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Sovereignty and the Right to Regulate

Periodic Reporting for period 2 - SRR (Sovereignty and the Right to Regulate)

Reporting period: 2019-02-01 to 2020-01-31

The overall aim of the project is to fill an important gap in the scholarship on international economic law by subjecting to analytical and empirical scrutiny a central notion in this field: the idea that, in order to preserve the possibility of meaningful democratic choice, we need to find an appropriate balance between the conflicting values of investment protection or free trade, on the one hand, and the states’ ability to regulate in the public interest, on the other. The rhetoric of balance is particularly prevalent in the scholarship on investment law. However, it is far from obvious that the notion of balancing enables us to capture the multiplicity of claims and arguments that have been advanced about the constraining effects of investment treaties. My aim is not simply to pave the way to a more nuanced description of the underlying issues. I also explore the framing effects of the balancing language. This issue has great importance for the society at large. Investment protection has been subjected to fierce criticism in recent years. It is claimed that it puts excessive emphasis on the rights of investors at the expense of democracy, the environment, worker rights, etc. In the specialist literature, all these concerns have been filtered through the balancing language and cast as 'non-economic considerations' to be weighed against 'economic considerations' (such as the value of increased investment). Yet if, as I claim, the notion of balancing distorts in many ways the criticism that different societal groups have addressed to the investment regime, it is unlikely that this criticism will even receive a fair hearing. In other words, the shortcomings of the balancing language can stand in the way of achieving highly important objectives (such as safeguarding the possibility of pursuing public policies which may harm investment). The overall objective of the project is to bring to light the distorting effects accompanying the balancing rhetoric and to render the scholarship on international economic law more receptive to the concerns of the public.
"In the first six months of the project, I gained an overview of the most recent worldwide developments in trade and investment law, with particular emphasis on how the debate on the merits of the present investment regime is approached by practitioners in the field, especially arbitrators. I attended numerous conferences in the United States, Europe and Asia. As a result of two seminars I attended at Harvard, I realized that achieving the objectives of the project required much historical research into the complex origins of international investment protection. It also led me to explore the multi-layered nature of international law: abstract rules, on the one hand, and assumptions regarding the proper application of these rules, on the other. I published some results of my research in the Estonian law journal ""Juridica"" in November 2017. The first months of 2018 were dedicated to attending workshops and seminars at Harvard and research on the historical origins of international investment law. In April 2018, I taught a short course on international investment law at the University of Tartu. This was the first course ever taught on investment law in Estonia.

In the returh phase, I completed research for two wide-ranging articles. The first article, entitled “The Myth of the Standard of Civilisation”, was first presented in outline in May 2019 at the workshop which I co-organised at the University of Tartu. I argue in the article that the so-called 'standard of civilization’ was never part of international law. This conclusion changes our perspective on the present system international investment law since it undermines the claim that its investor-friendly character reflects a survival of the old civilisational standard. The second article (forthcoming in the Oxford Handbook of the History of International Law in Europe) is entitled “Sovereignty: Alive and Well?”. In this text, I was able to link the work completed during the project to ongoing debates surrounding responses to the Covid-19 crisis.

A large part of the work carried out during the return phase related to skill transfer. I taught a seminar course at the University of Tartu dedicated to sovereignty in the Autumn semester of 2019. It had many participants from other European countries, thus being yet another means to disseminate the results of the project internationally. I was also able to apply the management skills acquired at Harvard in putting together a successful grant proposal for a five-year international project on sovereignty and self-determination in May 2019."
The project has advanced the state of the art in at least three directions. First, it has contested the widely believed notion that the struggle over the present investment regime is exclusively about defining the boundaries of the right to regulate. It has shown that the methodology of balancing does not offer a neutral way of capturing all possible views on the value of the goods that are involved in making decisions regarding investment protection. One result of the project is that proportionality analysis becomes biased when combined, as it historically has been, with assumptions about the weight to be put on various interests and the degree of deference to be shown to the governments of different countries.

Secondly, the project has contested the notion that international investment law is biased towards investment protection because of its historical origins. I developed an alternative to the reception model which had been dominant in studying the history and global diffusion of international law. The introduction of this novel approach has extended the impact of project beyond the field of law since the reception paradigm I criticise is prevalent in cultural studies more generally.

Thirdly, the project has led to important results regarding the political effects of economic interdependence. It is often assumed - particularly in the context of European integration - that rules which enhance economic interdependence (by promoting cross-border trade and investment), favor the creation of larger political units. The project has led to a better understanding of how rules protecting economic openness may cause an entirely rational backlash against economic openness by some groups. The appreciation of this fact should lead to more research into the political effects of economic integration, especially in the context of the European Union.

The project led to the creation of a permanent outfit dedicated to studying international economic law in Tartu. The grant proposal put together in the final year of the project obtained full funding from the Estonian Research Council for the next five years. The project also led to direct input into policy planning. In 2018, I became member of the group of experts helping the Estonian Ministry of Foreign Affairs to formulate the “Foreign Policy 2030 Development Plan”. Drawing directly on the work conducted under the project, I advised top officials of the Ministry on ways to contribute to the EU’s investment and trade policy in the coming decade, especially in the area of digital trade. In November 2019, I shared the results of the project with around 300 state officials involved in drafting legislation.
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