Suing foreign governments

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

Actually, it’s not really that difficult. Relatively speaking. Developments in international law have been such that a determined individual can sue any government that has done him wrong, whether it be in the realm of criminal or civil matters, on investments, or trade discrimination (and -- to a certain extent -- on human rights). Of course, a helpful government from the country of which one is a citizen of would also go a long way indeed. But even then, such is not a necessity.

These thoughts came up recently, what with pronouncements by World Trade Organization Director-General Pascal Lamy decrying that “there has been no slowdown in the imposition of new trade restrictions over the past seven months” and noted that “the more recent wave of trade restrictions seems no longer to be aimed at combatting the temporary effects of the global crisis, but rather at trying to stimulate recovery through national industrial planning, which is a an altogether longer-term affair.”

This has led to quite ridiculous statements by some leading Philippine businessmen condemning developed economies’ support for their local markets. Ridiculous because it’s what Philippine industries have long been demanding. One can’t exactly condemn another for doing what one has also been wanting to do. These businessmen then clangingly clamored we forge ahead with bilateral deals. Which again betrays fuzzy thinking. If the Philippines -- rightly -- decided to approach the Scarborough Shoal issue through a pacific multilateral track, what makes people think that trade matters would not benefit from a similar policy and avoid similar pitfalls.

Thus the importance of dispute settlement mechanisms, for which the WTO version is really a cut above the rest. As reported by the WTO Web site: “There is very broad confidence in the WTO dispute settlement mechanism. Ninety-eight members have participated in one capacity or another, which is 63% of the membership. Importantly, developing members are just as active as developed ones.” The Philippines was party recently to two big WTO cases, winning one (against Thailand, on cigarettes) and losing the other (against the European Union and the United States, on distilled spirits).

The WTO dispute procedure has been discussed in this column in past articles. But any local industry that feels it is being discriminated against by a foreign market need only approach the Department of Trade and Industry (for non-agricultural, i.e., industrial, goods) or the Department of Agriculture (for agricultural products) for assistance. For Association of Southeast Asian Nations (ASEAN) member-countries, there is also the ASEAN dispute settlement mechanism, which is patterned closely after the WTO dispute system.

Then there is the International Centre for the Settlement of Investment Disputes (ICSID). The ICSID short-circuits State immunity from suit obstacles by allowing private entities to protect the investments they made in a foreign country. Complaints covered could include improper expropriation of the investment or unfair treatment, either through violation of most-favored-nation or national treatment principles. Thus: “The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.”

It is also possible to sue, if such be in existence, under a bilateral investment treaty (BIT). The rules would normally fall under that of the United Nations Commission on International Trade Law. It must be noted that what qualifies as an “investment” for ICSID (thus allowing one to sue) may not qualify as such under a BIT (and vice-versa). There are, however, a couple of advantages to an ICSID suit. First is that ICSID members are duty-bound to respect ICSID awards as if they were judgments by their own national courts. Furthermore, ICSID has developed a considerable body of “case law” (relatively speaking, as there is essentially no stare decisis in international law) and this has lent a certain amount of predictability and credibility to ICSID proceedings.

One can also sue governments without resort to international tribunals. While clearly there are sovereign immunity issues that need to be resolved, this is not as impossible as one might think. In the Philippines, there are certain laws that allow individuals to sue its government, particularly if the government act questioned fall under that which is classified as jure gestionis (or commercial acts).

The US has a developed set of legislations enabling individuals to sue foreign states or governmental agencies. The Foreign Sovereign Immunities Act provides such a framework that US citizens can take advantage of. Like Philippine law, the primary basis for allowing the suit is if the act complained of against the foreign government is considered a “commercial activity.”

Suing a foreign government, one finds quite quickly, isn’t as glamorous as it sounds. Like domestic litigations, one would most likely be frustrated by the mind-numbing paperwork involved more than anything else.