [7.100]. 47 Australia—​Measures Affecting Importation of Salmon, Report of the Appellate Body (20 October 1998) WT/​DS18/​AB/​R, DSR 1998:VIII, 3327, [251] (hereafter Australia—​Salmon, Appellate Body Report). Art 2.3 SPS Agreement: Members shall ensure that their sanitary and phytosanitary measures do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail, including between their own territory and that of other Members. Sanitary and phytosanitary measures shall not be applied in a manner which would constitute a disguised restriction on international trade. Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) (opened for signature 15 April 1994, entered into force 1 January 1995) 1867 UNTS 493, art 5.5. 48 India—​Measures Concerning the Importation of Certain Agricultural Products, Report of the Panel (14 October 2014) WT/​DS430/​R, DSR 2015:V, 2663, [7.400], [7.427] (hereafter India—​Agricultural Products, Panel Report); India—​Measures Concerning the Importation of Certain Agricultural Products, Report of the Appellate Body (4 June 2015) WT/​DS430/​AB/​R, DSR 2015:V, 2459, [5.260], [7.428], [7.429], [7.432]. See similarly Russian Federation—​Measures on the Importation of Live Pigs, Pork and Other Pig Products from the European Union, Report of the Panel (19 August 2016) WT/​DS475/​R, DSR 2017:II, 361, [7.1320]–​[7.1323] (hereafter Russia—​Pigs, Panel Report): ‘[T]‌he Panel will examine whether the regulatory distinction between the two situations/​sets of imports bears a rational connection to the stated objective of the measures.’ 49 Korea—​Import Bans, and Testing and Certification Requirements for Radionuclides, Report of the Panel (22 February 2018) WT/​DS495/​R, [7.343], [7.349], see also [7.344]–​[7.346] (hereafter Korea—​ Radionuclides, Panel Report). 50 Ibid, [7.350], [8.3]. 51 Ibid, [7.351]–​[7.355], [8.3]. Although the Appellate Body overturned the findings in relation to both the bans and the additional measures because the Panel had focused only on actual contamination levels in food and had failed to take into account territorial conditions affecting the potential for contamination.

Rational Relationships  185 Similarly, in the India—​ Measures Concerning the Importation of Certain Agricultural Products case, the Panel found that the inflexibility of India’s SPS measures did not connect with the rationale that India had put forward to try and explain their discriminatory effect. India had argued that the risks associated with an outbreak of notifiable avian influenza connected with imported products always differed from those associated with domestic outbreaks. The Panel rejected this, and found that the discriminatory effect of India’s measure in circumstances where there was no risk associated with a foreign outbreak remained unaccounted for by its rationale.52 In Russian Federation—​Measures on the Importation of Live Pigs, Pork and Other Pig Products from the European Union the Panel found that a practice of refusing to accept imports from disease-​free areas within the European Union (EU) while allowing intra-​Russian trade from disease-​free areas did not bear the required rational connection with Russia’s regulatory objective of preventing re-​entry and further spread of swine fever.53 The Article XX cases are also taken as guidance for applying the provision on discrimination in Article 5.5 of the SPS Agreement,54 although it is important to bear in mind that the crafting of this provision differs, as it refers to avoiding arbitrary or unjustifiable distinctions in levels of protection against sanitary or phytosanitary risks.55 In the SPS context panels have often begun with a more traditional or static interpretive approach in ascertaining what might constitute ‘arbitrary or unjustifiable’ distinctions in levels of protection. For instance the Panel in United States—​Certain Measures Affecting Imports of Poultry from China, in its discussion of the ordinary meaning of the phrase ‘arbitrary or unjustifiable’, began by examining the dictionary definitions of the terms ‘arbitrary’ and ‘unjustifiable’, recalling the customary rules of interpretation set out in the Vienna Convention on the Law of Treaties. The Panel observed that a dictionary definition of the term ‘arbitrary’ referred to action ‘based on mere opinion or preference as opposed to the real nature of things’, action that was ‘capricious, unpredictable, inconsistent’. The term ‘unjustifiable’ was defined as ‘not justifiable, indefensible’ with ‘justifiable’ meaning 52 India—​Agricultural Products, Panel Report (n 48) [7.435]. See also [7.457]. See further United States—​Measures Affecting the Importation of Animals, Meat and Other Animal Products from Argentina, Report of the Panel (24 July 2015) WT/​DS447/​R, DSR 2015:VIII, 4085, [7.574], [7.589]–​[7.590], [7.595], [7.612] (hereafter US—​Animals, Panel Report). 53 Russia—​Pigs, Panel Report (n 48) [7.1347]–​[7.1362]. See especially [7.1351]. 54 United States—​Certain Measures Affecting Imports of Poultry from China, Report of the Panel (29 September 2010) WT/​DS392/​R, DSR 2010:V, 1909, [7.260]–​[7.262] (hereafter US–​Poultry, Panel Report). 55 Art 5.5 SPS Agreement: With the objective of achieving consistency in the application of the concept of appropriate level of sanitary or phytosanitary protection against risks to human life or health, or to animal and plant life or health, each Member shall avoid arbitrary or unjustifiable distinctions in the levels it considers to be appropriate in different situations, if such distinctions result in discrimination or a disguised restriction on international trade . . .

186  World Trade Organization Dispute Settlement ‘[c]‌apable of being legally or morally justified or shown to be just, righteous, or innocent; defensible’ and ‘[c]apable of being maintained, defended, or made good’.56 However, the US—​Poultry Panel went on to recall Appellate Body reasoning on the term ‘arbitrary or unjustifiable discrimination’ in the Article XX chapeau and to focus on whether the justification for the distinctions bore a rational relationship to the US measures’ objective.57 The US case here was fatally undermined by the failure to have based its measures on a risk assessment. The Panel found the US poultry measures to constitute arbitrary or unjustifiable discrimination contrary to Article 2.3 and Article 5.5.58

4.  Divergent policy objectives Naturally enough, the rational connection test has posed difficulties where a measure is crafted so as to allow a WTO Member to pursue divergent policy objectives. For instance, a measure may contain certain exceptions so that the measure will not apply in given situations, and the reasons for these exceptions may be unconnected with the reasons for the measure itself, and even diverge from them or cut across them. In the European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products case an EU ban on seal products for animal welfare purposes exempted Inuit and indigenous peoples.59 Might the effects of such exceptions constitute arbitrary and unjustifiable discrimination such that a WTO Member is unable to rely on Article XX? This dual objectives problem was perturbing, and caused considerable concern.60 As we shall see, a solution to the difficulty posed by a rational connection requirement was found when the Appellate Body firstly re-​emphasised that the test might only require that discrimination be ‘reconcilable with’ rather than rationally related to a measure’s objective, and secondly instituted an increasing emphasis on the significance of the particular circumstances of a case. These dynamics can be analysed by looking at the developments that took place in Brazil—​Retreaded 56 US—​Poultry, Panel Report (n 54) [7.259]. See also Russia—​Pigs, Panel Report (n 48) [7.1320]; US—​Animals, Panel Report (n 52) [7.587], [7.259]. 57 US—​Poultry, Panel Report (n 54) [7.260]–​[7.262] citing Australia—​Measures Affecting Importation of Salmon, Report of the Panel (12 June 1998) WT/​DS18/​R, DSR 1998:VIII, 3407, [8.133] (hereafter Australia—​Salmon, Panel Report); and Australia—​Salmon, Appellate Body Report (n 47). See likewise US—​Animals, Panel Report (n 52) [7.574], [7.589]–​[7.595], [7.607]-​[7.613]; Russia—​Pigs, Panel Report (n 48) [7.1321]–​[7.1323], [7.1347], [7.1393]. 58 US—​Poultry, Panel Report (n 54) [7.294], [7.319]. 59 European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products, Reports of the Panel (25 November 2013) WT/​DS400/​R, WT/​DS401/​R, DSR 2014:II, 365 (hereafter EC—​Seal Products, Panel Reports); and European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products, Reports of the Appellate Body (22 May 2014) WT/​DS400/​AB/​R, WT/​ DS401/​AB/​R, DSR 2014:I, 7 (hereafter EC—​Seal Products, Appellate Body Reports). 60 For one critique see Lorand Bartels, ‘The Chapeau of the General Exceptions in the WTO GATT and GATS Agreements: A Reconstruction’ (2015) 109(1) AJIL 95, 117–​120.

Rational Relationships  187 Tyres, EC—​Seal Products and United States—​Measures concerning the Importation, Marketing and Sale of Tuna and Tuna Products (US—​Tuna II). In response to the facts before it in Brazil—​Retreaded Tyres the Appellate Body put a relatively strong emphasis on the core point that discrimination will be arbitrary or unjustifiable when the reasons given for the discrimination bear no rational connection to a measure’s objective.61 In EC—​Seal Products the Appellate Body softened this emphasis on the rational connection factor, pulling the requirement back and laying a greater emphasis on the need only, as mentioned in US—​Shrimp, for the rationale for discrimination to be ‘reconcilable with’ the respondent’s policy objective.62 Arguably this remained insufficient to deal with the dual objectives problem. Eventually in the US—​Tuna II Article 21.5 proceedings the Appellate Body further softened the concept of ‘rational connection’ by making it quite clear that the nature of the connection was to be understood in the ‘particular circumstances of the case’.

a) Brazil—​Measures Affecting Imports of Retreaded Tyres The rational connection element was central in Brazil—​Retreaded Tyres, and the case exposed difficulties with the rational connection test where a WTO Member seeks to pursue divergent objectives. Readers will recall that Brazil had introduced restrictions on the importation of retreaded tyres with the aim of reducing the number of used retreaded tyres in the country.63 Retreaded tyres were problematic because when their useful life was over they accumulated as waste, providing mosquito breeding grounds and contributing to the problem of mosquito-​borne diseases including dengue fever, yellow fever and malaria, while the disposal of tyres by burning created toxic emissions.64 There were two sources of discrimination in Brazil—​Retreaded Tyres: (a) an exemption for members of the Mercado Común del Sur (MERCOSUR) in order to give effect to Brazil’s obligations under the Montevideo Convention, following a decision of a MERCOSUR arbitral tribunal and (b) an exemption for imports of used tyres mandated by Brazilian court injunction. In the view of the Appellate Body both the import of used tyres under court injunctions and exemption for MERCOSUR Trading Partners to Brazil’s ban on retreaded tyres had resulted in the ban being applied in a manner constituting arbitrary or unjustifiable discrimination and therefore Brazil could not rely on Article XX to justify its measures and consistency with Article XI:1 of GATT.65 According to the Appellate Body, it would be difficult to understand how discrimination could be viewed as complying with 61 Brazil—​Retreaded Tyres, Appellate Body Report (n 10) [227]. 62 US—​Shrimp, Appellate Body Report (n 7) [165] mentioned also in Brazil—​Retreaded Tyres, Appellate Body Report (n 10) [227]; EC—​Seal Products, Appellate Body Reports (n 59) [5.306], [5.318]. 63 Chapter Five, section E 1 c). 64 Ibid. 65 Brazil—​Retreaded Tyres, Appellate Body Report (n 10) [252].

188  World Trade Organization Dispute Settlement the chapeau of Article XX when the reasons given for the discrimination bore no rational connection to a measure’s justified objective, or would go against that objective.66 Accordingly in Brazil—​Retreaded Tyres the Appellate Body considered there to be arbitrary or unjustifiable discrimination in relation to used tyre imports because of the fact that there was no relationship between the rationale for this discrimination and the ban’s objective.67 In relation to the ruling issued by the MERCOSUR arbitral tribunal the Appellate Body took the view that this ruling had resulted in Brazil’s import ban being applied in a manner constituting arbitrary or unjustifiable discrimination because the discrimination bore no relationship to the legitimate objective pursued by the ban and even went against that objective, to however small a degree.68 The Appellate Body rejected at the same time the Panel’s reasoning that the discrimination was justifiable because the volume of MERCOSUR imports was too low to undermine the ban’s health and environmental objectives. Importantly the Appellate Body observed that the unacceptable discrimination in this instance did not necessarily result from a conflict between the MERCOSUR provisions and GATT 1994. The MERCOSUR Tribunal had heard no argument from Brazil that its import ban was potentially justifiable to protect human, animal and plant health under the MERCOSUR equivalent to Article XX(b) of GATT 1994, Article 50(d) of the Treaty of Montevideo.69 In regard to the domestic court injunction, naturally, as the Panel had also said, it was not a capricious or random act to comply with the ruling of a judicial or quasi-​ judicial body. However, discrimination resulting from a rational decision could still be arbitrary or unjustifiable where the rationale for the discrimination bore no relationship to or went against the objective of a measure as accepted under one of the Article XX subparagraphs.70 The reasoning in the Brazil—​Retreaded Tyres decision seemed to raise potential difficulties. Why should discrimination be arbitrary simply because its rationale lies elsewhere than in the objective pursued under the Article XX exceptions? What would the situation be where discrimination in the application of an environmental measure could be justified for instance by human rights considerations? Disputants modified their arguments in subsequent cases to present them in a light they hoped would satisfy the rational connection test. In US—​Clove Cigarettes, discussed earlier in Chapter Five, the United States admitted that it had more than one objective in relation to clove cigarettes and menthol cigarettes. However, as the

66 Ibid, [227]. 67 Ibid, [246]. 68 Ibid, [228], [233], [252]. 69 Ibid, [233] and see at [234]. Treaty of Montevideo: Instrument Establishing the Latin American Integration Association (ALADI) (opened for signature 12 August 1980, entered into force 18 March 1981) 1329 UNTS 225. 70 Brazil—​Retreaded Tyres, Appellate Body Report (n 10) [232].

Rational Relationships  189 United States described them both the objectives could have been considered to include health-​related aims. The United States argued that its ban on clove cigarettes gave effect to the objective of deterring youth smoking, while, in effect, the decision not to ban menthol cigarettes pursued the objective of avoiding the potential negative consequences associated with banning products to which tens of millions of adults are chemically and psychologically addicted.71 Additionally the United States wished to avoid the development of a black market in menthol cigarettes. The US—​Clove Cigarettes Panel commented that ‘we consider that it would be entirely possible, both as a factual and a legal matter, for a single technical regulation to pursue more than one objective’.72 However, the Panel rejected the idea that the US desire to avoid the potential negative consequences of a ban on menthol cigarettes was an objective of the US regulation. Rather, it was if anything a justification for excluding menthol cigarettes from the ban.73

b) European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products Jurisprudence remained in a difficult state when proceedings were initiated in the EC—​Seal Products case. The EC—​Seal Products case concerned a ban on the importation and sale of seal products adopted by the EU in 2009,74 defended against complaints in the WTO by Canada and Norway on the basis the ban had been adopted to protect public morals.75 Fundamentally, the concern was that seal products could come from seals killed in ways causing pain, distress, fear and other forms of suffering. The EU’s ban incorporated two important exceptions. The first exception allowed seal products from indigenous communities’ subsistence hunts. The second allowed seal products produced from seals killed in marine resource management hunts. The Inuit and indigenous communities exceptions in particular privileged Greenlandic exporters’ access to the European market. The EC—​Seal Products Panel found the EC seal regime inconsistent with the non-​ discrimination provisions in Articles I:1 and III:4 of the GATT 1994 because of these exceptions.

71 Chapter Five, section 2 a). US—​Clove Cigarettes, Panel Report (n 17) Annex D-​2, Executive Summary of Opening Oral Statement of the United States at the First Substantive Meeting, [19]; see also US—​Clove Cigarettes, Panel Report (n 17) [7.312], [7.339] citing Answers of the United States of America to the First Set of Questions from the Panel to the Parties (6 January 2011) 41–​42, Panel Question 60 and Answers of the United States of America to the Second Set of Questions from the Panel to the Parties (3 March 2011) 25–​28, Panel Question 100. C.f. Indonesian Pleadings, US—​Clove Cigarettes, Panel Report (n 17) [7.339] citing Annex D-​1, Executive Summary of the Opening Statement of Indonesia at the First Substantive Meeting, [7]‌. 72 US—​Clove Cigarettes, Panel Report (n 17) [7.342]. 73 Ibid, [7.342]. 74 Regulation (EC) 1007/​2009 on trade in seal products [2009] OJ L286/​36; Commission Regulation (EU) 737/​2010 laying down detailed rules for the implementation of Regulation (EC) No 1007/​2009 of the European Parliament and of the Council on trade in seal products [2010] OJ L216/​1. 75 EC—​Seal Products, Panel Reports (n 59); EC—​Seal Products, Appellate Body Reports (n 59).

190  World Trade Organization Dispute Settlement The Panel’s conclusion that the EU seal regime was inconsistent with the non-​ discrimination disciplines in Articles I:1 and III:4 of GATT 1994 was not disturbed on appeal,76 although additional findings that the Panel had made under the TBT Agreement were set aside on the basis that the TBT Agreement did not apply. The Appellate Body went on to consider whether the EU seal regime was justified under Article XX(a) of GATT 1994. The Appellate Body reversed the Panel’s findings that the EU seal regime was inconsistent with the chapeau to Article XX on the basis that the Panel had applied an incorrect legal test by relying on its analyses and findings under Article 2.1 of the TBT Agreement to determine compatibility with the chapeau. The Appellate Body then completed the analysis and found that the EU had not demonstrated that its regime met the chapeau’s requirements.77 As indicated earlier, in the EC—​Seal Products case, the Appellate Body applied the rational connection requirement so that it was necessary only for the discrimination to be reconcilable with a respondent’s policy objective rather than requiring that the EU establish more fully the existence of a rational relationship between the discrimination and the policy objective. The EC explained well the problem associated with regulating WTO Members’ inclusion of exceptions in their Article XX measures. Exceptions were often not rationally connected to a measure’s main purpose. Typically there would be a disconnect between the rationale for the exceptions and the main objective pursued by the Article XX measure, where exceptions had been inserted to achieve a balance between the main objective and other legitimate objectives. There was nothing arbitrary or unjustifiable in this.78 Accordingly the EC argued that an investigation of the reason for discrimination should not be limited to a search for a rational connection with the EU seal regime’s main objective. As the EC—​Seal Products Panel had realised, other factors might require consideration.79 Importantly, the Appellate Body observed in EC—​Seal Products that looking at the relationship between the discrimination present in a case and a Member’s policy objective was not the only way to assess whether discrimination was arbitrary and unjustifiable. Additional factors might be relevant.80 The Appellate Body criticised in several respects the poor design of the EU seal regime’s exception for seal products from indigenous communities’ subsistence hunts. Flaws included the regime’s failure to define ‘subsistence’ and to address clearly the degree to which commercialisation of products from indigenous subsistence hunts was permitted. Seal products from what were more properly characterised as 76 EC—​Seal Products, Panel Reports (n 59) [7.592]–​[7.600], [7.604]–​[7.609], [8.3]. 77 Ibid, [7.649]–​[7.651]; and EC—​Seal Products, Appellate Body Reports (n 59) [5.310]–​[5.313], [6.1(d)(i)], [6.1(d)(ii)]. 78 EC—​Seal Products, Appellate Body Reports (n 59) [2.149]. 79 Ibid, [2.146], [2.148], [5.309]. 80 Ibid, [5.321].

Rational Relationships  191 ‘commercial’ hunts could enter the EU market under the indigenous communities exception. These factors, together with the regime’s different treatment of Inuit groups in different countries, specifically a failure to try and facilitate equally their access to the regime,81 led to the finding that the EU had not demonstrated that the regime had been designed and applied in a manner which would not constitute a means of arbitrary or unjustifiable discrimination under the chapeau.82 We can see here that the Appellate Body was employing a form of multifaceted design-​test, observing that whether a measure is applied in a particular manner ‘can most often be discerned from the design, the architecture and the revealing structure of a measure’.83 Considering these three elements would enable determination of whether the measure ‘in its actual or expected application’ constituted a means of arbitrary or unjustifiable discrimination inconsistent with the chapeau.84 The Appellate Body found for the complainants. Together with the weaknesses in the regime’s design and application referred to above, the EU’s failure satisfactorily to explain how the way in which its measure was applied could be ‘reconciled with’ the regime’s objectives meant that the EU lost the case.85 The EU had not demonstrated for instance why the need to protect Inuit social and economic interests meant the EU could not do anything further to address seal welfare in the context of indigenous communities’ subsistence hunts.86 However, the EC—​Seal Products decision left onlookers with concerns that the WTO’s Article XX discrimination jurisprudence had not yet dealt appropriately with measures reconciling divergent policy objectives.

c) United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products (US—​Tuna II) In due course the Article XX rational connection test was further rehabilitated in a way that adapted it better for situations where a WTO Member’s measure is crafted to address divergent policy objectives. The Appellate Body allowed that the ‘particular circumstances’ of a case must be considered when looking to see whether a measure is applied in a way that would constitute arbitrary or unjustifiable 81 Ibid, [5.322]–​[5.338]. 82 Ibid, [5.302] citing Japan—​Taxes on Alcoholic Beverages, Report of the Appellate Body (4 October 1996) WT/​DS8/​AB/​R, WT/​DS10/​AB/​R, WT/​DS11/​AB/​R, DSR 1996:I, 97; ibid, [5.338]–​[5.339], [6.1(d)(ii)]. 83 Ibid, [5.302]. 84 Ibid, [5.302]. Design testing is used in WTO law for a range of purposes and a range of contexts. Under art 2.2 of the TBT Agreement the test for a detrimental impact on competitive opportunities likewise involves scrutinising a regulation’s design, architecture, revealing structure, operation, application, and even-​handedness. See further EC—​Seal Products, Panel Reports (n 59) [7.597] on detrimental effect. 85 For a summary on the point, Peter Van den Bossche and Werner Zdouc, The Law and Policy of the World Trade Organization: Text, Cases and Materials (CUP 2017) 620. 86 EC—​Seal Products, Appellate Body Reports (n 59) [5.320], [5.338].

192  World Trade Organization Dispute Settlement discrimination. As it happens, it was in the context of a dispute arising under both the TBT Agreement and the GATT that the Appellate Body had the opportunity to emphasise that the particular circumstances of the case and the nature of the measure in question will want to be considered when looking for arbitrary or unjustifiable discrimination. Readers will recall that the jurisprudence under Article XX of GATT and under Article 2.1 of the TBT Agreement runs together and the considerations relevant under Article XX have been considered valid under Article 2.1 of the TBT Agreement. We have already seen that the Appellate Body report in EC—​Seal Products left room for additional factors going beyond the question of whether discrimination can be reconciled with a respondent’s policy objective in the analysis of whether the discrimination is arbitrary or unjustifiable.87 The Appellate Body has subsequently underlined that the test for arbitrary or unjustifiable discrimination is not a one-​factor test. In the Article 21.5 proceedings in US—​Tuna II, discussed further below, the Appellate Body held specifically that a panel carrying out an Article XX style analysis ‘does not err by assessing whether the detrimental impact can be reconciled with, or is rationally related to, the policy pursued by the measure at issue, so long as, in doing so, it does not preclude consideration of other factors that may also be relevant to the analysis’.88 The Appellate Body considered that the Panel in that case had been correct in recognising that additional factors might be relevant,89 and the Appellate Body rejected US arguments that the Panel had erred in its articulation of the applicable legal standard.90 In the event the Appellate Body found that the United States had failed to establish the consistency of its amended tuna measure with the Article XX chapeau prohibition on arbitrary or unjustifiable discrimination on the basis that aspects of the measure’s design were difficult to reconcile with the objective of protecting dolphins.91 The United States had not satisfactorily explained why provisions triggering a requirement for fisheries observer certification differed as between fisheries. This same failing showed a lack of even-​handedness, grounding a parallel finding that the US amended tuna measure was inconsistent with Article 2.1 of the TBT Agreement on the basis it could not be said to stem exclusively from a legitimate regulatory distinction.92 The place of the ‘stems exclusively’ requirement and the role of the even-​handedness test are addressed in the following sections.

87 Ibid, [5.306], [5.318]. 88 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [7.95]. 89 Ibid, [7.85], [7.93], [7.78]. 90 Ibid, [7.95], [7.99], [8.1]. See also US—​Tuna II, Appellate Body Report [7.316]–​[7.317], [7.329], [7.343]. 91 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [7.355], [7.356], [7.359], [8.1(d)(iii)]. 92 Ibid, [7.258]–​[7.260], [7.266], [8.1(a)(viii)].

Rational Relationships  193

5.  ‘Stems exclusively’ from a legitimate regulatory distinction Complementing the rational relationship requirement under the general exceptions in the GATT and GATS, a further feature of WTO non-​discrimination jurisprudence has emerged from the cluster of TBT cases decided by the Appellate Body from 2012 onwards: the possibility that the otherwise discriminatory effects of a trade-​inhibiting measure may be justified, under Article 2.1 of the TBT Agreement, if they ‘stem exclusively’ from a legitimate regulatory distinction. The ‘stems exclusively’ test introduces a new regulatory test, best understood in light of the cases as requiring internal rationality in WTO Members’ regulatory measures as a way to ascertain their consistency with the non-​discrimination provision in Article 2.1 of the TBT Agreement. The EC welcomed the Appellate Body’s clarification that Article 2.1 can be understood to permit differential effects stemming exclusively from legitimate regulatory distinctions; others expressed concerns about the allocation of the burden of proof.93 Increasingly, adjudicators look to the responding party to provide information that will help them determine a case.94 The application of the ‘stems exclusively’ test was relatively straightforward in the first case in which it appears, the US—​Clove Cigarettes case. Subsequently in US—​COOL the Appellate Body considered further the matter of how to assess whether differential treatment of imported products stems exclusively from a legitimate regulatory distinction. The Appellate Body found itself stretching for language to explain its reasoning and in the course of its exegesis mentioned the idea of disproportionality, but it appeared that in fact the Appellate Body was examining whether the US measure was characterised by internal rationality. That the ‘stems exclusively’ test will require internal rationality, in the sense of a rational relationship between a measure’s regulatory distinctions and its objectives, is brought through more effectively and without reference to disproportionality in the Appellate Body Report on the occasion of Mexico’s second recourse to Article 21.5 in the US—​Tuna II proceedings.95

a) United States—​Measures Affecting the Production and Sale of Clove Cigarettes Article 2.1 of the TBT Agreement provides that imported products must be accorded treatment no less favourable than that accorded to like products of national origin and like products originating in any other country.96 The Appellate Body held in US—​Clove Cigarettes that where differing treatment of imported 93 WTO (Dispute Settlement Body), ‘Minutes of Meeting held on 13 June 2012’ (31 July 2012) WT/​ DSB/​M/​317, [1]‌–​[37], ‘United States—​Measures concerning the importation, marketing and sale of tuna and tuna products’. On allocation of the burden of proof, Chapter Ten, section B 1. 94 E.g. US—​COOL, Appellate Body Reports (n 45), Chapter Six, section A 5 b). 95 US—​Tuna II, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44). 96 Art 2.1 TBT Agreement, reproduced here for ease of reference:

194  World Trade Organization Dispute Settlement products ‘stems exclusively from a legitimate regulatory distinction’ it will not constitute ‘treatment less favourable’ and the WTO Member in question will not have breached its Article 2.1 obligation.97 In reaching this view the Appellate Body employed a clearly reasoned interpretive approach, relying partly on the principle of effet utile, taking the view that any interpretation of Article 2.1 needed to ensure that effect could still be given to the provision in Article 2.2 of the TBT Agreement, according to which obstacles to international trade are permissible as long as they are not more trade restrictive than necessary to fulfil a legitimate objective.98 The Appellate Body also noted that Article 2.2 provided context for the interpretation of Article 2.1.99 The Appellate Body’s reasoning was supported by reference to the sixth recital of the preamble to the TBT Agreement which made it clear that WTO Members were permitted to pursue objectives including the protection of human, animal or plant life or health or of the environment, provided they were not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination.100 The Agreement’s object and purpose was further considered to weigh in favour of the Appellate Body’s interpretation.101 Accordingly the Appellate Body concluded that in the absence of de jure discrimination against imports, analysis would be needed to determine whether any detrimental impact on a group of imported products ‘stemmed exclusively’ from a legitimate regulatory distinction rather than reflecting discrimination by the importing country against those products.102 The Appellate Body’s pronouncement has been subject to some criticism. There has been a suggestion that the inherent logic of the TBT Agreement indicates it is incorrect to be carrying out an Article 2.1 non-​discrimination analysis prior to or in isolation from an Article 2.2 necessity analysis, taking into account also that the analyses would not take place in this sequence under Article XX of GATT. On this

Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country. 97 US—​Clove Cigarettes, Panel Report (n 17); United States—Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Appellate Body (22 March 2012) WT/DS406/AB/R, DSR 2012:XI, 5751 (hereafter US—Clove Cigarettes, Appellate Body Report) 98 US—​Clove Cigarettes, Appellate Body Report (n 97) [171]. 99 Art 2.2 TBT Agreement: Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-​restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-​fulfilment would create. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-​uses of products. 100 US—Clove Cigarettes, Appellate Body Report (n 97), [172], [173]. 101 Ibid, [174]–​[175]. 102 Ibid, [182].

Rational Relationships  195 approach an Article 2.2 assessment of the measure’s necessity would come first, including an examination of whether measures are appropriately calibrated to risk. The Article 2.1 non-​discrimination analysis would focus on a measure’s even-​ handedness, ‘likeness’ in the marketplace being beside the point in the context of technical regulations adopted by governments to help correct consumer preferences. The requirement for detrimental impact to stem exclusively from a legitimate regulatory distinction has been described as a demanding and unwarranted test, even a ‘quixotic quest’, in the context of a non-​discrimination analysis.103 There have been concerns particularly about the effect for developing countries whose exports continue to encounter regulatory trade barriers. Interpreting Article 2.1 in a way that allowed such differential treatment has been said to reintroduce into the analysis of likeness the previously discarded ‘aims and effects’ test, as well as potentially to allow a raft of distinctions based on products’ processes and production methods.104 However, there is plainly an argument that the Appellate Body’s understanding of Article 2.1 is well supported by interpretive principle and indeed that it operates to ‘make whole’ the TBT Agreement so that the Agreement’s provisions can work together. This ‘making whole’ leaves open difficult questions such as whether the making available to consumers of product information would be a basis for a legitimate regulatory distinction,105 and more generally whether an Article 2.2 legitimate objective must be present in order to find an Article 2.1 legitimate regulatory distinction.106 Where the interpretation takes on an interstitial hue may not be so much in the incorporation into Article 2.1 of the general proposition that differential treatment must be grounded in legitimate regulatory concerns. Rather it may lie in the inclusion of the phrase ‘stems exclusively from’, denoting the relationship that is required between differential treatment and a legitimate regulatory distinction. The Appellate Body seems to have coined this phrase as the best expression of the logic of the TBT Agreement as the Appellate Body perceived it. The phrase emerges specifically in the Appellate Body’s description of what the Appellate Body suggests is the object and purpose of the TBT Agreement—​to strike a balance between the objective of trade liberalisation and WTO Members’ right to regulate. The Appellate Body says this object and purpose suggest that Article 2.1 should not be understood to prohibit detrimental impact where this impact stems exclusively from legitimate regulatory distinctions.107 As a description of the TBT Agreement’s 103 Petros C Mavroidis, ‘Last Mile for Tuna (to a Safe Harbor) What is the TBT Agreement All About?’ (2019) 30(1) EJIL 279, including at 290–​293, 299, 300. 104 Interview 27 September 2015; Interview 29 September 2015. C.f. Brazil argued that assessments of likeness should be informed by a measure’s legitimate objectives. US—​Clove Cigarettes, Appellate Body Report (n 97) [63]–​[64]. See in contrast Mexico’s arguments, [69], and those of Norway, [73]. 105 Canada has argued to the contrary US—​COOL, Appellate Body Reports (n 45) [61]–​[62], [330]. 106 The United States and Japan have argued that this is not necessary. Ibid, [31], [229], [329]. 107 US—​Clove Cigarettes, Appellate Body Report (n 97) [174], [175].

196  World Trade Organization Dispute Settlement object and purpose the casual reader might find this a little unexpected. The TBT Agreement’s object and purpose could perhaps instead be described in terms of bringing greater discipline to Members’ maintenance of technical barriers to trade. However, the Appellate Body chooses to describe the TBT Agreement’s object and purpose rather in terms of this balance between competing categories of interests. The Appellate Body may have been responding to the point in EU pleadings that the relationship between trade and regulation was complex, the problem being to distinguish between the exercise of regulatory autonomy that is acceptable and that which is not.108 Clearly it is true that the TBT Agreement is intended to facilitate the striking of a balance between trade liberalisation and the right to regulate, even though not all would see this as the Agreement’s main objective. The ‘stems exclusively’ test balances WTO Members’ competing interests in free trade and regulation through reliance on a form of design testing. The Appellate Body explained in US—​Clove Cigarettes that in determining whether detrimental impact stems exclusively from a legitimate regulatory distinction a panel ‘must carefully scrutinize the particular circumstances of the case, that is, the design, architecture, revealing structure, operation, and application of the technical regulation at issue, and, in particular, whether that technical regulation is even-​handed, in order to determine whether it discriminates against the group of imported products’.109 The basic facts appear to have spoken volumes in the US—​Clove Cigarettes case. The record showed that menthol cigarettes accounted for about 26% of the total US cigarette market, in particular three domestic brands of menthol cigarettes. The Appellate Body took the view that: ‘Given the above, the design, architecture, revealing structure, operation, and application of Section 907(a)(1)(A) strongly suggest that the detrimental impact on competitive opportunities for clove cigarettes reflects discrimination against the group of like products imported from Indonesia.’110 The Appellate Body was clearly not persuaded that this detrimental impact stemmed from a legitimate regulatory distinction. Menthol cigarettes and clove cigarettes shared the same characteristics of appeal to young people. Furthermore, the reasons given by the United States for exempting menthol cigarettes did not demonstrate that the detrimental impact on competitive opportunities stemmed from a legitimate regulatory distinction. As mentioned above, the reasons given by the United States for its menthol cigarettes exemption were ‘the impact on the US healthcare system associated with treating “millions” of menthol cigarette smokers affected by withdrawal symptoms’ and ‘the risk of development of a black market and smuggling of menthol cigarettes to supply the needs of menthol cigarette

108 Ibid, [67]. 109 Ibid, [182], [215]. See also US—​Tuna II, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [6.10]. 110 US—​Clove Cigarettes, Appellate Body Report (n 97) [223]–​[224].

Rational Relationships  197 smokers’. The Appellate Body noted that regular unflavoured cigarettes would remain available on the market in the United States. This undermined the US arguments. It was not clear that the risks that the United States claimed to minimise by continuing to permit the sale of menthol cigarettes would actually eventuate if menthol cigarettes were to be banned, give that regular cigarettes would continue to be sold. The Appellate Body therefore agreed with the Panel that the US regulation accorded ‘treatment less favourable’ to clove cigarettes that did not stem exclusively from a legitimate regulatory distinction. On this basis the Appellate Body upheld the Panel’s finding of inconsistency with Article 2.1.111

b) United States—​Certain Country of Origin Labelling (COOL) Requirements The character of the ‘stems exclusively’ test as a requirement for regulatory measures’ internal rationality became clearer in the United States—​Certain Country of Origin Labelling (COOL) Requirements case. The US country of origin labelling measure disputed in US—​COOL was a technical regulation requiring retailers to use ‘country of origin labelling’ (COOL) for commodities including meat and other agricultural products.112 The labelling system for meat took into account that livestock could be born, raised and slaughtered in different countries—​thus having more than one country of origin. This was reflected in a complex set of four different labelling categories. Labels designating meat as possessing US origin and reading ‘Product of the US’ could be granted only to meat from animals ‘exclusively born, raised, and slaughtered in the United States’.113 Where animals were born or raised elsewhere but slaughtered in the United States all countries of origin were to be identified, with the United States appearing first only in certain circumstances. This labelling system was accompanied by recordkeeping, auditing and verification requirements applying to producers, providing retailers with information enabling them to determine the correct label to apply. Among retailers, the scheme exempted restaurants, cafeterias and establishments providing ready-​to-​eat foods, and commodities that were ingredients in processed food items, including cooked, cured, smoked and restructured beef and pork.114 Canada and Mexico challenged the US COOL measure as it applied to beef and pork, although the measure also covered lamb, chicken, goat meat, fish, shellfish, perishable agricultural commodities, peanuts, pecans, ginseng and macadamia nuts. The complainants argued strongly that the COOL measure was intended to protect US domestic industry. The United States defended the COOL measure as 111 Ibid, [225]–​[226], [234]. 112 United States—​Certain Country of Origin Labelling (COOL) Requirements, Reports of the Panel (18 November 2011) WT/​DS384/​R, WT/​DS386/​R DSR 2012:VI, 2745 (hereafter US—​COOL, Panel Reports); US—​COOL, Appellate Body Reports (n 45). 113 US—​COOL, Panel Reports (n 112) [7.100]. 114 US—​COOL, Appellate Body Reports (n 45) [3ff], [239ff].

198  World Trade Organization Dispute Settlement a measure to provide consumer information on origin. The Panel found the US measure inconsistent with Article 2.1 and 2.2 of the TBT Agreement. The Panel’s Article 2.2 finding against the United States was overturned on appeal, leaving open the question of whether the US measure was in breach of that provision as the Appellate Body was unable to complete the analysis. As to Article 2.1, the Panel concluded that the measure’s recordkeeping and verification requirements for all practical purposes necessitated the segregation of meat according to origin. On an analysis of five business scenarios, the Panel then found there was an incentive for US producers to process only domestic livestock, and a reduction in the competitive opportunities of imported livestock, constituting less favourable treatment and a violation of Article 2.1.115 The Appellate Body agreed with the Panel’s finding that the US COOL measure treated like products differently, both de jure and de facto, through the modification of conditions of competition to the detriment of imported livestock.116 However, the Appellate Body reports in US—​Clove Cigarettes and also US—​Tuna II117 having come down in the interim between the Panel Report and the Appellate Body Report in the original proceedings in the US—​COOL case, the Appellate Body redid the analysis of whether the US COOL measure was inconsistent with Article 2.1, incorporating consideration of whether the different treatment accorded to imported meat stemmed exclusively from a legitimate regulatory distinction. The Appellate Body set out to scrutinise the particular circumstances, including the design, architecture, revealing structure, operation and application of the COOL measure. The Appellate Body decided to begin by considering the recordkeeping and verification requirements in the US COOL measure, and indeed this is where the analysis ended, the Appellate Body having found detrimental impact that was discriminatory and did not stem from a legitimate regulatory distinction. Thus the Appellate Body Report confirmed that the US COOL measure was inconsistent with Article 2.1.118 Going into the Appellate Body’s finding more specifically, we see that, ‘taking account of the overall architecture of the COOL measure and the way in which it operates and is applied’,119 the Appellate Body found that ‘the informational requirements imposed on upstream producers under the COOL measure are disproportionate as compared to the level of information communicated to consumers through the mandatory retail labels’. Considerations leading to this conclusion included the significantly greater detail and accuracy of the information 115 US—​COOL, Panel Reports (n 112) [7.327], [7.333]–​[7.350], [7.357], [7.372], [7.381], [7.420], [7.548]. 116 US—​COOL, Appellate Body Reports (n 45) [496(a)(i)], [496(a)(ii)]. 117 US—​Clove Cigarettes, Appellate Body Report (n 97); United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Report of the Appellate Body (16 May 2012) WT/​DS381/​SB/​R, DSR 2012:IV, 1837 (hereafter US—​Tuna II, Appellate Body Report). 118 US—​COOL, Appellate Body Reports (n 45) [271], [340], [349], [350], [496(a)(iv)]. 119 Ibid, [346].

Rational Relationships  199 required to be tracked and transmitted upstream compared with the information required to be communicated to consumers. There was also the fact that upstream users would still be subject to recordkeeping and verification requirements even when the meat in question was ultimately going to be exempt from labelling requirements, and the fact that where processors used livestock of different origins the information to be conveyed to consumers would be confusing.120 There was nothing in the Panel’s record or findings to explain or supply a ‘rational basis’ for this ‘disconnect’121 or ‘lack of correspondence’ between the US recordkeeping and verification requirements and the limited consumer information conveyed through the US labelling regime. Therefore, the Appellate Body considered the ‘manner in which the COOL measure seeks to provide information to consumers on origin . . . to be arbitrary, and the disproportionate burden imposed on upstream producers and processors to be unjustifiable’.122 Accordingly, the differential treatment recorded to foreign meat by the US measure did not stem exclusively from a legitimate regulatory distinction and was inconsistent with Article 2.1 of the TBT Agreement. Importantly for discussions in later chapters of this book, we can view the Appellate Body’s reference to the notion of proportionality in US—​COOL not as involving a proportionality test per se, but rather as indicating a yardstick for the rationality of the measure’s internal structure in light of its objectives. The disproportionality detected by the Appellate Body was internal to the measure. Information-​gathering requirements had been put in place at one stage of the measure’s operation to enable the furnishing of related information at a later stage, but the former went beyond what was required and were thus unjustifiable. This is different to a proportionality test where it is proposed to make a judgement about the ultimate value of a measure. It is different also to a test that would ask whether a measure’s effects on imported products are assessed as being out of proportion with effects on domestic products.123 When a measure’s internal structure is not rational, the associated discrimination is arbitrary and potentially unjustifiable, and this is clearly a simple, non-​intrusive way to determine measures to be WTO-​ illegal. As the EU recalled in the Article 21.5 proceedings in US—​Tuna II, there is no pure proportionality test under the covered agreements, no trade-​off between an appropriate level of protection and trade restrictiveness: ‘judges are neither mandated nor qualified to make political decisions’.124 The EU was clear that

120 Ibid, [346]. 121 Ibid, [347], [349]. 122 Ibid, [347], [348]. 123 E.g. in the view of Brazil, disproportionately high costs on imported products were to be regarded as a strong indication of inconsistency with art 2.1. Ibid, [208]. 124 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) Addendum, WT/​DS381/​AB/​RW/​Add.1, Annex C-​2, Executive Summary of the European Union’s Third Participant’s Submission, [3]‌.

200  World Trade Organization Dispute Settlement regulatory autonomy was a pillar of the WTO and that regulatory space could not be subjected to ‘judicial scrutiny without limitation’.125 Disproportionality was referred to also in the Appellate Body report in the Article 21.5 proceedings in US—​Tuna II in 2015, but was not referred to in the subsequent US—​Tuna II Article 21.5 proceedings. In 2015 the Appellate Body remarked that an examination of whether a technical regulation constituted a means of arbitrary or unjustifiable discrimination (and thus was not even-​handed) had to be conducted ‘in the particular circumstances of the case’,126 but it was likely that this assessment would involve ‘consideration of the nexus between the regulatory distinctions found in the measure and the measure’s policy objectives, including by examining whether the requirements imposed by the measure are disproportionate in light of the objectives pursued.’127 A requirement for the absence of disproportionality between the requirements imposed and the objectives pursued can still be understood as a rationality requirement, indeed it is probably best described that way.128 This is at best an indicative disproportionality. There are indications that WTO Members have taken on board the core idea here that, if disproportionality is relevant, what is being tested for is the disproportionality of differences in regulatory treatment and resulting detrimental impact in the context of a measure’s nexus with the objectives pursued.129 Subsequently the United States took steps to bring its COOL measure into compliance with its WTO commitments but then faced proceedings alleging that the steps that had been taken were insufficient. At the compliance stage Canada and Mexico challenged under Article 21.5 the consistency of the amended COOL measure with both Articles 2.1 and 2.2 of the TBT Agreement. The regulatory change put in place by the United States following the original proceedings took the form of a ‘Final Rule’ issued by the Agricultural Marketing Service of the US Department of Agriculture laying down final origin labelling rules based on the scheme in the US legislation. The Final Rule imposed new more detailed labelling requirements requiring indication of the place where each step in production had taken place (i.e. where an animal was born, raised and slaughtered). Exemptions

125 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) Addendum, WT/​DS381/​AB/​RW/​Add.1, Annex C-​2, Executive Summary of the European Union’s Third Participant’s Submission, [3]‌. 126 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [7.97] citing here US—​Clove Cigarettes, Appellate Body Report (n 97) [182]. 127 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [7.97] recalling the Appellate Body’s finding of the disproportionality of upstream information requirements on producers compared to the level of information communicated to consumers on country-​of-​origin labels in US—​COOL, Appellate Body Reports (n 45) [347]. 128 As understood by Mexico, US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44). E.g. Annex B-​3, Executive Summary of Mexico’s Appellee’s Submission, [15]–​[16]. 129 E.g. US—​Tuna II, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) Addendum, Mexico’s Notice of Appeal, 4, [7]‌.

Rational Relationships  201 in the original measure were retained with only slight adjustment. Recordkeeping and verification rules remained unchanged.130 The Article 21.5 Panel found the amended COOL measure inconsistent with Article III:4 of the GATT and with Article 2.1 of the TBT Agreement and both findings withstood appeal. The Appellate Body’s Article 21.5 Report agreed with the Panel that the detrimental impact on imported livestock arising from the amended COOL measure did not stem exclusively from legitimate regulatory distinctions: the recordkeeping and verification requirements of the amended COOL measure still imposed an unexplained, disproportionate burden on livestock producers and processors.131

6.  Even-​handedness The Appellate Body has also included reference to a concept of even-​handedness in describing how panels are to assess whether differential treatment stems exclusively from a legitimate regulatory distinction.132 Most notably in the US—​Tuna II dispute the question of whether US restrictions on tuna imports were even-​handed became central.133 Looking for even-​handedness is a form of design-​testing. As finessed in the US—​Tuna II Article 21.5 proceedings, the understanding is that ‘a panel must carefully scrutinise whether the technical regulation at issue is even-​ handed in its design, architecture, revealing structure, operation, and application in the light of the particular circumstances of the case.’134 The US—​Tuna II dispute involved a Mexican challenge to US law and policy restricting the use of a ‘dolphin-​safe’ label on tuna products. Tuna fishing methods can pose a considerable threat to dolphin populations. As the Appellate Body explained, when using a fishing technique known as ‘setting on’ dolphins, fishing vessels chase and encircle groups of dolphins with a purse seine net in order to catch the tuna swimming beneath the dolphins, taking advantage of the fact that tuna tend to swim beneath schools of dolphin.135 The method of ‘setting on’ dolphins was commonly used by Mexico’s purse seine tuna fleet in the Eastern Tropical Pacific Ocean (ETP), a location in which dolphins associated with tuna with particular

130 United States—​Certain Country of Origin Labelling (COOL) Requirements, Recourse to Article 21.5 of the DSU by Canada and Mexico, Reports of the Panel (20 October 2014) WT/​DS384/​RW, WT/​ DS386/​RW, DSR 2015:IV, 2019, [7.7]–​[7.9], [7.18], [7.27]–​[7.30], [7.45]. 131 US—​COOL, Recourse to Article 21.5 of the DSU by Canada and Mexico, Appellate Body Reports (n 45) [5.47]. 132 US—​Clove Cigarettes, Appellate Body Report (n 97) [95], [182] and see [215]. See also US—​ COOL, Appellate Body Reports (n 45) [271]–​[272], [293], [340]. 133 US—​Tuna II, Appellate Body Report (n 117) [216], [232], [297], [298], [299]. 134 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [7.31]; and US—​Tuna II, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [6.10]. 135 US—​Tuna II, Appellate Body Report (n 117) [172], footnote 355.

202  World Trade Organization Dispute Settlement frequency. Under the US regulations,136 tuna caught by ‘setting on’ dolphins was ineligible for US dolphin-​safe labelling, as was tuna caught by driftnet fishing on the high seas. Tuna caught by large vessels using purse seine nets in the ETP remained eligible for the dolphin-​safe label, but only if the captain of the vessel and an observer approved under the International Dolphin Conservation Programme certified that no purse seine net was intentionally deployed or used to encircle dolphins during the fishing trip and that no dolphins were killed or seriously injured during the sets in which the tuna were caught, and that other requirements were met.137 The United States and Mexico were agreed that setting on dolphins would affect them adversely. There was the potential for serious injury or mortality in every set, and harm would not always be observable; unobservable harms included the separation of cows and calves, muscle injury from the chase, failures of dolphins’ immune or reproductive systems and continuous or acute stress. For all these reasons a convention had been concluded, the Agreement on the International Dolphin Conservation Program, which had entered into force in 1999 and was complied with by Mexico in the ETP.138 This had made a dramatic difference. Whereas in 1986 the estimated dolphin mortality for the year in the ETP had been 132,169 animals, by 2008 it was 1,169. The vast majority of sets on dolphins in the ETP now produced zero mortalities.139 As Mexico argued, tuna products labelled ‘dolphin-​ safe’ in the United States might in fact have been caught in various oceans by methods adversely affecting dolphins. Following the Appellate Body’s finding that the US measure was inconsistent with Article 2.1 of the TBT Agreement—​by reason of the less favourable treatment accorded to Mexican tuna products, the measure not being even-​handed and its detrimental impact not being based on a legitimate regulatory distinction—​ the United States amended its dolphin safety measure.140 The amended measure continued to bar access to the label for tuna caught by setting on dolphins, or by driftnet fishing on the high seas.141 It also required that all tuna coming into the United States for which a dolphin-​safe label was sought had to be accompanied by certification that no nets had been intentionally set on dolphins in the set in which 136 US law and policy was embodied in the Dolphin Protection Consumer Information Act of 1990, 16 USC § 1385 (1990), relevant regulations, and a US Federal Appeals Court ruling of 2007, Earth Island Institute v Hogarth, 494 F.3d 757 (9th Cir. 2007). 137 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Report of the Panel (15 September 2011) WT/​DS381/​R, DSR 2012:IV, 2013, [2.20] (hereafter US—​Tuna II, Panel Report). 138 Agreement on the International Dolphin Conservation Program (opened for signature 15 May 1998, entered into force 15 February 1999) 37 ILM 1246. 139 US—​Tuna II, Panel Report (n 137) [7.609]. 140 US—​Tuna II, Appellate Body Report (n 117) [298], [407(b)]. 141 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Recourse to Article 21.5 of the DSU by Mexico, Report of the Panel (14 April 2015) WT/​ DS381/​RW, DSR 2015:XI, 5653, [3.5].

Rational Relationships  203 the tuna was caught, and no dolphins had been killed or seriously injured in the sets in which the tuna was caught. A more demanding certification regime still applied for tuna from large purse seine vessels fishing in the ETP than for other tuna. However, the United States argued that its measure was ‘calibrated’ to the level of risk to dolphins. In addition, more stringent tracking and verification requirements applied in practice for tuna caught by purse seine vessels in the ETP. The amended tuna measure came under challenge in Article 21.5 compliance proceedings brought by Mexico, producing an Article 21.5 Panel report, followed by an Appellate Body report, both circulated in 2015. For our purposes the important point is that, having found the Panel report in error and in completing the analysis under Article 2.1 of the TBT Agreement, the Appellate Body found the amended tuna measure inconsistent with Article 2.1 of the TBT Agreement on the basis that its detrimental impact did not stem exclusively from a legitimate regulatory distinction,142 and found that the United States could not rely on Article XX of GATT to justify the measure’s inconsistency with Article I:1 and III:4 of GATT because it had not been demonstrated that the measure was applied in a manner that does not constitute arbitrary or unjustifiable discrimination.143 The Appellate Body considered, as had the Panel, that the US law governing determinations of when observer certifications of catch would be required showed a lack of even-​handedness. Notably, provisions governing determinations that regular and significant mortality or serious injury was occurring did not apply to purse seine fisheries outside the ETP.144 These determination provisions could then entail different tracking and verification requirements. It followed from this lack of even-​handedness that the measure’s detrimental impact could not be said to stem exclusively from a legitimate regulatory distinction.145 The Appellate Body also completed the analysis under Article XX of the GATT, although, as had been the case under Article 2.1, the Appellate Body’s ability to complete the analysis was constrained. Here too, the US measure failed on the basis of the US determination provisions.146 The US—​Tuna II dispute continued to remain unresolved. Following further regulatory action in 2016 the United States requested a further ruling under Article 21.5 with a view to establishing that it was in compliance with its WTO obligations, while Mexico also requested fresh consideration of US compliance under Article 21.5. The proceedings were heard by two identically composed Panels.147 Under 142 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [8.1(a) (viii)]. 143 Ibid, [8.1(d)(ii)]. 144 While provisions governing determinations of when there was regular and significant association between tuna and dolphins applied only to the non-​ETP purse-​seine fishery. 145 US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [7.266]. 146 Ibid, [7.353], [7.354]–​[7.360]. 147 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of

204  World Trade Organization Dispute Settlement the US 2016 tuna measure eligibility for the ‘dolphin safe’ label continued to turn on the fishing methods by which tuna had been caught: tuna caught by setting on dolphins or driftnet fishing on the high seas was ineligible for the label. The Panels made extensive factual findings on the risks for dolphins of different tuna fishing methods in different oceans. They concluded that the risk profile of setting on dolphins was much higher than that of gillnet fishing, longline and hand line fishing, trawl fishing, pole and line fishing and purse seine fishing without setting on dolphins. The Panels found the 2016 tuna measure’s eligibility criteria were appropriately calibrated to these differing risk profiles.148 The Panels went on to find that all of the US 2016 tuna measure’s different elements, including in relation to determination and certification and tracking and verification, were crafted in such a way that they were calibrated to differences in the risk profiles of the fishing methods that had been analysed, and overall the 2016 tuna measure was calibrated to the differences in risk.149 The Panels concluded that the distinctions made in the US 2016 tuna measure stemmed exclusively from legitimate regulatory distinctions. The US 2016 tuna measure accorded treatment no less favourable to Mexican tuna products than it accorded to like products from the United States and other countries, and the US measure was not inconsistent with Article 2.1 of the TBT Agreement.150 The Panels held further that, as it was calibrated to different levels of risks posed to dolphins by different fishing methods in different ocean areas, the 2016 tuna measure was not applied in a manner constituting arbitrary or unjustifiable discrimination and was justified under Article XX of the GATT.151 In 2018 the Appellate Body upheld the Panels’ conclusion that the detrimental impact on Mexican tuna of the US 2016 tuna measure stemmed exclusively from a legitimate regulatory distinction and was consistent with Article 2.1 of the TBT Agreement.152 The 2016 tuna measure was not applied in a manner constituting a means of arbitrary or unjustifiable discrimination and was therefore consistent with the chapeau to Article XX and justified under that Article.153 In this final report in the US—​Tuna II saga the Appellate Body expressly linked the idea that even-​handedness may be needed for a measure’s detrimental impact to be considered to stem exclusively from a legitimate regulatory distinction back into concepts of rational relationship. This responded to Mexican pleadings. Mexico had highlighted previous Appellate Body statements on the importance the DSU by Mexico, Reports of the Panels (26 October 2017) WT/​DS381/​RW/​USA, WT/​DS381/​RW2 (hereafter US—​Tuna II, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Panel Reports). 148 Ibid, [7.525], [7.540]. 149 Ibid, [7.671]–​[7.673], [7.674], [7.717], [7.691], see also [7.702]. 150 Ibid, [7.717], [8.2], [8.6]. 151 Ibid, [7.740], [8.3], [8.7]. 152 US—​Tuna II, Recourse to Article 21.5 of the DSU by the United States, Second Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report (n 44) [6.258], [7.11]. 153 Ibid, [7.14].

Rational Relationships  205 of looking for a rational relationship between measures and their objectives when applying the Article XX chapeau, and asserted that an Article 2.1 analysis likewise required a panel to assess whether detrimental impact could be reconciled with or was rationally related to a measure’s policy objective.154 The Appellate Body reiterated that one of the most important factors in assessing whether there is arbitrary or unjustifiable discrimination under Article XX of GATT 1994 is the question of whether the discrimination can be reconciled with or is rationally related to the policy objective with respect to which the measure has been provisionally justified under the subparagraphs of Article XX.155 If properly conducted, it was to be expected that an assessment of the calibration of a measure like this one would encompass consideration of the rational relationship between the regulatory distinctions drawn in a respondent’s regulatory measure and the measure’s objectives.156 This did not necessarily require a distinct step in a panel’s analysis.157 In this case the regulatory distinctions causing detrimental impact for Mexico had to be calibrated in an even-​handed manner to the different risks to dolphins arising from different fishing methods in different ocean areas.158 Once this had been established there was no need separately to assess for the purposes of Article 2.1 the rational relationship between the regulatory distinctions drawn in the measure and its objectives, including dolphin protection and consumer information.159 In the circumstances of these compliance proceedings it was also appropriate for the Panels to have relied on their calibration analysis under Article 2.1 in assessing whether the US 2016 tuna measure had been applied in a manner constituting arbitrary or unjustifiable discrimination under the Article XX chapeau.160 The Panels’ calibration analysis having encompassed consideration of the rational relationship between the US measure and its objectives, the Appellate Body upheld the Panels’ finding in favour of the United States under the chapeau to Article XX.161 Where has the concept of even-​handedness come from?162 If we go back to Appellate Body references to even-​handedness in the US—​Clove Cigarettes case 154 Ibid, [6.15], [6.30], [6.33], [6.5] and see Addendum, WTDS381/​AB/​RW/​USA/​Add.1, WT/​ DS381/​AB/​RW2/​Add.1, Annex A-​1, Mexico’s Notice of Appeal, 15, [47]. 155 Ibid, [6.288]. 156 Ibid, [6.13], [6.79], [6.278], [6.288], [7.2]. 157 Ibid, [6.16], [6.41], [6.43], [6.46], [6.74], [6.79]. 158 Ibid, [7.2]. 159 Ibid, [6.278], [7.2], [7.12]. 160 Ibid, [6.277], [6.288], [7.12]. 161 Ibid, [6.279], [6.289]-​[6.290], [7.13]-​[7.14]. 162 Even-​handedness has been referred to under art XX(g) of the GATT as a way to understand the requirement that measures for the conservation of exhaustible natural resources be ‘made effective in conjunction with domestic restrictions’ which is taken to mean that they must be ‘working together’ with domestic restrictions. The idea of even-​handedness in this context was invoked by the US in US—​Shrimp, Appellate Body Report (n 7) [27]. See for instance Brazil—​Certain Measures Concerning Taxation and Charges, Report of the Panel (30 August 2017) WT/​DS472/​R, WT/​DS497/​ R, [7.978]–​[7.979] citing China—​Rare Earths, Reports of the Appellate Body (n 23) [5.93] (referring to

206  World Trade Organization Dispute Settlement we find the term emerges from the Appellate Body’s discussion about how Article 2.1 of the TBT Agreement is to be interpreted. The Appellate Body considered the ‘balance’ set out in the TBT preamble no different in principle to the ‘balance’ in the GATT 1994, under which Article XX obligations qualify obligations such as the national treatment obligation in Article III.163 As noted earlier, the Appellate Body progresses through a traditional consideration of the context and object and purpose of Article 2.1 with reference to the TBT Agreement’s preamble,164 where the Appellate Body finds counterbalancing objectives. These counterbalancing objectives are, on the one hand, the TBT Agreement’s trade liberalisation objective and the desire to ensure that technical regulations and standards do not create unnecessary obstacles to trade, and, on the other hand, the Agreement’s recognition of Members’ rights to regulate when necessary in the pursuit of certain legitimate objectives provided that the measures taken are not applied in a manner constituting a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.165 The Appellate Body then remarks that it understands the preamble’s sixth recital to suggest ‘that Members have a right to use technical regulations in pursuit of their legitimate objectives, provided they do so in an even-​handed manner and in a manner that is otherwise in accordance with the provisions of the TBT Agreement’.166 Some WTO Members have encouraged reference to this concept in various contexts.

B. Conclusion WTO rational relationship requirements, together with the ‘stems exclusively’ test developed under the TBT Agreement, form an important contribution to the development of a global regulatory standard requiring coherence between regulatory measures and their objectives. Requiring a rational relationship between a measure’s discriminatory effects and its legitimate objectives, and requiring that a measure’s discriminatory effects stem exclusively from a legitimate regulatory distinction, set new understandings that contribute meaningfully to the balance under the relevant WTO agreements between WTO Members’ trade and non-​ trade interests. The rational relationship and ‘stems exclusively’ requirements contribute to refining this balance of interests, reducing its level of abstraction so as to enable the balance to be determined in the specific circumstances of a given case. They do so in ways that may accommodate domestic level decision-​making US—​Gasoline, Appellate Body Report (n 4). However, the present analysis is focused on the appearance of even-​handedness as part of WTO disciplines on discrimination.

163

US—​Clove Cigarettes, Appellate Body Report (n 97) [96]. Ibid, [85]–​[102]. 165 Ibid, [92]–​[95]. 166 Ibid, [95]. The Appellate Body picks up the concept again later in its Report [182], [215]. 164

Rational Relationships  207 on core matters of health and environmental policy. They call mainly for a focus on measures’ internal rationality, including through an assessment where appropriate of whether a measure’s discriminatory effects are calibrated to the different forms of risk addressed by the measure and whether the measure is even-​handed. The development of the rational relationship requirement emerged in Appellate Body cases without explicit reliance on the rules and principles of treaty interpretation and has evolved since, with the ‘stems exclusively’ test appearing by virtue of the Appellate Body’s reasoning on the importance of striking a balance between trade and non-​trade interests under the TBT Agreement. There is a diversity of views among WTO Members, and among scholars and practitioners, on the appropriateness of rational relationship testing. There is also a desire for simplicity in the law governing regulatory policy. Undoubtedly an element of commonsense plays into the handling of regulatory disputes. Colloquially, it is said that what we are really asking is ‘is there something else going on?’,167 or perhaps ‘who is being unreasonable?’.168 However, while adjudicators may be sensitive to these questions, their answers will depend on the particular case and it is clear that the type of analytical framework embodied in the tests discussed in this chapter may meet a number of needs that such simpler questions cannot fully address. There are of course potential alternatives to rational relationship testing. Some have suggested that rather than employing existing tests, the sorts of basic questions asked here could instead be backed up with new requirements, for instance, to ensure that a full explanation is provided for detrimental impact on trade partners,169 perhaps alongside evidence of good regulatory practice demonstrating that thought has been given to the relative value of a regulation.170 For instance, would an approach emphasising the value of explanation be thought preferable to least restrictive alternative testing as found in the necessity test?171 It is in the nature of governmental policy and administration that responding parties may often have been inconsistent in their levels of protection against comparable risks, and they should be given the opportunity to explain this.172 Many though would insist

167 Interview 11 September 2015. 168 Interview 16 September 2015. 169 Interview 11 September 2015; Interview 16 September 2015; Interview 27 September 2015. Note for instance the EU suggestion in US—​Clove Cigarettes, Appellate Body Report (n 100) that a regulating Member’s ‘countervailing explanations’ should be considered when assessing whether the design of a technical barrier to trade is related to the regulated product’s foreign origin. US—​Clove Cigarettes, Appellate Body Report (n 97) [67]. 170 Interview 16 September 2015; 171 Interview 27 September 2015. A similar idea has been seen in the context of the security exception to the GATT. Describing the analytical principles put forward by Japan for interpreting and applying art XXI, Jinguyan Zhou, ‘New WTO Ruling on National Security in Qatar-​Saudi Arabia Case and its Impact on South Korea-​Japan Dispute’ (ASIL Insights, 3 September 2020) 24(22) accessed 30 September 2020. 172 Interview 27 September 2015.

208  World Trade Organization Dispute Settlement that a good story explaining differential treatment cannot be regarded as sufficient in itself, emphasising the importance of evidence-​based distinctions.173

C.  Reflections on Regulatory Standards in WTO Dispute Settlement The WTO is a major multilateral organisation established at a time of rapid change in domestic economic policies associated with the ideological shifts of the 1980s and now complemented by an array of regional trade arrangements and organisations. Freer trade has served as the engine for major economic development and continues to do so, but what we see coming through in regulatory dispute settlement is the desire for this to take place without the handing over of self-​government. Populations want the benefits of proactive trade negotiation, market access for goods, better trade facilitation, provision for competition in trade in services, a secure basis for e-​commerce, rules about data-​flow and forward-​thinking engagement on major environmental and health-​related threats. International economic law has to be responsive to governments who are accountable to their people, and key actors in international economic law need to be aware of potential and actual deficits in this respect. The pressures falling on WTO dispute settlement mechanisms have been intense. Disputes occur regularly, and are intended to be addressed on a time-​bound programme under the Dispute Settlement Understanding (DSU). Their outcomes are concrete in that a successful responding party will be directed to bring its measure into conformity with its WTO obligations. Panels sense that the WTO dispute settlement system’s social and political legitimacy depends on the adoption and acceptance of reports. They know the importance of respect for the system,174 as did the Appellate Body.175 This is the context in which the need to draw out the workings of how the legal interests embodied in WTO regulatory rules sit together in practice comes to a head, where authoritative pronouncements in particular cases must be sought and gained. Panels and the Appellate Body have had the strong support of their respective secretariats, who have provided important continuity and have helped ensure that WTO Members can have confidence in the dispute settlement process.176 It is helpful, too, that cases are presented by often well-​versed government lawyers and members of relevant government departments and agencies, who also in many cases employ private law firms with extensive experience. Procedures for dealing 173 Idem. 174 Interview 23 September 2015. 175 Interview 29 September 2015. 176 Interview 17 September 2015; Interview 22 September 2015; Interview 28 September 2015; Interview 25 September 2015.

Rational Relationships  209 with cases that are scientifically and technically fact-​intensive have continued to evolve, and the work of the WTO secretariat’s Economic Research and Statistics Division may assist. The working methods of WTO panels and the Appellate Body have been effective, and the standards they have developed in regulatory disputes are consistent and workable while allowing for a degree of evolution, with room for trial and error. In this overall context it is not surprising that the WTO standards are crafted so as to be capable of application in ways that will accommodate choice in the exercise of domestic legal regulatory authority. In the case of the necessity test addressed in Chapter Five, the multifactorial nature of the necessity test provides scope for policy flexibility in domestic level decision-​making, while weighing and balancing processes are expected to take place only in the context of examining the reasonable availability of alternative measures. As to rational relationship testing as discussed in this chapter, this form of regulatory test tends to be respectful of the exercise of regulatory authority at the domestic level provided a base level of regulatory coherence is achieved. There are also additional reasons why tests with an emphasis on regulatory coherence have been useful for dispute settlement. Panels and the Appellate Body have shared a conscious awareness that these tests generally alleviate any potential need to address questions concerning Members’ subjective motivations for challenged measures. Assessing measures based on their internal consistency takes care of this.177 Panels may never need to feel they are judging WTO Members’ actual motivations,178 even though occasionally it appears they may be doing so. In principle the purpose of a measure may be identified objectively, while avoiding observations, assumptions or imputations concerning a Member’s actual intentions.179 The interpretive logic that has led to the adoption of the tests for regulatory coherence discussed in the preceding chapters may briefly be highlighted. Chapter Five revealed the way in which the development of the necessity test for gauging measures’ consistency with the subparagraphs could be seen as a product of reasoning processes oriented around the interpretive principles of contextualism and effectiveness. Chapter Six’s insights into the evolution of tests requiring rational relationships between WTO Members’ regulatory measures and their objectives reveal an intuitive, commonsense approach to the question of how WTO law can detect arbitrary or unjustifiable discrimination inconsistent with the general exceptions chapeau. The Appellate Body’s identification of a requirement in parallel jurisprudence under the TBT Agreement that in order for measures to be consistent with Article 2.1 their discriminatory effects must stem exclusively from legitimate regulatory distinctions is also grounded in the interpretive principle of

177

Interview 25 September 2015. Interview 23 September 2015. 179 Interview 17 September 2015. 178

210  World Trade Organization Dispute Settlement effectiveness. The concept of even-​handedness employed in the course of determining whether differential treatment stems exclusively from legitimate regulatory distinctions logically ties back into the requirement for a rational relationship between regulatory measures and their objectives. The overall result has, arguably, been largely positive. The regulatory standards developed in the WTO environmental cases should help bring about the substantive decision-​making needed to produce outcomes from both trade and environmental perspectives that can help meet many of States’ and populations’ substantive needs. They will do so largely by injecting into domestic decision-​ making certain requirements that could be considered natural to good regulatory processes and are thus in general relatively unintrusive. WTO dispute settlement has respected the concept of WTO Members’ chosen level of protection against harm and has avoided adopting regulatory standards involving proportionality testing stricto sensu. The vision of international adjudication they implement appears to be one in which international adjudicatory bodies have an accepted part to play in identifying and reinforcing international legal requirements for regulatory coherence, as an aspect of an overall compromise between domestic regulatory authority and international regulatory integration in the construction of a slowly emerging global regulatory order.180 This sits well with contemporary perspectives in accordance with which the non-​discrimination disciplines are viewed as a means of promoting better public regulation rather than purely or primarily as disciplining protectionism.181 At the same time it has to be acknowledged that an uneasiness has long been present in several quarters among the WTO Membership about the idea of standards imposing requirements potentially going beyond regulatory coherence, particularly with respect to the weighing and balancing that may be involved in the application of necessity testing. In the WTO it would be easy to gain the perception that the development of regulatory standards has been a constitutional process.182 This is in part because WTO dispute settlement has taken place in a highly institutionalised setting, and the Appellate Body established its understandings of the WTO treaties through a series of orderly and carefully considered decisions. These understandings have then been furthered in subsequent cases, contributing to stability in international economic relations under WTO law. However, when we look at the tests emerging 180 Andrew Lang, ‘The Judicial Sensibility of the WTO Appellate Body’ (2016) 27(4) EJIL 1095, 1103–​1105 (hereafter Lang, ‘The Judicial Sensibility’); John H Jackson, ‘Sovereignty-​Modern: A New Approach to an Outdated Concept’ (2003) 97(4) AJIL 782, 800. 181 Lang, ‘The Judicial Sensibility’ (n 180) 1099. 182 Joel P Trachtman, ‘Global Commercial Constitutionalization: The World Trade Organization’ in Anthony F Lang and Antje Wiener (eds), Handbook on Global Constitutionalism (Edward Elgar Publishing 2017) 395; Deborah Z Cass, The Constitutionalization of the World Trade Organization: Legitimacy, Democracy, and Community in the International Trading System (OUP 2005). C.f. Jeffrey L Dunoff, ‘The WTO Constitution, Judicial Power and Changing Patterns of Authority’ in Volker Rittberger, Martin Nettesheim and Carmen Huckel (eds), Authority in the Global Political Economy (Palgrave Macmillan 2008) 55.

Rational Relationships  211 in the cases addressed in Chapters Five and Six, we can see that their identification has emerged in an unsequenced way, highly dependent on the contingencies associated with the occurrence of disputes with particular characteristics and the lodging of appeals in relevant points. The original Appellate Body and its members may at any given time have had a sense of the best direction in which to take aspects of WTO jurisprudence in future to give effect to the WTO agreements, but the composition of the Appellate Body changed over time and the outcome of deliberations in any dispute could not be predicted. The process has been a patchwork, and its development consistent with pluralist impulses. With the Appellate Body entering into a period of stasis, and the determination of appeals by arbitration likely, a close dependence on Appellate Body jurisprudence to date is expected. However, the WTO dispute settlement system will have to survive without the continuity and institutional perspective formerly provided by the Appellate Body. Further developments in relation to the terms on which regulatory disputes in the health and environmental sphere are best resolved will take place on a more ad hoc basis for the time being.

PART IV

IN V E STME N T T R E AT Y A R BIT R AT ION

7

Regulatory Coherence Requirements in Investment Treaty Arbitration A. Introduction The remarkable rise of investment treaty arbitration is among the signature features of the early 21st-​century international legal landscape. Investment treaties together with investment protection chapters in regional trade agreements number in the thousands, and the ad hoc arbitral dispute resolution mechanisms they employ have facilitated a rapid proliferation of decisions and awards. Investment tribunals’ reasoning and the regulatory standards elaborated in regulatory disputes merit special attention also in the light of current reform processes and the potential establishment of an international investment court or appeals mechanism.1 The jurisprudence of this body is likely to make a critical contribution to the development of regulatory standards globally. An investment court or appeals mechanism can be expected to have an influence over the development of international investment law and also beyond, enabling it to catalyse outcomes that might not be produced through intergovernmental negotiations alone.2 This part of the book, Part IV, comprises two chapters addressing the emergence of regulatory coherence requirements in investment treaty arbitration, Chapters Seven and Eight. This chapter, Chapter Seven, addresses three regulatory coherence tests arising under the core investment disciplines, while the following chapter looks at the somewhat controversial use of proportionality testing as a further potential regulatory coherence test. Readers will recall that for ease of reference ‘proportionality stricto sensu’ is frequently denoted simply as ‘proportionality’ in this book. It should also be noted that although the focus of this book remains 1 For discussion in the UNCITRAL Working Group tasked with considering Investor-​State Dispute Settlement Reform see accessed 25 August 2020, contemplating new processes for the selection and appointment of investment tribunal members, an appellate mechanism and/​or the EU proposal for a multilateral investment court. For the two tier permanent court agreed upon in the comprehensive economic trade agreement between the EU and Canada see Canada-​European Union (EU) Comprehensive Economic and Trade Agreement (CETA) (signed 30 October 2016, entered into force provisionally 21 September 2017) (hereafter Canada-​European Union Comprehensive Economic and Trade Agreement). Alec Stone Sweet and Florian Grisel, The Evolution of International Arbitration: Judicialization, Governance, Legitimacy (OUP 2017) 236–​238. 2 Consider Alec Stone-​Sweet and Thomas L Brunell, ‘Trustee Courts and the Judicialization of International Regimes’ (2013) 1 Journal of Law and Courts 61.

Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0007

216  Investment Treaty Arbitration on environmental disputes, disputes over regulatory measures beyond the environmental sphere are referred to as necessary in these two chapters in order to provide the context needed for an appreciation of how the relevant investment treaty disciplines are being understood by tribunals. Regulatory coherence tests can be identified in relation to each of the core investment protection guarantees. Requirements for measures to bear reasonable relationships to rational policies have been elaborated as an aspect of fair and equitable treatment guarantees, and it has been determined that a reasonable nexus to a rational government policy may protect a regulatory measure from challenge under the national treatment discipline. Under the international law governing expropriation of investor property the requirement that the taking of property be for a public purpose is becoming host to tests such as the formula seen in Philip Morris Brands Sàrl and ors v Uruguay, where government actions were required to have been reasonable measures adopted in good faith to address a real public health concern. In that case the measures adopted were also found to be capable of contributing to the public aim.

B.  An Introduction to Investment Disciplines Investment treaties commonly incorporate a suite of requirements concerning the treatment that host States are required to afford investors in addition to provisions governing the expropriation of foreign investments. The guarantee of fair and equitable treatment is central; frequently it is accompanied by a guarantee of full protection and security. Then there are the non-​discrimination disciplines including the national treatment requirement as well as the requirement for most favoured nation treatment.3 Most difficult to determine has been the content of the fair and equitable treatment guarantee. Treaty language differs and may be more or less specific. The guarantee is understood to incorporate requirements for host States to act transparently, protect investors’ legitimate expectations, refrain from arbitrary or discriminatory treatment of investors as well as coercion or harassment of investors, ensure access to justice and due process, and act in good faith. In certain contexts it is clear that the fair and equitable treatment guarantee will require only the treatment that would be afforded in accordance with the customary international law minimum standard of treatment of aliens.4 The fair and equitable treatment guarantee overlaps with the non-​discrimination requirements of 3 Campbell McLachlan, Laurence Shore and Matthew Weiniger, International Investment Arbitration: Substantive Principles (2nd edn, OUP 2017) 268, [7.01] (hereafter McLachlan, Shore and Weiniger, International Investment Arbitration). 4 NAFTA Free Trade Commission, Interpretation of NAFTA Chap 11 (31 July 2001) 6 ICSID Rep 567, 568. See also the awards in certain non NAFTA cases. Jeswald W Salacuse, The Law of Investment Treaties (2nd edn, OUP 2015) 247 (hereafter Salacuse, The Law of Investment Treaties) c.f .249–​250.

Regulatory Coherence Requirements  217 national treatment and most favoured nation treatment,5 as well as with distinct provisions guaranteeing that host States shall not impair investments by ‘arbitrary or discriminatory’ measures” 6 or ‘unreasonable or discriminatory’7 measures. For clarity, this book refers to provisions of investment treaty law of indeterminate content such as the guarantee of fair and equitable treatment as ‘guarantees’, ‘disciplines’ or ‘provisions’ rather than standards. The term ‘standards’ is reserved for discussion of the regulatory standards implicit in such provisions. Investment disputes naturally concern a wide range of government activity, including the introduction of new regulatory requirements or planning and zoning restrictions, changes to tax or tariff regimes, decisions to refuse or revoke operating licences and the termination or modification of contracts. Only in a certain proportion of cases do questions about the definition of States’ regulatory freedoms arise. Accordingly there may be greater pressure to develop potential standards in certain areas of investment law than in others, where tribunals find that they need to explain how the open textured provisions they are applying lead to the decisions adopted. The development of regulatory standards in investment arbitration is more commonly prompted by complaints about State action in the administrative or regulatory sphere, rather than legislative or judicial action. Complaints concerning judicial action may tend to turn on requirements that can be applied without recourse to abstract reasoning of the sort that tends to produce regulatory standards, for instance where an investor claims it has been denied access to national courts. Complaints concerning legislative action have the potential to be resolved for instance with reference to whether investors may have had legitimate expectations regarding the stability of the regulatory framework. This may depend particularly on any specific assurances they might have received from the host State’s government, although there is also an emerging jurisprudence determining the appropriate scope of legitimate expectations regarding changes in a host State’s regulatory framework as a matter of fair and equitable treatment regardless of specific assurances or the absence of specific assurances. Certainly the fulfilment of legitimate expectations may be pivotal in determining compliance with the fair and equitable treatment guarantee where a State has provided

5 Both may be invoked simultaneously as seen e.g. in Westmoreland v Canada where a US company brought proceedings in respect of the province of Alberta’s climate leadership plan under which the province sought to phase out the generation of electricity from coal by 2030. Westmoreland Coal Company v Canada ICSID Case No UNCT/​20/​3, Notice of Arbitration and Statement of Claim, 12 August 2019. 6 Christoph Schreuer and Rudolf Dolzer, Principles of International Investment Law (OUP 2012) 191, 194; Salacuse, The Law of Investment Treaties (n 4) 272–​273; McLachlan, Shore and Weiniger, International Investment Arbitration (n 3) 322–​323, [7.210]. 7 E.g. see the Energy Charter Treaty (opened for signature 17 December 1994, entered into force 16 April 1998) 2080 UNTS 95, art 10(1). For instance as applied in AES Summit Generation Ltd and AES-​ Tisza Erömü Kft v Hungary ICSID Case No ARB/​07/​22, Award, 23 September 2010 (Claus von Wobeser, J William Rowley and Brigitte Stern) [10.3.9] (hereafter AES v Hungary).

218  Investment Treaty Arbitration particular reassurance or commitments concerning the protection of an investment.8 Although the doctrine of legitimate expectations is of growing importance in investment treaty law and scholarship, and has been addressed by some writers alongside the regulatory standards addressed in the present work, attention to the doctrine is not central in this book, which focuses more on disputes that may be determined according to standards governing regulatory design. Even in claims concerning regulatory and administrative action, many aspects of the applicable guarantees in investment law will not tend to invite the development of regulatory standards. For instance the full protection and security guarantee and many of the more concrete aspects of the fair and equal treatment guarantee and the national treatment guarantee may not call as intensely for tribunals to elaborate legal understandings that may guide the balance of interests that is read into investment treaties going forward. However, we see regulatory coherence tests emerging in relation to each of the major investment treaty disciplines. The examples mentioned earlier have been selected for further analysis and discussion. First, the chapter turns its attention to a regulatory coherence test that may be developing under the fair and equitable treatment guarantee in relation to when it can be said that a State’s conduct is arbitrary or unreasonable, in the form of requirements that regulatory measures bear a reasonable relationship to rational policies. Second, we also see indications that regulatory coherence testing may be developing under national treatment obligations where tribunals look similarly for the justification of differential treatment on the basis of a reasonable nexus to rational government policies. Third, in disputes over the alleged indirect expropriation of investor property through administrative or regulatory action we see indications of the development of regulatory coherence tests to assess whether action is ‘for’ a public purpose reflecting and giving effect to concepts of reasonableness and possibly proportionality. The development of regulatory coherence tests resonates with descriptions of arbitral methodology in existing scholarship. In the scholarship on fair and equitable treatment it has been suggested that tribunals may be employing several different methodological approaches or lines of reasoning in order to draw fact-​specific conclusions from the fair and equitable treatment guarantee in individual cases. One approach is to decide ad hoc whether a State’s conduct satisfies the guarantee. An alternative approach is to identify typical situations in which the guarantee has previously been applicable and base decisions on these precedents. Finally, a line of

8 As may be argued in Rockhopper v Italy in relation to the complainant’s interest in the potential exploitation of offshore hydrocarbon deposits. Rockhopper Italia S.p.A., Rockhopper Mediterranean Ltd, and Rockhopper Exploration Plc v Italian Republic ICSID Case No ARB/​17/​14, Decision on the Intra-​EU Jurisdictional Objection, 26 June 2019 (Klaus Reichert, Charles Poncet and Pierre-​Marie Dupuy).

Regulatory Coherence Requirements  219 reasoning may be employed that works out the essential elements of the guarantee by employing abstract reasoning.9 When the broad notion of fair and equitable treatment is expressed in terms of its possible essential elements we find that among these elements are often concepts themselves calling for further elaboration. In investment law more than in other areas of international law, it is as though we are dealing with concentric circles of meaning, nested within one another. For instance, the award in Saluka Investments BV v Czech Republic viewed the fair and equitable treatment guarantee in the applicable bilateral treaty as requiring that a host State refrain from acting in a way that is ‘manifestly inconsistent, non-​transparent, unreasonable (i.e. unrelated to some rational policy), or discriminatory (i.e. based on unjustifiable distinctions)’.10 The Saluka case concerned the effects of the imposition of a forced administration on Saluka’s shareholding in a State-​owned commercial bank and the bank’s exclusion from State aid in response to a systemic debt problem. Pleadings are not available and the tribunal does not cite direct authority for its dictum, and so it is difficult to understand the formal derivation of the test. Later cases as discussed below commonly cite only to Saluka v Czech Republic for the point. The dictum reproduced here, and the reliance placed on the dictum by subsequent tribunals, illustrate arbitral methodologies as described above. They also illustrate how investment tribunals may engage at more than one level in reasoning leading to the development of regulatory coherence tests. A first and outer level is a tribunal’s identification of the essential elements of an investment protection guarantee. For example, the Saluka dictum takes the view that essential elements of the fair and equitable treatment guarantee require host States to refrain from actions that are unreasonable or discriminatory. A second level is the articulation of formulae or rubrics for applying these essential elements, as seen in the bracketed text in the previous paragraph. According to the Saluka dictum, unreasonableness is manifested where State action is ‘unrelated to some rational policy’, and that action is discriminatory where it is ‘based on unjustifiable distinctions’. The production of concentric circles does not cease even at this point, as it would then be necessary to consider what may be meant by a ‘rational policy’ or an ‘unjustifiable distinction’. 9 Schreuer and Dolzer, Principles of International Investment Law (n 6) 141; Stephan Schill, ‘Fair and Equitable Treatment, the Rule of Law, and Comparative Public Law’ in Stephan Schill (ed), International Investment Law and Comparative Public Law (OUP 2010) 153, 157. 10 Saluka Investments BV v Czech Republic PCA Case No 2001-​04, Partial Award, 17 March 2006 (Arthur Watts, L Yves Fortier and Peter Behrens) [309], see also [307] (hereafter Saluka v Czech Republic). C.f. the articulation of fair and equitable treatment under Article 1105(1) of the North American Free Trade Agreement drawing on previous cases combined in Waste Management, Inc v United Mexican States, which examines whether the host State’s conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety. Waste Management, Inc v United Mexican States (‘Number 2’) ICSID Case No ARB(AF)/​00/​3, Award, 30 April 2004 (James Crawford, Benjamin R Civiletti and Eduardo Magallón Gómez) [98] (hereafter Waste Management v Mexico).

220  Investment Treaty Arbitration As we count off the rings towards the centre of the circle we move closer to finding a tribunal’s articulation of what it believes to be the appropriate approach for applying the law to the point at hand, though not all tribunals will articulate this clearly. The formulae that embed themselves may increasingly become recognisable as established regulatory coherence tests.11 They may come to be relied upon and replicated in arbitral practice, employed by the parties when this will reinforce the framing of their arguments, taken into account by governments contemplating their legal positions and potentially used to inform the negotiation of new treaty clauses. Before examining more closely the emergence of selected regulatory coherence tests in investment treaty arbitration, it is important to observe that exceptions clauses akin to those seen in the WTO are becoming increasingly common in investment treaties.12 Clearly there is also the potential for the trade jurisprudence analysed in Chapters Five and Six to be applied or modified in the case of investment treaty arbitration under these agreements, with far-​reaching implications. In certain cases investment treaties or investment chapters of recently concluded trade and investment agreements specifically borrow the formulae used in the general exceptions found in Article XX of the General Agreement on Tariffs and Trade (GATT) and XIV of the General Agreement on Trade in Services (GATS).13 Although there is a history of provisions on non-​precluded measures, views differ on the appropriateness of the development of general exceptions in the investment treaty context.14 Practice among investment tribunals can also be expected to vary, as will the cases before them, for instance there may be situations where tribunals will turn to exceptions to the exclusion of general international law including the police powers doctrine.15 Investment treaties also incorporate a range of provisions recognising States’ freedom to take action in areas including public health, public morals, conservation of natural resources and essential security, and to take prudential action in the financial system. They refer variously to requirements that measures be necessary 11 Vadi speaks of patterns that become more consistent over time. Valentina Vadi, Proportionality, Reasonableness and Standards of Review in International Investment Law and Arbitration (Edward Elgar 2018) 105. 12 Caroline Henckels, Proportionality and Deference in Investor-​ State Arbitration: Balancing Investment Protection and Regulatory Autonomy (CUP 2015) 81 (hereafter Henckels, Proportionality and Deference). See also Caroline Henckels, ‘Scope Limitation or Affirmative Defence? The Purpose and Role of Investment Treaty Exception Clauses’ in L Bartels and F Paddeu (eds), Exceptions in International Law (OUP 2020) 363. 13 Chapter Six, section A. 14 Andrew Newcombe, ‘The Use of General Exceptions in IIAs: Increasing Legitimacy or Uncertainty’ in Armand de Mestral and Céline Lévesque (eds), Improving International Investment Agreements (Routledge 2012) 267; Jürgen Kurtz, The WTO and International Investment Law: Converging Systems (CUP 2018) ch 5, 168. 15 Bear Creek Mining Corporation v Peru ICSID Case No ARB/​14/​21, Award, 30 November 2017 (Karl-​Heinz Böckstiegel, Michael Pryles and Philippe Sands) [471]–​[478]. C.f. Partial Dissenting Opinion of Professor Philippe Sands [41].

Regulatory Coherence Requirements  221 for, related to, directed to, appropriate to, designed and applied for, or proportional to these objectives.16 Certain new agreements include annexes on expropriation setting down how it is to be determined in a given case whether an indirect expropriation may have occurred.17 Thus investment treaty tribunals’ elaboration of regulatory coherence tests now takes place in a context where a wide variety of different treaty provisions operate. Each case will be considered by a tribunal on the basis of the treaty or treaties applying in that situation.

C.  Regulatory Coherence Requirements in Investment Treaty Arbitration 1.  Fair and equitable treatment: arbitrary or unreasonable conduct: reasonable relationships to rational policies The determination of whether treatment of an investor is fair and equitable will take into account, as an overarching consideration, the need to preserve scope for regulatory activity on the part of host States.18 However, substantive unfairness will arise where administrative decisions are arbitrary or unreasonable, or in circumstances where there is unfair discrimination, coercion, harassment or bad faith.19 Unreasonable or discriminatory measures are also stated to be prohibited per se in some texts.20 The notions of arbitrary conduct and unreasonable conduct are at times seen as interchangeable.21 Arbitrariness is understood by tribunals sometimes through reliance on a textual approach, with reference to legal dictionaries.22 At other times arbitrariness is understood with reference to broader considerations such as the rule of law. Tribunals have referred to the description of arbitrariness by a Chamber of the International Court of Justice (ICJ) in the Case Concerning Elettronica Sicula S.p.A. (ELSI) (United States of America v Italy), in which the applicable treaty stated that arbitrary action on the part of Italy was not permitted: ‘Arbitrariness is not 16 Henckels, Proportionality and Deference (n 12) 82. 17 E.g. Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP) (signed 8 March 2018, entered into force 30 December 2018) Annex 9-​B (Expropriation), Chapter Eight, section A, with art 3(b) of Annex 9-​B providing also that ‘Non-​discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment, do not constitute indirect expropriations, except in rare circumstances.’ 18 McLachlan, Shore and Weiniger, International Investment Arbitration (n 3) 275, [7.24]; 314, [7.178]; 327, [7.228]. 19 Ibid, 322, [7.208]. As expressly stated in Canada-​European Union Comprehensive Economic and Trade Agreement (n 1) art 8.10(2). 20 McLachlan, Shore and Weiniger, International Investment Arbitration (n 3) 322, [7.20]; Schreuer and Dolzer, Principles of International Investment Law (n 6) 191. 21 Schreuer and Dolzer, Principles of International Investment Law (n 6) 191. 22 E.g. Lauder v Czech Republic UNCITRAL, Final Award, 3 September 2001 (Robert Briner, Lloyd Cutler and Bohuslav Klein) [221].

222  Investment Treaty Arbitration so much something opposed to a rule of law, as something opposed to the rule of law . . . It is a wilful disregard of due process of law, an act which shocks, or at least surprises, a sense of judicial propriety.’23 Alternatively tribunals have sought to understand the concept of arbitrariness through reference to domestic legal systems.24 Further, catalogues of conduct that would qualify as arbitrary have been developed.25 They include the categories of: measures inflicting damage without serving any apparent legitimate purpose; measures based not on law but on discretion, prejudice or personal preference; measures taken for reasons that are different from those put forward; and measures taken in wilful disregard of due process and proper procedure.26 Reasonableness may be in the eye of the beholder, but has been regarded as an important determinant of whether treatment is fair and equitable.27 On occasion, tribunals have referenced the idea of the ‘reasonable man’ to determine whether host State conduct was arbitrary. For instance in the Neer claim in 1926 the US—​Mexico Claims Commission observed inter alia that conduct that could be characterised as arbitrary was conduct ‘presenting insufficiencies that would be recognized “ . . . by any reasonable and impartial man” ’.28 The confined take-​up of this approach may in part reflect the contrast between the English concept of Wednesbury unreasonableness and US law which has relied on an ‘arbitrary and capricious’ conduct test as a form of reasonableness standard.29 The concept of reasonableness has been employed also in regard to investors’ legitimate expectations regarding their treatment by host States, which have been required to be reasonable as well as in regard to the actions of host States in modifying their statutory and regulatory frameworks over time. 23 Elettronica Sicula SpA (ELSI) (United States of America v Italy) (Judgment) [1989] ICJ Rep 15, 76, [128], see also at 127, referring both to unreasonable and to arbitrary conduct. Even an act which was ruled by the Court of Appeal of Palermo as falling into the category of administrative acts that were unlawful for ‘eccesso di potere’ did not necessarily cross this threshold, given that Italian law provided a framework within which such acts would be controlled. Referred to for instance in Genin and ors v Estonia ICSID Case No ARB/​99/​2, Award, 25 June 2001 (L Yves Fortier, Meir Heth and Albert Jan van den Berg) [371] (hereafter Genin v Estonia). See further Schreuer and Dolzer, Principles of International Investment Law (n 6) 172. 24 Schreuer and Dolzer, Principles of International Investment Law (n 6) 192. 25 A brief survey is offered in Henckels’ book, Henckels, Proportionality and Deference (n 12) 120–​121. 26 Schreuer and Dolzer, Principles of International Investment Law (n 6) 193; see also views of claimant’s legal expert, Professor Christoph Schreuer, as employed by the Tribunal in EDF (Services) Ltd v Romania ICSID Case No ARB/​05/​13, Award, 8 October 2009 (Piero Bernadini, Arthur W Rovine and Yves Derains) [303]. 27 Pope & Talbot Incorporated v Canada UNCITRAL, Award on the Merits of Phase 2, 10 April 2001 (Lord Dervaird, Benjamin J Greenberg and Murray J Belman) [123]–​[128] (hereafter Pope & Talbot v Canada). 28 F. H. Neer and Pauline Neer (USA) v United Mexican States (1926) 4 RIAA 60; 3 ILR 213 (US—​ Mexico General Claims Commission). The Tecmed Tribunal referred also to ‘what a reasonable and unbiased observer would consider fair and equitable’. Técnicas Medioambientales Tecmed SA v Mexico ICSID Case No ARB(AF)/​00/​2, Award, 29 May 2003 (Horacio A Grigera Naón, José Carlos Fernández Rozas and Carlos Bernal Verea) [166] (hereafter Tecmed v Mexico). 29 Henckels, Proportionality and Deference (n 12) 118.

Regulatory Coherence Requirements  223 As we have seen in Saluka v Czech Republic, whether an investor has been accorded fair and equitable treatment has also been analysed with reference to the existence of a rational or legitimate policy and the reasonableness of the act of the host State in relation to the policy. One Tribunal making such a pronouncement considered a rational policy to be one taken by a State ‘following a logical (good sense) explanation and with the aim of addressing a public interest matter’.30 Potentially qualifying matters would seem to include economic, social and other public interest matters.31 The existence of a ‘clear and legitimate public purpose’, was declared for instance in a dispute concerning regulation of banking in circumstances of political and economic transition, with the Tribunal, having considered all relevant matters, clearing the host State of charges or arbitrary or discriminatory action in breach of the Estonia-​United States bilateral investment treaty (BIT).32 The reasonableness of a State’s measure may then require ‘an appropriate correlation between the State’s public policy objective and a measure adopted to achieve it’.33 For instance, in Marion Unglaube and Reinhardt Unglaube v Costa Rica the Tribunal applied the Saluka dictum referenced above, iterating that standards of fair and equitable treatment would be breached by host State measures that were ‘manifestly inconsistent, non-​transparent, [or] unreasonable (i.e. unrelated to some rational policy)’.34 The Tribunal rejected Marion Unglaube’s fair and equitable treatment claim but found there to have been an indirect expropriation of the land she had acquired for the development of an ecotourism project when Costa Rica decided to create a national park in the area to protect the leatherback turtle population and failed to compensate the complainant.35 Scholarly commentary draws out the same idea in relation to arbitrariness, suggesting that actions will not be arbitrary where they are rational and necessary to protect the public interest.36 A closer look at two selected cases will enable us to see the dynamics at work in the articulation and application of the idea that a reasonable relationship between 30 AES v Hungary (n 7) [10.3.8]. 31 El Paso Energy International Company v Argentina ICSID Case No ARB/​03/​15, Award, 31 October 2011 (Lucius Caflisch, Piero Bernadini and Brigitte Stern) [372] (hereafter El Paso v Argentina). 32 Genin v Estonia (n 23) [370]. The Tribunal cites Ian Brownlie, Principles of Public International Law (5th edn, Clarendon Press 1998) 551. 33 AES v Hungary (n 7) [10.3.9]. See further Electrabel SA v Hungary ICSID Case No ARB/​07/​19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012 (V V Veeder, Brigitte Stern and Gabrielle Kaufmann-​Kohler) [8.34]–​[8.35], determining that Hungary’s re-​introduction of price regulation had been a rational and reasonably appropriate measure in the circumstances. 34 Unglaube v Costa Rica ICSID Case No ARB/​08/​1, ICSID Case No ARB/​09/​20, Award, 16 May 2012 (Judd Kessler, Franklin Berman and Bernardo Cremades) [246] citing Saluka v Czech Republic (n 10). 35 Similarly the following year in Micula v Romania, a case where the withdrawal of incentives to invest in certain regions of Romania was found to be justified, the Tribunal looked for the existence of a rational policy and the reasonableness of the State’s action in relation to that policy. Micula and ors v Romania ICSID Case No ARB/​05/​20, Award and Separate Opinion, 11 December 2013 (Laurent Lévy, Stanimir A Alexandrov and Georges Abi-​Saab) [525], following the award in Saluka v Czech Republic (n 10) and the award in AES v Hungary (n 7). 36 Salacuse, The Law of Investment Treaties (n 4) 261–​262. This was the reasoning of the Tribunal in Genin v Estonia (n 23) in relation to the government’s revocation of a banking licence [353], [370].

224  Investment Treaty Arbitration regulatory activity and rational policies is required as an aspect of fair and equitable treatment. The cases, Glamis Gold Ltd v United States37 and Mesa Power Group, LLC v Canada38 were both disputes under the North American Free Trade Agreement (NAFTA). In both cases the claimants failed to establish the absence of a reasonable relationship.

a) Glamis Gold Ltd v United States The Glamis Gold v US case concerned the unsuccessful claims of a Canadian mining company against the United States under NAFTA Chapter 11. Glamis Gold’s proposed 19-​year Imperial Project in California was to extract an expected 150 million tons of gold and silver ore together with 300 million tons of waste rock. The ore would be processed on site with conventional cyanide processing methods. This would create three large open pits and two waste rock stockpiles. The project area was of major cultural importance to the Quechan Tribe, and of archaeological importance. The United States noted that the Quechan had indicated that the location was ‘likely the final resting place for their ancestors’, and a critical learning and teaching centre.39 The Tribe’s non-​party submission described how the area contained some 55 recorded historic properties eligible for listing on the National Register of Historic Places, including the Indian Pass-​Running Man area. The area was characterised by a high density of religious sites including ‘prayer circles, ceremonial places, shrines, ceramic scatters, petroglyphs (rock drawings) and spirit breaks linked by ancient trails and segments of the Trail of Dreams’.40 The Tribunal found that as well as buried cultural artifacts, the proposed mining would destroy spirit circles, sight lines, teaching areas and viewsheds. The Running Man geoglyph site at Indian Pass was of specific significance and was used by the Tribe for traditional cultural education programmes. The Trail of Dreams crossed the area, as part of a major trail network, believed by the Quechan to have been laid down for them by their creator, connecting the sacred Avikwaame Mountain with the tribal lands along the Colorado river.41 Glamis’ first two pits were to be backfilled by sequential mining, but because of the cost Glamis intended only partially to backfill and reclaim the third and deepest pit, leaving it open for potential future mining. Specifically, the plan of operations submitted by Glamis for approval envisaged that after the project was complete there would be left behind ‘an open pit with a length of approximately 4,700 feet, 37 Glamis Gold Ltd v United States UNCITRAL, Award, 8 June 2009 (Michael K Young, David R Caron and Kenneth D Hubbard) (hereafter Glamis Gold v United States). 38 Mesa Power Group, LLC v Canada PCA Case No 2012-​17, Award, 24 March 2016 (Gabrielle Kaufmann-​Kohler, Charles N Brower and Toby Landau) (hereafter Mesa Power v Canada). 39 Glamis Gold Ltd v United States (n 37) [33], [674]. 40 Ibid, Application for Leave to File a Non-​Party Submission, Submission of the Quechan Indian Nation (19 August 2005) 1. 41 Ibid, [93].

Regulatory Coherence Requirements  225 a width of approximately 2,700 feet, and a depth in excess of 800 feet’ as well as ‘a waste rock pile or piles which will contain residual harmful solutions and be up to a mile or more in total length and up to 300 feet in height’.42 The Project’s Plan of Operations was denied approval at the federal level. Although the denial was rescinded, the State of California then imposed mandatory backfilling requirements that undermined the project’s profitability. Glamis claimed that the United States had expropriated its rights under Article 1110 of NAFTA and failed to accord the company the proper treatment under Article 1105 of NAFTA in relation to its project. Glamis failed in both its claims. For present purposes the key point is that no breach of the Vision on the appropriate treatment of investments in Article 1105(1) of NAFTA required under NAFTA had been demonstrated. Article 1105(1) of NAFTA required the parties to accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.43 The NAFTA Free Trade Commission had clearly stated that Article 1105(1) prescribed the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to investors.44 The Tribunal grounded its view of the customary international law minimum standard in the formulation articulated in Neer v Mexico in 1926.45 Glamis invoked the US obligation, inherent in this formulation, to provide protection from arbitrary measures. Both the claimant and the respondent expressed the view that the issue was not the host State’s motivation, or even its policy judgement, but turned on whether its measures were rationally related to a legitimate government purpose, or, to put it another way, whether the measures matched the State’s objectives.46 The Californian measures requiring backfilling comprised California Senate Bill 22 and State Mining and Geology Board Regulations on open pit surface mine excavations for metallic minerals. As to Senate Bill 22, Glamis argued that the Bill was not rationally related to its stated purpose because cultural resources would still be destroyed by the project—​putting the dirt back in the ground under a mandatory backfilling requirement did not change that, and would bury further artefacts. Further, according to Glamis, backfilling would not improve environmental degradation and actually increase it.47 As to the Regulations, Glamis argued that there 42 Ibid, [34], [182], quoting State Mining & Geol Board, Executive Officer’s Report 5 (12 December 2002). 43 Ibid, [829]. 44 Ibid, [599]. 45 ‘The treatment of an alien, in order to constitute an international delinquency, should amount to an outrage, to bad faith, to willful neglect of duty, or to an insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency.’ F. H. Neer and Pauline Neer (USA) v United Mexican States (1926) 4 RIAA 60; 3 ILR 213 (US—​Mexico General Claims Commission) 61–​62. 46 Claimant, Glamis Gold v United States (n 37) [588], [591], citing Saluka v Czech Republic (n 10). 47 Glamis Gold v United States (n 37) [687], [688].

226  Investment Treaty Arbitration was no rational reason to distinguish between metallic and non-​metallic mines: the California landscape was ‘dotted with open-​pit non-​metallic mines’ that would not have to be filled.48 Only 8 out of some 955 mines in California were metallic. Glamis also relied on the fact that the Board had used no technical, theoretical or empirical studies in making the regulations.49 Both these factors allegedly showed there to be no rational relationship between the measure and its stated objectives. The US noted that mandatory backfilling requirements were themselves a compromise, but this did not make them an irrational or arbitrary proposition. The Tribunal agreed. Backfilling would disturb or bury further cultural artefacts, but would restore or preserve teaching areas, viewsheds, sightlines, as well as restoring land to a more usable state and removing danger to the public.50 The Tribunal found neither Senate Bill 22 nor the Regulations to violate Article 1105.51 In the course of its reasoning Tribunal further expressed the view that Article 1105 legal standard would only be breached by a level of arbitrariness that amounted in the words of the International Thunderbird Tribunal to ‘a gross denial of justice or manifest arbitrariness falling below international standards’.52 The Tribunal added that ‘The act must, in other words, exhibit a manifest lack of reasons’, which Glamis had not proved to be the case.53 The Tribunal viewed as its sole enquiry the question of whether or not there was a manifest lack of reasons for US action. The requirement that there be no manifest lack of reasons would be satisfied and was satisfied in the present case where ‘it appears to the Tribunal that the government had a sufficient good faith belief that there was a reasonable connection between the harm and the proposed remedy’.54 The Tribunal was satisfied that Senate Bill 22 was ‘rationally related to its Stated purpose and reasonably drafted to address its objectives’.55 Glamis had failed to establish that Senate Bill 22 was manifestly arbitrary, evidently discriminatory or exhibited a complete lack of reasons.56 As to the Regulations, the Tribunal found no manifest lack of reasons in the distinction between metallic and non-​metallic mines.57 Key aspects of Glamis Gold’s unsuccessful claim against the United States in Glamis Gold v US thus rested in part on US satisfaction of the requirement that measures negatively affecting investors should bear a rational relationship to a legitimate governmental purpose, a requirement that appears to have been supported by both parties.58 There is little indication in the pleadings of why the parties 48 Ibid, [697]. 49 Ibid, [700]–​[702]. 50 Ibid, [726], [728], [731], [743] [804]–​[806]. 51 Ibid, [790]. 52 International Thunderbird Gaming Corporation v Mexico, UNCITRAL, Award, 26 January 2006 (Agustín Portal Ariosa, Thomas W Wälde, Albert Jan van den Berg) [194]. 53 Glamis Gold v United States (n 37) [803]. 54 Ibid, [805]. 55 Ibid, [803]. 56 Ibid, [807]. 57 Ibid, [816]. 58 Ibid, [591].

Regulatory Coherence Requirements  227 supported the requirement of a rational relationship to a measure’s purposes,59 though this appears to have been familiar to US lawyers from US domestic law.60 In US federal administrative law the rationality of a decision is central,61 with a rational connection between the facts and the actions of an administrator specifically required under the Supreme Court’s authoritative statement of the ‘hard look’ doctrine in Motor Vehicle Manufacturers Association of the United States, Inc v State Farm Mutual Automobile Insurance Co.62 The ‘hard look’ doctrine was developed by US courts as a way of assessing whether agency actions are arbitrary, capricious or an abuse of discretion as specified in the Administrative Procedure Act 1946.63

b) Mesa Power Group LLC v Canada The Mesa v Canada64 dispute arose when companies owned ultimately by the Mesa Power Group LLC, registered in the United States, all failed to secure contracts for the supply of renewable energy to Ontario. Mesa was unsuccessful in its claims against Canada. Mesa’s claim that it had not received fair and equitable treatment (1105(1)) was rejected based on tests embodying the need for a reasonable relationship to rational policies, which had been emphasised by the claimant in pleadings.65 Mesa’s claims of discrimination under NAFTA Articles 1102 (national treatment) and 1103 (most favoured nation treatment) were also dismissed, on the basis that the Ontario feed-​in tariff programme (FIT programme) constituted government procurement under Article 1101(5) of NAFTA. In 1980 the Government of Ontario (‘the Government’) had created by legislation the Ontario Power Authority with responsibility for long-​term planning, procurement of new power generation through long-​term purchase agreements and promoting diversification in Ontario’s power supply with particular emphasis on renewable energy.66 In 2009 the Minister of Energy of the Government was 59 E.g. Counter-​Memorial of Respondent United States of America (19 September 2006). 60 Rejoinder of Respondent United States of America (15 March 2007) 154–​155, footnote 613. See for instance William W Burke-​White and Andreas von Staden, ‘Private Litigation in a Public Law Sphere: The Standard of Review in Investor-​State Arbitrations’ (2010) 35 Yale J. Int’l L. 283, 315. 61 Sofia Ranchordás and Boudewijn de Waard, ‘Proportionality Crossing Borders: Why it is Still Difficult to Recognise Sparrows and Cannons’ in Sofia Ranchordás and Boudewijn de Waard (eds), The Judge and the Proportionate Use of Discretion: A Comparative Administrative Law Study (Routledge 2015) 1, 10; Jud Mathews, ‘Agency Discretion, Judicial Review and “Proportionality” in US Administrative Law’ in Sofia Ranchordás and Boudewijn de Waard (eds), The Judge and the Proportionate Use of Discretion: A Comparative Administrative Law Study (Routledge 2015) 160, 179 (hereafter Mathews ‘Agency Discretion’). 62 Mathews ‘Agency Discretion’ (n 61) 174–​175, discussing Motor Vehicle Manufacturers Association of the United States, Inc v State Farm Mutual Automobile Insurance Co 463 US 29 (1983). 63 Although questions of law or fact are subject to review by other standards. Administrative Procedure Act of 1946 5 USC § 706(2)(a). Mathews ‘Agency Discretion’ (n 61) 167–​168. See also Paul Craig, Administrative Law (8th edn, Sweet & Maxwell 2016) [21-​005]. 64 Mesa Power v Canada (n 38). 65 E.g. Memorial of the Investor (20 November 2013) [357], [359], citing Saluka v Czech Republic (n 10) and Kenneth J Vandervelde, Bilateral Investment Treaties, History, Policy, and Interpretation (OUP 2010); Mesa Power Group, LLC v Canada Investor’s Reply Memorial and Rejoinder on Jurisdiction (30 April 2015) [528], citing Saluka v Czech Republic (n 10). 66 Mesa Power v Canada (n 38) [9]‌.

228  Investment Treaty Arbitration authorised by legislation to direct the Authority to develop an FIT programme to promote renewable energy generation and consumption in Ontario. This took place under the Green Energy and Green Economy Act 2009. The programme was launched on 1 October 2009. The FIT would be administered by the Authority which would set prices and administer contracts. The Government received a high number of applications to participate in the FIT. Those were scored and ranked to determine which projects would be awarded contracts, based on the available transmission capacity, and contracts began to be awarded in successive rounds from April 2010.67 Contracts were offered only where the transmission capacity for connecting the project to the grid was available. This was determined using a Transmission Availability Test. Where capacity was not available the Authority was to determine the economic and technical feasibility of upgrading the transmission system, through an Economic Connection Test.68 Mesa’s projects faced transmission difficulties because they were in the Bruce Region of Ontario. Connection of projects in the Bruce Region required ‘construction of a new high-​voltage transmission line’ (the Bruce to Milton line)—​for which regulatory approval was to be completed only in mid-​2011,69 with construction taking place in May 2011.70 Meantime the FIT’s success was already bringing Ontario close to target for renewable energy supply (a 10,700 MW capacity by 2018) and Ontario needed now ‘to slow down the pace of its procurement of renewable energy’. In this context, the Minister of Energy (on 3 June 2011) directed that a discrete regional process take place (the Bruce to Milton Allocation Process). The Authority was to award contracts for the supply of 750 MW in the Bruce Region. Applicants were given a five-​day window, publicised in advance, to change their projects’ connection points by selecting a new point outside the Bruce Region to which they would themselves build the necessary transmission lines. Contracts were then awarded.71 No province-​wide Economic Connection Test was conducted. The Test scheduled for August 2010 was not carried out because at that time connection points had not been finalised for a major boost to the province’s renewable energy supply to be provided by a Korean consortium.72 A full Test would likely have led to excess procurement.73 The Tribunal describes separately in its Award the process of discussion that had been taking place meantime between the Government of Ontario and the Korean consortium comprising two Korean companies (Samsung C & T Corporation) and Korea Electric Power Corporation. These discussions involved a Memorandum



67 68 69 70 71 72 73

Ibid, [11]–​[13], [16]–​[17], [28]. Ibid, [24], [621]. Ibid, [26], [28], [32]. Ibid, [24], [623]. Ibid, [33]–​[36], [624], [626]. Ibid, [613], [614]. Ibid, [24], [625].

Regulatory Coherence Requirements  229 of Understanding signed in December 2008 and a January 2010 Green Energy Investment Agreement (GEIA) providing for what Canada described as the largest investment in renewable electricity generation in the province’s history. The Korean consortium was to establish and operate manufacturing facilities for wind and solar generation equipment in the province while in exchange it was guaranteed priority access to 2,500 MW of transmission capacity to be phased in over five years, with a higher price for its electricity than that given to FIT producers. Ontario had provided for the Korean consortium’s priority access by holding transmission capacity in reserve in a number of regions, including 500 MW of transmission capacity in the Bruce Region, by direction of the Minister of Energy. Mesa contended that the GEIA with the Korean consortium had led to the failure of Mesa group companies to secure FIT contracts.74 The Tribunal dismissed Mesa’s Article 1105 claim,75 on the basis that Mesa had not made out the required facts and Canadian conduct did not reach ‘the high threshold needed to establish a violation of Article 1105’.76 The Tribunal addressed and rejected here Mesa’s three complaints concerning the Authority’s implementation of the FIT, the GEIA between the Government and the Korean consortium, and allocation of capacity in the Bruce Region.77 In relation to Mesa’s argument that allocation of capacity in the Bruce region had benefited particular FIT applicants, the Tribunal found that the Minister’s direction ‘was based on rational considerations responding to the situation prevailing at the time in Ontario’ and if it favoured a few applicants that was the outcome of this ‘rational policy’. Allegations of the exertion of influence over officials, and of a quid pro quo for political donations went unsubstantiated.78 In relation to Mesa’s argument that the GEIA constituted unjustifiable preferential treatment for the Korean consortium, the Tribunal based its approach on an understanding that the FIT programme and the GEIA were two distinct programmes or deals, put in place for different sets of reasons or purposes. The Tribunal was not prepared to intervene in the Ontario Government’s decision to pursue the GEIA where there was a reasonable relationship between the justification given for the GEIA and the terms of the GEIA.79 The Tribunal identified a fourfold rationale for the GEIA. The GEIA provided a committed ‘anchor tenant’ to help ensure the Government could achieve its renewable energy goals; it provided substantial amounts of green energy; it would attract manufacturing plants to Ontario; and it would create jobs in the wake of the global economic crisis.80 74 Ibid, [38]–​[44], [555]. 75 Ibid, [682], [706(iv)]. 76 Ibid, [512]. 77 Applying the formulation in Waste Management v Mexico (n 10). Mesa Power v Canada (n 38) [501]. 78 Mesa Power v Canada (n 38) [672], [676]–​[678], [680]. 79 Ibid, [569]. Emphasis added. 80 Ibid, [565].

230  Investment Treaty Arbitration The Tribunal added that so long as the conclusion of the GEIA was pursuant to a bona fide policy decision by the Ontario Government at the time it was not relevant whether or not the GEIA actually succeeded in its objectives. The Canadian action was acceptable even if, for instance, the need for an anchor tenant could be questioned by January 2010, and the Government could have decided not to go ahead with the GEIA. The same applied in relation to the Ontario Government’s decision on the process applied to allocate capacity on the Bruce to Milton line. All this said, in reaching the conclusion there had been no violation of Article 1105(1) the Tribunal criticised the Government’s decision ‘to run two renewable energy programs in parallel’ without clearly articulating the relationship between them or their interaction in the event of changes in the electricity market.81 Arbitrator Brower’s dissenting views highlight the contrast between the conclusions the Tribunal reached concerning the GEIA and the conclusions it might have reached. Arbitrator Brower considered that the Government of Ontario had acted ‘arbitrarily, grossly, unfairly, unjustly, idiosyncratically, discriminated against the FIT applicants and in favour of the Korean Consortium, and acted with a complete lack of transparency and candor’.82 At the nub of the matter was the fact that at the time the Government of Ontario decided to go ahead and conclude the GEIA it was already known that the FIT programme could supply the desired power. Yet the Government went ahead. This enabled FIT applicants ranked far lower down the list than the claimants to capitalise on their ‘otherwise doomed investments’ by selling them to the Korean consortium while the claimant missed out on any allocation of capacity despite the high ranking of its top projects. Arbitrator Brower considered this ‘grotesque’ and viewed the GEIA as standing the FIT programme on its head, making a mockery of it, and pulling the rug out from under it. This ‘misconduct’ could not be ‘excused’ ‘by noting that a sovereign is to be given a certain degree of deference’ or that regulatory change remained permissible.83 The Tribunals in Glamis Gold v US and Mesa Power v Canada required reasonable relationships between regulatory measures and rational government policies in order to satisfy the customary international law minimum standard of treatment of aliens and the guarantee of fair and equitable treatment requirement under Article 1105(1) of NAFTA. The same test is now commonly seen in analyses of compliance with the fair and equitable treatment guarantee under other investment treaties, including in renewable energy cases where governments have been challenged for their rollbacks of renewable energy investment incentives.84 Still

81 Ibid, [573], [579], [632], [682], see also [607]. 82 Concurring and Dissenting Opinion of Judge Charles N Brower [4]‌, [22]. 83 Ibid, [4]‌–​[5], [14]–​[22]. 84 Watkins Holdings S.à r.l. and ors v Spain ICSID Case No ARB/​15/​44, Award, 21 January 2020 (Cecil WM Abraham, Michael Pryles and Hélène Ruiz Fabri) [595]–​[597]; Hydro Energy 1 S.à r.l. and Hydroxana Sweden AB v Spain ICSID Case No ARB/​15/​42, Decision on Jurisdiction, Liability and Directions on Quantum, 9 March 2020 (Lawrence Collins, Peter Rees and Rolf Knieper) [569].

Regulatory Coherence Requirements  231 pending is a NAFTA decision in Lone Pine v Canada where a US investor complains about Canada’s revocation of its gas exploration permits under Québec’s moratorium on fracking under the St Lawrence river. Lone Pine has lodged claims under Article 1105(1) fair and equitable treatment and Article 1110 (expropriation) of NAFTA and in respect of the former Lone Pine claims there is no rational connection to the preservation of the river.85 Host States’ failure evenly to enforce their regulation against foreign investors’ competitors86 or targeting of foreign investments for enforcement action87 may also lead to successful investor claims under fair and equitable treatment guarantees, as discussed in the next section on non-​discrimination.

2.  National treatment: a reasonable nexus to rational government policies Commonly invoked together with the fair and equitable treatment obligation, national treatment guarantees require host States to afford foreign investors the same treatment as domestic investors in like circumstances. The jurisprudence reflects a general idea that the national treatment guarantee implies a prohibition on unreasonable distinctions between foreign and domestic investors. This was applied for instance in the context of the Argentine economic crisis where the El Paso Energy International Company v Argentina Tribunal considered it reasonable for Argentina to have imposed taxes on unexpected profits in the hydrocarbon sector while treating the banking sector differently.88 Tribunals’ views on the appropriateness of a host State’s social policy will in general have no bearing on the question of whether there exists differentiation in the treatment of the foreign investor,89 but assessments of whether investors are in like circumstances may potentially take into account the circumstances that would justify governmental regulations treating them differently to protect the public interest.90 Increasingly this is reflected in newly negotiated investment treaty texts.91 85 Jarrod Hepburn ‘In New Pleading, Lone Pine Questions “Environmental” Bona Fides of Decision to Cancel Fracking Exploration Permit, and Offers a DCF Valuation of Its Losses’ (IAR, 7 May 2015). 86 E.g. Serafín García Armas and Karina García Gruber v Venezuela PCA Case No 2013-​3, Award, 26 April 2019 (Eduardo Grebler, Guido Santiago Tawil and Rodrigo Oreamuno Blanco). 87 E.g. Zelena NV and Energo-​Zelena doo Inđija v Serbia ICSID Case No ARB/​14/​27. 88 El Paso v Argentina (n 31) [310]–​[315]. See also GAMI Investments, Incorporated v Mexico UNCITRAL, Final Award, 15 November 2004 (Jan Paulsson, W Michael Reisman and Julio Lacarte Muró) [114]. 89 Schreuer and Dolzer, Principles of International Investment Law (n 6) 201. 90 Ibid, 200; Salacuse, The Law of Investment Treaties (n 4) 279–​280; Andrew Newcombe and Lluís Paradell, Law and Practice of Investment Treaties: Standards of Treatment (Kluwer Law International 2009) 162–​163. 91 E.g. Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP) (signed 8 March 2018, entered into force 30 December 2018), art 9.4 (National Treatment), note 14, and art 9.5 (Most-​Favoured-​Nation Treatment). See Drafters’ Note on Interpretation of ‘In Like Circumstances’ Under Article 9.4 (National Treatment) and Article 9.5 (Most-​Favoured-​Nation Treatment).

232  Investment Treaty Arbitration Where an investor in like circumstances with national investors receives less favourable treatment it has been held specifically that this may be justified if there is ‘a reasonable nexus to rational government policies’ that do not distinguish between foreign and domestic owned companies either on their face or de facto.92 The existence of such a nexus has been key in a number of cases.93 The nature of the required nexus between a measure and its objective has gone underarticulated.94 However, at least one tribunal has contemplated that the appropriate nexus between differential treatment and an otherwise legitimate objective will be absent when discriminatory conduct is inapposite or excessive in regard to achieving an otherwise legitimate State objective, and the differential treatment is unreasonable or lacking proportionality.95 The regulatory standard being applied here is strikingly similar to that highlighted in the previous section on fair and equitable treatment. It also resonates closely with the rational relationship test applied in WTO non-​discrimination jurisprudence. As we shall see, a similar standard emerges in relation to the expropriation discipline, discussed below. Examining selected cases more closely affords further insight.

a) Apotex Holdings Inc and Apotex Inc v United States The decision in Apotex Holdings Inc and Apotex Inc v United States concerned an investor complaint under NAFTA about import restrictions by the US Food and Drug Administration (FDA) stopping at the border drugs produced by the investors’ facilities in Canada.96 The complainants argued that the FDA was responding to public opinion requiring the agency to demonstrate its control over drugs produced in foreign facilities in the wake of a national scandal, which saw 81 US deaths attributed to a contaminant in the active ingredients of heparin, a blood-​thinning drug sourced from China.97 They argued that the true reason for import restrictions was that the FDA was demonstrating to the world its tough new enforcement policy by making an example of Apotex.98 FDA inspections at Apotex facilities revealed multiple systemic issues requiring attention. The respondent commented for instance that inspection at one facility ‘found that Apotex had 92 Pope & Talbot v Canada (n 27) [78]–​[79]. This idea had been floated in the Memorial of the Investor. Pope & Talbot Inc v The Government of Canada Memorial of the Investor (Second Phase) (5 September 2000) [269]–​[272]. See further Feldman Karpa v Mexico ICSID Case No ARB(AF)/​99/​1, Award and Dissenting Opinion, 16 December 2002 (Konstantinos Kerameus, Jorge Covarrubias Bravo and David Gantz) [182] (hereafter Feldman v Mexico). Schreuer and Dolzer, Principles of International Investment Law (n 6) 202. See similarly Saluka v Czech Republic (n 10) [307]. 93 McLachlan, Shore and Weiniger, International Investment Arbitration (n 3) 342, [7.296]; Schreuer and Dolzer, Principles of International Investment Law (n 6) 202. 94 Henckels, Proportionality and Deference (n 12) 81. 95 Parkerings-​Compagniet AS v Lithuania ICSID Case No ARB/​05/​8, Award, 11 September 2007 (Julian Lew, Marc Lalonde and Laurent Lévy) [368] (hereafter Parkerings-​Compagniet AS v Lithuania). 96 Apotex Holdings Inc and Apotex Inc v United States ICSID Case No ARB(AF)/​12/​1, Award, 25 August 2014 (VV Veeder, J William Rowley and John R Crook) (hereafter Apotex v US). 97 Ibid, [3.12]. 98 Ibid, [2.26].

Regulatory Coherence Requirements  233 distributed products in the US market contaminated with hair, glue, plastic, nylon, metal, rust, acetate fibres, fluorocarbons and PVC-​based material’, although the Tribunal did note that it has ‘received no firm evidence’ that Apotex drugs had ‘caused any actual harm to any patient in the USA’.99 The complainants were unable to establish that the United States had discriminated against their products in breach of NAFTA Articles 1102 (national treatment) and 1103 (most favoured nation treatment), and were also unable to establish that it was a breach of the minimum standard of treatment in Article 1105. For present purposes we are interested in the reasoning employed to determine the discrimination claim under Article 1102. Here the Tribunal simply decided that none of the three domestic drug companies proposed as comparators was ‘in like circumstances’ to the claimant, as they were subject to a different set of rules under US law.100 Unlike domestic companies, foreign companies’ products were subject to border inspections and import alerts such as the one complained of in this dispute. There would be no presumptive violation of Article 1102 the Tribunal said, where differences in treatment had a reasonable nexus to rational government policies that did not distinguish, on their face or de facto, between foreign owned and domestic companies and did not otherwise and unduly undermine NAFTA’s investment to liberalising objectives.101

b) Parkerings-​Compagniet AS v Republic of Lithuania The same principle had been applied earlier under the bilateral investment treaty between Lithuania and Norway in the case of Parkerings-​Compagniet AS v Republic of Lithuania.102 Parkerings asserted that the Municipality of Vilnius had discriminated against its parking lot construction project in favour of a project at the same site to be built by a Dutch company, Pinus Propius. The Tribunal found that the Norwegian company Parkerings was not ‘in like circumstances’ with successful Dutch rival Pinus Propius because of how the proposed Parkerings project would have affected the archaeological heritage near the ‘culturally sensitive area’ of the Cathedral in the Old Town of the City of Vilnius, a UNESCO World Heritage site.103 Parkerings’ claims for breach of guarantees of equitable and reasonable treatment and protection against expropriation without compensation also failed. Parkerings was a Norwegian company with a 100% shareholding in the Lithuanian company UAB Baltijos Parkingas—​which became co-​owner with 99 Ibid, [2.43], [3.26], [3.46], [3.62]. 100 Ibid, [8.22]–​[8.58]. The Tribunal cited the decision in Pope & Talbot v Canada (n 27) [79]. 101 Ibid, [8.55]–​[8.56]. 102 Parkerings v Lithuania (n 95) [368]. 103 Ibid, [388], [392]. Convention Concerning the Protection of the World Cultural and National Heritage (opened for signature 16 November 1972, entered into force 17 December 1975) 1037 UNTS 151. Additionally the Parkerings project was subject to the Convention for the Protection of the Architectural Heritage of Europe (opened for signature 3 October 1985, entered into force 1 December 1987) ETS 121.

234  Investment Treaty Arbitration the UAB Egapris Consortium of UAB Vilniaus Parkavimo Kompanija. Baltijos Parkingas and Egapris acquired an interest in an agreement to construct a series of multi-​storey parking buildings as part of developing and implementing a public parking plan in the city of Vilnius. The agreement specified that the plan’s implementation was subject to approval by the Municipality of the City of Vilnius.104 There were various difficulties in the relationship. Specific dispute arose in relation to Baltijos Parkingas’ plan for an underground parking lot on the Gedimino Avenue between Jogailos Str. and Katedros Sq. Having approved construction in January 2001, the municipality changed its mind in March 2001 and decided instead on the construction by Baltijos Parkingas only of an underground parking lot next to the Pergales Movie Theatre.105 From the investor perspective, the refusal of its Gedimino Project was not justified, while from the city’s perspective Baltijos Parkingas failed in its contractual obligations in not delivering plans for the Pergales construction.106 The city gave the Gedimino construction job to UAB Pinus Propius, a Dutch company, and terminated the agreement with Baltijos Parkingas and Egapris.107 Why had the municipality changed its mind? Initially, the municipality had been prepared to go ahead despite objection by the National Monument Commission, who argued that the Baltijos Parkingas’ plan for the Gedimino project ‘would change the character of the Old Town of global value; destroy large areas of unexplored cultural layer . . . ’. However, the Commission emphasised that ‘a big portion of archaeological heritage of Vilnius will be destroyed’ and the old city’s authenticity damaged.108 In contrast, the Pinus Propius project would be built outside the Old Town, and was significantly smaller, with 233 parking slots as compared with the 500 spaces envisaged in the Parkerings project.109 The Parkerings project also extended ‘significantly more into the Old Town as defined by the UNESCO’, and this was the decisive point for the Tribunal. The Pinus Propius project did not extend into the area near the Cathedral.110 The Tribunal reasoned that less favourable treatment was acceptable where justified by a State’s legitimate objective.111 In this case ‘[t]‌he historical and archaeological preservation and environmental protection could be and in this case were a justification for the refusal of the project’.112 Accordingly the Tribunal considered that the City of Vilnius had legitimate grounds to distinguish between the two projects, finding the Municipality’s refusal to authorise the Gedimino project was

104

Parkerings v Lithuania (n 95) [88]. Ibid, [146], [148]. 106 Ibid, [151], [153]. 107 Ibid, [171], [188]. 108 Ibid, [142], [147], [385], [388]. 109 Ibid, [284], [380]. 110 Ibid, [392], [395]. 111 Ibid, [370]–​[371]. 112 Ibid, [392]. 105

Regulatory Coherence Requirements  235 justified by various concerns, especially in relation to historical and archaeological preservation and environmental protection. The claimant had failed to demonstrate discrimination.113

3.  Expropriation: ‘for a public purpose’ The final investment treaty discipline to be addressed in this chapter is the discipline on expropriation. Tribunals addressing expropriation claims may find themselves drawn into the articulation of tests delineating States’ regulatory freedoms, particularly in cases involving claims of indirect expropriation. These cases may relate to the adoption of regulations arguably having the effect of expropriating an investment.114 They could alternatively involve situations where the refusal or revocation of government permits or licences renders an investment valueless, or potentially situations where an investor is subject to penalties in the course of law enforcement. The non-​discriminatory expropriation of private property in accordance with due process for a public purpose is in principle lawful as an exercise of territorial competence on condition there is adequate compensation.115 Traditionally, the uncompensated taking of property was considered an expropriation regardless of whether it had been carried out in the course of exercising the governmental function of regulating the general welfare, for instance in the spheres of health, safety and the environment (known as the exercise of ‘police powers’). The purposes of a taking were irrelevant: it was the effect of the State’s action that counted.116 This view was partly superseded by an understanding that deprivation of property by virtue of the exercise of police powers might constitute a form of expropriation that did not require compensation.117 Taking the development of the law one step further, it is now understood that customary international law today recognises that where an investor is deprived of property by virtue of regulatory action constituting an exercise of police powers the effects on foreign investors will not amount to expropriation, though a Tribunal will look to see that there have been no specific commitments to an investor with which the conduct is inconsistent.118 Less contemporary investment protection treaties may be read in the light of customary

113 Ibid, [396]. 114 Salacuse, The Law of Investment Treaties (n 4) 327–​328, 334. 115 James Crawford, Brownlie’s Principles of Public International Law (9th edn, OUP 2019) 604. 116 Schreuer and Dolzer, Principles of International Investment Law (n 6) 120, 122; Salacuse, The Law of Investment Treaties (n 4) 341. 117 Schreuer and Dolzer, Principles of International Investment Law (n 6) 123. 118 Ibid, 120–​121; Saluka v Czech Republic (n 10) [262]; Methanex Corporation v United States UNCITRAL, Final Award on Jurisdiction and Merits, 3 August 2005 (J William Rowley, W Michael Reisman and VV Veeder) Part IV, Ch D, 4, [7]‌.

236  Investment Treaty Arbitration international law to enable this understanding to emerge even where a tribunal must apply outdated textual provisions.119 The context in which a measure is adopted and the purpose for which the host State is acting have thus become important.120 This strengthened acknowledgement of States’ domestic regulatory functions firmly nudges investment jurisprudence into territory where regulatory standards can be expected to develop to guide the law’s application. Notably, on this broad, modern understanding of the police powers doctrine, a tribunal may need in particular to establish not only the existence of a ‘public purpose’ but importantly also that a measure is ‘for’ that purpose. The concept of ‘public purposes’, although a long-​standing element of the customary international law on expropriation as well as of the expropriation treaty disciplines, is broad, and may encompass a wide range of action.121 It is, in effect, in the ‘for’ that regulatory coherence tests are more likely to become established. An appropriate relationship between the State’s actions and their objectives will be required. For instance in Philip Morris Brands Sàrl and ors v Uruguay the Tribunal considered whether Uruguayan cigarette packaging measures were taken bona fide for protecting the public welfare and were non-​discriminatory and not disproportionate to the objective they were meant to achieve. The Framework Convention on Tobacco Control served as a reference point for determining the reasonableness of the Uruguayan measures. The Tribunal did not need to ascertain whether the Uruguayan measure/​s actually had the intended effect.122 Criteria or formulae for ascertaining whether there is an appropriate relationship between the host State’s actions and their objectives sit among and are not always clearly distinguishable from a broader range of requirements. A tribunal will look to see whether action may have been abusive by virtue of unfairness, inequity or arbitrary or discriminatory conduct, as well as whether due process has been followed.123 There is also a broader notion that the legality of a taking is to 119 Philip Morris Brands Sàrl and ors v Uruguay ICSID Case No ARB/​10/​7, Award, 8 July 2016 (Piero Bernardini, Gary Born and James Crawford) [290]–​[301] (hereafter Philip Morris v Uruguay). C.f. South American Silver Ltd v Bolivia PCA Case No 2013-​15, Award, 22 November 2018 (Eduardo Zuleta Jaramillo, Francisco Orrego Vicuña and Osvaldo César Guglielmino) [552], [623]–​[630] (hereafter SAS v Bolivia). 120 Salacuse, The Law of Investment Treaties (n 4) 346; LG&E Energy Corp, LG&E Capital Corp, LG&E International INC v Argentine Republic ICSID Case No ARB/​02/​1, Decision on Liability, 3 October 2006 (Tatiana B de Maekelt, Francisco Rezek and Albert Jan van den Berg) 194–​195. 121 Salacuse, The Law of Investment Treaties (n 4) 67, c.f. 349–​350. For discussion, M Sornarajah, The International Law on Foreign Investment (4th edn, CUP 2017) 482–​485 (hereafter Sornarajah, The International Law). 122 Philip Morris v Uruguay (n 119) [302]–​[307]. WHO Framework Convention on Tobacco Control (opened for signature 16 June 2003, entered into force 27 February 2005) 2302 UNTS 229. C.f. in SAS v Bolivia the Tribunal focused on the lack of evidence that Bolivia had alternative means to address the public order problem it was facing in connection with SAS’ mining investment. SAS v Bolivia (n 119) [568]–​[577]. 123 McLachlan, Shore and Weiniger, International Investment Arbitration (n 3) 404, [8.141]–​[8.142], citing Link–​Trading Joint Stock Company v Moldova UNCITRAL, Final Award, 18 April 2002 (Jeffrey M Hertzfeld, Ion Buruiana and Ivan S Zykin) [604].

Regulatory Coherence Requirements  237 be considered with reference to a general criterion of reasonableness. The 1961 Harvard Draft Convention on the International Responsibility of States for Injuries to Aliens considered expropriation to include unreasonable interference with the use, enjoyment or disposal of property. Consistent with this, Article 10(5) dealt with indirect expropriation by providing that uncompensated takings arising from the action of competent authorities of the State in the maintenance of public order, health or morality . . . were not to be considered wrongful provided inter alia that they were not ‘an unreasonable departure from the principles of justice recognised by the principal legal systems of the world’.124 The Iran-​United States Claims Tribunal for instance found new banking requirements involving signature authentication were not unreasonable or indeed contrary to normal banking practice in Iran.125 A reliance on the concept of unreasonableness, including unreasonableness vis-​ à-​vis the need being addressed was seen in the analysis of the El Paso v Argentina Tribunal on the indirect expropriation claim lodged by the investor in relation to Argentina’s taxes on the hydrocarbon sector. The El Paso Tribunal took the view as a matter of principle that general regulations did not amount to indirect expropriation but that unreasonable general regulations might do so. Argentina’s taxes did not constitute indirect expropriation, being reasonable and not resulting in the neutralisation of the claimant’s property rights. The Tribunal considered that regulations would be unreasonable where they were arbitrary, discriminatory, disproportionate or otherwise unfair. Thus while the Tribunal emphasised the concepts both of reasonableness and of proportionality, the overarching concept in this case appears to have been that of reasonableness.126 A pair of indirect expropriation cases, considered here in more detail, enables a closer appreciation of the nature of the relationship that may be sought between regulatory States’ measures and their objectives. Both cases were decided under bilateral investment treaties, and pleadings for both remain unavailable; accordingly we must consider them based on the awards.

a) Vestey Group Ltd v Venezuela The complainant, Agroflora, a highly productive agricultural enterprise, had been deprived of its properties under Venezuela’s 2001 land reform legislation, said to be aimed at recovering deemed idle or unproductive estates to help increase food security.127 The Tribunal found that Venezuela had breached the guarantee against 124 Art 10(3), Harvard Law School, Harvard Draft Convention on the International Responsibility of States for Injuries to Aliens, Louis B Sohn and RR Baxter, ‘Responsibility of States for Injuries to the Economic Interests of Aliens’ (1961) 55(3) AJIL 548. 125 Harza Engineering v Republic of Iran Award, 30 December 1982, 1 Iran-​US CTR 499, [28]. 126 El Paso v Argentina (n 31) [234], [236], [241], [243], [299]. 127 Vestey Group Ltd v Bolivarian Republic of Venezuela ICSID Case No ARB/​06/​4, Award, 15 April 2016 (Gabrielle Kaufmann Kohler, Horacio Grigera Naón and Pierre-​Marie Dupuy) (hereafter Vestey v Venezuela).

238  Investment Treaty Arbitration expropriation in Article 5 of the UK-​Venezuela investment agreement, which required that an expropriation be ‘for a public purpose related to the internal needs of the Party’.128 The tenor of the Tribunal’s approach was respectful of host State interests. The Tribunal began by observing that it had first to assess whether there existed a public purpose for the Venezuelan land reform. States deserved broad deference on such a matter, the Tribunal echoing an historical view that the State is ‘free to judge for itself “what it considers useful or necessary for the public good” ’. Venezuela had submitted that its purpose was to ensure its citizens had timely access to food as part of its national plan for food self-​sufficiency, and access to agricultural and livestock resources was said to be a key part of the strategy. The Tribunal deferred to this policy determination. Such a policy appeared to the Tribunal legitimate and worthy of protection, with no suggestion otherwise in the record.129 However, that finding did not end the inquiry. The Tribunal had also to assess whether Venezuela’s expropriatory conduct was ‘for’ this public purpose. The Tribunal had to consider all the relevant circumstances, including the government’s actions after the expropriation had taken place. Although the objective was not to review the measure’s effectiveness, failure on the part of a government to advance a declared purpose could serve as evidence that a measure was not taken in furtherance of such purpose. As the Tribunal put it, the idea was to determine whether the measure had ‘a reasonable nexus with the declared public purpose or in other words was at least capable of furthering that purpose’.130 The Tribunal then examined the nexus. As the Tribunal saw it, it was difficult on the facts to see that expropriation of the private enterprise in this case better served the purpose of wider access to food. Where a productive private farming enterprise had been selling all of the beef it produced on the domestic market at regulated prices, this contributed to implementing an access to food policy. There was nothing in the record to suggest that Agroflora’s output increased after the expropriation, or that access to the beef produced by Agroflora became wider or cheaper. Rather, there were unrebutted statements that government management of Agroflora had resulted in declined production.131 The Tribunal also rejected Venezuela’s argument that the aim of facilitating public access to food warranted redistributing to the people the country’s latifundios (large uncultivated land plots in private hands). The government had clearly acknowledged Agroflora’s productivity, and its expert had acknowledged Agroflora’s use of its land as in terms of there being no ‘higher and better’ use for the land. However, all this was somewhat



128

Ibid, [472], [293]. Ibid, [294], [295]. 130 Ibid, [296]. 131 Ibid, [297]. 129

Regulatory Coherence Requirements  239 beside the point as there was no evidence of actual redistribution or government planning for such.132 Accordingly, the Tribunal said the least it could say was that the nexus between Venezuela’s declared purpose to achieve wider public access to food and the expropriation of Agroflora was not obvious. The Tribunal dispensed with a definitive ruling on the point as this was not necessary.133

b) Philip Morris Brands Sàrl and ors v Uruguay The Philip Morris v Uruguay arbitration involved a challenge under the Switzerland-​Uruguay BIT to public health measures adopted by Uruguay in 2008 and 2009 to reduce smoking. These measures affected the business of Uruguayan company Abal Hermanos S.A., which was wholly owned by Swiss company Philip Morris Brand Sàrl; both were claimants in the case. Their ultimate parent company was the US company Philip Morris International Inc.134 Uruguay’s measures comprised firstly a ‘single presentation requirement’ (SPR) unprecedented in other jurisdictions allowing each cigarette brand only a single presentation. Abal could no longer sell multiple products under the one brand (e.g. ‘Marlboro Red’, ‘Marlboro Gold’, ‘Marlboro Blue’ and ‘Marlboro Green (Fresh Mint)’).135 Uruguay’s aim was to protect consumers from buying cigarettes in the belief that some brand variants were safer than others. This false idea was a carry-​ over from the time when tobacco companies had been permitted to market variants using the descriptors ‘light’, ‘mild’ and ‘ultra-​light’ which had been eliminated by parties to the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC). Uruguay’s measures comprised secondly an increase in the size of graphic health warnings on cigarette packages so that the warnings would cover 80% of the package as compared with a previous 50% (the 80/​80 Regulation). The aim here was to increase consumer awareness and encourage young people to quit or not to take up smoking to begin with. The claimants made a number of claims. Inter alia they asserted that Uruguay had expropriated their property and denied them fair and equitable treatment. They sought compensation and the withdrawal of the relevant regulations.136 The claimants lost on all counts and the Tribunal took this into account in the award of costs.137 Uruguay was a party to the FCTC.138 Switzerland was not a party, but had signed the FCTC. The FCTC includes provisions in Articles 11(1)(a) and 13(4) 132 Ibid, [299]. 133 Ibid, [300]. 134 Philip Morris v Uruguay (n 119) [2]‌–​[6]. 135 Ibid, [10], [404]. 136 Ibid, [12]. 137 Ibid, [582]–​[588]. 138 WHO Framework Convention on Tobacco Control (opened for signature 16 June 2003, entered into force 27 February 2005) 2302 UNTS 166.

240  Investment Treaty Arbitration (a) committing parties to eliminating false, misleading, deceptive or other packaging, labelling, advertising and promotion likely to create an erroneous impression about its characteristics and health effects. Article 11(1)(b) says that health warnings on packages should cover at least 50% or more of principle display areas, while the Guidelines to Article 11 call for warnings covering as much of the principal display area as possible, ‘[g]‌iven the evidence that the effectiveness of health warnings and messages increases with their size.’139 The Tribunal recorded the undisputedly serious health risk represented by tobacco products, the use of which killed approximately 5.1 million adults annually according to the WHO.140 However, the parties disagreed on matters including the effect of the challenged measures on smoking in Uruguay. The Tribunal found the evidence to suggest that tobacco use had been in decline since 2006. Prevalence among adults had been at 32% from 1998 to 2006 but in 2013 was said to have approached 19%. The International Tobacco Control Policy Evaluation Project, an international research collaboration spanning 23 countries, reported data indicating that the SPR and 80/​80 Regulations were each having the intended effect in certain measure.141 The Philip Morris v Uruguay case included a claim of indirect or de facto expropriation. The claimants asserted that Uruguay had, inconsistently with Article 5 of the BIT, expropriated assets including their intellectual property and goodwill, ‘by effectively banning seven of Abal’s thirteen variants and substantially diminishing the value of the remaining ones’. Major adverse impact must be demonstrated to establish indirect expropriation, amounting to substantive deprivation of an investment’s value, use or enjoyment. This the claimants failed to show; indeed, Abal had grown more profitable.142 The Tribunal had first to consider the nature of the right confirmed by a trademark, for instance, is this a right of use or only a right to exclude others from use? The Tribunal took a reasoned approach. The Tribunal considered trademarks in certain circumstances to grant a right of use, but this was only vis-​à-​vis other persons—​‘[i]‌t is not an absolute right to use that can be asserted against the State qua regulator’.143 For instance, registering a trademark would not guarantee the right to market products containing a food additive subsequently found to cause cancer. Nevertheless, trademark rights could be private property rights, and their use by the owner protected as such. The Tribunal considered that the claimants ‘had property rights regarding their trademarks capable of being expropriated’.144 139 WHO, ‘Guidelines for Implementation of Article 11 of the WHO Framework Convention on Tobacco Control (Packaging and Labelling of Tobacco Products)’ Decision FCTC/​COP3(10) (November 2008) [12]. See also [39], [43]. 140 Philip Morris v Uruguay (n 119) [74]. 141 Ibid, [133], [136], [140], [142]. 142 Ibid, [180], [191]–​[192], [284]–​[286]. 143 Ibid, [267]. 144 Ibid, [269], [272]–​[274].

Regulatory Coherence Requirements  241 However, there was no such expropriation by the 80/​80 Regulation, which affected only the modalities of use,145 and in the case of the SPR there was insufficient adverse impact on the investment. In view of ‘the Parties’ extensive debate’ on the subject the Tribunal also considered an additional basis for the finding that Uruguay’s measures did not amount to expropriation, holding them to be a valid exercise of the State’s police powers for the protection of public health.146 The Philip Morris v Uruguay Tribunal also rejected a claim that Uruguay had breached fair and equitable treatment requirements in Article 3(2) of the BIT. The 80/​80 Regulation was found to be a reasonable measure, that was not arbitrary, grossly unfair, unjust, discriminatory or disproportionate to the objective,147 and the SPR, by majority, likewise.148 The claimants could have had no legitimate expectations that such measures would not be adopted, neither had their effect been ‘to modify the stability of the Uruguayan legal framework’.149 Indeed, ‘changes to general legislation (at least in absence of a stabilization clause) are not prevented by the fair and equitable treatment guarantee if they do not exceed the exercise of the host State’s normal regulatory power in the pursuance of a public interest and do not modify the regulatory framework relied upon by the investor at the time of its investment “outside of the acceptable margin of change” ’.150 The Tribunal concluded that Uruguay’s measures were not arbitrary on the basis they had been adopted for the purpose of protecting public health and were an effective means of doing so. This ‘connection between the objective pursued by the State and the utility of the two measures’ was recognised in the amicus briefs submitted respectively by the WHO and the FCTC Secretariat and by the Pan American Health Organization.151 The key question, especially in relation to the SPR, related to whether Uruguay’s measures successfully conveyed the message that ‘no cigarette is safer than any other’.152 With the parties’ evidence discordant as to the SPR’s actual effectiveness in the market,153 the Tribunal ultimately took the view that it was not necessary ‘to decide whether the SPR actually had the effects that were intended by the State’, rather what mattered was ‘whether it was a “reasonable” measure when it was adopted’.154 It was sufficient to hold that the SPR ‘was an attempt to address a real public health concern, that the measure taken was not disproportionate to that concern and that it was adopted in good faith’.155 Accordingly the Tribunal concluded that the SPR ‘was a reasonable measure, not

145

Ibid, [276]. Ibid, [287], [307]. 147 Ibid, [420]. 148 Ibid, [410]. 149 Ibid, [434]. 150 Ibid, [423]. 151 Ibid, [391]. 152 Ibid, [392]. 153 Ibid, [408]. 154 Ibid, [409]. 155 Ibid, [409] . 146

242  Investment Treaty Arbitration an arbitrary, grossly unfair, unjust, discriminatory or a disproportionate measure’ and was not in breach of the Article 3(2) fair and equitable treatment requirement. Arbitrator Gary Born dissented from this conclusion. We may note that the Tribunal relied on such findings also in determining that the measures were an exercise of police powers as mentioned earlier. Holding that regulatory action must meet certain criteria in order to qualify as non-​ expropriatory, the Tribunal observed that this was indicated by earlier investment treaty decisions and went on to identify criteria that were among those most commonly mentioned in previous awards articulating the police powers doctrine. Accordingly, the Tribunal found that the customary international legal police powers doctrine operated where three conditions were met, that the action ‘be taken bona fide for the purpose of protecting the public welfare’, be non-​ discriminatory and be proportionate.156 Both the SPR and the 80/​80 Regulation satisfied these conditions. The reasons were adopted in good faith and were non-​ discriminatory. They were ‘proportionate to the objective they meant to achieve’. They were not ‘arbitrary and unnecessary’ as argued by the claimants. Indeed, both had been adopted in fulfilment of Uruguay’s national and international legal obligations for the protection of public health.157 The Tribunal based its conclusion that Uruguay’s measures were an exercise of police powers on the facts that these were public health measures directed to reducing the incidence of smoking in Uruguay, that this had in fact taken place, ‘notably among young smokers’, and that the measures were capable of contributing to the achievement of this end. The Tribunal considered these points sufficient to defeat an expropriation claim. The Tribunal remained unphased in relation to the difficulty of establishing a causal link to Uruguay’s resources, in an area where experts agreed that research was difficult and the measures formed part of a broader scheme of tobacco control with a variety of different components. That the measures were ‘potentially effective means to protecting public health’ was important and the Tribunal noted that this conclusion had been endorsed in the amicus submissions.158 The Dissenting and Concurring Opinion of Arbitrator Gary Born in the Philip Morris v Uruguay case found to the contrary that Uruguay’s SPR was irrational and disproportionate, and therefore in breach of the fair and equitable treatment obligation. Further, Arbitrator Born seems to have applied proportionality testing in a way that incorporated the finding that Uruguay’s measure had disproportionately injured investor rights.159 Some may feel uncomfortable with the idea of substantive assessment of States’ regulatory policies pivoting on arbitrators’ assessments of 156 Ibid, [305]. 157 Ibid, [302], [305], [306]. 158 Ibid, [306]. 159 Concurring and Dissenting Opinion of Arbitrator Gary Born [129], [139], [146], [157], [176], [196].

Regulatory Coherence Requirements  243 the value of the policies at stake for host States as weighed up with rights held by specific investors. Contrastingly, the more restrained approach of the majority is of real interest, because proportionality testing is a mechanism for the co-​ordination of domestic and international law by which international law could potentially insert itself more directly into domestic legal orders. The Tribunal looked at proportionality in terms of whether Uruguay’s smoking reduction measures were proportionate to their objective.160 The effect on Philip Morris’ investment appears to have been less central,161 though it was still taken into account as part of the Tribunal’s overall assessment of whether Uruguay’s smoking reduction measures were ‘arbitrary, grossly unfair, unjust, discriminatory or . . . disproportionate’.162 The Philip Morris v Uruguay Tribunal also referred frequently, in applying the fair and equitable treatment requirement, only to the absence of disproportionality or of obvious disproportionality.163 The Tribunal may have been more concerned with the internal rationality of Uruguayan measures than their proportionality in terms of the balance of interests involved.

D. Conclusion The regulatory coherence tests that have emerged in the application of the three core investment treaty disciplines as assessed in this chapter have much in common with one another, all requiring in essence a reasonable or rational relationship between the measures in question and an acceptable or legitimate government policy.164 The tests bear real similarity to regulatory coherence tests in the WTO165 and even in the ICJ, including particularly that seen in the case of Whaling in the Antarctic (Australia v Japan: New Zealand intervening).166 The assertion that

160 Philip Morris v Uruguay (n 119) [306], [409]. See also [410], [420]. 161 Ibid, [306], [409]. 162 Ibid, [410], [420]. 163 Ibid, [410], [419], [420]. E.g. ‘In the end, the question is whether the 80% limit in fact set was entirely lacking in justification or wholly disproportionate’ [419]. 164 Indeed, recent investment law scholarship has observed that precepts of reasonableness inform particularly the fair and equitable treatment discipline, as well as the guarantee of full protection and security found in many investment treaties and protection against non-​impairment of investment through arbitrary or unjustifiable measures. Federico Ortino, The Origin and Evolution of Investment Treaty Standards: Stability, Value, and Reasonableness (OUP 2019) 171–​174. See previously, contemplating a move away from reliance on substantive disciplines, particularly the non-​discrimination discipline, towards reliance on concepts such as reasonableness in both investment and trade law, Federico Ortino, ‘From “Non-​Discrimination” to “Reasonableness”: A Paradigm Shift in International Economic Law?’ (2005) Jean Monnet Working Paper 01/​05 accessed 11 August 2020; Andrew Lang, ‘Protectionism’s Many Faces’ (2018) 44 Yale Journal of International Law Online 54, 60. 165 See previously Chapter Six. 166 Chapter Three, section 2 c) (ii).

244  Investment Treaty Arbitration we are seeing the emergence of a global standard calling for domestic regulatory coherence is well supported in the international investment law context. Looking back to the previous chapters of this book, we see that all the bodies studied in these chapters have articulated regulatory coherence standards that are by their nature potentially accommodating of domestic authority. Investment arbitration, for its part, appears to have responded almost intuitively to societal pressures mandating an increasingly nuanced and generally host-​State friendly approach to questions involved in identifying the balance between the various interests that are given effect under investment protection agreements, particularly host States’ regulatory freedom. For instance, applying Article 1105 of NAFTA the Tribunal in Glamis Gold v US ultimately required only that there be no manifest lack of reasons for US actions, a requirement satisfied in the circumstances of the case where it appears the government had had a sufficient ‘good faith’ belief that there was a reasonable connection between its measures and the harm they addressed.167 In Mesa v Canada the Tribunal took the view by majority that there existed a reasonable relationship between the justification for and the terms of Ontario’s actions. Provided these actions were due to a bona fide policy decision it was not relevant whether or not they were successful.168 In Apotex v US and Parkerings v Lithuania we see the requirement for a reasonable nexus to rational government policies employed in the context of the non-​discrimination discipline. The reasoning in Phillip Morris v Uruguay is similar to that in Mesa v Canada, and defeated Philip Morris’ expropriation claim as well as its claim for breach of the fair and equitable treatment guarantee.169 The same reasoning is seen in Vestey v Venezuela, albeit that in this case serious doubt was cast on whether Venezuela’s expropriation of Agroflora’s agricultural property was capable of contributing to the declared public purpose of improving food security.170 Common to all these cases is the extent to which these investment tribunals’ articulations of applicable regulatory coherence tests can accommodate domestic level decision-​making rather than encouraging an international legal override of the exercise of domestic authority. The social dynamics associated with the working out of relative domestic and international legal authority in environment-​ related investment treaty arbitration jurisprudence appear, most of the time, to produce formulae that should enable States’ and populations’ regulatory needs to be met while also affording an appropriate measure of investment protection. By facilitating acceptance of decision-​making at the national level these tests allow room for the operation of democratic processes that may assist with traditional procedural justifications for authority at the domestic and international level.



167

Chapter Seven, section C 1 a). Chapter Seven, section C 1 b). 169 Chapter Seven, section C 3 b). 170 Chapter Seven, section C 3 a). 168

Regulatory Coherence Requirements  245 There appear to be certain differences in outlook between members of investment tribunals and members of the international courts and tribunals addressed in previous chapters. In interviews conducted for the purposes of this research the question of the investment arbitrator’s function or role was conceived of more in terms of an arbitrator’s sense of his or her individual responsibilities than in terms of tribunals’ responsibilities. This may reflect the fact that arbitrators pursue individual professional careers. The arbitrator’s primary responsibility is to deal with the dispute at hand fairly, impartially and effectively. There may additionally be a sense of institutional duty, for instance if an arbitrator is working under the auspices of the International Centre for Settlement of Investment Disputes he or she may work to uphold the institutional values of quality and efficiency. There were also those who observed that in the course of carrying out his or her duties the arbitrator had responsibilities in relation to the development of international law as appropriate, and beyond this responsibilities towards conceptions of public order and the development of methods by which international society copes with pressing contemporary problems, including in the environmental sphere. The more experience gained by an arbitrator, the more he or she was likely to see the high-​level issues at play. Such differences in orientation between investment arbitrators and members of other international courts and tribunals may in part explain a variable interest in the idea that investment arbitration can be understood as a form of review or judicial review of domestic government decision-​making as discussed in later chapters.171 At first appearance many investment treaty cases invite such an analogy, as they have characteristics like those of disputes concerning the improper use of powers in domestic, or international law. This is due to the concrete presence of the complainant within the State in question, and the fact that individual complaints are private actors. It is due also to the possibility that the complaints have been specifically targeted by the host State and/​or treated unfairly. Further the governmental activity of the State that is complained of may well have been a breach of domestic administrative law in the host State. Investment treaty arbitration may even in practice substitute for the adjudication of administrative law disputes in national courts. Comparative public law scholarship on investment arbitration has also had an influence.172 Yet, as discussed in the next chapter, investment treaty law is most 171 Chapter Ten, section C 2 a). 172 For instance the Electrabel Tribunal cited recent scholarship in observing that the test for proportionality had been developed from certain municipal administrative laws. Electrabel SA v Hungary ICSID Case No ARB/​07/​19, Award, 25 November 2015 (Gabrielle Kaufmann-​Kohler, Brigitte Stern and VV Veeder) [179] (hereafter Electrabel v Hungary, Award) citing Benedict Kingsbury and Stephan W Schill, ‘Public Law Concepts to Balance Investors’ Rights with State Regulatory Actions in the Public Interest—​the Concept of Proportionality’ in Stephan W Schill (ed), International Investment Law and Comparative Public Law (OUP 2010) 75. The Tribunal considered the proportionality test required a measure ‘to be suitable to achieve a legitimate policy objective, necessary for that objective, and not excessive considering the relative weight of each interest involved’. Electrabel v Hungary, Award, [179]. For discussion, Chapter Eight, Chapter Ten, section C 1.

246  Investment Treaty Arbitration fundamentally about the balance of interests between States party to the relevant investment treaty agreements and their populations, as embodied in treaty and related customary international law guarantees, rather than between claimants and respondents. The potential emergence of proportionality testing in investment treaty arbitration requires special attention, as will also be discussed further in Chapter Eight. An interest in proportionality testing as a means to assess regulatory coherence is most apparent in investment treaty arbitration as compared with the other fora examined in this book, though still only rarely employed. The difficulty with proportionality testing is that it calls, when needed, for a value judgement to be taken as a matter of international law on the relative merits of the legal interests at stake. In other words, proportionality testing is not ultimately as accommodating of domestic decision-​making as many other regulatory coherence tests curbing regulatory excess or inaction more indirectly, such as regulatory coherence tests drawing on concepts of reasonableness. Though substantive, a test such as that seen in Whaling in the Antarctic, under which the ICJ was able to assess Japan’s scientific whaling programme on the basis of the reasonableness of its internal design, also constrains regulatory action while imposing only a moderate level of international legal intervention. A similar observation can be made regarding the application of approaches found in cases where a court or tribunal applies capability testing as seen in cases considered in Chapter Three, and also in WTO practice as well as in this chapter. The tests for rational correspondence between measures and their objectives seen across the jurisprudence studied in this book can likewise be applied without the potential for intrusion implicit in proportionality-​based reasoning. Proportionality testing is altogether distinct, and for this reason requires its own chapter.

8

Proportionality in Investment Treaty Arbitration A. Introduction International investment law is unusual for the number of occasions on which tribunals have indicated that proportionality stricto sensu, frequently referred to in this book simply as ‘proportionality’, may serve as a test for determining the extent of host State regulatory freedom. This idea has been alluded to only rarely in the other international adjudicatory fora studied in this book, although references were made to criteria of proportionality in a number of law of the sea and World Trade Organization (WTO) cases.1 Requiring regulatory action to reflect a proportionate balance between competing interests, proportionality differs markedly from the remainder of the regulatory standards and tests featuring in this study. On the one hand, the concept of proportionality holds marked promise as a means to bring about better accommodation of competing interests in international law over time through better co-​ordination in the exercise of domestic and international legal authority. However, this is precisely because the principle heightens the possibility that international law could override policy decisions made under domestic law and, with that, domestic democratic decision-​making processes. International courts and tribunals are rightly wary of introducing such a concept into their reasoning when it does not already form part of the law they are asked to apply. The potential effects of proportionality analysis also play into systemic challenges posed by the emergence of regulatory standards in international law in distinctive and significant ways as discussed further in Chapter Ten, and for this reason too need open and wide-​ranging discussion. This chapter begins by introducing further the principle of proportionality and its lack of standing as a general principle of law internationally, before moving on to consider situations where the concept has been relied upon by investment tribunals in relation to claims of expropriation and breach of the fair and equitable treatment guarantee. The chapter then seeks to lay the ground for ongoing consideration of proportionality as a potential regulatory coherence test in the investment sphere by laying bare the competing legal interests at stake in investment



1

Chapter Three; Chapter Six.

Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0008

248  Investment Treaty Arbitration disputes, highlighting that these are fundamentally the interests of States and their populations. Against this background, the chapter proposes that proportionality analysis, if conducted, be focused on the protection of the rights set down in investment treaties and customary international law, rather than on the protection of individual investors, with an emphasis on proportionality relative to regulatory purpose. The chapter endorses the idea that proportionality testing could be used indicatively, as a flag that conduct may not be consistent with other regulatory coherence tests, and prefers manifest disproportionality testing over proportionality testing simpliciter. Certain domestic jurisdictions together with European Union (EU) law embrace an extensive concept of proportionality, as discussed below. In the extended sense, proportionality analysis may be understood as incorporating three elements: the analysis of a measure’s suitability for purpose, the analysis of its necessity in terms of the availability of less restrictive alternatives and the analysis of its proportionality stricto sensu.2 Only this last involves evaluating a measure’s effects against the importance of its purpose. It is this type of testing for proportionality stricto sensu that is the focus of this study. This critical form of proportionality testing may be mandated either under an extended proportionality analysis or independently as a regulatory coherence test. In this book it is reliance on proportionality testing as an independent test that comes under scrutiny. The idea that international law may re-​orient itself around extended proportionality analysis in the regulatory field seems a distant possibility in light of the state of the jurisprudence. Although an element of deference may be employed in its application,3 there is clearly significant potential for value judgements to be imposed on States through proportionality testing in the course of adjudicatory processes in regulatory disputes, undermining regulatory freedom and potentially arbitral tribunals’ social legitimacy. In the scholarly discussion on proportionality testing the related and much discussed problems of indeterminacy in the law and the judge as law-​maker continually resurface, together with the observation that weighing processes are liable to become unfeasible in the face of incommensurable values.4 Subjectivity 2 Regarded by some as ‘global best practice’ for dealing with certain types of normative conflict, Alec Stone Sweet and Florian Grisel, The Evolution of International Arbitration: Judicialization, Governance, Legitimacy (OUP 2017) 243–​244. 3 Thomas Cottier and others, ‘The Principle of Proportionality in International Law: Foundations and Variations’ (2017) 18 JWIT 628; Caroline Henckels, Proportionality and Deference in Investor-​ State Arbitration: Balancing Investment Protection and Regulatory Autonomy (CUP 2015) (hereafter Henckels, Proportionality and Deference). 4 Chapter Eight, section E N Jansen Calamita, ‘The Principle of Proportionality and Problem of Indeterminacy in Investment Treaties’ in Andrea K Bjorklund (ed), Yearbook of International Investment Law and Policy 2013–​2014 (OUP 2015) 157, 159, 171–​176 (hereafter Calamita ‘The Principle of Proportionality’); Anne Peters, Beyond Human Rights: The Legal Status of the Individual in International Law (tr Jonathan Huston, CUP 2016) 18–​19; Gebhard Bücheler, Proportionality in Investor-​State Arbitration (OUP 2015) 63–​66 (hereafter Bücheler, Proportionality) 63–​66; Alec Stone Sweet, ‘Investor-​State Arbitration: Proportionality’s New Frontier’ (2010) 4(1) Law & Ethics of Human Rights 48, 50.

Proportionality in Investment Treaty Arbitration  249 seems inescapable. Even its advocates recognise that cultural socialisation and institutional hermeneutics will play a part in the application of the principle.5 The basic difficulty is generally that when we ask what is proportionate, everything depends on what we consider important. The balance will depend on the value of what is in the scales.6 Even if the principle in its application is aimed at bringing competing values into concordance, these and other concerns have led writers often to reject the appropriateness of incorporating proportionality analysis into investment treaty law. Where they have accepted that proportionality should enter the law, they may specify that they would allow only what they may view as proportionality analysis in the limited sense of considering a measure’s suitability and the availability of alternatives, excluding proportionality testing stricto sensu.7 An especial challenge for practice is that there are situations where it comes naturally for the representative of a party affected by governmental actions to argue that the government has gone too far, for instance in the case of pandemic response. Moving forward too quickly with such arguments may overlook important opportunities to put forward alternative claims that raise fewer systemic difficulties. The need for a rational relationship between a regulatory or administrative measure and its objectives should remain central.8 Indicators of rationality may include the nature of the relationship between a government’s scientific advice and its actions, including timely governmental review of current measures in the light of new information. Further, where disproportionality is apparent, this may be viewed as an indicator of the absence of a rational relationship between measures and their objectives in treaty contexts where this argument would sit well. The notion of proportionality clearly forms part of the law in a range of international legal fields, including the law on countermeasures, the law on the use of force, international humanitarian law, international human rights law and the law of the sea.9 However, in these subfields of international law, the concept of proportionality has been adopted consciously, with specific applications in mind. Proportionality does not appear to enjoy the status of a recognised general principle of law in the sense of Article 38(1)(c) of the Statute of the International Court of Justice (ICJ).10 5 Benedict Kingsbury and Stephan W Schill, ‘Public Law Concepts to Balance Investors’ Rights with State Regulatory Actions in the Public Interest—​The Concept of Proportionality’ in Stephan W Schill (ed), International Investment Law and Comparative Public Law (OUP 2010) 75, 85–​86 (hereafter Kingsbury and Schill, ‘Public Law Concepts’). 6 Robert Alexy, ‘Balancing, Constitutional Review, and Representation’ (2005) 3(4) ICON 572, 577. 7 E.g. Henckels concludes that investment tribunals should seek only to determine the suitability and necessity of regulatory measures, rather than their proportionality stricto sensu. Henckels, Proportionality and Deference (n 3) 22, 168–​171. 8 Chapter Seven. 9 Thomas Cottier and others, ‘The Principle of Proportionality in International Law: Foundations and Variations’ (2017) 18 JWIT 628. 10 Calamita ‘The Principle of Proportionality’ (n 4) 168, 195–​196, 200; José E Alvarez, ‘ “Beware Boundary Crossings”—​A Critical Appraisal of Public Law Approaches to International Investment

250  Investment Treaty Arbitration First off, as discussed below, the principle remains at present inconsistently adopted in domestic administrative law across jurisdictions. Further, even if domestic administrative law requirements for proportionality in domestic regulation were more evenly to be found, the implications of its application as a matter of international law as compared with domestic law would stand in the way of its automatic transposability. Surprisingly, then, several scholars writing on investment treaty arbitration have suggested that proportionality is to be regarded as a general principle of law under Article 38(1)(c).11 In one case an annulment committee took an alternative view that proportionality is to be regarded as a general principle of international law, at least in terms of proportionality between sanctions and the illicit activity to which they are directed.12 Contemporary debate in the administrative law of a range of common-​law jurisdictions underlines the lack of acceptance of the proportionality principle as a pivot for acceptable administrative decision-​making. Only in those cases involving fundamental rights does the principle play an important and established role in domestic jurisdictions such as England, Australia, Canada, New Zealand and South Africa.13 In all of these jurisdictions the judicial review of administrative decisions more broadly continues to be based on reasonableness rather than proportionality.14 Scholarship is divided on the question of whether proportionality should become a general head of review in English administrative law. Were this to take place, it is expected that proportionality would supplement the three existing Law’ (2016) 17(2) JWIT 171; M Sornarajah, The International Law on Foreign Investment (4th edn, CUP 2017) 487 (hereafter Sornarajah, The International Law). 11 Patrick Dumberry, A Guide to General Principles of Law in International Investment Arbitration (OUP 2020) [4.297], [4.313], arguably linking the principle over-​closely with the abuse of rights doctrine, [4.292]; Alec Stone Sweet and Florian Grisel, The Evolution of International Arbitration: Judicialization, Governance, Legitimacy (OUP 2017) 242; Kingsbury and Schill, ‘Public Law Concepts’ (n 5) 77–​78, 88. Bücheler, Proportionality (n 4) 100; Stephan W. Schill, ‘General Principles of Law and International Investment Law’ in Tarsicio Gazzini and Eric De Brabandere (eds), International Investment Law: the Sources of Rights and Obligations (Martinus Nijhoff 2012) 133. See also Alec Stone Sweet and Giacinto Della Cananea, ‘Proportionality, General Principles of Law, and Investor-​State Arbitration: A Response to Jose Alvarez’ (2014) 46(3) N.Y.U.J.Int’l Law & Pol. 911. 12 Occidental Petroleum Corporation and Occidental Exploration and Production Company v Ecuador ICSID Case No ARB/​06/​11, Decision on Annulment of the Award, 2 November 2015 (Juan Fernández-​ Armesto, Florentino P Feliciano and Rodrigo Oreamuno B) [350] (hereafter Occidental Petroleum v Ecuador, Decision on Annulment). Ecuador argued inter alia that the Occidental Tribunal had manifestly exceeded its powers because the principle of proportionality was not encompassed in the company’s contract, Ecuadorian law or customary international law. However, the Committee held that the Tribunal had ‘convincingly explained that the principle of proportionality between intensity and scope of the illicit activity, and severity of the sanction is a general principle of punitive and tort law, both under Ecuadorian and under international law’. 13 For a broader survey of rights jurisprudence relying on proportionality see Alec Stone Sweet and Jud Mathews, Proportionality Balancing and Constitutional Governance: A Comparative and Global Approach (OUP 2019). 14 Neither does proportionality have the status of a general principle in China, notes N Jansen Calamita, ‘International Human Rights and the Interpretation of International Investment Treaties: Constitutional Considerations’ in Freya Baetens (ed), Investment Law within International Law: Integrationist Perspectives (CUP 2013) 164, 174.

Proportionality in Investment Treaty Arbitration  251 grounds of illegality, procedural impropriety, and irrationality or unreasonableness. Alternatively proportionality testing could conceivably supplant the existing administrative law reasonableness or rationality tests.15 Proportionality is considered a general principle of EU law,16 and claimants can rely on the principle to challenge Member State action or EU action.17 As among EU Member States it is within German law that the principle of proportionality is most fully developed as a basic administrative law principle, and it is German law that has particularly influenced EU practice, leading to the adoption of extended proportionality analysis. However, reliance on the proportionality principle has been subject to criticism even in Germany.18 There have been concerns that, lacking objective criteria,19 the principle involves subjective judgement,20 and that it is used too frequently and could swallow up administrative discretion.21 Proportionality has not had the same central place in the domestic legal traditions of all EU Member States as it has in German law.22 In France the Conseil d’État has been slow to make a methodological commitment to a structured proportionality test.23 Critics of proportionality testing in French administrative law point out that 15 Contrast the perspectives of Paul Craig with the more traditional position taken in Wade and Forsyth. Paul Craig, Administrative Law (8th edn, Thomson Reuters 2016); HWR Wade and CF Forsyth, Administrative Law (11th edn, OUP 2014). See earlier Jeffrey Jowell and Anthony Lester, ‘Proportionality: Neither Novel Nor Dangerous’ in JL Jowell and D Oliver (eds), New Directions in Judicial Review: Current Legal Problems (Stevens & Sons 1988) 51 (hereafter Jowell and Lester, ‘Proportionality’); Anthony Lester and Jeffrey Jowell ‘Beyond Wednesbury: Substantive Principles of Administrative Law’ (1988) 14(2) Commw L. Bull. 858, 863–​864. 16 Paul Craig and Gráinne De Búrca, EU Law: Text, Cases and Materials (OUP 2015) 111, 551; Jowell and Lester, ‘Proportionality’ (n 15) 51, 56 citing Case 11/​70 Internationale Handelsgesellschaft mbH v Einfuhr—​und Vorratsstelle für Getreide und Futtermittel [1970] ECR 1125. 17 Consolidated Version of the Treaty on European Union [2012] OJ C326/​01. Art 5(4) says, ‘Under the principle of proportionality, the content and form of Union action shall not exceed what is necessary to achieve the objectives of the Treaties.’ See also Charter of Fundamental Rights of the European Union 2012/​C 326/​02, art 52(1). 18 Jeff King, ‘Proportionality: A Halfway House’ [2010] NZ L Rev 327, 358 (hereafter King, ‘Proportionality’) citing Jürgen Schwarze, European Administrative Law (1st edn, Sweet & Maxwell 2006) 681 (hereafter Schwarze, European Administrative Law). 19 Nikolaus Marsch and Vanessa Tünsmeyer, ‘The Principle of Proportionality in German Administrative Law’ in Sofia Ranchordás and Boudewijn de Waard (eds), The Judge and the Proportionate Use of Discretion (Routledge 2015) 13, 36, citing Fritz Ossenbühl Aufsatz, ‘Der Grundsatz der Verhältnismäßigkeit (Übermaßverbot) in der Rechtsprechung der Verwaltungsgerichte’ (1997) 19 Juristische Ausbildung 617, 620–​662 (hereafter Marsch and Tünsmeyer, ‘The Principle of Proportionality’). 20 Ibid, 34, citing Philipp Reimer, ‘Verhältnismäßigkeit im Verfassungsrecht, ein heterogenes Konzept’ in O Lepsius/​MJestaedt (eds), Verhältnismäßigkeit–​Struktur und Funktion eines rechtlichen Schlüselkonzepts (Forthcoming) Sect II 5. 21 Ibid, 37; Hanna Wilberg, ‘Judicial Review of Administrative Reasoning Process’ in Peter Cane and others (eds), Oxford Handbook of Comparative Administrative Law (OUP 2020) 857, 875 citing Ralf Brinktrine, Verwaltungsermessen in Deutschland und England: Eine Rechtsvergleichende Untersuchung von Entscheidungsspielräumen der Verwaltung im Deutschen und Englischen Verwaltungsrecht (C F Müller Verlag 1998) 134. 22 King, ‘Proportionality’ (n 18) 356–​366 citing Schwarze, European Administrative Law (n 18), although noting that the Netherlands adopted the principle by legislation in 1992. 23 Yoan Sanchez, ‘Proportionality in French Administrative Law’ in Sofia Ranchordás and Boudewijn de Waard (eds), The Judge and the Proportionate Use of Discretion (Routledge 2015) 47–​48, 68.

252  Investment Treaty Arbitration the effect is to bring about review of administrative decisions on the merits, and it is observed that proportionality testing represents a gradual extension of judicial review into the discretionary power of the administration.24 Reliance on considerations of proportionality by the European Court of Human Rights has a long history, and is accepted as an aspect of the limitations provision in paragraph 2 of Articles 8 to 11 of the European Convention on Human Rights.25 Concern has however been raised about the Court’s reliance on proportionality in the specific context of the right to property recognised in Article 1 of Convention’s First Protocol.26 The argument is made that this promotes neoliberalism by strengthening the protection of property to the disadvantage of social legislation.27 More generally so far as the predictability of the outcome in any given case is concerned, the doctrine of proportionality has been criticised for its indeterminate, elusive and complex nature.28 If a further protocol to the European Convention were to be adopted embodying a human right to a healthy environment the proportionality doctrine would be likely to find new purchase, however. Investment tribunals have turned to considerations of proportionality only infrequently, although this is occurring more commonly than previously. This has taken place in disputes involving claims of expropriation and breach of the fair and equitable treatment guarantee. Few investment treaties refer expressly to proportionality, although this is seen in some of the provisions on indirect expropriation in newer treaties.29 Generally however, investment treaties do not do so, and it has been remarked that a doctrine of proportionality will not have been 24 Ibid, 67 and 70, citing P Serrand, ‘Le contrôle juridictionnel de l’administration à travers la jurisprudence récente’ (2012) 4 Révue de Droit Public 901, 921–​923. 25 The Sunday Times v UK 1979 ECHR 1; Jowell and Lester, ‘Proportionality’ (n 15) 51, 58–​59. 26 E.g. James and ors v UK 1986 ECHR 2, para 50 (hereafter James and ors v UK). 27 Danny Nicol, The Constitutional Protection of Capitalism (Hart Publishing 2010) 138–​142. 28 Bernadette Rainey, Elizabeth Wicks, and Clare Ovey, Jacobs, White, and Ovey: The European Convention on Human Rights (7th edn, OUP 2017) 360 (hereafter Rainey, Wicks, and Ovey, The European Convention on Human Rights); Valentina Vadi, Proportionality, Reasonableness and Standards of Review in International Investment Law and Arbitration (Edward Elgar 2018) 89 (hereafter Vadi, Proportionality). 29 Consider Canada-​ European Union (EU) Comprehensive Economic and Trade Agreement (CETA) (signed 30 October 2016, entered into force provisionally 21 September 2017) Annex 8-​ A (Expropriation), art 3, referring to the rare circumstances when the impact of a measure or series of measures is so severe in light of its purpose that it appears manifestly excessive; United States-​ South Korea Free Trade Agreement (signed 30 June 2007, entered into force 15 March 2012) Annex 11-​B (Expropriation), art 3(b); Agreement Among the Government of Japan, The Government of the Republic of Korea and the Government of the People’s Republic of China for the Promotion, Facilitation and Protection of Investment (signed 13 May 2012, entered into force 17 May 2014), Protocol, art 2(a),(c); see also Agreement Establishing the ASEAN-​Australia-​New Zealand Free Trade Area (AANZFTA) (signed 27 February 2009, entered into force January 2012), Chapter 11, art 9(1), and Annex on Expropriation and Compensation, art 3. Contrastingly see the novel provision in the Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP) (signed 8 March 2018, entered into force 30 December 2018), Annex 9-​B (Expropriation), art 3(a), providing that the factors that are to be among those considered when inquiring into whether an action constitutes indirect discrimination will include the economic impact, the interference with reasonable investment-​ backed expectations, and the character of government action.

Proportionality in Investment Treaty Arbitration  253 contemplated by States negotiating and concluding them.30 In a limited number of cases investment tribunals have adapted their reasoning to the stepped sequence associated with the extended proportionality tests in EU law, explicitly attending to requirements for suitability, necessity (in terms of the availability of alternative measures), and excessiveness. Notably, addressing the claims that the actions of the Polish banking regulator amounted to unlawful expropriation the Tribunal in PL Holdings Sàrl v Poland found the Polish actions failed for lack of suitability, that there appeared to have been alternatives, and that the record fell well short of refuting the argument that the measures were excessive.31

B.  Proportionality in the Practice of Investment Treaty Arbitration 1.  Expropriation As seen already in the examples given, have included an element drawing on notions of proportionality or disproportionality in a number of expropriation cases,32 including the early case of Técnicas Medioambientales Tecmed SA v Mexico.33 According to the Tribunal in Azurix Corporation v Argentina, a legitimate measure serving a public purpose would have to be characterised by ‘a reasonable relationship of proportionality between the means employed and the aim sought to be realised’ in order to escape categorisation as expropriation.34 Refining this, the Tribunal in LG&E Energy Corporation v Argentina acknowledged that ‘It can generally be said that the State has the right to adopt measures having a social or general welfare purpose. In such a case, the measure must be accepted without any imposition of liability, except in cases where the State’s action is obviously disproportionate to the needs being addressed . . . ’.35 In echo, the Tribunal in Continental

30 Sornarajah, The International Law (n 10) 487–​488. Indeed, Sornarajah says that ‘the arbitrators have waved the magic wand and converted the pumpkin into a doctrine under the treaties’ (487, note 21). 31 PL Holdings Sàrl v Poland SCC Case No V 2014/​163, Partial Award, 28 June 2017 (George Bermann, Julian DM Lew and Michael E Schneider) [354]–​[391]. See also RREEF Infrastructure (GP) Ltd and RREEF Pan-​European Infrastructure Two Lux Sàrl v Spain ICSID Case No ARB/​13/​30, Decision on Responsibility and on the Principles of Quantum and Dissenting Opinion, 30 November 2018 (Alain Pellet, Pedro Nikken and Robert Volterra) hereafter RREEF Infrastructure v Spain). 32 Vadi, Proportionality (n 28) 90–​96. 33 Técnicas Medioambientales Tecmed SA v Mexico ICSID Case No ARB(AF)/​00/​2, Award, 29 May 2003 (Horacio A Grigera Naón, José Carlos Fernández Rozas and Carlos Bernal Verea) (hereafter Tecmed v Mexico). 34 Azurix Corporation v Argentina ICSID Case No ARB/​01/​12, Award, 14 July 2006 (Andrés Rigo Sureda, Mark Lalonde and Daniel Hugo Martins) [311] (hereafter Azurix v Argentina). 35 LG&E Energy Corp, LG&E Capital Corp, LG&E International INC v Argentine Republic ICSID Case No ARB/​02/​1, Decision on Liability, 3 October 2006 (Tatiana B de Maekelt, Francisco Rezek and Albert Jan van den Berg) [189], [195] (hereafter LG&E v Argentina). Emphasis added.

254  Investment Treaty Arbitration Casualty Company v Argentina considered to fall outside the scope of expropriation such limitations to the use of property as might fall ‘within typical government regulations of property entailing mostly inevitable limitations imposed in order to ensure the rights of others or of the general public . . .’.36 The Tribunal added that this was conditional on the restrictions not affecting property in ‘an intolerable, discriminatory or disproportionate manner’.37 There appears to be a trend towards reliance on manifest disproportionality testing rather than proportionality testing proper, but practice has been variable. The case of Les Laboratoires Servier, SAS and ors v Poland provides an engaging additional illustration.38 Poland denied the renewal of marketing authorisations for drugs produced by the claimants while granting authorisations for generic alternatives produced by product companies. In considering the claimants’ expropriation claim, the Servier Tribunal accepted, as agreed by the parties, that a host State would not be liable for dispossession of property where this was a valid exercise of its regulatory or administrative powers. The Tribunal considered this attendant on four requirements. A host State measure had to be taken (i) in good faith, (ii) for a public purpose, (iii) in a way proportional to that purpose, and (iv) in a non-​discriminatory manner.39 The treaty applying in this case was worded in terms of the measures’ ‘public necessity’. The Tribunal found the regulatory measures were disproportionate in nature and thus not a matter of public necessity.40 Accordingly they were inconsistent with the treaty’s expropriation provision and Poland was liable to compensate Servier. Both parties espoused the view that a measure had to be proportionate to the public interest aims pursued. However, Poland viewed this as an aspect of the underlying requirement that there be a rational, or plausible, link between the measures and the public purpose.41 Poland also argued that the test was one of obvious disproportionality, however the award is heavily redacted and it is difficult to tell how the Tribunal looked upon this.42

36 Continental Casualty Company v Argentina ICSID Case No ARB/​03/​9, Award, 5 September 2008 (Giorgio Sacerdoti, VV Veeder and Michell Nader) [276] (hereafter Continental Casualty v Argentina). 37 Ibid, [276]. The Tribunal in Yukos v Russia referred to the disproportionality of the conduct of the Russian Federation’s expropriatory conduct in the course of assessing Yukos’ own contribution to its injury. Yukos Universal Ltd v Russian Federation PCA Case No 2005-​04/​AA227, Final Award, 18 July 2014 (L Yves Fortier, Charles Poncet and Stephen M Schwebel) [1635]. 38 Les Laboratoires Servier, SAS and ors v Poland UNCITRAL, Final Award, 14 February 2012 (William W Park, Marc Lalonde and Bernard Hanotiau) (hereafter Laboratoires Servier v Poland). 39 Ibid, [569]. See also [276]–​[278]. 40 Ibid, [575], [582]. Art 5(2) prohibited any expropriation or nationalisation measures or any other measures which would have the effect of divesting investors of the other party of investments belonging to them except for reasons of public necessity. Ibid, [516] 41 Ibid, [277]–​[278]. 42 Ibid, [335], [403].

Proportionality in Investment Treaty Arbitration  255

2.  Fair and equitable treatment On occasion tribunals have indicated a view that a requirement for proportionality is one of the elements of the fair and equitable treatment guarantee.43 The concept of proportionality often appears in tandem still with reasonableness. For instance in Total SA v Argentina the Tribunal observed that considering the existence of a breach of the fair and equitable treatment standard would involve taking into account the purposes, nature and objectives of the measures challenged, and an evaluation of whether they were proportional, reasonable and not discriminatory. The Tribunal went on to find that Argentina’s decision to unpeg the peso from the dollar and related measures were directed towards legitimate aims, were adopted in good faith, and were proportionate to legitimate aims.44 Most prominently, in Occidental Petroleum Corporation and Occidental Exploration and Production Company v Ecuador the Tribunal found that the Ecuadorian government’s heavy response to the claimant’s breach of contract was not a proportionate response in the circumstances of the case and was accordingly in breach of Ecuadorian law, customary international law and the Ecuador-​US bilateral investment treaty.45 There have also been tribunals who, like the Electrabel SA v Hungary Tribunal applying the Energy Charter Treaty in 2015, have had little difficulty in viewing as immanent in the customary international legal standard for fair and equitable treatment a proportionality requirement that requires consideration of the relative weight of each interest involved.46 The Electrabel Tribunal viewed rationality, unreasonableness, inequitable and disproportionate treatment as all amounting for the purposes at hand to much the same concept, that of arbitrariness.47 Contrastingly, the Tribunal in Al Tamimi v Oman, applying the Oman-​United States Free Trade Agreement in 2015, took a conscious decision to refrain from considering or relying on proportionality testing in applying the international

43 See further Vadi, Proportionality (n 28) 96–​99. 44 Total SA v Argentina ICSID Case No ARB/​04/​1, Decision on Liability, 27 December 2010 (Giorgio Sacerdoti, Henri C Alvarez and Luis Herrera Marcano) [109]–​[111], [160]–​[165], [197], [429] (hereafter Total v Argentina), and specifically in relation to legitimate expectations as an aspect of fair and equitable treatment at [122]–​[123], [309], [429]. 45 Occidental Petroleum Corporation and Occidental Exploration and Production Company v Ecuador ICSID Case No ARB/​06/​11, Award, 5 October 2012 (L Yves Fortier, David AR Williams and Brigitte Stern) [452] (hereafter Occidental v Ecuador). Ecuador had, notably, failed to afford fair and equitable treatment, and treatment no less than that required by international law. [452]. For analysis, Calamita ‘The Principle of Proportionality’ (n 4) 189–​192; Henckels, Proportionality and Deference (n 3) 83–​86. For the Annulment Committee’s decision on a challenge to the award based on this point see Occidental Petroleum v Ecuador, Decision on Annulment) (n 12). 46 See for instance Electrabel S.A. v Hungary ICSID Case No ARB/​07/​19, Award, 25 November 2015 (Gabrielle Kaufmann-​Kohler, Brigitte Stern and VV Veeder) [179]–​[180] (hereafter Electrabel v Hungary, Award). The Tribunal found there to have been a reasonable and proportionate exercise of Hungary’s discretion, [186]. 47 Ibid, [167].

256  Investment Treaty Arbitration minimum standard of treatment, the issue not falling for determination on the facts in this case.48 Tribunals tasked with determining disputes concerning the rolling back of incentives for renewable energy production have alluded to proportionality in their analyses under the Energy Charter Treaty’s fair and equitable treatment requirement, with parties commonly making submissions on proportionality together with due process, transparency and related considerations.49 At least one tribunal has explicitly questioned whether a proportionality requirement should be accepted as a separate element of a fair and equitable treatment guarantee, and whether such considerations are readily transferable to a context where legislative measures are at issue as compared with the State’s response to an investor’s breach of contract as seen in Occidental v Ecuador. Expressing these doubts, the Tribunal in OperaFund Eco-​Invest SICAV PLC and Schwab Holding AG v Spain thought that proportionality might rather be inherent in the balancing of regulatory and investment interests in relation to obligations to provide stability and give effect to legitimate expectations.50 Some other tribunals have been quick to accept an unparsed proportionality requirement.51 Yet other tribunals have taken a more nuanced approach. In a distinct ten-​page section of its award focusing on proportionality and reasonableness the Tribunal in RREEF Infrastructure (GP) Ltd and RREEF Pan-​ European Infrastructure Two Lux Sàrl v Spain took the view that reasonableness in the exercise of regulatory power incorporated legitimacy of purpose, necessity in terms of the existence of a pressing social need, and the suitability of the chosen means for pursuit of a legitimate objective—​applying here a capability test in that the measure needed to be one that made it possible to achieve the objectives. Proportionality for its part was a weighing mechanism that sought a balance between the competing interests affected by regulatory actions. A regulation should interfere as little as possible with effective exercise of affected rights, being closely adjusted to attainment of the objective.52 In this case, where the claimants held a legitimate expectation of a reasonable return on investment, establishing that there had been acceptable exercise of Spanish regulatory power required an assessment

48 Al Tamimi v Oman ICSID Case No ARB/​11/​33, Award, 3 November 2015 (David AR Williams, Charles N Brower and J Christopher Thomas) [393]. On States’ margin of discretion in the exercise of police powers to enforce their environmental laws, see at [446] and [389]. 49 RREEF v Spain (n 31) [324]; Blusun SA and ors v Italy ICSID Case No ARB/​14/​3, Award, 27 December 2016 (James Crawford, Stanimir A Alexandrov and Pierre-​Marie Dupuy) [319(5)] (hereafter Blusun v Italy). See also [372] and, finding no disproportionality, at [343]. 50 OperaFund Eco-​Invest SICAV PLC and Schwab Holding AG v Spain ICSID Case No ARB/​15/​36, Award, 6 September 2019 (Karl-​Heinz Böckstiegel, August Reinisch and Philippe Sands) [555]. 51 Watkins Holdings Sàrl and ors v Spain ICSID Case No ARB/​15/​44, Award, 21 January 2020 (Cecil WM Abraham, Michael Pryles and Hélène Ruiz Fabri) [601]–​[603]. C.f. Dissent on Liability and Quantum of Professor Dr Hélène Ruiz Fabri, [9]‌, [14]. 52 RREEF v Spain (n 31) [464]–​[465].

Proportionality in Investment Treaty Arbitration  257 of the reasonableness of the return available under the altered regulatory regime.53 It transpired that the claimants had not been able to earn a reasonable return and for this the host State was accordingly held responsible under the fair and equitable treatment requirement.54 Among these tribunals are also some who have referred inter alia to the concept of proportionality in holding that an investor has a legitimate expectation that a State, when modifying legislation based on which an investment has been made, will not act unreasonably, disproportionately or contrary to the public interest.55 This test has been referred to in an undemanding form, rejecting an approach under which the host State’s pursuit of its legitimate policy interest would be weighed against a measure’s impact.56 Instead, the view has been taken that a requirement for proportionality will be fulfilled where modifications to the regulatory regime are not random or unnecessary and provided that they do not suddenly and unexpectedly remove the essential features of the regulatory framework.57 The balancing associated with proportionality is treated softly, with tribunals seeking ‘an appropriate correlation’ between the host State’s policy and its measure, and reasonableness as the dominant consideration.58 Investment tribunals’ various references to proportionality as an aspect of substantive investment law, as opposed to where proportionality is relevant in relation to the quantum of damages awarded to a successful complainant, or in the context of determining compensation or allocation of costs,59 have been described as ‘obviously an innovation’.60 Scholarly commentary has observed that tribunals largely do not explain why they are referring to proportionality. Often they refer to previous awards where this has also been done.61 On one view proportionality 53 Ibid, [472], noting this implied as per earlier cases that the industrial benefit guaranteed to producers would not be disproportionate or irrational [474]. 54 Ibid, [589], [600(3)]. See also the decision of the Tribunal in BayWa r.e. Renewable Energy GmbH and BayWa re Asset Holding GmbH v Spain ICSID Case No ARB/​15/​16502, Decision on Jurisdiction: Liability and Directions on Quantum, 2 December 2019 (James Crawford, Horacio Grigera Naón and Loretta Malintoppi) (hereafter BayWa v Spain), though differently structured as explained at [500] and [501]. 55 Total v Argentina (n 44). See also, adopting the claimant’s submission on this point, Charanne BV and Construction Investments SARL v Spain SCC Case No 062/​2012, Final Award, 21 January 2016 (Alexis Mourre, Guido Santiago Tawil and Claus von Wobeser) [514] (hereafter Charanne v Spain), although finding for Spain without direct reference to proportionality or reasonableness at [536]. SolEs Badajoz GmbH v Spain ICSID Case No ARB/​15/​38, Award, 31 July 2019 (Joan E Donoghue, Giorgio Sacerdoti and David A R Williams) [316] (hereafter SolEs v Spain). 56 SolEs v Spain (n 55) [328]. 57 Ibid, [316], [327], citing Charanne v Spain (n 55), also cited in Eiser Infrastructure Ltd and Energia Solar Luxembourg SARL v Spain ICSID Case No ARB/​13/​36, Award, 4 May 2017 (John R Crook, Stanimir A Alexandrov and Campbell McLachlan) [370], [382]. 58 The PV Investors v Spain PCA Case No 2012-​14, Award, 28 February 2020 (Gabrielle Kaufmann-​ Kohler, Charles Brower and Bernardo Sepúlveda Amor) [582]–​[626], explicitly allowing a margin of appreciation to the State and citing Electrabel v Hungary (n 46) [165], [180]. 59 Vadi, Proportionality (n 28) 103, 174–​175 175–​178. 60 Sornarajah, The International Law (n 10) 487–​488. 61 Vadi, Proportionality (n 28) 106, 121.

258  Investment Treaty Arbitration analysis has begun to appear in investment arbitration as a response to arbitrators’ perceptions that this could help enhance the legitimacy of investor-​State dispute settlement, even if the legal basis for applying the concept has been weak. It may be that disputants can be expected more readily to accept a decision where adjudicators formally recognise the importance of interests and values at stake.62 The cases discussed above demonstrate that the application of proportionality in investment treaty arbitration takes a variety of forms. The following section of this chapter revisits the context in which investment treaty arbitration takes place, with a view to facilitating the application of the principle of proportionality in ways appropriate to the public international law character of investment treaty law.

C.  The Competing Interests in Investment Treaty Disputes Regulatory standards and tests embody aspects of relevant rules and provisions that will help enable their consistent application in specific cases. They serve in effect as algorithms that will balance competing legal interests generically, be they economic, social and environmental. In contemplating proportionality testing it is helpful to come back to consideration of whose interests are involved. This will allow us to evaluate its potential as a regulatory coherence test, and the appropriateness of its emergence via the work of international tribunals, as well as systemic issues associated with its use or contemplated use. Investment treaty arbitration has its own particular dynamics because of the presence of private parties.63 Taking into account the nature of arbitration, including especially the principles of party autonomy and tribunals’ responsibilities to disputants, it is not surprising that the public international legal interests represented by investment treaty law tend to decrease in apparent significance. Investment arbitrators and lawyers coming to the practice of investment treaty law with accumulated experience in international commercial arbitration may not be as attuned to public international law considerations as arbitrators and judges with longer careers and training in public international law.64 Layering onto these sociological factors are academic assertions that the legitimacy of international investment law as a field will be improved if it is understood as a public law discipline 62 Erlend M Leonhardsen, ‘Looking for Legitimacy: Exploring Proportionality Analysis in Investment Treaty Arbitration’ (2012) 3(1) JIDS 95, 99, 116, citing Alec Stone Sweet and Jud Mathews, Proportionality Balancing and Constitutional Governance: A Comparative and Global Approach (OUP 2019) 85. 63 Anthea Roberts, ‘Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty System’ (2013) 107(1) AJIL 45. 64 The frequent appointment of individuals from commercial practice has been a particular characteristic of investment treaty arbitration. Stephan W Schill, ‘W(h)ither Fragmentation? On the Literature and Sociology of International Investment Law’ (2011) 22(3) EJIL 875, 880, 883, 888 (hereafter Schill, ‘W(h)ither Fragmentation?’). Chapter Eight, sections E, F.

Proportionality in Investment Treaty Arbitration  259 oriented around the complaints of private economic actors.65 The likelihood that a concept such as proportionality could lead to the development of global regulatory standards with a skew that elevates the importance of private interests is high. Investment treaties are bargains between and among States. Investors’ business and financial interests may be severely affected when this bargain is broken, and in these circumstances many investment treaties afford them the opportunity to seek redress through direct access to arbitration. However, the premise for the conclusion of such treaties and their true object and purpose lies in the economic benefits they are expected to provide for both home and host States’ economies and populations, and to the global economy. Investors from each State benefit respectively as a class from investment protection guarantees found in this body of law, but States clearly retain the foundational legal interests. The rights protected under investment treaties are not most essentially the rights of individual companies, but rather those of sending and receiving States. It is the impact on the rights themselves that should be borne in mind when the effects of host State regulatory measures are considered, even if the particular investor or claimant may in practice be the only entity obviously affected. As counsel for Glamis in Glamis Gold v US explained, the burden of a regulation may fall on a very small universe in which the claimant is a part; but this is a universe nonetheless.66 It follows that the application of a proportionality test is not fundamentally about the weighing of regulatory effects on a particular claimant’s interests, although it remains perfectly correct that the impact of a measure on a foreign investor will be an important factor in an overall analysis of a measure’s effects on protected investment rights in light of its aims.67 There remains scope for argument in the specific sphere of investment treaty arbitration that it is the human rights of investors that are at issue and that proportionality testing ought to be employed in the light of this observation as it is in the European Court of Human Rights. Although human rights law and investment protection law may raise similar issues, as seen even in occasional parallel proceedings, the argument is lacking in strength. The overlap is most clear in disputes involving due process, and particularly where private persons are involved. The right to property on the other hand is of a more distinct character to the majority of human rights. Protection for property rights is not provided in the international human rights covenants.68 Neither is it found in all constitutions. The 65 Stephan W Schill, ‘Enhancing International Investment Law’s Legitimacy: Conceptual and Methodological Foundations of a New Public Law Approach’ (2011–​2012) 52(1) Va.J.Int’l L. 57, 100. 66 Glamis Gold Ltd v United States of America Transcript of the Hearing on the Merits—​Day One (Redacted) (12 August 2007) 26, Mr Gourley for Glamis Gold Ltd, citing the United States Supreme Court in United States v Locke 471 US 84 (1985). 67 Jeswald W Salacuse, The Law of Investment Treaties (2nd edn, OUP 2015) 341 (hereafter Salacuse, The Law of Investment Treaties). 68 International Covenant on Civil and Political Rights (opened for signature 16 December 1966, entered into force 23 March 1976) 999 UNTS 171 (ICCPR); International Covenant on Economic, Social and Cultural Rights (opened for signature 16 December 1966, entered into force 3 January 1976) 993

260  Investment Treaty Arbitration right’s post hoc addition to the European Convention by Protocol is one indication of its difference.69 Property rights serve instrumental purposes in societies rather than directly protecting the human dignity that is generally preserved by respect for fundamental human rights. Even in the EU courts we find a recognition of the instrumental or social function of property rights, with the courts conducting on this basis their analysis of whether restrictions for public interest objectives constitute disproportionate and intolerable interference with such rights.70 Scholars have also remarked that the four freedoms protected under EU law do not per se represent human rights, and there is a need to resist an insidious slide from the language of instrumental economic freedoms to that of fundamental human rights.71 For all these reasons it is difficult to conclude, at least from a perspective outside the EU and European human rights contexts, that it is necessarily a commitment to fundamental human rights that we are seeing in the international legal protection afforded to investments by investment treaties and customary international law. We may add to this the additional point that it remains unestablished that investors possess substantive legal rights under international investment law in addition to the procedural rights they obviously enjoy. This remains a novel proposition and the question is unresolved.72 The view that investors’ procedural rights to initiate arbitral proceedings lead to substantive rights as a result of these proceedings has a certain appeal, but it remains possible to view the remedies awarded to investors as a making-​good of the damage caused by host State regulatory action to home State rights. Taking this perspective, investment tribunals deciding investment treaty disputes are, like other international adjudicatory bodies dealing with regulatory disputes, responding to situations where competing public international interests require to be aligned. In the investment context these are the legal interests of the States party to the relevant rules, generally sending and receiving States respectively, and their populations.

UNTS 3 (ICESCR). C.f. Universal Declaration of Human Rights (opened for signature 10 December 1948) UNGA Res 217 A(III) (UDHR), art 17(1). 69 Protocol 1 to the European Convention for the Protection of Human Rights and Fundamental Freedoms (opened for signature 20 March 1952, entered into force 18 May 1954) ETS 9, art 1. 70 Paul Craig, EU Administrative Law (3rd edn, OUP 2018) 659 (hereafter Craig, EU Administrative Law). 71 King, ‘Proportionality’ (n 18) 355–​356. 72 Caroline Foster, ‘A New Stratosphere? Investment Treaty Arbitration as “Internationalized Public Law” ’ (2015) 64(2) ICLQ 461; Martins Paparinskis, ‘Investment Treaty Arbitration and the (New) Law of State Responsibility’ (2013) 24(2) EJIL 617; Schill, ‘W(h)ither Fragmentation?’ (n 64) 880; Thomas W Wälde, ‘The Specific Nature of Investment Arbitration’ in Philippe E Kahn and Thomas W Wälde (eds), Les Aspects Nouveaux du Droit des Investissements Internationaux (Martinus Nijoff 2007) 43, 92; Zachary Douglas, ‘Hybrid Foundations’ (2003) 74 BYIL 151; consider also Anthea Roberts, ‘State-​to-​ State Investment Treaty Arbitration: A Hybrid Theory of Interdependent Rights and Shared Interpretive Authority’ (2014) 55(1) Harv.Int’l L.J. 1.

Proportionality in Investment Treaty Arbitration  261 Accordingly the primary focus should be on the legal rights providing investment protection rather than on investors. Yet tribunals at times express their task as involving ‘balancing the interests of the State against those of the individual’.73 While a tribunal may feel that in practical terms this is what the disputing parties are requesting, it is important for the development of appropriate regulatory standards and tests simultaneously to retain a broader perspective. For instance the Tecmed v Mexico Tribunal succeeded only at times in expressing the idea of proportionality in a way that appreciated that it was not necessarily the effects on the individual investor that might fall to be considered in a proportionality style analysis, but rather first and foremost the effects on the legal protection that had been granted to investments in general under the relevant treaty. However, the Tribunal did observe at other times in more felicitous language that it was assessing ‘whether such actions or measures are proportional to the public interest presumably protected thereby and the protection legally granted to investments’.74 To the extent that it is relevant, it may be noted that the European Court of Human Rights’ semantic practice, too, is mixed. Meanwhile in investment arbitration a distinction has been drawn between absolute and relative proportionality analyses, with only the latter more exceptional form of analysis requiring a weighing up of the effects on particular claimants vis-​à-​vis the host State’s regulatory aim.75 The Tribunal in Stadtwerke München GmbH and ors v Spain rightly refers in this context, like the Tecmed Tribunal, to the burden placed on ‘the foreign investor’, which can be understood in the abstract to the foreign investor or in general rather than as a reference to the claimant investor.76 An analogy may be drawn with the ICJ’s decision in the Dispute Regarding Navigational and Related Rights (Costa Rica v Nicaragua). Although the impact would be felt by private beneficiaries including vessel owners and operators and passengers, the ICJ’s focus was on the overall impact of the regulation on the rights of the other State.77 Various factors help explain instances of language in investment cases emphasising the harm to a particular investor. It is the investor who stands before a tribunal. Where real property has been lost one can understand that this may be foremost in the mind of a tribunal. Where a high value investment is affected this may magnify the particularity of the negative effect. If businesses have closed 73 Eg Occidental v Ecuador (n 45) [417]. 74 Tecmed v Mexico (n 33) [122]. 75 Stadtwerke München GmbH and ors v Spain ICSID Case No ARB/​15/​1, Award, 2 December 2019 (Jeswald W Salacuse, Kaj Hobér and Zachary Douglas) [354]–​[355] (hereafter Stadtwerke v Spain). 76 Finding the claimants’ burden in any event reasonably proportionate to the aim of the contested measures, Stadtwerke v Spain (n 75) [354]–​[355]. See also Marfin Investment Group v Cyprus ICSID Case No ARB/​13/​27, Award, 26 July 2018, (Bernard Hanotiau, David AO Edward and Daniel M Price) [982]–​[984]. 77 Dispute Regarding Navigational and Related Rights (Costa Rica v Nicaragua) (Judgment) [2009] ICJ Rep 213, [114] (hereafter Navigational Rights).

262  Investment Treaty Arbitration down, the harm to the particular investor is likely to be clear and pronounced. These factors are likely to come to bear in general in cases involving claims of indirect expropriation, including where the investor alone or specifically is affected. Further, in cases of expropriation through the imposition of an administrative or criminal penalty or sanction there may be a natural tendency to shift the analysis away from a focus on the host States’ legal interests and the legal protection accorded to investments in general under the relevant treaty, and to focus directly on the detrimental effects of the sanction on the particular investor. Proportionality of penalty is an established principle in multiple domestic jurisdictions, and the innate instinct to ensure proportionality may have carried over into investment arbitration. The same effect is arguably seen in a situation where a tribunal employs proportionality testing to reject a challenge to a tribunal’s jurisdiction on the basis an investment was not made in accordance with host State law and so does not fall within the scope of a host State’s acceptance of jurisdiction. There have been cases where a tribunal applies the principle of proportionality in order to take jurisdiction when an investor’s non-​compliance with national law remains essentially unimportant relative to the host State interest protected through the relevant law.78 As to the host State’s legal interests, when considering the public interest lying behind host State action in penalties cases it will be important to appreciate that these interests include the positive reinforcement of the host State’s authority to exercise control over the exploitation of its natural resources.79 The host States’ public interests are largely prospective—​indeed the actual harm caused by investors’ offending actions may or may not be reversible or may only be partially remediable, depending on the circumstances, and is clearly not the exclusive consideration in any proportionality analysis. Serious disrespect for a host country’s fundamental public policies in relation to resource development and the environment was sanctioned by the Tribunal in Cortec Mining Kenya Ltd and ors v Kenya, where the claimants had failed to comply with Kenyan environmental law and regulation in relation to a project in an environmentally vulnerable forest and nature area.80 78 Kim and ors v Uzbekistan ICSID Case No ARB/​13/​6, Decision on Jurisdiction, 8 March 2017 (David D Caron, L Yves Fortier and Toby Landau) [396]–​[404] (hereafter Kim v Uzbekistan). The Tribunal analysed the significance of the obligation under national law, the seriousness of the investor’s conduct and whether ‘the combination of investor’s conduct and the law involved results in a compromise of a significant interest of the Host State to such an extent that the harshness of the sanction of placing the investment outside of the protections of the BIT is a proportionate consequence for the violation examined’ [408]; c.f. Cortec Mining Kenya Ltd and ors v Kenya ICSID Case No ARB/​15/​29, Award, 22 October 2018 (Ian Binnie, Kanaga Dharmananda and Brigitte Stern) [343]–​[365] (hereafter Cortec Mining v Kenya) again applying a proportionality test but declining jurisdiction. Similarly Álvarez y Marín Corporación SA and ors v Panama ICSID Case No ARB/​15/​14, Award, 12 September 2018 (Juan Fernández-​Armesto, Henri Alvarez and Horacio A Grigera Naón) [151]–​[156], [398]. 79 Henckels, Proportionality and Deference (n 3) 86. 80 Cortec Mining v Kenya (n 78). See also Kim v Uzbekistan (n 78).

Proportionality in Investment Treaty Arbitration  263

D.  Refocusing Proportionality Analysis Realigning proportionality analysis bearing in mind the nature of the competing home and host State interests at stake in international investment law as discussed in the previous section leads to three particular insights into how proportionality analysis may best be carried out. The first of these involves a focus on the proportionality of governmental action vis-​à-​vis regulatory purpose. The second seeks to move the emphasis away from the notion of avoiding undue burdens on the individual that appears to have made its way into investment treaty arbitration from the jurisprudence of the European Court of Human Rights. The third suggests that ‘proportionality-​light’ in the form of manifest disproportionality testing as seen in EU law is preferable to full proportionality testing. Further, the most appropriate use of manifest disproportionality tests may be simply as an indication of a failure to meet the requirements of other regulatory standards such as the absence of a reasonable relationship to a rational policy.

1.  Proportionality in relation to regulatory purpose Tribunals ought to be examining whether the impact on investment protection of a challenged measure is reasonably proportional to the purpose a government is seeking to achieve. For instance, an emphasis on the proportionality of a disputed measure vis-​à-​vis the public interest to which it is directed is found in Philip Morris Brands Sàrl and ors v Uruguay, as discussed earlier.81 Similarly, both the Tecmed Tribunal, as mentioned earlier,82 and the LG&E Tribunal found that the proportionality test for questions regarding the right to regulate involved looking to see whether the challenged measures were proportional to the public interest protected and to the protection legally granted to investments,83 with the significance of a regulatory measure’s impact on foreign investments also to be taken into account.84 Elegantly, in Continental Casualty v Argentina the Tribunal concluded

81 Philip Morris Brands Sàrl and ors v Uruguay ICSID Case No ARB/​10/​7, Award, 8 July 2016 (Piero Bernardini, Gary Born and James Crawford) (hereafter Philip Morris v Uruguay). 82 Tecmed v Mexico (n 33) [122]. 83 LG&E v Argentina (n 35) [195]. Discussing how the LG&E Tribunal viewed the contested measures as part of a package or suite of interrelated measures taken in the pursuit of Argentina’s essential security interests and public order in response to the economic crisis it was experiencing, see Salacuse, The Law of Investment Treaties (n 67) 343. C.f. the Tribunal’s determination in Continental Casualty v Argentina that it would assess whether the Argentinian measures affecting the value of the claimant’s insurance business had ‘contributed materially’ to their objectives, finding that they were apt to and did make a material or decisive contribution. Continental Continental Casualty v Argentina) (n 36) [196]–​ [197], [210]. 84 Tecmed v Mexico (n 33) [122]; LG&E Energy Corporation v Argentina (n 35) [195]. For analysis, Calamita ‘The Principle of Proportionality’ (n 4) 185–​189; Henckels, Proportionality and Deference (n 3) 107–​110.

264  Investment Treaty Arbitration that, applying the relevant measures in a reasonable and proportionate way, Argentina had struck an appropriate balance between the aim of meeting its international obligations and its responsibility to the Argentinian population.85 This approach potentially ties proportionality analysis in with other regulatory coherence tests employed in investment treaty arbitration as discussed in the previous chapter and beyond as seen in the WTO and the ICJ. A proportionality test that looks at a measure’s proportionality relative to its purpose may employ the test effectively as a gauge of rationality in the relationship between a measure and its objectives. This appears to be what we see in certain remarks from the ICJ in the Case Concerning the Dispute Regarding Navigational and Related Rights (Costa Rica v Nicaragua). The Court recalled that the exercise of a power to regulate may legitimately include placing limits on the activity in question: Nicaragua’s prohibition on night time navigation ‘applies to everyone, Nicaraguans included. The river is treacherous to navigate at night, since there are no lights, and fallen logs and sandbars, invisible in the dark, are prevalent, as are crocodiles.’ The limited interference with Costa Rica’s freedom to navigate did not, in the Court’s opinion, amount to an unlawful impediment to that freedom, particularly when the purposes of the regulation were considered.86 The practice of looking for disproportionality in relation to the aim of the host State’s regulatory or legislative measure is seen in certain of the European renewable energy cases, including cases decided in 2019 and 2020. For instance in Hydro Energy 1 Sàrl and Hydroxana Sweden AB v Spain the Tribunal took the view that regulatory measures must be proportionate, non-​arbitrary and non-​ discriminatory, while finding that the modification of renewable energy subsidies and feed-​in tariffs, where this was necessary, should be done in a manner which was not disproportionate to the aim of the legislative amendment and with due regard to investors’ reasonable reliance interests.87 A reasonable relationship to a rational policy was required,88 and also that the State’s acts should have been ‘appropriately tailored to the pursuit of that rational policy’ with due regard for the consequences for investors.89 At the same time the Tribunal appeared to suggest that a balancing or weighing exercise should have been carried out and considered by the host State in order to ensure that a measure’s effects remained proportionate to affected rights and interests.90 85 Continental Casualty v Argentina) (n 36) [227]. Emphasis added. 86 Navigational Rights (n 77) [126] quoting Rejoinder of Nicaragua (15 July 2008). Emphasis added. 87 Hydro Energy 1 Sàrl and Hydroxana Sweden AB v Spain ICSID Case No ARB/​15/​42, Decision on Jurisdiction, Liability and Directions on Quantum, 9 March 2020 (Lawrence Collins, Peter Rees and Rolf Knieper) [568], [676(4)] (hereafter Hydro Energy v Spain). See also BayWa v Spain (n 54) [460], [463] citing the earlier case of Blusun v Italy (n 49) [319(5)]. Emphasis added. 88 Hydro Energy v Spain (n 87) [569] citing Saluka Investments BV v Czech Republic PCA, Partial Award, 17 March 2006 (Arthur Watts, L Yves Fortier and Peter Behrens). 89 Ibid, [569] citing Micula and ors v Romania ICSID Case No ARB/​05/​20, Award and Separate Opinion, 11 December 2013 (Laurent Lévy, Stanimir A Alexandrov and Georges Abi-​Saab). 90 Ibid, [574], [676(6)].

Proportionality in Investment Treaty Arbitration  265 Orienting the test around the relationship between a regulatory action and its objective is consistent also with the digital commerce provisions of the newly concluded Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP) and the Agreement between the United States of America, the United Mexican States, and Canada (USMCA). Eschewing both WTO necessity testing and proportionality stricto sensu, these e-​commerce provisions state simply that non-​discriminatory measures inconsistent with the requirements in these chapters may be maintained to achieve legitimate public policy objectives provided that they do not impose restrictions greater than required to achieve the objectives.91

2.  Looking beyond individual burdens Certain tribunals have emphasised the negative effects experienced by particular investors. However, it would be more consistent with the nature of investment treaty law as a law between States to look beyond individual burdens in the investment treaty context. The emphasis on individual burdens appears to be due to the influence of jurisprudence under the European Convention on Human Rights.92 European Convention case-​law has incorporated in its proportionality analyses references to the burden placed on an individual complainant, together with the idea that the severity of the restriction placed on the individual should be appropriate in light of the importance of the public interest that is at issue,93 and a focus on the idea that administrative action should not create an excessive burden for a particular individual as seen in cases including James and ors v UK.94 This idea made its way into international investment law having been employed inter alia in the application of Article 1 of the First Protocol to the European Convention.95 The Tribunal in Tecmed v Mexico cited James and ors v UK to the effect that there must be a reasonable relationship of proportionality between the means employed by a government and the aim sought to be realised, and that the requisite balance 91 Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (n 28) art 14.11 (Cross-​ Border Transfer of Information by Electronic Means), art 14.13 (Location of Computing Facilities); Agreement between the United States of America, the United Mexican States, and Canada (USMCA) (signed 30 November 2018, entered into force 1 July 2020) Chapter 19 (Digital Trade), art 19.11. 92 The EDF v Romania Tribunal focused on whether the claimant bore ‘an individual and excessive burden’, but found the host State’s anticorruption measure to be proportionate. EDF (Services) Ltd v Romania ICSID Case No ARB/​05/​13, Award, 8 October 2009 (Piero Bernadini, Arthur W Rovine and Yves Derains) [293]–​[294] (hereafter EDF v Romania) citing Azurix v Argentina (n 34) [311] quoting approvingly James and ors v UK (n 26) paras 50 and 63 and the Legal Opinion of Claimant’s Expert, Professor Schreuer, 4 June 2007 [505]. 93 Rainey, Wicks, and Ovey, The European Convention on Human Rights (n 28) 359. 94 Tor-​Inge Harbo, The Function of Proportionality Analysis in European Law (Brill/​Nijhoff 2015) 66 (hereafter Harbo, The Function of Proportionality Analysis) citing cases including James and ors v UK (n 26) para 50; Lithgow and ors v UK 1986 ECHR 8. 95 Sofia Ranchordás and Boudewijn de Waard, ‘Concluding Remarks’ in Sofia Ranchordás and Boudewijn de Waard, The Judge and the Proportionate Use of Discretion (Routledge 2015) 191, 198.

266  Investment Treaty Arbitration will not be found where the person concerned has had to bear ‘an individual and excessive burden’.96 This strand of European Convention jurisprudence may reflect the influence of German law and the place of fundamental rights and liberties in the Grundgesetz, and perhaps the notion of equality before public burdens in French, Dutch and Belgian law. Concepts of standing in German administrative law may possibly also have had a bearing. Standing in German actions for judicial review depends on there being an alleged violation of a schutznorm, that is to say either a subjective right or an objective norm aimed at protecting individual interests.97 Although it is said in the literature that what will be weighed in the balance under German administrative law is the degree to which the State measure interferes with the right in question,98 rather than the harm to the particular complainant, the idea that standing should tie back to a subjective right may possibly be responsible for a strongly individualised conception of complainants’ legal interests in the context of human rights cases about regulatory measures involving deprivation of property. The requirement that there be alleged violation of a schutznorm has been applied broadly in German law so that circumstances where individuals assert the need for protection from any unlawful burden are included, based on the precept of individual freedom.99 Looking beyond the individual burden may be particularly difficult in the context of claims of expropriation, and the investor may even simultaneously have individual claims for breach of rights to property that could be taken forward in a human rights forum. Yet differences between the application of the concept of proportionality under the European Convention on Human Rights and in investment treaty awards are to be expected, and there are times when it may be appropriate to recognise this, rather than seek to eliminate them. Matters will naturally be different in the unusual situation where an applicable treaty refers specifically to the imposition of individual burdens as a determinant of the existence of indirect expropriation.100 However, it is certainly questionable whether the idea of the imposition of an individual burden should be a key factor in determining breach of the fair and equitable treatment guarantee. Contrastingly the Tribunal in RWE Innogy GmbH and RWE Innogy Aersa S.A.U. v Spain considered that where a regulatory regime had undergone radical change, the imposition of a particular burden was 96 Tecmed v Mexico (n 33) [122]; EDF v Romania (n 92) [293]; Harbo, The Function of Proportionality Analysis (n 94) 77. However, see Stadtwerke v Spain (n 75). 97 Marsch and Tünsmeyer, ‘The Principle of Proportionality’ (n 19) 16–​17. 98 Bücheler, Proportionality (n 4) 37. 99 Marsch and Tünsmeyer, ‘The Principle of Proportionality’ (n 19) 16–​17. 100 United States-​South Korea Free Trade Agreement (signed 30 June 2007, entered into force 15 March 2012) Annex 11-​B (Expropriation), art 3(a)(iii) providing that the determination of whether an action constitutes an indirect expropriation is to take into account ‘whether the government action imposes a special sacrifice on the particular investor or investment that exceeds what the investor or investment should be expected to endure for the public interest’.

Proportionality in Investment Treaty Arbitration  267 potentially relevant in relation to a claim for breach of the fair and equitable treatment guarantee through the disappointment of legitimate expectations.101

3.  Manifest disproportionality Investment law scholarship apprehends that tribunals could potentially apply a proportionality test that looks to see whether challenged measures are, affirmatively, reasonably proportionate to the regulatory purposes at hand.102 However, it might be more consistent with understandings of investment treaties as bargains between States to adopt, together with the approaches recommended just above, a formulation whereby a tribunal will check for the absence of disproportionate103 or even ‘wholly disproportionate’104 effects. It may not be coincidental that the international law abuse of rights doctrine has been understood by at least one scholar as calling for a manifest disproportionality test.105 Importantly, manifest disproportionality testing would share with other regulatory standards addressed in previous chapters the capacity to accommodate domestic legal authority more generously than proportionality testing proper. Manifest disproportionality testing has been employed in EC and EU law as a way to avoid over-​intrusion into policy decisions. Contrastingly, WTO law has done without a proportionality test. Occasionally elements of disproportionality are found on the facts and treated as indicative of a failure to meet the requirements of WTO standards,106 but there is no requirement for proportionality. In the investment context, the Tribunal in RWE Innogy v Spain took a lead in 2019 by using subheadings in its award emphasising that the Tribunal was assessing ‘disproportionality’,107 although this may have been due to the fact that the Tribunal’s finding was indeed one of disproportionality. Similarly the Tribunals in Blusun SA and ors v Italy, and BayWa r.e. Renewable Energy GmbH and BayWa re Asset Holding GmbH v Spain espoused the view that modification of subsidies such as feed-​in 101 RWE Innogy GmbH and RWE Innogy Aersa S.A.U. v Spain ICSID Case No ARB/​14/​34, Decision on Jurisdiction, Liability and Certain Issues of Quantum, 30 December 2019 (Anna Joubin-​Bret, Judd L Kessler and Samuel Wordsworth) [570], [589], [598]–​[600] (hereafter RWE Innogy v Spain). 102 E.g. Sornarajah, The International Law (n 10) 484–​485. 103 E.g. LG&E v Argentina (n 35) [195]; and Azurix v Argentina (n 34) [311]–​[312]. Campbell McLachlan, Laurence Shore and Matthew Weiniger, International Investment Arbitration: Substantive Principles (2nd edn, OUP 2017) 314, [7.178], 327–​328, [7.228] and [7.233]. 104 Philip Morris v Uruguay (n 81) [419]. 105 Robert Kolb, La Bonne Foi en Droit International Public: Contribution à l’étude des principes généraux de droit (Presses Universitaires de France 2000) 466 specifying that the doctrine balances interests in terms of ‘disproportion manifeste des intérêts’. 106 See Japan—​Measures Affecting the Importation of Apples, Report of the Panel (15 July 2003) WT/​ DS245/​R, DSR 2003:IX, 4481 [8.181], [8.198] (hereafter Japan—​Apples, Panel Report). Chapter Eight, section D 3 b). 107 RWE Innogy v Spain (n 101) [568]–​[571], [598]–​[600]. This followed after subheadings on suitability and necessity.

268  Investment Treaty Arbitration tariffs should be done in a manner ‘not disproportionate’ to the aim of a legislative amendment.108

a) European Union law Debate on the development of proportionality testing in the law of the European Communities brought out concern in the 1990s that this concept could be ‘strongly evaluative’, and involve the European Court of Justice (ECJ) in actively weighing the interests involved in a situation.109 It was asked whether such activity might lie beyond the judicial function, although in its defence the needs of the Community legal system were asserted.110 The idea of testing rather for ‘manifest disproportionality’ offered one way to deal with this concern.111 Disputing parties’ contending arguments in cases against EU Member States are generally assessed in some depth, but this scrutiny is likely in many cases to come to bear at stages of the analysis prior to any ultimate assessment of proportionality of means to ends. In cases concerning the four freedoms there is a strong focus on available alternatives. The jurisprudence emphasises that restrictions should be the least restrictive possible.112 In cases specifically concerning discretionary policy choices of the EU administration, EU action will in general be overturned only when a measure constitutes a disproportionate and intolerable interference with the very substance of guaranteed rights, though a tighter approach can still be expected in cases where a person is arguing solely that their individual rights have been affected by EU action or complaining about an administrative penalty or charge.113 Significantly, the ECJ has in 2019 taken the view that EU law is appropriately respected in the investment protection provisions of the Canada-​European Union Comprehensive Economic and Trade Agreement (CETA), which include a ‘manifestly excessive’ test.114 b) World Trade Organization law The idea of employing proportionality in regulatory disputes under WTO law is contentious and has involved heated debate.115 One experienced former Appellate 108 Blusun v Italy (n 49) [319(5)]; BayWa v Spain (n 54) [460]. 109 Gráinne de Búrca, ‘The Principle of Proportionality and its Application in EC Law’ (1993) 13(1) YEL 105 (hereafter de Búrca, ‘The Principle of Proportionality’). 110 Francis G Jacobs, ‘Recent Developments in the Principle of Proportionality in European Community Law’ in Evelyn Ellis (ed), The Principle of Proportionality in the Laws of Europe (Hart Publishing 1999) 1, 20–​21; de Búrca, ‘The Principle of Proportionality’ (n 109) 112. 111 As seen in Case C-​331/​88 R v Minister for Agriculture, Fisheries and Food, ex parte Fedesa [1990] ECR I-​4023. 112 Craig, EU Administrative Law (n 70) 653, 656, 670–​675; Craig and de Búrca, EU Law (n 16) 556–​ 557, 659. 113 Craig and de Búrca, EU Law (n 16) 552–​556. 114 Opinion 1/​17 (2019) EU:C:2019:341, paras 148–​161. The Court does not consider that the operation of the CETA consistently with this approach could call into question the EU’s chosen level of protection. 115 Peter Van den Bossche, ‘Looking for Proportionality in WTO Law’ (2008) 35(3) L.I.E.I. 283 (hereafter Van den Bossche, ‘Looking for Proportionality in WTO Law’).

Proportionality in Investment Treaty Arbitration  269 Body member has suggested that if ever proportionality testing is to be formally applied, the right approach will be a simple one: to define the objective pursued and check that the action taken is not atrociously disproportionate to this.116 Further, disproportionality testing, if employed, should be applied only as a verification test at the end of an analysis that has already reached a conclusion, as a way to confirm that the conclusion indeed seems correct.117 This approach is indeed essentially what is seen in the practice, which is limited. If we look back on United States—​ Import Prohibition of Certain Shrimp and Shrimp Products, the Panel in that case referred to the US legislation under challenge and stated only that ‘it appears to us that Section 609, cum implementing guidelines, is not disproportionately wide in its scope and reach in relation to the policy objective of protection and conservation of sea turtle species. The means are, in principle, reasonably related to the ends.’118 The Appellate Body appears deliberately to have chosen not to focus on concepts of disproportionality or proportionality in finding subsequently in Korea—​Beef that Korea’s dual retail system was necessary to secure compliance with Korean law on deceptive practices. The Appellate Body did, though, endorse the Panel’s finding that ‘the dual retail system is a disproportionate measure not necessary to secure compliance with the Korean law against deceptive practices’.119 Soon afterwards, the Appellate Body eschewed the language of proportionality in European Communities—​Measures Affecting Asbestos and Asbestos Containing Products, even while introducing full necessity testing for trade-​inhibiting health measures.120 As to the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), in Japan—​Measures Affecting the Importation of Apples, United States v Japan the Appellate Body avoided espousing the idea that Article 2.2 of the SPS Agreement involved a proportionality test. Article 2.2 requires WTO Members to ensure that any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal or plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence, except as provided for in Article 5. The Appellate Body tolerated, though, the

116 Interview 24 September 2015. 117 Idem. 118 United States—​Import Prohibition of Certain Shrimp and Shrimp Products, India and ors v United States, Report of the Appellate Body (12 October 1998) WT/​DS58/​AB/​R, DSR 1998:VII, 2755. 119 Korea—​Measures Affecting Imports of Fresh, Chilled and Frozen Beef, Report of the Appellate Body (11 December 2000) WT/​DS161/​AB/​R, WT/​DS169/​AB/​R, DSR 2001:I, 5 [152], [174], [179]. Contrast with the Appellate Body’s reasoning the Panel’s report, Korea—​Measures Affecting Imports of Fresh, Chilled and Frozen Beef, Report of the Panel (31 July 2000) WT/​DS161/​R, WT/​DS169/​R, DSR 2001:I, 59 [165] (hereafter Korea—​Beef, Panel Report). 120 European Communities—​Measures Affecting Asbestos and Asbestos Containing Products, Report of the Appellate Body (12 March 2001) WT/​DS135/​AB/​R, DSR 2001:VII, 3243. Robert Howse and Elisabeth Tuerk, ‘The WTO Impact on Internal Regulations—​A Case Study of the Canada-​EC Asbestos Dispute’ in Gráinne de Búrca and Joanne Scott (eds), The EU and the WTO: Legal and Constitutional Issues (Hart Publishing 2001) 283, 325.

270  Investment Treaty Arbitration Panel’s reasoning that a rational or objective relationship to the scientific evidence could not be identified in these circumstances where the Panel had made a finding of clear disproportionality.121 The Panel considered that two of Japan’s requirements established most obviously that Japan’s measure as a whole was maintained without sufficient scientific evidence. These two requirements were the requirement for a 500-​metre buffer zone around the US orchards from which apples were sourced for export to Japan, and the requirement for the orchards and buffer zones to be inspected three times annually. Neither requirement was found to bear a rational relationship to the available scientific evidence, which past jurisprudence had found to be required under Article 2.2 and Japan’s measure was clearly disproportionate to the risk of fireblight on the available evidence.122 The Panel determined that Japan’s measure was therefore maintained without sufficient scientific evidence and was inconsistent with Article 2.2.123 Proportionality continues occasionally to be invoked in WTO pleadings, for instance under Article 2.2 of the Agreement on Technical Barriers to Trade (TBT Agreement). Article 2.2 requires Members to ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations are not to be more trade-​restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-​fulfilment would create.124 The EU has previously said that both Article XX of the General Agreement on Tariffs and Trade (GATT) 1994 and Article 2.2 of the TBT Agreement attempt to ensure that measures are proportionate to their objectives.125 Mexico invoked in the Article 21.5 appellate proceedings in United States—​Certain Country of Origin Labelling (COOL) Requirements the ‘profoundly disproportional relationship’ between the amended US COOL measure and the very low level of gravity, in Mexico’s view, of the consequences that would arise from the non-​fulfilment of the US objective, as well as between the measure’s trade restrictiveness and its contribution

121 Japan—​Measures Affecting the Importation of Apples, Report of the Appellate Body (26 November 2003) WT/​DS245/​AB/​R, DSR 2003:IX, 4391 [163] (hereafter Japan—​Apples, Appellate Body Report). See also [147]. 122 Japan—​Apples, Panel Report (n 106) [8.181], [8.198]. 123 Ibid, [8.199], [8.224]. 124 As scholars have observed, a footnote to art 2.2 TBT Agreement, eliminated during drafting, read: ‘This provision is intended to ensure proportionality between regulations and the risks non-​ fulfilment of legitimate objectives would create.’ See WTO, ‘Agenda Item 1: Trade Provisions Contained in Existing Multilateral Environmental Agreements vis-​à-​vis GATT Principles and Provisions’ (14 October 1993) TRE/​W/​16/​Rev.1, [8]‌. Gabrielle Marceau and Joel P Trachtman, ‘The Technical Barriers to Trade Agreement, the Sanitary and Phytosanitary Measures Agreement and the General Agreement on Tariffs and Trade: A Map of the World Trade Organization Law of Domestic Regulation of Goods’ (2002) 36(5) JWT 811, 831. See also Axel Desmedt, ‘Proportionality in WTO Law’ (2001) 4(3) J Intl Econ L 441, 442–​443, 459 (hereafter Desmedt, ‘Proportionality’). 125 United States—​Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Panel (2 September 2011) WT/​DS406/​R, DSR 2012:XI, 5865 Addendum, Annex B-​4, Executive Summary of the Third Party Submission and Oral Statement of the European Union, [6]‌.

Proportionality in Investment Treaty Arbitration  271 to the US objective.126 Tobacco-​growing countries Nigeria and Zimbabwe indicated in Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products their view that the trade restrictions resulting from Australia’s regulation should be proportionate to its health contribution,127 or at least not disproportionate,128 with Nicaragua also advocating for the application of notions of proportionality under Article 20 of the Agreement on Trade-​Related Aspects of Intellectual Property Rights to help identify unjustifiable encumbrances on the use of trademarks.129 There are those who view the multifactorial test for necessity discussed in Chapter Five above as representing a proportionality analysis. However, the WTO necessity test has not been presented as a proportionality test, and neither has it worked this way in practice. There remains an important doctrinal distinction between WTO necessity testing and proportionality testing. WTO necessity testing takes as read the right of a WTO Member to set its own level of protection for legitimate objectives. Consistent with this, the WTO necessity test was designed to address the value of a measure’s contribution to its objective only as part of, or in conjunction with, the determination of whether there may be a reasonably available alternative measure.130 Contrasting directly with EU law, the absence of a doctrine of proportionality is one of the distinctive features of WTO law and practice in the settlement of regulatory disputes in health and environmental matters.131 This said, there is an awareness that there will be situations where it is apparent that a WTO Member’s level of protection or domestic policy ambition goes beyond what could be considered justifiable in light of the trade costs.132 There is also an awareness that the concept of proportionality has multiple incarnations and meanings, depending in part on an individual’s legal training.133 It may be perceived by some within the epistemic community of the WTO as a fundamental norm that could be brought to

126 United States—​Certain Country of Origin Labelling (COOL) Requirements, Recourse to Article 21.5 of the DSU by Canada and Mexico—​Appellate Body Reports (18 May 2015) WT/​DS384/​AB/​RW, WT/​DS386/​AB/​RW, DSR 2015:IV, 1725 [2.97], [2.162]. 127 Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products, Reports of the Panels (28 June 2018) WT/​ DS435/​R, WT/​DS441/​R WT/​DS458/​R, WT/​DS467/​R, Addendum, Annex C-​12, Executive Summary of the Arguments of Nigeria, [27] (hereafter Australia—​Tobacco Plain Packaging, Panel Reports). 128 Ibid, Addendum, Annex C-​24, Executive Summary of the Arguments of Zimbabwe, [27]. 129 Ibid, Addendum, Annex C-​11, Executive Summary of the Arguments of Nicaragua, [12]–​[14]. 130 Van den Bossche, ‘Looking for Proportionality in WTO Law’ (n 115). Chapter Five. 131 Jan Neumann and Elisabeth Türk, ‘Necessity Revisited: Proportionality in World Trade Organization Law After Korea—​Beef, EC—​Asbestos and EC—​Sardines’ (2003) 37 JWT 199, 231; Desmedt, ‘Proportionality’ (n 124); C.f. Stefan Zleptnig and Mads Andenas, ‘Proportionality: WTO Law: In Comparative Perspective’ (2007) 42(3) Tex.Int’l L.J. 371, viewing proportionality as underpinning many more specifically articulated WTO rules. 132 Interview 16 September 2015. 133 Interview 24 September 2015; Interview 29 September 2015.

272  Investment Treaty Arbitration bear where treaty text fails to afford solutions, but for many others this will not be the case.134

E. Conclusion Developing a broader and deeper appreciation of proportionality as a possible regulatory coherence test will be timely. Reliance on proportionality analysis in investment treaty arbitration has increasingly been advocated by scholars and the use of proportionality tests in investment treaty arbitration is in flux. Views on the use of the concept differ within the investment arbitration community. The views of arbitrators and lawyers spoken with in the course of this research coalesced around the belief that the appropriateness of employing the notion of proportionality in investment treaty arbitration is an open question, subject to debate and requiring further consideration.135 The concept is an awkward one, core dimensions of which remain unresolved.136 On what terms is proportionality to be quantified? In relation to what are States’ actions or their effects to be proportionate?137 There is a lack of clarity about whether it is a measure’s effects on the particular investor that should weigh in the balance, its effects on a group of investors as a class or the effects of a measure in the broadest sense.138 Or is the most useful aspect of the concept perhaps simply to enable a tribunal to check for the absence of obvious disproportionality as between a measure’s objectives and the means by which they are to be achieved?139 In many of the situations where it is potentially applicable in regulatory disputes proportionality testing was thought to be more accurately referred to as disproportionately testing, as opposed to contexts such as the law on the use of force where the proportionality of an action’s significance and effects is indeed to be weighed up.140 There was a sense that the relevance of the proportionality concept lies mainly in the need to gauge whether measures’ means and ends were out of ‘kilter’ and that the more specific understandings of proportionality found in certain legal systems might go beyond what was needed or appropriate in investment arbitration.141 It was not the business of investment tribunals to weigh up the relative importance 134 Interview 29 September 2015. Discussing a potential role for the principle, Andrew D Mitchell, Legal Principles in WTO Disputes (CUP 2008) 177–​182. 135 Interview 25 November 2016; Interview 16 December 2016. 136 Interview 14 December 2016. Consider also, observing a relative lack of interest in proportionality among investment lawyers and arbitrators, David Schneiderman, ‘Global Constitutionalism and Its Legitimacy Problems: Human Rights, Proportionality, and International Investment Law’ (2018) 12 LEHR 251, 267–​274. 137 Interview 29 November 2016. 138 Interview 14 December 2016; Interview 29 November 2016. 139 Interview 25 November 2016. 140 Interview 25 June 2018. 141 Interview 14 December 2016.

Proportionality in Investment Treaty Arbitration  273 of the values informing a State’s actions or impugn its sovereign right to make certain decisions,142 though the concept might serve a purpose in connection with questions relating to host States’ intentions in particular cases.143 Proportionality was a tool rather than a principle or rule in its own right.144 In an investment treaty arbitration there is a problem because the claimant is equated to the respondent, yet the respondent has to regulate a category of situations and not just the situation in which the respondent is involved.145 Nevertheless a claimant will conceptualise its interests in purely individual terms.146 This feature of investment arbitration may distort proportionality analysis and other domestic public law analogies in investment treaty arbitration.147 In regulatory disputes it is the proportionality of the action to the aim of a measure that needs to be determined.148 For some it will be disturbing to contemplate the application of proportionality in privately initiated dispute settlement, particularly when the terms on which it would be employed remain so unsettled. Aligning proportionality analysis with an appreciation of investment treaties as bargains between States and their populations as discussed in this chapter should help in orienting the practice. However, core difficulties remain. Proportionality testing formally lifts ultimate value judgements, as needed, onto the international plane. Domestic administrative and constitutional adjudicatory bodies will be more socially embedded in their home societies than investment tribunals, or an investment court or appellate facility, and their adjudicatory processes will be subject to greater public control or transparency. Further, investment arbitration is a mechanism traditionally responsive to commercial considerations, with a significant proportion of arbitrators more experienced in that realm than in public law regulatory disputes or public international law.149 Asking investment tribunals, or even an investment court, to make decisions concerning the appropriate balance of what may be incommensurable values appears more questionable than asking domestic courts or administrative bodies to do so.150 Proportionality continues, though, to hold potential as a means to reach potentially generally acceptable balances among and between competing public 142 Interview 1 December 2016. 143 Interview 25 November 2016; Interview 1 December 2016. 144 Interview 4 July 2018. 145 Interview 25 June 2018. 146 Interview 29 November 2016. 147 Idem. 148 Interview 25 June 2018. 149 Toby Landau, ‘Protecting Human Rights through International Adjudication: Reflections on Recent Cases and Developments’ (ASIL 114th Annual Meeting, ‘The Promise of International Law’, Virtual, 25 June 2020) accessed 29 August 2020. 150 Arguing that, in domestic law, this problem is less intense than often assumed, ACL Davies and JR Williams, ‘Proportionality in English Law’ in Sofia Ranchordás and Boudewijn de Waard (eds), The Judge and the Proportionate Use of Discretion (Routledge 2015) 73.

274  Investment Treaty Arbitration interests in public international law. Successfully applied, proportionality testing could enhance the justifications for international law’s claim to relative authority vis-​à-​vis domestic law by helping enable the coordinated exercise of domestic and international legal authority to address global needs. However, the way in which proportionality analysis takes decision-​making on sensitive and important policy matters out of the hands of the domestic legal constituency is precisely the real sticking point. This makes it difficult to accept the idea that proportionality testing could be initiated by international courts and tribunals. If it is hoped that proportionality testing is to become part of international investment law, this ambition will need to be progressed politically. The procedural justification of the authority claims of a standards-​enriched international law will otherwise be undermined.

F. Reflections on Regulatory Standards in Investment Treaty Arbitration Investment treaty arbitration is a unique form of dispute settlement in international law. Built on a novel form of privatisation in the enforcement of government-​to-​government commitments, investment arbitration has brought an unprecedentedly commercial ethos to the process of dispute resolution under public international law. Yet the regulatory disputes dealt with by investment treaty tribunals are as likely as those dealt with in the ICJ, in the WTO or under the law of the sea to contribute to the emergence of global regulatory standards. As with all international courts and tribunals applying public international law, it is important for investment treaty tribunals to appreciate that the identification of regulatory standards in the course of investment dispute settlement may involve a contribution to the development of international law more broadly, and that serious questions arise concerning the appropriate role for international adjudicatory bodies in this process. As ad hoc party-​appointed bodies operating on relatively short time schedules and applying arbitral principles of party autonomy, investment treaty tribunals appear more likely than other international adjudicatory bodies to produce decisions depending less heavily on formal legal reasoning. Due to the generality of certain investment protection guarantees it may be difficult to rely on the usual international legal interpretive approaches reflected in the Vienna Convention on the Law of Treaties in reaching a sufficiently specific understanding of their content.151 Investment tribunals rely with high frequency primarily on prior arbitral

151 Stephan W Schill, ‘Fair and Equitable Treatment, the Rule of Law, and Comparative Public Law’ in Stephan W Schill (ed), International Investment Law and Comparative Public Law (OUP 2010) 153, 156–​157.

Proportionality in Investment Treaty Arbitration  275 awards to support important findings in their decisions,152 potentially enabling the construction of regulatory standards through a process that runs the risk of creating houses built of cards.153 At times the pleadings or the parties’ agreement on a key point appear to be directly influential, as seen in Glamis Gold v US154 and in Laboratoires Servier v Poland.155 This is perhaps not overly surprising in an arbitral context. Indeed in investment arbitration in general tribunals may be more closely channelled into considering matters as presented by the parties’ advocates.156 The legitimacy and governance challenges associated with the investment treaty system, and particularly investment arbitration, have achieved notoriety.157 These and other factors have prompted scholars and indeed the public to question the appropriateness of asking investment treaty tribunals to make certain types of ruling.158 The need for international debate and reflection on international dispute settlement in general is arguably at its strongest in relation to the work of these particular tribunals, with the systemic issues addressed in Part V of this book presenting as particularly pressing in the investment treaty sphere.

152 Stephan W Schill, ‘Sources of International Investment Law: Multilateralization, Arbitral Precedent, Comparativism, Soft Law’ in Samantha Besson and Jean d’Aspremont (eds), The Oxford Handbook on the Sources of International Law (OUP 2017) 1095, 1104. 153 Anthea Roberts, ‘Power and Persuasion in Investment Treaty Arbitration: The Dual Role of States’ (2010) 104(2) AJIL 179. 154 Glamis Gold Ltd v United States UNCITRAL, Award, 8 June 2009 (Michael K Young, David R Caron and Kenneth D Hubbard) [599] (hereafter Glamis Gold v United States). 155 Chapter Seven, section C 1 a), Chapter Eight, section B 1. 156 Thomas W Wälde, ‘The Specific Nature of Investment Arbitration’ in Philippe E Kahn and Thomas W Wälde (eds), Les Aspects Nouveaux du Droit des Investissements Internationaux (Martinus Nijhoff 2007) 43, 53. 157 Jonathan Bonnitcha, Lauge N Skovgaard Poulsen and Michael Waibel, The Political Economy of the Investment Treaty Regime (OUP 2017). 158 Michael Waibel and others, The Backlash Against Investment Arbitration: Perceptions and Reality (Kluwer Law International 2010).

PART V

CRIT IC A L QU E ST IONS

9

Regulatory Standards, Legitimate Authority and the Adjudicatory Role A. Introduction Parts II, III and IV of this book have presented comprehensive analyses establishing the emergence of regulatory standards in the environmental cases determined by the International Court of Justice (ICJ), in dispute settlement under the United Nations Convention on the Law of the Sea (UNCLOS), in the Permanent Court of Arbitration (PCA), in the World Trade Organization (WTO) and by investment treaty arbitral tribunals. Commonalities appearing despite overarching institutional differences confirm the emergence of a cluster of potential core ‘global’ regulatory standards. These comprise requirements for regulatory coherence, due regard for the interests of others and due diligence in respect of actions within States’ jurisdiction and control that may cause harm further afield. Part V of the book now draws on the findings in the preceding chapters to respond to the three questions raised in Part I. The most significant findings relate to the generous way in which the regulatory standards that are being elaborated, often enabling the indulgence of decision-​making within domestic legal systems, and to the dynamics of their elaboration through adjudicatory decision-​ making. These include findings demonstrating the influence of the pleadings on the content of these standards and tests. They also include findings concerning the interpretive methods employed when international courts and tribunals are elaborating regulatory standards and tests. The book then returns to consideration of the broader challenges and opportunities uncovered in the course of these investigations. Part V comprises two chapters, Chapter Nine, the present chapter, and Chapter Ten. The present chapter begins by responding to the question of the degree to which the regulatory standards emerging in the cases preserve, enhance or even undermine international law’s claim to legitimate authority. Drawing on the theory of relative authority outlined in Part I of the book the chapter considers first the effect on procedural justifications of international law’s authority. The chapter concludes that by virtue of their accommodation of domestic decision-​making these regulatory standards appear to contribute to the strength of these justifications, at least if traditional procedural justifications of authority are relied upon. However, while beneficial, their effect in terms of substantive justification for international Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0009

280  Critical Questions law’s claim to legitimate authority may be more slight. The regulatory standards that are emerging contribute only partially to an ideal balancing of international interests, and make fewer demands of States than might alternative standards or tests. The standards seen in the practice to date do not promise sufficient co-​ ordination between domestic and international legal orders to provide strong support for claims to relative legitimate authority. In accommodating domestic legal authority, opportunities are missed for the adoption of tests that could enable international law better to serve its subjects by better balancing competing global interests. At the same time, more is arguably not to be expected from international courts and tribunals. The chapter then addresses the appropriateness of relying on international adjudicatory processes in the generation of regulatory standards. Among the dynamics of adjudication seen in the chapters comprising Parts III and IV are findings relating to the formal and social constraints on international courts and tribunals. Firstly, international adjudicatory bodies are formally constrained in their activity. They are to interpret the law consistently with international legal requirements for interpretation and to draw on relevant doctrines only so far as they are already established as a matter of international law. Secondly, international adjudicatory bodies are socially constrained. Their capacity to hear views from and promote deliberation among actors other than disputing parties is limited, and their responsiveness to disputing parties is apparent. The analyses in Parts II, III and IV have revealed the distinct influence of pleadings in the elaboration of regulatory standards. This detracts from the procedural justification of the claim to authority of the standards-​enriched international law that is emerging through international dispute settlement processes. As a method for the development of regulatory standards for the international community as a whole, international adjudicatory procedure is not on its own a clear match. Greater international political involvement would be appropriate, especially in relation to the possible future adoption of regulatory coherence tests that might require the proportionality of regulatory action stricto sensu. In the interim, Chapter Ten of the book invites international courts and tribunals to make more use of the opportunity to articulate standards calling on States to have due regard for one another’s interests, and for shared interests. The due regard standard offers an important vehicle for co-​ordination between plural legal orders and authorities in the absence of tests under which the substantive balance of interests can be determined as a matter of international law. Chapter Ten addresses this possibility as part of a broader investigation into the challenges and opportunities posed by the emergence of global regulatory standards in international adjudicatory proceedings.

Regulatory Standards and Legitimate Authority  281

B.  Regulatory Standards and International Law’s Claim to Legitimate Authority There are certain respects in which a standards-​enriched international law as we see it emerging from the empirical analyses in Parts II, III and IV of this book is better equipped than a standards-​unenriched international law to claim legitimate authority from a substantive perspective. Regulatory standards fine-​ tune international legal rules, making them more amenable to application. This generates greater certainty as to the content of international rules and should promote consistent behaviour by relevant actors as well as providing a basis for the development of further international rules and regimes addressing common problems. All this contributes to the capacity of international law to fulfil rather than to cut across the reasons that would otherwise guide the actions of its subjects. Beyond this, concerns arise. The overall challenge of producing regulatory standards that will enhance substantive justification of legal authority in international law is highly demanding given the multiple conflicting global interests at play. It is perhaps in part as a result of this that the standards adopted tend to indulge domestic authority, making considerable allowance for decision-​making through domestic legal systems. This strengthens procedural justifications for international law’s claim to legitimate authority. However, whether the standards that are emerging from regulatory disputes are the best standards to enable international law to respond, through co-​ordination with domestic legal authority, more appropriately to the substantive needs of its subjects remains an open and difficult question. Due to social and legal constraints the ‘governance’ reasons that might require new modes of co-​ordination between international and domestic legal orders largely remain unconsidered in regulatory disputes.1 This underlines the insufficiency of international adjudicatory processes as a means for developing global regulatory standards. Potential future progress towards recognisedly imperative gains in global welfare and equity may lie in the articulation of these reasons through discourse and action among or by a range of international actors, with a central part to be played by inter-​State negotiation informed by deeper processes of societal reflection.2

1 Chapter Two, section D 2. 2 Benedict Kingsbury, ‘The International Legal Order’ in Peter Cane and Mark Tushnet (eds), The Oxford Handbook of Legal Studies (OUP 2003) 271, 284–​285, envisaging reflection that will seek to take apart and reconstruct prevailing conceptions of ‘national interests’.

282  Critical Questions

1.  Procedural justification: accommodation of domestic decision-​making The regulatory standards we are seeing emerge in the decisions of international courts and tribunals are generally crafted on conservative terms, with low normative content, such that they can be applied so as to allow central place to domestic decision-​making. The primary emphasis has been on ensuring coherence in regulatory decision-​making. The various tests presently predominating among the regulatory standards that have been identified by international courts and tribunals almost all fit this pattern. This is most certainly true of the prevalent tests for regulatory coherence, which require reasonableness and rational relationships between regulatory measures and their objectives. These tests are seen in disputes determined by the ICJ and in WTO dispute resolution as well as in investment treaty arbitration. Multifactorial necessity tests as we have seen them in operation in the institutional context of the WTO also fit the pattern in that, as practice has demonstrated, they allow for an element of policy flexibility while remaining capable of application without incursive weighing and balancing of the respective policy aims at issue. Perhaps most notably, and arising in a different context, due diligence tests are also conservatively crafted as compared with stricter alternatives in that they pose lower demands and fewer restrictions on States’ domestic regulatory freedom. The due diligence standard as articulated under UNCLOS in the Responsibilities and Obligations of States with Respect to Activities in the Area (Advisory Opinion) comprises the most prominent instance of the accommodation of States, who would undoubtedly not have accepted the idea that obligations to ensure contractors’ compliance with applicable rules could have a literal application consistent with a simple plain language meaning of treaty commitments to ‘ensure’ compliance.3 Does the adoption of these inbuilt allowances for the operation of domestic authority ultimately enhance or undermine the claim to legitimate authority of the standards-​enriched international law to which international adjudication is currently making a central contribution? Such allowances appear prima facie to enhance procedural justifications for international law’s claim to legitimate authority. International courts’ and tribunals’ orientation towards traditional aspects of the procedural justification of international legal authority initially looks helpful, taking into account that the requirement for procedural justification is a sine qua non under the theory of relative authority.4 However, because of the way they allow so generously for domestic decision-​making, many of the standards adopted may 3 Responsibilities and Obligations of States with Respect to Activities in the Area (Advisory Opinion) ITLOS Reports 2011, 11 (hereafter Seabed Advisory Opinion); Chapter Four, section B 2 c). 4 C.f. Samantha Besson, ‘International Law’s Relative Authority: A Review of Nicole Roughan, Authorities: Conflicts, Cooperation and Transnational Legal Theory’ (2015) 6(1) Juris 169. Chapter Two, section D.

Regulatory Standards and Legitimate Authority  283 not produce the decisions that would in general accord with the reasons applying to the subjects of international law and produce the best outcomes for States and their populations, as discussed in the next section. They only partially generate the co-​ordination of domestic and international authority that would be needed for this. They are too lenient. They avoid or put off enquiries into whether the law can be read and applied in ways producing better outcomes. Appropriate consideration of the modes and forms of such co-​ordination is lacking.

2.  Substantive justification: the challenge of balancing global interests International law addresses and seeks to provide for sound resolutions on a wide range of substantive concerns. These concerns include the realisation of obvious public goods, such as internationally shared economic and environmental interests like those that may be realised through co-​operative arrangements including liberalised trade arrangements and multilateral environmental agreements. These will not be the only concerns addressed by international law. Among international law’s substantive concerns are many matters that States as public authorities within their own jurisdictions will be best placed to govern. Examples might include matters relating to domestic public health, educational curricula or domestically appropriate pathways for a transition to a low carbon economy. All States have an interest in ensuring that international law enables and permits such domestic legal activity. Recognising States’ regulatory capacity in some circumstances may be the best route towards the substantive justification of authority in international law. However, at times other States will still have interests, protected under international law, that compete with the argument that a matter should lie within the preserve of domestic authority. For instance when States are permitted to protect their populations against the harmful effects of addiction to tobacco products, or a novel virus, the economic interests of other States and indeed the legal interests of other States in investment security or free trade may suffer. Making matters more complex, some of these matters seemingly of concern primarily to particular populations have the potential to be cast simultaneously as matters of internationally shared interest or common concern. This produces situations where it becomes apparent that policies promoting global public goods are being weighed up with or traded off against other policies also arguably promoting such goods. In the case of tobacco packaging, it can be argued for example that on the one hand all States have shared economic interests in free trade, including those States adopting measures restricting trade in tobacco products. At the same time, all States arguably also have an internationally shared interest as a matter of human dignity in the protection of human health and the prevention of suffering in all jurisdictions. The argument runs differently again when the threat

284  Critical Questions to public health is one in which all States have an interest not only as a matter of principle but also because the threat is physically contagious, as in the case of a global pandemic. Scenarios of competing and overlapping local and global interests are common. To take a contrasting example, a high cost to the global public interest in the earth’s shared environment could for instance be entailed in permitting extractive or polluting activities producing an economic gain for a particular State, or commercial gain for its nationals or registered or sponsored companies. Yet all States also have an internationally shared interest in the availability on the international market of extracted resources and the enhancement to the international economy contributed by extractive activities. The task of alighting upon a body of international legal standards that can appropriately be used to establish the contours of States’ regulatory freedom and obligations in relation to interconnected matters such as these is a highly complex one. Domestic and global interests are engaged in diverse ways, and they may genuinely conflict with one another, calling for standards enabling appropriate compromises. As we have seen, the organic response to this situation has taken the form of regulatory standards that can be applied in ways that are accommodating of domestic decision-​making. This leaves international law under-​equipped to provide what is needed to serve the substantive interests of its subjects. Yet it may be an appropriate response from international dispute resolution bodies and processes, given their institutional design and primary functions. If more is to be achieved, and international law’s claim to authority rendered more convincing, other forms of institutional and more political engagement in the resolution of these issues are needed.

3.  Attaining relative authority? The need for regulatory standards that will assist in balancing competing global interests overlaps closely with the pressing need for co-​ordination between domestic and international authority required to protect and advance internationally shared common interests. Recalling the theory of relative authority as introduced in Part I, the precepts of procedural relativity recognise that legitimate authority does not extend to the authority to interfere with another legitimate authority. Where it is necessary only for one authority to tolerate another, compliance with this precept is not problematic. However, where the circumstances appear to call for the co-​ordinated exercise of authority matters become more intense. In the types of situation addressed in this book, ‘governance reasons’ then come into play. The disadvantages and advantages of co-​ordinated or centralised authority, and the modes for this, require to be determined. In the international legal setting this is a

Regulatory Standards and Legitimate Authority  285 particularly demanding task politically and in an adjudicatory setting could also require departure from formal legal reasoning. As a result, the regulatory standards elaborated by international courts and tribunals by and large avoid expressing an appreciation of the governance reasons that might point towards the adoption of more demanding global regulatory standards geared to producing better co-​ordination between domestic and international authority and enabling international law better to serve its subjects. In doing so they render less visible the concerns that underpin the call to consider these issues. The debate is postponed, but arguably properly so. International adjudicatory process, even in the case of advisory opinions, does not provide an adequate setting for the development of regulatory standards reflecting a true appreciation of governance reasons. The systemic nature of the implications demands analysis and declaration through processes that are targeted to and focused on this task, and that are more deliberative and representative than the processes associated with the rendering of international judgments and awards. Clearly, international dispute settlement as an exclusive process for the production of law in general would lack characteristics needed to legitimise the envisaged product, and accordingly there are limits on what it can do in any specific setting. The work of international courts and tribunals may provide valuable and necessary mechanisms for the elaboration of candidate global regulatory standards, but discussion and deliberation alone or predominantly in these arbitral and judicial fora will be insufficient. A standards-​enriched international law produced only through international courts and tribunals would remain lacking in legitimate authority due to the absence of procedural justification in this respect. Meantime the question of the relative weight appropriately to be given to governance reasons remains to be further theorised, alongside their relationship with substantive justifications for legal authority.

C.  The Role of International Courts and Tribunals The previous section of this chapter has approached from a theoretical perspective the question of whether international adjudication and arbitration provide suitable fora and processes for the development of regulatory standards, observing that there are inbuilt limits on the contribution appropriately to be made by international courts and tribunals. In more practical terms, while many of the characteristics of international adjudicatory process make it a productive and important means for positing potential global regulatory standards, the social and formal constraints that operate in these fora ultimately prevent full and public consideration of the systemic implications.

286  Critical Questions

1.  The strengths of international adjudicatory process Critics of pluralism say that plurality ‘leaves judges and other decision-​makers in a quandary as to how they should frame their links with other sub-​orders—​because it fails to posit an overarching frame, it seems to invite arbitrary choices’.5 Yet, faced with just such situations, the processes of international adjudication have consistently been producing standards and formulae helping generate frameworks to avoid arbitrary decision-​making. The most developed framework is that seen in the distinctive and constitutionally pluralist context of the European Union, but the work of the courts and tribunals studied in this book takes place on a global plane.6 International courts and tribunals are in many respects well equipped for the task required of them here. The inherent conservatism of judicial process may be an advantage in preventing overly rapid developments requiring ongoing reflection before potential adoption. Maintaining a medium and long-​term perspective on the law while focusing directly on the dispute immediately at hand is a professional habit familiar to senior judicial bodies, particularly standing bodies and members of ad hoc bodies with relevant experience. The fact that international adjudicatory bodies are required to deal with real-​world situations sharpens their insight, and the diversity of these situations assists in rendering international adjudication a sensible locus for working through relevant law and practice. Importantly, judges and arbitrators further have the benefit of seeing and hearing arguments tested and developed in written and oral submissions, where the parties will take issue with their opponents’ weaker points and promote alternative perspectives. On the whole international adjudicatory bodies’ contribution to the articulation of the law in regulatory disputes is a carefully calibrated one. In identifying and applying regulatory standards, international courts and tribunals are guided in part by their sense of what would be considered acceptable by their various audiences. Their decisions refrain from indulging more fully the impulse that judges and arbitrators must occasionally feel to interpret international law in ways that might in substance better advance public interests or help control activity with a detrimental impact on internationally shared legal interests, but that would cut into domestic legal administrative decision-​making authority more deeply. This moderation or restraint can be attributed to a range of factors including the character of international dispute settlement processes, institutional context and a sensitivity to the social boundaries of international law’s legitimate authority and that of international courts and tribunals themselves. Scholarly work on the social authority of

5 Nico Krisch, Beyond Constitutionalism: The Pluralist Structure of Postnational Law (OUP 2010) 25–​26. 6 Miguel Poiares Maduro, ‘Contrapunctual Law: Europe’s Constitutional Pluralism in Action’ in Neil Walker (ed), Sovereignty in Transition (Hart Publishing 2003) 502.

Regulatory Standards and Legitimate Authority  287 international courts and tribunals as institutions has concluded that this is a dynamic and variable authority, constituted through the relationship between a court and its audiences in the course of a recursive practice and is significantly shaped by social and political context.7 These audiences most obviously include disputants and potential future disputants, but also scholars and non-​governmental actors with both civic and corporate agendas, and affected groups of individuals. International adjudicatory bodies must operate in an awareness of the potential for critique and acceptance of all they do by these multiple actors. However, international adjudication remains in essence a bilateral and adversarial process, albeit with third party submissions depending on the case and the forum. The mechanisms through which international courts and tribunals are rendered accountable as agents of public authority differ as a whole from those through which government and State representatives and agencies may be held to account for official actions, and in general are limited. Significantly, as seen in Part II, the parties’ pleadings, and particularly the parties’ agreement on key points in the course of their pleadings, may feed directly and persuasively into the form taken by regulatory standards. The problem is that the effects of regulatory standards are not limited to the circumstances of the case. These are not formulae for one-​off application. They operate at the level of the international legal regime in question and, beyond this, are increasingly widely adopted across diverse regimes and subfields of international law. By what right does an international court or tribunal elaborate, particularly in a bilateral dispute, regulatory standards that may become global standards of governance?8 For one matter, the difficulty might arise of third parties potentially becoming bound by regulatory standards elaborating the obligations deriving from rules or provisions to which they are party but which are articulated in cases to which they are not party. In such cases we might wonder whether the Monetary Gold principle should preclude admissibility.9 Monetary Gold is however a narrow doctrine. There remains a broader and fundamental issue here. Can dispute settlement mandates, and disputing parties’ agreement on the substance of the law in particular cases, appropriately operate collectively as the source of a set of generic understandings on potentially universal regulatory standards? Third party participation in dispute settlement, though available on different terms in different fora, may provide a certain opportunity for third States to present 7 Karen J Alter, Laurence R Helfer and Mikael Rask Madsen (eds), International Court Authority (OUP 2018) 300. See further Erik Voeten, ‘International Judicial Behavior’ in Cesare PR Romano, Karen J Alter and Yuval Shany (eds), The Oxford Handbook of International Adjudication (OUP 2013) 550. 8 As Alvarez says, more broadly, there is no general acceptance of the idea that international adjudicators hold a broad licence to promulgate public values on behalf of the international community though this may differ in particular cases. José E Alvarez, International Organizations as Law-​Makers (OUP 2005) 538–​539. 9 Monetary Gold Removed from Rome in 1943 (Italy v France, UK and US) (Preliminary Question) [1954] ICJ Rep 19, 32.

288  Critical Questions their views on matters of systemic interest. There is an argument also that advisory opinions may offer a better avenue for the international adjudicatory contribution to development of such standards than decisions in contentious cases. Different and more inclusive dynamics are involved in the exercise of their advisory role for those courts endowed with an advisory jurisdiction. Advisory opinions are formulated in a context where submissions can be received from multiple parties and interested agencies.10 Procedure is inherently more representative, and the weight of submissions differs from that of disputing parties’ submissions in contentious cases. The advisory jurisdiction also offers the possibility of seeking opinions specifically focused on obtaining judicial perspectives on standards inhering in particular rules or provisions. Further, international courts and tribunals are considered to have more flexibility in the advisory setting compared with contentious proceedings, and may be prepared to be a little more avant-​garde in this context. All these factors could be considered to make advisory proceedings look a preferable format for the development of regulatory standards. In fact, what appears to be taking place, as seen in Chapters Three and Four, is that pronouncements in advisory opinions build into and are interconnected with decisions in contentious proceedings, often by happenstance concluded in other fora. This may be a better situation than more exclusive reliance on advisory proceedings alone, helping ensure that standards are developed with reference to concrete situations where their effects are brought into sharp relief by disputing parties’ submissions, and diluting the idea that what we are seeing is ‘legislation by advisory opinion’.11

2.  The constraints on international adjudicatory process As the analyses in Parts II, III and IV have shown, international courts’ and tribunals’ decision-​making processes remain subject both to social and to formal constraints that shape the choices they make in the articulation of regulatory standards.

a) Social constraints The responsiveness to disputants that is inherent in the international adjudicatory function is distinctly apparent in regulatory disputes in all the fora considered in Parts II, III and IV above. A classic instance of this is seen in Whaling in the Antarctic (Australia v Japan: New Zealand intervening) where the main standard employed in the ICJ’s judgment drew on the submissions made by Australia and Japan.12 10 On the advisory jurisdiction of the ICJ, JG Merrills, International Dispute Settlement (5th edn, CUP 2011) 132–​134. 11 Tom Ginsburg, ‘Bounded Discretion in International Lawmaking’ (2005) 45(3) Va.J.Int’l L. 631, 647–​648. 12 Whaling in the Antarctic (Australia v Japan: New Zealand intervening) (Judgment) [2014] ICJ Rep 226 (hereafter Whaling in the Antarctic). Chapter Three, section E 2 c) ii).

Regulatory Standards and Legitimate Authority  289 The standard articulated by the Court in the Dispute regarding Navigational and Related Rights (Costa Rica v Nicaragua) drew likewise on the submissions of Costa Rica and Nicaragua.13 The Netherlands’ pleadings appear to have been influential though not pivotal in the decision in the Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation),14 in which Russia declined to appear, while the concessions made by Great Britain led to the identification of the standard applied in the North Atlantic Coast Fisheries Case (Great Britain v the United States), a PCA case.15 In the WTO, where the handling of regulatory disputes is an established aspect of broader institutional practices, the relationship between disputing parties’ views on regulatory coherence tests and their use by panels and the Appellate Body is circular in that cases are pleaded consistently with tests previously laid down by the Appellate Body, while third party submissions also frequently evidence acceptance of previously articulated tests. This is seen most clearly in relation to the necessity test, discussed in Chapter Five, but also in relation to rational relationship tests discussed in Chapter Six. The influence of the parties’ pleadings is particularly marked in certain cases in investment treaty arbitration, though cannot always be traced when pleadings have been withheld from the public domain or awards are redacted. Their influence is not surprising in an arbitral forum, and a context where both the complaining parties and the arbitrators may be accustomed to private dispute resolution processes. There is a premium on satisfying the parties in order that an award be accepted rather than challenged, and arbitrators’ future appointments will depend on perceptions of their performance. Despite a certain diversity in practice, it is, overall, fair to say that responsiveness to disputants characterises the regulatory standards applied in all the international courts and tribunals studied in this book. The social dynamics operating in international adjudication are powerful ones. They may improve the chances of lasting dispute settlement, but whether the standards-​enriched international law that results is best configured to help international law serve its subjects is open to question. In effect it is concern for certain aspects of the procedural justification of authority that most strongly informs disputing party pleadings calling for standards that will accommodate domestic decision-​making. Governments will be aware that arguments for standards that accommodate domestic legal authority are likely to prove an effective litigation strategy due to their political and rhetorical appeal. Further, governments’ domestic status in many States depends on 13 Dispute regarding Navigational Rights (Costa Rica v Nicaragua) (Judgment) [2009] ICJ Rep 213 (hereafter Navigational Rights). Chapter Three, section E 2 d) iii). 14 The Arctic Sunrise Arbitration (Kingdom of the Netherlands v Russian Federation) (Award on the Merits) (2015) 171 ILR 1 (hereafter Arctic Sunrise). Chapter Three, section E 2 d) iv). 15 North Atlantic Coast Fisheries Case (Great Britain v the United States) (1910) Scott Hague Court Rep 141 (hereafter North Atlantic Coast Fisheries). Chapter Three, section E 2 d) i).

290  Critical Questions their constitutional mandate at home and this consideration is naturally central to their framing of international disputes. The conclusion must be that an adversarial, dispute-​specific process is not by itself altogether well-​suited to the production of constitutional legal developments. The audiences that are most directly and obviously served by international courts and tribunals may be too small, particularly in the case of arbitral proceedings where principles of party control dominate and responsiveness to the parties helps proof awards against challenge. As we have seen, the parties’ submissions also have a marked and important influence, and may open up new avenues of reasoning as well as inclining adjudicatory bodies towards certain approaches. There is potential for international courts’ and tribunals’ sensitivity to the social demands emerging through the pleadings they hear, and potentially from the membership of the organisations within which they work, to lead down less than optimal pathways. International courts and tribunals may, quite naturally, and even desirably, be operating in ways calibrated centrally to the preservation of their own institutional legitimacy.

b) Formal constraints International courts’ and tribunals’ work is subject also to formal constraints, among them restrictions on the interpretive methods they may employ in their articulation of regulatory standards. In the cases considered in Parts II, III and IV above it is common to see international courts and tribunals elaborating regulatory standards through logic and commonsense reasoning grounded in the nature of the rules and regime in question. Though not necessarily relied on expressly, interpretive principles of contextualisation and effectiveness are of distinct importance in producing constructive, workable and convincing outcomes.16 In combination, the two can produce a powerful effect.17 At the same time international law governing the exercise of regulatory authority appears to call by its very nature for extrapolation along certain lines, taking into account also the particular demands of different international regulatory regimes. These distinctive features of interpretive reasoning stand out across the board in the cases discussed in the previous chapters. They are seen in the ICJ in the Whaling in the Antarctic case18 and the Navigational Rights case.19 In the law of the sea context they are apparent in the Arctic Sunrise arbitration20 and the Chagos 16 On the importance of persuasiveness in judicial reasoning, Andrea Bianchi, ‘The Game of Interpretation in International Law’ in Andrea Bianchi, Daniel Peat and Matthew Windsor (eds), Interpretation in International Law (OUP 2015) 34; Iain Scobbie, ‘Rhetoric, Persuasion, and Interpretation in International Law’ in Andrea Bianchi, Daniel Peat and Matthew Windsor (eds), Interpretation in International Law (OUP 2015) 61. 17 Consider Charles De Visscher, Theory and Reality in Public International Law (Princeton University Press 1957) 355–​360. 18 Whaling in the Antarctic (n 12). 19 Navigational Rights (n 13). 20 Arctic Sunrise (n 14).

Regulatory Standards and Legitimate Authority  291 Marine Protected Area Arbitration21 discussed in Chapter Three, and the Advisory Opinions on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area22 and in response to the Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission23 discussed in Chapter Four. We can see the same phenomena strongly paralleled, with institutional variation, in WTO dispute settlement, in relation to necessity tests as discussed in Chapter Five, and rational relationship testing as discussed in Chapter Six. Interpretation by investment treaty tribunals follows an eclectic pattern; in addition to the factors referred to above investment tribunals rely heavily on the views of previous investment tribunals. The interpretive principles of contextualism and effectiveness appear to do considerably more work towards the production of regulatory standards than is often acknowledged. Their employment in WTO disputes has been the subject of intensive study,24 and the reasoning in regulatory disputes in fora beyond the WTO also appears to be marked by international courts’ and tribunals’ reliance on these principles.25 The principle of contextualism, and indeed Article 31(2) of the Vienna Convention on the Law of Treaties, can be broadly or narrowly understood. Preparatory work for the Convention indicated the need for a broad understanding of the role that might be played by context, and the International Law Commission (ILC) commentary on the Draft Articles on the Law of Treaties also sustained a non-​exhaustive definition of context. The ILC ultimately opted against including a separate provision on the principle of effectiveness, although considering that the application of the principle of effectiveness would be appropriate in certain circumstances.26 However, the principle plays a recognised role in international legal interpretation,27 remaining distinct from the concept of effet utile which requires a treaty to be read in such a way that each of its provisions has meaning. The principle of effectiveness aims to ensure 21 Chagos Marine Protected Area (Republic of Mauritius v United Kingdom) (Award) (2015) 162 ILR 1 (hereafter Chagos Marine Protected Area (Award)). 22 Responsibilities and Obligations of States with Respect to Activities in the Area (Advisory Opinion) ITLOS Reports 2011, 11. 23 Request for an Advisory Opinion Submitted by the Sub-​Regional Fisheries Commission (Advisory Opinion of 2 April 2014) ITLOS Reports 2015, 4. 24 Isabelle Van Damme, Treaty Interpretation by the WTO Appellate Body (OUP 2014) 280 (hereafter Van Damme, Treaty Interpretation). 25 Miguel Poiares Maduro, ‘Courts and Pluralism: Essay on a Theory of Judicial Adjudication in the Context of Legal and Constitutional Pluralism’ in Jeffrey L Dunoff and Joel P Trachtman (eds), Ruling the World? Constitutionalism, International Law and Global Governance (CUP 2009) 356, 359–​361, 368–​369 (hereafter Maduro, ‘Courts and Pluralism’), explaining that contextualism and teleological reasoning is likely to be called for in the adjudication of disputes in conditions of plurality, together with a reliance on systemic understandings of the relevant legal order which ideally should be articulated in judgments and awards. 26 ILC, ‘Draft Articles on the Law of Treaties’ (1966) II U.N.Y.B.I.L.C. 172, 218–​219, see alternatively Report of the ILC on the work of its eighteenth session (4 May–​19 July 1966) UN Doc A/​6309/​Rev.1. 27 Sir Hersch Lauterpacht, The Development of International Law by the International Court (Stevens 1958) 227–​228 (hereafter Lauterpacht, The Development of International Law).

292  Critical Questions that interpretation gives effect to the object and purpose of a treaty.28 Adjudicatory bodies will take especial care when working with the principle of effectiveness.29 The application of the principle of effectiveness revolves around relevant values and objectives, and adjudicators’ understanding of why a relevant treaty matters will play into their interpretation of the treaty.30 Indeed, as ILC Special Rapporteur Sir Humphrey Waldock explained when tentatively formulating a possible draft article on effective interpretation based on the prior work of Sir Gerald Fitzmaurice, the idea of effective interpretation could potentially be confused with extensive or teleological interpretation.31 There clearly remains room for pragmatism and judicial instinct in the process we know as interpretation. This is in tension with longstanding views on the proper role for the international judiciary. Dispute settlement by international tribunals is the settlement of disputes according to law, and is traditionally accompanied by the understanding that an international court cannot make new law or legislate.32 As Judge Shahabuddeen remarked in the Advisory Opinion on the Legality of the Threat or Use of Nuclear Weapons ‘[r]‌eluctance to encroach upon the province of the legislature is a proper manifestation of judicial caution.’33 However, even on a traditional view a certain adaptation of the law may be seen to come within the parameters of interpretation,34 and it is understood, indeed expected, that international adjudicators will bear in mind the policy considerations associated with a tribunal’s decisions.35 Further, though the impetus to rely on the canons of interpretation is largely irresistible, ‘[i]t is by no means always clear . . . [whether] . . . the principles of interpretation...do in fact give objectivity to the Court’s conclusions, 28 Hugh Thirlway, ‘The Law and Procedure of the International Court of Justice 1960–​1989: Part Two’ (1991) 62(1) BYIL 1, 44; Van Damme, Treaty Interpretation (n 24) 279. 29 Lauterpacht, The Development of International Law (n 27) 283. 30 Van Damme, Treaty Interpretation (n 24) 280, citing John H Jackson, Sovereignty, the WTO, and Changing Fundamentals of International Law (CUP 2006) 87. 31 ILC, ‘Third Report on the Law of Treaties, by Sir Humphrey Waldock, Special Rapporteur’ (1964) II U.N.Y.B.I.L.C. 5, 53, 60, see alternatively Third Report on the Law of Treaties, by Sir Humphrey Waldock, Special Rapporteur (3 March, 9 June, 12 June and 7 July 1964) UN Doc A/​CN.4/​167 and Add.1-​3. 32 Legality of the Threat or Use of Nuclear Weapons (Advisory Opinion) (1996) ICJ Rep 226, 267 at [18] (hereafter Nuclear Weapons Advisory Opinion). For discussion, Gleider I Hernández, The International Court of Justice and the Judicial Function (OUP 2014) 85–​93 (hereafter Hernández, The International Court). 33 Nuclear Weapons Advisory Opinion Dissenting Opinion of Judge Shahabuddeen 375, 42, adopting the words of Judge Lauterpacht in the South West Africa cases, adding also Judge Lauterpacht’s remarks that such caution must not be exaggerated, lest the Court fail to fulfil its function. 34 RY Jennings, ‘The Role of the International Court of Justice in the Development of International Environmental Protection Law (1992)’ in RY Jennings, Collected Writings of Sir Robert Jennings (Kluwer Law International 1998) 567, 569; RY Jennings, ‘The Judiciary, International and National, and the Development of International Law (1998)’ in RY Jennings, Collected Writings of Sir Robert Jennings (Kluwer Law International 1998) 796, 799–​800. 35 Wilfred Jenks, The Prospects of International Adjudication (Ocean 1964) 429–​431, 457–​546 (hereafter Jenks, International Adjudication); Mitsuo Matsushita, ‘A Review of Major WTO Jurisprudence’ in Merit E Janow, Victoria Donaldson and Alan Yanovich (eds), The WTO: Governance, Dispute Settlement & Developing Countries (Juris Publishing Inc 2008) 505–​524, 521.

Regulatory Standards and Legitimate Authority  293 or . . . merely free the Court . . . from the suspicion of deciding cases on subjective or arbitrary grounds.’ 36 Modern scholarship comes more readily to the conclusion that interpretation is inherently creative.37 At the same time, in working for an objectively legitimate legal system, international courts and tribunals will remain constrained by the tenets of interpretation. Arguably, these are ultimately another form of social constraint. International courts and tribunals have to work to maintain their semantic authority and, for this, they have to remain sensitive to expectations that they will observe acceptable interpretive practice.38 Yet it is not on interpretive principles alone that international courts and tribunals rely in the articulation of regulatory standards. Supplementing international adjudicatory bodies’ use of various interpretive practices is a reliance on the international law discipline of the abuse of rights.

3.  The abuse of rights doctrine International courts’ and tribunals’ reasoning, and the regulatory standards they articulate frequently carry resonances from the international law on abuse of rights, as already discussed in Chapter Two.39 International legal recognition of the abuse of rights doctrine itself is due in significant part to the attention it received from the Permanent Court of International Justice.40 Work on the abuse of rights doctrine has since noted its potential to act as a bridgehead for the development of more precise normative regimes, reflecting that, by itself, the doctrine is not sufficient to address related needs.41 This is gradually being remedied through the development of regulatory standards. A natural role for the international judiciary in employing appropriate reasoning to determine the balancing of rights has previously been envisaged in scholarship 36 Julius Stone, ‘Fictional Elements in Treaty Interpretation—​A Study in the International Judicial Process’ (1954) 1 Sydney L Rev 344, 345–​346 quoting Sir Eric Beckett in ‘Comments by Sir Eric Beckett’ (1950) 43(1) Annuaire de l’Institut de Droit international 435, 435–​436, and see at 367–​368. 37 Robert Kolb, Interprétation et création du droit international. Esquisse d’une herméneutique juridique moderne pour le droit international public (Bruylant 2006) 124 as cited in Michael Waibel, ‘Demystifying the Art of Interpretation’ (2011) 22(2) EJIL 571, 576; Ingo Venzke, How Interpretation Makes International Law: On Semantic Change and Normative Twists (OUP 2012) (hereafter Venzke, How Interpretation Makes International Law). 38 Venzke, How Interpretation Makes International Law (n 37) 1–​15. 39 Chapter Two, section A 2. 40 Lauterpacht, The Development of International Law (n 27) 162–​165, referring to Certain German Interests in Polish Upper Silesia (Germany v Poland) (1926) PCIJ Series A No 7, 30, 38; Free Zones of Upper Savoy and the District of Gex (France v Switzerland) (Order) (1930) PCIJ Series A No 24, 12; Free Zones of Upper Savoy and the District of Gex (France v Switzerland) (Judgment) (1932) Series A/​B No 46, 167. 41 Robert Kolb, ‘La Bonne Foi en Droit International Public’ (1998) 2 Revue Belge de Droit International 661, 722 (hereafter Kolb, ‘La Bonne Foi’ 1998); Robert Kolb, La Bonne Foi en Droit International Public: Contribution à l’étude des principes généraux de droit (Presses Universitaires de France 2000) 466–​467 (hereafter Kolb, La Bonne Foi 2000).

294  Critical Questions on the abuse of rights doctrine. The scholarship suggests that absolute rights may be transformed into less absolute or ‘relative’ rights through the international adjudicatory process.42 This judicial role has been considered authorised on the basis that the jurisdiction of international courts and tribunals rests on the consent of parties, and that disputants seek out international adjudication intending to eliminate their differences and settle their disputes. The argument is that the disputing parties’ intention that an international court or tribunal resolve their dispute empowers a court or tribunal to settle the dispute practically and constructively. Further, the parties’ consent to jurisdiction enables the injection of equitable considerations into the possibly otherwise more rigid rules applying to a dispute. These factors are said to have led international adjudicatory bodies into reliance on intricate and at times under-​articulated balancing processes in order to reconcile the rights at issue.43 The task is made easier in certain respects when the disputing parties in the course of their pleadings express agreement on the substance of the rights concerned. States may possibly be less likely to press the absolute character of a right when appearing before an international court or tribunal, and, perhaps as a result, may, as we have seen, make admissions during the proceedings, even inadvertently, that affect their substantive position.44 Such admissions can produce a level of agreement between disputing parties on the means by which their competing rights are to be reconciled, with the court or tribunal then adopting the substance of the parties’ agreement. This appears to describe the dynamic seen in cases including North Atlantic Coast Fisheries and Whaling in the Antarctic. The difficulty with both these explanations of international adjudicatory bodies’ role is that any resulting findings are closely dependent on the particular circumstances of a case and how the parties’ advocates choose to present it, yet the overall effects of certain dimensions to the handling of regulatory disputes may be far-​ reaching, and potentially of general effect for all States. While this proposition might be acceptable in relation to narrow points at issue in specific cases, it is less comfortable in the broader, modern context where we see the gradual emergence of common regulatory standards across multiple international legal fields. Further, the influence of the abuse of rights doctrine in regulatory disputes is marked by a particular feature of central interest. International courts and tribunals do not always draw on the classical form of the doctrine, which envisages the balancing of legal interests involving rights tied to sovereignty.45 Rather, the doctrine is being drawn on in ways that feed into a conception of regulatory freedom in terms analogous to the constitutionally conferred powers enjoyed by the state as 42 Georg Schwarzenberger, ‘The Principle of Good Faith’ in Collected Courses of the Hague Academy of International Law, Vol 87 (Nijhoff 1955) 291, 320–​324. 43 Ibid, 291, 320–​321. 44 Ibid, 291, 322. 45 Kolb, ‘La Bonne Foi’ 1998 (n 41), 721.

Regulatory Standards and Legitimate Authority  295 sovereign in the domestic sphere. Particularly influential is the notion of the misuse of power for purposes other than those for which it was established. Historically the notion of misuse of power appears previously to have featured especially in applications of the international law abuse of rights doctrine in situations involving the membership of international organisations and the competence of their organs, where specific juridical rights or powers are at issue, though it has also been applied previously in inter-​State relations.46 Now, however, misuse of power may be on the verge of becoming a turn-​to concept in the delineation of States’ regulatory freedom. Perhaps it is no coincidence that earlier work on the abuse of rights doctrine predicted the disappearance of the doctrine and its replacement with the single notion of détournement de pouvoir.47 The concept of the general freedom of States as international legal sovereigns may at this point in history be coming increasingly to be understood as involving a bundle of powers that are then subject to control under the international rule of law, as seen in many societies at the national level.48 For present purposes the most significant point is that the way that the abuse of rights doctrine has been drawn upon in regulatory disputes, moving away from the more classical form of the doctrine in favour of an engagement with misuse of power, adds to the inference that sovereign regulatory capacity is a matter of conferred power. The abuse of rights doctrine appears particularly to have been influential when understood to subject the exercise of the power to a similar discipline to that seen in domestic administrative law,49 including the requirement that a power be used only for the purposes for which it is conferred,50 and without regard to improper purposes or irrelevant factors.51 Thus, as international law tailors itself to increasing global interdependence, we are being asked to consider the nature of international sovereignty in a new light.52 Seen in this new light, sovereignty in international law appears to be analogous in general with that constitutionally conferred on states by their constituencies 46 Alexandre Kiss, ‘Abuse of Rights’ in Encyclopaedia of Public International Law, Vol I (North-​ Holland 1984) 4, 5 (hereafter Kiss, ‘Abuse of Rights’ 1984); Alexandre Kiss, ‘Abuse of Rights’ in Max Planck Encyclopedia of Public International Law (2006) [5] (hereafter Kiss, ‘Abuse of Rights’ 2006); Kolb, ‘La Bonne Foi’ 1998 (n 41) 721. Kiss refers to dissenting opinions of five judges in the Advisory Opinions on the Conventions of Admission of a State to the Membership in the United Nations (see Dissenting Opinions of Judges Zoricich and Krylov) and the Competence of the General Assembly for the Admission of a State to the United Nations (see notably the Dissenting Opinion of Judge Alvarez) and decisions of the United Nations Administrative Tribunal and the Administrative Tribunal for the International Labour Organisation. 47 Alexandre Kiss, L’Abus de Droit en Droit International (Librairie générale de droit et de jurisprudence 1952) 197 (hereafter Kiss, L’Abus de Droit). 48 Considering this to have been international law’s trajectory since 1945, Philip Allott, ‘Power Sharing in the Law of the Sea’ (1983) 77(1) AJIL 1, 26 (hereafter Allott, ‘Power Sharing’). 49 Eyal Benvenisti, The Law of Global Governance (Hague Academy of International Law 2014) 89–​90. 50 GDS Taylor, ‘The Content of the Rule Against Abuse of Rights in International Law’ (1972) 46 BYIL 323, 334 (hereafter Taylor, ‘The Content of the Rule’). 51 Ibid, 341, citing Kiss, L’Abus de Droit (n 47). 52 Allott, ‘Power Sharing’ (n 48) 14, 16.

296  Critical Questions domestically. However, there may be some situations where regulatory power could be considered to have been allocated to States under international law. Under a treaty such as the UNCLOS there may be grounds for regarding certain of States’ rights, freedoms and powers as having been granted to them under international law and on this basis to generate a basis for claims concerning détournement de pouvoir.53 There may also be another way in which States’ international legal sovereignty might be viewed as involving conferred power, which is in cases where an international regulatory regime has been established for the reconciliation of states’ individual and collective interests. It is of interest here that in Whaling in the Antarctic, several of the judges viewed Japan’s right to grant permits for scientific whaling under Article VIII of the International Convention for the Regulation of Whaling as a ‘discretionary power’, or fettered discretion,54 and the Article VIII right was viewed by some specifically as a discretionary power within a system of collective regulation or regulatory regime.55 In light of the Whaling Convention’s object and purpose the discretion afforded by Article VII was necessarily limited in its scope. There was a view that, together with other features of the situation, the contracting parties’ common interest in the operation of the Convention and its institutions indicated real limits on the permitting power.56 On one view the permitting power was to be exercised ‘judiciously or “reasonably” ’, or ‘properly and reasonably’.57 On another view, the application of the concept of reasonableness was too context-​dependent.58 Although a standard of unreasonableness had been used by the Court before, to establish that conduct was not arbitrary, in that case the terms of the applicable treaty required that conduct not be arbitrary.59 For a good example of a case that concerns neither high seas rights and freedoms nor an international regulatory regime we can turn to Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v France).60 As this is not an environmental case it has not been addressed in the course of the chapters above, however the case deserves attention. It is a classical instance of a situation where sovereignty in the international sense is effectively viewed in similar terms to constitutionally 53 Ibid, 10–​11. See also Taylor, giving as an example of a dispute where the exercise of a conferred power may be at issue the South West Africa Cases (Liberia v South Africa; Ethiopia v South Africa) (Preliminary Objections) [1962] ICJ Rep 319. Taylor, ‘The Content of the Rule’ (n 50) 345–​350. 54 Whaling in the Antarctic (n 12) and see Chapter Three, section E 2 c) ii); Dissenting Opinion of Judge Yusuf [9]‌; Separate Opinion of Judge Cançado Trindade [23]; at least one judge disagreed. Dissenting Opinion of Judge Abraham [23]. 55 Separate Opinion of Judge Sebutinde [4]‌; Separate Opinion of Judge Cançado Trindade [23]; Dissenting Opinion of Judge Owada [19]; Separate Opinion of Judge Xue [7]. 56 Declaration of Judge Keith [7]‌. 57 Separate Opinion of Judge Sebutinde [4]‌–[​ 5]; Separate Opinion of Judge Xue [7]–​[9]. 58 Dissenting Opinion of Judge Owada [39]. See also at [46]. 59 Case Concerning Elettronica Sicula S.p.A. (ELSI) (United States of America v Italy) (Judgment) [1989] ICJ Rep 15, 76–​77, cited in Whaling in the Antarctic (n 12) Dissenting Opinion of Judge Yusuf [16]. 60 Certain Questions of Mutual Assistance in Criminal Matters (Djibouti v France) (Judgment) [2008] ICJ Rep 177, [145] (hereafter Certain Questions of Mutual Assistance).

Regulatory Standards and Legitimate Authority  297 conferred power. In this case the disputing parties’ bilateral Convention on Mutual Assistance in Criminal Matters of 1986 put in place agreed systems for the parties’ co-​operation and the actioning of requests for assistance. Article 2(a) of the Convention provided that ‘Assistance may be refused: . . . if the requested State considers a request likely to prejudice its sovereignty, its security, its ordre public or other of its essential interests.’ France successfully relied on this provision. The Court referred to the principle of good faith in the Vienna Convention on the Law of Treaties and in previous judgments in finding that the question of whether or not Article 2(a) applied in a given case was a matter for judicial determination.61 Counsel for France having accepted that the principles of abuse of rights and misuse of power might be relevant, Judge Keith addressed in his Declaration the considerations relating to détournement de pouvoir.62 Judge Keith observed that the French judge dealing with Djibouti’s request for French assistance appeared to have exercised the power to decline assistance for wrong reasons, and in a way that cut across the Convention’s purpose. The judge had cited the non-​conformity of Djibouti’s request with the Convention and the refusal of one of the Djibouti officials to respond to a witness summons. Neither, as the Court observed, had the judge addressed whether France might have been able to assist Djibouti through a partial release of the requested documents. Likewise in the WTO general exceptions jurisprudence WTO Members’ sovereign powers on the international plane could be understood as similar in nature to the powers conferred on states domestically by their home constituencies. The general exceptions provision in Article XX of the General Agreement on Tariffs and Trade (GATT) and its counterpart in the General Agreement on Trade in Services (GATS) are cast as savings provisions, making it clear that ‘. . . nothing in this Agreement shall be construed to prevent’ WTO Members’ adoption or enforcement of measures envisaged in the subparagraphs. In passing it might be noted that the Appellate Body handled with sensitivity the relevance of the abuse of rights doctrine in United States—​Import Prohibition of Certain Shrimp and Shrimp Products case. WTO Members’ regulatory freedom as expressly preserved under the Article XX chapeau was referred to in terms of a Member’s right to invoke Article XX rather than in terms of powers, conferred or otherwise.63 The same is true in cases involving transit rights, such as Navigational Rights.64 This case concerned the exercise of Nicaragua’s sovereign regulatory freedom, which was subject to treaty commitments in respect of Costa Rica’s navigational rights. When we take into account the abuse of rights doctrine this helps make 61 Ibid, [145]. 62 Declaration of Judge Keith [6]‌–​[10]; Verbatim Record (Translation, 24 January 2008 at 3pm), 44, [33], Mr Ascensio for France. 63 United States—​Import Prohibition of Certain Shrimp and Shrimp Products, Report of the Appellate Body (12 October 1998) WT/​DS58/​AB/​R, DSR 1998:VII, 2755 [158]. Chapter Six, section A. 64 Navigational Rights (n 13).

298  Critical Questions sense of the Navigational Rights judgment’s otherwise unexplained reliance on certain considerations, centrally the view that Nicaraguan regulation ought not to render impossible or substantially impede the exercise of the right of free navigation; and that it have a legitimate purpose, such as safety of navigation, crime prevention and public safety and border control or environmental protection; that it not be discriminatory; and that it not be unreasonable, which the Court said would mean that its negative impact on the exercise of the right in question must not be manifestly excessive.65 The Court appears to have considered these characteristics to represent the essence of the territorial sovereign’s regulation-​making power.66 The idea that regulation should have these characteristics can be traced to specific aspects of the abuse of rights doctrine. Arbitrary, unreasonable and even discriminatory conduct has been considered to qualify as an abuse of rights in leading typologies and summaries of practice.67 Rather than the classical and familiar aspect of the doctrine dealing with the balancing of States’ rights and obligations, it is the alternative aspect of the doctrine dealing with abuse of discretion which is seemingly drawn upon by the Court.68 The abuse of rights doctrine appears to have wielded silent influence not only in the Navigational Rights case but also possibly in other cases such as the Iron Rhine (‘Ijzeren Rijn’) Railway (Kingdom of Belgium v Kingdom of the Netherlands)69 and the Arctic Sunrise arbitrations.70 There are a number of factors that may explain why the abuse of rights doctrine has not explicitly been relied upon, and is seldom referred to, in contemporary regulatory disputes. Key among them are the doctrine’s unpalatable name and its associations with malicious action, impure motives and bad faith.71 Frequently, a court or tribunal relies centrally on the good faith required of States in relation to their treaty obligations, and this assists in drawing out a rule’s meaning. This is seen in the North Atlantic Coast Fisheries decision of 1910, where the Tribunal considered the good faith execution of the parties’ bilateral treaty to require reasonableness in British fisheries regulation, going on to extrapolate beyond this to a more complex formula which it viewed as embodying the requirements of reasonableness.72 It is seen also in the Chagos Marine Protected Area Arbitration of 2015 where the Tribunal found there to be a functional equivalence between relevant 65 Ibid, [13], [89]. Chapter Three, section E 2 d) iii). 66 As the Court stated explicitly in relation to Nicaragua’s obligation to notify the adoption of regulations. Navigational Rights (n 13) [96]. 67 Kiss, ‘Abuse of Rights’ 1984 (n 46); Kiss, ‘Abuse of Rights’ 2006 (n 46) [34]; Robert Kolb, ‘La Bonne Foi’ 1998 (n 41) 720, 722. 68 Kiss, ‘Abuse of Rights’ 1984 (n 46) 4, 8; Kiss, ‘Abuse of Rights’ 2006 (n 46) [34]; Kolb, ‘La Bonne Foi’ (n 41) 661, 720, 722; Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (CUP 2006) 123–​132, 132–​136. 69 Arbitration Regarding the Iron Rhine (‘Ijzeren Rijn’) Railway between the Kingdom of Belgium and the Kingdom of the Netherlands (Award) (2005) 140 ILR 1; Chapter Three section E 2 d) ii). 70 Arctic Sunrise (n 14); Chapter Three section E 2 d) iv). 71 Kolb, ‘La Bonne Foi’ 1998 (n 41) 721. 72 North Atlantic Coast Fisheries (n 15).

Regulatory Standards and Legitimate Authority  299 good faith obligations, parties’ obligations to have due regard to the rights and duties of other States when exercising rights and duties in the exclusive economic zone, and their obligations to refrain from unjustifiable interference with the legal activities of other States.73 The points then articulated by the Tribunal as indicators of the regard required in this case were thus grounded in and formed an expression of the broader set of requirements, based on the Tribunal’s common-​sense reasoning. As noted earlier, these factors included the nature and importance of Mauritius’ rights, the extent of impairment anticipated, the nature and importance of the United Kingdom’s contemplated activities and the availability of alternative approaches. However, international courts and tribunals will be cautious in relation to any potential inference of bad faith on the part of States.

4.  The absence of public deliberation The relative absence of a general international dialogue and debate on the transition to a standards-​enriched international law is marked. We have seen that it is not uncommon for decisions to rest on formulae with their origins in the pleadings. Yet international adjudicatory bodies’ responsibilities clearly extend beyond their duties to disputants in particular cases. The ICJ for example is recognised as an organ of the legal order of the international community and not of the parties to the disputes before it.74 The various regulatory standards and tests elaborated in regulatory disputes may have effects both within and beyond the regimes in which these disputes arise. They may affect concretely the extent and terms of international law’s general control of domestic regulatory decision-​making, and affect how current and future generations will conceive of sovereignty. Push-​back against the WTO’s appellate machinery may be symptomatic of the need for a more widespread understanding of the part played by international courts and tribunals in the development of standards like those studied in this book, as part and parcel of the deepening overlap between international and domestic legal systems. However, although in 2020 the Appellate Body’s operation came up against seemingly intractable political problems, the Appellate Body’s prior decisions in regulatory disputes had valuably clarified the terms of multiple WTO agreements.75 The creation of an investment court or appeals mechanism can likewise be expected to generate standards and tests with the potential to become widely accepted as an embodiment of the legal rights and obligations of host and home States 73 Chagos Marine Protected Area (Award) (n 21). 74 Georges Abi-​Saab, ‘The International Court as a World Court’ in Vaughan Lowe and Malgosia Fitzmaurice (eds), Fifty Years of the International Court of Justice: Essays in Honour of Sir Robert Jennings (CUP 1996) 3. 75 Chapter Five, Chapter Six.

300  Critical Questions under international investment law. The need for wider deliberation on the issues arising in the book seems clear. Heed must be paid to concerns that the emergence of global administrative law will be facilitated in part through ‘juristocracy’.76 The potential for this judicial body to exercise significant power over the development of regulatory standards within investment treaty law is apparent.77 The influence of its pronouncements can further be expected to reverberate through the work of other international courts and tribunals and to have an impact on the future of law globally.78 The institutional design, work procedures, and recruitment of appropriate individuals to an investment court or appeals mechanism and its secretariat require close attention. There are multiple steps that can be taken to help ensure the robustness of international adjudicatory process in regulatory disputes.79 Scholars of international public authority emphasise that in general adjudicatory reasoning should incorporate open discussion on the competing interests and positions at play in a decision, and justifications for the tribunal’s conclusions.80 Seeking a more democratic legitimation for the work of international courts and tribunals, they suggest that together with greater deliberativeness in the selection of judges this can be improved through transparent argumentation and dialogue.81 The way in which specific exercises of authority are justified should be open to challenge and revision, with actors embedded in a political context that will enable this to take place.82 Appropriately calibrated approaches to ‘standards of review’ are to be promoted. International courts and tribunals should be encouraged to employ reasoning that will help promote democratic deliberation on the law and its ongoing development.83 This will not necessarily occur without prompts.84 76 Carol Harlow, ‘Global Administrative Law: The Quest for Principles and Values’ (2006) 17 EJIL 187. 77 Alec Stone Sweet and Thomas L Brunell, ‘Trustee Courts and the Judicialization of International Regimes: The Politics of Majoritarian Activism in the European Convention on Human Rights, the European Union, and the World Trade Organization’ (2013) 1(1) Journal of Law and Courts 61. 78 Consider Anne-​Marie Slaughter, ‘A Global Community of Courts’ (2003) 44 Harv.Int’l L.J. 191, 196, 202. 79 Alec Stone Sweet and Florian Grisel, The Evolution of International Arbitration: Judicialization, Governance, Legitimacy (OUP 2017). 80 Armin Von Bogdandy and Ingo Venzke, ‘On the Democratic Legitimation of International Judicial Lawmaking’ (2011) 12 German Law Journal 1341, 1349. 81 Armin von Bogdandy and Ingo Venzke, In Whose Name? A Public Law Theory of International Adjudication (OUP 2014) 208 (hereafter von Bogdandy and Venzke, In Whose Name?); Ingo Venzke, ‘International Courts’ De Facto Authority and its Justification’ in Karen J Alter, Laurence R Helfer and Mikael Rask Madsen (eds), International Court Authority (OUP 2018) 391. C.f. Andreas Føllesdal, ‘Constitutionalization, Not Democratization’ in Grossman Nienke and others (eds), Legitimacy and International Courts (CUP 2018) 307. 82 Joana Mendes and Ingo Venzke, ‘Introducing the Idea of Relative Authority’ in Joana Mendes and Ingo Venzke (eds), Allocating Authority: Who Should Do What in European and International Law? (Hart Publishing 2018) 1, 11. 83 Maduro, ‘Courts and Pluralism’ (n 25) 368. 84 C.f. Shai Dothan, International Judicial Review: When Should International Courts Intervene? (CUP 2020) 67–​84.

Regulatory Standards and Legitimate Authority  301 These considerations merit attention not only in WTO discussions but also in the context of reform in investment treaty arbitration and more widely. Particularly if we view international courts as operating on behalf of individual members of the populations of the States of the world, we need to consider seriously the personnel, institutional processes and structures through which the international adjudicatory function is exercised.85 If an international investment court or appeals mechanism is established, the selection of both arbitrators and registry staff with sufficiently broad perspectives will be critical. As international investment law has grown into a siloed and specialist subfield, the volume of practitioners, lawyers and commentators without experience in government, international law or domestic public law has grown. A registry and a court staffed with arbitrators and officials versed exclusively or primarily only in investment law itself would be lacking in vital capacity and breadth of vision. It will also be important to consider the institutionalisation of outlook that is to be expected from a permanent secretariat, and ongoing professional refreshment aimed at maintaining and facilitating the development of broader perspectives will be important. The public interest may additionally be better protected if an assembly of States were to be established for the monitoring of investment treaty dispute settlement and development of the substantive law as needed where possible.86

D. Conclusion While the appreciation that the international judicial function involves the application rather than the making of law remains a touchstone,87 it has been understood since early on that the requirements of international society increasingly feed a ‘healthy dynamism’ in the ICJ, and beyond, including in relation to the environment.88 Balancing the law’s competing needs for stability and change, the ICJ and international tribunals generally must provide both the core predictability associated with law as well as a responsiveness to the international community’s legitimate needs and aspirations. International adjudicatory anticipation of future consequences and clarity as to the values or interests engaged in a given case are

85 von Bogdandy and Venzke, In Whose Name? (n 81) 210–​214. 86 Stephan W Schill, ‘Reforming Investor–​ State Dispute Settlement: A (Comparative and International) Constitutional Law Framework’ (2017) 20(3) J Intl Econ L 649, 665, 668. 87 Francis Bacon, ‘Of Judicature’ (1612) (Authorama) accessed 30 August 2020. 88 Shabtai Rosenne, The International Court of Justice: An Essay in Political and Legal Theory (Leyden: Sijthoff 1957) 13; Philippe Sands, ‘Litigating Environmental Disputes: Courts, Tribunals and the Progressive Development of International Environmental Law’ in Tafsir Malick Ndiaye and Rüdiger Wolfrum (eds), Law of the Sea, Environmental Law and Settlement of Disputes: Liber Amicorum Judge Thomas A Mensah (Martinus Nijhoff 2007) 313–​325. See also Tim Stephens, International Courts and Environmental Protection (CUP 2009) 348–​353.

302  Critical Questions central to the role.89 Consistent with this, making general pronouncements of law and principle is viewed by many as a proper and even a central function of the judge, in international law and also more widely.90 Arbitral decision-​making may be more restricted,91 including investment treaty arbitration, where private parties are the complainants. However, arbitral awards, too, have been influential in developing international law,92 and there is no question but that investment tribunals’ decisions advance international law. By upholding and clarifying the law and how it applies, albeit with due consideration to societal needs, both international courts and international arbitral bodies also contribute importantly to the rule of law on the international plane.93 The task we are now asking of international courts and tribunals is a significant one. Regulatory disputes are requiring international courts and tribunals collectively to play a role that goes beyond previously accepted descriptions of their part in international legal relations. International adjudicatory and advisory processes have become a medium for the development of standards that may coalesce into global regulatory standards. The legislative dimension involved in elaborating regulatory standards has to be acknowledged. The standards and tests seen in the cases are not just statements of principle, for instance that regulatory action be ‘rational’ or ‘diligent’. They are intended to identify and lay down potentially enduring requirements and are often accompanied by an articulation of what will for instance be ‘diligent’ across varying situations in the particular legal context. Further, judicial and arbitral statements have an authoritative, even determinative impact on actors’ subsequent conduct and are frequently regarded as representing the law. The elaboration of international legal regulatory standards is thus an activity that has a legislative dimension, and not really only ‘a type of judging’.94 However, international courts and tribunals are not recognised as legislators, and indeed it is generally possible to justify their rulings from an interpretive perspective, taking into account the interpretive principles of effectiveness and context. At the same time international courts and tribunals remain institutionally under-​equipped for the part they are asked to play in the elaboration of regulatory standards. It ought 89 Interview 28 September 2015; W Michael Reisman, ‘A Judge’s Judge: Justice Florentino P. Feliciano’s Philosophy of the Judicial Function’ in Steve Charnovitz, Debra P Steger and Peter Van den Bossche (eds), Law in the Service of Human Dignity: Essays in Honour of Florentino Feliciano (CUP 2005) 3–​10, 8. 90 Lauterpacht, The Development of International Law (n 27) including 5–​7, 61–​62, 70–​71, 155–​157 and 394–​400; Sir Gerald Fitzmaurice, ‘Hersch Lauterpacht—​The Scholar as Judge’ (1961) 37 BYIL 1, 14–​15. For discussion, see Hugh Thirlway, ‘Judicial Activism and the International Court of Justice’ in Nisuke Ando, Edward McWhinney and Rüdiger Wolfrum (eds), Liber Amicorum Judge Shigeru Oda (Kluwer Law International 2002) 75–​105. 91 W Michael Reisman, ‘ “Case Specific Mandates” versus “Systemic Implications”: How Should Investment Tribunals Decide? The Freshfields Arbitration Lecture’ (2013) 29(2) Arb Intl 131. 92 Alan Boyle and Christine Chinkin, The Making of International Law (OUP 2007) 293. 93 Jenks, International Adjudication (n 35) 460, 757; James Crawford, ‘Continuity and Discontinuity in International Dispute Settlement: An Inaugural Lecture’ (2010) 1 J Int Disp Settlement 3, 24; H Lauterpacht, The Function of Law in the International Community (Clarendon Press 1933) parts 4 and 6. 94 C.f. Neil MacCormick, Rhetoric and the Rule of Law: A Theory of Legal Reasoning (OUP 2005) 170.

Regulatory Standards and Legitimate Authority  303 not to surprise us that the formulae they produce are designed to accommodate domestic regulatory decision-​making, and the standards that are emerging from regulatory disputes favour considerations grounded in traditional types of procedural justification of international law’s authority claims above those relating to governance reasons and substantive justification. Discussion in the next chapter about further, systemic considerations arising in the course of their elaboration underlines the importance of informed societal reflection and engagement in the development of regulatory standards.

10

Systemic Challenges and Opportunities A. Introduction Regulatory disputes act as a laboratory for developing prototype or model articulations of the ways in which international law can operate in the regulatory space. The regulatory standards that are beginning to emerge through the work of international courts and tribunals will be subjected to ongoing critique and discussion by States, scholars and practitioners and those most directly affected. The tests through which they are given effect may change and develop, as seen in World Trade Organization (WTO) dispute settlement in relation to the problem of regulatory instruments serving diverging rationales. Those that are considered best will continue to be employed and others may drop out of use. In order to evaluate emerging global regulatory standards successfully it is important to consider not only their most obvious characteristics but also deeper, structural challenges that may accompany them. Regulatory standards play their part in the contemporary metamorphosis of sovereignty, and their design and employment will be closely linked with the extent to which international law remains an integrated rather than a fragmented body of law, where economic, social and environmental rules and principles are all applied together. The legal status of private actors within the public international legal system is also clearly implicated in the development of regulatory standards and calls likewise for attention. Potential developments in all these aspects of the international legal system can be expected to take place concurrently as it continues to develop, at least in part ‘from below’,1 including through investment arbitration.2 The systemic challenges arising as a result of increased regulatory overlap between international and domestic legal systems can be viewed as having stemmed largely from the rules and provisions negotiated and applied by governments and international organisations. It is with the disputes associated with the operation of these rules and provisions that international courts and

1 Frédéric Mégret, ‘International Law as Law’ in James Crawford and Martti Koskenniemi (eds), The Cambridge Companion to International Law (CUP 2012) 64, 85–​87. 2 On dynamics of change in international law, including how changes in the superstructure may effect change in the substructure, see Paul F Diehl and Charlotte Ku, The Dynamics of International Law (CUP 2010).

Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0010

306  Critical Questions tribunals must deal. This places international adjudicatory bodies at the cutting edge of the law, and they must work with what they have. In some cases, treaty texts set down more contemporary or new regulatory requirements. In other cases international courts and tribunals must work with older text. In all disputes their work is time-​bound and they are obliged to produce principled rulings. Yet international adjudicatory process is not set up to generate comprehensive perspectives on the broader issues accompanying the emergence of regulatory standards, and international courts and tribunals must simply take such matters into account to the best of their abilities when dealing with the disputes before them. This chapter canvases a number of systemic challenges associated with the emergence of the global regulatory standards we are seeing in the decisions of international courts and tribunals in health and environment cases. These challenges include changes in the conception of sovereignty, the fragmentation of international law and the place of private actors in public international law. The chapter goes on to address opportunities for reconsideration of current ways of thinking about regulatory standards, first in relation to proportionality tests. As explained in earlier chapters, proportionality tests hold significant promise as a legitimacy-​enhancing feature of international law, but this is strongly brought into question by their ultimate removal of control over value judgements from the domestic to the international level. The chapter proposes instead reliance on due regard standards, keeping decision-​making grounded in the domestic realm but requiring other-​regarding analysis on the part of decision-​makers. Due regard standards are also less troubling than proportionality tests in respect of the systemic challenges posed, including in relation to fragmentation and the place of private actors. Due regard standards may be employed on their own or in combination with requirements for measures to bear rational or reasonable relationships to their objectives. The chapter then looks at how opportunities to reconsider current ways of thinking about regulatory standards arise also in relation to the use of the language of judicial review. The idea that regulatory disputes be viewed as a form of judicial review and that certain regulatory standards be described as standards ‘of review’ or similar is arguably best set aside. Judicial review and standard of review are not necessary concepts in international adjudication, and international rules and adjudicatory practices involving deference to domestic authority can operate without them. A ‘judicial review’ perspective is appealing for the way in which it reinforces respect for domestic decision-​making, but may narrow thinking about regulatory disputes unfortunately at a time when opening up debate and retaining broad horizons may be a better way forward. The chapter closes by asking, in light of the systemic challenges emerging in relation to regulatory standards, whether an element of internal structural sacrifice may be unavoidable in the operation of plural legal systems.

Systemic Challenges and Opportunities  307

B.  Systemic Challenges Associated with the Advent of Regulatory Standards Regulatory standards bring with them actual and potential systemic changes in international law generating both challenges and opportunities for its future development. The first of these is their effect on our understanding of sovereignty, which will vary depending on the regulatory standard. The concept of States’ sovereignty has been put under strain by globalisation yet is considered preferable to the alternatives, which would do less to conserve global equality and protect against power imbalances.3 However, for some decades it has been appreciated that in dealing with problems associated with the intransigent assertion of sovereignty ideas eliciting a greater civility among States and peoples will be important; and that there is a need to help ensure that the power with which governments are endowed is ordered to human ends.4

1.  Sovereign freedom as conferred power Regulatory standards simultaneously assume and give concrete form to a conception of sovereignty as a conferred power. The emergence of the standards identified in the international regulatory disputes studied in this book thus needs to be seen as part of a broad and ongoing process in which the idea of sovereign power for modern times undergoes continued reconstruction.5 Foundational WTO scholarship has recognised that international legal conceptions of sovereignty must change and develop in the light of populations’ interdependence. International lawyers, it has been said, must ‘morph’ into constitutional lawyers.6 However, it is in relation to investment treaty arbitration that an impetus towards the re-​conception of sovereignty from a domestic public law perspective most strongly infuses scholarship. Indeed a distinct view has been put forward proposing that we integrate international investment law and treaty arbitration into a public law model that transcends territorial borders.7 Investment treaty arbitrators have been encouraged to employ reasoning drawing 3 Benedict Kingsbury, ‘Sovereignty and Inequality’ (1998) 9(4) EJIL 599. 4 Charles de Visscher, Theory and Reality in Public International Law (Rev edn, Princeton University Press 1968) 94, 101. 5 Neil Walker, ‘Sovereignty and Beyond: The Double Edge of External Constitutionalism’ (2017) 57(3) Va.J.Int’l L. 799. 6 John H Jackson, ‘Sovereignty: Outdated Concept or New Approaches’ in Wenhua Shan, Penelope Simons and Dalvinder Singh (eds), Studies in International Trade Law Volume 7: Redefining Sovereignty in International Economic Law (Hart Publishing 2008) 3, 25. 7 Stephan W Schill, ‘Introduction’ in Stephan W Schill (ed), International Investment Law and Comparative Public Law (OUP 2010) 25, 35; Stephan W Schill, ‘Enhancing International Investment Law’s Legitimacy: Conceptual and Methodological Foundations of a New Public Law Approach’ (2011) 52(1) Va.J.Int’l L. 57, 59, and 100.

308  Critical Questions on comparative public law in building new understandings of investment protection rules. The emergence of a genuinely constitutional jurisprudence is envisaged, with investment treaty arbitral decision-​making even seen as a means of higher lawmaking.8 There has been discussion of the values on which arbitral tribunals should draw and how best respect can be accorded to the voice of government agencies representing self-​governing peoples in circumstances of equality and participation, as well as to domestic agencies’ expertise.9 The comparative public law perspective on investment treaty arbitration has generated warnings about the possibility of unintended consequences, based on the wisdom that importing domestic public law notions into investment treaty arbitration too readily imposes a set of principles with insufficient attention to the complexity of the international regime.10 Should or could international investment tribunals in effect amend, alter or transform domestic constitutional arrangements in ways that were unforeseen by States in the construction of the international investment law regime, let alone seriously debated in public?11 International investment law is concerned with assessing the conformity of State conduct with public international law that can be expected to differ from relevant domestic public and administrative law,12 although there are cases in which administrative law principles and methods may appear obviously appropriate, including cases effectively safeguarding individuals against the misfunctioning of administrative and judicial systems and denial of justice. Certainly, comparative public law provides a rich storehouse of concepts and ideas that may assist in thinking through international law’s developmental needs,13 but the call for caution expressed in the investment law context is well founded.14 In particular, a move in some quarters from viewing regulatory disputes 8 Santiago Montt, State Liability in Investment Treaty Arbitration: Global Constitutional and Administrative Law in the BIT Generation (Hart 2009) 13–​15, 84; Alec Stone Sweet, ‘Arbitration and Judicalization’ (2011) 1(9) Oñati Soio-​Legal Series 1. See also Andreas Kulick, Global Public Interest in International Investment Law (CUP 2012) 91–​93. For a critical perspective David Schneiderman, ‘Investment Rules and the New Constitutionalism’ (2000) 25 Law and Social Inquiry 757. David Schneiderman, Constitutionalising Economic Globalisation: Investment Rules and Democracy’s Promise (CUP 2008). 9 Stephan W Schill, ‘Deference in Investment Treaty Arbitration: Re-​conceptualising the Standard of Review’ (2012) 3(3) JIDS 577, 600–​603. 10 José E Alvarez, ‘Beware: Boundary Crossings’—​A Critical Appraisal of Public Law Approaches to International Investment Law’ (2016) 17 JWIT 171. 11 Joshua Paine, ‘Investment Protection Standards as Global Constitutional Law’ (forthcoming) in Stephan Schill, Christian Tams and Rainer Hofmann (eds), Investment Law and Constitutional Law (Edward Elgar) 43 accessed 1 October 2020 (hereafter Paine, ‘Investment Protection Standards as Global Constitutional Law’). 12 Eric de Brabandere, Investment Treaty Arbitration as Public International Law: Procedural Aspects and Implications (CUP 2014) 5. 13 Observing that public law analogies may become increasingly appropriate as international law is employed for the purposes of co-​operation, An Hertogen, ‘The Persuasiveness of Domestic Law Analogies in International Law’ (2018) 29(4) EJIL 1127, 1140. 14 Benedict Kingsbury, Nico Krisch and Richard B Stewart, ‘The Emergence of Global Administrative Law’ (2005) 68 LCP 15, 56, observing the constraints on direct borrowing from domestic administrative law (hereafter Kingsbury, Krisch and Stewart, ‘The Emergence of Global Administrative Law’).

Systemic Challenges and Opportunities  309 in general as subject to ‘review’ rather than adjudication has taken place at speed, and it is time to pause, rewind and consider broader aspects of the phenomenon we are witnessing.15 The conversion of international legal sovereignty into an attribute of international Statehood that is subject to constraints like those applying to the conferred powers of the sovereign state domestically is no small matter. Notions of sovereignty, in some form, and of the State and public agencies more generally, must surely remain fundamental to the international legal landscape,16 and there is much to consider about how international legal relations will be structured in the century to come. For instance the pressure that is being placed on traditional conceptions of sovereignty forces us simultaneously to ask whether the rule of law under public international law must be considered in a new light. There are, traditionally, fundamental differences between the domestic and international contexts. In the domestic context, public and administrative law operates to ensure an appropriate allocation and exercise of public power as a constitutional matter, to ensure the proper running of the State in the interests of its population, avoiding the arbitrary exercise of power, especially against individuals, consistent with the rule of law. This entails constitutional limits on the exercise of conferred power. Contrastingly in the public international law context the power of each State is generally held to be checked instead according to the balance of interests between and among States as negotiated and reflected in international legal instruments and rules. Rule of law in the international setting traditionally refers primarily to the observance of these obligations. With States’ exercise of power increasingly, it seems, being held up and measured against standards previously more applicable in domestic legal spheres, is the concept of the rule of law in the international setting coming to have a new meaning, embracing also the general idea of preventing the arbitrary exercise of power? Then there are more fine-​grained issues. For instance, will the expected metamorphosis of sovereignty be complete when accepted regulatory standards are bedded in? Consequential questions are likely to arise with further ramifications. In the dispute settlement context, the advent of regulatory standards and the development of a more sophisticated global administrative law could potentially bring with it changes in the rules on the allocation of the burden of proof in regulatory disputes which themselves would have an effect on sovereignty and on sovereign regulatory freedom. Traditionally in international legal proceedings the legal burden of proof has lain with the party asserting a particular claim or defence, applying to the assertions of fact required to establish the claim or defence.17 15 Chapter Ten, section C 2 a). 16 Benedict Kingsbury, ‘International Law as Inter-​Public Law’ in HR Richardson and MS Williams (eds), Nomos XLIX: Moral Universalism and Pluralism (New York University Press 2009) 167. 17 Caroline E Foster, Science and the Precautionary Principle in International Courts and Tribunals: Expert Evidence, Burden of Proof and Finality (CUP 2011) (hereafter Foster, Science and the Precautionary Principle).

310  Critical Questions International judicial practice also incorporates the understanding that a party asserting a fact will bear the burden of establishing it. The question now is whether the idea that a regulatory or administrative decision-​maker should be expected to justify its actions should carry over into a new approach to the burden of proof. De facto steps in this direction are seen for instance in the developing jurisprudence under the WTO Agreement on Technical Barriers to Trade (TBT Agreement),18 as well as in the International Court of Justice (ICJ) in the case of Whaling in the Antarctic (Australia v Japan: New Zealand intervening).19 The view that a respondent State should justify its regulatory action may have an intuitive appeal in that the respondent is often the party best placed to provide evidence relating to the nature, purposes and expected or actual effects of its action. The idea of a ‘culture of justification’ as referred to in domestic administrative law may also perhaps seem appealing.20 Such an approach is in tension with the existing understanding of how the burden of proof will operate in international law and its inbuilt respect for regulatory freedom. Yet retaining the current public international law approach, which is more consistent with international legal sovereignty as we know it, may nevertheless require a conscious decision.21

2.  The fragmentation of international law Global regulatory standards’ implications for better integration of the currently fragmented public international legal system also require careful thought. Concerns about the separate developmental trajectory of international trade law, international investment law, international environmental law and international human rights law, to name just four of many fields, have drawn particular attention since prior to the establishment of the WTO.22 18 Chapter Six, section 5. Chapter Six, section A 5 b). Agreement on Technical Barriers to Trade (opened for signature 12 April 1979, entered into force 1 January 1980) 1186 UNTS 276, art 2.2. 19 Chapter Three, section E 2 c) ii). See commentary in Caroline E Foster, ‘Methodologies and Motivations: Was Japan’s Whaling Programme for Purposes of Scientific Research?’ in Malgosia Fitzmaurice and Dai Tamada (eds), Whaling in the Antarctic: Significance and Implications of the ICJ Judgment (Brill/​Nijhoff 2016) 11, 20–​23, discussing also whether and how the precautionary principle may reverse the burden of proof (hereafter Foster, ‘Methodologies and Motivations’); see further Shotaro Hamamoto ‘From the Requirement of Reasonableness to a “Comply and Explain’ Rule: The Standard of Review in the Whaling Judgment’ in Malgosia Fitzmaurice and Dai Tamada (eds), Whaling in the Antarctic: Significance and Implications of the ICJ Judgment (Brill 2016) 38, 50. 20 An idea introduced powerfully in the South African context by Etienne Mureinik, ‘A Bridge to Where? Introducing the Interim Bill of Rights’ (1994) 10(1) SAJHR 31. See more recently Mark Elliott, ‘From Bifurcation to Calibration: Twin-​Track Deference and the Culture of Justification’ in Hanna Wilberg and Mark Elliot (eds), The Scope and Intensity of Substantive Review: Traversing Taggart’s Rainbow (Bloomsbury Publishing 2015) 61, 68–​69. 21 Foster, Science and the Precautionary Principle (n 17) 185–​239. 22 ILC, ‘Conclusions of the Work of the Study Group on the Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law’ (2006) II(2) U.N.Y.B.I.L.C. 177, see alternatively Report of the ILC on the work of its fifty-​eighth session (1 May–​9 June and 3 July–​11 August 2006) UN Doc A/​61/​10 (hereafter ILC, ‘Conclusions of the Work of the

Systemic Challenges and Opportunities  311 As to international trade law specifically, many of the difficult legal issues involved in the ‘trade and’ debate in its early incarnations have begun to resolve themselves through the emergence in the WTO of the regulatory standards discussed earlier in Part III of this book. This is because to a considerable extent that debate concerned itself closely with domestic regulatory freedom to address environmental and public health concerns even where this might disrupt trade. As illustrated by the discussion in Chapters Five and Six, the regulatory standards that have been identified and applied in WTO disputes are accommodating of domestic regulatory decision-​making and from a normative perspective are characterised by relative neutrality, instead focusing on regulatory coherence. This can be seen in the multi-​factorial necessity test,23 and rational relationship formulae.24 Even the advent of references to ‘weighing and balancing’ as an aspect of WTO necessity testing has not distorted the overall picture of an international law that is indulgent of domestic regulatory freedom. At the same time, WTO law has remained effective, as the regulatory standards that have been developed require an important level of rigour in domestic decision-​making for which the WTO dispute settlement mechanism continues to provide accountability.25 Arguably the regulatory standards that have emerged in WTO dispute settlement go a long way towards mitigating the problems discussed in the scholarship around the fragmentation theme of 20 years ago, including the problems of evaluative decision-​making on the part of international adjudicatory bodies, the associated unease in connection with asking adjudicatory rather than legislative institutions to perform this task and the tensions over the reallocation of jurisdiction from the domestic to the international level.26 However, the fragmentation problem itself remains, and is emerging in a new form. Addressing global challenges effectively requires seeing international law as an integrated whole. Reliance on emerging global regulatory standards may subtly change the dynamics of integration and fragmentation through international dispute settlement and the question is whether these changes take us in the right direction. Firstly, these standards are relatively generic. Reliance on such standards has the potential to shelter the issues concerned under a set of black umbrellas, keeping from sight a range of international legal rules and principles of various hue that could be a better match for the case at hand. Depending on how a case is Study Group on Fragmentation’). Margaret A Young, Regime Interaction in International Law: Facing Fragmentation (CUP 2012). 23 Chapter Five. 24 Chapter Six. 25 Richard B Stewart, ‘Remedying Disregard in Global Regulatory Governance: Accountability, Participation, and Responsiveness’ (2014) 108 AJIL 211, 251. 26 Problems identified by Joel P Trachtman, ‘Trade and . . . Problems, Cost-​Benefit Analysis and Subsidiarity’ (1998) 9 EJIL 32, 34, 35, 45, 84; Joel P Trachtman, The Economic Structure of International Law (Harvard University Press 2008) 248–​271 (hereafter Trachtman, The Economic Structure of International Law).

312  Critical Questions argued, and how adjudicators are inclined, proportionality testing may for instance eclipse the bright potential of the precautionary principle or even replace its application almost entirely.27 If a State chooses not to plead its case in terms of precaution, or other principles or goals important to the international community, there may be a little impetus for adjudicators to bring such aims and principles to bear in their reasoning. The same fate may be suffered by other important principles or soft law dimensions of international environmental law, the law on sustainable development and international law relating to human rights and social policy. This is significant because many international legal rules and principles are vehicles for addressing internationally shared or community interests that individual States may at times be disinclined to assert in a dispute settlement context, depending on the circumstances. Secondly, an approach grounded in regulatory standards that foreground States’ national public policy interests or incumbent domestic governments’ political priorities may at times be in tension with progress towards realising globally shared interests. The application of many of the regulatory standards we are seeing will be closely oriented around the legitimate regulatory objectives identified by regulating States, requiring assessment of these States’ actions with respect to their domestic objectives. This type of focus could tend to cut off discussion concerning the recognition of the centrality of competing objectives that are important for the international community. The fact that the category of ‘legitimate objectives’ is not a closed international legal category, particularly now that jurisprudence on the scope of exceptions to protect public order and public morals has begun to open up in the WTO, poses both risks and opportunities.28 Thirdly, the adoption of regulatory standards is often closely tied with the apprehension that regulatory disputes are a form of ‘review’ of government action.29 This may tend to put the regulatory action in question into a verticalised silo surrounded by the inward-​curving walls of the relevant international legal discipline, be this investment treaty law, WTO law or that of another subfield.30 Argument is likely to be more contained, with a focus on the procedural and design flaws

27 Caroline E Foster, ‘Adjudication, Arbitration and the Turn to Public Law “Standards of Review”: Putting the Precautionary Principle in the Crucible’ (2012) 3(3) JIDS 525 (hereafter Foster, ‘Adjudication, Arbitration and the Turn to Public Law “Standards of Review” ’); Federico Ortino, ‘Investment Treaties, Sustainable Development and Reasonableness Review: A Case Against Strict Proportionality Balancing’ (2017) 30 LJIL 71, 91, promoting the alternative of reasonableness review in order to facilitate the implementation of the sustainable development agenda domestically. 28 Caroline E Foster, ‘The Problem with Public Morals’ (2019) 10(4) JIDS 622. 29 E.g. Matthias Oesch, Standards of Review in WTO Dispute Resolution (OUP 2003) 4, 21, 28, 33 (hereafter Oesch, Standards of Review); Joshua Paine, ‘Standard of Review: Investment Arbitration’ in Hélène Ruiz Fabri (ed), Max Planck Encyclopedia of International Procedural Law (OUP 2018) 21 accessed 13 September 2020 (hereafter Paine, ‘Standard of Review’). 30 Caroline E Foster, ‘Diminished Ambitions? Public International Legal Authority in the Transnational Economic Era’ (2014) 17(2) J Intl Econ L 355.

Systemic Challenges and Opportunities  313 of the specific domestic regulatory reaction. Contrastingly, viewing international disputes as involving ‘adjudication’ rather than ‘review’ places the emphasis more squarely on the balance of interests between the parties as embodied in applicable provisions and rules of international law. This keeps disputed action in a horizontal framework that may be more open to an appreciation of broader public international law’s relevance and importance, including soft law. Arguments and deliberation may be more likely to be expansive, to take into account a wider range of policy considerations, to read international law in light of the bigger picture globally and possibly to draw on third-​party and amicus submissions as appropriate. In reality, many of the regulatory actions taken by States today implement policies contributing to the global as well as to the national legal good, and implement or assist in implementing binding and non-​binding commitments made in international legal fields other than international economic law. Dealing with regulatory disputes from such a broad public international law perspective is preferable. As regulatory standards increasingly come to carry the weight of the legal demands associated with the balancing of public interests in an internationalising world we must hope that the opportunity will be taken to develop novel tools to help create new syntheses between social and environmental law and policy at the domestic and global levels. International courts and tribunals do not traditionally have access to the same techniques of integration as domestic courts dealing with administrative disputes. Naturally missing from international practice are presumptions of interpretation consistent with fundamental rights and applicable international law in general, and a doctrine requiring domestic decision-​makers to take into account mandatory relevant considerations including international legal considerations. International law relies rather on the interpretive principles in customary international law and in the Vienna Convention on the Law of Treaties 1969.31 Contrastingly, in the domestic context where the meaning of a domestic statute is ambiguous the common law presumes that a statutory interpretation consistent with human rights or with a State’s international legal obligations is the correct interpretation. Where these exercises in statutory interpretation do not resolve the issue, administrative law in a number of domestic jurisdictions has incorporated the requirement that governmental decision-​making take into account mandatory relevant considerations as a matter of procedural propriety. Such considerations may include both domestic considerations and international legal obligations as appropriate.32

31 ILC, ‘Conclusions of the Work of the Study Group on Fragmentation’ (n 22). See also Vienna Convention on the Law of Treaties between States and International Organizations or between International Organizations 1986. 32 There are shades, too, of the mandatory relevant considerations doctrine in the ‘hard look’ doctrine developed by the US courts, which enables administrative action to be scrutinised to see whether an administrative agency took a sufficiently ‘hard look’ at the situation before it, including considering all the relevant factors. Paul Craig, Administrative Law (8th edn, Sweet & Maxwell 2016) [21-​005].

314  Critical Questions While Article 31(3)(c) of the Vienna Convention has a role to play,33 international law could benefit from the application of such domestic law techniques, which could require States’ regulatory activity to take into account important goals and principles of international environmental and human rights law that may not qualify as rules applicable in the relations between the parties under Article 31(3) (c).34 Applicable international law would thus be understood in the light of the legal system as a whole.35 This type of approach is seen for instance in the South China Sea Arbitration (Republic of the Philippines v People’s Republic of China) arbitration, where the Tribunal viewed the Convention on International Trade in Endangered Species of Wild Fauna and Flora as part of the ‘general corpus of international law that informs the content of Articles 192 and 194(5) of the Convention’.36 The European Court of Human Rights has relied on such a practice in cases involving environmental claims.37 An alternative route to integration is seen in the case concerning the Gabčikovo-​Nagymaros Project (Hungary v Slovakia). Prompted by pleadings on the relevance of developments in international environmental law, the ICJ made a point of advising the parties that the terms of their bilateral treaty required them to take new environmental norms into consideration in its implementation.38 The potential to apply this type of approach depends on the case at hand. Achieving greater integration of public international law in a standards-​enriched international law will in large part depend on international and national adjudicators’ selection and orientation. As commentators have previously observed, the more specialised a judicial regime, the greater may be the likelihood that its judges identify strongly with the social values thought to be realisable through the

33 For instance in Dispute Concerning Filleting within the Gulf of St. Lawrence the Tribunal referred to the relevance of UNCLOS under the rule reflected in art 31(3)(c) in support of its findings on the regulatory authority of the coastal State, while appreciating that the Convention was yet to come into force. Dispute Concerning Filleting within the Gulf of St Lawrence (‘La Bretagne’) (Canada v France) (Award) 82 ILR 590, 627–​630 (hereafter La Bretagne (Award)). 34 On art 31(3)(c), Campbell McLachlan, ‘The Principle of Systemic Integration and Article 31(3)(c) of the Vienna Convention’ (2005) 54 ICLQ 279. 35 Dirk Pulkowski, ‘Structural Paradigms of International Law’ in Tomer Broude and Yuval Shany (eds), The Shifting Allocation of Authority in International Law: Considering Sovereignty, Supremacy and Subsidiarity: Essays in Honour of Professor Ruth Lapidoth (Hart Publishing 2008) 51, 74, citing Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) Notwithstanding Security Council Resolution 276 (1970) (Advisory Opinion) [1971] ICJ Rep 16, [53]. 36 South China Sea Arbitration (Republic of the Philippines v People’s Republic of China) (Merits) (2016) 170 ILR 1, [956], citing Southern Bluefin Tuna Cases (New Zealand v Japan; Australia v Japan) (Provisional Measures, Order of 27 August 1999) ITLOS Reports 1999, 280, [70] for the point that ‘[t]‌he conservation of the living resources of the sea is an element in the protection and preservation of the marine environment’. Chapter Four, section B 2 e). 37 Ole W Pedersen, ‘The European Convention of Human Rights and Climate Change—​Finally!’ (EJIL:Talk!, 22 September 2020) accessed 30 September 2020. 38 Case Concerning the Gabčikovo-​Nagymaros Project (Hungary v Slovakia) (Judgment) [1997] ICJ Rep 7 [112].

Systemic Challenges and Opportunities  315 regime’s implementation.39 Their outlook will in turn depend also on their initial formation as law students and young professionals, subsequent training and individual sensitivities. Appropriate institutional design and staffing for the secretarial machinery of international economic dispute settlement will be essential. Scholars too have their part to play, and there will also be ways in which national courts are positioned to assist.40 The problem of ensuring appropriate consideration of broader international legal concerns is particularly apparent in investment treaty arbitration, where consideration for host States’ legal concerns for their populations’ human rights or their environment have seldom been integrated into the decisions of investment treaty tribunals.41 A wealth of scholarly discussion has been generated in response to the challenge of integrating broader international law into investment law.42 This includes volumes on international environmental and international human rights law,43 as well as protection of public health, cultural property and indigenous peoples’ rights.44 Aided by such work, a change in mindset may gradually 39 Jochen von Bernstorff, ‘Specialized Courts and Tribunals as the Guardians of International Law? The Nature and Function of Judicial Interpretation in Kelsen and Schmitt’ in Andreas Follesdal and Geir Ulfstein (eds), The Judicialization of International Law: A Mixed Blessing? (OUP 2018) 9, 22–​23, 25; Johannes Hendrik Fahner, Judicial Deference in International Adjudication: A Comparative Analysis (Hart 2020) 211 (hereafter Fahner, Judicial Deference). 40 Eyal Benvenisti and George W Downs, ‘National Courts, Domestic Democracy, and the Evolution of International Law’ (2009) 20(1) EJIL 59. 41 E.g. Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. v Argentina ICSID Case No ARB/​03/​19, Decision on Liability, 30 July 2010 (Jeswald W Salacuse, Gabrielle Kaufmann-​Kohler and Pedro Nikken); c.f. Amicus Curiae Submission in ICSID Case No ARB/​03/​ 19 Between Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal, S.A. and The Republic of Argentina (Centro de Estudios Legales y Sociales (CELS), Asociación Civil por la Igualdad y la Justicia (ACIJ), Consumidores Libres Cooperativa Ltda. de Provisión de Servicios de Acción Comunitaria, Unión de Usuarios y Consumidores, Center for International Environmental Law (CIEL)), 4 April 2007. See now the situation in respect of counterclaims by States against investors, including in Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v The Argentine Republic ICSID Case No ARB/​07/​26, Award, 8 December 2016 (Andreas Bucher, Campbell McLachlan and Pedro Martinez-​Fraga). See also Bear Creek Mining Corporation v Peru ICSID Case No ARB/​14/​21, Award, 30 November 2017 (Karl-​Heinz Böckstiegel, Michael Pryles and Philippe Sands) especially Partial Dissenting Opinion of Professor Philippe Sands (English), [7]‌–[​ 14], [36] in relation to the rights of indigenous peoples. 42 Freya Baetens (ed), Investment Law within International Law: Integrationist Perspectives (CUP 2013); Jorge E Viñuales, Foreign Investment and the Environment in International Law (CUP 2012); Marie-​Claire Cordonier Segger, Markus W Gehring and Andrew Newcombe (eds), Sustainable Development in World Investment Law (Kluwer Law International 2011); Valentina Vadi, Public Health in International Investment Law and Arbitration (Routledge 2013). 43 Jorge E Viñuales, Foreign Investment and the Environment in International Law (CUP 2012); Pierre-​ Marie Dupuy and Jorge E Viñuales (eds), Harnessing Foreign Investment to Promote Environmental Protection: Incentives and Safeguards (CUP 2013); Kate Miles (ed), Research Handbook on Environment and Investment Law (Edward Elgar Publishing 2019); Pierre-​Marie Dupuy, Ernst-​Ulrich Petersmann and Francesco Francioni (eds), Human Rights in International Investment Law and Arbitration (OUP 2009). 44 Valentina Vadi, Public Health in International Investment Law and Arbitration (Routledge 2013); Valentina Vadi, Cultural Heritage in International Investment Law and Arbitration (CUP 2014); Judith Levine, ‘The Interaction of International Investment Arbitration and the Rights of Indigenous Peoples’ in Freya Baetens (eds), Investment Law within International Law: Integrationist Perspectives (CUP 2013) 106

316  Critical Questions be coming about;45 and the adoption of new treaty provisions more consistent with regulatory protection of the environment will assist.46 At the same time, the comparative public law literature on community interests in investment treaty arbitration has been known to devote the balance of its attention to domestic community interest and to sustainable development at the domestic level.47 This perspective needs to be complemented in ways that will take in global community interests in non-​economic spheres including the environment, health and human rights.48 We may otherwise continue to see a corresponding minimalism in the extent to which international law in such fields features in the reasoning of investment awards upholding the host State’s right to enforce its environmental law.49 The decision in Philip Morris Brands Sàrl and ors v Uruguay provides an example of a tribunal’s willingness to engage with broader public international law.50 Meantime, the development of regulatory standards in WTO environment and health cases has started to come to grips with the challenge of integration in various ways. The Appellate Body set the scene in United States—​Import Prohibition of Certain Shrimp and Shrimp Products, where it discussed the relevance of the WTO Agreement’s preambular reference to sustainable development, tying this to the importance of maintaining a balance between Members’ rights and obligations when applying WTO general exceptions provisions. The Appellate Body’s

45 Jorge E Viñuales, ‘Foreign Investment and the Environment in International Law: Current Trends’ in Kate Miles (ed), Research Handbook on Environment and Investment Law (Edward Elgar Publishing 2019) 12. 46 Sam Luttrell, ‘Green Multilateralism: “Mega FTAs” and the Changing Interface Between Environmental Regulation and Investment Protection’ in Kate Miles (ed), Research Handbook on Environment and Investment Law (Edward Elgar Publishing 2019) 264; Romesh Weeramantry and Montse Ferrer, ‘Going Green? The Evolution of Environmental Provisions in India’s Investment Treaties’ in Kate Miles (ed), Research Handbook on Environment and Investment Law (Edward Elgar Publishing 2019) 313. 47 Stephan W Schill and Vladislav Djanic, ‘International Investment Law and Community Interests’ in Eyal Benvenisti and Georg Nolte (eds), Community Interests Across International Law (OUP 2018) 221. See, more ambiguously, Stephan E Schill, ‘Shared Responsibility? Stopping the Irresponsibility Carousel for the Protection of Public Interests in International Investment Law’ in August Reinisch, Mary E Footer and Christina Binder (eds), International Law and ...: Boundaries of International Law and Bridges to Other Fields and Disciplines: Vienna, 4–​6 September 2014 (Hart Publishing 2016) 160, 166–​168 (Select Proceedings of the European Society of International Law; Vol 5). 48 Bruno Simma and Theodore Kill, ‘Harmonizing Investment Protection and International Human Rights: First Step Towards a Methodology’ in Christina Binder and others (eds), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer (OUP 2009) 678. 49 Consider David R Aven et al v Costa Rica ICSID Case No UNCT/​15/​3, Final Award, 18 September 2018 (IIC 1472 (2018), 18 September 2018 (Eduardo Siqueiros T, Pedro Nikken and C Mark Baker) [417]–​[419]; Cortec Mining Kenya Ltd and ors v Kenya ICSID Case No ARB/​15/​29, Award, 22 October 2018 (Ian Binnie, Kanaga Dharmananda and Brigitte Stern) [364]–​[365]; Chevron Corporation and Texaco Petroleum Company v Ecuador PCA Case No 2009-​23, Second Partial Award on Track II, 30 August 2018 (VV Veeder, Vaughan Lowe and Horacio Grigera Naón); and Perenco Ecuador Ltd v Ecuador ICSID Case No ARB/​08/​6, Interim Decision on the Environmental Counterclaim, 11 August 2015 (Peter Tomka, Neil Kaplan and Christopher Thomas) [70]. 50 Caroline E Foster, ‘Respecting Regulatory Measures: Arbitral Method and Reasoning in the Philip Morris v Uruguay Tobacco Plain Packaging Case’ (2017) 26(3) Review of European, Comparative and International Environmental Law 287 (hereafter Foster, ‘Respecting Regulatory Measures’).

Systemic Challenges and Opportunities  317 approach to the non-​discrimination requirements in the exceptions chapeau effectively encouraged international environmental negotiations, for the protection of sea turtles in this case.51 In applying general exceptions such as Article XX(a) of the General Agreement on Tariffs and Trade (GATT) allowing for regulatory measures ‘necessary to protect public morals’ there is clearly scope for broader international law to be considered at the stage of identifying whether a WTO Member’s regulatory action pursues a legitimate objective. For instance if a WTO Member wishes to argue its case in reliance on international environmental and sustainable development law this may help to bring that broader body of international law into consideration. Illustrating this, Brazil’s Article XX(a) argument in Brazil—​Certain Measures Concerning Taxation and Charges revolved around the importance of digital television as a means of creating social inclusion and bridging the divide between regions with access to modern information and communications technology and those without. Consistent with Goal 8 of the Millennium Development Goals (MDGs) ‘Developing a global partnership for development’,52 Brazil highlighted how its measures would help ensure better literacy, democracy, social mobility, economic equality, growth and a better standard of living.53 The Panel was prepared to accept that Brazil’s measure favouring domestic production of digital television components pursued a legitimate objective. Australia argued successfully in Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products that the reference to the Framework Convention on Tobacco Control (FCTC) in its domestic legislation confirmed that Australia was pursuing legitimate public health objectives under the TBT Agreement.54 Contrastingly the Appellate Body has responded carefully to arguments that a regulating WTO Member’s policy objectives should be relevant when considering whether a measure is ‘essential’ to the acquisition or distribution of products in general or short supply under Article XX(j) of the GATT. As seen earlier in Chapter Five, in India —​Certain Measures Relating to Solar Cells and Solar Modules, India argued that the understanding of when a measure was ‘essential’ 51 United States—​Import Prohibition of Certain Shrimp and Shrimp Products, Report of the Appellate Body (12 October 1998) WT/​DS58/​AB/​R, DSR 1998:VII, 2755 [158] (hereafter US—​Shrimp, Appellate Body Report) [161]–​[176], [177]–​[184]. Chapter Six, section A 1. 52 Brazil—​Certain Measures Concerning Taxation and Charges, Panel Report (30 August 2017) WT/​ DS472/​R, WT/​DS497/​R [5.563]. Specifically this would be consistent with target 8F of the MDGs, to ‘[i]‌n corporation with the private sector make available the benefits of new technologies, especially information and communications’. 53 Ibid, [7.561]. 54 Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products, Reports of the Panels (28 June 2018) WT/​ DS435/​R, WT/​DS441/​R WT/​DS458/​R, WT/​DS467/​R [7.243] (hereafter Australia—​Tobacco Plain Packaging, Panel Reports). See similarly [7.2596], [7.2624] in relation to the claim against Australia under art 20 of the TRIPS Agreement. Chapter Five, section E 2 b).

318  Critical Questions should be informed by the reasons why short supply was problematic, in that case the importance as policy objectives of energy security and sustainable development, and ecologically sustainable growth while addressing the challenges of climate change.55 The Appellate Body considered that policy considerations like those invoked by India might inform the nature and extent of supply and demand, and thus be relevant in determining whether solar cells and modules were in ‘short supply’ in India, but a responding party still had to demonstrate that imported products were not available to meet demand and that the products at issue were in ‘short supply’.56 The COVID-​19 pandemic has put the pressure on the supply of goods including personal protective equipment especially, and this issue will remain under the spotlight. We can see that wider public international law may well be taken into account in identifying regulating States’ legitimate objectives. However, broader public international law considerations then tend to drop away as we turn from looking at the scope of legitimate objectives to the regulatory coherence tests governing relationships between regulatory measures and their objectives. Here we find that generic tests foregrounding States’ national public policy interests may tend to be applied in ways that draw on broader public international law only where almost unavoidably relevant, and only indirectly as support for assertions that could probably stand alone or as evidentiary rather than interpretative support. We might consider first those situations where the nexus takes the form of a necessity test, and secondly situations in regard to allegedly discriminatory measures where a rational relationship test may apply. Among the classical cases in which the concept of necessity has been applied are the proceedings in Australia—​Plain Packaging.57 The contours of the WTO necessity formula have been outlined earlier.58 In this case the Panel found that the recognition of the comprehensive nature of effective tobacco control in the FCTC and guidelines reinforced Australia’s pivotal argument that its tobacco policies needed to be evaluated as a suite of measures operating together to protect public health rather than as a series of alternative policy options.59 However, the bulk of Australia’s case was based on complex factual evidence. Indeed in the context of the claim against Australia under the Agreement on Trade-​Related Aspects of Intellectual Property Rights (TRIPS) for unjustifiable encumbrance of intellectual property rights the Appellate Body understood that the FCTC and Guidelines 55 India—​Certain Measures Relating to Solar Cells and Solar Modules, Report of the Appellate Body (16 September 2016) WT/​DS456/​AB/​R, DSR 2016:IV, 1827, [5.78]. 56 Ibid, [5.71], [5.78]–​[5.79]. 57 Australia—​ Tobacco Plain Packaging, Panel Reports (n 54); Australia—​Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products, Reports of the Appellate Body (9 June 2020) WT/​DS435/​AB/​R, WT/​DS441/​AB/​R (hereafter Australia—​Tobacco Plain Packaging, Appellate Body Reports). 58 Chapter Five. 59 Australia—​Tobacco Plain Packaging, Panel Reports (n 54) [7.1728]–​[7.1732].

Systemic Challenges and Opportunities  319 were regarded by the Panel as evidence rather than interpretive tools, thus insulating Australia against Honduras’ claim on appeal that the Panel had given undue weight to these documents.60 Arguably the decision in Philip Morris v Uruguay, for all its strengths, can be analysed along parallel lines.61 Similarly in United States—​ Measures Affecting the Production and Sale of Clove Cigarettes the Panel relied on the draft World Health Organization (WHO) Guidelines as ‘evidence’ for the proposition that banning clove and other flavoured cigarettes could contribute to reducing youth smoking,62 also recalling that the guidelines recommended prohibiting the sale of flavoured cigarettes in finding that Indonesia had failed to demonstrate the availability of less trade-​restrictive alternatives.63 In the application of the regulatory standards that are emerging from international practice, domestic law thus remains distinctly insulated from international law beyond that of the subfield in question. Turning to the context of discrimination and the test that has emerged requiring rational relationships between measures and their objectives, we can see how it is possible inadvertently to adopt regulatory standards and tests which may tend to exclude incorporation of broader international legal considerations. There has been particular concern about rational relationship testing because of the way in which it has appeared to require a rational relationship between a measure and one main objective, and the test has had to be broadened in order to accommodate situations where a regulating WTO Member is attempting to address more than one, potentially competing, objective.64 Tensions ran high around the Appellate Body’s report in the European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products case, where the EC was seeking to protect indigenous peoples’ interests while regulating market access for seal products in light of the need for more humane treatment of seals. In this case the potential centrality of international human rights law relating to indigenous peoples was arguably marginalised by the rational relationship test. Reference to the international instruments concerning indigenous peoples is absent from the Appellate Body’s analysis of discrimination under the GATT Article XX chapeau.65 Contrastingly

60 Ibid, [7.2595]–​[7.2596]; Australia—​ Tobacco Plain Packaging, Appellate Body Reports (n 57) [6.700]–​[6.707]. 61 Foster, ‘Respecting Regulatory Measures’ (n 50). 62 United States—​Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Panel (2 September 2011) WT/​DS406/​R, DSR 2012:XI, 5865, [7.414]–​[7.416]. 63 Ibid, [7.427]; c.f. Thailand—​Restrictions on the Importation of and Internal Taxes on Cigarettes, Report of the Panel (7 November 1990) DS10/​R-​37S/​200, [81], where the Panel found there to be reasonably available alternatives to the Thai ban on US cigarette imports, which was accordingly not ‘necessary’ under art XX (b)of the GATT. 64 Chapter Six, section A 4. 65 European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products, Reports of the Appellate Body (22 May 2014) WT/​DS400/​AB/​R, WT/​DS401/​AB/​R, DSR 2014:I, 7, [5.337] (hereafter EC—​Seal Products, Appellate Body Reports) [5.291]–​[5.339]. Chapter Six, section A 4 b).

320  Critical Questions the Panel referred in its analysis of discrimination under Article 2.1 of the TBT Agreement to the United Nations Declaration on the Rights of Indigenous Peoples and International Labour Organisation Convention 169. These instruments had been invoked by the European Union to establish international recognition of the importance of Inuit or indigenous communities’ interests and were treated as factual evidence.66

3.  Developments in the status of private entities in international law A further crucial aspect of the potential futures opened up by the adoption of regulatory standards relates to the interplay between public and private interests and power at the global level. If private activity is to remain in appropriate harness to and with States’ collective regulatory authority it is vital to consider with care the international legal status of private actors, especially non-​natural persons.67 Guarantees of market freedom in international trade law have been viewed as a second line of constitutional entrenchment protecting private interests, and investment treaty law is perceived as contributing likewise to the development of an international economic constitution.68 There is a possibility that, through unintentional bootstrapping, investors and perhaps in time incorporated entities and certain private parties more generally, come to be considered the holders of substantive rights under public international law, rather than simply procedural rights. A comparative public law approach and analogies with judicial review in the field of investment treaty law, especially, lead practice down avenues of development that may make this a reality, as discussed in Chapter Eight. Attention should be devoted to evaluating the desirability of such developments and the terms on which they take place.

66 European Communities—​Measures Prohibiting the Importation and Marketing of Seal Products, Reports of the Panel (25 November 2013) WT/​DS400/​R, WT/​DS401/​R, DSR 2014:II, 365, [7.292]–​ [7.298] (hereafter EC—​Seal Products, Panel Reports); see previously European Communities—​ Measures Affecting the Approval and Marketing of Biotech Products, Reports of the Panel (29 September 2006) WT/​DS291/​R, WT/​DS292/​R, WT/​DS293/​R, [7.92]–​[7.95] where the Panel envisaged consulting the Convention on Biological Diversity and the Cartagena Protocol on Biosafety as you would a dictionary in order to cast light on the ordinary meaning of terms in the WTO Agreement on Sanitary and Phytosanitary Measures. 67 For a contribution from within global administrative law see Paul Mertenskötter and Richard B Stewart, ‘Remote Control: TPP’s Administrative Law Requirements as Megaregulation’ in Benedict Kingsbury and others (eds), Megaregulation Contested: Global Economic Ordering After TPP (OUP 2019) 384 observing that implementation of the tenets of global administrative law may indeed empower private actors vis-​à-​vis governments. 68 Thomas Kleinlein, ‘Alfred Verdross as a Founding Father of International Constitutionalism’ (2012) 4(2) Goettingen Journal of International Law 385, 409, 409.

Systemic Challenges and Opportunities  321 In contrast with investment treaty arbitration, explicit consideration of private interests in the content of international law is not a distinctive feature of the reasoning in the environmental cases dealt with by the ICJ and in inter-​State arbitration.69 Yet private interests do stand to be affected in different ways in most if not all of the fields dealt with in these disputes. The adoption of due diligence standards clearly has implications for transnational business, as well as for the private interests of individuals and groups who may experience harm when business is insufficiently regulated.70 Indeed, one criticism that might be made of the due diligence jurisprudence is that the resulting vision of international law constrains private activity insufficiently.71 Contrastingly individuals and companies will benefit from rulings on rights of passage, access to resources, and the permitted use of watercourses, yet their interests are seldom acknowledged. We see in the Dispute Concerning Filleting within the Gulf of St Lawrence (‘La Bretagne’) (Canada v France) one of the rare instances where reference is made to private interests. The Tribunal expressly referred to the interests of the French nationals engaged in fishing with trawlers registered in Saint Pierre and Miquelon as beneficiaries of the agreement between France and Canada,72 and the interests of Canadian fishermen settled on the Gulf of Saint Lawrence who constituted coastal fishing communities as referred to in Article 61 of the United Nations Convention on the Law of the Sea (UNCLOS).73 In WTO dispute settlement private actors are not directly or formally represented. However, as we progress through the next decades there may come a time when a crossroads decision must be made about whether private sector representatives might be given standing to initiate and take forward proceedings in the multilateral trade context.74 Already, private lawyers are frequently engaged 69 See broadly Kate Parlett, The Individual in the International Legal System: Continuity and Change (CUP 2011). 70 The Environment and Human Rights (State Obligations in Relation to the Environment in the Context of the Protection and Guarantee of the Rights to Life and Personal Integrity: Interpretation and Scope of Articles 4(1) and 5(1) in relation to Articles 1(1) and 2 of the American Convention on Human Rights), Advisory Opinion OC-​23/​17, Inter-​American Court of Human Rights Series A No 23 (15 November 2017). 71 Caroline E Foster, ‘Diminished Ambitions? Public International Legal Authority in the Transnational Economic Era’ (2014) 17(2) J Intl Econ L 355. 72 La Bretagne (Award) (n 33) 613, 629. See also Dissenting Opinion of Donat Pharand, 666, emphasising that the real beneficiaries of the agreement as an arrangement between neighbours were the inhabitants of Saint Pierre and Miquelon. 73 Ibid, 614. See also Dissenting Opinion of Donat Pharand, 639, 665–​666. The Tribunal objected however to a Canadian argument that Canada felt the need to take multiple measures to help protect the fish stocks in its exclusive fisheries zone because of the considerable pressure placed by Canadian fishing companies and representatives on the Canadian fisheries authorities responsible for setting the total allowable catch and the concern that this jeopardised the system’s stability. 636. 74 For discussion, Marco Bronckers, ‘Private Appeals to WTO Law: An Update’ (2008) 42(2) JWT 245; Trachtman, The Economic Structure of International Law (n 26) 248–​271, including at 250, 251, 259, 260 and 261.

322  Critical Questions by disputing parties, and the private sector will be heavily involved in discussions with governments about the relevant economic and legal issues, both day to day and in the context of pending disputes. With initiatives on topics such as private sector standard-​setting moving forward, private actors are becoming more visible in intergovernmental trade relationships. The WTO precinct presently remains the preserve of governments, but this could change and our appreciation of the WTO regulatory standards must take that into account. The treatment of private actors under the regulatory standards and tests that are being developed through international adjudication undoubtedly has to be considered in the broad context of the current global transformation in their standing and effectiveness in international legal relations.75 Part of the backdrop to these developments has been formed by the intense debate over emergence of a new lex mercatoria for transnational business, said to incorporate autonomously functioning contractual principles as well as privatised forms of dispute settlement.76 Further, as transnational legal ordering comes better to be understood as a process of interaction between and among public and private actors, it is clear that neither power nor even authority to generate public regulation on the international level necessarily lies exclusively in public hands. Tensions naturally arise between transnational problem solving and the demand to retain local and national autonomy in the form of sovereignty and subsidiarity.77 The systemic challenges faced in the context of the development of regulatory standards and tests are significant. As international law gradually puts together an appropriate package of regulatory standards and finds a more settled modus operandi vis-​a-​vis domestic legal systems it is necessary to begin to come to grips with the deeper and wider effects and changes that this may induce. As mentioned it is perhaps the due diligence standard that most insufficiently promotes the control of private activities. Such a standard may also promote reliance on industrial standards over which there is only partial governmental influence. At the same time the standard’s subjectivity is thought troubling also in relation to concerns it could be employed to bolster government overreach, for instance potentially legitimising free speech restrictions in the digital realm.78

75 A Claire Cutler, ‘Critical Reflections on the Westphalian Assumptions of International Law and Organization: A Crisis of Legitimacy’ (2001) 27(2) Rev.Int’l Stud. 133. 76 Alec Stone Sweet, ‘The New Lex Mercatoria and Transnational Governance’ (2006) 13(5) J.E.P.P. 627. 77 Terence C Halliday and Gregory Shaffer, Transnational Legal Orders (CUP 2015) 33, 40, 57. See previously P Jessup, Transnational Law (Yale University Press 1956). On the legitimate authority on the part of transnational legal orders and private rules and regimes, Nicole Roughan, ‘From Authority to Authorities: Bridging the Social/​Normative Divide’ in Roger Cotterrell and Maksymilian Del Mar (eds), Authority in Transnational Legal Theory: Theorising Across Disciplines (Edward Elgar Publishing 2016) 280. 78 Professor Anne Peters, ‘Keynote Address: The Rise of Due Diligence as a Structural Change of the International Legal Order’ (Cambridge International Law Conference Webinar Series, 30 April 2020).

Systemic Challenges and Opportunities  323

C.  Opportunities for Reconsideration Debate over the emerging global regulatory standards and the tests used to apply them needs to embrace a range of matters where there may be scope for reconsideration of currently contemplated approaches. Three points are addressed in turn below. The first is the part to be played by proportionality analysis, as discussed in Chapter Eight in relation to investment treaty arbitration.79 There is then the matter of whether the adjudication of regulatory disputes in international courts and tribunals should be referred to as ‘judicial review’ or merely as ‘adjudication’. Finally it may be helpful to make a few remarks on the concept of international legal deference to States’ regulatory decision-​making.

1.  Employing due regard standards in place of proportionality tests Proportionality tests raise issues in respect of all of the systemic challenges canvassed above. Their potentially intrusive character accentuates the revision of sovereignty generated by the advent of regulatory standards more generally. Their capacity to stand in place of criteria-​based value judgements means they are more likely than other standards at least partly to supplant international legal principles such as sustainable development or the precautionary principle.80 Their application is susceptible to modes in which the status of private interests is misapprehended.81 Further, their adoption as a global regulatory standard would strengthen the idea discussed later in this chapter that the adjudication of regulatory disputes constitutes a form of judicial review.82 Among the opportunities arising for reconsideration of current pathways forward in relation to the particular problem of proportionality analysis are those discussed in Chapter Eight.83 In addition, there is the option of employing due regard standards in place of proportionality tests.

a) Proportionality The most demanding regulatory test seen in the disputes, not yet espoused in international adjudicatory practice in general, is that of proportionality stricto sensu, referred to in this book alternatively simply as proportionality. As previously mentioned, the most significant attribute of proportionality is that it may elevate decision-​making concerning the relative priorities of different values and policies from the domestic to the international legal plane. This means that from a substantive perspective there are certain respects in which proportionality might

79

Chapter Eight, sections C, D. Chapter Ten, section B 2. 81 Chapter Eight, section C; Chapter Ten, section B 3. 82 Chapter Ten, section C 2 a). 83 Chapter Eight, section D. 80

324  Critical Questions possibly enable international law better to serve its subjects’ needs over time. In a world where collective interests overlap in so many different spheres, governance reasons referred to in relation to international law’s claim to legitimate authority may further point to the adoption and application, through appropriate processes, of proportionality standards, possibly together with a practical application of the principles of subsidiarity.84 More importantly in concrete terms, bringing a proportionality test into regulatory disputes could also render international law more effective and more credible as a deterrent to inappropriate conduct and as a protection for appropriate exercises of regulatory capacity.85 This is because proportionality testing has the advantage, compared with standards requiring only due regard, of signalling ahead of time that the merits of a regulatory decision will be subject to scrutiny at the international level, all other relevant conditions being met. Proportionality testing or other forms of balancing have been thought potentially desirable in both the trade and investment contexts,86 based in part on the assumption that international scrutiny could lead to a more frequent approval, endorsement and reinforcement of domestic regulatory decisions. However, on the flip side it is clear that proportionality tests do not accommodate domestic authority in the same way as the other regulatory coherence tests seen in the studies in earlier chapters of this book. States’ regulatory value judgements may fail to meet international law proportionality tests and be ruled non-​compliant with their international obligations. The fact that proportionality analysis opens the door for the making of such adjudicatory decisions as a matter of international law, potentially on occasion taking regulatory governance out of the hands of domestic governments, is the greatest impediment to international courts’ and tribunals’ adoption of proportionality as a regulatory standard. Proportionality is in effect a constitutionalising concept. Indeed the potential role of proportionality as a global constitutional principle is openly declared by its advocates.87 As proponents observe, the principle’s application would change the character of the international legal order in a pluralised world, ‘in a deep way’.88 Proportionality invites ultimate judgements about competing values to be made

84 Chapter Two, section D 2. On subsidiarity, Chapter Two, section C, section D 1; Chapter Ten, section B 3, section C 1 a), section C 2 b). 85 Chapter Eight. 86 Andrew Lang, World Trade Law after Neoliberalism: Reimagining the Global Economic Order (OUP 2011) 321 (hereafter Lang, World Trade Law after Neoliberalism); Gus Van Harten, Sovereign Choices and Sovereign Constraints: Judicial Restraint in Investment Treaty Arbitration (OUP 2013) 161. 87 E.g. Alec Stone Sweet and Jud Mathews, ‘Proportionality Balancing and Global Constitutionalism’ (2008) 47(1) Colum.J.Transnat’l L. 72, 112–​159 (hereafter Stone Sweet and Mathews, ‘Proportionality Balancing and Global Constitutionalism’). 88 Anne Peters, ‘Proportionality as a Global Constitutional Principle’ (2016) Max Planck Institute for Comparative Public Law & International Law (MPIL) Research Paper No 2016-​10 1–​2, 13 accessed 14 September 2020. See also Anne Peters, ‘Proportionality as a Global Constitutional Principle’ in Anthony F Lang Jr and Antje Wiener (eds), Handbook on Global Constitutionalism (Edward Elgar 2017) 248.

Systemic Challenges and Opportunities  325 through international legal institutions, including international courts and tribunals. It is for this reason that proportionality holds the potential to integrate domestic and international legal orders more profoundly than other standards. Proportionality differs from some other potential ‘interface norms’ potentially serving as a mechanism for the management of the relationship between domestic and international legal orders,89 because it involves shifting the locus of decision-​making rather than imposing specified values. It is not that proportionality itself injects values into domestic law, but that it enables this to be done by international legal actors as a default practice in case of otherwise unresolvable dispute. Proportionality-​based reasoning thus invites the external imposition of value judgements in the course of third-​party international dispute settlement. Indeed, importantly, depending on the circumstances of the case, proportionality may require an international court or tribunal to engage in a value judgement concerning the respective importance of the interests in question. Clearly proportionality brings also a long-​term enhancement of the international judicial role, as international courts and tribunals may be called upon to supervise the implementation of the proportionality criterion in case of dispute.90 Difficulties associated with the normative orientation of international adjudicatory institutions, both actual and perceived, then arise. Consistent with its character as a constitutionalising concept, the prospect of proportionality testing renders more acute the systemic challenges canvassed earlier in this chapter. As to the sovereignty challenge, and reconceptualisation of sovereign regulatory freedom as conferred power, it is no coincidence that proportionality testing is well established in the context of conferred power. This is seen not only in domestic law but also in European Union (EU) law where the principle of proportionality operates inter alia to restrict the competence of the EU consistent with the principles of conferral as reflected in Article 5 of the Treaty on European Union.91 In the EU setting the application of proportionality is conditioned by the principle of subsidiarity, providing a predetermined constitutional context for deliberation over the operation of proportionality.92 The principle of subsidiarity promotes decision-​making at the level of political hierarchy corresponding to the nature of the concern in question and the capacity to address that concern. Autonomy at the local level is considered important, together with 89 Nico Krisch, Beyond Constitutionalism: The Pluralist Structure of Postnational Law (OUP 2010) (hereafter Krisch, Beyond Constitutionalism). 90 Başak Çalı, ‘International Judicial Review’ in Anthony F Lang and Antje Wiener (eds), Handbook on Global Constitutionalism (Edward Elgar 2017) 291 (hereafter Çalı, ‘International Judicial Review’); Stone Sweet and Mathews, ‘Proportionality Balancing and Global Constitutionalism’ (n 87). 91 Consolidated Version of the Treaty on European Union [2012] OJ C326/​01, art 5(3). 92 Mattias Kumm, ‘The Cosmopolitan Turn in Constitutionalism: On the Relationship between Constitutionalism in and beyond the State’ in Jeffrey L Dunoff and Joel P Trachtman (eds), Ruling the World? Constitutionalism, International Law, and Global Governance (CUP 2009) 258, 291–​295 (hereafter Kumm, ‘The Cosmopolitan Turn).

326  Critical Questions opportunities for meaningful participation by affected persons and protection of local identity. Good reason must be present to justify allowing a decision to be taken at a higher level. Indeed, the idea of subsidiarity holds considerable promise as a concept that could be adopted in international law as a means for achieving relations consistent with the relative authority of domestic and international law. However, sovereignty would be significantly affected, as with proportionality, as this would involve increased responsibility at the international level for determinations as to whether, according to precepts of subsidiarity, decision-​making should take place at the domestic or the international level. Proportionality testing also potentially feeds the fragmentation of international law. If the concept of proportionality is relied on as a pivot for determination of whether an action or activity should continue this may eclipse the relevance of substantive, subject-​specific principles that could otherwise be determinative. For instance, as discussed earlier where principles of sustainable development or the precautionary principle might have operated directly on a legal dispute, such principles or rules could be relegated to the back seat in the broader context of a proportionality analysis.93 Much would depend on how proportionality was deployed. Advocates for applying proportionality in investment treaty arbitration suggest that the concept could be used in ways alleviating the concern that investment law is too isolated from legal regimes protecting other public interests.94 However, unless both disputants and tribunals take a proactive approach, proportionality could tend to eclipse the content of principles and rules from flanking international legal fields. Proportionality testing is perhaps most troubling vis-​à-​vis the problem of the status of the private actor in investment treaty law. As discussed in Chapter Eight, despite the physical presence of the investor before a tribunal and the harm done to an investment the competing interests in an investment dispute are most fundamentally those of home and host States and their populations. Chapter Eight accordingly suggested that, if applied, proportionality testing should focus on the relationship between a measure and the host State’s regulatory purpose, and that it look beyond an investor’s individual burden and focus on the harm done to the protected right. Chapter Eight also advocated manifest disproportionality testing on the basis this would be more accommodating of the authority of host State legal systems than affirmative proportionality testing, and suggested that indicative, manifest disproportionality testing only would be the preferable approach. What these proposals have in common is their recognition that the rights advanced in an investment treaty arbitration are the rights of States. They help alleviate the 93 Chapter Ten, section B 2. See also Foster, ‘Adjudication, Arbitration and the Turn to Public Law “Standards of Review” ’ (n 27). 94 Benedict Kingsbury and Stephan W Schill, ‘Public Law Concepts to Balance Investors’ Rights with State Regulatory Actions in the Public Interest—​The Concept of Proportionality’ in Stephan W Schill (ed), International Investment Law and Comparative Public Law (OUP 2010) 75, 79.

Systemic Challenges and Opportunities  327 confusion between domestic administrative law and international adjudication associated with the idea that investment treaties grant private companies or investors substantive international legal rights in addition to the procedural right to initiate arbitration against host States for breach of treaty guarantees.

b) Due regard A regulatory standard requiring regulating States to exercise due regard for the rights of others can do a good part of the work that is sought from proportionality testing, emphasising the growing importance of other-​regardingness in international law95 and taking the pressure off the debate around proportionality. Due regard is potentially of broad application in international law, having featured, significantly perhaps, in understandings of the international law abuse of rights doctrine, where it stands in contrast with aspects of the doctrine relying on concepts of misuse of power. As a discipline on the abuse of discretion the doctrine is said to require not only good faith, and the reasonable, sincere and honest exercise of rights in conformity with the spirit of the law, but also the exercise of rights with due regard to the interests of others, and moderation as appropriate.96 The need for due regard has also been read into international law in connection with an international duty of co-​operation where States have committed themselves to abide by a regime applying ‘international law, equity and the principle of good neighbourly relations in order to achieve a fair and just result by taking into account all relevant circumstances’.97 Much of what is sought from proportionality-​based reasoning might potentially be provided through the adoption of a regulatory test specifically requiring States to have due regard to the legal rights and interests of others. Frequently the attraction of proportionality tests lies in the fact that they provide a structured vehicle both for justification of public authorities’ decision-​making98 and for arbitral reasoning.99 As regards arbitral reasoning the hope is that this may be less susceptible to the influence of subjective considerations, avoiding reliance on notions of 95 George Nolte and Eyal Benvenisti (eds), Community Interests Across International Law (OUP 2018); Marise Cremona and Joanne Scott, ‘Introduction’ in Marise Cremona and Joanne Scott (eds), EU Law Beyond EU Borders: The Extraterritorial Reach of EU Law (OUP 2019) 1, 17–​20; Joanne Scott, ‘The Global Reach of EU Law’ in Marise Cremona and Joanne Scott (eds), EU Law Beyond EU Borders: The Extraterritorial Reach of EU Law (OUP 2019) 21, 59–​61. 96 Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Stevens & Sons 1953) 133–​136. 97 Arbitration Agreement between the Government of the Republic of Croatia and the Government of the Republic of Slovenia (signed 4 November 2009) art 4; Arbitration Between the Republic of Croatia and the Republic of Slovenia (Final Award) (29 June 2007) PCA Case No 2012-​04 [1122], [1134], determining the special regime for the Junction Area referred to in the arbitration agreement, 347. 98 Mattias Kumm, ‘The Idea of Socratic Contestation and the Right to Justification: The Point of Rights-​Based Proportionality Review’ (2010) 4(2) Law & Ethics of Human Rights 140. 99 Alec Stone Sweet and Florian Grisel, The Evolution of International Arbitration: Judicialization, Governance, Legitimacy (OUP 2017) 245 (hereafter Stone Sweet and Grisel, The Evolution of International Arbitration).

328  Critical Questions reasonableness, which it is believed may risk ‘impressionistic decision-​making’.100 Yet it is in regard to ensuring the justifiability of public authorities’ decision-​ making, rather than arbitral and judicial decision-​making, that the greatest benefit of proportionality analysis proper may lie. The carrying out of advance analyses is what is needed, and is exactly what will be mandated by due regard requirements. This is likely to involve the type of internal balancing exercise envisaged in the due regard jurisprudence discussed in Chapter Four. The concept of due regard is obviously most apparent on the face of the law in UNCLOS, and was elaborated in terms of its application in one particular set of circumstances in the Chagos Marine Protected Area Arbitration. The Chagos Marine Protected Area Tribunal asked whether, in British decision-​making processes, consideration had been given to ‘the nature of the rights held by Mauritius, their importance, the extent of the anticipated impairment, the nature and importance of the activities contemplated by the United Kingdom, and the availability of alternative approaches’.101 This particular due regard formula amounts to a call for a domestic decision-​maker to adopt a process employing elements close to those seen in a traditional proportionality analysis. The difference is that when it applies a due regard test an international court or tribunal will focus on whether this has been done rather than on evaluating itself the proportionality of an alleged infringement of international legal rights. A State is to conduct an appropriate procedure at the domestic level,102 sustaining the plurality of domestic and international law while at the same time rendering domestic law more inclusive of outsiders.103 ‘Due regard’ is employed in several provisions of UNCLOS to capture the conduct to which States party commit in their relations with one another, including both on the high seas104 and in the Exclusive Economic Zone 100 Caroline Henckels, Proportionality and Deference in Investor-​ State Arbitration: Balancing Investment Protection and Regulatory Autonomy (CUP 2015) 117, 119 (hereafter Henckels, Proportionality and Deference). 101 Chagos Marine Protected Area Arbitration (Republic of Mauritius v United Kingdom) (Award) (2015) 162 ILR [519]; Chapter Four, section B 1 a). 102 Henckels, Proportionality and Deference (n 100) 162. 103 Michael Ioannidis, ‘Beyond the Standard of Review: Deference Criteria in WTO Law and the Case for a Procedural Approach’ in Lukasz Gruszczynski and Wouter Werner (eds), Deference in International Courts and Tribunals: Standard of Review and Margin of Appreciation (OUP 2014) 91, 108–​111; see also Ingo Venzke, How Interpretation Makes International Law: On Semantic Change and Normative Twists (OUP 2012) 194. 104 United Nations Convention on the Law of the Sea (opened for signature 10 December 1982, entered into force 16 November 1994) 1833 UNTS 307, art 87(2) (hereafter UNCLOS)). Art 87(2) states that: These freedoms shall be exercised by all States with due regard for the interests of other States in their exercise of the freedom of the high seas, and also with due regard for the rights under this Convention with respect to activities in the Area. See also Intergovernmental Conference on an International Legally Binding Instrument under the United Nations Convention on the Law of the Sea on the Conservation and Sustainable Use of Marine Biological Diversity of Areas Beyond National Jurisdiction, Fourth Session, New York, 23 March–​3 April 2020, ‘Revised draft text of an agreement under the United Nations Convention on the Law of the

Systemic Challenges and Opportunities  329 (EEZ).105 The requirements here for States to give due regard to one another’s interests in the ocean and its resources denote the balance of rights embodied in the Convention as a whole. The language is the product of careful negotiation, and in contrast with alternative language that dropped away during the negotiating process, ‘due regard’ recognises States’ contemporary interdependence in the oceans space, adjusting prior conceptual understandings about the appropriate limits on their regulatory and operational freedom at sea.106 On one view, the due regard concept embodies a general limit on sovereign conduct in the modern legal order for the seas. The concept marks what may be a final step in a long transition away from the concept of laissez faire on the high seas that characterised Grotius’ mare liberum.107 According to this narrative, the first step was a realisation in legal theory that in a system characterised by such liberty there is scope for conduct that causes injury but does not constitute an actionable wrong, provided such action does not cross the threshold of unreasonableness.108 The second step was a shift from reasonableness to ‘due regard’. This involved UNCLOS negotiators dropping the standard of ‘reasonable regard’ applying on the high seas as found in Article 2 of the Geneva Convention on the High Seas 1958,109 its interim replacement during the UNCLOS negotiations on the regime for the high seas with a concept of ‘due consideration’, followed by the eventual harmonisation of the high seas regime language with the ‘due regard’ language on which coastal and other States had meantime settled in the provisions of UNCLOS relating to the EEZ. This outcome was facilitated by the ICJ decision in Fisheries Jurisdiction (United Kingdom v Iceland) (Federal Republic of Germany v Iceland) endorsing the concept of due regard as a proper reflection of what should

Sea on the conservation and sustainable use of marine biological diversity of areas beyond national jurisdiction’ (18 November 2019) UN Doc A/​CONF.232/​2020/​3.

105

UNCLOS (n 104) arts 56(2), 58(3). Art 56(2) reads: In exercising its rights and performing its duties under this Convention in the exclusive economic zone, the coastal State shall have due regard to the rights and duties of other States and shall act in a manner compatible with the provisions of this Convention. Art 58(3) states that: In exercising their rights and performing their duties under this Convention in the exclusive economic zone, States shall have due regard to the rights and duties of the coastal State and shall comply with the laws and regulations adopted by the coastal State in accordance with the provisions of this Convention and other rules of international law in so far as they are not incompatible with this Part. 106 Julia Gaunce, ‘On the Interpretation of the General Duty of “Due Regard” ’ (2018) 32(1) Ocean Yearbook Online 27 (hereafter Gaunce, ‘On the Interpretation’). 107 Ibid, 38, 46, citing Robert Feenstra (ed), Hugo Grotius Mare Liberum 1609–​2009 (Brill 2009) 2, 13, 16, 19–​21. 108 Ibid, 38–​39, citing Joseph William Singer, ‘The Legal Rights Debate in Analytical Jurisprudence from Bentham to Hohfeld’ (1982) 1982(6) Wis.L.Rev. 975, 1032, 1050. 109 Convention on the High Seas 1958 (opened for signature 29 April 1958, entered into force on 30 September 1962) 450 UNTS 11.

330  Critical Questions be required by ‘reasonable regard’ in contemporary, interdependent times, with the intensification of fishing and the prospect of seabed mineral resource exploitation increasingly becoming a reality.110 However, reference to due regard concepts is also found in further international legal subfields on which this book is focused. Due regard type requirements potentially substitute in many ways for potential proportionality analysis within WTO law. It is not coincidental that it has been after underlining the absence and inappropriateness of pure proportionality testing in the WTO that the EU has on occasion discussed the potential significance of WTO Members’ internal analyses of affected interests. The EU has further suggested in the WTO context that it would be a strong indication that a regulatory measure falls within a WTO Member’s permitted regulatory space if a WTO Member bases the regulatory measure on an analysis that takes into account the measure’s cost for trading partners.111 It is notable that in United States—​ Standards for Reformulated and Conventional Gasoline the failure to consider the costs for foreign refiners of imposing statutory baselines was one of the factors establishing that the US Clean Air Act involved unjustifiable discrimination and a disguised restriction on international trade.112 The importance of considering the different conditions prevailing in different jurisdictions and the failure to attempt to negotiate an arrangement catering to such conditions have also been pivotal in considering whether trade measures are applied in a way that constitutes arbitrary or unjustifiable discrimination.113 Scholars continue to ask nonetheless whether panel and WTO Appellate Body jurisprudence have done enough to render domestic regulatory processes sufficiently other-​regarding.114 This sits against a background of studies observing the trend towards a broader proceduralisation of legal obligations in international trade law with a focus on transparency, objectivity and procedural fairness,115 and identifying the

110 Gaunce, ‘On the Interpretation’ (n 106); Fisheries Jurisdiction (United Kingdom v Iceland) (Merits) [1974] ICJ Rep 3, [72]; Fisheries Jurisdiction (Federal Republic of Germany v Iceland) (Merits) [1974] ICJ Rep 175, [64]. The Court envisaged due regard not only to the rights of other States but also to the needs of conservation for the benefit of all. Chapter Four, section B 1. 111 United States—​Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, Recourse to Article 21.5 of the DSU by Mexico, Report of the Appellate Body (20 November 2015) WT/​DS381/​AB/​RW, DSR 2015:X, 5133, Addendum, Annex C-​2, Executive Summary of the European Union’s Third Participant’s Submission, [4]‌, [7] (hereafter US—​Tuna II, Recourse to Article 21.5 of the DSU by Mexico, Appellate Body Report). 112 United States—​Standards for Reformulated and Conventional Gasoline, Report of the Appellate Body (29 April 1996) WT/​DS2/​AB/​R, WT/​DS4/​AB/​R, DSR 1996:I, 3, 28–​29 (hereafter United States—​ Gasoline, Appellate Body Report). 113 Ibid, 27–​28; US—​Shrimp, Appellate Body Report (n 51) [163]–​ [176]; EC—​Seal Products, Appellate Body Reports (n 65) [5.337]. 114 Andrew Lang, ‘The Judicial Sensibility of the WTO Appellate Body’ (2016) 27(4) EJIL 1095, 1104. Panagiotis Delimatsis, International Trade in Services and Domestic Regulations. Necessity, Transparency and Regulatory Diversity (OUP 2007) 160–​162. 115 Lang, World Trade Law after Neoliberalism (n 86) 320–​353.

Systemic Challenges and Opportunities  331 potential of WTO law as an instrument demanding the active consideration of others’ economic interests.116 Observance of due process is one of the vehicles through which due regard may be achieved. In the WTO, good governance specifications incorporating due process requirements are particularly strong under the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-​Dumping Agreement),117 and in relation to the Agreement on Safeguards,118 with Article VI of the General Agreement on Trade in Services (GATS) also requiring all measures of general application affecting trade in services to be administered in a reasonable, objective and impartial manner with review of administrative decisions on request.119 More broadly, since early days WTO jurisprudence under the GATT has identified the importance of transparency in domestic decision-​making and the giving of reasons for decisions made.120 These have been understood as requirements for basic fairness and due process expressly requiring the taking into account of both domestic and foreign stakeholder interests.121 Notably, in the US—​ Shrimp case the Appellate Body found that the US turtle protection measures had failed to provide importers with a formal opportunity to be heard, or respond to arguments, and had failed to provide for a formal, reasoned decision with the opportunity for review, concluding on this basis that US turtle protection measures were being applied in a manner amounting to arbitrary discrimination between countries where the same conditions prevailed.122 The distinction between the due regard accorded by one State to the interests of other States and the due process accorded by a State to private individuals is an important one, even if at times they may appear to meld.123 In the trade and investment context due regard will naturally include taking into consideration, but ought not focus exclusively on, the effects of proposed administrative decisions and activity

116 A von Bogdandy, ‘Legitimacy of International Economic Governance: Interpretive Approaches to WTO Law and the Prospect of its Proceduralisation’ in S Griller (ed), International Economic Governance and Non-​economic Concerns (Springer-​Verlag 2003) 103, 121. 117 Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-​Dumping Agreement) (1 January 1980) BISD 26S/​171, arts 6.1, 6.9, 12.1, 12.2. 118 The Appellate Body has held that art 11 of the DSU requires a panel to assess whether national authorities have considered all relevant factors during their decision-​making and explained how the facts support their decisions. Argentina—​Safeguard Measures on Imports of Footwear, Report of the Appellate Body (14 December 1999) WT/​DS121/​AB/​R, DSR 2000:I, 515, [121]. 119 Delimatsis, International Trade (n 114) 95–​117. 120 Richard B Stewart and Michelle Ratton Sanchez Badin, ‘The World Trade Organization and Global Administrative Law’ in Christian Joerges and Ernst-​Ulrich Petersmann (eds), Constitutionalism, Multilevel Trade Governance and International Economic Law (Hart Publishing 2011) 457, 475. 121 Stefan Zleptnig, ‘The Standard of Review in WTO Law: An Analysis of Law, Legitimacy and the Distribution of Legal and Political Authority’ (2002) 6 European Integration online Papers (EIop) 15 accessed 14 September 2020. 122 Appellate Body Report in US—​Shrimp, Appellate Body Report (n 51). 123 RWE Innogy GmbH and RWE Innogy Aersa S.A.U. v Spain ICSID Case No ARB/​14/​34, Decision on Jurisdiction, Liability and Certain Issues of Quantum, 30 December 2019 (Anna Joubin-​Bret, Judd L Kessler and Samuel Wordsworth) [590]–​[597].

332  Critical Questions on trade and investors together with other relevant considerations. This involves an emphasis on due process in domestic administration, including providing the opportunity for those who will be affected by a decision to be heard. Transparency in government decision-​making will assist, for instance as seen in US ‘notice and comment’ rule-​making procedures. Yet new treaty provisions produced through intergovernmental negotiation may not specify explicitly that States must consider the impact of their regulatory actions on the economic interests of treaty partners’ populations, traders and investors. This is the case in the Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP).124 The regulatory coherence chapter of the CPTPP does, though, set down specific procedures for States party to follow in their regulatory activity. Regulatory Impact Assessment is encouraged, under which, in addition to identifying their regulatory objectives and examining a range of ways in which these may be met, States party should address inter alia the alternatives and their costs and benefits as well as distributional impacts, and the potential for managing risks.125 The parties affirm among other matters also the importance of taking into account input from interested persons in the development of regulatory measures.126 As with the WTO jurisprudence, the investment treaty case-​law on administrative due process as an aspect of fair and equitable treatment helps give practical effect to the need for due regard to the legal interests protected under investment treaties.127 An emphasis on the need for consultation with investors as a matter of due process is seen also in the expropriation context.128 The fair and equitable treatment obligation is most clearly considered to express a general principle requiring due process.129 Classically, for instance, the Metalclad Corporation v Mexico 124 Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP) (signed 8 March 2018, entered into force 30 December 2018); c.f. under EU textual proposals on Regulatory Cooperation for the Transatlantic Trade and Investment Partnership (TTIP) regulators would have been required to consider the impact of proposed regulation on international trade or investment. ‘The Transatlantic Trade and Investment Partnership (TTIP) List of documents: updated on 28 November 2016’ 19 ‘Revised EU textual proposals on regulatory cooperation and good regulatory practises’ (sic) 4 February 2016, art 7.2 (c), accessed 30 September 2020. 125 Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP) (signed 8 March 2018, entered into force 30 December 2018), art 25.5.2. 126 Ibid, art 25.2.2. 127 Regarded by Paine as a striking example of ‘supplementary constitutionalism’. Paine, ‘Investment Protection Standards as Global Constitutional Law’ (n 11). See also David Schneiderman, ‘Investment Arbitration as Constitutional Law: Constitutional Analogies, Linkages, and Absences’ (forthcoming) in Thomas Schultz and Frederico Ortino (eds), Oxford Handbook of International Arbitration (OUP 2020) 20 accessed 19 September 2020, advocating a commitment on the part of host States to the principle of audi alteram partem. 128 E.g. CC/​Devas (Mauritius) Ltd and ors v India PCA Case No 2013-​09, Award on Jurisdiction and Merits, 25 July 2016 (Marc Lalonde, David R Haigh and Anil Dev Singh). Although consultation was not required to the extent that India’s cancellation of the claimants’ lease of satellite capacity was a matter of national security. Ibid, [416]. 129 Campbell McLachlan, Laurence Shore and Matthew Weiniger, International Investment Arbitration: Substantive Principles (2nd edn, OUP 2017) 272, [7.15], see further at 317–​320, [7.191]–​ [7.199] (hereafter McLachlan, Shore and Weiniger, International Investment Arbitration); Christoph

Systemic Challenges and Opportunities  333 Tribunal found a breach of the fair and equitable treatment guarantee where the investor had not been given the opportunity to participate in a local town council meeting discussing whether the investor’s landfill construction permit would be granted.130 An emphasis on due process links into the understanding that a host State should not act arbitrarily.131 Host State measures have been considered arbitrary where they have been adopted without a ‘rational decision-​making process’ in which due consideration is given to a measure’s effect on foreign investments and to ‘a balance of the interests of the State with any burden imposed on such investments’.132 On this approach, it appears that requirements to abstain from arbitrary conduct incorporate requirements to have considered the interests of affected parties in the course of decision-​making and engage in ‘reasoned judgement’.133 Sufficiently egregious breaches of such requirements may constitute a breach of the fair and equitable treatment guarantee. Where host States have evaluated potential alternative policy measures this will help establish that they have given effect to substantive investment protection disciplines.134 The key difference between due regard and proportionality testing is that a due regard standard can be expected to operate procedurally, calling for appropriate consideration by the domestic decision-​maker of the rights and interests of others.135 In applying a due regard standard, an international court or tribunal’s focus will be on a State’s compliance with requirements going to whether a decision was properly made rather than whether it was consistent with the balance of substantive rights and interests that the adjudicatory body would read into international law as it applied in the particular case under a proportionality test. The advantage of an emphasis on due regard rather than reliance on principles of proportionality is that this avoids the problem of elevating important value judgements to the international level while at the same time remaining likely to produce substantive outcomes that better balance competing international interests. Certain

Schreuer and Rudolf Dolzer, Principles of International Investment Law (2nd edn, OUP 2012) 154. C.f. M Sornarajah, The International Law on Foreign Investment (4th edn, CUP 2017) 425–​426. 130 Metalclad Corporation v Mexico ICSID Case No ARB(AF)/​97/​1, Award, 30 August 2000 (Elihu Lauterpacht, Benjamin R Civiletti and José Luis Siqueiros) [91]. 131 McLachlan, Shore and Weiniger, International Investment Arbitration (n 129). 132 LG&E Energy Corp, LG&E Capital Corp, LG&E International INC v Argentine Republic ICSID Case No ARB/​02/​1, Decision on Liability, 3 October 2006 (Tatiana B de Maekelt, Francisco Rezek and Albert Jan van den Berg) [158], [162] (hereafter LG&E v Argentina, Decision on Liability). 133 Ibid, [158]. 134 Methanex Corporation v United States UNCITRAL, Final Award on Jurisdiction and Merits, 3 August 2005 (J William Rowley, W Michael Reisman and VV Veeder), Part III, Chapter A, [13]–​[16] (hereafter Methanex v United States). See also for interest SD Myers Inc v Canada UNCITRAL, First Partial Award on the Merits and Separate Opinion, 13 November 2000 (Bryan P Schwartz, Edward C Chiasson and J Martin Hunter) [215], [221], [255] (hereafter SD Myers v Canada); Henckels, Proportionality and Deference (n 100) 98–​100. 135 Consistent with encouragement in the literature for international courts to focus on States’ decision-​making processes rather than their policies. Eyal Benvenisti, The Law of Global Governance (Hague Academy of International Law 2014) 205 (hereafter Benvenisti, The Law of Global Governance).

334  Critical Questions of the primary purposes of proportionality testing will certainly be fulfilled. The introduction of proportionality into the fair and equitable treatment discipline is clearly motivated at least in part by an appreciation of the importance of ensuring that host States appropriately consider the rights and interests that will be affected by a measure,136 and due regard requirements help ensure this. Due regard’s interaction with the systemic challenges posed earlier in this chapter differs from that of proportionality analysis. In comparison with proportionality testing, a due regard standard has greater potential to ameliorate concerns arising in relation to the systemic challenges raised earlier in this chapter, and to generate positive new pathways for the analysis of States’ compliance with their regulatory obligations. Due regard tests may at times be demanding, but in principle they leave sovereignty less affected, because they require only that sovereign States genuinely engage in an evaluation of the competing interests at issue in a given situation. Unlike proportionality testing they do not call in principle for value judgements to be made at the international level.137 Neither do they necessarily add to the inference implicit in the development of many regulatory standards that sovereignty is akin to a conferred power, although they are compatible with certain analyses from that point of view. A due regard standard may also increase the likelihood that international law is applied as an integrated rather than fragmented set of subfields.138 Depending on how they are employed, the legal rights and interests of others are likely to be understood and analysed by a regulating State with reference to the rules of environmental law and other applicable substantive law, as the regulating State attempts to ensure it is in overall compliance with all its international legal obligations and that its decisions are robust and defensible from all angles. Procedure will inevitably shade into substance in certain circumstances. There will be challenging cases where it is necessary for courts or tribunals to consider aspects of the substance in order to be able to gauge whether due regard has genuinely been accorded to the interests of other parties. However, a case may fail at many hurdles before reaching this point. In particular due regard obligations may be limited in potential substantive effect where they apply in connection with certain regulatory coherence tests. The weight may be borne by other simultaneously applicable test, including through rationality requirements. Depending on how 136 For instance the award of the Tribunal in Electrabel v Hungary can be read to emphasise that the application of the ECT’s fair and equitable treatment standard envisages the carrying out of a balancing exercise by the host State. Electrabel SA v Hungary ICSID Case No ARB/​07/​19, Award, 25 November 2015 (Gabrielle Kaufmann-​Kohler, Brigitte Stern and VV Veeder) [165]. Here the Tribunal found there to have been a reasonable and proportionate exercise of Hungary’s discretion. The Tribunal adds that a State can make mistakes in this analysis without being unreasonable. [180]. Chapter Eight, section B 2. 137 C.f. Evan J Criddle and Evan Fox-​Decent, ‘Mandatory Multilateralism’ (2019) 113(2) AJIL 272, 303. 138 Sivan Shlomo Agon and Eyal Benvenisti, ‘The Law of Strangers: The Form and Substance of Other-​Regarding International Adjudication’ (2018) 68(4) U.T.L.J. 598, 637.

Systemic Challenges and Opportunities  335 they are framed, due regard analyses may cast valuable light on the facts and make it easier to assess the fulfilment of these tests. The close relationship between substance and procedure here echoes the situation in the Lake Lanoux case, where the Tribunal emphasised that a party was obliged both to take into account the other party’s interests in the course of negotiations and to give reasonable place to these interests in the water-​use scheme adopted. The manner in which a scheme was developed went to the question of whether it adequately preserved the rights of each party.139 Due regard tests may themselves be formulated in various ways. The Chagos Marine Protected Area formula mentioned above, for instance, sets out a due regard test following some of the contours of a substantive proportionality analysis. Requirements amounting to forms of due regard may alternatively be found where, as in the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), international agreements set down other types of internal analyses that a State needs to complete in situations where it chooses to depart from or go beyond accepted international standards. Due regard tests are likely to operate in a close relationship with the rules on proof. For instance in Whaling in the Antarctic, where it was the recommendations of an international organisation for which due regard was required, lack of an explanation for Japan’s absence of analysis told against Japan.140 In sum, due regard tests are a softer option than proportionality requirements and are quite distinct from proportionality testing in key respects.141 They are likely to assist with coordination between domestic and international legal orders without enforcing such coordination in the same way as adoption of tests potentially requiring proportionality stricto sensu in the balancing of legal interests. Due regard tests offer a more pluralistic, less constitutionalist alternative to proportionality and may better reflect the social consensus for the present, although their practice may potentially open up the debate towards further new regulatory standards and tests in future. They are consistent with the pragmatic approach envisaged in global administrative law scholarship of including affected social and economic interests and regulatory decision-​making, with a view to accumulating experience of the advantages and disadvantages of doing so in order to reflect on this practice.142 139 Lake Lanoux Arbitration (France v Spain) (1957) 24 ILR 101, 141. 140 Chapter Four, section B 1 b). See also Eyal Benvenisti, ‘Sovereigns as Trustees of Humanity: On the Accountability of States to Foreign Stakeholders’ (2013) 107 AJIL 295, 318 (hereafter Benvenisti, ‘Sovereigns as Trustees of Humanity’). 141 Due regard standards have more in common with the procedural dimensions to proportionality review envisaged for domestic human rights law. See Claudia Geiringer, ‘Process and Outcome in Judicial Review of Public Authority Compatibility with Human Rights: A Comparative Perspective’ in H Wilberg and M Elliott (eds), The Scope and Intensity of Substantive Review: Traversing Taggart’s Rainbow (Hart Publishing 2015) 329. 142 Kingsbury, Krisch and Stewart, ‘The Emergence of Global Administrative Law’ (n 14) 50.

336  Critical Questions Global administrative law scholarship is increasingly aware of the importance of other-​regardingness in administrative decision-​making, while important strains of scholarship on sovereignty as trusteeship explain the idea that sovereign decisions should be taken in consideration of the expressed views of all who will be affected including populations beyond the sovereign State.143 Writings on plurality have drawn our continued attention to the close connection between the ordering of domestic and international legal orders and the contemporary problem that the range of people affected by decisions made within any one State may range far beyond the State’s own population, described as the ‘constitutive design puzzle’ of our times.144 Cosmopolitan constitutionalists suggest that we need to go beyond a focus on national electoral accountability and consider whether public decision-​ making procedures are both sufficiently transparent and sufficiently inclusive of all those who will be affected,145 incorporating an element of responsibility for affected persons living outside the polity.146 Reflective practitioners are conscious that we are living in a global village.147 States are dependent on the exercise of regulatory authority by other States, and, with growing frequency, when States regulate they are regulating not just for their own populations but for others too.148 Scholarship on international adjudication edges towards the same realisation, and towards an appreciation of how this might be addressed through due regard requirements.149 Whether the employment of due regard requirements alone or in combination with rationality testing will enhance international law’s claim to legitimate authority remains an open question. This may depend in part on how traditional procedural justifications for international legal authority are weighted in relation 143 Benvenisti, ‘Sovereigns as Trustees of Humanity’ (n 140); Roger Cotterrell, ‘Transnational Legal Authority: A Socio-​legal Perspective’ in Roger Cotterrell and Maksymilian Del Mar (eds), Authority in Transnational Legal Theory: Theorising Across Disciplines (Edward Elgar Publishing 2016) 253; Benjamin Straumann, ‘Early Modern Sovereignty and Its Limits’ (2015) 16 Theo Inq L 423; Nico Krisch, ‘Global Administrative Law and the Constitutional Ambition’ in Petra Dobner and Martin Loughlin (eds), The Twilight of Constitutionalism? (OUP 2010) 245, 249 (hereafter Krisch, ‘Global Administrative Law’). 144 Neil Walker, Intimations of Global Law (CUP 2015) 100. See also David Held, Democracy and the Global Order (Polity Press 1995) ch 10; Krisch, ‘Global Administrative Law’ (n 143) 245, 249; Krisch, Beyond Constitutionalism (n 89) 21–​22, 86–​66, 298–​299. 145 Kumm, ‘The Cosmopolitan Turn (n 92); Mattias Kumm, ‘Sovereignty and the Right to be Left Alone: Subsidiarity, Justice-​Sensitive Externalities, and the Proper Domain of the Consent Requirement in International Law’ (2016) 79 LCP 239, 254. See also Evan J Criddle and Evan Fox-​Decent, ‘Mandatory Multilateralism’ (2019) 113(2) AJIL 272, 303, viewing due regard requirements as an emanation of the re-​conception of sovereignty in fiduciary terms combined with international legal concepts of joint stewardship. 146 Armin von Bogdandy, ‘Legitimacy of International Economic Governance: Interpretative Approaches to WTO Law and the Prospects of its Proceduralization’ in Stefan Griller (ed), International Economic Governance and Non-​Economic Concerns (Springer-​Verlag 2003) 103, 134. 147 Interview 29 June 2019. 148 Idem. 149 Fahner observes ‘[i]‌t seems that the various arguments raised for and against deference on democratic grounds could be reconciled in the form of an approach that accords deference to domestic decisions resulting from deliberations involving the interests of all affected stakeholders, domestic and foreign’, although noting this would be insufficient on its own as a comprehensive solution to the puzzles associated with the adjudication of regulatory disputes. Fahner, Judicial Deference (n 39) 169.

Systemic Challenges and Opportunities  337 to relativity’s requirement to heed the impact of ‘governance reasons’.150 The general pluralist prescription is meanwhile that we should work on inculcating habits of mind leading us seriously to consider the multiple communities and bodies of rules that may be affected by our decisions.151 Due regard tests may help afford the means to make this a routine aspect of international legal practice.152 Their employment may well be significant for the application of the theory of relative authority in plural legal orders, which posits that procedures conferring the moral standing of authority may be contingent, if they are to confer this standing, on the observance of additional procedures.153

2.  International adjudication as judicial review? The role of international courts and tribunals has expanded as new international adjudicatory structures are set up to service wider communities. Together with dispute settlement, the review of international administrative actions now formally plays a part in the work of at least 11 identifiable international adjudicatory bodies, and in most cases these bodies may also hear complaints regarding national level decision-​making, and may receive private complaints.154 As this book focuses on the administrative decision-​making of States, the majority of the bodies whose work is studied in this book do not appear on the list, with the exception of the Seabed Disputes Chamber of the International Tribunal for the Law of the Sea (ITLOS). However, dispute settlement in the ICJ, the WTO and under UNCLOS, as well as in investment treaty arbitration, is increasingly referred to as involving the ‘review’ of States’ regulatory decision-​making.

a) Judicial review and standards of review For international judges and lawyers and scholars alike, using domestic administrative law terminology to describe the legal developments seen in regulatory disputes may come naturally because much of the time we think of international 150 Chapter Nine, section B 3. 151 Paul Schiff Berman, Global Legal Pluralism: A Jurisprudence of Law Beyond Borders (CUP 2012); Miguel Poiares Maduro, ‘Three Claims of Constitutional Pluralism’ in Matej Avbelj and Jan Komárek (eds), Constitutional Pluralism in the European Union and Beyond (Hart Publishing 2012) 67, 76–​82. 152 Perhaps in accordance with the Roman law principle quod omnes tangit ab omnibus tractari et approbari debet—​all those affected should be heard and agree. Discussing also medieval English law on the governance of political communities and disposition of church offices, Richard B Stewart, ‘Remedying Disregard in Global Regulatory Governance: Accountability, Participation, and Responsiveness’ (2014) 108 AJIL 211, 225–​226. 153 Observing that this may require modification to democratic procedures to incorporate participation or representation of non-​subjects who might be affected by the exercise of authority, for instance due to their close proximity to developments, Nicole Roughan, Authorities: Conflicts, Cooperation and Transnational Legal Theory (OUP 2013) 140. 154 Karen J Alter, The New Terrain of International Law: Courts, Politics, Rights (Princeton University Press 2014) ch 11.

338  Critical Questions law as an external constraint on the exercise of power and authority by the State. From such a perspective the adjudication of an international dispute concerning the regulatory or administrative action of a government may look like domestic judicial review.155 Viewing international arbitration and adjudication of regulatory disputes as ‘review’ may also be attractive to governments because it downplays the gravity of the institution of international legal proceedings. Where the complainant is a private party, as in investment cases, the idea that proceedings are a form of review may have a more palatable tone politically. Further, governments may explicitly encourage international courts and tribunals in using the language of judicial review and ‘standards of review’ with the intention protectively to ring-​ fence sovereignty.156 However, this language may have perverse implications, promoting an overconstitutionalised view of the relationship between domestic and international law.157 The notion that international adjudication could expressly be thought of as review is reflected in differing degree across the diverse practice canvassed in this book. For instance in the ICJ parties to the Whaling in the Antarctic dispute themselves employed the language of ‘review’, ‘judicial review’ and ‘standard of review’, with the latter then adopted in the Court’s judgment.158 Australia was concerned that Japan viewed the standard of review as a preliminary check for apparent good faith, and urged the Court to judicially review Japan’s actions based on more concrete considerations.159 New Zealand iterated that Japan’s discretion was not unfettered and that affording Japan a margin of appreciation placing it beyond ordinary review would be inconsistent with the object and purpose of the Convention.160 Japan itself employed the language of ‘standard of review’, perhaps prompted by the idea that it would be concerning if the Court were to determine the acceptability of its decision to permit Japan’s programme based solely on a subjective judgement.161 Japan’s invocation of the idea of a margin of appreciation may also have 155 Benvenisti, The Law of Global Governance (n 135) 203. 156 See Benvenisti’s discussion, demonstrating how the language of standard of review lends itself to discussions envisaging limits on international law’s intervention in the exercise of sovereignty. Ibid, 232–​239. 157 See for interest Çalı, ‘International Judicial Review’ (n 90) 291, 293, 295. Çalı points out further that employing the concept of judicial review invites the reconceptualisation of international law in itself in more constitutional and less contractual terms. See, too, remarking on the problematic comparison with domestic judicial review that overstates the impact and purpose of international review, Fahner, Judicial Deference (n 39) 22. 158 For discussion, Foster, ‘Methodologies and Motivations’ (n 19). 159 Whaling in the Antarctic (Australia v Japan) Verbatim Record (Original Language, 10 July 2013 at 10am) 57–​61, 64, 65, Professor Crawford for Australia, considering that ‘judicial review, notably in relation to resources in the public domain which do not belong even prima facie to any individual State, and which are a matter of collective interest, should not be regulated by the Court wholly or primarily on the basis of such fluctuating and subjective notions as bad faith’. 160 Whaling in the Antarctic (Australia v Japan) Verbatim Record (Original Language, 8 July 2013 at 10am) 26–​27, Mr Finlayson for New Zealand. 161 Whaling in the Antarctic (Australia v Japan) Verbatim Record (Translation, 16 July 2013 at 10am) 15–​16, M Pellet for Japan.

Systemic Challenges and Opportunities  339 fed into the idea that what the Court was engaged in was a form of judicial review, and that the Court should employ what it called a ‘standard of review’.162 The use of the terminology of ‘review’ and ‘standards of review’ in the WTO setting may further have influenced the Court in choosing to employ such language, with WTO material also referred to during pleadings.163 Although perhaps foreseeable,164 the Court’s use of ‘standard of review’ language provoked academic discussion.165 Yet the idea of standards of review as a general concept may have less resonance or endorsement in the WTO context than might be thought from discussion in scholarly publications and indeed from references in selected WTO dispute settlement reports to ‘standards of review’.166 Individuals with experience as WTO adjudicators at panel and Appellate Body level alike are likely to conceptualise the adjudicatory task in terms of looking squarely at what is prescribed by WTO law and assessing the compatibility of a Member’s actions with this law.167 This process is carried out consistently with Article 11 of the Dispute Settlement Understanding requiring a panel to make an objective assessment of the matter before it.168 It is appreciated that WTO adjudication might be thought of as ‘review’ where the actions in question are administrative or possibly judicial actions,169 and in the general sense that adjudication always involves the review of others’ activities.170 But adjudicators themselves may not think in terms of review, although this may be

162 Whaling in the Antarctic (Australia v Japan) Counter-​Memorial of Japan (in English, 9 March 2012) 416–​418; c.f. Whaling in the Antarctic (Australia v Japan) Verbatim Record (Original Language, 26 June 2013 at 3pm) 44–​45, Professor Crawford for Australia; Whaling in the Antarctic (Australia v Japan) Verbatim Record (Translation, 2 July 2013 at 3pm) 11–​12, M Pellet for Japan; Whaling in the Antarctic (Australia v Japan) Verbatim Record (Original Language, 8 July 2013 at 10am) 25–​26, 34, Mr Finlayson for New Zealand; Whaling in the Antarctic (Australia v Japan) Verbatim Record (Translation, 16 July 2013 at 10am) 3, M Pellet for Japan. 163 Chapter Three, section E 2 c) (ii). 164 Caroline E Foster, ‘International Adjudication—​ Standard of Review and Burden of Proof: Australia-​Apples and Whaling in the Antarctic’ (2012) 21(2) RECIEL 80. 165 See inter alia Shotaro Hamamoto ‘From the Requirement of Reasonableness to a “Comply and Explain” Rule: The Standard of Review in the Whaling Judgment’ in Malgosia Fitzmaurice and Dai Tamada (eds), Whaling in the Antarctic: Significance and Implications of the ICJ Judgment (Brill 2016) 38; Foster, ‘Methodologies and Motivations’ (n 19). 166 E.g. Stephen P Croley and John H Jackson, ‘WTO Dispute Procedures, Standard of Review, and Deference to National Governments’ (1996) 90 AJIL 193 (hereafter Croley and Jackson, ‘WTO Dispute Procedures’); Oesch, Standards of Review (n 29) 635; Claus-​Dieter Ehlermann and Nicolas Lockhart, ‘Standard of Review in WTO Law’ (2004) 7(3) J Intl Econ L 491; Andrew T Guzman, ‘Determining the Appropriate Standard of Review in WTO Disputes’ (2009) 42 Cornell Int’l L.J. 45. 167 Interview 24 September 2015; Interview 29 September 2015. 168 Article 11 of the Dispute Settlement Understanding: ‘ . . . a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements . . . ’ Marrakesh Agreement Establishing the World Trade Organization (signed 15 April 1994, entered into force 1 January 1995) 1869 UNTS 401, Annex 2: Understanding on Rules and Procedure Governing the Settlement of Disputes. For an overview, Fahner, Judicial Deference (n 39) 58–​66. 169 Interview 29 September 2015. 170 Interview 23 September 2015.

340  Critical Questions different in regard to practice in the highly specific context of the Anti-​Dumping Agreement.171 Whether the notion of a standard of review is apposite in an international legal context such as WTO dispute settlement appears to remain an open question for practitioners directly involved. Though referred to in earlier cases, particularly under the SPS Agreement,172 mention of the idea of standards of review appears to have declined in significance and frequency in WTO dispute settlement reports in environment and health cases. This may in part be due to the increasing number of proceedings taking place since 2012 under the TBT Agreement.173 The concept’s ongoing popularity in academic literature,174 continuing at times to be linked explicitly to constitutionalist perspectives on WTO law,175 is thus less strongly reflected in practice. Concepts of international dispute settlement as judicial review have arguably been most prevalent in investment treaty arbitration.176 For some scholars, as in the WTO field, it may be simply that using the language of standard of review is a convenient way to talk about a broad cluster of factors relating to the intensity with which international courts and tribunals scrutinise host State action.177 For others, the matter is more agenda-​oriented. For certain scholars the primary purpose in making the analogy may be the view that the institutional design of investment treaty dispute settlement needs to be configured bearing closely in mind 171 Fahner, Judicial Deference (n 39) 66–​69. On the major political problems leading to the impasse of late 2019, Chapter Five, section B. For a history, Croley and Jackson, ‘WTO Dispute Procedures’ (n 166) 198–​201. 172 United States—​Continued Suspension of Obligations in the EC—​Hormones Dispute, Report of the Appellate Body (16 October 2008) WT/​DS320/​AB/​R, DSR 2008:X, 3507, [585]–​[616] including in particular [590]; Canada—​Continued Suspension of Obligations in the EC—​Hormones Dispute, Report of the Appellate Body (16 October 2008) WT/​DS321/​AB/​R, DSR 2008:XIV, 5373, [585]–​[616] including in particular [590]; Australia—​Measures Affecting the Importation of Apples from New Zealand, Report of the Appellate Body (29 November 2010) WT/​DS367/​AB/​R, DSR 2010:V, 2175, e.g. at [215] ff, [265]. 173 Chapter Six, section A 2, 4, 5, 6. 174 Jan Bohanes and Nicolas Lockhart, ‘Standard of Review in WTO Law’ in Daniel Bethlehem and others (eds), The Oxford Handbook of International Trade Law (OUP 2009) 378; Tracey Epps, ‘Recent Developments in WTO Jurisprudence: Has the Appellate Body Resolved the Issue of an Appropriate Standard of Review in SPS Cases?’ (2012) 62(2) U.T.L.J. 201; Michael M Du, ‘Standard of Review in TBT Cases’ in Tracey Epps and Michael J Trebilcock, Research Handbook on the WTO and Technical Barriers to Trade (Edward Elgar 2013); Valentina Vadi and Lukasz Gruszczynski, ‘Standard of Review and Scientific Evidence in WTO Law and International Investment Arbitration: Converging Parallels?’ in Lukasz Gruszczynski and Wouter Werner (eds), Deference in International Courts and Tribunals: Standard of Review and Margin of Appreciation (OUP 2014) 152; Alexia Herwig and Asja Serdarevic, ‘Standard of Review for Necessity and Proportionality Analysis in EU and WTO Law: Why Differences in Standards of Review are Legitimate’ in Lukasz Gruszczynski and Wouter Werner (eds), Deference in International Courts and Tribunals: Standard of Review and Margin of Appreciation (OUP 2014) 209. 175 Ernst-​Ulrich Petersmann, ‘Judicial Standards of Review and Administration of Justice in Trade and Investment Law and Adjudication’ in Lukasz Gruszczynski and Wouter Werner (eds), Deference in International Courts and Tribunals: Standard of Review and Margin of Appreciation (OUP 2014) 19. 176 E.g. Stone Sweet and Grisel, The Evolution of International Arbitration (n 99) 248. 177 Paine, ‘Standard of Review’ (n 29); Jonathan Bonnitcha, Lauge N Skovgaard Poulsen and Michael Waibel, The Political Economy of the Investment Treaty Regime (OUP 2017) 119–​121.

Systemic Challenges and Opportunities  341 the functional similarities between domestic judicial review and investment treaty arbitration in order to generate the required public ethos and accountability.178 Other scholars have proposed a more far-​reaching vision, suggesting that the functional equivalence they perceive between investment treaty arbitration and domestic public law can be viewed as the basis for a new and distinctive modern body of law, to be generated through the mechanism of arbitral jurisdiction. The idea here has been that through arbitral practice investment treaty law could create an escape from the ‘mental prisons’ of traditional State-​to-​State relations, leaving behind the outdated mercantilist economic theories they had housed. In this vision, the global system is increasingly populated by private actors whom investment arbitration has empowered to invoke checking and balancing mechanisms to limit governmental authority.179 The comparative public law approach has been subject to some critique, including asking whether, if public law analogies are to be employed, it may be more appropriate to analogise investment relations with relations between public entities rather than relations between public and private entities in order to reflect the underlying inter-​State bargains embodied in international investment law.180 Viewing regulatory disputes as judicial review tends to push prematurely for the consummation of the shift in our conception of sovereignty which, as discussed earlier, reconfigures international legal sovereignty as akin to or equating with constitutionally conferred power in the domestic setting. The difficulty with viewing regulatory disputes as judicial review is that this language goes further, treating the international and domestic legal orders as already conjoined. This overstates the pace of development and may pre-​empt future choices; international and domestic legal systems presently remain plural, concurrently operating legal systems, as discussed in Chapter Two. Further, the complex and sophisticated constitutional and administrative law apparatus that would be needed to support a conjoined legal system is missing. Using the language of judicial review may have significant follow-​on effects also on the dynamics of fragmentation and integration among subfields of international law. Viewing adjudication as review significantly also increases the likelihood of 178 Gus Van Harten, Investment Treaty Arbitration and Public Law (OUP 2007); Gus Van Harten and Martin Loughlin, ‘Investment Treaty Arbitration as a Species of Global Administrative Law’ (2006) 17(1) EJIL 121; As Paparinskis describes in Martins Paparinskis, ‘Analogies and Other Regimes of International Law’ in Zachary Douglas, Joost Pauwelyn and Jorge E Viñuales (eds), The Foundations of International Investment Law: Bringing Theory into Practice (OUP 2014) 73, 91 citing Ralf Michaels, ‘The Functional Method of Comparative Law’ in Mathias Reimann and Reinhard Zimmermann (eds), The Oxford Handbook of Comparative Law (1st edn, OUP 2006) 339. 179 Thomas W Wälde, ‘The Specific Nature of Investment Arbitration’ in Philippe Kahn and Thomas W Wälde (eds), Les Aspects Nouveaux du Droit des Investissements Internationaux: New Aspects of International Investment Law (Martinus Nijoff 2007) 43, 49, 86. 180 See also discussion in Chapter Eight, section C. See Martins Paparinskis, ‘Analogies and Other Regimes of International Law’ in Zachary Douglas, Joost Pauwelyn and Jorge E Viñuales (eds), The Foundations of International Investment Law: Bringing Theory into Practice (OUP 2014) 73, 92.

342  Critical Questions certain problems in the sphere of investment treaty arbitration. The potential for conflation of home States’ public interests in investment protection and investors’ individual private interests is marked.181 Investment treaties are adopted for the former purpose and their adoption reflects little intention to elevate the status of private actors in public international law to the position of right holders or beyond. Viewing investment treaty arbitration as judicial review has the potential to provoke the adoption and application of regulatory standards in ways that could consolidate such a promotion. Overall the language of judicial review and standard of review remains unnecessary as a means to conceptualise, describe and discuss the emergence of regulatory standards and tests. As the studies in this book have demonstrated, the reality is that although regulatory standards and tests are sometimes referred to as ‘standards of review’ or ‘methods of review’ they do not constitute rules separate and distinct from the legal provisions being applied by an international court or tribunal. Rather they are based on the interpretation of those provisions. The real question for a court or tribunal must be the question of what the substantive law says and requires, and it is doubtful in the international legal context that there is a clear distinction between this and any standard of review.182 A focus on ‘standards of review’ indeed risks abdicating the judicial function,183 bifurcating the merits of a case,184 and potentially producing a judgment that may come close to a non liquet.185 In this respect the decision of the ICJ in Whaling in the Antarctic is telling in that the judgment said so little about what is required by Article VIII of the International Convention on the Regulation of Whaling 1946, while saying a good deal about why Japan’s scientific research programme was unsatisfactory under this provision.186 The notion of deference, on the other hand, as discussed in the following section, is a broad and flexible concept posing fewer immediate difficulties.

b) Deference and margin of appreciation Though often considered to accompany the framing of proceedings as ‘review’,187 the expectation of deference or a margin of appreciation may operate regardless of whether the language of review is employed.188 In general it is understood that 181 Chapter Eight, section C. 182 Fahner, Judicial Deference (n 39) 24, 126, 130, observing that the close connection between treaty interpretation and the determination of the standard of review casts doubt on the validity of the distinction between the two. 183 Ibid, 177–​181. 184 Ibid, 212. 185 Ibid, 219. 186 Chapter Three, section E 2 c) ii). 187 Fahner, Judicial Deference (n 39) 22. 188 Esmé Shirlow, ‘Deference and Indirect Expropriation Analysis in International Investment Law: Observations on Current Approaches and Frameworks for Future Analysis’ (2014) 29(3) ICSID Review—​Foreign Investment Law Journal 595.

Systemic Challenges and Opportunities  343 an international tribunal ‘should give particular weight to governmental regulatory decisions taken in good faith in the interests of public morals, health or the environment’.189 Deference could be introduced at multiple points in a tribunal’s analysis, more or less formally and more or less transparently. International courts and tribunals presently have a remarkably broad discretion in terms of the modes and degrees of deference they may afford governments. This can be controversial, especially in investment treaty law.190 Deference is most obviously manifested when international courts and tribunals interpret or apply international law as leaving to States the determination of legitimate regulatory objectives, as well as leaving to States the appreciation of the seriousness of the situation subject to regulatory action. For instance, to take one standout example from WTO law and practice, WTO Members are permitted to set their own level of protection against sanitary and phytosanitary risks. This goes hand-​in-​hand with an apparent acceptance of broad understandings of the exception for public order and public morals in the GATT and in the GATS,191 and indications that the matter of what might constitute a legitimate objective under the TBT Agreement is open-​ended. Deference as a concept however is not generally spoken of in WTO dispute settlement, although referred to academically.192 In the investment sphere the practice is varied.193 Some tribunals emphasise that deference is to be afforded only so far as it is effectively built into the applicable legal rules,194 or emphasise deference primarily to the setting of legislative priorities or identification of a host States’ policy needs.195 Other tribunals speak openly and directly in their awards of the deference they consider due more broadly to host States’ exercise of regulatory powers by virtue of the institutional competence and expertise of host State agencies.196 The term ‘margin of appreciation’ is not frequently used, and its use has been strongly criticised,197 but the term has 189 McLachlan, Shore and Weiniger, International Investment Arbitration (n 129) 268 [7.01], 275 [7.24]. 190 Gus Van Harten, Sovereign Choices and Sovereign Constraints (OUP 2013) 161. 191 Caroline E Foster, ‘The Problem with Public Morals’ (2019) 10 JIDS 622. Chapter Ten, section B 2. 192 Croley and Jackson, ‘WTO Dispute Procedures’ (n 166). 193 Scoping the practice, Fahner, Judicial Deference (n 39) 71–​84. 194 Glamis Gold Ltd v United States UNCITRAL, Award, 8 June 2009 (Michael K Young, David R Caron and Kenneth D Hubbard) [23], [617]; Chemtura Corporation v Canada PCA Case No 2008-​ 01, Final Award, 2 August 2010 (Gabrielle Kaufmann-​Kohler, Charles N Brower and James R Crawford) [113]. 195 Philip Morris Brands Sàrl and ors v Uruguay ICSID Case No ARB/​10/​7, Award, 8 July 2016 (Piero Bernardini, Gary Born and James Crawford) [399] (hereafter Philip Morris v Uruguay). 196 Mesa Power Group, LLC v Canada PCA Case No 2012-​17, Award, 24 March 2016 (Gabrielle Kaufmann-​Kohler, Charles N Brower and Toby Landau) [505], [553], [585], [632]; Les Laboratoires Servier, SAS and ors v Poland UNCITRAL, Final Award, 14 February 2012 (William W Park, Marc Lalonde and Bernard Hanotiau) [568]; Crystallex International Corporation v Venezuela ICSID Case No ARB(AF)/​11/​2, Award, 4 April 2016 [583]–​[585] (Laurent Lévy, John Y Gotanda and Laurence Boisson de Chazournes) (hereafter Crystallex International Corporation v Venezuela). For related discussion, Aikaterini Titi, The Right to Regulate in International Investment Law (Nomos/​Hart 2014) 40. 197 Gary Born, Danielle Morris and Stephanie Forrest, ‘ “A Margin of Appreciation”: Appreciating its Irrelevance in International Law’ (2020) 61(1) Harv.Int’l L.J. 65.

344  Critical Questions been employed to describe this latter form of deference.198 As is well known the term ‘margin of appreciation’ emanated specifically from the jurisprudence of the European Court of Human Rights,199 but its broader application in public international law has been considered from time to time.200 In the ICJ there was argument on whether a margin of appreciation might apply to Japan’s permitting decision in the Whaling in the Antarctic case, but the Court did not employ the phrase.201 Meantime in European human rights law there has been encouragement to move away from reliance on the margin of appreciation doctrine and towards more clearly embracing the concept of subsidiarity.202 The regulatory standards that are being adopted in international courts and tribunals as canvassed in Parts II, III and IV of this book are inherently deferential in that they provide relatively objective means for gauging the legality of State conduct. The case of Whaling in the Antarctic is an excellent example of how coherence between a measure and its stated objectives may be tested through reliance on concrete criteria. This decreases the subjectivity of judgement, and makes the decisions of international courts and tribunals more palatable, as well as more robust. At the same time when applying regulatory standards there will remain scope for international courts and tribunals to engage in practices amounting to variable intensity review as seen in domestic administrative law. Variable intensity review, both tacit and overt, is well established in common law jurisdictions, with variations between and within jurisdictions, and is also seen more widely including in German and French administrative law.203 International courts’ and tribunals’ practice and the regulatory standards they have been developing are sensitive towards States also in that often they do not 198 Philip Morris v Uruguay (n 195) [388]. For discussion, Erlend Leonhardsen, ‘Treaty Change, Arbitral Practice and the Search for a Balance: Standards of Review and the Margin of Appreciation in International Investment Law’ in Lukasz Gruszczynski and Wouter Werner (eds), Deference in International Courts and Tribunals: Standard of Review and Margin of Appreciation (OUP 2014) 135. 199 Handyside v United Kingdom 1976 ECHR 5, para 48; Yutaka Arai-​Takahashi, The Margin of Appreciation Doctrine and the Principle of Proportionality in the Jurisprudence of the ECHR (Intersentia 2002); 200 Yuval Shany, ‘Toward a General Margin of Appreciation Doctrine in International Law?’ (2015) 16 EJIL 907. 201 Theodore Christakis ‘The “Margin of Appreciation” in the Use of Exemptions in International Law: Comparing the ICJ Whaling Judgment and the Case Law of the ECtHR’ in Malgosia Fitzmaurice and Dai Tamada (eds), Whaling in the Antarctic: Significance and Implications of the ICJ Judgment (Brill/​ Nijhoff 2016) 139. 202 See Protocol No 15 Amending the Convention on the Protection of Human Rights and Fundamental Freedoms (opened for signature 24 June 2013, not yet entered into force) CETS 213 recognising the applicability of the principle of subsidiarity, and Benvenisti’s encouragement of reliance on this principle rather than the margin of appreciation doctrine in Eyal Benvenisti, ‘Margin of Appreciation, Subsidiarity and Global Challenges to Democracy’ (2018) 9(2) JIDS 240; also Eirik Bjorge, ‘Been There, Done That: The Margin of Appreciation and International Law’ (2015) 4(1) CJICL 181. 203 Mark Elliott and Jason NE Varuhas, Administrative Law: Text and Materials (5th edn, OUP 2017) 266ff; Craig, Administrative Law (n 32) [21.010]; The Right Hon. Lord Woolf and others, De Smith’s Judicial Review (8th edn, Thomson Reuters 2018) [11.084]; Nikolaus Marsch and Vanessa Tünsmeyer, ‘The Principle of Proportionality in German Administrative Law’ in Sofia Ranchordás and Boudewijn de Waard (eds), The Judge and the Proportionate Use of Discretion (Routledge 2015) 13, 31.

Systemic Challenges and Opportunities  345 require adjudicatory bodies to take a view on the actual intentions that may be driving States’ actions.204 International law in general, though, appears to differ in this respect from domestic administrative law in common law jurisdictions and beyond, where government actors’ objective and subjective purposes may both potentially be considered in case of a legal challenge, depending on the jurisdiction.205 The ICJ opted not to go down this route in Whaling in the Antarctic, and in the WTO the Appellate Body has opted for a jurisprudence bypassing the question of a government’s aims.206 At the same time, there will be cases where international courts and tribunals are left with a certain impression regarding a government’s motivational orientation which may be apparent in their reports.207 Contrastingly in investment treaty law we occasionally see reliance on clearer determinations of motivation in findings that host States have failed to afford national treatment,208 or fair and equitable treatment,209 or even determining a tribunal’s jurisdiction.210 Regulatory standards will bring only a measure of certainty and stability to the international adjudication of regulatory disputes. Deferential practices of various sorts can be expected to continue, and may be unpredictable, although certain understandings around the conditions in which deference is appropriate may continue to coalesce.211 Transparency in reliance on deferential practices will be important.212 However, these practices may provide a helpful element of flexibility in the settlement of regulatory disputes that enhances scope for relativity in international law’s interaction with domestic legal systems. As mentioned earlier there is also the potential for deferential practices to soften the impact of proportionality testing, although the potential for deference would not entirely negate the effect of shifting the locus of ultimate value judgement to the international level. 204 Consider likewise, albeit in the security context, Russia—​Measures Concerning Traffic in Transit, Report of the Panel (5 April 2019) WT/​DS512/​R, where the Panel developed a ‘not implausible’ standard in panel report interpreting/​applying the security exception in art XXI. 205 Hanna Wilberg, ‘Judicial Review of Administrative Reasoning Process’ in Peter Cane and others (eds), Oxford Handbook of Comparative Administrative Law (OUP 2020) 857. 206 Chapter Six. 207 E.g. China—​Measures Related to the Exportation of Various Raw Materials, Reports of the Panel (5 July 2011) WT/​DS394/​R, WT/​DS395/​R, WT/​DS398/​R, DSR 2012:VII, 3501, [7.350], [7.351] (hereafter China—​Raw Materials, Panel Reports). See for interest Andrei Mamolea, ‘Good Faith Review’ in Lukasz Gruszczynski and Wouter Werner (eds), Deference in International Courts and Tribunals: Standard of Review and Margin of Appreciation (OUP 2014) 74. 208 SD Myers v Canada (n 134) [162]; and Quiborax SA and Non Metallic Minerals SA v Bolivia ICSID Case No ARB/​06/​2, Award, 16 September 2015 (Gabrielle Kaufmann-​Kohler, Marc Lalonde and Brigitte Stern) [248], [253]. 209 Windstream Energy LLC v Canada PCA Case No 2013-​22, Award, 27 September 2016 (Veijo Heiskanen, R Doak Bishop and Bernardo Cremades) [277]; and Crystallex v Venezuela (n 196) [600]–​ [614], [683]. 210 Methanex v United States (n 134) Part IV, Chapter E, [18], [20], where the Tribunal’s finding of benign intent confirmed that a Californian ban on a gasoline additive was not a measure ‘relating to’ an investment. 211 Consider Fahner, Judicial Deference (n 39) 12, 22; Caroline Henckels, Proportionality and Deference in Investor-​State Arbitration: Balancing Investment Protection and Regulatory Autonomy (CUP 2015) 34–​43; see also Gus Van Harten, Sovereign Choices and Sovereign Constraints (OUP 2013) 3–​6. 212 Nico Krisch, ‘Liquid Authority in Global Governance’ (2017) 9(2) International Theory 237.

346  Critical Questions

D. Conclusion Awareness of the deeper structural challenges and changes associated with the adoption of regulatory standards reopens the matter of whether what we are seeing amounts only to the ordering of plurality or would more accurately be described as a constitutional process. The regulatory standards that are emerging are distinctly pluralistic. Their main characteristic is the overwhelming extent to which they enable international law to accommodate domestic legal authority and desist from facilitating the exercise of value judgements on regulatory matters at the international legal level. This may be, in part, because international adjudicatory process is likely to produce pluralistic results due to the social and formal constraints at work. However, it remains important to be aware that the regulatory standards and tests emerging from the decisions of international courts and tribunals may also be capable of application in ways that would accommodate domestic legal authority less rather than more. While they are designed so as to permit and even generate deferential decision-​making, much will depend on the prevailing social, political and institutional dynamics. Changes in the application of the rules on allocation of the burden of proof that may accompany the adoption of global regulatory standards would also constitute a potentially significant inroad into sovereign regulatory freedom as presently known.213 The pressure placed on international courts and tribunals as they seek to find workable interpretations of international legal rules and provisions while remaining faithful to basic tenets of international legal interpretation indicates the stresses and strains associated with making international law work in conditions of deepening overlap with domestic legal systems. The morphological changes in our understandings of sovereignty, the challenges regarding the integration of international law, and the complex situation in relation to the evolving status of private actors in international law discussed above all evidence an underlying disturbance. Such structural destabilisation brings to mind theoretical insights that autonomous legal systems may be capable of structural coupling with other legal systems and the wider social environment only ad hoc and at the expense of their own internal consistency.214 Yet participants in respective legal systems may not think of their experience in terms of a plurality of legal orders at all,215 let alone as a series of developments of cumulatively far-​reaching significance.

213 See Chapter Ten, section B 1. 214 Gunther Teubner, Law as an Autopoetic System (Blackwells 1993) ch 6. C.f. James Crawford ‘International Law as an Open System’ in James Crawford, International Law as an Open System: Selected Essays (Cameron May 2002) 17. 215 William Twining, General Jurisprudence: Understanding Law from a Global Perspective (CUP 2009) 34.

11

Conclusion The dense, overlapping bodies of international and domestic regulation accompanying increasing global economic and environmental interdependence are ever-​ thickening. Disputes over the extent of States’ regulatory freedom and obligations will naturally occur in this setting, and the need to resolve these disputes in a reasoned way has led international courts and tribunals to develop regulatory rubrics or formulae establishing how competing legal rights and interests are to be balanced under the applicable international legal provisions and rules. Requirements for coherence between regulatory action and its objectives are now all-​pervasive. Simultaneously, we see across the jurisprudence growing indications that in their regulatory decision-​making States will be required to demonstrate that they have engaged in other-​regarding internal balancing processes taking into account the legal rights and interests of States’ populations beyond their jurisdiction. States are further being required to demonstrate that they have exercised due diligence in their control of private activity with extra-​jurisdictional effects. International courts’ and tribunals’ contribution to the elaboration of such potentially global regulatory standards forms part of a broader dynamic. Their judgments and decisions experiment with various innovations and incorporate a range of borrowings, especially as advocated in pleadings. Although outcomes in particular contentious cases are binding on the parties, the overall body of practice created remains subject to reflection, ongoing assessment and mutual learning on the part of all involved. Intergovernmental negotiations meantime progress the development of new treaties and treaty provisions advancing more demanding expectations for global regulatory practice. These instruments may help cater to gaps and indeterminacies of the type that are confronting international adjudicators in regulatory disputes. Adjudicatory proceedings need to be understood as part of this wider process, with their views also serving to catalyse the development and implementation of public law norms by governments and a wider range of actors.1 At present the production and application of regulatory standards in the work of international courts and tribunals remains ad hoc, and can be viewed in terms of an ordering of the relations between multiple coexisting domestic legal systems and international law rather than a process of constitutionalisation. However, the effusion of regulatory rubrics appearing across the jurisprudence in all the 1 Joanne Scott and Susan Sturm, ‘Courts as Catalysts: Re-​Thinking the Judicial Role in New Governance’ (2007) 13(3) Colum.J.Eur.L. 565.

Global Regulatory Standards in Environmental and Health Disputes. Caroline E. Foster, Oxford University Press. © Caroline E. Foster 2021. DOI: 10.1093/​oso/​9780198810551.003.0011

348 Conclusion international courts and tribunals featuring in this study marks a significant development globally. Most notably, the application of these standards by its nature involves the conceptualisation of States’ regulatory freedom as comparable with conferred powers, feeding a refinement and redefinition in twentieth-​century understandings of sovereignty that appears almost inevitably to be involved in the deepening plurality of law globally. It is not that international legal sovereignty is necessarily to be regarded as being conferred on States by other States or by international law. Rather, international law is coming to see international legal sovereignty as more akin to a domestic sovereignty conferred on the state by human persons. This sovereignty may be subject to challenge with reference to the doctrines of misuse of powers and détournement de pouvoir. The processes now taking place have a decades-​long history. Scholarly discussion on the abuse of rights of doctrine nearly a century ago described States’ independence of legal regulation as the rule rather than the exception, but also acknowledged that in light of the interests of the international community there could be nothing absolute even in so-​called exclusive rights of domestic jurisdiction.2 The conclusion of the United Nations Convention on the Law of the Sea in 1982 is said to have marked an important moment in the move towards the understanding of many of States’ rights and duties from a perspective in which power is fettered and the general interest of international society is correspondingly better protected.3 With the advent of the World Trade Organization in 1995 it was further recognised that effective international co-​operation required a willingness on the part of States to constrain themselves and relinquish at least a minimal power to international adjudicatory bodies to articulate their obligations. The difficulty lay in how to formulate the necessary mediating principle or principles.4 There is a growing appreciation that the pursuit and protection of global public goods may prove to be the engine that increasingly instantiates requirements like those seen in the regulatory rubrics studied in this book.5 Established regulatory standards could in due course potentially come to be considered as an important aspect of an envisaged international public order.6 Arguably, in a globalising world, sovereignty was necessarily going to come to be understood differently over time.7 International adjudicatory process was also 2 H Lauterpacht, The Function of Law in the International Community (Clarendon Press 1933) 305, 305–​306. 3 Philip Allott, ‘Power Sharing in the Law of the Sea’ (1983) 77 AJIL 1, 27. 4 Stephen P Croley and John H Jackson, ‘WTO Dispute Procedures, Standard of Review, and Deference to National Governments’ (1996) 90 AJIL 193, 211–​212. 5 Eyal Benvenisti, The Law of Global Governance (Hague Academy of International Law 2014) 228–​231. 6 Consider Hermann Mosler, The International Society as a Legal Community (Rev edn, Sijthoff & Noordhoff 1980). See also James Crawford, International Law as an Open System: Selected Essays (Cameron May 2002) 18. 7 John H Jackson, ‘Sovereignty Modern: A New Approach to an Outdated Concept’ (2003) 97(4) AJIL 782, 802; Eyal Benvenisti, ‘The Future of Sovereignty’ in Sabino Casssese (ed), Handbook on Global Administrative Law (Edward Elgar Publishing 2016) 491.

Conclusion  349 inevitably an arena in which the processes contouring this evolution would be seen at work.8 The regulatory disputes coming before international courts and tribunals have to be addressed in principled fashion, and their reasoning explained, and consistency in international adjudication is also expected. These bodies may have little option except to develop interest-​balancing formulae for understanding and applying the law. The standards and tests they articulate then provide a basis for addressing numerous similar situations. The rubrics they identify continue to evolve as the deficiencies and promise of alternatives are perceived. Sooner than expected, global regulatory standards predictably emerge. What advice can be offered for international courts and tribunals, government advisers, practising international lawyers, scholars and all with an interest in these matters, especially public actors? The demands on international courts and tribunals today are significant, reflecting the sophisticated nature of the contemporary international adjudicatory role. The international judge or arbitrator must remain principled in his or her conception of the judicial function and role and is expected to be able to demonstrate an understanding of the theoretical foundations of the legal order within which they are acting.9 A capacity for broad oversight vis-​à-​vis the ‘overall global agenda’ and an ability to appreciate policy considerations at scale is considered essential. International courts and tribunals must be prepared to bear in mind power asymmetries and the potential accrual of benefits to particular subsections of global society, including the status and empowerment accruing to non-​ natural persons. These pressures on international adjudicatory bodies combine closely in regulatory disputes. Regulatory disputes call for international courts and tribunals to go beyond the specific terms of the provisions or rules at hand, articulating the standards and tests needed to ascertain the balance of legal interests in the applicable rules and provisions. As we have seen, firstly, the emerging global regulatory standards characterising environmental and health disputes have included a requirement for regulatory coherence. This is implemented through diverse tests of the relationship between regulatory measures and their objectives including tests examining whether the measures are capable of serving the objectives in question, tests of reasonableness and rationality or even proportionality in this relationship. Secondly, a global regulatory standard is beginning to emerge that requires a regulating State to have demonstrated due regard for the interests of other States. Thirdly, certain of States’ regulatory obligations are considered to call for performance to a standard of due diligence. However, the elaboration of these standards and tests marks only a certain point on the journey, and the standards and the tests applying them can be expected to continue to evolve. 8 Neil Walker, Intimations of Global Law (CUP 2015) 188; N Walker, ‘Beyond Boundary Disputes and Basic Grids: Mapping the Global Disorder of Normative Orders’ (2008) 6 ICON 373, 376–​377, 394. 9 Gleider I Hernández, The International Court of Justice and the Judicial Function (OUP 2014) 292.

350 Conclusion Simple answers to the challenges faced by international courts and tribunals in regulatory disputes may be difficult to identify. Transparent articulation of the reasons for conclusions reached in judgments, awards and advisory opinions is needed, together with ongoing reflective interaction between judges, practitioners and the broader scholarly community.10 Indeed a juristic response to plurality invites all to engage in the idea of the theoretical management of the law as a socially valuable practice with aspirations including the common good and justice, as well as the achievement of order.11 Public information and international engagement is essential. Wider discussion of the issues raised will be instrumental, and this book is intended both to provoke and to contribute to this debate.

10 Andreas Paulus, ‘International Adjudication’ in Samantha Besson and John Tasioulas (eds), The Philosophy of International Law (OUP 2010) 207, 221, 223. 11 Roger Cotterrell, ‘Do Lawyers Need a Theory of Legal Pluralism?’ in Nicole Roughan and Andrew Halpin (eds), In Pursuit of Pluralist Jurisprudence (CUP 2017) 20, 38–​39.

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Index For the benefit of digital users, indexed terms that span two pages (e.g., 52–​53) may, on occasion, appear on only one of those pages.  abuse of rights  8–​9, 20, 30–​33, 36–​37, 143, 145–​46, 176–​78, 181, 250n.11, 267, 293–​99, 327, 348 accountability  14–​32, 37–​38, 45n.133, 140–​ 41n.35, 311, 336, 340–​41 advisory opinions  5–​6, 51, 54, 89, 96, 129, 285, 287–​88 Agreement between the United States of America, the United Mexican States, and Canada (USMCA)  265 American Convention on Human Rights/​Inter-​ American Court of Human Rights  59–​60, 126–​28, 321 amici curiae  241–​42, 312–​13, 315–​16 balance of legal interests  ix, 3–​5, 11–​12, 14–​15, 20–​21, 30–​31, 33–​34, 36, 43–​44, 47, 48, 52, 53–​54, 64–​65, 82, 85, 90, 104, 145, 146, 147–​ 49, 152, 153, 160–​61, 162, 165–​66, 170–​71, 172, 173–​74, 177, 181–​82, 190, 195–​96, 205–​ 6, 207, 209, 210, 218, 244, 247, 248–​49, 256, 257, 258, 261, 263–​64, 265–​66, 273, 279–​80, 282, 283–​85, 293–​95, 297–​98, 309, 311, 312–​ 13, 316–​17, 328–​29, 332–​34, 335, 340–​41, 348–​49, see also weighing and balancing biological diversity in areas beyond national jurisdiction  6–​7, 131, 328–​29n.104 burden of proof  33–​34, 193, 309–​10, 346, see also explanation; justification Canada-​European Union Comprehensive Economic and Trade Agreement (CETA)  21–​22, 135, 215n.1, 252n.29, 268 coastal States  25, 27–​28, 60–​69, 78–​79, 80–​81, 85–​87, 90–​96, 103–​4, 113–​21, 321 community of interest  28 comparative public law  7, 48, 307–​9, 315–​16, 320, 340–​41 Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP)  6–​ 7, 21–​22, 221n.17, 231n.91, 252n.29, 265, 331–​32 conferred power  8–​9, 15, 32, 294–​97, 307–​10, 325–​26, 341, 347–​48

constitutional  8–​9, 32, 37–​39, 210–​11, 273, 289–​ 90, 294–​97, 307–​9, 320, 341, 346 constitutionalisation  8–​9, 14–​15, 20, 36–​41, 48, 324–​26, 335–​36, 337–​38, 346, 347–​48 fundamental rights  14–​15, 37–​38, 250–​51, 259–​60, 266, 310 fundamental values  37–​38 constitutional pluralism  38–​39, 45–​46, 286 Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)  125–​26, 314 co-​operation  15–​16, 21–​22, 30, 35, 97–​113, 120–​ 21, 124–​25, 296–​97, 308n.13, 327, 348, see also law of co-​operation COVID-​19 pandemic  ix, 15–​16, 249, 283–​ 84, 317–​18 deference  230–​31, 238, 248–​49, 306, 323, 342–​45 détournement de pouvoir  32, 294–​96, 347–​48, see also misuse of power Dispute Settlement Body (DSB)  135–​36, 141 Dispute Settlement Understanding (DSU)  137–​ 38, 141–​42, 173, 208 energy security  161, 317–​18 environmental impact assessment  105–​6, 110n.152, 124–​25, 128 European Convention on Human Rights/​ European Court of Human Rights  40–​41, 67, 252, 259–​61, 263, 265–​67, 314, 343–​44 European Union (EU) law  11–​12, 23–​24, 37, 38–​39, 248, 251–​53, 259–​61, 263, 267–​68, 271–​72, 286, 325–​26 Exclusive Economic Zone  27–​28, 29–​61, 68n.98, 87, 90–​96, 113–​26, 298–​99, 328–​30 expert evidence  33–​34 explanation see justification flag States  27, 29–​30, 63, 64–​65, 66, 68–​69, 103–​ 4, 113–​21, 123–​25, 130 food security  237–​38, 244 fragmentation  13–​14, 305, 306, 310–​20, 326, 334, 341–​42

374 Index general principles of law  247–​48, 249–​52, 262 German law  23–​24, 41n.107, 251–​52, 266 global administrative law  7–​8, 16, 20, 23–​24, 30–​33, 46, 309–​10, 335–​36 global commons  28–​29 globalisation  3, 36, 37, 43–​44, 307 good faith  25–​26, 31–​32, 76–​78, 80–​81, 90–​91, 92–​95, 96–​97, 100–​1, 105n.112, 111–​13, 120–​21, 176–​77, 216–​17, 226, 241–​42, 244, 254, 296–​97, 298–​99, 327, 338–​39, 342–​43 good governance  34–​35, 331 good neighbourliness  73–​74, 81, 321, 327 High Seas  3–​4, 27, 51–​52, 89–​90, 98, 116, 118–​ 20, 175, 202–​3, 204, 328–​30 indigenous peoples  9, 40–​41, 186, 189–​91, 315n.41, 319–​20 inherent powers  33–​34 ‘interface’ norms  40–​41, 324–​25 internal balancing  23, 27–​28, 93–​95, 327–​28, 334n.136, 347 International Covenant on Civil and Political Rights  67, 259–​60 international investment court/​appeals mechanism  10, 19–​20, 215, 273, 299–​ 300, 301 International Law Commission  67–​68, 90, 93, 99–​101, 109, 110–​11, 120, 128, 291 international negotiations  xxx transparency  13, 37–​38, 44–​45 public involvement  13, 37–​38, 281, 350 international regulatory system/​system of collective regulation  97–​98, 295–​96 interpretation see also Vienna Convention on the Law of Treaties clarification  10–​11, 136–​37, 141, 193, 299, 301–​2 context  4, 68–​69, 75–​76, 89, 93, 113, 117, 128, 130, 135–​51, 163–​64, 173, 194, 206, 209–​10, 290, 291, 302–​3 effectiveness  4, 61–​62, 89, 128, 173, 209–​10, 290, 291–​92, 302–​3 effet utile  194, 291 object and purpose  75–​76, 93, 96, 150, 195–​ 96, 206, 259, 291–​92, 296–​97, 338–​39 judicial function  35, 54, 245, 268, 301–​2, 342, 349 judicial review  245–​46, 306, 308–​9, 312–​13, 320, 323, 337–​45, see also standards of review domestic administrative law  250–​52, 266 justification  27–​28, 95, 96–​97, 207–​8, 223, 309–​ 35, see also explanation

law and economics  136–​37 law of coexistence  35 law of co-​operation  35, 308n.13 legitimate authority  ix consent  43–​44 normative perspective  7–​8, 20, see further relative authority sociological perspective  41–​42, 286–​87 lex mercatoria 322 mandatory relevant considerations  14, 312–​13 margin of appreciation  40–​41, 67, 165, 249n.8, 338–​39, 342–​45 misuse of power  8–​9, 31–​32, 36–​37, 295–​97, 327, 347–​48, see also détournement de pouvoir obligations of conduct  100–​2, 104–​7, 108–​9, 111, 117, 118–​19, 124–​25, 127–​28, 130 ordre public see public order other-​regarding  viii, 4, 27–​28, 89–​90, 306, 327–​28, 330–​31, 336, 347 Paris Agreement  6–​7, 30, 55n.26, 131 Permanent Court of Arbitration  9–​10, 51, 55, 70–​72, 80–​82, 327 precautionary principle/​precautionary approach  76n.149, 110, 110n.152, 310n.19, 311–​12, 323, 326 precedent (doctrine of)  5–​6, 138–​39 private actors  4, 11, 13–​15, 29, 35, 247–​48, 258–​ 62, 263, 265–​67, 272, 273, 301–​2, 305, 306, 320–​22, 323, 326–​27, 331–​33, 334, 337–​38, 340–​42, 346, 347 proportionality  247–​75, 323–​27 disproportionality  27, 193, 199–​200, 247–​48, 249, 253–​54, 263, 267–​72, 326–​27 due regard (as an alternative)  15, 23, 306, 323–​37 proportionality and private interests  247–​48, 258–​62, 263–​67, 272, 273, 306, 323, 326–​27, 331–​33, 334 proportionality analysis (extended)  23–​24, 248, 252–​53, 257, 268 proportionality (stricto sensu)  12–​13, 14–​15, 23–​24, 26–​27, 32–​33, 39–​40, 46–​47, 145, 147n.52, 148–​49, 199–​200, 210, 247–​75, 280, 306, 311–​12, 323–​37, 345, 349 proportionality as a general principle of law?  247–​48, 249–​52, 262 public order (ordre public)/​public order system  36, 245, 348

Index  375 reason-​giving  ix–​x, 32, 300, 331 relative authority  7–​9, 12–​13, 14–​15, 20, 26–​27, 41–​47, 48, 52, 85–​86, 130, 172–​73, 244, 273, 279–​80, 281–​85, 289–​90, 302–​3, 323–​24, 325–​26, 336–​37 coordination  12, 14–​15, 45–​46, 47–​48, 247, 273–​74, 279–​80, 281, 282–​83, 284–​85 toleration  45–​46, 284–​85 ‘governance reasons’  45–​46, 47–​48, 281, 284–​ 85, 302–​3, 336–​37 review see judicial review right to a healthy environment  11–​12, 252 Rio Declaration  99–​100 rule of law  35, 37–​38, 139, 221–​22, 294–​302, 309 security  3, 16, 56, 90–​91, 143–​44, 149n.59, 163, 194n.99, 207n.171, 220–​21, 263n.83, 296–​ 97, 332n.128, 345n.204 soft law  311–​13 sovereignty  8–​9, 13–​14, 15, 32, 36–​38, 61–​62, 69–​70, 81–​85, 92–​93, 121–​22, 294–​97, 299, 305, 306, 307–​22, 325–​26, 334, 336, 337–​38, 341, 346 standards (distinguished from rules)  4–​5, 33–​ 35, 136–​37, 281, 302–​3

standards of review  7, 75–​76, 301, 306, 337–​42 Stockholm Declaration  99–​100 subsidiarity  35, 45–​46, 322, 324–​26, 343–​44 sustainable development  21n.8, 161, 181–​82, 311–​12, 312n.27, 316–​17 tort of injurious interference  36 Transatlantic Trade and Investment Partnership (TTIP)  21–​22, 332n.124 transparency  13, 14, 21n.11, 32, 37–​38, 44–​45, 216–​17, 219, 223, 230, 256, 300, 330–​32, 345 Vienna Convention on the Law of Treaties  137, 150, 176n.11, 185–​86, 274–​75, 291, 296–​97, 313, 314 weighing and balancing  145, 147–​49, 153, 154, 160–​61, 162, 165–​66, 170–​71, 173–​74, 209, 311 World Trade Organization dispute settlement  Appellate Body appointments crisis  ix, 9–​11, 135–​36, 137–​42, 173–​74, 210, 299 Multi-​Party Interim Appeal Arbitration Arrangement  19–​20, 139