RAJIV GANDHI NATIONAL UNIVERSITY OF LAW, PUNJAB

Submitted in the partial fulfillment of B.A.LL.B (Hons.), Tenth Semester

Rough Draft

“INTERNATIONAL ECONOMIC LAW VIS-A-VIS RECENT

DEVELOPMENTS”

SUBMITTED TO
DR. SUKHWINDER KAUR VIRK
(ASST. PROF. OF LAW)

SUBMITTED BY
DHRUV D. AGARWAL (14122)
B.A. LL.B.(HONS.), 10TH SEMESTER

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 TABLE OF CONTENTS

I. INTRODUCTION ............................................................................................................. 4

A. General ........................................................................................................................ 4

B. Definition of IEL ......................................................................................................... 4

a. What system of law or systems of law are involved? ................................................. 5

b. What is the content of IEL? ..................................................................................... 6

C. Basis of IEL................................................................................................................. 7

II. EVOLUTION OF IEL ........................................................................................................... 10

A. General ...................................................................................................................... 10

B. United Nations and Economic Cooperation .............................................................. 10

C. Role of General Assembly ........................................................................................ 10

D. Charter of Economic Rights and Duties of States ..................................................... 11

E. New International Economic Order .......................................................................... 12

III. PRINCIPLES OF IEL ........................................................................................................ 13

A. Economic Sovereignty .............................................................................................. 13

B. Permanent Sovereignty over Natural Resources ....................................................... 13

C. Fundamental Principles of IEL ................................................................................. 15

IV. GLOBAL INEQUALITY & IEL .......................................................................................... 18

A. Global Inequality Problem ........................................................................................ 18

B. Addressing Inequality ............................................................................................... 19

V. IEL VIS-A-VIS SUSTAINABLE DEVELOPMENT .................................................................... 20

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VI. IEL VIS-A-VIS HUMAN RIGHTS ...................................................................................... 23

A. General ...................................................................................................................... 23

B. Human Rights require Citizen oriented conception of International Law ................ 23

C. Human Rights integrated IEL ................................................................................... 24

VII. IEL & INDIA .................................................................................................................. 26

VIII. CONCLUSION .............................................................................................................. 27

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 I. INTRODUCTION

A. GENERAL

1. International Economic Law (herein after “IEL”) is the branch of international law that
includes trade law, investment law, global banking and nonce law, development lending and
crisis lending and international commercial law. Given its subject matter, it is not surprising
that the problem of inequality is central to IEL, and vice versa.

2. While the field has, to some extent, addressed inequality between states, inequality within
states has largely been ignored; only recently has the field struggled to take into account the
extent to which inequalities within states are influenced by laws and policies set at the inter-
state level.1

3. This essay, part of a larger interdisciplinary working group on inequality, seeks to introduce
the reader to the way inequality questions present themselves in international economic law,
to some of the current thinking within the field on how to address inequality, and what
international economic law can contribute to the larger inquiry into inequality and its drivers,
and to broader societal efforts at remediation.

4. The notion of fairness and justice is closely linked to IEL. Fairness as expounded by Franck,
from J. Rawls’s Theory of justice,2 has two aspects – the substantive (distributive justice) and
the procedural (right process).3

5. In the field of IEL, the question of inequality is shadowed by three inter-related concerns: the
history and legacies of colonialism and post-colonialism, the related notion of
“development,” itself a fraught term and now by the transformative effects of globalization.

B. DEFINITION OF IEL

6. International economic law regulates the international economic order or economic relations
among nations. However, the term ‘international economic law’ encompasses a large number
of areas.

1
(Garcia 2006), “Trade, Justice and Security” explores impact of trade law on domestic inequality, and impact
of trade-related inequalities on security and other policy concerns.
2
J. Rawls, Theory of Justice (1972).
3
Franck, Fairness in International Institutional Law and Institutions (1995), p.7.

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7. It is often defined broadly to include a vast array of topics ranging from public international
law of trade to private international law of trade to certain aspects of international
commercial law and the law of international finance and investment. At a preliminary level,
the process of defining IEL mainly involves the following two questions:

a. What system of law or systems of law are involved?

8. There appears to be two conceptions of IEL.4 Firstly, it is understood as a branch of Public
Int’l Law5 (narrow definition). Secondly, it is conceived of, particularly of late, as including
all branches of law concerned with economic phenomena of international concern 6 (broader
definition).

9. The broader definition does not deny Public International Law as being a source; it merely is
not confined to it. It includes domestic law, including Private International Law and
Transnational Business Law.7

10. Defining IEL in the terms of Public International Law may give the impression of endorsing
a State centric “Westphalian”, “Top-down” conception of IEL.8 On the other hand, in the
broader definition, market driven solutions and individual economic rights are taken into
account.9 The broader definition is referred to by E-U Petersmann as “Multilevel Economic
Law Perspective” with an emphasis on “Public-Private” partnerships.10

11. The broader definition is justified by its advocates mainly on the following grounds:

 Firstly, the definition of the subject should not be grounded in the origins of the law,
but rather should focus on its objects.11

 Secondly, there is in fact convergence of Public Int’l Law (herein after “PIL”) and
Domestic Law12 because the increasing economic relations between states and private
parties have meant that states have become subject to domestic law as a consequence.

4
H. Fox, “The definition and Sources of Int’l Economic Law” in International Economic Law and Developing
States (2002) BIICL at p.12.
5
G. Schwarzenberger, “The Principles and standards of IEL” (1966) Recueil des Cours, pp.1 and 7.
6
E-U Petersmann, “The Future of IEL: A Research Agenda”, European University Institute, Florence,
Department of Law Working Paper LAW 2010/06.
7
P. Caryl Jessup, “Transnational Law” (New Haven, 1956).
8
PETERSMANN, Supra note 6.
9
Id.
10
Id.
11
P.V. Dijk et al., Restructuring the international economic order: the role of law and lawyers (Kluwer law and
Taxation Publishers, 1987), p.14.

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  Thirdly, PIL should be re-evaluated so that it governs both states and private parties
and that a broader definition fulfils this function.13

 Fourthly, many of the private economic structures and transactions are ultimately of
public and governmental concern. They need to be regulated nationally. Given that
they are regulated nationally, they also become of international interest. 14

 Finally, Domestic law affects both inward and outward relations between states and
people. Therefore, the policy formation processes involved therein should be
integrated internationally.15

b. What is the content of IEL?

12. The basic subject matter comprises the economic phenomena. It may be generally defined,
and/or its coverage may be listed. Many of the writers have engaged in the list approach. This
is enlightening to the extent that it is illustrative.

13. Thus, Jackson includes “trade, investment, services when they are involved in transactions
that cross national borders and those subjects that involve the establishment on national
territory of economic activity of persons or forms originating from outside that territory”.16

14. The list approach on its own can have its shortcomings like where the list purports to be
exhaustive it becomes problematic. Schwarzenberger described the field as being concerned
with:

 The ownership & exploitation of natural resources;

 The production and distribution of goods;

 Invisible international transaction of an economic or financial character;

 Currency and finance;

 Related services; and

12
R.A. Brand, “Introduction: semantic distinction in an age of legal convergence”, University of Pennsylvania
Journal of IEL (1996) 17.
13
J.P. Tachtman, “Introduction: The International Economic Revolution”, the American University Journal of
International Law & Policy (1995) 10.
14
Id.
15
Id.
16
J.H. Jackson et al., International Economic Relations, pp. 193-194.

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  The status and organisation of those engaged in such activities.17

15. However he specifically excluded18 labour, social, transport and intellectual property spheres.
Such exclusion is an arbitrary legal constructs which detracts from the inter-linkages b/w
various disciplines. It is to be noted that subsequent list to that formulated by
Schwarzenberger’s are broader and non-exclusive.

16. Development now is more integrated and holistic concept, involving the realisation of
individual freedom, as well as the notion of sustainable development. 19 The core of IEL
comprises of that which is directly and obviously of an economic dimension; whereas the
penumbra consists of those non-economic consideration which colour the development of the
core.20

17. The preoccupation at the core of International Economic relations are generally identified as
relating to international trade in goods and services, international monetary relations, and the
development and investment field.21 The range in the penumbra is however more extensive –
indeed, potentially open-ended.

C. BASIS OF IEL

18. The International Economic Law Interests Group of the American Society of International
Law includes the following non-exhaustive list of topics within the term ‘international
economic law’:

(1) International Trade Law, including both the international law of the World Trade
Organization and GATT and domestic trade laws;

(2) International Economic Integration Law, including the law of the European Union,
NAFTA and Mercosur;

(3) Private International Law, including international choice of law, choice of forum,
enforcement of judgments and the law of international commerce;

17
SCHWARZENBERGER, supra note 5.
18
SCHWARZENBERGER, supra note 5.
19
P. Sands, “International Law in the field of Sustainable Development”, (1994) B.Y.I.L., p.303.
20
Asif H Qureshi et al., “International Economic Law”, 3 rd Ed. (2011).
21
S. Zamora, “Is there Customary International Economic Law?” German Yearbook of International law (1989)
32, p.15.

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 (4) International Business Regulation, including antitrust or competition law,
environmental regulation and product safety regulation;

(5) International Financial Law, including private transactional law, regulatory law,
the law of foreign direct investment and international monetary law, including the law of the
International Monetary Fund and World Bank;

(6) The role of law in development;

(7) International tax law; and

(8) International intellectual property law

19. International economic law is based on the traditional principles of international law such as:

 Pacta sunt servanda

 Freedom

 Sovereign

 Equality

 Reciprocity

 Economic Sovereignty.

20. It is also based on modern and evolving principles such as:

 The duty to co-operate

 Permanent sovereignty over natural resources

 Preferential treatment for developing countries in general and the least-developed

countries in particular

21. The sources of international economic law are the same as those sources of international law
generally outlined in Article 38 of the Statute of the International Court of Justice: Article 38
states that the Court, whose function is to decide in accordance with international law such
disputes as are submitted to it, shall apply:

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 (a) International conventions, whether general or particular, establishing rules expressly
recognized by the contesting states;

(b) International custom, as evidence of a general practice accepted as law; (c) the general
principles of law recognized by civilized nations;

(d) Subject to the provisions of Article 59, judicial decisions and the teachings of the most
highly qualified publicists of the various nations, as subsidiary means for the determination of
rules of law.

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 II. EVOLUTION OF IEL

A. GENERAL

22. IEL regulates the international economic relations among nations. Modern state controls both
private and public economy, export and import, internal and external trade, investments and
agriculture. The impact of this control has given rise to various methods of regulations. This
control and regulations have also influenced the inter-country trade. Prior to the globalisation
of economy, most of the economic and monetary matters were regulated through bilateral
agreements.

23. This practice of bilateralism has not been given up altogether. But the new developments
have given rise to multilateral agreements. The charter of the UN also envisages “economic”
advancement of all people of the world. The economic and social council, one of the
principle organs of UN, is required to make or initiate studies, inter alia, on economic
matters22.

24. In view of this also, the necessity of multilateral agreements and treaties has arisen. Now,
there are many multilateral agreements on economic and monetary matters, such as Articles
of Agreement of the International Monetary Fund (IMF) and the International Bank for
Reconstruction and Development (IBRD) adopted in 1944.

B. UNITED NATIONS AND ECONOMIC COOPERATION

25. The charter of UN in its Preamble expresses the determination of the people of the
organisation for economic and social advancement of these people. The Economic and Social
Council (herein after “ECOSOC”) of the UN serves as a central forum for discussion of
international economic issues and formulation of policy recommendations to the member
states and to the UN system to which the ECOSOC is responsible.

26. The global financial crisis of 2008 highlighted the interconnections of the global economies.
It also underlined the necessity of major changes in the existing international economic
framework within the UN. This reaffirms the central role of the UN in seeking common
economic solution.

C. ROLE OF GENERAL ASSEMBLY

22
Article 62, UN Charter 1945.

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27. The UNGA, being a universal organ and consisting 193 countries of the world, plays an
important role in international economic matters. Since 1974, when it adopted a Declaration
on the Establishment of a New International Economic Order 23 , up to July 2009, it has
adopted eight Conventions and Declarations on this subject.

28. These include Model Law of United Nations Commission on International Trade Law
(UNCITRAL), Declaration on International Cooperation, Model Law on Cross Border
Insolvency, and the charter of Economic Rights and Duties of States. The UNCITRAL is a
core legal body of the UN system in the field of international trade law.

29. Its functions include formulations of Conventions and model law and rules which are
acceptable worldwide. Its Model Law on Electronic Commerce was adopted by the General
Assembly on 16th December 1996. It is the first law adopting fundamental principles of non-
discrimination, technological neutrality and financial equivalence which are basic elements of
modern electronic commerce.

30. In 1974, UNGA adopted a unanimous declaration on the establishment of a New

International Economic Order. This Declaration is claimed as the most important of
economic relations among all peoples and all nations. This declaration contains 20 principles
including principles of right of regularisation of the activities of transnational corporations in
the interest of national economy.

31. Recently in 2009, the UNGA endorsed the outcome of the conference on the world financial
and economic crisis and its impact on Development held in New York from 24 to 30 June
2009. The outcome has emphasised the need of strengthening the international financial and
economic system.24

D. CHARTER OF ECONOMIC RIGHTS AND DUTIES OF STATES

32. This charter was adopted by the UNGA25 by a vote of 120 in favour, 6 against including the
UK and US, and 10 abstentions. The UN conference on trade and Development, in its
Resolution 45 (III) of 18th may 1972 had stressed upon the urgency to establish generally
accepted norms to govern the international economic relations.

23
UNGA Res. 3201 (S-VI), 1-5-1974.
24
UNGA Res. A/63/303 of 9-7-2009, UN Website(www.un.org/en/).
25
UNGA Res. 3281 (XXIX) of 12-12-1974.

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33. The basic purpose of the charter of International Economic Rights and Duties of states is to
promote the establishment of new International Economic Order based on equity, sovereign
equality, independence, common interests and cooperation among all states. The Charter
consists of a preamble and 34 articles divided into 4 chapters.

34. Chapter I lay down 15 principles of international economic order. Chapter 2 deals with the
economic rights and duties of the states. These rights include the right to choose its economic
order, to exercise full sovereign rights over its national resources and economic activities, to
regulate foreign investment and transnational corporations within the state, to nationalise, to
participate in regional and sub-regional and inter-governmental cooperation.

35. These rights have some correlative duties and responsibilities also. The duties of every state
party include contributing to the development of the international trade, to cooperate in
liberalisation of world trade, to promote complete disarmament. The primary responsibility is
to promote the economic, social and cultural development of its people.

E. NEW INTERNATIONAL ECONOMIC ORDER

36. The UNGA adopted resolution 26 on the establishment of a New International Economic
Order. This Declaration lays down 20 principles on which the New International Economic
Order was to be founded. This Declaration was not favoured by most of the western
European and industrialised nations.27

37. It was meant for removing isolation between the developed and the developing countries in
the economic field and to establish a new international economic order based on equity,
sovereign equality, independence, common interest and cooperation among all states,
irrespective of their economic and social systems.

38. These principles include sovereign equality of states, right of self-determination, broadest
cooperation of all states based on equity, effective participation on the basis of equality,
freedom of adoption of economic system of one’s choice, full and permanent sovereignty
over the natural resources of the state concerned, right of regulation and supervision of the
activities of multilateral corporation, reformations of international monetary system and
preferential and non-reciprocal treatment for the developing countries.

26
UNGA Res. 3201 (S-VI), 1-5-1974
27
K.C. Joshi, “International Law & Human Rights”, 3rd Ed., Easter Book Company (2016).

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 III. PRINCIPLES OF IEL

A. ECONOMIC SOVEREIGNTY

39. When states began to function as politically independent and sovereign entities, they realised
that one of the most important attributes of state sovereignty was economic sovereignty.
Without this, political sovereignty was not complete. Asserting economic sovereignty meant
having control over the economic activities of both juridical and natural persons conducting
business within the country, whether nationals of that country or foreigners.

40. Owing to a number of historical reasons, many states inherited on independence a situation in
which foreign individuals or companies enjoyed certain concessions or privileges or control
over the economic activities of the country concerned. In many states the natural resources
and mining rights were controlled by foreign companies or individuals under a concession
agreement entered into with the previous administration, whether colonial or otherwise.

41. When the country concerned wished to embark on a policy of economic development, one of
the first initiatives it had to take was to consider harnessing its natural resources in
accordance with its economic policies. It therefore became necessary for these states to assert
sovereignty over the natural resources of the country and require that foreign individuals and
companies comply with the new policy adopted by the state.

42. In many countries it was difficult to assert economic sovereignty without doing away with the
rights, concessions and privileges enjoyed by foreign individuals and companies over the
country’s natural resources.

43. However, developed countries whose nationals had gone overseas to invest and do business
resisted attempts to impose national law on foreigners. They argued that existing concessions
and contracts had to be honoured under international law. It was at this juncture that the
concept of permanent sovereignty over natural resources was introduced in international law.

B. PERMANENT SOVEREIGNTY OVER NATURAL RESOURCES

44. When the number of newly independent developing countries grew, these states sought to
assert their complete economic sovereignty by proclaiming that they had complete and
permanent sovereignty over their natural resources – regardless of any arrangements made by
their previous colonial administrations.

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45. Consequently, a resolution was introduced in the UN General Assembly to this effect and
was passed by an overwhelming majority of states. Paragraphs 1 and 2 of the famous 1962
UN General Assembly Resolution on the Permanent Sovereignty over Natural Resources
(PSNR) state:

 Paragraph 1: The right of peoples and nations to permanent sovereignty over

their natural wealth and resources must be exercised in the interest of their
national development and of the well-being of the people of the state
concerned;

 Paragraph 2: The exploration, development and disposition of such resources,

as well as the import of the foreign capital required for these purposes, should
be in conformity with the rules and conditions which the peoples and nations
freely consider to be necessary or desirable with regard to the authorisation,
restriction or prohibition of such activities.

46. Accordingly, the resolution goes on to outline the rights of states with regard also to the
expropriation and nationalisation of the assets of foreign companies:

 Paragraph 4: Nationalisation, expropriation or requisitioning shall be based on

grounds or reasons of public utility, security or the national interest which are
recognised as overriding purely individual or private interests, both domestic
and foreign. In such cases the owner shall be paid appropriate compensation,
in accordance with the rules in force in the state taking such measures in the
exercise of its sovereignty and in accordance with international law. In any
case where the question of compensation gives rise to a controversy, the
national jurisdiction of the state taking such measures shall be exhausted.
However, upon agreement by sovereign states and other parties concerned,
settlement of the dispute should be made through arbitration or international
adjudication.

47. The concluding paragraph of the resolution seeks to assure investor countries and foreign
investors that the provisions of bilateral investment agreements will be respected:

 Paragraph 8: Foreign investment agreements freely entered into by or between

sovereign states shall be observed in good faith; states and international
organisations shall strictly and conscientiously respect the sovereignty of

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 peoples and nations over their natural wealth and resources in accordance with
the Charter and the principles set forth in the present resolution.

48. The provisions of the PSNR Resolution28 (Resolution 1803 of 1962) have been held widely
as representing customary international law because of:

 The unanimous support it received at the UN

 Its declaratory nature of the rules of customary international law on the subject
matter.

C. FUNDAMENTAL PRINCIPLES OF IEL

49. As an attempt to implement the objectives of the NIEO and to establish the norms of
international economic relations, the UN General Assembly adopted as part of its resolutions
on the NIEO the Charter of Economic Rights and Duties of States (CERDS) of 1974.29 The
full text of this Charter is appended to this Study Guide.

50. Chapter 1 of the Charter outlines the fundamentals of international relations in the following
words:

51. Economic as well as political and other relations among states shall be governed, inter alia,
by the following principles:

a. Sovereignty, territorial integrity and political independence of States

b. Sovereign equality of all States

c. Non-aggression

d. Non-intervention

e. Mutual and equitable benefit

f. Peaceful coexistence

g. Equal rights and self-determination of peoples

h. Peaceful settlement of disputes

28
UNGA Res. 1803 on PSNR, 1962.
29
Charter of Economic Rights and Duties of States (CERDS), 1974.

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 i. Remedying of injustices which have been brought about by force and which
deprive a nation of the natural means necessary for its normal development

j. Fulfilment in good faith of international obligations

k. Respect for human rights and international obligations

l. No attempt to seek hegemony and spheres of influence

m. Promotion of international social justice

n. International co-operation for development

o. Free access to and from the sea by land-locked countries within the framework of
the above principles

52. These are principles of a general nature which include both economic and political principles
and reflect the trend of the early 1970s. Articles 1, 2, 4 and 5 outline the economic rights and
duties of states in a more concrete manner:

 Article 1: Every State has the sovereign and inalienable right to choose its
economic system as well as its political, social and cultural systems in
accordance with the will of its people, without outside interference, coercion
or threat in any form whatsoever.

 Article 2: Every State has and shall freely exercise full permanent sovereignty,
including possession, use and disposal, over all its wealth, natural resources
and economic activities.

 Article 4: Every State has the right to engage in international trade and other
forms of economic cooperation irrespective of any differences in political,
economic and social systems. No State shall be subjected to discrimination of
any kind based solely on such differences. In the pursuit of international trade
and other forms of economic cooperation, every State is free to choose the
forms of organisation of its foreign economic relations and to enter into
bilateral and multilateral arrangements consistent with its international
obligations and with the needs of international economic cooperation.

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 Article 5: All States have the right to associate in organizations of primary
commodity producers in order to develop their national economies, to achieve
stable financing for their development and, in pursuance of their aims, to assist
in the promotion of sustained growth of the world economy. In particular
accelerating the development of developing countries. Correspondingly, all
States have the duty to respect that right by refraining from applying economic
and political measures that would limit it.

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 IV. GLOBAL INEQUALITY & IEL

A. GLOBAL INEQUALITY PROBLEM

53. The problem of inequality is not new, yet globalization has intensified the nature of inequality
today to worrisome proportions. The forces of inequality are global in nature and intensity.
We should be concerned about global inequality for the same reasons we are concerned about
national inequality, as well as some new ones.

54. On the face of it, the outlook for equality is not encouraging. To attempt to summarize some
very contentious statistics, overall we see a disturbing reversal of the 20th-century trend
towards growth with lower inequality. The OECD has forecasted that by 2060, and without a
change in policy approaches, inequality in the average OECD country will match that found
today in the most unequal countries. Most importantly, global inequality (inequality between
people, across countries) greatly exceeds national inequality (inequality within countries).

55. While it may be that inequality between countries (international inequality) is decreasing
(thanks largely to the gains by China and India), inequality within countries is increasing, at
least partially offsetting any reductions in global inequality.

56. The most disturbing conclusion of them all is that, depending how one reads the data, it could
be that domestic inequality entirely offsets reductions in international inequality—it could
even be that overall global inequality has increased despite the gains between states and the
gains in poverty reduction.

57. Technological change also has a well-understood effect on inequality, which is magnified
through trade and investment channels. New technologies intensify inequality within
countries by increasing skill premiums, substituting automation for human labour, and
promoting non-traditional work.

58. The effect of new technologies is particularly acute in developed economies, themselves
ironically also the lead innovators, where new technologies have contributed to the
destruction or off shoring of old jobs in traditional areas of employment.

59. Finally, global inequality is having domestic political effects, intensifying there activity of
domestic politics and further complicating our policies towards inequality and political
reform. One can see this in everything from the Euro crisis to Brexit to the reactionary
nationalism of U.S., French, Hungarian, Polish and Austrian politics, to list only a few

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 examples. Global inequality thus creates unique political problems for domestic societies,
when socio-economic resentments and migration pressures stoke nativism, xenophobia and
reactive domestic politics.

B. ADDRESSING INEQUALITY

60. Globalization is not simply intensifying the inequality problem—it is transforming our
understanding both of the problem and how to approach it. Effectively addressing inequality
today requires a paradigm shift in how we approach both inequality and the larger questions
of development and fairness it is a part of: we must now approach them as global problems
within a global market society.

61. Given that the transnational space now resembles more closely what we think of as domestic
space than it does our traditional accounts of the international context for inequality policy,
the kinds of things we do in Western social welfare democracies at the local community level
to ameliorate inequality and promote opportunity for everyone are closer to the heart of post-
global “development” than to traditional international law and policy solutions, such as large
multilateral structural adjustments and “development” policies.

62. Insofar as globalization has collapsed the boundaries between the local and the global, then
reimagining development in a post-national environment (and, with it, inequality policy)
means reconstructing our paradigm so that artificial distinctions between opportunity and
fairness for “Us”, and what passes as “opportunity” and “fairness” for “Them,” are
eliminated.

63. It means rejecting the view that national boundaries justify distinguishing pejoratively
between “Our” aspirations and “Theirs”, and foregoing facile excuses for failing to support
aspirations trans-nationally in ways we expect our aspirations to be respected at home.

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 V. IEL VIS-A-VIS SUSTAINABLE DEVELOPMENT

64. International economic law has an important role to play in the regulation of climate change,
in particular with respect to technology diffusion and unilateral responses to multilateral
negotiation failure. It has not been possible to reach multilateral agreements with respect to
climate change finance, intellectual property rights for plant varieties, a multilateral
investment agreement, or international trade in environmental goods and services.30

65. Multilateral progress in all of these areas would facilitate technology diffusion and diminish
the need for unilateral action. In the case of the international trade law, deadlock at the
multilateral level has led to unilateral, bilateral and regional policy responses. The same may
happen with respect to climate change negotiations. Unilateral measures may be taken to
address local or global concerns and may be used to create incentives for multilateral action.

66. They may be consistent with international obligations or not, depending on the circumstances
of each case. Unilateral measures can serve as catalysts for multilateral action on climate
change, by prompting the affected economic actors to pressure their governments to seek a
solution, through litigation or negotiation. Climate change agreements should either comply
with or prompt modifications to international economic law and global models of economic
governance.

67. Existing international economic law places limitations on the right of national and sub-
national governments to regulate to address climate change. Given the current difficulty in
reaching multilateral agreements, for the most part countries will have to develop climate
change policy and law within the constraints of the existing legal, economic and financial
framework.

68. The shifting fortunes of developed and emerging economies have altered the dynamics of
global governance. The ensuing multilateral negotiation paralysis means that unilateral action
will be necessary to create incentives to address climate change. However, the risk of
regulatory capture needs to be addressed to ensure that these unilateral measures are
consistent with international law and are economically viable.

69. It is important to identify policy issues and options and ways to overcome negotiation
obstacles. One proposal, with respect to WTO negotiations, is to make negotiations less

30
Bradley Condon & Yahir Acosta, “Climate Change and International Economic Law”, 4th WTO Chairs
Programme Annual Conference(www.wto.org),

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 ambitious, by abandoning the rule that ‘nothing is agreed until everything is agreed’, and to
abandon decision making by consensus.

70. There are precedents for this approach at the WTO, in which a limited number of Members
agreed to liberalize specific sectors once enough Members were on board to cover ninety
percent of trade in the sector. The most-favoured-nation rule extends concessions to all WTO
Members and the resulting agreement is left open for other Members to join. The same
approach to environmental goods and services would reduce barriers to technology diffusion
for climate change.

71. A similar approach could be taken with respect to GHG emissions, by seeking agreement
among the countries that account for the overwhelming majority of emissions, and by leaving
it open for other countries to join. However, even this approach may be difficult to achieve in
a reasonable period of time. In the current political and economic context, multilateralism is
not working in the UNFCCC and WTO systems.

72. This requires unilateralism, but in a well-considered approach that creates economic
incentives to engage the private sector and to push governments into effective multilateral
agreements. For example, funding for adaptation and technology transfer should be made
conditional on recipients implementing PPP-based mitigation measures, in order to channel
funding and technology to combat climate change.

73. This can be accompanied by unilateral trade measures on goods and services to create
political will in developing countries; the private industry that opposes climate change action
based on competitive concerns might change their stance if unilateral trade measures begin to
affect market access and competitiveness.

74. However, unilateral measures to combat climate change need to be taken in a manner that is
consistent with existing obligations and principles of international environmental and
economic law, as far as possible, in order to more effectively address this urgent global issue.
One country or one region cannot reduce the greenhouse gas emissions of other regions or
countries.

75. In theory, it may be possible to create incentives for other countries, for example with
unilateral trade restrictions or foreign aid that is conditional upon emissions reductions.
However, trade restrictions do not just impose costs on the exporting country. They also

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 impose costs on the importing country, where importers are affected by the increased cost of
inputs.

76. In addition, few domestic markets are large enough for trade barriers to have an economic
impact that would be sufficient to create an adequate incentive to reduce emissions. Foreign
aid that is conditioned upon the use of inputs from the donor country also may violate WTO
law. Moreover, foreign aid costs money for donor countries, too. Even if we resolve the
problems of cost and WTO consistency of trade barriers and foreign aid, they remain partial
solutions only because they will not achieve the desired level of emissions reductions.

77. We can estimate the future concentrations of greenhouse gases and we can estimate the
probability of a range of temperature increases, but we cannot say precisely what the
temperature increase will be, how that temperature increase will vary from one part of the
planet to another, and what the ecological and economic effects will be. What we do know is
that the risks are grave.

78. Debating whether we have underestimated or overestimated the proximity and severity of
those risks misses the point. We need to address those risks through mitigation and
adaptation. To do so effectively will require creating incentives for multilateral action and
removing obstacles to financing the dissemination of the technologies needed for mitigation
and adaptation.

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 VI. IEL VIS-A-VIS HUMAN RIGHTS

A. GENERAL

79. In his Theory of Justice, 31 Rawls used the idea of reasonableness for designing fair
procedures that prompt reasonable citizens (as autonomous moral agents) to agree on basic
equal freedoms and other principles of justice. In his later book on Political Liberalism,
Rawls reframed his theory of justice as fairness by emphasizing the importance of the public
use of reason for maintaining a stable, liberal society confronted with the problem of
reasonable disagreement about individual conceptions for a good life and a just society.

80. Public reason and ‘ deliberative democracy ’ require constitutional guarantees of basic equal
rights (e.g. freedoms to participate as equals in public discourse, independent judicial
protection of basic rights) as legal preconditions for public debate defining the conditions for
a stable consensus on the principles of justice.32

B. HUMAN RIGHTS REQUIRE CITIZEN ORIENTED CONCEPTION OF INTERNATIONAL

LAW

81. UN human rights law proceeds from the Kantian premise that – as emphasized in the
Preambles to the 1966 UN Covenants on civil, political, economic, social, and cultural rights
– human rights ‘derive from the inherent dignity of the human person’ and are based on
‘recognition of the inherent dignity and of the equal and inalienable rights of all members of
the human family [as] the foundation of freedom, justice and peace in the world’.33

82. The Preambles make clear that human rights precede ‘the obligation of States under the
Charter of the United Nations to promote universal respect for, and observance of, human
rights and freedoms’.

83. Today universal recognition by all states – in hundreds of UN, regional, and national human
rights instruments and national constitutions – of inalienable human rights has objectively
changed the legal status of individuals as legal subjects and bearers of human rights under
international law: Inalienable human rights now exist erga omnes and require respect, legal
protection, and fulfilment of inalienable human rights by all governments.

31
J. Rawls, a Theory of Justice (1973).
32
J. Habermas, Between Facts and Norms: Contributions to a Discourse Theory of Law and Democracy (1996),
at 279.
33
Int’l Covenant on Civil and Political Rights, 1966; Int’l Covenant on Economic, Social and Cultural Rights,
1966.

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84. Due to their progressive transformation into international ius cogens, the fragmented, treaty-
based UN human rights guarantees gradually evolve into constitutional restraints limiting the
powers also of international organizations.34 Yet, most UN human rights guarantees prescribe
only minimum standards without hindering states and regional organizations in providing for
higher standards of constitutional protection.

85. For example, human dignity and human rights are also recognized as constitutional
foundations of European law (e.g., in Article 6 EU), which tends to provide for more
comprehensive guarantees of human rights (e.g., in the EU Charter of Fundamental Rights)
and fundamental freedoms (including common market freedoms) than UN human rights law.
Hence, judicial protection by European courts of human rights vis-à-vis UN Security Council
Resolutions requiring the seizure, without due process of law, of private property of alleged
terrorists may be in conformity with UN human rights law.35

86. Human rights require all governments and intergovernmental organizations to review how the
power-oriented structures of the Westphalian ‘International law among states’ must be
restructured so as to respect citizens as legal subjects and protect and promote human rights
more effectively.

87. The development of the customary international law rules for the protection of aliens, which
require states to provide decent justice to foreigners and ‘to create and maintain a system of
justice which ensures that unfairness to foreigners either does not happen, or is corrected’,36
into human rights of access to justice37 illustrates this progressive transformation of state-
centred into citizen-oriented rules of international law.

C. HUMAN RIGHTS INTEGRATED IEL

88. As explained by John Rawls, it is unreasonable for democratic constitutions and international
law regulating cooperation among people and free citizens with diverse moral, religious, and
political conceptions of justice to prescribe comprehensive political doctrines of justice.

34
Cf. Petersmann, ‘ Human Rights, Markets and Economic Welfare: Constitutional Functions of the Emerging
UN Human Rights Constitution ’ , in F.M. Abbott, C. Breining-Kaufmann, and T. Cottier (eds), International
Trade and Human Rights (2006), at 29 – 67.
35
Cf. Petersmann, ‘Multilevel Constitutionalism and Judicial Protection of Freedom and Justice in the
International Economic Law of the EC’, in A. Arnull, P. Eeckhout, and T. Tridimas (eds), Continuity and
Change in EU Law (2008), at 338, 343.
36
J. Paulsson, Denial of Justice in International Law (2006), at 7, 36.
37
Cf. F. Francioni (ed.), Access to Justice as a Human Right (2007).

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89. Just as human rights tend to prescribe only minimum standards which may be implemented in
diverse ways in national and international legal systems, so must democratic
constitutionalism and international law limit themselves to protecting an ‘overlapping
consensus ’ of reasonably diverse moral, religious, and political conceptions that are likely to
endure over time in democratic societies.38

90. Yet, the increasing ‘legalization’ and ‘judicialization’ of IEL demonstrate that it is no longer
reasonable for national laws to ignore the general consensus among economists that
liberalizing trade and investments is more important for alleviating unnecessary poverty than
reliance on redistributive foreign aid. Even though trade liberalization will produce winners
and losers, it tends to increase national wealth inside each of the trading partners in ways also
benefiting the poor.

91. This mutually beneficial character of trade liberalization in terms of global and national
welfare and poverty reduction (e.g., as a result of trade liberalization in India and China since
the 1990s) offers important utilitarian justifications of IEL and of its potential, ‘constitutional
functions’ for limiting protectionist ‘governance failures’ and ‘constitutional failures’ inside
states.39

92. The Westphalian conception of ‘international law among states’ as an instrument for
advancing national interests in an anarchic world continues to prompt many international
diplomats and state-centred lawyers to argue that effective international tribunals must
remain ‘dependent’ tribunals staffed by ad hoc judges closely controlled by governments; for
example, through their power of reappointment and threats of retaliation.

93. Independent international courts are perceived with suspicion because independent judges
risk allowing moral ideals and interests of third parties to influence their judgments; the
domestic ideal of rule of law is seen as inappropriate for the reality of international power
politics: ‘dependent tribunals’ are more likely to ‘render judgments that reflect the interests of
the states at the time that they submit the dispute to the tribunal’.40

38
RAWLS, supra note 29.
39
Cf. C. Joerges and E.U. Petersmann (eds), Constitutionalism, Multilevel Trade Governance and Social
Regulation (2006).
40
Posner and Yoo, ‘Judicial Independence in International Tribunals’, 93 Calif L Rev (2005) 1, at 6.

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 VII. IEL & INDIA

94. The international economic relations between two countries depend on a number of factors
like the import export relations, investment between two countries and the like. Trade is an
important factor in this context. Normally there are two types of trades - bilateral trade and
multilateral trade.

95. Bilateral trade is the trade between two countries and multilateral trade is trade between more
than two countries. In the recent times, foreign direct investment relations between two
countries have assumed increased importance as well. The inflow of money in a country from
another one goes a long way in determining the relations between those countries in the
international scenario.

96. In the modern day economic scenario globalization has played an important role in
determining the international economic relationship between two or more countries. Prior to
this phenomenon there were several countries that had erected trade barriers in the form of
oppressive foreign trade legislations and tax policies that were not exactly in favour of
attracting foreign direct investment from other countries.

97. In the era of globalization there have been major changes in the economic relationships
between the various countries of the world. The World Trade Organization has worked in
conjunction with the governments of several countries to lift trade barriers and bring about a
better economic environment.

98. This has led to the creation of several free trade zones all around the world. As a result of the
creation of the free trade zones it has been possible to promote free trade on a global basis.
The importance of good international economic relations may be understood by taking a look
at India and China. Apart from being in good terms with other countries these two nations
also have cordial economic relationships and they have shared an almost symbiotic
relationship from an economic point of view as well.

99. They have continued to make economic progress by helping each other out and have set the
trend as far as international economic relations are concerned.
The implementation of the various reform measures has given immense opportunities to the
countries of the world to have part in and. The international economic relation section is
simply a country's participation in the field of trade and investment with other countries of
the world.

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 VIII. CONCLUSION

100. Traditionally speaking, international economic law did not pay much attention to
environmental concerns. International economic and commercial activities continued to
expand until recently with little concern for the harm done to the environment by these
activities.

101. The main international economic agenda in the post-Second World War period involved
promoting the free movement of goods and capital across borders and enabling states to
exploit their natural resources to the maximum extent possible for their economic
development.

102. IEL is not merely concerned with substantive IEL. IEL also has an institutional aspect, as
well as a focus on national legal system. The exigencies of the domestic economic and legal
system have a bearing on the development of IEL.

103. Thus, not only are transnational economic law and purely domestic economic law of concern,
but so is the private international law, national conflict resolution procedures, and the
national administrative and legislative processes. Good Governance at the national level is of
increasing international concern, particularly to the extent that it affects the national and
economic system. Similarly, the manner of the reception of the IEL in the domestic system is
significant in the terms of efficient implementation of IEL.41

104. International economic law tried to catch up with this expansion of international economic
and commercial activities and regulate wherever and whichever aspect possible, but without
paying much serious attention to environmental aspects of economic development.

105. However, more recently, developments taking place within international environmental law
have influenced the development of international economic law. The international
environmental law principle of sustainable development, a relatively new principle, has had a
profound impact on international economic law.

106. Within the UN’s economic development agenda, a significant shift in emphasis in the theory
of economic development began in 1987 with the introduction of the concept of sustainable
development, which sought to impose some restraints on economic development in favour of

41
Id.

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 the need to protect the environment. This new idea also sought to unite both the developing
and developed countries in pursuit of a common agenda.

107. Implicit in the idea of sustainable development was that the developing countries would
receive financial assistance from the developed countries to carry out developmental projects
which:

 Do not harm the environment

 Take into account concepts such as intergenerational equity.

108. The development agenda of the world was no longer supposed to be a struggle between the
developed and developing countries. Rather, both groups of states were supposed to work
jointly to achieve sustainable economic development. All states had a duty to contribute to
the process, but the level of contribution would be guided by the concept of common but
differentiated responsibility. This idea was endorsed by the Rio Declaration of 1992 and other
instruments adopted by the Rio Conference.

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