Investor State Dispute Settlement - Things heating up?

I usually do not write about investment issues. That is not my forte. However, have been coming across a lot of pieces on the issue of Investor State Dispute Settlement (ISDS) that caught my attention. The ISDS provision in an investment agreement essentially permits private investors to initiate a dispute against the State where it has invested in cases of alleged violations of the State's obligations under the investment treaty.

The IELP blog carried this piece on the latest Australian FTA with Japan that apparently does not have an ISDS provision. The recent example of this FTA establishes that the issue is not resolved and will continue to arise in international negotiations. The pros and cons of having ISDS provisions have been debated ad naseum. Two pieces on varying positions are an interesting read.

This piece called "Profiting from Injustice" essentially argues against having provisions of ISDS due a variety of reason including that it is fuelled by law firms, arbitrators and financiers and is essentially not neutral. 

Countering the above premise, a detailed piece in the Harvard Journal of International Law argues against the "re-statification" of investment state disputes essentially arguing in favour of the existing ISDS provisions.

A whole lot of literature, interests and impacts. Issues about what constitutes "neutrality" itself? is there a pro-investor or pro-state bias? What trend would coming bilateral, plurilateral agreements follow? Is there a middle ground?

It's LIVE, well almost!

The WTO website announced the viewing of the compliance proceedings of the much talked about Boeing Subsidies case about which I have blogged here, here and here.

"At the request of the parties in the dispute “United States — Measures Affecting Trade in Large Civil Aircraft (Second Complaint) — Recourse to Article 21.5 of the DSU by the European Union” (DS353), the panel has agreed to show to the public a video recording of the non-confidential portions of its hearing. The screening is scheduled for 31 October 2013 at the WTO."

Though it is not live, it is a recording of some parts of the hearing.

What lies next - a webcast perhaps?

Airbus subsidies - it goes on!

For those following the epic Airbus dispute (DS 316) at the WTO it seems to be a never ending case. From the Panel to an Appellate body decision and now to a lengthy compliance proceedings - the dispute has seen it all. The recent move of Airbus to locate a plant in the US does not seem to have cooled down tempers. Many have argued that only a political settlement between the two countries can end this long standing dispute.Apart from the legal intricacies involved, the case reiterates the role subsidies play in boosting industries - and subsidies are not limited to the developing world. it cuts across economies and geographies.

(http://www.airbus.com/company/americas/us/locations/)

The latest oral submission of the US in the case at the WTO gives an overview of what the US feels are the subsidies Airbus receives. The submission made in the compliance proceedings is rather hard hitting so had to quote some of it here:

"1. What is most remarkable about this dispute is how little has changed in the last eight years. In spite of the longest, most complex WTO dispute ever, and the largest-ever findings of subsidization and serious prejudice, the EU has done nothing to change its WTO-inconsistent behavior. It has withdrawn only a few tiny subsidies, and has taken no meaningful steps to remove the adverse effects of the $15 billion in subsidized financing that it left untouched. And then, just as the original panel was completing its work, the EU granted Airbus more than $4 billion in subsidized financing for the A350 XWB with the same core terms as LA/MSF for earlier aircraft, and once again with a massive benefit. 

2. The market situation has not changed in a meaningful way, either. Where subsidies caused Airbus’s market share to skyrocket in the years leading up to 2006, they have allowed Airbus to retain that market share today. Thanks to subsidies, Airbus overcame major setbacks, including the A380 production and design flaws, the failure of its initial proposal for the A350, and the failure and premature end of the A340 program in 2011. Thanks to the EU’s relentless subsidies, the U.S. large civil aircraft industry continues to lose billions of dollars’ worth of sales and market share to Airbus every year.

3. Instead of taking meaningful compliance action, the EU seeks to convince the Panel that the same arguments it raised before the original Panel now justify inaction in the face of the DSB recommendations and rulings rejecting those arguments. Its arguments are certainly lengthy, but that does not mask their fundamental lack of substance. ..."

This case is not only a landmark case to understand the concept of subsidization under the Agreement on Subsidies and Countervailing Measures but is also a reminder of the fact that a dispute settlement proceeding need not necessarily offer immediate remedies of removal of subsidies that may be adversely impact one's industry.

  

         

Airbus-Boeing battle takes a new turn

While the Airbus-Boeing dispute continues at the WTO between Europe and the US, news of Airbus assembling it's new aircrafts in Alabama, US provided an interesting insight. Airbus has just walked into Boeing's territory. With both the US and EU alleging that the other has given huge subsidies to its respective airline manufacturers, is Airbus's move the beginning of the end of the dispute?

What next? A Boeing assembly plant in Germany?

Tobacco Plain Packaging - A classic WTO dispute?

I had blogged yesterday about UK's moves to introduce plain packaging. Parallelly, the TRIPS Council at the WTO was the venue for the continued challenge to the proposed plain packaging measures of New Zealand with the Dominican Republic and Honduras maintaining that employment opportunities and TRIPS obligations must be the main consideration on deciding the fate of plain packaging measures.

ICTSD summarised the proceedings thus:

"Members at the TRIPS Council meeting also addressed a proposed New Zealand law that, if implemented, would require plain packaging for tobacco products. (See Bridges Weekly, 27 February 2013) The controversial legislation would require standardised packaging without trademarks, a drab monotone design, and prominent health warnings on cigarette packaging, with only a small line of text to distinguish one brand from another. 

At this week’s meeting, the Dominican Republic - whose main export is tobacco - took the lead in commenting on the draft legislation, saying that it would hinder employment and would force producers to compete based on price instead of quality.  

...

In response, New Zealand said it would continue developing the planned legislation - which is currently in the drafting stage - but may wait to see the outcome of the dispute before implementing it, echoing recent comments made by the country’s prime minister, John Key. It also recalled that the 2001 Doha Declaration says that TRIPS does not and should not prevent members from taking measures supportive of public health. 

The plain packaging regime is a part of “a long policy development process,” New Zealand added, noting that smoking is its single largest cause of preventable death."

Public health objectives, domestic policy space, long term development process vis a vis employment opportunities, growth of less develop countries and intellectual property law obligations. The stage is set for a classic WTO dispute!

China, wine and a trade dispute

Retaliatory trade actions are increasingly becoming common in "protectionist" times. The trend has not spared both the developed and developing world. The latest example is news trickling in of intended Chinese action on wine from the EU - and this time it is an allegation of wine from EU being "dumped" in China.

The official Chinese government portal reported:

"Wine producers have applied to the Ministry of Commerce (MOC) demanding investigations into whether European imports are damaging China's domestic market. 

Wang Zuming, head of the wine division of the China Alcoholic Drinks Association, told Xinhua, that winemakers want the ministry to look into the increasing amount of EU imports and its impact on the domestic industry. 

EU wine imports surged to 169,114 kiloliters, in 2011, from 35,944 kiloliters, in 2008, at an annual pace of 67.71 percent. In the past four years, its market share in China increased from 4.94 percent to 14.76 percent, Wang said. 

Almost every Chinese winemaker has felt the impact from the EU, he said.
The EU has provided various subsidies to the wine industry, putting Chinese makers at a disadvantage, Wang added."

The China Alcoholic Drink Association (CADA), the group representing local Chinese alcohol drink manufacturers, has apparently sought intervention from the Chinese government against supposed "dumping" of wine from the EU in China, basically implying that the price of imported wines in China were below normal price compared to prices back in Europe and that this adversely affected the Chinese wine industry.This has been reported here.

Reuters reporting on the development noted:

"Wine exports from the EU to China have increased sharply in recent years, reaching 169 million litres in 2011, compared with 35.9 million litres in 2008, Wang Zuming, secretary of the association's wine subcommittee, was quoted as saying. 

"Almost all wine enterprises in China have strongly felt the impact of the attack by wine imports from the European Union, with operations, performance and market share seriously sliding," Wang said. 

"The Chinese wine consumption market has shown great potential. By exporting such large amounts of cheap wine, it's obvious they're trying to seize Chinese market share."

Are some EU countries like Spain and France "dumping" cheap wine into china? Or is it just a case of better, competitive, cheaper wine from Europe int he Chinese market? is European wine subsidized in contravention of EU's WTO obligations ? Does china have a claim under the ASCM or the Antidumping Agreement? Some reports of alleged EU subsidies to wine production is found here.

An interesting fact about Chinese consumers and Chinese wine producers is brought out in the reuters piece above:

"Wealthy Chinese consumers show an overwhelming preference for expensive French wine, and Chinese companies and well-to-do individuals are buying multimillion-dollar wine chateaux in France's Bordeaux region."

Are the wine lovers the real losers in China in this battle or are they the insignificant minority whose voice doesn't really have political or business force? Another example of multiple stakeholders in any trade dispute. 

More glasses of wine will be sipped in China as this trade imbroglio unfolds.