Thursday, March 16, 2017

Joel Slawotsky--Essay "On the potential shift from the present-day architects to new architects on the definition of international law"

Joel Slawotsky, of the Radzyner School of Law, Interdisciplinary Center, Herzliya, Israel, and the Law and Business Schools of the College of Management, Rishon LeZion, Israel has guest blogged for "Law at the End of the Day"  on issues relating to corporate liability under international law  (e.g., "Rethinking Financial Crimes and Violations of International Law", Jan. 9, 2013; "Corporate Liability Under The Alien Tort Statute: The Latest Twist"April 26, 2014) and on issues of multilateral trade and finance (Joel Slawotsky Reports From Chinese University of Hong Kong: Asia FDI Forum II--China's Three-Prong Investment Strategy: Bilateral, Regional, and Global Tracks) He has also recently also served as Guest Editor of the Sovereign Wealth Fund special issue of Qatar University International Review of Law (IRL) (2015).

He has very kindly produced a marvelously insightful essay: On the potential shift from the present-day architects to new architects on the definition of international law. In the essay he considers the ramifications of the U.S. shift away from a stable 70 year effort to create and maintain a system of international governance architecture and what it might mean for the future of law, the structures of globalization, and international relations.

The essay follows

"On the potential shift from the present-day architects to new architects on the definition of international law"
Joel Slawotsky
Throughout history, the framework of economic and legal institutions have been created by the strongest nations  in any given time frame (from both an economic and military perspective). Such nations constituted the “creators” or “architects” of international law. The ramifications of being an architect are significant since international law forms an integral pillar of the global governance architecture and shapes the resolution of trade and investment disputes as well as forming the basis of treaties and justification for sanctions and war. Recently, international law has also served as a springboard for advancing significant transformative norms on human rights, corporate social responsibility and sustainability.

The prior 70 years have witnessed a relative stability – a U.S. led Western coalition of architects constructed an international governance architecture based on “Western” norms and values (such as freedom, accountability, transparency and human rights); a rules based global trading system; large U.S. dominated IFIs to foster development and a financial system intertwined with the U.S. Dollar.

International law scholars, as well as policy makers, have been working with the expectation that the stability of the existing international legal framework will continue. Future governmental planning and international legal scholarship has presumed that the prior 70 years architecture will continue relatively unchanged. However, a transitioning United States certainly raises the specter of a transformational alteration in the governance architecture and a real potential of a substantially different international law construct.
Rising powers including for example, China, Russia, India, Iran, or Brazil have increasingly expressed dissatisfaction with their roles, access, and authorities within the current international system. The inability or unwillingness to accommodate the aspirations of these powers in the future may increasingly cause some states to challenge or even reject current rules and norms. (see HERE)
A large number of questions arise from this prospect. The topic of this essay focuses on one - the potential shift from the present-day architects to new architects on the definition of international law.

The Post WW2 Context

In the decades following WW2, the U.S. became the Chief Architect of the present legal and economic orders along with a coalition of allies. The United States - through its domination of international financial institutions and trade dispute mechanisms as well as the superlative supremacy of the US Dollar as a reserve currency – has been the recognized exceptional nation. To be an architect of international law is to wield significant power (see HERE) since the financial and legal orders are inextricably linked to the formation, context, application, and enforcement of International Law. ("Canton is not Boston: The Invention of American Imperial Sovereignty," 57 Am. Q. 859, 861 (2005)). The current architects of International Law’s global governance architecture are the “civilized” or “advanced” nations of the world (History of International Law and Western Civilization, 9 Int’l Cmty. L. Rev. 353, 365 (2007)) — the Anglo-Western powers, led by the United States, “the indispensable nation.” (See HERE). The United States dominates the existing global governance architecture in a number of ways: First, the United States-dominated International Financial Institutions  (“IFI”) (see HERE) based in Washington, D.C., such as the IMF, the World Bank, and the International Centre for Settlement of Investment Disputes (“ICSID”) have dominated the existing political and economic architecture of the global financial system, including trading, lending, and development (see HERE).
Second, the U.S. Dollar has reigned as the most desired currency of international business, IFI lending, and global trade (see HERE) and forms the principle reserve currency of the world’s central banks. (see HERE).
Third, a critical component has been the unparalleled dominance leadership in international legal rule-making. Unquestionably, the status of the United States as the indispensable nation is inextricably linked with the fact that global finance and trade is encapsulated in the rules and institutions dominated by the United States and - as former U.S. National Security Advisor Rice noted - has proximately caused “the spread of [United States] values, both in Asia and beyond” (see HERE).

Fourth, the American military power enforces this United States hegemony and maintains embedded territorial military bases in the U.K., Germany, Italy, Turkey, South Korea, Saudi Arabia, Bahrain, Qatar, Japan, and Australia, among other strategic locations. See List of US military bases world-wide. Major US Bases Around the World, Google Maps, here.
Fifth, U.S. technology corporations have been global leaders. Apple, Google, Intel, Microsoft, and others have become dominant actors in their fields. Illustrating this exceptionality, consider the fact that hundreds of years of Swiss banking secrecy (see HERE) was eviscerated only by the United States as the Swiss were justifiably concerned that failure to comply with the American directive would imperil the Swiss economy (see HERE) The global taxation regime of the IRS through FATCA forces foreign banks to comply with U.S. directive or face economic sanctions. See HERE.

Despite these superlative indicia of exceptionality, perception of U.S. decline has increased proximately causing the recent election of President Trump and manifesting the demand of U.S. citizens to make America “Great Again”. Are competitors truly a threat to the existing frameworks? Rising economic and military competitors are clearly waiting to supplement or in fact supplant the existing United States led order and global governance architecture. The question is whether another coalition of interests – led by a dominant power - can effectively offer an attractive and workable alternative vision commanding the adherence of states. And – what ramifications this could potentially bring to international law.

To analyze the prospects, it is instructive to put the issue in context as this is not the first time the post WW2 hegemony of the U.S. has been challenged. For example, the former Soviet Union was a staunch rival yet failed to achieve its aspiration for the U.S. to decline. The Soviet failure to achieve its goal was caused by serious weaknesses in the realms of finance, technology and self-sufficiency. As President Reagan noted:
In the 1950's, Khrushchev predicted, ''We will bury you.'' But in the West today, we see a free world that has achieved a level of prosperity and well-being unprecedented in all human history. In the Communist world, we see failure. Technological backwardness. Declining standards of health. Even want of the most basic kind - too little food. Even today, the Soviet Union still cannot feed itself. (See HERE).
Moreover, the Soviet Union never exercised influence on the global governance architecture. The Soviets were always on the “outside looking in” predicting America’s demise but contributing nothing more than military flashpoints and support for anti-Western dictators and “revolutionary groups”. The Soviets never undertook to assemble a potentially alternative architecture or to become a rule setter. Not surprisingly, the Soviet plan to dethrone America failed miserably.

The Potential New Architects

China, India, and several others have been listed as competitors or revisionists, i.e., budding new architects. Will the new challengers fail as the Soviets did? The current prospect is different in several crucial aspects. First, while China is the spiritual leader of the new architects, several other significant players are now allied with China. Unlike the Soviet Union, whose main allies were failed communist states with stagnant economies and little or no influence on the governance architecture, China’s allies are set to become some of the largest global economies in the near future (see HERE). Second, the Soviets never really set forth an alternative architecture or vision. In contrast, China has embraced globalization and economic partnership indeed leading the charge on climate change (see HERE).
Third, unlike the Soviets, China has already advanced the prospect of a reduced global American role to a far greater extent by masterfully integrating – and immensely benefiting from – globalization and free trade. Indeed, an impressive array of metrics indicates that China is a bona fide rival “of equals”. For example, China is the lone nation that can wield enough military power to openly confront the United States (see HERE) and a recent comprehensive report (see HERE) indicates that China’s military is close to reaching parity with the Western powers (see HERE).
In the spheres of the likely most important economic and military spheres of the coming decades, robotics, space exploration and artificial intelligence, Chinese aspirational hegemony is self-evident. A Chinese White paper envisions China as the most powerful space nation (see HERE).  And China is on course to achieve a relative parity or perhaps superiority to the United States (see HERE). NASA concedes China is a serious contender for leadership in space and Chinese ambitions are to use space exploration to stir innovation and achievement (See HERE). Another potential new architect, India is also rapidly expanding its technological prowess (see HERE).  Aside from military empowerment China is also focusing on education and investing substantial resources (see HERE) in an attempt to rival Western institutions (see HERE).
Fourth, and perhaps the most potentially important difference between China and the Soviets is Chinese leadership on several impressive economic initiatives. As a counter balance to the IMF, the World Bank, and the Japanese dominated Asian Development Bank (“ADB”), China launched a Chinese-dominated IFI called the Asian Infrastructure Investment Bank (“AIIB”). “[T]he AIIB has stoked controversy because Asia already has a multilateral lender, the Asian Development Bank (ADB)” (see HERE). While it is no surprise that both the United States and Japan “have stayed out of the China-led institution, seen as a rival to the U.S.-dominated World Bank and Japan-led Asian Development Bank,” (see HERE) the fact that many nations have embraced the AIIB was unexpected. Japan and the U.S. “were caught off guard when a total of [fifty-seven] countries, including Group of Seven members Britain, Germany[,] and France jumped on board the AIIB bandwagon by March.” (See HERE).

The new Chinese-led bank “is seen as encroaching on the regional financial clout of Tokyo and its ally Washington” and equated to a “Bretton Woods” moment whereby the mantle of global economic leadership may be moving to China. (See HERE). Not surprisingly, Japan is attempting to strengthen its ties to other Asian nations as a counter-balance to the new Chinese-led bank. (See HERE). Indeed, China’s creation and domination of the new AIIB clearly constitutes a consequential mechanism to achieving the interests of China and presages a concurrent weakening of the U.S.-led post-World War II order. (See HERE).
The New Development Bank (“NDB”) is another component of the new alternative architecture to Western domination of international finance (see HERE) being constructed and should be viewed in the context of the other initiatives. The objective of the NDB is to embrace a new financial order. The goal of offering a replacement IFI is stated on the bank’s website. The [NDB] is “operated by the BRICS states as an alternative to the existing US-dominated World Bank and International Monetary Fund.” New Dev. Bank (see HERE).  As former U.S. Treasury Secretary Lawrence Summers noted, 2015 likely constituted “the moment the United States lost its role as the underwriter of the global economic system.” (See HERE).

OBOR and the Yuan

Another important development is China’s OBOR which brings dozens of nations into China’s strategic orbit. (See HERE). OBOR is a harbinger of significant change and constitutes an important component of China’s long-term strategic plan to regain dominance in Asia and prestige in the world. (See HERE).

Additionally, the growing recognition that the Chinese Yuan is becoming a reserve currency points to China’s status as an up and coming new architect. (See HERE). A growing list of nations are now using the Yuan for transactions instead of exclusively relying on the U.S. Dollar. (See HERE).

Looking Forward

(Pix© Larry Catá Backer 2017)

Based upon these developments, and presuming current trends continue, China and several other rising revisionist nations will likely successfully provide an alternative architecture in the not too far distant future. It is therefore timely to examine the issue of the formation and creation of international law and the potential impact on norms and values since several of the rising new architects’ norms differ markedly from Western notions. (See HERE).
For example, critics claim that China has been obstructing Hong Kong citizens advocating for democratic institutions and respect for human rights work and there are serious questions concerning allegations of Chinese interference in Hong Kong. (See HERE). Rights advocates claim China regularly engages in arbitrary arrests, ongoing detentions, enforced disappearances and refusal of access to counsel right to a fair trial. (See HERE).
The fact that non-Western states’ norms differ from Western states’ notions is of the utmost importance because these new non-Western architects are likely to be at the forefront in reshaping international law. Accordingly, numerous issues will take on a different context in order to reflect the understandings that differ from the following Western notions: sources of international law; the discourse on corporate social responsibility; and negotiations on the adoption of international treaties on labor issues, immigration, and human rights. It seems naïve at best to believe the new architects will not seek to modify current norms. As such, the fact that numerous new architects have markedly different conceptions of misconduct and acceptable norms will likely create tension as nations struggle to redefine the basic character of international law.

This is not a purely speculative inquiry. China may harbor an ambition to transform Western nations to its own norms and values. Referring to democracy as “flawed”, China seems bent on promoting “an alternative political and economic system.” (See HERE). Chinese control of internet technology can be expected (see HERE). China would like to influence the global political system and shape universal values. (See HERE). At least some Chinese government officials believe that Western democracy has reached its limits, and capitalism will ultimately fail enabling Communism to emerge victorious. (See HERE).

Echoing these sentiments, an eminent Chinese jurist has urged judges to “absolutely” not embrace “false” Western concepts such as judicial independence, separation of powers and constitutionalism. Referring to “false Western ideals”, China’s Supreme People’s Court president, denounced the idea of judicial independence. (See HERE).
But of course these differing values are only criticized from the Western viewpoint. If nations that do not here to Western values become architects who is to say Chinese norms are wrong or violate international law?

With respect to international economic law, investment treaty interpretation relies on international law. (See HERE). The understanding of concepts such as due process, corruption, and national emergency may differ between the existing architects and the new architects. The definition, contours, and application of treaty obligations will have different outcomes depending upon interpretations of international law in investment tribunal rulings. (See, "The Development of International Law by ICSID Tribunals," 31 ICSID Rev. 1, 8 (2016)). The terms and rules of international trade, the usage of certain dispute resolution techniques, and the interpretations of disputes based upon International Law may all be potentially affected.

Global litigation against individuals and businesses (see HERE) for international law violations will be among the issues affected by the new architects (See HERE). In the United States, the Alien Tort Statute (“ATS”) permits aliens to file suits against defendants for violations of international law (see HERE). Pursuant to the ATS, only misconduct considered a violation of customary international law can be litigated, so, expectedly, defining customary international law through the lens of “civilized nations” is a significant issue in ATS litigation. Whether a certain misconduct is considered a violation of international law by the “civilized nations” is of fundamental importance. (See HERE). However, what if the benchmarks change? Ironically, modern ATS litigation, which was green lighted in Filartiga v. Pena-Irala (see HERE) contains the means necessary for its own “reversal.” In Filartiga, the court had to decide whether state-sponsored torture was cognizable as a violation of International Law. After examining the state of international law, the court found that customary international law changes over time and that, currently, state sponsored torture is an accepted violation of customary international law. In the ensuing years, courts have routinely examined sources of international law to decide whether a particular misconduct was cognizable based upon the notion that the majority of the civilized world recognized such misconduct as a violation of an international law norm – such as the failure to obtain informed consent (see HERE).
However, as noted in Filartiga, international law changes over time. What happens when states that employ torture become international law architects? What would happen if a majority of the nations of the world found that discrimination against certain groups based upon ethnic, gender, or religious criteria was not merely permissible but obligatory? What if, perhaps, child labor was not considered abuse, but rather an educational or mandatory activity to a majority of the nations? What about human rights that are currently entrenched in the Western world and their interference with religious, cultural, and perhaps legal systems of the new architects? Perhaps some rights, cherished in the West, are abhorrent or sacrilegious in some other nations? Moreover, does the phrase ‘majority of civilized nations,’ refer to population or the number of states? China and India, the two most populous nations, have combined populations that dwarf the population of the United States. Should a “democratically inspired” international law paradigm rely upon rules derived from a majority of “citizens” or “states”?


(Pix © Larry Catá Backer 2017)
There is a serious potential that international law will no longer be dominated and shaped by the United States and its Western-aligned allies. New architects will likely attempt to affect international law. International law may very well be subject to revisionist interpretation. A different code of conduct practiced by these new architects may conflict with current norms, and international law will need to focus on the potential dichotomy between former and new standards and customs. Much will depend on whether President Trump can re-marshal the instruments of American power to re-assert and re-energize the US-led existing economic and legal structure. But the stakes are high. Should the current administration fail to revitalize American hegemony the mantle of global leadership may be very well be within China’s grasp. The ramifications of a Chinese led hegemony of new architects on the current model of international law would be transformative.

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