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Trump and the TPP: un-writing history?

In November 2009, President Obama formally announced the intention of the US to participate in the negotiations of the Trans-Pacific Partnership Agreement (TPP), a free-trade agreement tracing its origins to a 2005 pact between New Zealand, Brunei, Chile and Singapore. Negotiations were completed six years later on 5 October 2015. On 4 February 2016, 12 Pacific-rim countries (New Zealand, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, the US and Vietnam) signed the TPP. The original signatories of the TPP represent approximately 36% of the world’s GDP. The TPP’s objectives included:

  • Promoting high levels of environmental protection.
  • Improving working conditions and living standards.
  • Recognising the importance of cultural identity and diversity among and within the parties.

On midday Friday, 20 January 2017, President Trump took the oath of office. By Monday afternoon, 23 January 2017, President Trump had directed the US Trade Representative to withdraw the US’ signature from the TPP. In a matter of days, President Trump unravelled years of negotiations. This post considers the nature of that withdrawal, the principles of public international law that enabled it to occur, and what these mean for the future of the TPP.

Signing and “un-signing” the TPP

The TPP contains a “waterfall” entry into force provision, which is primarily dependent on all of the original signatories notifying the depository (New Zealand) of “the completion of [each state’s] applicable legal procedures”. As is usual with international treaties, under the TPP, the act of notifying constitutes that state’s ratification. Under public international law, specifically article 2(1)(b) of the Vienna Convention on the Law of Treaties (VCLT), ratification is “the international act … whereby a State establishes on the international plane its consent to be bound by a treaty”.

In his Presidential Memorandum regarding Withdrawal of the United States from the [TPP] Negotiations and Agreement, President Trump directed the US Trade Representative:

“… to provide written notification to the Parties and to the Depository of the TPP … that the United States withdraws as a signatory of the TPP and withdraws from the TPP negotiating process”.

The acting US Trade Representative notified the depository on 30 January 2017, stating unequivocally that “the United States does not intend to become a party to the [TPP]” and confirming that, in its view, the United States “has no legal obligations arising from signature on February 4, 2016”.

Technically, the US has not withdrawn its signature. Rather, it has stated that its signature is not legally binding and that it has no intention of ratifying the TPP in the future. Pursuant to article 18 of the VCLT, once a treaty is signed, signatories must refrain from doing anything that may be a breach of the object and purpose of that treaty. Interestingly, a failure to ratify does not constitute a breach. However, in at least one instance, mere signature of a treaty has been sufficient to bind that state to the obligations of that treaty (for example, in Cameroon v Nigeria, the International Court of Justice held that the Nigerian head of state signing an agreement (which had not been ratified following the domestic process that was then in force) was a valid declaration of consent). That case can be distinguished here on the grounds that the US has now clearly communicated its intention not to ratify the TPP. By contrast, in the dispute between Cameroon and Nigeria, Nigeria had not subsequently made it known of its intention not to be bound by (or comply with) the relevant agreement.

President Trump’s chosen course is in line with past practice of the US, which has sought to “un-sign” treaties through similarly worded letters (such as the Bush administration’s letter to “unsign” the Rome Statute). It has long been the American view that a clear communication that it is not bound by a treaty is required in order to sidestep the article 18 conundrum (although the US is not a party to the VCLT, the VCLT is generally accepted as part of customary international law, which is therefore binding on the US).

The action of “un-signing” is distinct from withdrawing from a treaty post-ratification (also known as denunciation) and withdrawing from a treaty following a breach by another party (also known as termination). Both of those options are legally less straightforward and may not be effective. For example, recent decisions have not recognised a state’s denunciation of a treaty for one reason or another. In Murphy v Ecuador, the tribunal held that a “withdrawal, termination or amendment of the BIT” was governed, first, by the provisions of the bilateral investment treaty (BIT) itself and, secondly, by reference to public international law (including the VCLT). On the facts before it, neither the relevant BIT nor the International Centre for the Settlement of Investment Disputes (ICSID) Convention permitted Ecuador to unilaterally withdraw with immediate effect and the relevant jurisdictional objection therefore failed. More recently, a tribunal has upheld an ICSID claim against Venezuela, notwithstanding Venezuela’s denunciation of the ICSID Convention.

(Interestingly, in the investment-treaty context, although high-profile, a state’s denunciation of a treaty remains a rare event. A study carried out by the Organisation for Economic Co-operation and Development (OECD) found that only 1% of 1,896 treaties in force as at September 2014 were denounced unilaterally.)

What next for the TPP?

Absent a complete about-turn by the US, the TPP threatens to become an historical relic. It may have legal effect where not all the original signatories have ratified, provided that “at least six of the original signatories, which together account for at least 85% of the combined [GDP] of the original signatories in 2013” have ratified. In 2013, the combined GDP of the original signatories was approximately US $27,600 billion, 60% of which was attributable to the US. In other words, the US effectively retained a right of veto over the TPP. Without the US, the TPP can never come into force. Even if China were to accede to the TPP, it is not an original signatory and its GDP does not “count” for the purposes of the TPP’s entry into force provision.

It would be misleading to suggest that the TPP is of no relevance. Amongst other things, it provides an unequivocal statement, as at February 2016, of the original signatories’ attitudes towards the various matters addressed therein, including investment, cross-border trade, national treatment and market access to goods. The ICJ has held that an unratified treaty could be used to ascertain the parties’ intentions at the time of the signature. In the context of a dispute concerning legitimate expectations (for example), creative lawyers could alight upon this principle to either corroborate or undermine an investor’s subjective expectations at the time of an investment.

Moreover, there exists an academic debate as to the status of a treaty that has not yet entered into force, with some commentators considering that an unratified treaty could amount to state practice and therefore form part of customary international law. That debate is easily overlooked when considering the state of customary international law at any point in time. With respect to the TPP, such an argument presents a significant challenge on the basis that only 12 countries signed the agreement, with the US having now withdrawn.

Finally, there remains the (arguably remote) possibility that the TPP may be revived in the future. A future US administration may take a different view to President Trump and proceed to ratify the agreement. The TPP does envisage a situation where it remains dormant for a time prior to coming into force, at article 30.5(3). However, it is silent on whether a state could change its mind and ratify once it has expressed its intention not to be bound.

 

The author would like to thank Sandipan De (Trainee Solicitor, Allen & Overy LLP) for his contribution to this blog.

Allen & Overy Lauren Lindsay

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