Conflicting Rules and Clashing Courts: The Case of Environmental Agreements, Free Trade Agreements and the WTO

Study
Date period
4 November 2010

International law is like the expanding universe. After World War II there was a first “big bang” which created the United Nations (UN) and most of its specialized agencies, including the Bretton Woods Organizations and the General Agreement on Tariffs and Trade (GATT). The 1980’s and 1990’s brought a second “big bang”, during which the GATT was transformed into the World Trade Organization (WTO), which was a galaxy of international agreements unto itself. This period also saw the formation of other such galaxies (or regimes, as they have sometimes been called by lawyers), in particular in the areas of international criminal law and, more relevant to this paper, in the field of environmental law, where many so-called Multilateral Environmental Agreements (MEAs) were created within a time span of barely ten years.

Within the new WTO, the seeming impossibility to make progress through negotiations at the galactic level pushed internal tensions up to the point where a supernova developed that projected great numbers of Regional Trade Agreements (RTAs) outwards. 

All these legal galaxies and their fragments are criss-cross racing outwards, losing their cohesion more and more, and yet collisions cannot always be avoided. This is what international lawyers call fragmentation. 

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International law is like the expanding universe. After World War II there was a first “big bang” which created the United Nations (UN) and most of its specialized agencies, including the Bretton Woods Organizations and the General Agreement on Tariffs and Trade (GATT). The 1980’s and 1990’s brought a second “big bang”, during which the GATT was transformed into the World Trade Organization (WTO), which was a galaxy of international agreements unto itself. This period also saw the formation of other such galaxies (or regimes, as they have sometimes been called by lawyers), in particular in the areas of international criminal law and, more relevant to this paper, in the field of environmental law, where many so-called Multilateral Environmental Agreements (MEAs) were created within a time span of barely ten years.

Within the new WTO, the seeming impossibility to make progress through negotiations at the galactic level pushed internal tensions up to the point where a supernova developed that projected great numbers of Regional Trade Agreements (RTAs) outwards. 

All these legal galaxies and their fragments are criss-cross racing outwards, losing their cohesion more and more, and yet collisions cannot always be avoided. This is what international lawyers call fragmentation. 

This paper is concerned primarily with the collisions - which are of two kinds. They are (1) the collisions between the substantive rules of the different galaxies/regimes (conflicts of norms) and (2), if these regimes are equipped with courts and tribunals, the collisions between the courts and tribunals of different regimes (conflicts of jurisdiction). A conflict of norms occurs, for example, when the GATT states that quantitative import restrictions on goods are prohibited, while the so-called Basel Convention gives governments the possibility to stop imports of certain industrial waste, even if it is sold for treatment abroad. A conflict of jurisdiction occurs, for example, when the WTO Appellate Body has decided that certain trade remedies, such as particular anti-dumping measures, were imposed in conformity with the WTO Anti-Dumping Agreement, whereas an Investment Arbitration Tribunal has ruled that the same measures seriously affect the value of investments of foreign investors and are contrary to the “fair and equitable treatment” standard protected by a Bilateral Investment Treaty. The two kinds of conflict obviously can reinforce each other.

These collisions are of great importance. Though discussed for many years already by academic lawyers and WTO litigators, they are habitually neglected by trade negotiators. This is dangerous. Why? 

First of all, in respect of clashes of jurisdictions, the law of the strongest dispute settlement system prevails. Strength is measured in such cases primarily in terms of whether the system is compulsory and cannot be escaped from, as it is the case of the WTO system. Strength is thus a question of attraction. Imagine that an RTA contains norms that are largely parallel to WTO rules, but that it has more advanced and detailed rules on the treatment of tradeable waste within national jurisdictions of the members on the basis of what is called the proximity principle in international environmental law. Suppose that the RTA has a dispute settlement system that is not fully compulsory, but all RTA members are also WTO Members. Inevitably, cases on tradeable waste will end up in the compulsory WTO dispute settlement system that will deal with such cases under the exceptions of Article XX GATT. As a consequence, the detailed rules on tradeable waste laid down in the RTA will seldom be used and will atrophy.

Foreword



Inherent structural changes resulting from the expansion and diversification of international law have fundamentally transformed what is conceived of as the ‘international trading regime\\\\\\\\\\\\\\\'.

A large number of increasingly specialised, complex international organizations addressing more and more areas of global governance beyond trade have emerged. Even though these fora address issues other than trade, they introduce a new level of competition since cases may not always fall clearly within one of the regimes. At the same time, the vast increase in bilateral and regional agreements providing for trade regulation has generated numerous new fora for dispute settlement. These seem to coexist with the World Trade Organization\\\\\\\\\\\\\\\'s (WTO) dispute settlement system, yet the legal interrelation of the different jurisdictions, that is their legal mandates, is unclear. The potential for conflicting rules and clashing courts has thus increased immensely during the last decade.

Many of these bilateral, regional and multilateral agreements address issues of conflicts of laws and jurisdictions only in a limited way. However, international agreements, first and foremost the Vienna Convention on the Law of Treaties (VCLT) provide for certain ‘conflict rules\\\\\\\\\\\\\\\'. In the past, several of these provisions have been applied by the WTO Panels and the Appellate Body as well as other dispute settlement fora. Yet, jurisprudence has shown that these provisions tend to be limited in their ability to comprehensively address potential conflicts.

Cases such as the  Mexico-Soft Drinks case at the WTO have illustrated the problems that arise in cases of conflict of jurisdiction, meaning when a claimant may have recourse to several fora: the situation facilitates forum shopping, legal uncertainty increases, a threat of incoherent jurisprudence arises, and eventually conflicting decisions may be pronounced.

As illustrated by the longstanding discussions on possible conflicts between the CBD and the WTO TRIPS Agreement, differing objectives and purposes may also lead to conflicting interpretations and conclusions that may, in the absence of clear conflict rules, prejudice a certain objective. Other agreements may again require a certain expertise that may not be provided for by a dispute settlement mechanism established under another agreement. Thus the concern has been articulated that the WTO\\\\\\\\\\\\\\\'s dispute settlement understanding (DSU) may not be sufficiently equipped to decide on certain trade questions that relate for example to environmental protection or climate change.

Likewise, these challenges fundamentally affect developing countries and their capacity to resort to dispute settlement. The increased complexity makes it harder to navigate through the system and to judge on the legal and economic feasibility of claims. Consequentially, extensive legal capacity is required to ensure an economically efficient and legally successful use of the system. Likewise, the fragmentation and its affects threaten the effectiveness, credibility and thus stability of the multilateral trading system.

At the same time, the \\\\\\\\\\\\\\\"fragmentation\\\\\\\\\\\\\\\" of international law provides for great opportunities. The sophistication of different regimes and the development of new fora can bring up mechanisms that are better equipped to address conflicts arising under the increasingly complex agreements.

All these topics, fora and concerns have been on the Centre\\\\\\\\\\\\\\\'s core agenda since its establishment in 1996. The relation of issues such as environmental protection, climate change, trade supported development strategies, regional economic integration and the multilateral trading system is more obvious and important than ever before. With the increase in formal and informal linkages there is also greater need for providing sound and comprehensive analysis on the challenges arising from the observed development.

As a contribution to this debate and an introduction of the topic to the greater trade law community, the International Centre for Trade and Sustainable Development (ICTSD) commissioned the present study under its Programme on Dispute Settlement and Legal Aspects of International Trade. It provides a comprehensive overview on existing and potential conflicts of laws and jurisdictions in the international trading system; discusses the legalistic interrelation of relevant agreements and dispute settlement systems; assesses challenges arising thereof; examines existing conflict laws included in agreements, and finally develops potential solutions.

By suggesting various policy options for negotiators, lawyers, international tribunals and other key policy makers, ICTSD aims at paving the way for exploring and applying novel approaches so to ensure that the opportunities provided by the fragmentation of international trade law work for the better for all different actors and fora involved. At the same time the study can be deployed as a reference booklet as it includes definitions and examples of the most relevant conflict clauses and rules on treaty interpretation.

We hope that you will find this input a useful contribution to approach conflicting rules and clashing courts in practice.

Ricardo Meléndez-Ortiz

Chief Executive, ICTSD