Agora 1: International Economic Law

Chaired by Dr Lorand Bartels

If globalisation has influenced just one area of international law since 1989, we might expect this to be international economic law. But has international economic law really changed and, if so, in what ways and through what institutions? Has it been bypassed by more informal means of co-operation? What are the lessons from the global financial crisis for international economic law?

Sugar and the making of international economic law: explicating the 1902 Brussels Sugar Convention

PROFESSOR MICHAEL FAKHRI, Assistant Professor, University of Oregon

Abstract: This paper traces the beginnings of modern international economic law to the 1902 Brussels Sugar Convention. The treaty was the result of negotiations mainly among the UK, Germany, Austria-Hungary, and France. The treaty’s principal purpose was to discourage governments from subsidizing sugar production. I examine the legal structure of the Brussels Convention and its travaux préparatoires within the political context and economic discourse of the time. I then juxtapose this against the social dynamics of world sugar production and consumption.

Appreciating the 1902 treaty challenges the common assumption that modern international economic legal institutions are primarily a post-Word War II phenomenon and that globalization most acutely affected international economic law after 1989. In many respects, the Brussels Convention established an international trade institution that we would recognize as contemporary in form. The Brussels Convention included legal mechanisms regarding economic regulation akin to the WTO. The sugar treaty created a Permanent Commission which was empowered to resolve disputes between treaty parties. There were also similar assumptions in the late 19th and early 20th centuries as there have been in the late 20th and early 21st centuries that an international institution was necessary to mediate state sovereignty in light of world economic interconnectedness.

Despite these similarities, the ideational and social context of the Brussels Convention meant that the implications of the ensuing 1902 trade institution were remarkably different from the 1994 WTO. Unlike today, in 1902 the world was primarily economically interconnected through formal imperial power and the sugar treaty reinforced these empires.

Biography: Professor Fakhri’s academic interests are in international economic law with an emphasis on questions of development. He began his legal career with one of Canada’s leading business law firms, later shifting to a practice in social justice advocacy. He obtained his LLM from Harvard Law School and is completing his SJD at the University of Toronto, Faculty of Law. His most recent work is a historical examination of international trade institutions, focusing on the regulation of food and agriculture. Other research interests of his include trade and development in the Middle East.

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International Financial Stability as a Global Public Good and its Consequences

MS ANNAMARIA VITERBO, Assistant Professor of International Law, University of Torino, Italy

Abstract: The international financial institutions (IFIs) created in the aftermath of the Second World War were intended to foster economic growth and to guarantee exchange rate stability. Their focus was on balance of payments and exchange rates behaviour. While the IFIs’ primary objectives did not change in 1978 with the end of the so-called Bretton Woods system, the need for their adaptation to the mutations of the global market was emphasized by the debt crises of the ’80s and the financial and currency crises of the ’90s. These days, one of the lessons we are learning from the tsunami of the global credit crisis is that monetary and financial stability are inextricably intertwined. In the debate around the new global economic order, both are emerging as global public goods (GPGs), whose nonrival and nonexcludable benefits shall be granted and delivered worldwide. The time is ripe to consequently amend the IFIs mandate. The paper will address the question of the IFIs reform - and in particular of the IMF - from the perspective of the theory of international public goods. The first part of the research will be devoted to investigating the characteristics of a subject designated to deliver global public goods. This analysis could add to the debate on the IFIs governance reform: are the Financial Stability Board and the Basel Committee on one side, or the IMF on the other side, sufficiently representative, legitimate and accountable to deliver global financial stability standards? Is there a need to create a World Financial Organization? The second part of the paper will investigate whether the IFIs should be attributed new competences. Under the current legal framework, financial system stability was pursued mainly through monitoring and prevention mechanisms (supervision, surveillance, and dissemination of standards). The global crisis revealed the weaknesses of this network of - predominantly - soft law instruments. Should the IMF role be limited to an - albeit broader - exercise of surveillance (including, for instance, systemic risks)? Or should it be widened to adopt financial regulations and to sanction members whose national regulatory policies are not up to the international standards and rules? Having regards to emergency actions to be adopted once a crisis is triggered, new attention should also be given to capital controls (to which a number of countries have recently resorted). While the free movement of capital is guaranteed among developed countries through the OECD Code of Liberalisation of Capital Movements and at regional (EU and EEA treaties) and bilateral levels (investment treaties), no parallel regulation exists at the international level. This entails a rethinking of the IMF competences on capital mobility and of the safeguard clauses of international economic law instruments, which mainly refer to balance-of-payments problems, national and international security, and public order.

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Two decades lost: reinvigorating the weak cousin of WTO law

DR MICHAEL WAIBEL, British Academy Postdoctoral Fellow, Lauterpacht Centre / University of Cambridge

Abstract: To contemporaries, the late 19th century globalization was the natural order of things. By many measures, the world economy was as open then as it is now. The present generation, too, has become accustomed to a world in which goods and capital move freely across borders. Yet economic openness is the result of fragile equilibrium in international affairs, easily reversed. Unlike past financial crises, the epicenter of this crisis lies in the countries with the political power and weight in the world economy to reverse globalization.

The likely source of deglobalising shocks lies in the financial sphere. Many developed countries today borrow as if at war. The prospect of exchange controls and strong currency fluctuations looms on the horizon. In the 19th century, the open economic system rested on informal rules of conduct, rather than legal norms, especially the gold standard and British hegemonic stability.

At the beginning of the 21st century, the public international law of finance is dangerously underdeveloped. Countries may violate their obligations under the IMF Articles, among others, with relative impunity. After 1989, the international community missed the opportunity to recalibrate the mission and governance of the IMF. More generally, it is puzzling how little international financial law evolved over the last two decades, despite dazzling growth in global capital markets. We rely mainly on informal means of co-operation, which are fail to constrain policymakers who seek to re-orient their economic policies inwards.

Biography: Michael Waibel is a British Academy Postdoctoral Fellow at the University of Cambridge Law Faculty, the Lauterpacht Centre for International Law and Downing College. His main research interests are public international law and international economic law with a particular focus on finance and the settlement of international disputes. He received the Deak prize for his AJIL article on sovereign bonds. Michael holds Mag. iur. and Dr. iur. degrees from the Universität Wien, an MSc (Econ.) from the LSE and an LLM from Harvard Law School.

Waibel - Draft ESIL Paper

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