Normal is The New Legal

The Syria crisis has people digging for legal guidance. Is the use of chemical weapons really “illegal” under international law, and what does that mean? Is UN Security Council support necessary for an intervention to be “legal” under international law, and what does that mean? Doctrinal, empirical and ethical explorations along these lines come from Ian Hurd, Oona Hathaway and Scott Shapiro, Erik Voeten, and Andrew Gelman.

These debates have prompted me to reflect on my own research into the international law of investment, and why it seems to be so hotly debated.

After all, corporations and other powerful interests influence affairs through many channels: coups, street fights, hostile takeovers, salary negotiations, campaign donations. However, when I outline the phenomenon of companies suing countries in transnational courts over environmental and other policies, many liberal intellectuals and ordinary folk are aghast. I often wonder about what sparks that particular outrage. It’s no secret that corporations influence affairs – they sue governments in domestic courts all the time. What’s so egregious about international lawsuits?

On the one hand, nothing, as some skeptics argue. At best, the outcome that corporations get in investor-state cases is a bit of money – often a lot less than what they asked for. As Susan Franck wrote a few years back:

Recent systematic, descriptive quantitative research makes several points. First, governments can and did win investment disputes. In fact, governments (57.7%) were more likely than investors (38.5%) to win cases and have no damages awarded for alleged treaty breaches. Second, the average amount awarded (approximately US$10 million) was a fraction of what investors typically requested (approximately US$343 million).

There’s little evidence that laws are changed because of these rulings, and for the most part, lives aren’t changed (anymore than they were due to the underlying dispute context in the first place). Most journalists don’t report on investment claims, and most legislators aren’t aware of them. These facts would seem to indicate that investment law is a big nothing burger that has little or no independent impact on social or economic reality. When corporate clients finally figure this out, the cases will probably dry up… as the story goes.

On the other hand, isn’t there something special about being able to achieve one’s goals with the imprimatur of the law? When one facilitates a coup, one gets criticized and ostracized. Your share price may take a hit. Your third wife may love you a little less. Your minister will eye you suspiciously in the church pew. In contrast, using the law has more legitimacy, and may also be a way to get the buy in of institutions in rich countries: US judges will readily back up corporations that win international arbitrations.

So, there’s some currency and power in using the law, which is presumably why the Obama administration and its allies are expending considerable effort trying to convince Congress and the world that a “red line” has been crossed with chemical weapons in Syria. At present, it seems that conventions around domestic use of chemical weapons relate more to norms than laws. This is not nothing: in international law, norms can morph into laws. The importance of investment treaty arbitration seems tied to this as well: an effort to use disputes to shape what is “normal” in the global economy, in the hopes that these norms will develop some of the bindingness of law – above and beyond the payments that are ordered or not in a given case. Whether or not disputes create norms is an empirical question – and not one that is easy to answer.