The Law’s "Majestic Equality": Enforcing Unequal Investment Contracts

“The law, in its majestic equality”, the French author Anatole France cynically noted, “forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.” In international law, the concept of sovereign equality – a central building block of the international legal order enshrined in Article 2 No. 1 UN Charter – guarantees ‘equality before the law’. Lawyers tend to forget the fundamental inequalities that can be enforced through an equal application of the law.

Let’s have a brief look at the field of international investment protection. Liberal supporters of international investment law have pointed out that NAFTA’s Chapter 11 has proven to serve the Mexican interest – and not merely that of United States’ or Canadian companies. Roughly one third of NAFTA proceedings have been initiated by Mexican nationals (cf. http://www.naftalaw.org/).

Such a perspective loses sight of a fundamental underlying problem. Investment treaties serve to protect particular ‘investments’. Such investments are typically contractual arrangements (such as a participation contract or a concession) pursuant to which a developing country grants an investor the right to exploit its natural resources in exchange for a participation fee. Such investments may present the following inequalities:

• The participation fee is extremely low – often as low as 10 to 15%. This raises the question to what extent a people’s right to its natural resources is safeguarded (Article 1 of the Covenant on Economic, Social and Cultural Rights).
• The concession extends over a long period of time, without any possibility of adjustment. A ‘good government’ nowadays remains bound by an unfavorable arrangement agreed to by a ‘bad government’ several decades ago. This may hinder the sustainable development of the area in question.
• The concession relates to areas predominantly populated by indigenous people. This problem is particularly acute in the Amazon region. In disrespect of indigenous minority rights, governments have ‘sold off’ the land to a foreign investor.

Investment arbitration, no matter how equal the application of the investment treaty in question, inevitably serves to enforce such inequalities already present in the investment (see the example of Oxydental Petroleum v. Ecuador). Such inequalities cannot be avoided by a more equitable type of investment agreement (as recently proposed by the International Institute for Sustainable Development). Rather, public attention and pressure needs to focus on the equitable character of the investment itself. A new website called RED LISTED now introduces a platform for monitoring investments in light of the goal of sustainable development.

Peter Benenson

"Open your newspaper any day of the week and you will find a report from somewhere in the world of someone being imprisoned, tortured or executed because his opinions or religion are unacceptable to his government. The newspaper reader feels a sickening sense of impotence. Yet if these feelings of disgust all over the world could be united into common action, something effective could be done."

These were the words of Peter Benenson, wrtiting in The Observer on 28 May 1961. His campaign was intended to run for a year - it has led to an organisation with more than 1.8 million members and supporters: Amnesty International. And probably the campaign will have to continue for a long time, until maybe one day there will be no more torture and executions. But unfortunately the campaign has to continue without Peter Benenson.

Peter Benenson died on Friday, 25 February 2005 at the age of 83.

No hope for a tsunami peace dividend in Sri Lanka?

The tsunami of 26 December 2004 hit many war-torn world regions: Among them Sri Lanka, with its civil war lasting now more than 20 years, the Indonesian island Aceh, where rebel groups fight the central government in Jakarta, and Thailand, which has to struggle with insurgents fighting for the independence of the muslim south of the country. Even Somalia, where central government is virtually inexistent, was hit by the giant wave. The effect of the tsunami on Burma (or Myanmar) is not yet known, due to the information policy of the regime in Rangoon. But will the tsunami have an influence on these conflicts?

So far this question has been especially discussed in connection with Sri Lanka. Signs from the region are conflicting. How much direct military capabilities of the parties have been affected still has to be determined. Initial reports that the LTTE, the Tamil rebels in Sri Lanka, lost a significant part of their fleet were apparently not based on facts. On the other hand, the LTTE-controlled part of the island was hit badly, leaving room for speculation about the effect on the LTTE forces, especially on their supply chain. The LTTE is listed on the United States' official list of terror groups since 1997.

Some comments speak of a possible "peace dividend", if aid is equally distributed among all groups affected, leaving room for reconciliation efforts. But so far signs from the areas affected are less encouraging. Janes.com reports that initial joint aid efforts in Sri Lanka are now hampered by the government's desire to control all external relief efforts, although the government denies these accusations. Additionally, a senior leader of the LTTE was killed in an attack on 7 February 2005, possibly by a breakaway rebel faction within the Tamil movement. He was apparently returning from aid negotiations. This was the highest-ranking official to be killed since the government and the rebels signed a ceasefire agreement in February 2002. The LTTE announced that the truce was endangered by the incident. These developments prompted the Secretary-General of the UN, Kofi Annan, to condemn the killing and to "urge all parties to exercise calm and restraint so as to avoid actions that could disrupt the ceasefire agreement".

If there can indeed be a "peace dividend" in Sri Lanka will probably be decided when it comes to the distribution of long term aid projects. If the Tamil minority feels that aid is cut from their territory or if they suspect that central government in Colombo tries to exert control via aid projects, chances for a continued peace process are bleak. Confidence-building measures between the parties seem to be the only way to avoid a new eruption of the conflict. Today's efforts by Norway to act as peacebroker in the conflict again may offer the only small ray of hope.

Serbia and Montenegro... divided we stand?

Serbia and Montenegro never looked like a love marriage. The Union emphasizes its members' sovereignty, rather than the sovereignty of the entity of Serbia and Montenegro. According to Article 2 of the Charter of the State Union of Serbia and Montenegro, the Union "shall be based on the equality of the two member states, the state of Serbia and the state of Montenegro." The Union's territory is composed of the territories of Serbia and of Montenegro. Belgrade is but the "administrative center" of the Union.

As far as membership in international organizations or succession to treaties of the Federal Republic of Yugoslavia (FRY) is concerned, however, international lawyers have got used to dealing with Serbia and Montenegro as a single entity. In accordance with Article 63 of its Charter, Serbia and Montenegro has assumed most international obligations of the FRY.

At the February 15th 2005 meeting, the WTO General Council accepted separate applications for membership of the Republic of Serbia and the Republic of Montenegro and agreed to the establishment of Working Parties to start negotiations. At the same time the application of “Serbia and Montenegro” was withdrawn and Serbia and Montenegro ceased to be an applicant and an observer.

A prelude to a divided stand in other international organizations?

For the history of Serbia and Montenegro's membership in the United Nations, cf. the recent ICJ judgments in the use of forces cases. Click here for the Charter of the State Union of Serbia and Montenegro.

'Franz K.' in Guantanamo

"Well, what do you want?" said K. ... "No", said the man at the window, throwing the book on the table and rising from his chair. "You must not leave, after all you are arrested." - "It looks like it", said K. "And why, if I may ask?" he then asked. "We are not in a position to tell you. Go to your room and wait. Now the proceedings have been initiated and you will learn everything at the proper moment."

"How can I possibly be arrested? And then even in such a manner...?" - "Now you are starting all over again" said the guard and dipped his slice of bread into the honey keg. "We do not answer such questions." - "You will need to answer them", said K. "Here are my legitimation papers, show me yours and, more importantly, the arrest warrant." - "Good heavens!" said the guard. "That you are not able to bow to your situation..."

"I can certainly not tell you that you are being accused or, rather, I do not know. ... If, however, I do not answer your questions, I would nonetheless advise you: do not think so much of us, of what is going to happen to you, think more of yourself. And do not make such a noise of your sentiment of innocence, it disturbs the not even bad impression that you otherwise leave."

Obviously, Franz K.'s experience is singular, fictitious, full of paranoia and in any event clearly outdated, isn't it? After all, nowadays, stringent procedural safeguards render similar derailments of the machinery of justice impossible. Really? Then check out the following excerpt of an interrogation of an AlQaeda suspect before the US military Combatant Status Review Tribunal (CSRT) in Guantanamo. Please take a few minutes to read the excerpt on pp. 46 - 48. Truly kafkaesque.

Luckily, American district courts have partly quashed the resulting decisions due to an evident lack of procedural fairness. However, the basic concern remains: In the 21st century, the judicial machinery remains totally capable of serving as a diffuse and compliant instrument of political power. All this in the name of morality, justice and a "better world" without terror.

Quotes from Franz Kafka, The Trial, 1914.