Lord Goldsmith talks to ACICA audience about Brexit and arbitration – Marina Kofman

On 24 October 2016, Lord Goldsmith addressed an ACICA audience in Sydney about Brexit and arbitration. He set the Brexit scene: Theresa May is still tight-lipped about the nature of Brexit, following a Brexit campaign characterised by a lack of clarity on what Brexit would actually mean. Uncertainty abounds, except for in one aspect: indications are that negotiations will not be easy. The EU has made it clear to the UK that there will be ‘no negotiation without notification.’

First things first – the constitutional challenge: May plans to trigger Article 50 of the Lisbon Treaty next year but does she have the authority to do that under the royal prerogative? This issue is being hotly debated and is currently being tried in the London Courts. On 3 November 2016, the High Court delivered judgment finding that Article 50 could not be invoked without an Act of Parliament. Arrangements are in place for an expedited appeal straight to the UK Supreme Court and that case will be heard by December. Consequences for the UK and EU will be massive. Much of that is only dimly seen right now.

Impact on London arbitration

The thesis of Lord Goldsmith’s talk was that Brexit will not lead to a diminution of the merits or popularity of London as a seat of arbitration, nor damage the popularity of English law as the commercial law of choice for many international transactions. Why is this the case?

At the centenary conference of the Chartered Institute of Arbitrators (CIArb) in London last year, the CIArb published a list of ten features necessary to make for a safe, effective and successful seat of arbitration. These features are: (1) a clear arbitration law; (2) an independent judiciary; (3) legal expertise; (4) education; (5) the right of choice in representation; (6) accessibility and safety of the seat; (7) facilities; (8) professional ethics that embrace diversity of traditions; (9) enforceability; and (10) arbitrator immunity. London meets all of these requirements, none of which depend on UK membership of the EU. There is, therefore, no reason to believe that London will diminish in popularity as a seat of arbitration. Lord Goldsmith opined that despite the growth of arbitration and arbitral institutions in Asia, Brexit will not spark a ‘land grab’ for traditionally London-based work by other arbitration centres.

Potential opportunities

In addition to the challenges presented by Brexit, there are certain opportunities. First, there may be a substantive disentanglement of English law and EU law. European law has coloured English law, so if EU regulations no longer apply then English common law may see a resurgence. Secondly, the determination of jurisdictional issues in court cases may end up vastly different should the UK go down the path of abandoning the Brussels Regulation regime and return to common law forum non conveniens principles. The current regime means a UK commercial court can be seized of a matter in circumstances where it is not necessarily the most appropriate forum, but then have limited ways to decline jurisdiction. Right now though, it is uncertain what will happen in terms of UK court judgments until we know more about how the UK will proceed in relation to its private international law framework with respect to the EU. This might push some users towards arbitration, which has a reliable enforcement regime under the New York Convention. Another advantage of Brexit might be that UK courts will again be able to issue anti-suit injunctions directed at European courts. UK courts once commonly issued anti-suit injunctions to prevent proceedings brought in breach of arbitration agreements. This was, however, put to an end in 2004 when the European Court of Justice held that the practice was incompatible with the Brussels Convention.

Thirdly, Brexit might influence the debate about investor-State dispute settlement (ISDS). The EU has proposed an ‘Investment Court System’, a permanent investment court with an appeals process for the Transatlantic Trade and Investment Partnership (TTIP). The competence for negotiating EU treaties currently rests with the EU, and the EU has been firm that the UK is not free to negotiate its own treaties whilst it remains in the EU. The question is, would being freed from the EU give the UK a negotiating advantage? Only time will tell.

In the meantime, it is plausible even if the USA agrees to the an investment court system that it will still opt for conventional ISDS mechanisms in its other trade deals, in which case we might not see the inexorable rise of the Investment Court System. The UK’s decision to opt for one model or the other will influence the course of the debate particularly as the UK will become one of the more active trade negotiating countries over the coming years.

In his concluding remarks, Lord Goldsmith stated that it may now be time for Australia and the UK to grow a new and invigorated cooperation in the field of common law. This is also the time for lawyers to examine closely the opportunities for collaboration in training, development of the law and finding better ways to serve clients.

Marina Kofman is Assistant Editor of the ILA Reporter. A version of this article was originally written for and published by ACICA. It is partially reproduced here with permission.

The Implications of Trump Denouncing the Trans-Pacific Partnership Agreement – Leon Trakman

President- elect Donald Trump’s announcement on Tuesday 22 November 2016 that the US will not ratify the Trans-Pacific Partnership Agreement (TPP) is not a surprise.  He had stated that he would do as such throughout the presidential campaign, as had his democratic rival, Hillary Clinton.

His formal announcement is that the state parties to the TPP, including Australia, will revert to the position they had been in before the TPP was negotiated, seven years ago.

For now, there is no doubt that the TPP’s demise will disappoint the expectations of some TPP states, such as Japan, itself a late party that has strongly endorsed it.  Developing countries like Vietnam that stood to benefit disproportionately from its ratification will also be disappointed.

However, President-elect Trump’s announcement is unlikely to throw transpacific economies into turmoil, not only because his position was fully expected, but because the perceived benefit of the TPP for regional trade has been hotly debated and denounced by various labour, environmental, health and consumer lobby groups, among others, from its inception.

President-elect Trump’s announcement nevertheless has strategic importance, particularly in asserting that the US will negotiate bilateral trade agreements that best suit US interests in place of the TPP.  This statement is vague at best and wholly unsubstantiated.  First, it amounts to little more than a broad aspiration in the absence of verification.  Second, it does not stem from prior strategic planning by key US authorities.  In fact, President-elect Trump has opined as much before appointing a Secretary of Commerce or a US Trade Representative.  It is difficult to conceive of how replacing the world’s largest regional trade agreement with a series of bilateral trade agreements could be seriously contemplated without the serious consideration of such trade authorities. Third, as a practical matter, negotiating bilateral agreements take time, as Britain is likely to learn post-Brexit; and until they are negotiated, trade barriers are likely to continue.  Fourth, there is no assurance that the US will do better in negotiating bilateral trade agreements than under a ratified TPP.  States may run for cover from such bilateralism fearing that a pro-US trade deal will be too expensive to sustain, even though the US remains the world’s largest trade importer.  Fifth, the US already has bilateral trade agreements with a number of transpacific countries, including its 2004 US-Australia Free Trade Agreement.  Therefore, in many cases, no new bilateral treaties will eventuate in the absence of real economic impetus to negotiate them.

Importantly, the US withdrawal from the TPP, which excludes China, may provide China with even greater opportunity to conclude regional trade partnerships that exclude the US, such as the Regional Comprehensive Economic Partnership (RCEP) to which Australia is also a party.

Trump’s rejection of the TPP nevertheless has important economic consequences.  The TPP is particularly attractive to member states as a prototype treaty directed at reducing and then eliminating trade barriers, including costly import and export duties.  In contrast, the RCEP does not replicate that resolve, making it less attractive economically to countries like Australia seeking access to foreign markets.

If the US is to remain the primary player in defining global trade, the result of Trump’s assertion is likely to be a reluctance of states to reduce or eliminate trade barriers in bilateral trade agreements.

If President-elect Trump’s declaration against the TPP has legs to stand on, it is likely to undermine trade liberalisation more generally; and that result, feared by macro-economists, is potentially the most troubling.

Professor Trakman is a Barrister, Professor of Law and Former Dean at the University of New South Wales

The Champagne Problems of the Paris Agreement – Josh Sheppard

 

Introduction

On 4 November 2016, the Paris Agreement came into force, just under a year after it was concluded and signed. Coming into force earlier than expected, the First Meeting of the Parties to the Paris Agreement (“CMA1”) has been hastily organised to coincide with the twenty-second session of the Conference of the Parties (“COP22”). This article will address two critical questions regarding CMA1 and COP22: what is left for discussion after last year’s historic result, and how will the earlier-than-expected CMA1 affect negotiations?

 

The Detail

Whereas the 21st Conference of the Parties (“COP21”) was primarily concerned with the broad mechanisms of international climate cooperation – limiting global warming to 2°C, with an aspirational limit of 1.5°C and mandating that greenhouse gas emissions peak by the second half of the 21st Century – COP22/CMA1 will focus on the practical details of how these mechanisms will work and goals achieved.

 

Nationally Determined Contributions 

Some of the key negotiations will centre around the Nationally Determined Contributions (“NDCs”), which outline each country’s intended emissions reductions. Successive NDCs must contain greater emissions reductions and must reflect each party’s “highest possible ambition”. Decisions are scheduled to be made about the features of NDCs, how NDCs can be communicated in ways that aid clarity, transparency, and understanding, and what guidance should be given regarding accounting for NDCs so that there is consistency between communication and implementation. The depth of what remains unknown surrounding the practical operation of the NDCs is evident through analysis of the different debates currently taking place, particularly regarding timing and accounting practices.

 

  1. Timing

NDCs are due every five years (Art. 4(9)), although the exact timeframe is to be determined by the Parties: Art. 4(10). India has suggested that developing countries should not have to submit NDCs every five years. This submission may fuel debate in respect of how far the principle of “common but differentiated responsibilities and respective capabilities” extends, especially given that the Agreement explicitly refers to a five-year timeframe.

 

  1. Accounting

Accounting rules for determining emissions reductions illustrate further contrasts in the approaches adopted between developed and developing country Parties. The power of such rules has been demonstrated by Australia, infamously taking advantage of a rule that allowed for the crediting of good past performance under the initial Kyoto Protocol period to meet its current 2020 target, despite emissions actually being projected to increase by the end of the target period.

 

Some countries are seeking to avoid a rigid accounting system, with China advancing the following proposal:

[D]eveloped country Parties should take the lead in applying the guidance for accounting” [while] developing country Parties should be allowed to choose … the sectors and gases covered in their NDCs and specific methodologies on accounting”.

 

Iran and India, too, stress the different responsibilities for developed and developing countries in communicating NDCs, both specifically suggesting that the latter should not have to report on land use.

 

Demonstrating these rules’ critical importance to an effective Paris Agreement, the United Nations Framework Convention on Climate Change (“UNFCCC”) has made several comments regarding the accounting practices employed by Parties in their intended NDCs. Inconsistent reporting on land use between parties and the failure to provide information on assumptions and methods used to account for those emissions are obstacles to evaluating the entire effect of the actions outlined in the NDCs. Meanwhile, Costa Rica (on behalf of a coalition of Latin American countries) and Japan have requested that NDCs more clearly outline which emissions reductions are unconditional and conditional. These concerns, along with the differing application of agreed accounting standards justified by “common but differentiated responsibilities and respective capabilities” may see confidence in the NDC system decline and the Agreement unravel, if left unaddressed.

 

The dilemmas posed by the unanticipated swiftness of the Paris Agreement

Entering into force faster than most commentators expected, the Paris Agreement’s swift adoption has also created a headache for administrators and diplomats. Those who have not yet ratified the Agreement are technically not allowed to participate in the Meeting. The Climate Institute have highlighted the importance of allowing those who have not yet ratified the Agreement to participate in these processes, especially as many of these countries may have legitimate reasons for not yet having ratified the Agreement. Meanwhile, guidance that is supposed to be provided by sub-committees and working groups to CMA1 remains unfinished, the process of creating such advice having only begun this year. Therefore, many of the decisions that CMA1 was scheduled to make under the decision of COP21 are not yet ready to be made.

 

The World Resources Institute points out that this ought to be easily resolved, as COP22 can simply adopt new timeframes that accord with the early entry into force of the Agreement. However, the Paris Agreement contains reference to decisions being made at its first meeting, including the determination of common timeframes for NDCs. As this is in the treaty text, it is more difficult to amend the requirement for decisions to be made.

 

The Climate Institute posits that COP22 must formally create a method by which these practicalities can continue to be discussed and determined until the end of 2018. The World Resources Institute suggests that one possible solution is the suspension of CMA1 until agreed, providing the example of COP6’s suspension for seven months after the Conference was first opened. This appears to be the most likely solution.

 

Conclusion 

COP22, as CMA1 or its potential starting point, is where the difficult work begins in ensuring that emissions are reduced in a manner consistent with the Paris Agreement. The early entry into force of the Paris Agreement has, perhaps ironically, made this difficult work all the more complicated. It will likely mean the delay of important decisions to allow for expert guidance, the opportunity for Parties to put their views, and ratification by most, if not all, Parties. To resolve these issues, countries will have to draw further on that same cooperative spirit that facilitated the swift and unanimous adoption of the Paris Agreement.

 

Josh Sheppard is Assistant Editor of the ILA Reporter.

President Trump: a risk to some, but an opportunity for others – Nathan Huynh

When we first heard the news of Donald Trump, financial markets initially plunged as expected. However what was remarkable was that upon hearing his surprisingly conciliatory speech, the market then underwent one of the most incredible recoveries in history. Many began to consider the opportunities that a Trump Administration brings, particularly in the legal market.

Before I go any further, I just want to make it clear that I am not a Trump supporter, nor am I a Clinton supporter and aim to make this as neutral as one can.

The short answer is that it is impossible to accurately predict how the election of Donald Trump will impact the legal market, particularly given his change of tone and direction post-election. However assuming that Trump does follow through on them, below are my thoughts on how some of his proposals will impact the legal market.

Financial regulation

One of Trump’s first post-election announcements has been that he will work towards dismantling the Dodd-Frank Act and replace it with policies that “encourage economic growth and job creation”. Assuming this means a loosening of the existing rules (which may be good or bad – depending on what side of the fence you sit on), financial institutions will be scrambling to seek legal advice on how to best prepare for and comply with Trump’s alternative to the Dodd-Frank Act.

International trade deals

If Trump does follow through on his plans to rip up the international trade deals such as the Trans-Pacific Partnership and adopt a more protectionist policy, it is safe to say that the United States’ allies and partners will not go down without a fight. There will be an increase in legal work in the area of international law, particularly in relation to the legality of overturning existing trade agreements, structuring newly negotiated trade agreements and international arbitrations with affected countries.

Infrastructure

On a less contentious note, in his acceptance speech Trump emphasised that he was going to rebuild infrastructure in the United States. Regardless of whether his claims that the infrastructure will be “second to none” turns true or not, an emphasis on infrastructure will lead to a need for legal advice in the areas of construction, finance, real estate and regulatory issues (and hopefully some of this will involve international parties, leading to some opportunities world wide).

Immigration and employment law

Let’s now get the elephant in the room out of the way. During the campaign, Trump announced proposals requiring employers to check the immigration status of their employees. I would imagine such a measure would leave businesses scrambling for legal advice on how to ensure compliance and (sadly) advice on whether their workers have any chance of staying in the United States.

Healthcare and insurance

In a country without universal health care, any change to healthcare and insurance laws will have a profound impact on most Americans. Insurance firms, employers and healthcare providers will no doubt need to seek legal advice should Trump follow through with the Republican party’s desire to get rid of Obamacare (which seems highly likely).

Conclusion

In summary, the election of Donald Trump will lead to a strong level of change and uncertainty. Nobody can predict what direction he will take the free world, however one thing is certain – like always, any change can be translated into an opportunity.

Nathan Huynh is an Australian-based lawyer practicing in the finance division of a leading global law firm.

Common Article 2 as a paradigmatically challenging threshold for the application of IHL – Rob McLaughlin

Our blog mini-series, co-hosted with the ICRC, wraps up with a post by Associate Professor Rob McLaughlin, Co-Director of the ANU Centre for Military and Security Law.  Dr McLaughlin shares his reflections on common article 2 and the important question of when IHL must be applied.

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Ensuring respect: the role of State practice in interpreting the Geneva Conventions – John Reid

In this second instalment of the mini-series on the ICRC’s Updated Geneva Convention Commentaries, John Reid, Head of the Office of International Law at the Commonwealth Attorney-General’s Department, highlights the importance of State practice in understanding the common article 1 obligation to respect and ensure respect for IHL.

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Common Article 1: A Lynchpin in the System to Ensure Respect for International Humanitarian Law – Jean-Marie Henckaerts

In March, the ICRC released an updated Commentary on the First Geneva Convention of 1949.  This is the first instalment of six new commentaries aimed at bringing the interpretation of the Geneva Conventions and their Additional Protocols of 1977 to the 21st century.  In this blog mini-series co-hosted with the ICRC, three authors will share their perspective on some of the fundamental obligations enshrined in the Geneva Conventions and the evolution of the application and interpretation of these important provisions. 

Jean-Marie Henckaerts, ICRC’s Head of the Commentaries Update project, kicks off the mini-series with an examination of why the commitment by States to respect and ensure respect for IHL is more than just a “loose pledge”, and what measures States can take to fulfil this obligation.

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