Pricing Compliance: When Formal Remedies Displace Reputational Sanctions
56 Pages Posted: 13 Aug 2013
Date Written: August 1, 2012
The conventional wisdom in international law is that dispute resolution institutions sharpen the reputational costs to states. This article challenges this understanding by examining how the inclusion of dispute resolution tribunals and remedy regimes can alter reputational analysis by shifting the audience’s understanding of how mandatory a treaty’s substantive obligations are. Drawing on the distinction between prices and sanctions, this article contests the assumption that the introduction of a remedy regime in international agreements will regularly increase compliance with the treaty’s substantive terms. Instead, some remedy regimes may “price” deviations from the treaty’s terms and thereby facilitate breaches of the substantive rules. The article questions what the parties have actually agreed to when they form a treaty: Is it a promise to comply with the substantive provisions or is it a promise to abide by the terms of the dispute resolution system? Thus the article challenges whether the traditional reading of pacta sunt servanda (treaties should be obeyed), which requires adherence to a treaty’s substantive terms, is correct. Instead, this article argues that states can design (and are designing) treaties that are formally binding but define adherence to the dispute resolution system as the touchstone for compliance.
Keywords: reputation, compliance, sanctions, remedies, dispute resolution, treaties, WTO, investment
JEL Classification: C72, D74, F13, K33
Suggested Citation: Suggested Citation