16. International Economic Law

• The law governing international economic relations is one of the important areas in which international legal rules operate in practice. The law of international economic relations includes all economic transactions that cut across state boundaries or have implications for more than one of those involved in movement of goods, funds, persons, intangibles, technology, vessels or aircraft

16.1

• Bretton woods system:

• The Bretton woods system views market access and the reduction of barrirs to international trade and monetory transactions as the main instruements to promote high level employment, increase real income and to optimise the use of production factors.

16.2

• These liberal principles conflict with the sovereignty of states, as laid in Article 2 (1) of the UN Charter and their freedom to determine their economic policies and priorities.

• Communist countries have refused to join the Bretton Woods institutions because they were founded on capitalist ideology.

16.3

• The influence of industrialised countries on IMF & WB is because of the weighted voting system reflecting the amount of capital input into the organisation which dispenses with the principle of sovereign equality of states.

• There has a been global move towards regionalisation of trade & financial issues.

16.4

WBAs set forth in Article 1 of its Agreement the purposes of the

WB are to assist in the reconstruction and development of territories of members, to promote private foreign investment by means of guarantees or participation in loans and other investments made by private investors, to provide finance for productive purposes, to promote the long term balanced growth of international trade and maintenance of equilibrium in balances of payment, to arrange lending policies to give priority to the more useful and urgent projects and to conduct its operation with due regard to the effect of international investment on business conditions in member states.

16.6

Membership requires being IMF member. The voting system is the same as the IMF and the largest shareholders enjoy priviledged position.

The WB is complemented by the International Finance Corporation (IFC) which provides funds for private enterprises and International Development Assistance (IDA) which gives concessionary loans to the poorest countries which are unable to access them under normal market conditions.

16.5

IMFThe rights and duties of member states are based upon

quotas which are supposed to reflect the economic and financial position of members and which also determine the level of financial contribution to be made to the fund.

The members with the largest 5 quotas have the right to appoint directors (the US, UK, GERMANY, JAPAN AND FRANCE). The additional directors may be appointed by other members under certain conditions.

16.6

GATT/WTO

GATT was formulated to establish general principles and rules regarding the liberalisation of international trade on the basis of a multilateral treaty by reducing trade barriers and eliminating discriminatory tendencies between states in international commerce.

16.7

The most favoured-nation (MFN) principle/clause is central to GATT. It provides for non-discrimination among trading partners by requiring all GATT members to grant all other members of the agreement treatment as favourable in relation to a product as they may accord to any other country.

16.8

Once a product passes through customs, it must be treated as any other product of national origin. This prevents the use of internal regulations to discriminate the imported products.

If a country wants to protect its own producers it must use custom duties not any other means. This makes the system transparent and predictable.

The MFN principle does not also apply in the case of the formation of the custom union, free trade area, or if they offer developing countries preferential treatment.

16.9

GATT prohibits the use of quantitative restrictions e.g import/export quotas, restrictive use of import or export licences, or controls of payments concerning product transactions as a form of protectionism. Developing countries can be given priviledge if they have balance of payments problems.

16.10

The WTO came into effect in 1995 taking over GATT. But there are 2 systems functioning as a result of the failure by other members to concede to the new WTO.

Membership to WTO is restricted to states and customs territories. It covers issues relating to goods-agriculture, textile and clothing, rules of origin, anti-dumping measures, trade related investment measures (TRIMS), import licencing procedures, subsidies, reshipment inspection.

16.11

Services- there is a framework that applies to all services except in the service of government authority. Another framework consists of other types of commitments in national schedules. Thirdly, the individual sector pertaining to financial, telecommunication, air transport services, maritime transport services and movement of natural persons providing services.

16.12

Intellectual property rights- relates to protection and enforcement of copyrights and related rights, trademarks, geographical indications, industrial designs, patents and undisclosed information.

The highest organ of the WTO is the Ministerial conference, which meet every 2 years. It has the General Council made of all members’ representatives and then other special councils to deal with certain issues. It recognised that the WTO has international legal personality.

16.13

ConclusionThe NIEO reflects the wide gap in living standards

between the north and the south and the desire of developing countries to redress the international ecosystem.

It is recognised that there is need to increase the flow of finance to developing countries especially those burdened by debt and to low income countries depending on aid. The Charter on Economic Rights and Duties of 1974 revealed fundamental difference between the north and the south.

16.14

EXPROPRIATION AND STANDARD OF COMPENSATION

The rules of compensation are comprised in minimum international standard that belongs to the core often traditional rules of state responsibility for the treatment of aliens.

16.15

According to western countries, the minimum international standard contains 2 rules of customary law concerning expropriation. First, expropriation must be for public purpose. Second such expropriation must be followed by payment of compensation for the full value of such property.

16.16

Communist countries tended to argue that there shouldn’t be any compensation at all. Developing countries tended to support this idea but some choose to protect foreign investment.

Article 2 (2) of the 1974 Charter of Economic Rights and Duties of States states that appropriate compensation ought to be paid by the expropriating state…taking into account its relevant laws and regulations and all that the state considers pertinent.

16.17

The problem then is the determination of the property value. Read STARRET HOUSING CORPORATION CARE CTR 21, 1989, 112 AT 201