The Use, Nonuse and Abuse of Economics in WTO and Investor-­State Dispute Settlement

WTO Litigation, Investment and Commercial Arbitration – Cross-fertilization and Reciprocal Opportunities, Goldman, Romanetti & Stirnimann (eds.), Kluwer, 2013, Forthcoming

38 Pages Posted: 5 Sep 2012 Last revised: 25 Oct 2012

Joost Pauwelyn

Graduate Institute of International and Development Studies (IHEID); Georgetown University Law Centre

Date Written: August 30, 2012

Abstract

What is the role of economic evidence and arguments in WTO and investor-state dispute settlement? Both regimes epitomize the search for an international rule of law and legal stability. At the same time, both trade and investment agreements are economic contracts. Economics provides insights not only in lawmaking but also in law application, both fact establishment and legal interpretation. The influence of economic evidence and arguments, including quantitative studies, is on the rise in both fields. It spans far beyond damage calculations and decisions on appropriate trade retaliation. In the WTO: like products, less favorable treatment, subsidies and general exceptions. In investor-state arbitration: economic necessity. And in both regimes many more provisions lend themselves to input from economics. Such input can provide more robust, empirically sound and predictable outcomes. This, in turn, can broaden the support and legitimacy of both the trade and investment regimes. At the same time, reliance on economics does not come without risks. Core caveats and limits are: (1) economics must be filtered through legal criteria, (2) methodological discipline, (3) for communication purposes, ‘keep it simple’; (4) due process, (5) avoid or disclose value judgments. The cases and controversies discussed in this contribution indicate progress made but highlight that a lot of work must still be done to conform to ‘best practices’.

Keywords: law and economics, WTO, arbitration, investment law, expert evidence, social sciences

JEL Classification: A11, A12, A13, K33, K41

Suggested Citation

Pauwelyn , Joost, The Use, Nonuse and Abuse of Economics in WTO and Investor-­State Dispute Settlement (August 30, 2012). WTO Litigation, Investment and Commercial Arbitration – Cross-fertilization and Reciprocal Opportunities, Goldman, Romanetti & Stirnimann (eds.), Kluwer, 2013, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2141357 or http://dx.doi.org/10.2139/ssrn.2141357

Joost Pauwelyn (Contact Author)

Graduate Institute of International and Development Studies (IHEID) ( email )

PO Box 136
Geneva, Geneva CH-1211
Switzerland

HOME PAGE: http://graduateinstitute.ch

Georgetown University Law Centre ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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