Tuesday, May 26, 2020

Guest Blog Post: The Short-term and Long-term Legal Impact of COVID-19 on Globalization

We are pleased to share the following guest blog post, authored by Amin R. Yacoub and Mohamed S. El-Zomor

The COVID-19 pandemic has created a turbulence in the international legal order. Most nations have paused their international legal obligations in order to preserve their national legal order. The pandemic has forced many developing countries to halt their bilateral Foreign Direct Investments to preserve their essential national utilities. While the short-term legal impact of the pandemic on globalization seems to be devastating on many levels, we argue that – on the long term – the pandemic might have a positive impact on the international legal order and globalization. Indeed, the observable short-term legal impact of the pandemic seems to give credit to Marti Koskenniemi’s skepticism on global governance, yet we argue that the sudden reversal of the globalization movement during the pandemic does not render humanity’s progression towards globalization undesirable. In other words, countries only adopted nationalistic measures during the pandemic to preserve their national orders not to adopt nationalization as an aim per se – an innate need for globalization still exists among nations.

Short-Term Political and Legal Impact of COVID-19

On the short term, the political and legal impact of COVID-19 seems devastating. Most national courts all over the world have been closed alongside key judicial mechanisms for the protection of human rights, such as the European Court of Human Rights and the immigration courts of the US .

            Many international treaties are currently put on hold – presumably under the international law’s state of necessity or force majeure – in order to pursue protective nationalist measures to preserve public health against the pandemic. For instance, despite Canada’s latest ratification of USMCA (NAFTA’s substitution), COVID-19 has disrupted the USMCA implementation in accordance with the agreed timeline.

First, most countries have closed their borders to maintain public health: a protective step that might be interpreted as a tendency towards nationalism. By the same token, some of these restrictions may constitute a breach to international law, leading to a fragmentation of the international community.

Second, the recently updated NAFTA (“USMCA”) – although currently valid on paper – is on pause as the US and Canada have closed their borders, except only for medical supplies. Further, the US intends to place military troops near the border as part of the efforts to stop the spread of COVID-19.

Third, the Foreign Direct Investment (“FDI”) has been drastically impacted by COVID-19. As countries had taken major protective steps to avoid the privatization of essential governmental sectors, foreign investments have been faced with restrictive screening in the EU countries. Moreover, Italy and France have adopted a protective nationalistic approach against foreign capital to preserve public order.

Finally, most nations have unwillingly breached their Bilateral Investment Treaties (“BITs”) as part of their necessity measures against the spread of COVID-19. For instance, Italy had more than 70 bilateral investment treaties in force that might have been simultaneously breached. BITs damage claims might be brought by foreign investors against Italy once the pandemic crisis is over. The damage claims could be rooted on several breaches of BITs’ obligations such as Fair and Equitable Treatment (“FET”), Full Protection and Security (“FPS”), direct and indirect expropriation, and national treatment. However, such claims would likely be defended on a state of necessity ground of International Law, especially that the World Health Organization (“WHO”) has considered the current pandemic a state of necessity.

Marti Koskenniemi has long been a skeptic of the effectiveness of global governance. In his article Global Governance and Public International Law, Koskenniemi stated that: “[n]ational governments govern at home, the commission governs in Europe, and the UN administers a world society – “the international community”… perhaps the thickness of government diminishes as we proceed from the domestic to the global.” The pandemic had revealed that global governance also diminishes as we proceed from the global (e.g., World Health Organization “WHO”) to the domestic (e.g., “US”) especially in times of uncertainty. Put simply, preserving and promoting national interests take priority over complying with global governance when faced with existential threats. The current nationalistic wave against globalization - as a reaction to the pandemic - gives some credit to Koskenniemi’s argument against the effectiveness of global governance, at least for the short term. Lastly, globalization is directly reliant on global governance: it needs global governance as a tool to grow and have an impact on the international playground. Since global governance seems to be seriously threatened by the pandemic, humanity’s progress towards globalization has been jeopardized temporarily.  

Long-Term Political and Legal Impact

The long-term political and legal impact of COVID-19 cannot be easily predicted. However, we can speculate what the international legal order would be like in the aftermath of the pandemic.

First, nations would re-open their borders right after the pandemic returning the international legal order to its pre-existing condition. The EU would re-validate the free movements of goods and workers among its member-states. The recently renewed NAFTA would kick-start trade between the US and Canada. The international legal order would be reinstated as soon as the pandemic is over.

Second, most countries would witness a rise in the foreign direct investment on the long run. This is an inevitable result of the currently wrecked economy that resulted from the pandemic. In order to compensate the huge economic losses, countries would have more tendency to encourage foreign direct investments – especially developing countries that do not have enough economic means to drag their own economies out of the pandemic wreckage.

Third, International Investment Tribunals would develop more understanding of other important international law obligations: human rights obligations, the margin of appreciation of States, the public policy argument of States, force majeure, full protection and security, and state of necessity. The reason behind this lies in the humanitarian lens the pandemic had forced into the Arbitral Tribunals’ table and the investor’s world. Adopting such humanitarian lens would likely influence Arbitral Tribunals to create the desired balance in the ISDS system, which is sometimes criticized as a business focused Alternative Dispute Resolution system.

Theoretically, we argue that the world will witness a long-term rise in globalization. As Immanuel Kant had contemplated in his Perpetual Peace: “[e]ven if it were found that the human race as a whole had been moving forward and progressing for an indefinitely long time, no-one could guarantee that its era of decline was not beginning at that very moment… For we are dealing with freely acting beings to whom one can dictate in advance what they ought to do, but of whom one cannot predict what they actually will do . . .” We agree with Robert Howse and Ruti Teitel’s interpretation of Kant’s work. What Kant suggests – according to Howse and Tietel – is that even the greatest reversals of progress do not render it impossible to restart progress towards globalization and cosmopolitanism as a crucial means to advance perpetual peace. By way of analogy, we argue that the reversal of the globalization progress during the pandemic does not render it impossible for nations to renew such progress on the long run. Perhaps, it would not be a luxury, but a necessity to renew the globalization progress in the aftermath of the pandemic’s economic, legal, and social wreckage.

The language of the UN Secretary General on COVID-19 reveals that the world would likely renew its globalization progress after the pandemic. He stipulated that: “[w]ith the right actions, the COVID-19 pandemic can mark the beginning of a new type of global and societal cooperation.” Indeed, we predict that the pandemic might influence the conclusion of new international treaties to deal with unexpected world catastrophes and pandemics in order to guard the international legal order in the future.

In conclusion, notwithstanding the short-term legal impact of the pandemic on nations that had forced them to adopt nationalistic measures against globalization, a new atmosphere of cooperation among nations would arise from the current pandemic. Consequently, countries would have more tendency towards globalization after the pandemic through concluding new international agreements and treaties on the long run as that might be the first step towards healing socially, legally, and economically.

Amin R. Yacoub and Mohamed S. El-Zomor

https://lawprofessors.typepad.com/international_law/2020/05/impact-of-covid-19-on-globalization.html

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