India’s Export Ban on Cotton under International Law

On 5 March 2012, the Indian Central Government notified an immediate ban on the export of cotton from India. What’s more, the ban was given a retrospective effect such that export against registration certificates already issue was also prohibited. Although the official notification does not state the reason for the ban, it appears from news reports that the justification offered by the central government was based upon “the trend of domestic consumption and depletion of domestic availability”. The ban generated several sharp responses. Indian farmers and politicians, particularly from Maharashtra, Gujarat, Andhra Pradesh and Karnataka opposed the ban as it led to a decline in domestic cotton prices from INR 4,200 (per 100 kgs) last month to INR 3,000. The China Cotton Association also came down heavily upon the ban, hoping that “the Indian government will rectify this market-disrupting and mistaken policy in a timely fashion and comply with global trade rules”. China is the largest importer of Indian cotton. The Chinese government also seems to have taken the matter up formally with its Indian counterpart.

With all these voices against the ban, the (empowered) group of ministers of the Government of India today revisited the ban, and decided that it will be removed. So, of course, the ban will be revoked soon and the sun will shine again (soon). Nevertheless, this incident provides a useful instance to analyze Indian practice on export bans under international law. Specifically, India, as  a party to the WTO Agreement and the GATT 1994, has undertaken several commitments under WTO law. Also, this incident provides an apt opportunity to revisit the WTO Appellate Body’s report ruling on the inconsistency of China’s restrictions on the export of certain raw materials (China — Raw Materials).

Article XI:1 of the GATT 1994, titled “general restrictions on quantitative restrictions”, states:

1.       No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.

Now clearly, this seems to apply to India’s prohibition on the export of cotton.

As the AB noted in China — Raw Materials (para. 320), the title of Article XI “suggests that Article XI of the GATT 1994 covers those prohibitions and restrictions that have a limiting effect on the quantity or amount of a product being imported or exported.”

However, although this is a general obligation, its scope is delimited by Article XI:2, which lays down situations in which export and/or import restrictions may be imposed. Importantly, Article XI:2 begins with the chapeau that the “provisions of paragraph 1 of this Article shall not extend to the following…”, suggesting that it does not carve out an exception (like Article XX, e.g.), but instead circumscribes the scope of the obligation contained in Article XI:1 above.

Returning to the scenario at hand, as noted earlier, even though the notification itself does not provide any reasons, it appears that the ban was imposed as a result of rising domestic demand and decreasing supply. Article XI:2, in fact, contemplates such a situation by permitting

(a)      Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party;

At first, the ban may then seem consistent with India’s obligation under international law: The prohibition on imposing export restrictions contained in Article XI:1 does not extend to situations where such restrictions are applied “temporarily”, “to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party”. Clearly, this would be India’s justification for the ban under international law.

There are several problems with such a justification, however. In particular, I am not sure if the domestic conditions in India amounted to a critical shortage. I am not concerned so much about the non-temporary nature of the ban (the notification itself doesn’t prescribe an end date, but that may instead flow from the quantitative restriction provision in the Foreign Trade (Development & Regulation) Act of 1992, as amended in 2010), or even the essentiality of cotton (as the AB noted in para. 326: “[b]y including, in particular, the word “foodstuffs”, Article XI:2(a) provides a measure of what might be considered a product “essential to the exporting Member” but it does not limit the scope of other essential products to only foodstuffs.”).

On the issue of whether the shortage cited by India amounts to a “critical shortage” as used under Article XI:2(a), it is important to remember that the phrase is only self-judging in the first instance. In other words, India cannot finally decide what constitutes critical shortage for it, for WTO law shall decide this question. And indeed this is exactly what the Appellate Body did in China — Raw Materials, wherein it assessed the consistency of an export ban on raw materials imposed by China. China sought to justify the need for the ban as a critical shortage. On the meaning of a critical shortage the AB noted:

Taken together, “critical shortage” thus refers to those deficiencies in quantity that are crucial, that amount to a situation of decisive importance, or that reach a vitally important or decisive stage, or a turning point.

Importantly, according to the AB, the kind of shortages that fall under Article XI:2(a) are “narrower” than “general or local short supply” (para. 325). As an example, the AB noted:

It would seem that Article XI:2(a) measures could be imposed, for example, if a natural disaster caused a “critical shortage” of an exhaustible natural resource, which, at the same time, constituted a foodstuff or other essential product.

Thus, the definition of “critical shortages” under Article XI:2(a) is quite narrow, and does not include shortages resulting from regular fluctuations of domestic demand and supply. It seems that a critical shortage signifies a degree of acuteness.

With this definition as the standard, India’s export ban on cotton seems inconsistent with its obligation under Article XI:1 of the GATT 1994 not to impose quantitative restrictions simply because the shortage does not seem to be acute, out of the ordinary, or of decisive importance. The fact that the shortage sought to be fulfilled by the export ban is not critical or severe is confirmed by the steep decline in domestic prices and estimates that 30 per cent of the cotton produced is still lying with the farmers and an equal amount with the local ginners and traders after the ban. This means that there’s very little domestic demand. If there was a critical shortage, there certainly wouldn’t have been surplus lying around in warehouses. Of course, even with this, it would still need to be analyzed whether the ban could be justified under Article XX of the GATT 1994, which contains the general exceptions to the obligations under the GATT 1994. Let’s save that for another day, though.

All said, the export ban seems to have been a hasty and ill-advised step on part of the Indian government. Everyone, including the domestic constituencies and industry, as well as foreign industries and governments opposed the ban, which was promptly revoked by the government almost within a week of its notification. In the light of what WTO law has to say on such bans, let’s hope that India at least fully considers the AB’s guidance on export restrictions, before imposing another. Predictability, stability and certainty, are the catch words : )

Indian Judge at the ICJ: New Developments

According to a report by Dhanajay Mahapatra in the Times of India, Hon. Justice Dalveer Bhandari of the Indian Supreme Court is likely to be nominated by the Government of India for the position of a permanent judge at the ICJ. Readers may recall that we have discussed this issue before (here). In that post, I had said that an Indian judge could fill the vacancy arising out of the retirement of Judge Owada. It now appears that an Indian judge would fill the vacancy arising from the departure of Judge Awn Shawkat Al-Khasawneh, who left in order to take up the position of the Prime Minister of Jordan. India had supported Judge Al-Khasawneh’s in getting elected to the ICJ, and “MEA [India’s Ministry of External Affairs] circles believe that India’s nominee for the judge’s post in ICJ will get support from Jordan along with friendly neighbours like Sri Lanka and Bangaldesh.”

The Times of India article offers a fascinating insight into the Indian practice relating to the nomination of jurists to the ICJ. As the article details, the selection process involved both the Government of India and Indian national group at the Permanent Court of Arbitration (PCA).  To recap, the process of appointment of judges to the ICJ is governed by Article 4 of the ICJ Statute, which provides, inter alia, that:

1. The members of the Court shall be elected by the General Assembly and by the Security Council from a list of persons nominated by the national groups in the Permanent Court of Arbitration, in accordance with the following provisions.

India’s national group in the PCA comprises of retired Judges M. H. Kania and Y. K. Sabharwal, as well as senior advocate B. Sen. It appears that in the end, the list of possible names narrowed down to P. S. Rao, an ex-legal advisor in the Indian Ministry of External Affairs and currently an arbitrator in a dispute between India and Bangladesh at the PCA, and Justice Dalveer Bhandari. P. S. Rao’s name had been proposed by the Prime Minister’s Office to the national group. Initially, two of the three members of the PCA’s India national group were in favour of the nomination of P. S. Rao, however, after two months of deliberations, the national group chose to settle on Justice Dalveer Bhandari because of his “pro-poor and pro-social equity judicial disposition“.

Needless to say, this is great news. Its been over 20 years since India had a permanent judge on the ICJ (Justice R. S. Pathak, the last Indian permanent judge, retired in 1991). Justice Dalveer Bhandari is currently the third seniormost judge at the Supreme Court and is due to retire on 30 September 2012. As Justice bhandari’s profile indicates, apart from his work at the Supreme Court, he has an LL.M. from Northwestern University, Chicago, and has attended several international law conferences and events. He is also the President of the India International Law Foundation. Personally, I’ve had the opportunity to meet Justice Bhandari a couple of times during his visits to National Law University, Jodhpur, and I’ve always been impressed by his knowledge of the international legal order and interest in international developments. 

Needless to say, these developments also offer an opportunity to reflect upon the Indian practice and procedure for nomination to the ICJ. For a critical perspective on Justice  Bhandari’s appointment, I urge you to see this comment by “C. I. Singh” on my previous post, arguing that someone with direct experience in international law and international dispute settlement, like P. S. Rao, would have been better suited for the position. Whereas the commentor seems to make a reasonable point with regards to P. S. Rao’s experience, I disagree in principle when he or she states that P.S. Rao “would have been the right candidate as he is far more qualified to go up against other ICJ judges and protect India’s interests.” This, in itself, should not be a criteria for nomination to the ICJ: the position of permanent judge at the ICJ should be above and beyond protecting national interests, and it’s not about going up “against” other ICJ judges.   

That internal debate aside, ILCurry certainly hopes that we get to see an Indian jurist at the ICJ soon!

Breaking News: PCA stays construction of Kishanganga power project?

This just in: contrary to previous reports (as previously noted on ILCurry here), some reports that appeared today in Pakistani news-media (Associated Press of Pakistan, The Express Tribune, The Dawn) suggest that the PCA has issued an interim order restraining India from proceeding with the construction of the Kishanganga power project.

Frankly, I am thoroughly confused as the PCA website doesn’t provide a copy of the interim order, or a relevant press release. I hope things will get a little clearer in the days to come and will keep you posted on the latest. In the meanwhile, here is what the Associated Press of Pakistan reports on the PCA’s ruling:

The Court of Arbitration unanimously ruled that:
1)    India shall not proceed with the construction of any permanent works on or above the Kishanganga/Neelum River bed at the Gurez site that may inhibit the restoration of the flow of the river to its natural channel;
2)    Pakistan and India shall arrange for periodic joint inspections of the Dam site at Gurez in order to monitor the implementation of the Court’s Order;
Pakistan had submitted an application for interim measures to the Court of Arbitration.
In its application, Pakistan had sought:
a)    A stop work Order;
b)    An Order that any steps India has taken or may take in respect of the KHEP (Kishanganga Hydro Electric Project) are taken at its own risk without prejudice to the possibility that the Court may order that the works may not be continued, be modified or dismantled;
c)    That India be Ordered to inform the Court and Pakistan of any imminent and actual developments on the Kishanganga Dam that may adversely affect the restoring of the status quo ante or that may jeopardize Pakistan’s rights and interests under the Treaty;
d)    Any further relief the Court considered necessary.

Regarding Pakistan’s legal representation, the APP report notes that the Special Assistant to the Prime Minister of Pakistan on Water Resources and Agriculture along with legal experts from Pakistan and abroad “prepared a tremendous case“. Compare this to the description of the Special Assistant to the Prime Minister that appeared a few weeks ago in Pakistani news media labeling him as the “villain of the piece“:

The villain of the piece appears to be the special assistant to the prime minister, Kamala Majidullah, who has been leading the legal team pleading our case. The competence of Majidullah for this task has been questioned in the past by experts and researchers who have had something to say about the environmental impact of the Kishanganga dam on our own Neelum Valley project. The COA raised the highly pertinent point to Majidullah as to why he did not raise objections to Kishanganga when he had the opportunity to do so back in January this year – to which there was no satisfactory reply. In other words, for lack of a little fast footwork, Pakistan had missed the window of opportunity to register an objection to an Indian project that is clearly to its detriment. The COA has questioned why Pakistan failed to register objections in January but was putting it forward now.

Whatever be the truth of the matter, and the content of the PCA’s interim order, two things are clear:

(i) Considering the contradictory reports both with regard to the actual interim order and the role of the Special Assistant within the span of a month, the news media seems to be thoroughly confused and does not appear to have conducted a thorough unbiased factual check (unbiased at least with regard to the role of the Special Assistant) before publishing reports on an issue which, at the very least, is highly contentious, and quite sensitive keeping in mind the relations between India and Pakistan. Such reporting certainly does not go a long way in promoting a better, and unbiased, understanding of the issues between the two countries.

(ii) The contradictory reports serve as an example and reminder of the need for greater transparency in international arbitration. The Kishanganga arbitration is completely public (i.e. between two states, as opposed to a mixed arbitration like investor-state) and is of enormous importance to the people of the affected region, if not the entire population of both the countries and peace and security in South Asia. As such, in my opinion, there is no reason whatsoever for such opacity in the actual proceedings. Such information vacuum only provides space for irresponsible, biased, and inflammatory speculation to thrive. In such times, I think both India and Pakistan can do without that.

Update (27 September 2011): The Interim Order of September 23 is now available on the PCA website here. To settle the tug-of-war between the Pakistani and Indian media, in short, the Tribunal has issued some interim measures – “albeit not in as far-reaching a form as requested by Pakistan” – (para.136) to “avoid prejudice to the final solution” to the dispute as may be prescribed by the final award (Id.). Whereas this may help clear the fog a little, a cursory glance over the 50-page-Order reveals that there are many other interesting points and issues. A summary of the Interim Order shall follow shortly. Thank you Parties (and the PCA) for publishing the Order!

Prime Minister Singh’s Dhaka Visit

Here are some important developments from Indian Prime Minister Manmohan Singh’s recent visit to Bangladesh:

  • Exchange of land between India and Bangladesh:

India and Bangladesh signed an agreement on the exchange of land in adverse possession and enclaves. The agreement is in the form of a Protocol to the 1974 treaty between India and Bangladesh on the demarcation of land boundary, and forms an “integral part” of the 1974 Agreement (Art. 1 of the Protocol). The full text of the Protocol is available here.

A news report notes:

India and Bangladesh inked a historic pact on Tuesday to exchange 162 enclaves, resolving a 64-year-old boundary demarcation problem.

The breakthrough was made following discussions on the 162 enclaves (51 in India and 111 in Bangladesh) between Singh and his Dhaka counterpart Sheikh Hasina. Enclaves are defined as pockets of a country’s territory surrounded by the other’s.

They have been a bone of contention between successive regimes in India and Bangladesh and were created centuries ago when local kings in undivided Bengal and Assam exchanged pieces of land while gambling or playing chess.

The Indian enclaves in Bangladesh are located in four districts – Panchagarh, Lalmonirhat, Kurigram and Nilphamari. All of Bangladesh’s enclaves lie in West Bengal’s Cooch Behar district. The agreement enables Bangladesh to retain the Dahagram and Angarpota enclaves.

ALMOST 3,000 acres of Bangladesh’s land lies in India and India has around 3,500 acres inside Bangladesh.

The pact signed by Singh allows residents of an Indian enclave in Bangladesh to seek local citizenship once the area becomes a part of Bangladesh. Such inhabitants also have the right to return to their original country from which they will be allotted land.

  • Duty free import of 61 items from Bangladesh:

A report in The Hindu notes:

Prime Minister Manmohan Singh has announced duty-free import of 61 items from Bangladesh that were barred from entering India.

A majority of these items – 46 to be precise, relate to textiles, particularly readymade garments.

 

  • Water dispute not resolved

On the other hand, an agreement on sharing of the Teesta river water failed to materialize, apparently because of the opposition of the Chief Minister of the Indian state of West Bengal, which borders Bangladesh and was to be most affected by such an agreement (report here).

 

Sovereign Immunity Not Absolute: Supreme Court of India

Just a short post to note a judgment issued by the Supreme Court of India (reported in today’s Hindu here) on the issue of sovereign immunity in India.

The facts:

In the instant case, Ethiopian Airlines was aggrieved by a National Consumer Disputes Redressal Commission order holding that a dispute against it was maintainable and asking the Maharashtra State Commission to decide the issue afresh on its merits.

Complainant Ganesh Narain Saboo, who had booked a consignment with the airline, moved the State Commission, contending that gross delay in delivery at Dar es Salaam, Tanzania, led to deterioration of the goods.

The judgment:

Writing the judgment, Justice Bhandari rejected the contention that a foreign state or its instrumentality could not be proceeded against under the Consumer Protection Act for deficiency in service without obtaining prior permission from the Central government.

The Bench also did not accept the plea that a foreign state or its instrumentality could legitimately claim sovereign immunity from being proceeded against under the Act in a civil claim.

and

Countries which participate in trade, commerce and business with different countries ought to be subjected to normal rules of the market. If state-owned entities operate with impunity, “the rule of law would be degraded and international trade, commerce and business will come to a grinding halt,” said a Bench of Justices Dalveer Bhandari, Mukundakam Sharma and Anil R. Dave.

On international law:

“That Ethiopian Airlines was not entitled to sovereign immunity with respect to a commercial transaction is also consonant with the holdings of other countries’ courts and with the growing international law principle of restrictive immunity,” the Bench said.

“On a careful analysis of the American, English and Indian cases, it is abundantly clear that Ethiopian Airlines must be held accountable for the contractual and commercial activities and obligations that it undertakes in India”, the Bench said…

Readers may be interested in a related recent development in Hong Kong, where the Court of Final Appeal (CFA), in Democratic Republic of the Congo v FG Hemisphere Associates LLC, ruled that foreign states enjoy absolute immunity from jurisdiction of Hong Kong courts, and there is no exception even in cases the activity and assets are of a commercial nature. (A Fulbright and Jaworski publication on the case here.)

[Apologies for not providing a direct link to the judgment, I am currently traveling with minimal access to the Internet and hope to return to this once I get back to base.]

India to Reject Investment Treaty Arbitration Provision in FTA with EU?

A recent news report notes:

Despite a demand by the European Union (EU), India is unlikely to allow a clause in a proposed trade pact with the bloc that permits an overseas investor to sue a host country at an international dispute settlement agency.

India has rejected the EU’s demand on the contentious issue, as a result of which negotiations on the investment chapter of the pact have not moved forward….

I have a few thoughts on this development (as well as the news report):

1. Although several Indian BITs and investment chapters in FTAs contains investor-state dispute settlement (ISDS) provisions, India is not a a party to the ICSID Convention, and has not been an active respondent investment treaty disputes. This is despite India having several BITs with European nations (the UK and the Netherlands, most notably) with ISDS provisions. In light of this, the Indian government’s stand only suggests abundant caution on its part.

2. In April 2011, the Gillard government of Australia issued a trade policy statement, in which it said that it will discontinue the practice of including ISDS provisions in bilateral investment treaties (an ASIL Insight on this by Jurgen Kurtz here). Needless to say, India’s recent stance provides fodder to the opponents of the investment treaty arbitration (ITA) system. Indeed, to the extent that the ITA system remains a public system based on the foundation of state consent, such developments are quite disconcerting for its future by only adding to the growing “backlash.” I wonder though if Australia’s statement, as well as the Indian stance are in any way linked. Did one inspire the other? Or, at least, made India think again.

3. Continuing on from the last point, it would be very nice for the Indian government to actually follow its Australian counterpart’s steps and issue a formal statement that outlines its stance on ITA and provides reasons. As the report referenced above notes, when the Indian commerce secretary was contacted for comments on the matter, he declined to comment and said that “[a]s a matter of principle, India does not negotiate through the media.” Fair enough. Nevertheless, some transparency and a reasoned explanation would certainly be more helpful and will only add to the certainty.

4. As far as the Indian government’s position is concerned, it should only be too mindful of the debate surrounding MFN clauses in investment agreements, which have often been used to expand the scope of dispute settlement provisions in investment agreements based on more favourable provisions in agreements signed with third states. Indeed, as Professor Brigitte Stern noted in her concurring and dissenting opinion, arguing against the majority’s extension of MFN clauses to ISDS provisions, in the recent award of Impregilo v. Argentina, applying MFN clauses to ISDS provisions would theoretically permit the importation of an ICSID (or ITA) clause into a treaty that does not provide for international arbitration at all (Professor Stern’s concurring and dissenting opinion here; a concise Kluwer blog post on the issue here). As such, if India truly wants to reject ITA in all its forms, it should include an express exception in the MFN provision noting that it excludes dispute settlement from the scope of MFN treatment.

5. Finally, I could not help but chuckle at the news report referred to earlier when it noted that “…. customary international law requires foreign investors to sue governments in domestic courts for any claims, or at the World Trade Organization dispute panel ….” Come on now, the WTO definitely does not allow private investors to bring claims against states. A 1L should (hopefully!) be able to tell you that! Admitted the media does not specialize in international law, nevertheless, it wouldn’t have done any harm to run the story past a lawyer/scholar who specialized in international law (my email address is …., just kidding 🙂 ).

An Introductory Tikka.

Hi folks,

Add another to the countless international law blogs on the Internet. Of course, you’d now expect me to explain how this blog is unique and different from all the others. I am not going to disappoint you, however, my explanation may (or you just may be in no mood to read another paragraph after having proofed that manuscript all of last night). As such, I think a t-shirt slogan I came across in Pushkar (India) perhaps best sums it up: “same same but different.”[1]

Contemporary international legal thought is characterized by diversity and plurality. It is these diverse and different ‘ingredients’ that coalesce into the ‘curry’ that is contemporary international law. Like all curries, this one too is completely different from its constituent ingredients, yet would be incomplete and tasteless without them. Cooking up this curry, however, is no easy task (ask the 195 nation-cooks about it). The key lies in the recipe, which, much like the Coca-Cola recipe, although purportedly explained by many, remains a secret. Indeed, for all you know, all the wrong in the world may be making up the right!

ILCurry attempts to take a closer look at the ingredients and spices that go into making the curry that is international law, in the hope of contributing towards a better understanding of the elusive recipe that gives it its character and flavour.

That’s a ‘process’ explanation of the blog. For others, especially those who believe in the product/PPM distinction[2], however, there is also an end-product explanation. All the metaphorical banter about figuring out the ‘recipe’ of international law aside, ILCurry offers a distinctly Indian take on international law. Before I offend some and impress others, perhaps, a better explanation is in order.

Over the past few years as I have trained to join the college of international lawyers (visible or invisible, take your pick), I have been amazed by the remarkable lack of quality scholarship and discussion in India on issues relating to the contemporary world order.[3] Of course, such an inward looking focus may be explained by the fact that there simply are too many issues to deal with domestically, before even thinking about the international stage. However, it is reasonable to note that several factors (most importantly, demographic and economic) have led to India’s growing prominence at the world stage. Today, India is perhaps in a position where it can take initiatives, be proactive, and play a leader’s role in the spheres of international law and diplomacy. What such a role would envisage, of course, would be the subject of other debates and discussion. Nevertheless, there is both a need, and an opportunity, for India’s increased engagement and involvement at the international stage.

Driven by this belief, one of the main ideas behind ILCurry is to share news, ideas (others, as well as the authors’), scholarship, and events about India and international law.

Although, at this initial stage, the predominant focus of ILCurry is on India related scholarship and news, the blog is only too mindful of the fact that, for geographical and historical reasons at the very least, other South Asian nations form an integral part of such a focus. Thus, at least at this stage where I am running this blog alone, a correct explanation of the focus would be that India forms the umbra, and South Asia the penumbra. That said, I am certainly not over-possessive about the India focus, and welcome guest contributions on South Asia and international law.

As far as typology of blogs goes, for those familiar with the international legal blogosphere, ILCurry is a hybrid between OpinioJuris and ILReporter. The ILCurry menu varies from the authors’ personal opinions, others’ ideas and scholarship, events, to random interesting side-dishes. Of course, as time passes, I hope the blog will develop and be known for its own character.

In peroration, I hope that ILCurry will serve to increase awareness, and generate a democratic discussion, about international law in India and South Asia, as well as India’s involvement in international law and diplomacy.

Welcome to ILCurry, I hope you like today’s menu!

Truly,

Shashank

Paris, July 11, 2011

**

[1] This is indeed a common Asian-English phrase. See here (Arte) and here (Urban Dictionary).

[2] A concept under international trade law. See here (book chapter by Robert Read – free) and here (IISD publication – free).

[3] While browsing the archives of the British Yearbook of International Law, I was pleasantly surprised to find that, until India’s independence, almost every other issue contained a contribution on India. Today, the situation is very different with even the Indian Journal of International Law lacking an incisive and well-defined national focus.