In 1954 the ordo-liberal economist1For the distinction between ordo-liberals and American neoliberals see: Michel Foucault, The Birth of Biopolitics: Lectures at the College de France (Palgrave Macmillan, 2008). W. Roepke was invited in the Hague to deliver a paper on the relation between (neoliberal) economics and international law. In this instructive speech entitled ‘Economic Order and International Law’2Wilhelm Roepke ‘Economic Order and International Law’ 86 Recueil des Cours 203 Roepke observed that the 19th century being par excellence the time of economic liberalism lacked international legal documents on free trade, investment protection etc. For him this was not a contradiction, but rather a manifestation of political consensus: since all (Western) governments agreed on the merits of free market economy, there was no practical need to safeguard it through additional, international legislation. It was rather the experience of the inter-war ‘protectionism’ and the ongoing legacy of Keynesian politics and of differentiated legislation that according to Roepke disrupted free competition that necessitated the development of international law into what was to become international economic law. In his argument, international law is generally understood as a guarantee against the anti-competitive tendencies of the state in a time that the workers’ movement, Keynesianism, the existence and appeal of the socialist bloc and the slow emergence of post-colonial states appeared to tear apart the 19th century belief that the advantages of the free market were so obvious that no one needed to defend them on the international realm.
Roepke’s understanding of the proper relation between law and the economy was also marked by his profound sympathy towards the judiciary come to economic questions. In his 1942 book ‘The Social Crisis of Our Time’ Roepke lamented the perceived high-jacking of the state by ‘the mob of vested interests’. Such rhetoric was not uncommon in the ordo-liberal parlance. Even though ordo-liberals were not Nazis, they shared with Nazis the belief that the state of the Weimar era was weak, because it was too heavily influenced by the workers’ movement and therefore assumed functions (welfarism) that rendered it weak. Roepke’s ‘remedy’ to this perceived weakness was the decisive transfer of powers to the judiciary, since judges were understood to be the branch of government less susceptible to the pressures of the class-struggle and democratic movements.3‘It is now advisable, to make courts, more than in the past , organs of the economy and to entrust to their decision tasks that were previously entrusted to administrative authorities. ’ In: Wilhelm Roepke, The Social Crisis of Our Time (The University of Chicago Press, 1950)
BITs (and other legal) pieces: constructing a global neoliberal constitution
Even though Roepke never achieved the ‘celebrity’ status of Friedman or Hayek, his thought is essential, in order to fully comprehend the objectives and social function of the Transatlantic Trade and Investment Partnership (TTIP), currently negotiated between the EU and the US.4Dardot and Laval argue that the EU itself constitutes a blueprint ordo-liberal institution: Pierre Dardot, Christian Laval, The New Way of the World: on Neo-liberal Society (Verso, 2013), pp. 193–213
Any socio-legal analysis of the agreement should start by acknowledging that since tariff rates applicable to transatlantic trade are minimal, the TTIP clearly deviates from the post-war legal paradigm that mainly sought to minimise tariff barriers. Rather, it is part of the post-1990s attempt to internationally regulate literally any aspect of domestic legislation, from administrative processes (see Shrimp/Turtle case) to regulation of socially perceived hazardous substances (see EC-Hormones) that can somehow have an adverse effect on free trade. The European Commission admits that domestic regulation is the focus point of the negotiated treaty and the justification it provides thereof is that greater regulatory harmony would minimise investment costs for corporations in both sides of the Atlantic.
Interestingly, the Commission reassures us that this will not lead to a race to the bottom, but rather a ‘race to the top’ (sic). One of its main arguments on that front is that ‘regulators — i.e. the authorities that propose, adopt and/or implement the regulations under discussion — will be part of the negotiations.’ This point actually takes us to one of the most controversial provisions of the TTIP: the investor-state dispute settlement mechanism (ISDS). On a very basic level this provision, if it eventually becomes part of the final deal, will grant the investors (but not the states) the right to bring claims in front of an international arbitral tribunal for it to rule on whether the treaty was violated. Hence, even though the Commission argues that the participation of regulators in the negotiation process safeguards social interests like environmental or public health protection, it is silent about the fact that the day-to-day application of the TTIP will not rest at the end of the day with our political representatives, not even with domestic courts, but with international arbitrators.
Admittedly, there is nothing fundamentally new about this clause. An ISDS clause first appeared in a bilateral trade agreement between the proudly ordo-liberal Western Germany and Pakistan in 1959. The wave of nationalisations of natural resources by post-colonial states during the first three post-war decades and the attempts of the same states to challenge the international legal status quo that sanctioned the colonial plunder of their wealth, necessitated safeguards against this (partial) challenge to corporate power. The arguments invoked to justify this policy choice were a mix of neoliberalism (‘foreign investment is the only way to prosperity’) and 19th century civilisation discourse (‘the legal systems of the Third World states are too primitive to properly guarantee investment and their judges too inexperienced or corrupt’). This process reached its apogee after the fall of the Berlin Wall and the rise of market triumphalism. Thousands of Bilateral Investment Treaties (BITs) were concluded creating a solid international legal nexus of neoliberal policies. Further, NAFTA extended these arrangements in the heart of the ‘developed’ world. Unsurprisingly, arbitrators, who have been shown to have a disproportionally high commercial law background, showed a manifest bias towards big business. It probably suffices to be said that the Economist recently denounced the practice for being excessively pro-business.
In the legal realm, this shift was facilitated by the emergence of what Andrew Lang has coined as a ‘new legal imagination’.5Andrew Lang, World Trade Law after Neoliberalism: Re-Imagining the Global Economic Order (OUP 2011), pp. 271–2 For both WTO and NAFTA this new legal imagination meant that an ever increasing number of domestic regulations was understood discriminatory and therefore permissible under specific, limited conditions. For example, under NAFTA’s chapter 11 a U.S. waste disposal firm, successfully challenged a temporary Canadian ban on the export of toxic wastes. Even though the ban applied generally without discriminating on the basis of nationality, the arbitral tribunal ruled that Canada had violated NAFTA articles 1102 (national treatment) and 1105 (minimum standards of treatment). Similarly, expropriation clauses have been consistently interpreted liberally (in the dual sense of the word) to include “indirect expropriation”, which in turn entails pretty much any regulatory measure that adversely affects a foreign investor. Given our extensive historical experience, and given that the TTIP includes similar clauses, that are drafted quite broadly, there is no reason to believe that the ISDS mechanism of the TTIP will not follow these ‘precedents’.
What is relatively novel here is the introduction of such a mechanism in a trade and investment agreement concluded exclusively between ‘developed’ economies and legal systems. This evolution clearly proves how the inclusion of such clauses in bilateral agreements has always been politically motivated and not the by-product of the supposedly problematic character of the ‘developing’ states legal systems. Further, it has led to the articulation of exceptionally shaky arguments in order to support this politically motivated decision. My personal favourite so far is the argument that there is no fundamental difference between internationalised protection of human rights and ISDS clauses, and since we take the former for granted, there is no reason to reject the latter. This diffusion of trade and investment treaties and of the corresponding ISDS clauses indicated the ongoing attempt to ‘constitutionalise’ neoliberal politics at an international level, ‘locking in’ current political choices.
Crucial displacements and uncomfortable questions
In a recently sent and leaked letter, twelve trade ministers of EU member states, led by the UK,6The irony of the fact that the UK government is one of the more vocal supporters of the ISDS mechanism , while revolting against the ‘unelected judges’ of the ECtHR is just too stark to miss. urge for the inclusion of the ISDS clause in the final deal, despite the protests of social movements and even of some governments (Germany is allegedly leading the opposition camp). Both this motion and Roepke’s arguments highlight a crucial aspect of the neoliberal understanding of the state: their well-known ‘state phobia’ is informed by a peculiar understanding of the state. This conceptualisation falsely conflates the state with the legislative and the top of the executive (the government), while the (expansive) role of the judiciary is not problematised and is actually praised as a safeguard of (economic) freedom. While this trend is also common among some representative of traditional liberal thought, it reached its theoretical and practical apogee in our neoliberal era. Since politics is conceptualised by neoliberalism as inherently adverse to the individual, it is this branch of government that shows the greatest immunity to this perceived threat that is the ideal forum for decision-making. In the case of the TTIP this judicialisation is also part of an ongoing internationalisation of decision-making processes in economic matters. My argument is that given that historically progressive social movements tend to act on the national level (even when they have internationalist aspirations), the ‘outsourcing’ of economic policies performs an ‘immunisation’ function trying to minimise the effects of social movements upon political decisions. In the case of the EU the potential conclusion of the TTIP signifies a ‘double’ immunisation, since the EU has already assumed a significant role in disciplining states into the modalities and ethics of austerity.
This observation is a far cry from a call to economic nationalism and protectionism. Nevertheless, the TTIP is a stark example of how the proliferation of international economic law during the past three decades is an essential part of the neoliberal agenda and therefore, it is, to echo David Kennedy, ‘part of the problem’. This goes against the most deeply held beliefs of international lawyers, who persistently claim that the problem with international law is its ineffectiveness or that we don’t have enough of it. In the case of the TTIP, international law is instrumental in the process of dissolving the remnants of social-democracy in Europe and (right-wing) Keynesianism in the US. Furthermore, given the rapid rise of left-wing anti-austerity parties especially in the South of Europe (Podemos in Spain, SYRIZA in Greece), the conclusion of the TTIP would radically diminish the manoeuvre space for any future governments willing to challenge neoliberal orthodoxy.
The future of the ongoing negotiations remains unclear. What is clearer is that given the immense interests at stake, it is only popular mobilisation that could stop the conclusion of the TTIP and other relevant agreements (CETA between the EU and Canada, the TPP between Australia, the US, Japan and other Pacific states). If such agreements are advanced, then we will have to face political systems where freedom of speech and political action will be perfectly guaranteed, for the simple reason that they won’t be able to change much.
Ntina Tzouvala is a PhD candidate and part-time staff at Durham Law School. This post draws from a paper entitled ‘Resisting TTIP: What Role for International Legal Theory’ that was presented at the ESIL Interest Group on International Legal Theory on the 3rd of September 2014.
- 1For the distinction between ordo-liberals and American neoliberals see: Michel Foucault, The Birth of Biopolitics: Lectures at the College de France (Palgrave Macmillan, 2008).
- 2Wilhelm Roepke ‘Economic Order and International Law’ 86 Recueil des Cours 203
- 3‘It is now advisable, to make courts, more than in the past , organs of the economy and to entrust to their decision tasks that were previously entrusted to administrative authorities. ’ In: Wilhelm Roepke, The Social Crisis of Our Time (The University of Chicago Press, 1950)
- 4Dardot and Laval argue that the EU itself constitutes a blueprint ordo-liberal institution: Pierre Dardot, Christian Laval, The New Way of the World: on Neo-liberal Society (Verso, 2013), pp. 193–213
- 5Andrew Lang, World Trade Law after Neoliberalism: Re-Imagining the Global Economic Order (OUP 2011), pp. 271–2
- 6The irony of the fact that the UK government is one of the more vocal supporters of the ISDS mechanism , while revolting against the ‘unelected judges’ of the ECtHR is just too stark to miss.