When states enter into an agreement the credibility of their commitment is undermined by the weakness of the international enforcement system. Including a mandatory dispute resolution provision in the agreement is one of the available strategies to improve the binding nature of an agreement and, therefore, increase the credibility and value of the agreement. As a matter of practice, however, states typically do not include mandatory dispute resolution provisions in their treaties and other agreements. International law scholars have long known this fact, but have not offered an explanation for this behavior that is consistent with what we know about contract and bargaining theory.

This paper explains why the use of mandatory dispute resolution provisions is the exception rather than the rule in inter-state agreements. When states violate an international commitment, they face a loss in the form of direct sanctions or a reputational loss. These sanctions can be increased through the use of a dispute resolution clause. Both direct and reputational sanctions represent a joint loss for the parties to an agreement. In the event of a breach, therefore, the parties are better off without a dispute resolution provision. On the other hand, by increasing the sanction for a violation of international law, a dispute resolution clause increases the likelihood of compliance. States, therefore, must balance the credibility and compliance benefits of a mandatory dispute resolution provision against the joint costs imposed by those provisions in the event of a violation.

The analysis generates a series of results. It is shown that dispute resolution clauses are more likely when rates of compliance are high even in the absence of such clauses, when the marginal impact of the clause on compliance is large, and when the parties to the agreement face similar ex ante probabilities of breach. Dispute resolution clauses are also more likely in low stakes agreements than in high stakes ones, and in multilateral agreements rather than bilateral ones. On the normative side, the paper demonstrates that increasing the accuracy of tribunals will increase the use of dispute resolution clauses, even if the parties are risk neutral. It also offers support for the view that money damages (or other damages that take the form of transfers between the parties) should be encouraged.

 In the classic novel, Frankenstein, Doctor Frankenstein creates a living creature in the hope of cheating death.  The monster, as the creature is called, horrifies Doctor Frankenstein, turns against him, and kills several people, causing the doctor to regret his decision to make the monster in the first place.    When states establish an international organization (IO), they create an institution with a life of its own on the international stage.  Though states can, collectively, control the IO, without unanimity among them the organization can often act on its own.  The danger for a state, then, is that its creation, like Frankenstein’s, will become a monster and act contrary to its interests.  In contrast to Frankenstein, however, states are conscious of this risk and are able to guard against it.  This Article explains that much of the existing landscape of international organizations has been formed by the state response to this “Frankenstein problem.”  The effort by states to avoid creating a monster explains, among other things, why there are so many IOs, why they vary so widely in scope, and the manner in which they are permitted (and not permitted) to affect international law and international relations.  The Article also identifies the four types of activities that IOs are allowed to undertake and explains how states choose which activities to place within which organizations.  More generally, the Article offers a better understand of why and how IOs are designed and their place within the international legal order.  

In well-functioning domestic legal systems, courts provide a mechanism through which commitments and obligations are enforced. A party that fails to honor its obligations can be hauled before a court and sanctioned through seizure of person or property. The international arena also has courts or, to expand the category somewhat, tribunals. These institutions, however, lack the enforcement powers of domestic courts. How, then, do they work, and how might they work better or worse? The first objective of this Article is to establish that the role of the tribunal is to promote compliance with some underlying substantive legal rule. This simple yet often overlooked point provides a metric by which to measure the effectiveness of tribunals. But a tribunal does not operate in isolation. The use of a tribunal is one way to resolve a dispute, but reliance on diplomacy and other traditional tools of international relations is another. Furthermore, even if a case is filed with a tribunal, there may be settlement prior to a ruling and, even if there is a ruling the losing party may refuse to comply. To properly understand international tribunals, then, requires consideration of the entire range of possible outcomes to a dispute, including those that do not involve formal litigation. The second goal of the Article is develop a rational choice model of dispute resolution and tribunals that takes this reality into account. The third goal is to explore, based on the above model, various features of international tribunals and identify those that increase effectiveness and those that reduce it. Finally, the article applies the analysis to help us understand two prominent tribunals, the World Trade Organization’s Appellate Body and the United Nations Human Rights Committee.

Within the next twelve to twenty-four months, the World Trade Organization (WTO) may have to rule on a dispute between the United States and the European Communities (EC) regarding genetically modified organisms (GMO). This Article explains why the organization’s current jurisprudence risks making this case and others like it an unnecessarily explosive and damaging one for the trading system.

Existing WTO cases interpreting health and safety rules instruct panels and the Appellate Body to determine if there is a "rational relationship" between a challenged measure and the "risk assessment" that must be conducted before a measure is adopted. In making a ruling, therefore, panelists must evaluate scientific evidence, attempt to gage the defendant's willingness to tolerate risk, and assess the relationship between risk and the challenged measure.

This Article argues that substantive review of this kind is unwise and unnecessarily threatens the stability of the international trading system. The WTO is poorly placed to evaluate either science or the risk preferences of states. In addition, when the WTO finds a violation of WTO obligations, the relatively weak enforcement mechanisms of the organization will often be insufficient to overcome the political salience of health and safety measures or the sovereignty implications of an international review of these domestic policies. The sanctions that accompany non-compliance generate additional barriers to trade and impose additional costs on the system. A refusal to comply is further harmful because it undermines the legitimacy of the WTO and generates conflict among the litigants.

Similar costs may arise in any trade dispute, but they are especially likely in the context of the Sanitary and Phytosanitary Agreement (SPS), under which the WTO handles health and safety issues. This Article explains why the WTO should defer to domestic decisions on these issues rather than subject them to a substantive review. It also explains why procedural provisions in the SPS Agreement, along with non-discrimination and least restrictive alternative obligations, can effectively discipline states and discourage protectionist abuses.

The international trading system, embodied in the World Trade Organization (WTO), is rightly celebrated as one of the great successes of international cooperation. The success of that system, however, has not been matched in other important areas of international policymaking, including environmental, labor, human rights, and competition policy. In recent years, the trading system has come under stress because the impact of its success has been felt in these "non-trade" areas. The liberalization of trade and the establishment of multilateral trading rules, for example, have made it more difficult for nation-states to impose trade sanctions on states that fail to undertake certain environmental measures. Governments, non-governmental organizations (NGOs), and individuals concerned about the impact of the trading system on these non-trade issues have challenged the WTO to address this concern. As of yet no consensus has emerged on the question of how to balance existing trade interests against these other interests.

This Article proposes a strategy that would allow states to discuss trade and non-trade interests in a single forum. With a single place for the negotiation of a range of issues, states will be able to negotiate rules to govern the balance between trade and non-trade concerns. No such forum exists today.

The best starting point for this effort is the WTO. The WTO has the advantage of being an established and successful organization that has proven itself capable of managing complex negotiations and administering the resulting agreements. It also has the advantage of a well functioning dispute resolution system. The primary problem with the WTO as the single home for these diverse issues is the fact that it is a trade organization, staffed by trade specialists, and prone to favoring trade interests over others. If it is to be an effective and accepted forum for non-trade issues, this trade bias must be eliminated.

To overcome the trade bias of the institution, this Article advances a novel proposal to create autonomous, topical departments within the WTO. Each department would represent a single area, such as trade, environment, human rights, and so on. The departments would organize rounds of negotiation within their issue areas, leading to WTO obligations. In addition, to permit negotiation across issue areas, periodic "Mega-Rounds" would be convened in which trade concerns could be balanced against, for example, environmental concerns. The resulting agreements from the Mega-Rounds would also represent WTO obligations. The departmental structure would avoid the problems of a trade bias within the organization and retain the advantages of specialization. At the same time, the organization would have a mechanism to undertake the difficult but critical tasks of determining how trade and non-trade interests will interact.

Abstract: Over the past forty-five years, bilateral investment treaties (BITs) have become the most important international legal mechanism for the encouragement and governance of foreign direct investment. Their proliferation over the past two decades in particular has been phenomenal. These intergovernmental treaties typically grant extensive rights to foreign investors, including protection of contractual rights and the right to international arbitration in the event of an investment dispute. We argue that the spread of BITs is driven by international competition among potential host countries - typically developing countries - for foreign direct investment. We design and test three different measures of competition. The evidence suggests that potential hosts are more likely to sign BITs when their competitors have done so. We also control for diffusion via coercion, social learning, and cultural networks. We find some evidence that coercion plays a role, but less support for learning or cultural explanations. Our main finding is that diffusion in this case is associated with competitive economic pressures among developing countries to capture a share of foreign investment. We are agnostic at this point about the benefits of this competition for development.

Competition policy is made at the national level but a great deal of the business activity that it seeks to regulate takes place at the international level. Though it is universally accepted that some level of international cooperation is necessary to make regulation effective under these conditions, there is a considerable diversity of views on the question of how much cooperation is appropriate.

The presence of international activity distorts competition policy in at least two ways. First, it causes the preferred domestic policies of states to diverge from what they would be in the absence of such activity. States that are net exporters of goods sold in imperfectly competitive markets have an incentive to weaken their antitrust rules and states that are net importers of such goods have reason to tighten theirs. Second, the choice of law rules adopted to establish the jurisdictional reach of domestic law create an additional divergence between the substantive laws actually chosen and those that would be chosen by a closed economy. States that choose to limit their laws to activities that take place within their territory are better off if they also weaken their substantive laws. States that extend the reach of their laws generate overlapping jurisdiction and force firms to run a gauntlet of legal rules that includes the strictest elements of each state’s laws, leading to a de facto regulatory standard that is stricter than that of any single state.

This chapter explains why these problems cannot be resolved through the sort of low levels of cooperation that dominate current international antitrust efforts. Information sharing in particular cannot address the distortions to competition policy generated by cross-border business. Choice of law strategies can improve the regulatory framework, but can only partially address the problem and even this would require a dramatic change to existing policies. What is required, then, is a deeper form of cooperation on the subject of substantive laws or international standards. Though cooperation of this sort is difficult to achieve, there is no other way to address the policy distortions created when national authorities try to regulate international competition.