Turning Enemies into Adversaries - T-TIP Negotiations and the Quest for a New Westphalia Momentum -
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Neither universalism, nor isolationism can be regarded as legitimate representations of a pluralist global society. Evidence can be brought that in economic terms the current paradigm engenders instability by enhancing inequality within and among diverse constituencies. The present-day factual reality denies the zero-sum game pattern and, together with that, the reliability of the Westphalian model. What type of legal processes should be used in order to ensure investor protection for the purpose of concluding free trade agreements between the EU and a sovereign of equal calibre? With this question in mind and against the factual reality of an enlarged EU and other altered economic contingencies, we engaged in the study of a number of relevant disputes on investor protection obligations and state aid control.
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Turning Enemies into Adversaries - T-TIP Negotiations and the Quest for a New Westphalia Momentum -
- 1. TURNING ENEMIES INTO ADVERSARIES TTIP Negotiations and the Quest for a New Westphalia Momentum
- 2. THE PAST IS PROLOGUE …
- 3. A ‘BIT’ OF HISTORY: INVESTMENT LAW THROUGH THE AGES (1/4)
- 4. A ‘BIT’ OF HISTORY: INVESTMENT LAW THROUGH THE AGES (2/4)
- 5. A ‘BIT’ OF HISTORY: INVESTMENT LAW THROUGH THE AGES (3/4)
- 6. A ‘BIT’ OF HISTORY: INVESTMENT LAW THROUGH THE AGES (4/4)
- 7. THE TTIP MOMENT: TO ISDS OR NOT TO ISDS? (1/2)
- 8. THE TTIP MOMENT: TO ISDS OR NOT TO ISDS? (2/2)
- 9. ELEMENTS OF CLASSICAL ISDS: THE PATH TO SUCCESS
- 10. ISDS ISSUES TO BE ADDRESSED BY THE EC
- 11. ISDS REFORMATION IN THE VISION OF THE EUROPEAN COMMISSION Security of tenure A set salary Objective method of assignment Prohibition on outside lawyering Judicial procedure to solve conflict of interest claims
- 12. FIRST CLASH: HUNGARIAN PPA CASES (I)
- 13. FIRST CLASH: HUNGARIAN PPA CASES (I)
- 14. THE PARALLEL UNIVERSE OF EU LAW
- 15. UNITED IN DIVERSITY Paul Schiff Berman 2013
- 16. FIRST CLASH: HUNGARIAN PPA CASES (II)
- 18. HYBRID JUSTICE
- 22. EPILOGUE The conflicting nomoi in our essay may be represented as two tectonic plates moving away from each over. The point of departure is described by the term “divergent boundary”. In nature as in law, divergence may stimulate the creation of new material. Avoid the dilemma of choosing between automatic subordination and insistence on jurispathic autonomy! Allow divergence to function as a catalyst of jurisgenesis!
Editor's Notes
- 1- Horia + Emanuela [Horia] The Peace of Westphalia (1648) signified the emergence of a new international order, entrenched in a different conceptual framework. Diverging from the medieval model, the Westphalian paradigm proposed a new concept of sovereignty, granted to each state formation in identical terms as concerns its international capacity and national hegemony. It was a legal revolution in the utmost sense of the word. It was not simply a moment, but a new paradigm, the eruption of sovereignty into the world, shattering its foundations. Nowadays, we might be facing a similar moment. International order is deeply troubled and in search for a new consensus. Tension is rising up, as universality and particularity collide in a legal agora turning out of joint. Facing such challenges, we believe that the best way forward is to reform from within and not crash under unbearable external pressure. [Emanuela] Robert Cover argued that legal meaning cannot be reduced to manifestations of positive law. In Nomos and Narrative (1983), Cover wrote that: “If there existed two legal orders with identical legal precepts and identical, predictable patterns of public force, they would nonetheless differ essentially in meaning if, in one of the orders, the precepts were universally venerated while in the other they were regarded by many as fundamentally unjust”. Justice requires either the annihilation of the oppressive function of law or, alternatively, the creation of an autonomous legal system paralleling the larger system. Lately, a tension can be witnessed between the two parallel systems - EU and IIL - that initially were meaning to enhance and promote justice and rule of law in relation to investors’ rights. It may sound as a cliché, but this change of energy brings about an opportunity.
- Slide 3 2-Horia
- Slide 4 3-Horia
- Slide 5 4- Horia
- Slide 6 5-Horia
- Slide7 6-Horia
- Slide 8 7-Horia
- Slide 9 8-Horia
- Anim 1: The commitments taken through the signing/ratification of any IT imply a restriction of the sovereign rights. Though, a distinction must be made between an obligation imposed on the state and an obligation to comply with international law within the state. The protection of the right to regulate refers to the latter. Anim 2: The independence of the AT comes at a cost represented by the wide margins of discretion in the interpretation of FET and other concepts. Discrimination of the investor whose situation is not covered by a BIT constitutes a problem to be solved. Anim 3: As known, in EU law there is a limited direct right to access the CJEU. Hence, the procedural justice of the investor is anchored in the procedural guarantees offered by the national legal order and the principles of equivalence and effectiveness. In the presence of a minimalistic instrument of “state liability” - provided by EU law - this discrimination appears to be even more difficult to surpass. Anim 4: Anim 5: The provisions on the Union’s Ext Action reflect the necessity and obligations to coordinate the actions taken by MS into a convergent movement ensuring that the Union is able to assert its interests and values on the international arena. Though, the firm assertion of these common interests and values shall not imply the denial or disregard of the interests and values of other competing nomoi. Anim 6: Anim 7-8: The EU law in the light of KADI doctrine dictates that the IL cannot pass without a constitutional check, while the IL in the interpretation of the ATs treats EU law obligations embedded in the 28 national legal orders as FACTS. The collision is imminent and it cannot be ignored or lessened. The TTIP Draft adopts a curious stance on this issue by proclaiming (art 13(3-4)) the lack competence of the arbitral judges to interpret domestic law and attempting to ensure that domestic law will be treated as just “facts”. Robert Cover emphasises –with his astonishing intellectual energy – that the clash between contrasting nomoi cannot be avoided, thus mechanisms of conflict resolution that are deferential to the parties involved and mindful of their interests must be provided for. “Norms” convey into “human action” that’s to say the “ought-to-reality” into “is-reality” by passing through a “social reality-check” which is not the same with the sense of morality or the attachment to a set of universally valid arguments.
- Despite the named shortcomings, some progress can nonetheless be noticed in the newest version of the TTIP-draft. Anim 1: The absence of the possibility to bring an action for annulment based on substantive merits has been remediated and several measures increasing the legitimacy and accountability have been taken. Anim 2: A change to the better in relation to ensuring the equilibrium on appointments can be witnessed. Anim 3: Judges will be chosen randomly, which results in better objectivity. Anim 4: A salary is not provided for, but a retainer fee will be offered. Anim 5: Since the income from the fee seems to be insufficient, the outside lawyering will be allowed. Anim 6: The draft deals with the matter of conflict of interests, though it does not provide a judicial procedure. This may indicate that the presidents of the two instances will enjoy a lot of discretion. Anim 7: Anim 8-9: On the right side of the slide, you may see the five criteria defining a PUBLIC COURT. Is ICS a public court? The answer is negative. 1, 3 OK, 2, 4, 5 Insufficient
- Slide 12 10-Horia
- Slide 13 11-Horia
- Anim 1: The EU has been created in its incipient form in the aftermath of the 2nd ww. The participants to the EEC were determined to eliminate the old rivalries by merging their essential interests (economic and world peace). This plan resulted in several common policies (already fr the start, 1958), common agricultural/transport/competition policy/common customs. Anim 2: 1st The EU becomes as a result of ToL subject of international law. Art 47 TEU edicts that “The Union shall have legal personality”. 2nd The EU:s competence to regulate direct investment is maybe the most important change brought by the ToL. See: 207(1) TFEU and 3(1)(e) TFEU. 3rd The overlapping between the ECT and BITs on one side and a set of EU common on the other side has gradually become manifest. The only safe-harbour was offered by the primacy of pre- accession BITs signed with 3rd countries, though it was followed by an obligation to eliminate the incompatibilities. Anim 3-4-5-6: EU’s competence to conclude IT is stipulated in art 3(2) TFEU. Anim 7-8: Is it possible to derogate from EU primary law? In the beginning, the answer appeared to be based on a classical understanding of the pyramid of norms, where international law ought to prevail. After Kadi, the question has been reformulated: When is it possible to obtain a derogation from the primacy of EU primary law and thus continue to overtrump the adversary? R: When those provisions do not constitute the very foundation of Union legal order. This approach appears to be ambivalent and possibly unreflective. It may weaken the reliance on the commitment taken by EU/MSs under international law. Anim 9-10-11: In Case C-203/03 Commission/Austria, a potentially important answer was provided on this issue of unreflective rejection based on the principle of primacy. Austria was party of the respective ILO before its accession to the EU in 1995. The ILO contains a prohibition of work for women in mines, which is incompatible with the principle of equal treatment as reflected by the EU Directive 76/207/EEC making part of the acquis at the relevant time. The obligation to denounce must be sufficiently clear at the moment when denunciation is possible under the conditions imposed by the international convention in question. Such approach is definitely more deferential and mindful of the interests involved.
- Read quote… Paul Schiff Berman 2013 Jurisgenerative Constitutionalism: Procedural Principles for Managing Global Legal Pluralism … (quote shown on the slide) Anim 1: The main point of creating the Union was to eliminate old rivalries. It may happen that new rivalries have been created during this process, but this is not necessarily a bad thing! Anim 2: Consensus has been proven to reflect a certain approach to reality that does not take into consideration the fact that law is anchored in social reality and social interactions are inherently conflictive. Anim 3: Union solution to old rivalries has in fact created new law in the process of constructing arguments for getting closer and being “united in diversity”. (2nd quote: jurisdictional redundancy) Anim 4: In relation to the accession of 3rd countries inter alia Russia and Morocco to the Hague Convention that had been superseded by the Regulation 2201/2003, the CJEU required an analysis of the relation between that specific Convention and the EU law in force. The Commission reaction in re to the denunciation of intra-EU BITs shows exactly its strategic window towards the world. The risk of undermining the uniform and consistent application of EU law is dealt with by creating internal procedural mechanisms. CJEU as well has shown its determinacy to eliminate the possibility of competition (famous Opinion 2/13, 18 Dec 2014). In the press release from June 2015 in re to an action to be taken under art 258 TFEU against 5 MSs among them, Sweden and Romania, it can be read the following. The Commission’s opinion is that, since enlargement, this sort of additional reassurance should no longer be necessary because all Member States are subject to the same EU rules in the single market, including those on cross-border investments. The Commission is ready to explore the possibility of a mechanism for mediation of investment disputes within the EU.
- Let’s analyse now the Power Purchase obligations (compensation for stranded costs) fr the perspective of EU law. This parallel analysis of conflicting decisions on interrelated disputes is used in order to exemplifies the jurisdictional redundancy. Anim 1: What is the status of the ECT under EU law? ECT has legal effects in the internal law of the EU and the Member States. ECT creates rights and obligations for the Union institutions and Member States. ECT = part of the European legal order. Anim 2: Though, the ECT does not enjoy exclusivity and primacy. ECT = secondary law, BUT situated higher hierarchically than EU secondary law produced by the EU institutions (Reg, Dir, Dec). A COM Dec does not have higher value than the ECT, but the prohibition in Art 108(3) TFEU or any other rule, sufficiently clear and precise leaving no discretion will set aside any conflicting rule in the ECT, this is even truer when the ECT rule is unclear or abstract. Anim 3-4: What did happen in Electrabel/Dunamenti?
- Let’s take a deeper look into it. Anim 1: In 2002 the Hungarian authorities notified to the Commission the state measures, which instituted a system of compensation for the costs borne by MVM as an electricity wholesaler. (However it withdrew the notification not existing aid all measures being in force at the date of accession) In May 2004, Hungary acceded to the European Union. The procedure started on 4 May 2004, the formal investigation in Nov 2005 - NN SA.17365 04.06.2008. Anim 2: The existence of unlawful (not notified SA) must be assessed at the moment when it should have been notified. Was the state acting as an economy investor at the point when it granted the PPAs? One may argue that having in mind the pursuit of privatisation of these plants, the PPAs were necessary for being able to sell at a better price. They could have been analysed as an element of the selling price and then it could have been scrutinised if a MEI could have accepted such a price. Anim 3: In all cases of conflict between Int Investment and SA law, the foreign investor invokes the protection of legitimate expectations. Anim 4: and in all cases the CJEU reaffirms that the breach of the standstill provision 108 3, leaves the investor with no protection of LE under EU law, since the promises made by the State were unlawful. Anim 5: No guarantees against recovery granted by the State can be compatible with EU law. They are prone to constitute SA too. Anim 6: Article 108 3 has direct effect and it enjoys a superior position in the hierarchy of law in the EU legal order (above the ECT). Anim 7: What can a SA alleged beneficiary slash foreign investor do in order to achieve protection against the state failure to notify? This is a million dollar question!
- (18) Emanuela Anim1: It is important to understand that often theoretical dilemmas such as either “pluralism” or “constitutionalism”, either “monist” or “dualist” either “statist” or “universalist” are simplifications of reality. Anim2: the protection of investor in IIL is also a mix containing elements of deferential treatment such the automatic recognition of arbitral decisions by courts in any of the ICSID states, but also territorial thinking such as the definition of foreign investor. Anim3: What is the actual source of conflict?... Anim 4: if there is clear agreement in the liberal minded world about the necessity to protect investments. The answer is the lawyer’s top favourite : It depends on Anim 5: It depends on whether the two legal discourses: - Irreconcilable : PIL-rules for allocation of jurisdiction and determination of applicable law; Slightly different – Bosphorus solution is pertinent In between, neither irreconcilable nor almost the same: subsidiarity principle could be used to relax the tension. However, closeness, as a preference for localisms, must be relevant for the issue under examination. At a first glance – some values appear to be local, as a result closer to the people, but in reality they represent jurispathic wolves in counter-hegemonic clothing. If such claims were successful, a local law with extraterritorial implications would be on the verge to set aside the supranational norm in contradiction with the primacy and direct effect principles. The same may happen when the municipal law of the EU raises claims of closeness setting aside competing norms of international law.
- 9-Emanuela A jurisgenerative ‘Decalogue’ for overcoming the conflict of legal orders and their intrinsic exclusionary logic: Anim1: Primo, each constituency shall refrain from affirming its own identity in a manner that can be perceived as a threat brought against the constitutional foundation of an alter-constituency. Anim2: Secundo, the investor-state adjudication model shall be reformed in light of its rule of law origins and goals, emphasising the core tenets of its rationale: neutrality, autonomy, transparency, subsidiarity, external and internal consistency. Anim3: Tertio, the investor-state system of adjudication should be allowed to establish a direct relationship with the CJEU via the preliminary ruling mechanism, if not as a form of a court or tribunal with equal status for the purpose of Article 267 TFEU, at least via a procedure engaging a local court of a Member State, as a referring court.
- 10- Emanuela Anim1-Quarto, an alternative solution could be to empower the Commission with a function of monitoring the application of EU law in investor-state disputes and enable it to send preliminary questions to the CJEU. Anim2-Quinto, the investor-state system of adjudication should be integrated in a heterarchical network of trans-judicial dialogue, thus joining other interlocking forums in order to enable a systematic monitoring of court decisions, enhance interlegal communication and foster institutional trust. Anim3- Sexto, in light of the doctrine of margin of appreciation, an adjudication body might be entitled to adopt an extensive interpretation of an investor right implying a higher standard of protection than the one afforded under the ECHR law, provided that this reading would be compatible with general principles of law and fundamental rights enshrined in the EU Charter. However, the situations of incompatibility must be defined in a non-jurispathic manner. The invocation of general principles in itself may conceal jurispathic tendencies.
- 11-Emanuela Anim1- Septimo, a system of ex-ante control of regulatory measures through the perspective of investor protection may offer the perfect temporal window for the coordination of those potentially conflicting normative choices interacting in the web of interlegal identities. Anim2-Octavo, in those rare cases where a radical normative difference still persists, a decision favouring an internal value in opposition with an external value must be based on substantive and comprehensive argumentation founded on a jurisgenerative constitutionalist perspective. Anim3-Nono, in specific cases, where monetary remedies do not constitute appropriate means of protecting investor rights, alternative remedies must be identified and made available before irreparable harm occurs. Anim4-Decimo, a shift to a different paradigm – meant to replace the Westphalian model with a new epitome that could provide a better representation of the contemporary economic realities – should be prepared.
- Following the agonistic philosophy, we celebrate the tension arising at the boundaries of the “tectonic” plates representing the conflicting nomoi discussed in our essay. In the study of geology, a divergent boundary occurs when two tectonic plates move away from each other. Magma rises from the mantle and it oozes up into the gap forming new crust on the edges of the plates. In nature, divergence creates new geologic material. In law, divergence may constitute the catalyst of the process of norm-generation, called jurisgenesis. In the context of conflict between EU primary law and obligations imposed by an international trade agreement such as the TTIP, jurisgenesis can be the solution for avoiding the dilemma of choosing between subordination of the EU legal order to international legal order and the insistence on the primacy of the EU legal order over international legal order. There is a need for more coherence in the constitutional framework developed by the EU at the boundary with its int. relations and this need should be acknowledged sooner rather than later in order to avoid a gigantic tectonic disruption in the application of the new generation of international trade & investment agreements. The present study defends the idea that the purpose of attaining uniformity in an interlocking international legal order and reaching close to a point of global substantive convergence, where identities collapse into each other is not only a utopia, but also an irrational, potentially harmful projection.