1 Characteristics SECTION I. LEGAL NATURE AND SCOPE · PDF file1 Characteristics SECTION I. LEGAL NATURE ... the Convention on Settlement of Investment ... arises from the fact that

1 Characteristics

SECTION I. LEGAL NATURE AND SCOPE OF ECONOMIC DIPLOMACY

The laws which arise from a contractual relationship within a community of identified interests are usually supranational. They hurt the sovereignty of states less because of the gradual evolvement of a community of interests, which tend to override the fears of states and their sensitivities to sovereignty considerations. The solidarities created within these fields are motivated by the desire of heads of state or governments to satisfy the basic needs of the population under their jurisdiction, because in the present system of international affairs there is no single country, no matter how powerful, that is absolutely stdfsufficient and independent of other countries. This notion of interdependence, which is the brainchild of Article 55 has found practical application in the establishment of international economic and social arrangements, 1 which are gradually creating laws applicable to states and which consequently limit their sovereignty. Within the field of international economic law, which is consequently created through economic diplomatic activities culminating in agreements, the failure of traditional law has become glaringly obvious, because of its voluntarist nature. This is to say that a modern international law has been evolved since the creation of the UN to stabilise International Commodity Market prices within specific international institutions embracing producer and consumer countries of raw materials. This communityoriented law arising from international economic transactions covers a wide variety of institutions: for instance, the International Bank for Reconstruction and Development (IBRD); 2 the International Monetary Fund (IMF); the International Finance Corporation (IFC); 3

the Convention on the Settlement of Investment Disputes between States and the Nationals of Other States, arising from the convention of 18 March 1965; the Treaty of Rome of 25 March 1957, which established the EEC, the Treaty of the West African Economic Community (ECOW AS) signed in Lagos on 25 May 1975; the General

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E. Atimomo, Law and Diplomacy in Commodity Economics© Emiko Atimomo 1981

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Agreement on Tariffs and Trade (GATT) of 30 October 1947, and the international commodity agreements (e.g. tin, coffee, raisins, wheat, sugar). The evolution of an international economic law as a discipline would therefore pose problems of method of analysis and of reftexion in these areas of intensive economic activity, which gradually create laws that are supranational and which conform to the needs of governments and peoples.

To the developing world this law is very vital, not only because it poses a philosophy of international co-operation even for those in search of a world government, but also because it regulates the diplomatic activities of the poor versus rich countries. Whether it would attain its objectives will be dependent on how the notion of equity in a law that produces solidarity within a community of interests can be protected and encouraged in conformity with the 'principle of equal rights and selfdetermination' (Article 55 of the UN Charter) of peoples to raw materials and amenities. This is because, when we examine the movement of world commodity prices and their attendant contribution to the economic growth of the poor countries, which represent the producers, we shudder at the increasing gap created by the notion of international co-operation between the poor and the rich nations of the world. For, while the rate of economic growth of poor nations was 4·3 per cent- that is, less than 5 per cent earmarked for the first development decade up to 1970 -that of the developed world with liberal economy attained, between 1955 and 1960, 3·5 per cent; and 5·2 per cent between 1960 and 1964.4 This is to say that international co-operation expressed in terms of trade and aid has made the poor nations poorer and the rich ones richer. But the objectives of Article 55 were to provide the poorer nations of the world with the necessary tools for development. This contradiction shows that the international society is still characterised, in its diplomatic activities, by mistrust and by the prominence which the developed world still gives to bilateral relations over multilateral relations expressed in terms of aid and trade.

SECTION II. TRADITIONAL INTERNATIONAL LAW AND MODERN ECONOMIC DIPLOMACY IN

THE AREAS OF APPLICATION

Within the scope of all these economic international transactions, international economic law is trying to become a stabilising factor within economic agreements and treaties. This law is developing a

8 Law and Diplomacy in Commodity Economics

peculiar nature and characteristics because of its method of analysis and the techniques used in creating a wider scope of application in conformity with our present-day, fast-moving changes in technological progress. Traditional international law is therefore found to be insufficient in respect of its application and adaptation to these rapidly changing situations. In the area of application, the subjects of international traditional law are limited and its analysis is based on political philosophies. It does not take sufficient account of empirical and analytical research methods, which are quite distinct from a general legal logic approach, which involves reasoning and the use of a common sense of justice. 5 While international economic law is not only applicable to states and persons as in traditional international law, it also extends to other moral and physical persons, like private national companies and international organisations. This supranational nature arises from the fact that decisions arrived at within economic institutions are immediately applicable to industries within the territories of member states. Such powers are more apparent within the European Coal and Steel Community than in the EEC and EURATOM where the power to decide resides with the Council of Ministers. This supranationality only exists at the moment within the framework of European· economic integration, where the executives of the three European communities enjoy a real independence in respect of member states. They take decisions which are executory according to set provisions; so that in international economic law like in traditional international law, institutional authority over states is exercised in terms of decisions, control and sanctions. This is to say that international economic law still uses certain techniques of the traditional international law. For instance, decisions in international economic law, as in traditional international law, are expressed in terms of recommendations; the difference lies within the field of application. While a refusal to carry out these recommendations in economic institutions could lead to the compulsory withdrawal of a member state with a two-thirds distributed majority of producers and consumers,6 recommendations or resolutions in political organisations have no force oflaw. For instance, the General Assembly resolution of20 November 1959 requesting France to abstain from testing atomic bombs in the Sahara was simply an invitation to abstain. 7 France ignored this recommendation without having infringed her obligations as a member of UNO with a consequent sanction.

Within the fields of adaptation, traditional international law is less suited to a more complex international society that has evolved since the creation of the UN. Nationalism in its various forms, which tend to

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cripple solutions to international crises, such as the Vietnam war, Cyprus and the Middle East conflicts, are living testimonies to the failure of traditional international laws to adapt to present requirements. This is why commodity institutions have evolved their own methods of conflict settlement as distinct from the procedures of the International Court of Justice. This will be exmnined in Chapter VI, Section I, of this book. These procedures not only border on the panel system, 'consultation and co-operation', as with specific commodity institutions, but also on consultation8 and conciliation as with GATT and UNCTAD respectively. All these procedures require profound knowledge of the subject matter to be settled- for instance collection of adequate facts that could bring about an equitable settlement. The procedures used in economic institutions are therefore subtle and flexible but effective, as we shall see in the case studies. It is therefore a non-judiciary approach where there is often no 'victor or vanquished'. As an illustration, there was a controversy in the International Wheat Agreement9 by which the United Kingdom government wanted a system of arbitrage in the agreement during a renewal exercise, but the USA was opposed to this on the grounds that an external organ was not competent to exercise competence in complex economic problems. The American delegate held that there was need for conciliation of interests which would satisfy everybody without hurting anyone. She therefore preferred the competence of the Wheat Council in the settlement of conflicts.

The development of these methods only took root after the Second World War within international organisations. Before this time, there was the Committee of the League of Nations, which created a group of 14 experts for this purpose. We can therefore now say that in international economic law and diplomacy the method chosen for conflict settlement in the first instance is that of negotiation, consultation, conciliation and the panel system as a first instance, before further binding decisions are taken. A solution is consequently found within the organisation itself without recourse to an outside judge or a third party.

Furthermore, this discipline has destroyed the notion of equality among states prevalent in traditional law, although, curiously enough, ECOW AS and its sister organisation, CEAO, situated at Ouagadougou, employ the rules ofunanimity.Nowhere in the ECOWAS Treaty or in its Rules of Procedure of the Council of Ministers is mention made of a voting procedure which is being tacitly agreed upon by the Council of Ministers and the Authority as the unanimity rule prevalent in political


organisations, although Rule 27 (Miscellaneous) of Rules of Procedure of the Council of Ministers mentions that 'If there is any doubt as to the procedure to be followed in any particular case, or if no procedure is prescribed by or under the Treaty or these Rules, the procedure to be followed may be determined by the Council.' In practice the procedures used so far at meetings are those of negotiation, conciliation and, above all, consensus (i.e. unanimity) which is really meant. This is also true of the meetings ofthe Authority. On the other hand, the CEAO Treaty in its Articles 31 and 32 specifically mentions that the Acts and Decisions of the Authority and Council of Ministers, respectively, shall be taken by the unanimity rule. These are exceptions rather than the rule, and an innovation in African community Jaw and diplomacy, based on voluntarist law which is traditional and which is bound to raise unforeseen problems in the future, more at ECOW AS level than at the CEAO level, whose culture and linguistic affinity are Francophone. 10

However, the notion of equality of states has become unworkable in other economic institutions and has been replaced by the weighted system which put into consideration the financial contributions of a Member State and the amount of tonnages allotted to it.

International commodity agreements have encouraged the group system -for instance, producers and consumers- while in the UNCTAD, there is the Group of77 (made up of Groups A and C) and the rich world (made up of Groups B and D). In all these group formations the techniques of negotiation and the functioning of the mechanisms in commodity agreements and institutions have become new sources of legal obligations. Furthermore, because of the provision of periodical renewal in these agreements, the provision of amendment now questions pacta sunt servanda since rebus sic stantibus allows any state to question the validity of any previous engagement, particularly when such an engagement threatens or jeopardises the interests of a given state.

We can now see from the foregoing analysis that if the world must survive and tensions Jessen, a new type of law must be evolved and encouraged for international relations; this has found expression in the areas of economic and social international arrangements which are bound to bring the people of the world together within a community of interests for the purpose of world peace and order. Thus we have now seen why traditional law is unsuited and inadaptable to the increasing needs of our contemporary international society, because the law itself is based on the goodwill of states. International economic law is therefore

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a flexible law because it is easy of adaptation to international economic relations. It is a law by which the exercise of power contributes to a gradual limitation of sovereignty in multinational economic and social arrangements and to the gradual evolution of a legislative authority. It recognises equity as a basis for functioning in conformity with Article 55 of the UN Charter and the need in various economic institutions to prevent discriminatory trade practices, and to establish quota systems in the production and exportation of commodities.

SECTION III. METHODOLOGY IN INTERNATIONAL ECONOMIC LAW AND DIPLOMACY

This discipline is young in the sense that it dates from the creation of the UN whose organs are deliberately provided with set provisions in order to promote its rapid evolution. The League of Nations had no direct control over international technical institutions which were independent of it, so that jurists could not preoccupy themselves to a great extent with the task of evolving a theory based on a progressive methodology. Since it covers a wide variety of fields of human activity, the international jurist is confronted with a new approach to legal analysis -an approach which requires an interdisciplinary knowledge or what Rosenthal and Rosnow call 'boundary-melting disciplines', 11 because he is now also confronted with the politics and economics of this great field of international transactions. In other words, the international jurist of the present day is expected, in addition to the study of law, to have a sufficient knowledge of economics, politics, history and sociology. He must therefore be a technocrat with good knowledge of the surroundings to which this law is applicable. Strict adherence to the study of law would make the jurist conservative and insufficiently open-minded to new social realities and techniques. He is therefore as rigid as traditional international law, so that if this discipline is still not properly known and well understood, it is because of the non-exposure of our jurists to interdisciplinary studies during their university training period. Unless the jurist acquires the mind of a technician, he cannot translate, with sufficient realism, the solutions and findings of economists into precise rules oflaw. It is therefore not surprising to find most delegations of the developing world during international negotiations on commodities losing grip and in fact ignoring legal battles involved to


the advantage of developed nations who, however, either do not seem to, or refuse to, understand the philosophy arising from this discipline. This observation on the developed nations is necessary because they still encourage the use of vague and imprecise terminologies in economic negotiations where the solidarity which is born from a concluded agreement is based upon the notion of a new community of interest. It is discouraging to note how well-known negotiators of developed nations argue interminably or childishly because their draft proposals have not been accepted in general imprecise terms. 12 No doubt this is still due to the precarious nature of the international society and also to the agegroups and conservative academic background of the negotiators who have not yet understood, or have refused to understand, the modern concept of international co-operation as a doctrine based on equity enunciated in Article 55 of the UN Charter. Or perhaps for simple purposes of power-display they have decided to regard 'man as wolf to man' by throwing smaller eager nations into further possible confusion, because they are either helpless or unable to use to advantage certain favourable instruments at their disposal.

Thus we have seen that terminological imprecision characteristic of traditional international law is still unfortunately highly encouraged in international economic law, and even in community law, for the purpose of legal politics. It would, however, be greatly appreciated if international texts of economic and social nature discourage the use of vague terminologies not only for the purpose of clarity and international co-operation but also because producer nations, very sensitive to the desire to sell their products rapidly, most willingly hasten to append their signatures to legal texts without great consideration of depth. This attitude is naturally most rampant with mono-producers. Much more so that such legal texts in a generality of cases 13 go into effect on signature provisionally while awaiting the accomplishment of diverse constitutional methods of ratification. There is also the problem which official languages pose to the developing world, whose mother tongues are not often used in texts. The use of imprecise and meaningless terminologies could produce certain difficulties in understanding, interpretation and translation.

All the factors enumerated above pose the problem of further precise methodology because, as we have seen, the international jurist still possesses the tendency to use the hypothesis which is typical of traditional international law, and still bases his approach on the voluntarist law where states sovereignty is absolute and 'laissez-faire' is based upon an established order. But this is no more true of the

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contemporary international society where the notion of interdependence has grown considerably. This is to say that traditional international law does not offer adequate rules of law for the purpose of encouraging a new system of progress based upon the need to satisfy certain economic and sociological needs. A law must be made to conform to the evolutionary needs of a people for whom it is made, because it is expected to fashion them towards a desired goal. This is the direction which international economic law is gradually paving for itself.

Consequently, its method poses many research difficulties arising from the fact that states which do not belong to a legal community of interest scarcely want to divulge their national policies to the inquisitive research student. The student therefore must make great use of his personal contact not only to the secretariat of the organisations concerned, but also to national appropriate ministries where he could have fruitful discussions with their functionaries. His ability to achieve some satisfaction from his visit would depend on his personal charm and approach. Apart from the oral method, his other sources which are material conform to those established by traditional international law, with slight but important differences. These differences conform to those between the requirements of the International Court of Justice and traditional international law. 14 With the International Court of Justice, 'International Conventions whether general or particular, establishing rules expressly recognised by the contesting states' plays a more important role than international custom to which traditional international law gives a primary role. The role played by international economic law therefore conforms to the order established by the International Court of Justice, except that its other major sources apart from treaties, are decisions of international institutions, conference papers, jurisprudence and doctrine. To these are added national commercial policies because they determine commodity prices and government attitudes to trade. Custom in international economic law plays a negligible role because it is confined to old customary laws of international communications, particularly maritime, and to some principles of traditional commercial relations. 15 So that the international economic jurist is now expected to possess a firm knowledge of these added factors to enable him to interpret laws emanating from contractual communities of interest. Doctrine is also a material source in international economic law because of the nature of Article 55 of the UN Charter which enunciates not only the notion of equality of access to raw materials but also that of the right to independence of peoples. This


doctrine has become necessary because of the need to protect growing foreign investments within national boundaries and to recognise the right to compensation for the nationalisation of properties.

International economic law is therefore a boundary-melting discipline; that is, a meeting point for various disciplinaries (economist, moralist, jurist, political scientist and sociologist). This is why, in analysing a legal economic text, we must examine it from several angles: politics, economics, law and diplomacy and institutional framework within which function the administrative and law-making processes. This peculiar nature arises from its use of techniques which are not only traditional (negotiations, adoption, ratification and entry into force) but are also institutional and legal. These techniques help to facilitate the provisional entry into force of an agreement from signature 16 with a promise of intention to ratify the agreement within a given period. For instance the International Coffee Agreement of 1968 in its Article 62, paragraph 2, stipulates that the agreement shall enter into force provisionally for any signatory government on I October 1968, provided that this government notifies its intention or 'undertaking to apply the agreement provisionally', to the Secretary General of the United Nations not later than 30 September 1968, while awaiting the accomplishment of its constitutional procedure of ratification. Thus in international economic law, a simple notification of intention to ratify has the same effect in law as an instrument of ratification, approval or acceptance. In traditional international law, signature has no immediate legal effect except with executive agreements 17 or on express provision as with the Japanese-Australian Trade Treaty of 6 July 1957 which operated on provisional basis as from the date of signature. 18 In this discipline sanction depends on economic and psychological pressure because any country that violates the provisions of an agreement could be suspended or excluded or be asked to withdraw compulsorily, thus making sanction reside in its non-participation. 19

SECTION IV. THE ROLE OF TRADITIONAL DIPLOMACY IN THE MODERN WORLD OF

ECONOMIC TRANSACTIONS

(I) DIPLOMACY AND LAW

Diplomacy between states with the view to concluding commodity

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agreements starts to play a role from the stage when preliminary negotiations begin. In classical law there cannot be said to be diplomacy between states at war, until the first peace negotiations emerge either through bilateral or multilateral discussions. This notion also extends to economic and technical negotiations. In traditional diplomacy, negotiations could take place within any agreed traditional institutions, either in a diplomatic mission or in a Ministry of Foreign Affairs, among heads of states or their agents. In modern times, if it is a multilateral diplomacy, the locus could be in an international organisation or in a specialised institution. This is typical of modern economic diplomacy where negotiations are conducted within specialised institutions like UNCTAD, the EEC and in UNO, as we shall see in Part 2 ofthis book. From these meetings emerges law in diplomacy when negotiations lead to acceptable legal texts which set out rules and conduct for participating countries to adhere to. This is the case of international commodity agreements which set out to establish rules oflaw on how a commodity is to achieve stabilisation. This in itself constitutes diplomatic law, defined by Philippe Cahier in his work, Le Droit Diplomatique Contemporaine as: 'L'ensemble des normes juridiques destines a regler les rapports qui se forment entre les differents organes des sujets de droit international charges de maniere permanente ou temporaire des relations exterieures de ces sujets.' These rules of law which determine the conduct of relationship between different subjects of international law establish the notion of diplomacy within institutions and between the states.

(II) THE ROLE OF TRADITIONAL DIPLOMACY IN THE MODERN INTERNATIONAL ECONOMIC

DIPLOMACY

(A) Decadence of traditional diplomacy

Secret diplomacy became open after the First and Second World Wars with the rapid development of communication facilities. Diplomacy which was conducted in the secrecy of chancelleries was rendered ouverte after President Woodrow Wilson of the USA had presented his 14-point peace programme, after the First World War period, during the Treaty of Versailles negotiations. He believed in rendering diplomacy public rather than having it secret. Although there are advantages and


disadvantages in open diplomacy, we are here more concerned with the disadvantages of open diplomacy where, certainly, reciprocal concessions cannot adequately be made since its openness might destroy the entire objective of attaining peace or achieving useful results. This is why in modern economic diplomacy there is still a certain amount of diplomatic secrecy required so as to maximise the advantages that might accrue to contractual parties of an international agreement. This explains why there are closed sessions after an opening session, and even within an already established institution working sessions are not open to the press and to the public, although political institutions like UNO, OAU and OAS at a certain level have almost completely rendered modern diplomacy, which is essentially multilateral, open.

The decadence of traditional diplomacy, which was essentially political and military, has given place to modern diplomacy which has extended its tentacles to the areas of economics. First, this has been due to greater interdependence among states with the advent of more rapid communication systems. This is to say that no one country is selfsufficient as of today. Secondly, political struggles of the old diplomacy have made a place for ideological struggles which have found fertile terrain in the areas of economics, commerce, culture and even technology. Thirdly, the creation of UNO, whose Economic and Social Council (ECOSOC), and United Nations Conference on Trade and Development (UNCT AD) furnish the world with a locus for economic negotiations and planning. Modern diplomacy, whether political or economic, is therefore today characterised more in terms of bloc, for example, 'group of 77' in UNCT AD; the third world; the Western or Socialist alignments at the UN. This bloc diplomacy limits the liberty of action of individual states since they have submerged their specific national policies within the group system. This is also the case of contractual members of an international commodity agreement. We therefore can say that the development of international organisations has greatly led to the decadence of traditional diplomacy characteristic of ad hoc meetings and absolute respect for state sovereignty. In this modern type, negotiation is no more the exclusive prerogative of career diplomats because the development of rapid communication systems now makes it possible for even heads of state, prime ministers or ministers of foreign affairs to concern themselves directly with negotiations taking place within international organisations. In the technical and economic areas, diplomats are no more essential figures of negotiations because technicians of various disciplines from ministries other than the Foreign Ministry, now participate in the art.

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(B) Modernity in diplomacy

Modern diplomacy is expressed in two ways: through negotiations in international organisations and through direct contacts between political heads of state and not sovereigns, as of old. The turning-point in multilateral negotiations was reached with the creation of the League of Nations and then UNO after the First and Second World Wars.

The League was not as successful as UNO has grown to be, because the greater part of multilateral diplomacy was carried out outside the League. On the other hand, UNO has since provided the forum for the expression of modern diplomacy with its specialised agencies like UNCT AD, ILO, WHO, UNESCO, etc. Although it could be said that within UNO the Great Powers get away very easily with their actions in the security council, because of their veto power, UNO has been a magnificent forum for small nations which need international public opinion to survive, as will be demonstrated in Part 2, during the examination of the role of the UN General Assembly on the debate on the New International Economic Order.

Meetings held within specialised institutions eventually produce decisions often afterwards implemented by states because of their anxiety to contribute to national growth. On the African continent, modern diplomacy has been expressed in terms of what classical diplomacy called itinerant diplomacy because of the contact which this has generated among heads of state, e.g. OAU and ECOWAS. This type of African diplomacy has helped to solve certain thorny problems or made them better understood without necessarily achieving success, e.g.: (i) attitudes to liberation movements have since been modified although with little financial participation from members of OAU; (ii) the idea of a continental defence system is generally accepted as desirable and understood but not entirely accepted yet, because of the divergent national interests and the problems of logistics involved.

Modern diplomacy still keeps the triple function of representation, observation and negotiation. The techniques involved in this diplomacy are principally still those of the traditional, although it is gradually evolving its own peculiarities and characteristics as will be seen in Chapter 2: 'Diplomatic Techniques'. We shall subsequently see that through this triple function, a continuous communication is established between states and international organisations. In this continuous communication, the diplomat has not lost his complete status because diplomacy as an art is better carried out by a career diplomat since it requires some flexibility and finesse which technicians do not possess.


This is why a diplomat in modern diplomacy still plays the role of adviser in the art of, and approach to, negotiations. The technicians of diplomacy and the diplomat are therefore complementary, in spite of the diminishing role of the latter in economic and technical negotiations. In economic conference diplomacy, the diplomat still furnishes essential political information required by the technician for on-the-spot assessment of negotiation position. This role is also true if an ambassador is the chief negotiator or head of a delegation. In itinerant diplomacy or diplomacy of contact, the diplomat prepares the groundwork necessary for discussions between heads of state who are supposed to take decisions. In economic negotiations, the technical requirements are prepared by relevant ministries as we shall see later in this book, while in political conferences heads of state take with them essentially career diplomats as advisers. However, in this book we are most concerned with economic negotiations and agreements, the techniques of which will be discussed in subsequent chapters.

1 Characteristics SECTION I. LEGAL NATURE AND SCOPE · PDF file1 Characteristics SECTION I. LEGAL NATURE ... the Convention on Settlement of Investment ... arises from the fact that

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