Band 16, Heft 2 - Special Issue: Law and Sustainable Development

Over the last ten years, international investment tribunals have imported anti-corruption principles into the bilateral investment treaties (“BIT”) regime through the use of the doctrine of “unclean hands” and the requirement of “legality of the investment.” These principles have been invoked as a “trump card” defense by responding parties. In light of the rising case laws, the Article focuses on the success of the “trump card” defense of corruption invoked by host States. The Article makes several important findings. First, it shows that tribunals use the standard of a reasonable level of certainty to establish corruption – a standard below the “beyond reasonable doubt” standard employed in domestic criminal courts. At the same time, tribunals have discouraged mere insinuations of corruption without evidence. The Article also explains that this “trump card” defense is rarely successful owing to the minimal evidence offered by States in making allegations of corruption. Further, such a defense might place the entire burden of proof in rebutting corruption allegations on the investor even though the host State may have been complicit in the act. Fundamentally, the Article demonstrates that investment tribunals have not been able to effectively engage with corruption claims, due to the lack of enforceability of both the OECD Convention and the United Nations Convention against Corruption. However, this has not stopped the increasing use of the “trump card” defense. A separate mechanism such as introducing a corruption court could be a better alternative to deal with such claims.

We want government to help us prosper. For working people, prosperity requires employment and employment requires business. After World War II, most of the world was either devastated or underdeveloped leaving the United States without foreign competition. Local competition took its place. The States and local governments competed against one another on their natural resources, access to transportation, infrastructure, schools, and work force. These are the products of government spending. Some States did not have much to attract economic development. They created their own attributes instead. For example, right to work laws attracted companies that wanted to avoid unions and no usuary limits attracted credit card companies who wanted to charge high rates. Other States offered tax holidays. Move here and pay no tax for ten years. But saving money in taxes lost its appeal when other jurisdictions offered even more. Rather than build good sewage systems or roads for everyone, towns provided free infrastructure built to company specifications in addition to tax incentives. By the 1970s, firms learned that they could get States and localities to bid against one another. Each providing a package of bigger incentives. We can see the result of these races to the bottom in cities and towns that gave companies whatever they wanted only to find themselves with vacant factories and roads leading to nowhere. While the States were competing with one another, the rest of the world was emerging from war. Like the States, these countries wanted to help their citizens prosper. For those without natural resources or great infrastructure or educated workers, one alternative was to become a tax haven. A tax haven is the other side of a tax incentive. With tax incentives, a government gives up the right to tax in the hope that a firm's relocation will bring its citizens success. In a tax haven, a government hopes to improve its citizens’ fortune by helping a foreign taxpayer avoid another government’s taxes. Whether tax incentive or tax haven, in the end, the result is the same. The stakes get higher and higher. The companies and foreign taxpayers move from site to site. They take everything they can get and then convince another government to give more. Now a decade of investigative journalism shows that not only are the States in race to the bottom with their own tax revenues, but they are also transforming themselves into tax havens thus helping foreign taxpayers deplete their home countries’ revenues. This paper is a cautionary tale. It shows what makes the United States the world's favorite tax haven and examines what we can expect if this trend continues.

The OECD led BEPS project attempts key changes to the international tax standards to limit harmful tax avoidance. First, it is found that calls for the BEPS project are based on arguments (illicit financial flows and tax competition) that are supported by limited evidence and hence may not offer much fiscal gain to the developing countries. Second, it is found that the BEPS project would, through information sharing, further limit the fiscal jurisdiction of capital importing states. Further it is found that tax competition, even if existing in a limited form, is a result of the international tax architecture and the externalities caused by it. In fact, it is seen that the MNCs actually reduce the inefficiencies created by this tax architecture and thereby reduce transaction costs. By agreeing to the BEPS agenda of information sharing the developing countries would be paying the cost of internalising the externality.

The question of how to adequately integrate environment and labor provisions in free trade agreements is still a difficult one for both States and academicians. This article explores China’s approach to environment and labor issues in free trade agreements. For reference and comparison, it relies on the European Union’s and the United States’ approaches in their respective FTAs. The article identifies China’s preference for a case-by-case approach to the inclusion of environmental chapters in its FTAs. Additionally, in most FTAs it avoids to include provisions on labor standards. These two preferences represent major divergences from the European Union’s and the United States’ approaches, characterized by inclusion of chapters on environment and labor in all their modern FTAs. The article also finds that China’s FTAs rely solely on consultations and cooperation for the implementation of environmental and labor provisions, within the framework of Joint Committees and avoid the inclusion of civil society mechanisms. Moreover, resolution of disputes relies exclusively on consultations, in a diverse procedure than the one applicable to trade disputes. Despite alignment with the European Union model, this is another major point of divergence with the United States’ model, which applies the same enforcement mechanism for both environment and labor issues and trade issues and includes the possibility of applying sanctions. Finally, the article concludes that China’s options with regards to the treatment of environment and labor concerns in its free trade agreements aligns with both its domestic governance approach and its approach to international cooperation.

As of April 2020, the IMF categorised seven African countries as being in debt distress, whilst identifying twelve more that were at high risk of becoming distress. It is no longer a secret that considered immutable and eternally binding, debt by the global south (i.e., poor developing African countries) has become a tool for imperial powers in the post-colonial world to enforce and perpetuate their dominance over the global south. This is despite serious global crises that emerge from, and/or were caused by the rich countries of the global north; specifically, the negative effects of the global financial crisis of 2008, devastating impact of Covid-19 pandemic, and impact of Russia–Ukraine war on the African economies and contribution to these debt vulnerabilities. Yet, the rich countries of the global north have insisted on these poor countries to continue financing their debts. The paper considers how African countries could legally cancel the repayment of the debts by relying on the principles of international law (such as pacta sunt servanda, limit to legal obligation to pay, force majeure, State of Necessity or rebus sic stantibus) and States’ declarations to commitment to sustainable development agenda (such as the European Union’s response to the adoption of the 2030 Agenda featured in its Commission’s 2016 Communication) could be used as justifying grounds for cancellation of Africa debts. The paper draws on international law and development in the light of dependency and postcolonial theories and employs the human rights-based approach, interdisciplinary and critical-analytical perspective and using qualitative empirical evidence from rich countries and institutions of the global north and poor developing countries of the global south for analysis.