Author: Todd Tucker

Antigua’s WTO delegation released a delicious statement yesterday, calling the US to task for its failure to eliminate its Internet gambling ban, as called for in a 2005 WTO decision. I’ll quote it at length:

We would like to draw the attention of the DSB to certain matters expressed by the United States in its statement at the DSB [Dispute Settlement Body] meeting on 28th January. These statements, taken in the context of the US continued non-compliance, now assume alarming proportions. In its statement, the United States said: “if Antigua does proceed with a plan for its government to authorize the theft of intellectual property, it would only serve to hurt Antigua’s own interests. Government-authorized piracy would undermine chances for a settlement that would provide real benefits to Antigua. It also would serve as a major impediment to foreign investment in the Antiguan economy, particularly in high-tech industries.”

We are left to ask ourselves why the United States delegation would employ terms such as “theft of intellectual property” and “Government-authorized piracy” relating to the lawful and expressly authorised use of trade remedies provided for in the WTO agreements. We believe that the intemperate and dismissive language used in this very forum by the delegation of the United States, where the lawful judgment of the Dispute Settlement Board was characterized as theft and its rulings called piracy, is a fundamental challenge to the WTO by its most powerful member. If we were in a different setting, Mr. Chairman, this would be contempt of court.

I don’t know if the Antigua legal team has any critical legal studies students on its staff, but this certainly makes it seem so.

First, there’s the dueling rhetorical battles over what can constitute property and theft. First, the U.S. deems intellectual creations as “property”, even though the notion only exists because of a massive government intervention in the free market. Second, having defined property thusly, the US argues that breaking copyrights is theft. Finally, Antigua rebuts that something can’t be theft if a governance body has authorized it. At the risk of sounding like a grad student (ahem), I will note that this exchange perfectly captures the nature of property as a social construction, which can be and is contested socially.

Second, there’s the debate over the intersection of law and power. The US participated in the 2003-05 case brought by Antigua, presumably because it wants developing countries to consider the WTO dispute settlement process as a type of binding law. But, then, the US doesn’t follow the law. (Let’s set aside for a moment that it’s very odd to have trade tribunals ordering a country’s executive branch to eliminate non-trade regulations approved and defended by the legislative branch.) Antigua then attempts to defend its legal rights, and the US responds with a not-too-subtle extra-legal coercive threat to block investment in Antigua. Antigua cleverly calls the US out on this rhetorical gambit, calling it “a fundamental challenge to the WTO by its most powerful member.”

So is this a law game, or a politics game? Antigua to US: your move.

What is specific about putting global power relations in the hands of lawyers?

Arguably, this “legalization” is a defining feature of our era. International organizations have been given a great deal of delegated power, a lot of which is not readily reclaimed by national governments. States have put down on paper the rules of the game when it comes to commerce, investment and other topics, and the paper is not readily burned. Indeed, if a state wanted to burn the paper, it would feel the need to justify the action in accordance with the paper’s protocols. (Witness all the handwringing in the Bush and Obama administrations about how to ensure the War on Terror is being fought in accordance with international law.)

In the near-decade I spent as an advocate on Capitol Hill, I was often accused of crying wolf – imagining up a WTO or international threat to sovereignty over sensitive domestic issues where none had yet materialized. Nations wouldn’t challenge each others’ financial regulations, I was told by folks on the left, center and right – it was risky, impolite and would just boomerang back on them.

Reading the diplomatic and political tea leaves can be a fun game. But in an era of “legalization”, it matters less than it used to.

What do I mean? Lawyers and dispute-settlers have certain professional norms that they follow: use and give effect to legal texts; represent your client; resolve the dispute once it is initiated. Thus, once a nation or investor decides to use WTO rules to attack financial regulations, the WTO panelists will not typically refuse to apply the WTO law, or refuse to resolve the case.

That is what is interesting about the recent WTO case by Panama against Argentina over the latter’s anti-tax haven initiatives. While Panama and Argentina may not matter much in some realpolitik theory of international relations, they are equal members of the WTO, and have the right to launch cases on the bases that were laid out in texts from the Uruguay Round. The WTO panelists must resolve the case and apply the law – however inconvenient for the “great powers” that may prefer these rules to be kept under wraps. Precedent and norms will be created as a result of this process, like it or not.

This is part of what is specific about leaving the major tasks of global governance to the lawyers – they will actually do their job. Politicians, however, can choose at useful moments to not do their job, and save themselves and the planet the occasional headache.

Marx’s bromancer Friedrich Engels further developed Marx’s theory of the state.

Engels, in his 1884 “The Origin of the Family, Private Property, and the State,” wrote that the state emerged on top of the decay of the “gentile constitution” (or tribal social rules), which was organized in territorially and demographically homogenous groups and where no formal law existed.[i] Increased division of labor and commerce breaks up this traditional order, and people are divided into classes. The classes would either be in “continuous, open struggle”, or “under the rule of a third power which, while ostensibly standing above the classes struggling with each other, suppressed their open conflict and permitted a class struggle at most in the economic field, in a so-called legal form.” (Engels, 2004, at 156-157)

The state is therefore a “product of society at a certain stage of development,” which arises out of society but is increasingly alienated from society so that the classes do not destroy themselves or each other. Unlike tribal society, it organizes across territories, and has a “public power” component of armed military and police, which “grows stronger… in proportion as class antagonisms within the state become more acute, and as adjacent states become larger and more populous.” (Engels, 2004, at 157-158) In other words, the size of the state is endogenously influenced by class struggle, and exogenously influenced through freestanding militaristic calculations. Another distinguishing feature of the state is the system of taxation necessitated by military endeavors.  “Officials” standing above society with special taxation privileges require “exceptional laws” to enforce their will but which they do not have to follow. The price of these privileges is a loss of legitimacy relative to the tribal chiefs.

While “as a rule”, the state is “of the most powerful, economically dominant class”; “periods [exceptionally] occur in which the warring classes balance each other so nearly that the state power, as ostensible mediator, acquires, for the moment, a certain degree of independence of both.” (Engels, 2004, at 159) In other words, the state under capitalism can never be wholly independent of the capitalists, but there is some space for autonomy at moments of working class ascendancy.[ii]

Engels writes that the identification of states with ruling classes is particularly obvious in societies where the property-less have no political rights. But even under a democracy, “which under our modern conditions of society is more and more becoming an inevitable necessity, and is the form of state in which alone the last decisive struggle between proletariat and bourgeoisie can be fought out,” the wealthy exercise their power indirectly, such as through corruption, bond markets, and the granting of voting rights to workers. Worker oppression leads them to believe that capitalism is inevitable, and as such, their political parties “will form the tail of the capitalist class.”[iii] However, at some point, the channel of universal suffrage will lead the working class to express its will, at which point (echoing Marx), Engels believed the state would “inevitably fall.” (Engels, 2004, at 160)

Normal
0

false
false
false

EN-US
X-NONE
X-NONE

/* Style Definitions */
table.MsoNormalTable
{mso-style-name:”Table Normal”;
mso-tstyle-rowband-size:0;
mso-tstyle-colband-size:0;
mso-style-noshow:yes;
mso-style-priority:99;
mso-style-parent:””;
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-para-margin:0in;
mso-para-margin-bottom:.0001pt;
mso-pagination:widow-orphan;
font-size:11.0pt;
font-family:”Calibri”,”sans-serif”;
mso-ascii-font-family:Calibri;
mso-ascii-theme-font:minor-latin;
mso-hansi-font-family:Calibri;
mso-hansi-theme-font:minor-latin;}

What did power mean to Karl Marx? That’ll be the subject of the next few posts.

In order to kick off the conversation, we could do worse than consulting the dictionary definition of “power.” The Oxford English Dictionary tells us that “power” is “the ability or capacity to do something or act in a particular way,” or “the capacity or ability to direct or influence the behaviour of others or the course of events.”[i]

Read in this light, Marx seems to write primarily about power: the power of subjects of history (i.e. classes) to enforce their status quo, or struggle for change. But a casual perusal of Marx’s work shows several very different uses of the word power. On the one hand, Marx speaks of “productive power” or “labor power,” which relate to the ability to turn one’s own endowments into use values. On the other hand, Marx speaks of “political power,” which commonly means who controls the levers of the state. The tension between these two uses of the word “power” have challenged observers and proponents of Marxist thought since the publishing of the Communist Manifesto in 1848.

The Manifesto laid out the basic outlines of history as conceived by Marx and Engels. As the forces of production (technology, communications, etc.) develop, new modes of production (i.e. feudalism, capitalism, etc.) emerge, each with their distinct relations of production (i.e. peasant-lord, worker-capitalist). The bourgeoisie is a unique ruling class in that it is compelled through competition to revolutionize the instruments, and therefore relations, of production. This creates recurrent crises (such as of overproduction) that are resolved through further expansion of the system, which universalizes the system. (Marx and Engels, 1848, at 14-16)

The Manifesto does not use the phrase “labor power” that would be used in Das Kapital. But it makes clear reference to the “despotism” that characterizes the inside of the production process, and also to the “power” of productive forces to overcome an existing mode of production, and the “power” of individuals to appropriate the products of production. (Marx and Engels, 1848, at 17-18, 24) Passing reference is also made to both capital and labor as “social powers,” i.e. a force constituted and defined by relations within society (rather than being uniquely individual attributes). (Marx and Engels, 1848, at 23)

For the most part, however, the notion of “power” is used for political power.

Continue reading “Power for pinkos” →

One of the world’s premier law firms is helping reshape our civil justice system.

Back in March, I wrote about the efforts of Renco Group / Doe Run (a U.S. mining company) to derail a civil lawsuit in Missouri state courts. The Missouri case was being brought on behalf of a group of Peruvian children who experienced severe health damages, allegedly caused by claimed damage to their health from the Missouri-based company’s operations in La Oroya, Peru.

Around the same time, I wrote about Chevron’s attempts to derail a major civil lawsuit in Ecuadorian courts.

In both cases, the companies were using little known U.S. international treaties to get ahead of a domestic legal kerfuffle. In the Renco case, this took the form of launching an international treaty claim in order to move the Missouri case from state to federal courts (on the theory that the linkage of the case to international law gave federal courts “federal question” jurisdiction). Advocates connected to the case told me that the state courts would be likely to have a more favorable jury pool for the Peruvian children, since some Missourians claim health damages from the company’s Missouri operations. In the Chevron case, this took the form of launching an international treaty claim in order to bar Ecuadorian courts from finalizing a punitive damages claim against the company.

Another interesting coincidence: the law firm King & Spalding represents both claimants in these treaty cases. The firm and its top legal talent (like Ed Kehoe and Caline Mouawad, who are working both cases) are showing that new structures of global governance are creating opportunities for corporate claimants to shape where and how they are held accountable for alleged wrongdoing.

The strategeries seem to be working. Last week, an arbitral tribunal of Horacio A. Grigera Naón, Vaughan Lowe, and V.V. Veeder doubled down on its order of last year to have Ecuador block a class action case successfully brought by a group of Ecuadorian indigenous plaintiffs.

Continue reading “King for a day” →

Iceland did not break international law through its response to the financial crisis, found the European Free Trade Association (EFTA) Court last week.

Andrew Higgins at the New York Times explains the basic dispute:

Icesave collapsed in October 2008 along with Landsbanki and the rest of Iceland’s banking sector in a spectacular blowout by the North Atlantic island nation’s entire financial system.

Caught in the wreckage were some 350,000 people in Britain and the Netherlands who, lured by unusually high interest rates, had put their money in Icesave accounts.

The Icelandic government protected the deposits of Icelanders who had money in failed banks by moving the deposits into new, solvent versions of the banks. But the government declined to cover the losses of foreigners with online accounts operated by Icesave, a move that prompted complaints of illegal discrimination to the court in Luxembourg.

The case against Iceland was bought by the Surveillance Authority of the European Free Trade Association and revolved around interpretation of a European Union directive requiring that deposits in European banks be covered equally by deposit guarantee systems. Britain and the Netherlands supported the case.

My colleague Michael Waibel has a very full run-down of the EFTA Court decision at the EJIL blog. He understands European law far better than I do, so I won’t attempt to replicate his analysis.

But I did want to draw out a few things.

The way that the European judges approached this issue seemed quite a bit more delicate than the way that the World Trade Organization (WTO) often approaches regulatory questions. There has been very limited financial services jurisprudence at the WTO (see here for the exception), but the interpretation of consumer protection questions in products trade has left a bit to be desired. (See here for my take on a recent public health case.)

Continue reading “Nicesave” →

When does a US citizen lose their constitutional rights?

That’s the topic of an Obama administration memo that just leaked to CBS News.

The memo looks at when the US Armed Forces may “legally” kill a US citizen abroad without due process of law who is thought to be a senior Al Qaeda operative. It makes for a fascinating example of how legal rhetoric can be used to (attempt to) justify acts that would seemingly be illegal.

The justification proceeds in a few steps.

First, international law (UN Charter Article 51) recognizes an inherent right to a UN member’s self defense. Under the US Constitution, Congress can declare war and the president can execute war – both did.  Various academic commentaries suggest that when you go to war, you may be killed.

But aren’t the laws of war primarily about the law of war between nations?

Not so fast. The September 18, 2001 Authorization for Use of Military Force specifically allows action against “nations, organizations or persons” the president “determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons…” (emphasis added)

And the U.S. Supreme Court, in Hamdan v. Rumsfeld (2006), noted that the conflict with Al Qaeda was “not of an international character.” The Obama team uses this to argue why it would have authority to pursue operatives regardless of the specific country that they are in when they are in “conflict between a nation and a transnational non-state actor.” (I’m pretty sure that’s not what Justice Stevens had in mind when he wrote that opinion, upholding the notion that individuals continue to have some rights even in non-traditional conflicts. The Obama team however uses Stevens’ factual observation as Supreme Court endorsement of the globe-trotting approach to war. But I digress…)

Continue reading “Killing US Citizens” →

Like many of you, I spent my holidays avidly consuming “low brow” fare. A little 3D Martin Freeman there; a little conspiracy theory novel there. Because I’m in grad school, the diet was interwoven with some texts I’ve long meant to pull off the shelf, notably Steven Lukes’ “Power: A Radical View“, and journal articles like “Political Science Research on International Law: The State of the Field” by Emilie Hafner-Burton and colleagues. What the high and low brow had in common were the notions of power and persuasion.

It was fun to read and watch this batch of things together.

By night, I would read “The 500,” a taut political thriller about the exploits of Mike Ford – a law school grad who encounters the seamier side of power in Washington. In this fictionalized (but realistic) DC, the power elite keep each other in line through the mechanisms of money, influence, coercion and ego manipulation. When I was an advocate in DC, I knew the author, former journalist Matthew Quirk, through a common friend. As twenty-somethings in DC on the margins of power, it’s pretty obvious pretty immediately that this is a pretty loyal inventory of the way the capital works.

What is obvious to practitioners, however, is what social scientists painstakingly try to prove. (I can attest to the pain!)

So, by day, I would read through Lukes laboriously arguing with the scholars of the day about whether power was simply  a description of what legitimate government does (Hannah Arendt), the exercise of coercion (the first dimension of power, according to Lukes; see Robert Dahl’s exposition of the powerful getting the weak to do what they otherwise would not), or something else.

Dahl’s methods had much to recommend them, in that they looked at observable instances of conflict, where the well-defined interests of a well-defined elite prevailed regularly over a well-defined conflicted interest from any other group. Lukes attempted to build on that prevailing “pluralist” view by pointing to the work of “second dimension of power” scholars, who noted that the powerful can also set agendas, so that actually existing conflict is never brought into the open. Power is a lot harder to test in those cases. Even more difficult to test is Lukes’ third dimension of power: the setting of norms. Lukes writes:

A may exercise power over B by getting him to do what he does not want to do, but he also exercises power over him by influencing, shaping or determining his very wants. Indeed, is it not the supreme exercise of power to get another or others to have the desires you want them to have: that is, to secure their compliance by controlling their thoughts and desires?… What one may have here is a latent conflict, which consists in a contradiction between the interests of those exercising power and the real interests of those they exclude. (2005: 27-28)

On some level, this is a revival of the Marxist notion of “false consciousness.” Unlike many Marxists, however, Lukes tries to not simply assume by reference to a grand theory what an oppressed person’s real interests are. Social scientists working with the first and second dimensions of power are forced to look for activities by individual banner-holders of the elite views who are making things happen (or not happen). The third dimension points towards examining activity and inactivity by both individuals and larger groups who can make things happen by ensuring they not only don’t come up, but aren’t even contested. The challenge is to identify “real interests,” which Lukes says could be ascertained by recourse to utilitarian calculations, Amartya Sen’s human capabilities approach, or the revealed preferences of the underclasses at those exceptional moments when the tables are turned and the structures of domination are momentarily suspended. (2005: 146-147)

Lukes was primarily focused on domestic, localized conflict, where distinctions between groups could be drawn by criterion such as whether they were multi-issue (and then had power liquidity and could manipulate a wide range of activities and norms) or whether single issue (and thus having a very narrow range of contexts over which they could exercise power). Things get trickier when states are brought in, let alone many of them.

Continue reading “Power: in 3D!” →

AIG’s board is meeting today to consider joining a suit in US courts against the US government. They may should take their case to Panama.

A bit of background before I explain this alternative option for the company.

++

Maurice Greenberg was AIG’s CEO for many years before the financial crisis. While there, he oversaw the establishment of an corporation that provided offshore pension services to the company, Starr International Co., now registered in Panama. Greenberg remained a major shareholder in AIG after leaving, maintaining his holdings through Starr. In 2009, Greenberg used the Panama company to launch an attack on AIG,  who in turn sued the US government over Starr-related tax avoidance issues. (I documented some of this brouhaha in a 2009 report.)

In 2011, Greenberg took the unusual step of launching twin claims in New York and DC courts, claiming that the Bush administration’s 2008 bailout of AIG violated various contractual and constitutional protections. Today, he’s trying to convince AIG itself to join the fun. Members of Congress have not been pleased with these shenanigans, either in 2009 or today.

Greenberg has been represented by superpowered attorney David Boies, who argued for Al Gore in Bush v. Gore back in 2000. His 2009 case with AIG was settled, his 2011 New York case against the Fed was dismissed, and the 2011 DC case against the Treasury Department remains stalled. (And AIG’s tax case against the government seems to have stalled out since 2010.)

Could it be that Greenberg would have better luck outside of US courts, by claiming standing as an injured “Panamanian” investor under the US-Panama trade or investment treaties?

Continue reading “AIG Suit: Option Panama” →

The last 30 years have been marked by an alliance between libertarian rhetoric with neoclassical economics. But these two schools differ quite a bit, even if you just look at their “law and economics” theories.

For Austrians/libertarians, judges can never perform the efficiency-maximizing role assigned them by neoclassicals. As Zywicki writes, “A Posnerian judge will

thus face a three-fold challenge. First, the judge must possess sufficient learning, information, and expertise to be able to determine the efficient legal rule in isolation. Second, the judge must be able to determine whether the efficient rule in isolation is also the efficient rule when embedded in and interacting with other relevant legal rules. But finally, the judge must be able to discern how the legal rule interacts with other nonlegal rules that may be relevant to the determination.” This task supposes more knowledge than anyone can have. A “Hayekian judge has the more modest responsibility of ensuring the internal consistency of his own decision within the overall operation of the spontaneous order—or, perhaps more accurately, spontaneous orders—in which the judge acts.” (Zywicki and Sanders, 2008, at 575, 577)The Austrian view, that judges act modestly and in the name of coherence and parties’ expectations, does seem to more accurately reflect prevailing judicial ideology.

Posner for his part was active in responding to the Hayekian challenge, in particular, what he thought was Hayek’s overreliance on the importance of custom and tradition in deciding what the law should be. He noted that, if judges purely relied on custom, they would undoubtedly uphold tribal customs or economic practices (like traditional monopolies) that were harmful to society. (Posner, 2010, at 8.4)

Posner seems to be raising a normative objection (what should judges do) to what Hayek had attempted to make out as a descriptive and theoretical account (what judges actually do when they are articulating something that could be described as law). Nonetheless, Austrians have taken seriously the criticism that Hayek – while conceding that law does change – did not seem to provide a change mechanism. (While this is a lacuna worth addressing, it is ironic that Austrians felt prompted towards it by Posner, whose theory (while logically coherent in a static sense) itself lacks a motor of change.)

Continue reading “The libertarian fog meets the neoclassical black box” →