Where are the cases? That’s something one hears a lot when warning about business interests attacking regulation through trade deals, as I do in a new book with Kevin Gallagher from Boston University.
In that book chapter, I examine possible concerns that World Trade Organization (WTO) rules might pose for financial regulation. But, that pact went into effect in 1995, and, quite simply, has not been used that much to attack financial regulations. For many busy observers, that is reason enough to stop paying attention.
(The exceptions are a Panama case against Argentina (which is not yet resolved), and a US case against China last year, which is not a great example because the challenged policy was more of a service infant industry protection, from what I can tell.)
This raises an interesting question: how long does one have to wait to see an observable implication of a theoretical concern?
Let’s look at the investment treaty context. As Antonio Parra documents in his history of the topic, the first treaty was signed in 1959, between West Germany and Pakistan. Other countries soon followed with their own treaty programs. However, the first lawsuit under the system wasn’t resolved until 1990, in a case between a UK investor and Sri Lanka. Over the course of the 1990s, only five additional IIA awards were made. This changed abruptly in 2000, when seven awards were made. The upward trend continued in the years since, culminating in over 450 known cases today.
In other words, that’s a 31-year gap between the first investment treaty and the first dispute, and a 41-year gap before the caseload took off, and 50 years before there was any major caseload.
If past is any precedent, it could be 2025 or 2045 before there we really see many WTO challenges of financial services rules. I’m guessing that a lot of the public will be surprised that anything like this existed. But, for many insiders, it will seem like very old news.
I guess that’s the challenge with signing complicated international pacts that are not adequately understood or vetted with the public: they take a long time for business interests to use them and for their implications for governance to be appreciated. And, because they are international treaties with no expiration date, they tend to stay around for a long time.