U.S. LAW & GLOBAL TRADE RELATIONS.

   Finally, the Congress and President enacted legislation that will eventually compensate the U.S. diplomatic and military personnel held hostage for 444 days in Teheran in 1979. This has now  ended a disgraceful period of American diplomatic history. It evidences the newer period of state-sponsored terrorism that we face and the need to protect the rights of victims.

      President Carter signed the Iranian Hostage agreements that prohibited law suits by these victims. These agreements rewarded one of the first major acts of state-sponsored terrorism in the post-war era.  

     Finally, the Congress and President enacted legislation that will eventually compensate the U.S. diplomatic and military personnel held hostage for 444 days in Teheran in 1979.

      Prohibiting law suits was part of the agreement to get our personnel back. President Carter acted under his inherent authority to settle diplomatic claims which is a part of his executive authority under the Constitution.

     For years this was upheld by the Supreme Court and viewed as consistent with historical precedent in settling such claims.  The courts, the President, and Congress refused to recognize the rights of these victims. Things have now changed, finally.

     I’ve argued against these agreements for over thirty years in various articles. They were concluded under military duress (capture of the US embassy in Teheran) and in violation of customary international law of treaties and diplomatic immunity. Specifically, Article 52 of the Vienna Convention on the Law of Treaties voids coerced and imposed treaties.

    This newer international law was subsequent to the  presidential precedents in settling claims during the 19th century and prewar periods in diplomatic history. This was over-looked by U.S. courts. But private litigation pursued. Demonstrating the great importance of aggressive litigators and the judicial system in addressing international issues that the Congress and the President don’t want revisited.

     Really glad that this compensation legislation has now been enacted. Long-overdue. Now it has to be actually effectuated under our new financial sanctions legislation, anti-terrorist legislation, and recent judicial actions against foreign financial institutions who violated these laws.

     We are in a new era of ever-increasing terrorism and both U.S. law and international law need to recognize this.

…. “36 Years Later, Iranian Hostages Win Restitution — Congress Provides Up to $$.4 Million Each for Time in Captivity.” New York Times (December 2, 2015).

… Malawer. Collection of Essays on the Iranian Hostage Accords.” (Hein 1986).

… Malawer, “Coerced Treaties (Article 52) and the Vienna Convention on the Law of Treaties.”  Vanderbilt (1970).

Various historical and semi-historical trade developments have emerged in a geopolitical context recently. They include among other, US oil export ban, new ITA tariff reductions, the Paris Climate Agreement, Cuban-US compensation discussions, global tax and global corruption. Here are some specifics ………….

Lifting oil export ban makes for more global trade, less efficiencies and fewer subsidies. “Lifting the U.S. Oil Export Ban.” Financial Times (December 18, 2015).

Biggest IT tariff reductions in twenty years. “Information Technology Agreement.” WTO News (December 16, 2015).

US airlines have antitrust exemptions & huge mergers. Resulting in poor service. Gulf competition is most welcomed. “Mideast Rivals.” New York Times (December 14, 2015). 

Executive agreement as means for Paris Climate Agreement makes sense since have no domestic law consequences. Malawer, “Paris Climate Agreement — Treaty or Executive Agreement.” LinkedIn Blog (Malawer) (12.15.15).

Good analogy between the Paris Climate Agreement reached in Paris yesterday and the GATT agreement reached over 60 years ago. The former did for international trade what many hope the agreement reached in Paris will do for international climate. “Obama and Paris Climate Agreement.” Washington Post (December 12, 2015).

U.S. files a new case against China for VAT discrimination concerning aircraft in China. “US Files New Case.” WTO News (December 9, 2015).

New article in the New York Law Journal. It discusses two different means of litigating issues against member states by other member states and by foreign investors (multinational corporations) in the proposed TPP provisions for dispute settlement. Malawer, “TPPP and WTO Dispute Resolution.” New York Law Journal (December 8, 2015).

Compensation to Cuba for US sanctions as offset for Cuban nationalizations. “Cuban Compensation for Prior Nationalizations.” “Cuban Compensation.” Washington Post (December 8, 2015).

Global tax is a driver for international business operations and transactions. Malawer, “Global Tax as Driver for Global. Commerce.” LinkedIn Blog (Malawer) (November 25, 2015).

This discusses U.S. foreign corruption and money transfer laws, domestic money laundering, and state ‘commercial corruption’ laws. “Foreign Corruption and FIFA.” (Oct. 23, 2015).

     First, a quick review of some salient aspects of Chapter 28 (Dispute Settlement) and Chapter 9 (Investment) of the TPP.

•  The Dispute Settlement procedures between states for trade disputes (Chapter 28) is separate from the Investor-State dispute settlement (ISDS) mechanism (Chapter 9) for disputes between private parties and governments over investment issues.

• For trade disputes between member states a panel system is established to hear disputes between states. There may be a choice of forums, for example, between the TPP system and the WTO dispute system.

• The function of the panel is to provide an objective assessment. Reference to the Vienna Convention on the Law of Treaties as to treaty interpretation is very welcomed. It sets firm guideline in interpreting treaty obligations.

• Prompt compliance is required. A state’s non-conforming practice is required to be stopped. Compensation and then suspension of trade benefits (trade sanctions — tariff surcharges) are permitted. Non-compliance procedures are provided for.

• Most important as to private commercial disputes between firms no firm may bring an action in domestic courts. “No Party may provide a right if action under its domestic law ….” However, parties shall provide for enforcement of foreign arbitral awards.

• As to foreign investment disputes between a firm and a state, they may be brought before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) or any other arbitral tribunal agreed upon or the tribunal established by the investment agreement chapter. 

• This is a modified form of the ‘Investor State Dispute Settlement’ (ISDS) procedures that have been used for years by the U.S. in its investment treaties and including NAFTA which established international panels to review investment disputes.

• This procedure is aimed at, in part, issues of nationalization and expropriation of foreign investments. Most interestingly, it includes in an annex a provision confirming the customary international law rules concerning minimum standard of treatment (MSD) and protection of investments by aliens.

Three quick observations:

• The TPP dispute resolution process, unlike the WTO’s system, does not provide for any appeals. Not sure why? Wouldn’t be that more time consuming. It would provide for an extra level of oversight and increase legitimacy.

• The investment dispute mechanism is a well known approach via the World Bank’s ICSID. It has been significantly enhanced and adjusted. That’s good.

• The inclusion of provisions specifically referencing to customary international law and the Vienna Convention on the Law of Treaties, as to treaty interpretation, clearly demonstrates that these newer provisions sit firmly within the growing international legal system for providing ‘rules of the road’ for a dynamic global economy.

     My conclusion. Just based upon the above, TPP dispute resolution system is a well thought out approach to global trade and investment litigation for this ever-growing interconnected eco system. It sets the terms for future trade relations. This is good for U.S. national interests, the global economic system, and all players in this system, older ones as well as newer ones.

      The next two questions: (1) Will the congress approve the TPP? (2) What will be the impact of these dispute resolution provisions on the provisions currently being discussed with the EU under TTIP? The Europeans are already pushing for a more formal and permanent international court to hear trade and investment disputes. We’ll see …..

….. “Chapter 28 — Dispute Resolution in the TPP.” (Official Text) USTR (Nov. 5th, 2015).

….. “Chapter 9 — Investment and TPP.” (Official Text) USTR Nov. 5th, 2015).

….. “Investor State Dispute Settlement.” USTR (March 2015).

     The biggest development the last three weeks or so in global trade relations was the start of the battle by the Obama administration to get TPP through Congress. This proposed agreement includes new rules for dispute resolution over trade and investment matters. The relation of these new rules, as the agreement states,  to WTO rules for settling disputes, customary international law, and international commercial disputes  are striking and historical.

      But in addition to this development, somewhat less known, is the U.K. shift in trade relations toward China (as piece of President Xi’s visit to the U.K.), and the EU push for a new investment and tax  policies toward multinationals as well as cyber proposals. These are long term developments with significant implications for global trade relations today. Here are some additional particulars:

• “Obama and TPP and Congress.” Washington Post (11.6.15).

• Malawer, “Dispute Settlement and TPP.” Global Trade Relations Blog (11.6.15).

• “TPP and New Cyber Rules.” Global Trade Relations Blog (11.6.15).

• “U.S. and EU Cyber Regulations.” Financial Times (Oct. 30, 2015).

• “U.K. – China New Trade and Investment Policies and Relations.” Global Trade Relations Blog (October 25, 2015).

• “EU Releases New Investment and Trade Policy.” White and Case Memo (Oct. 20, 2015).

• “Global Tax Targets Multinationals.” Financial Times (October 9, 2015).