Redefining the ‘Centre’: International Economic Law and Grand Strategy in a Multipolar World

by Horia Ciurtin LL.M., Managing Editor of the EFILA Blog*

(Legal) Multipolarity Revisited: What Lies Beyond Westphalia?

This brief introduction to such an ambitious thematic must undoubtedly commence by positing its adherence to the (non-legal) core concept of ‘grand strategy’ and its realist avatars in international economic law. More precisely, it shall be argued that – at a certain level – the normative sphere is instrumentalised by competing nomothetic actors in order to enhance their power position and joint economic security, in a troubled multipolar world.

Thus, following John Mearsheimer’s influential paradigm and his (in)famous 1994 article regarding the false promise of international institutions, it can be affirmed that the “[international] institutions are basically a reflection of distribution of power in the world” and that the most powerful actors in the system “create and shape institutions so that they can maintain their share of world power, or even increase it”. For these reasons, international law and its main agents – international institutions – represent a formalised, but temporary consensus in the clash of competing interests.

However, this side of the story is entirely accurate only for an international arena dominated solely by sovereign state actors. Presently, as the Westphalian international system of autarchic legalities disintegrates, paving the way for a post-sovereign order, a different relation between legal macro-spaces (or, as Carl Schmitt famously called them, Grossräume) seems to emerge. New power blocs are forged from the global economic bellum omnium contra omnes, allowing them to surpass the notion of sovereignty and building stranger ‘empires’ bound together by the cold letter of international treaties which – eventually – develops into a more stable quasi-constitutional internal order.

The European Union, the NAFTA space and the Eurasian Union are just a few examples of this trend. Each of these blocs implies a loss or – at least – a limitation of state sovereignty in several fields, in the quest for attaining the upper hand in a larger global confrontation with other blocs or singular actors. In a certain way, some sovereignty is individually lost so that the sovereigns might increase its projected power in a joint manner, following their grand strategy for hegemony.

In such circumstances, the classical balance of power cannot any longer occur between single states and their shifting alliances, but rather among macro-spaces united in formal legal agreements (later turned into quasi-constitutional orders). Even though, as posited by Mearsheimer and other realists, self-interest and the desire for hegemony might drive sovereigns into such legal constructs, their origin does not account for their further development.

Thus, once roaming the international arena, macro-spaces appear as a new breed of economic ‘predators’, more powerful and more fit for survival than the sovereigns taken separately, factor which convinces such states that a (post)sovereign structural alignment might take them further in the quest for power and hegemony, despite having to share some part of the spoils with the co-victors.

Normative Mimesis: Imperial Weapon or Remedy for Lingering Divisions?

In such a context, can we still refer to a truly international system or just a series of regional sub-orders that economically interact in an episodic manner? Is the international order now also territorially fragmented, in addition to the already decried functional fragmentation?

If once upon an idealist time, ‘autonomous’ normative systems – such as FTAs, BITs, multilateral trade agreements – and the institutions that administrate them were thought to act as gap-filling mechanisms, offering a cohesive and coherent paradigm to an otherwise centrifugal setting, the new global paradigm reveals the original realist tenet.

More precisely, major power brokers – be it soft or traditional – use such instruments for their own strategic goals. While alignment with like-actors is carefully negotiated in a quest for convergence of paradigms and tactics, the relationship with non-aligned or competing actors is defined in different terms, seeking to advocate for rules that would attract the other in one’s own normative realm.

Setting an example, triggers normative mimesis. A ‘centre’ dominates the periphery solely by creating a model. With a model consistent enough, advocated by an actor strong enough (often adversarial), there commences a process of legal emulation and ‘bandwagoning’. The ones left on the margins will try to imitate the centre’s model in order to gain recognition and reflect its power. Once the peripheries and non-aligned actors had been attracted in the ‘gravitational’ area of a hegemonic actor, other hegemons might succumb to the newly created rules. Imitation is the beginning of legal dominion.

However, such a strategic ‘great game’ in the field of international economic law might not have results as cynical as its origins appear to be. The ailing divisions and fragmentation of this system might benefit from mimetic normativism, forcing reluctant actors in one direction or another and opening the path to an ‘imposed’ con vergence, but nonetheless convergence.

Between TPP and TTIP: Where is the ‘Centre’ of the World?

Such realities and tactics is what determined the BIT ‘European gold standard’ to be quasi-universal in the 20th century. It attracted in its sphere of legal influence both the north-American actors, the ‘Third World’, the Communist and post-Communist states. With few exceptions, such a model became the undisputed norm in international investment law. The trend set by EU (EC) member states in their bilateral relations reverberated across the globe, enveloping former colonies and present allies, benefactors and adversaries, richer and poorer states, without limits or tactical setbacks.

However, the first actor to start diverging from the model was undoubtedly the United States. Near the turn of the century, its FTAs and ‘model BITs’ were developed in an innovative way, reflecting a change of options and a new geopolitical framework. Part of another grand strategy, the US new FTAs and model BITs offered an alternative to the classical ‘neat’ European-inspired BIT, advocating a more expansive view upon international trade and investment.

Following this pattern, the US began the negotiation of two ample FTAs (including consistent investment chapters) along its new comprehensive trade and investment policy. Concentrating in ‘crossing’ both oceans, the US crafted a strategy of gaining an intermediary position between its Asian alterity and European kinship, acting both as a bridge and unavoidable toll-house. With this goal in mind, the US acted so as to transform itself into the epicentre of a globalised world that seems to be increasingly multipolar. Thus, in its design, even though the international arena is unavoidable moving towards plurality, the actors need not be of equal rank. Asymmetry reigns even better in a multipolar setting, allowing north America to be the utmost centre among several centres.

TPP. The first of these two agreements – TPP – involved the strategic lines of concentrating on the Asian ‘pivot’ and attracted twelve states from all around the Pacific Rim (both from North/South America, Asia and Australia), in a multilateral effort to create an open economic space. However, everybody seemed (and still seems) to diplomatically ignore the geopolitical elephant in the room: the total absence of China from the negotiations. If this was merely a legal-economic instrument, such a choice and development would have proved incomprehensible.

If, on the other hand, one analysed the situation (geo)politically, it might lead to different conclusions: (a) either this is one initial step of a ‘containment’ strategy directed against China, (b) or the relationship with China is a privileged one, deserving a bilateral approach between two sovereigns of equal calibre.

Nonetheless, even though China is the great absentee in the TPP game, the conclusion of this agreement – with its myriad of typically American exceptions and derogations – sets the scene for any further development of this legal sphere. The TPP example has been set and – with some effort – it will be ratified and come into full force before the US finishes the negotiations with other high-profile ‘centres’ such, representing a ‘living’ precedent that might compel other actors to follow this model or – at least – to make substantial concessions from their previous practice in the FTA/IIA area.

TTIP. As regards the negotiation of the comprehensive agreement with the European Union, the situation proved to be different from the outset. The 28 member states had a single voice in the negotiation (unlike the 11 Pacific states) with the US and their joint economies accounted for a higher power. One EU tactic for reaching an initial negotiation equilibrium was not to approach the US as part of a larger NAFTA space, but rather to take on individually each of the NAFTA states. Therefore, in the TTIP process, asymmetry was less evident and no decisive ‘upper hands’ appeared during the game.

Moreover, the EU itself also managed to have its ‘model’ tested and set out, in the FTA with Singapore and in the finalised agreement with Canada. At the same time, it also began a more ample FTA programme, envisioning a deal with Vietnam, India, South Korea and – eventually – China. Thus, the EU also strives to be the trend-setter in the FTA/IIA area, introducing its own innovations and idiosyncrasies, concentrating upon Asia and the Pacific Rim itself.

In these circumstances, TPP, EUFSTA, CETA proved to be a ‘prologue’ to the much anticipated clash of EU and US during TTIP negotiations, leaving both actors bound to their own models and with less room for manoeuvre. However, what keeps them wired to the endless rounds of negotiations (so far, eleven) is the idea that – once such an agreement reached – it will transform these two ‘centres’ in a formally allied mega-centre that irremediably sets the example for the entire world.

This is the reason for which each actor wishes to see its own model enshrined in TTIP. Once there, it will be the model. And the normative mimesis triggered thereafter will emulate the rules of the hegemon that managed to formalise its legal strategy in such an influential agreement.

 * Horia Ciurtin, Managing Editor, EFILA Blog; Legal Adviser – International Arbitration, Scandic Distilleries S.A; Editor, VERSO Journal [Romania]; Freelance researcher [see SSRN author page].


Beyond the Blockade: Law and Politics in the Investment Law Debate (A Further Reply)

by Horia Ciurtin LL.M., Managing Editor of the EFILA Blog*

This post represents a counter-reply to Emanuela Matei’s material “Defining International Investment Law for the 21st Century (A Reply)”, published on the EFILA Blog on 11th September.

Prologue: Antagonism and Agonism

There is no doubt that false dichotomies and sophistically (a)moral choices between two imagined evils are at the cause of nowadays chaotic debate regarding international law. Such Manichaean positions tend to polarize theoreticians and practitioners, lawyers and civil society, EU law proponents and investment law defenders, sovereigntists and European federalists in a never-ending race toward the horizon of a new conceptual hegemony.

Therefore, Emanuela Matei is right to argue that such oppositions are nothing but straw men intended to move the attention far away from the pressing issue of the moment (and from a possible real solution). Moreover, all the parties are led – in this manner – into the temptation of legal (and political) self-righteousness, professing isolated monologues and autarchic systems of meaning that are not meant to meet the other side in a common space of discussion. Hostile antagonism thus prevents constructive agonism from arising.

The Dialectics of Investment Law

However, my initial thesis was slightly different than Emanuela Matei’s representation of it. I never argued that allowing any modification of the current BIT structure – and its ISDS clauses – would irremediably compromise the investment regime. Far from me to develop such an apocalyptic scenario or endorse the position of those that argue that the present investment law system is without fault and in need of no reformation.

Rather, the intention was to depict two alternative attitudes that claim to finally solve the ISDS problem: one by modifying its terms of reference and procedures, the other by totally obliterating the investment law regime. However, none of them presents a true solution, a way out of the normative labyrinth, but rather a self-defeating detour that prolongs the stumbling of the entire system.

The first of them, metamorphosis, is not – in my vision – a Kafkaesque transformation, not a tragic and grandiose loss of legal sense. Such a metamorphosis, as experienced by the investment regime today, is rather one in the vein of Apuleius, presenting a tragicomic and ridiculous shape-shifting which awaits a miraculous normative ‘deus ex machina’ to save the day at the end.

Thus, stricter FET qualifications, resisting the enforcement of arbitral awards on the basis of EU law requirements or increasing the presence of the state in the proceedings of fers no great relief from the real issues which confront the investment regime. In reality, such amendments to the system appear only as a ‘bait’ offered by nation-states in order to appease their increasingly vocal civil society and anti-ISDS campaigners. In tactical terms, this is only a different path to continue undisturbed. It is neither a solution for the pro-ISDS side, nor for the anti-ISDS one.

The second strategy, deconstruction, appears – at a first glance – as a postmodern loss of faith in the possibility of (international) law to solve the problems of the global economy. The solution: erasing bilateral treaties. However, such a gloomy vision upon the international normative sphere is genuinely inconsistent with the same ‘deconstructive’ states’ policy in other areas. There, international law seems to still do its old job. The essence of such a position is – generally – also tactic: avoiding present and future investment claims against the host state.

The Westphalian Labyrinth

However, there is (legal) life beyond these paths. And the labyrinth can clearly be evaded. Usually, putting the right questions gives a picture of the real problems and – afterwards – of true solutions. In this regard, one must first inquire about the conceptual origin of today’s legal aporia.

Why does international law – and its self-professed universality – seem to be problematic at the present moment? Why is international investment law even more problematic and why it faces such an intense critique? Until now, it seemed that no one was really interested in such a disparaged fragment of the system and it posed no stake for neither side of the ideological antagonism.

A brief diagnostic – as the space only allows – would lead me to answer that the obsession with Westphalia (either in strongly re-asserting it or in emphatically claiming that it is over) might really be at the root of the problem. Much of the proposed metamorphosis and/or deconstruction stems from either harsh sovereigntists or from post-sovereign proponents. None of them is content with the investment law hybrid and the procedures it offers.

Such a mixed litigation model offers no hegemonic position for state entities or for supra-national entities. It rather channels the dispute in a commercial-inspired manner which leaves little space for Westphalian language-games and public policy objections. Moreover, the investment regime tends to work both ways and it occasionally backlashes against the same actors that initiated it.

For these reasons, the genuine solution is neither Westphalian, nor post-Westphalian. It is non-Westphalian: a mode of thinking that does not need to sacrifice sovereignty in order to acknowledge supranational entities or transnational networks. This latter element is (almost) never taken into account by any side of the dispute: there are actors that shape public policy and international norms, without any tangency with (supra)sovereignty. The influence of such transnational networks and their global reach might – in the end – prove as necessary for the reformation of international investment law as the use of (supra)state normative power.

Clearing the Air: Politics and Legal Discourse

Thus, as Emanuela Matei correctly indicated, the solution might indeed not lie within the legal sphere itself. But it shall take a legal form nonetheless. Law is a privileged discourse of the political realm, its most important language-game. It channels power and gives it a definitive and efficient shape. Even the strongest realist interpretation (a la Hans Morgenthau) would admit that although the origin of the norm is not legal and neither is its purpose, the instrument shall undoubtedly be legal in a global world that takes positive legality as legitimacy.

In such conditions, even though states, supra-states and non-state networks might clash in a bid for hegemony, their normative horizon is inevitably shared. The way beyond the blockade resides in first establishing a common space for reasoned debate. Then – and only then – could a solution be offered to some of the investment regime’s shortcomings. Antagonism must turn into agonism, if any change should appear into the sunset…

 * Horia Ciurtin, Legal Adviser – International Arbitration, Scandic Distilleries S.A; Editor, VERSO Journal [Romania].

Defining International Investment Law for the 21st Century (A Reply)

by Emanuela Matei, Of Counsel – Mircea and Partners*

This post represents a reply to Horia Ciurtin’s material “The Future of Investment Treaties: Metamorphosis or Deconstruction?”, published on the EFILA Blog on 8th September. Another reply will follow from Horia Ciurtin in the following weeks.

Of Two Evils Choose Neither

We are living in a hologram designed by a very confused mind. Witnessing the 21st century we all experience a degree of restlessness and fuzziness. In this context, the choice between two evils may be no more than a false dilemma. The misconception of the limits of international law is part of this holographic picture.

In his post “The Future of Investment Treaties: Metamorphosis or Deconstruction?“, Horia Ciurtin revisits the challenging task of defining – in our not-so brave new world – the concept of international law, in general, and of investment treaties law, in particular. I both agree and disagree with the author’s concerns. I fully agree with him that international law and legal institutions can provide effective means to solve human problems. I disagree with the either-or equation though and I will describe it as a deceiving choice between two evils.

The First Evil

In a world where the interactions are multiple and ubiquitous, it is very often not possible to determine which event occurs first and define it as the cause of a subsequent event, called effect. State interests do not exist outside the social sphere and the actions of states are therefore influenced by the attitudes of non-state constituencies. In other words, the border between state and non-state has been blurred.

It is up to the observer to judge. If the observer believes that coercion is the source of order and well-being in the world, he will naturally think that international law cannot have an influence on actual state behaviour. Such an observer sees international law as a source of democratic concern, arguing against the implementation of international law norms domestically. In my view, this hostile approach is the first evil and – so far – Horia Ciurtin and I agree with each other.

The Second Evil

The affirmation that the sovereign entities are “no longer needed as ‘procedural proxies’ for aggrieved investors, being able themselves to directly involve in international litigation and be compensated for their losses” is on the other hand not immune to criticism. Having a right and being able to exercise it effectively should be seen as two sides of the same coin. A right, which is not enforceable has no legal significance. It has only a symbolic value. States comply with international law as long as the social sphere – in which their interests are continuously defined – requires them to do so.

Moreover, the author pleads for the de-politicisation of the disputes by unconditionally escaping the domestic remedies. My counterargument is that such disputes are nonetheless political in nature, so their de-politicisation would provide no more than an empty gesture.

For a legal pragmatist as I am, the ICSID-convention is a tool designed to serve a set of functions. It is nothing unexpected in the fact that this tool has been designed at a certain moment in time and that time is gone. The question that must be answered is what kind of functional design shall be chosen for the 21st century FTAs? Attention, the designer may be somebody else than before! Again, the political configuration which is part of the social sphere is different now compared with 1950!

Furthermore, the situation of intra-EU BITs is a special case. I believe that the comparison between the South America and the Central-Eastern Europe is a bit misplaced. A conflict between supra-state constitutional law and international law obligations on one side, and between individual rights derived from international law and the obligation of the state to implement supranational law, on the other, constitutes an extra-complication that must be faced by countries like Romania, Hungary or Slovak Republic.

The either-or dilemma is often projected by the advocates of arbitration as a support for the affirmation that without an ISDS-system the protection of the investor will be severely depreciated. It can be true that some strategic contrivances will no longer be available. However, it must be recognised that the accession to the EU of the Central-Eastern European countries had a positive impact on their legal systems and the socio-economic environment is now more stable than in the nineties and early noughties.

More than so, the capital is the most mobile of all factors of production. If some jurisdictions became hostile to investors, the capital would vote with its feet as it does in all other cases, where the regulatory choices of the state or supra-state give an incentive to corporations to move, stay or entry. Thus, my contemplation of the post-Westphalian field of battle is much more optimistic in this particular sense. The second evil – no protection for the investor in the 21st century – is nothing else than a false alarm!

The discussion starts to sound irresistibly interesting to me when we begin to imagine deterritorialised ideas of governance … but this is a different kind of story. This is the true and exciting post-Westphalian realm left unexplored by the mainstream despotique!

* Emanuela Matei, Jurismaster; Of Counsel – Mircea and Partners; Associate Researcher – Centre for European Legal Studies.