ECONOMIC AND SPIRIT ANALYSIS OF INTERNATIONAL LAW

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This article is authored by Aparna Gupta, a 3^rd year Student of BA LLB(Hons.) at University Law College, Bangalore University, an intern under Legal Vidhiya

Before the dawn of globalisation, the primary purpose of law was to maintain peace and order within a nation. However, due to widespread globalisation and increased number of transactions or intercourses of political, economic and social nature, between the various nations in the world, there arose problem of maintaining peace and order at international level. Thus, a new body of rules was established to maintain peace and order in the world. This body of rules was called international law.

International law is a set of legal rules regulating the intercourse between sovereign nations. Today, international laws regulate almost every exchange between the sovereign states of the world. Whether it is policy regarding arms and ammunitions, space research, border disputes, trade disputes, taxation policies of countries, social welfare of all the people on the planet, international law regulates each one of them. Thus, understanding international law from an economic point of view is necessary.

Is international law a true law?

International law is in its spirit a law. But is it a true law?

As per the definition of law given by John Austin, for a rule to be called a law it should consist of 3 essentials – Sovereign, Command and Sanctions.

A close study of international law tells us that there is no sovereign to the whole world. All the countries are equal, there is no country above any other country. Similarly, the international laws do not even have sanctions. Say an international law is violated, there are no sanctions. Of course, there are effects but the law itself does not have sanctions. It is due to this reason that international law is not binding upon all the countries. Thus, international law seems to be a weak law.

However, according to the views of Prof. Oppenheim international law is a true law in its spirit. It has been recognised as a law by the States as binding and while breaking the rules of international law, the States try to justify their action rather than denying the law itself. Frequent violation of international law is no reason to deny it as a law. In the present times, international law has also overcome its lacuna of not having sanctions. Now, with UN Security Council the violating states are imposed with sanctions. Therefore, international law is a true law.

Economic analysis of international law

Economic analysis of something means a Cost – Benefit analysis i.e., looking into the gains or losses from a certain thing. Economic analysis of law means to analyse the effect or desirability of that law. The fruitful fusion of law and economics and the vision gained from international law and theories of international relations provides that the merger of law, international relations and economics is a natural extension for an interdisciplinary research agenda that analyses international cooperation.

Transaction Cost involved in international agreements

Transaction costs are those costs that are incurred during a transaction between two or more entities. It includes cost of making offer, sending notice of acceptance, drafting of a contract, registration of those documents and every other cost incurred to make that agreement and to enforce it thereof.

On an international level, the entities to the agreements are Governments of various states, Multinational Corporations, or other International Organisations. The transaction costs of such agreements are huge as the financial stability, technology, dynamic environment, level of risk is uncertain and there is a problem of coordinating collective action. So, the states through their practice draft contracts that are flexible to new additions or removal of clauses as and when necessary. It is unnecessary to incur transaction costs every time for an agreement. Therefore, countries by what is called ‘State Practice’ form such agreements or contracts that can be altered as the need be. This reduces the transaction cost incurred. The dynamic nature of such contracts helps to instil the spirit of cooperation.

There are two main types of government structures of international cooperation that provide for dispute settlement mechanism. In Exogenous Structure, the disputes regarding transaction costs that arise during the course of relationship between two international entities is settled by a third party. The formal structure enables better cooperation and a sort of binding on the parties. In Endogenous Structure, such disputes are settled through the contract itself without any intervention by a third party. It is more informal when compared to Exogenous Structure and is based on mutual understanding and amicability of the countries.

International law maintains world peace and order:

With various Peace Treaties like UN Charter, Paris Peace Treaty (1947), the Universal Declaration of Human Rights (1948), Vienna Convention on Diplomatic Relations (1961), International Covenant on Civil and Political Rights (1966), etc., international law has tried to uphold peace and order amongst the nations and have avoided another world war situation until now. Although there have been some disruptions to the world order like the Taliban issue in Afghanistan, the Russia – Ukraine war, recent attack on Iraqian Airport, etc., the UN has been trying to reinforce the law and bring in peace and order and settlement of disputes.

Consider the Anglo-Norwegian Fisheries Case[1], there was a declaration by Norwegian government stating that only Norwegian national could do fishery in the exclusive zone. In multiple instances British nationals were detained for fishing in that exclusive economic zone. After many attempts to negotiate the same, the issue was referred to ICJ. Before the Court, UK argued that the10-mile excusive zone was not in conformity with the international law. It was observed by the ICJ that many countries had set up their own exclusive zones of different limits and thus, Norway’s 10-mile exclusive zone was not in contradiction with the international law.

In another Lotus case[2], a French mail steamer collided with a Turkish Collier and caused deaths of 8 Turkish nationals. The French Officer of the Steamer was immediately tried and convicted by the Turkish laws. France challenged that decision of Turkey and the issue was referred to Permanent Court of International Justice. France claimed that as per the customary international law, the crimes committed on high seas are not under the jurisdiction of the States and thus the act of Turkey was unqualified. The Permanent Court held that although the states allow for no action on agents of other states, it does not do it as an obligation. There is no such obligation on countries to not try foreign agents. Thus, the act of Turkey was upheld.

Helps to protect our environment

International law provides thorough mechanisms of environment protection to all the signatories all over the world. In multiple conventions like Stockholm Declaration 1972, Rio Declaration 1992, Geneva Convention on Long-range transboundary Air Pollution 1979, etc. the member countries have developed an international law to fight global environment issues like global warming, Ozone depletion, Air pollution, conservation of biodiversity etc. all of which ultimately help us to sustain ourselves.

In the Trail Smelter Case[3], a smelter set up by a Canadian company was causing air pollution and also polluting water of Columbia – British valley in USA. The countries tried to come to a settlement through arbitration twice but failed, and the matter was referred to International Joint Commission by the US and Canada, which allowed for a compensation of $3,50,000 to US. Despite this, the smelter continued to cause such pollution. The Tribunal held that US should be given $78000 as compensation by Canada for the damage caused between 1932 and 1935. It also fixed maximum emissions of sulphur dioxide that the company could emit and provided for monthly reports of the same. Thus, the problems of environmental damage are well-handled by international law.

Helps in trade regulation and settlement of disputes

International laws provide the framework for protection of Industrial Property through various IPR conventions. The role of WTO and World Bank to business is as clear as day to us. Without these organisations, globalisation and free trade would be a far-fetched dream. The world today is one global economy because of trade regulations. A person in India can use goods manufactured in US, because of international trade. The dispute settlement board, International Court of Justice and other bodies help to settle the disputes amicably.

(See https://legalvidhiya.com/international-law-and-its-importance-to-businesses/ for more details about how international helps businesses)

Social Policies in International Law

Social policies include the policies that protect social rights of the people like labour laws, protection of family, protection of children and providing them education, eradicating poverty, recognising rights of women and assisting women who need assistance, providing proper health care facilities and so on. The Universal Declaration of Human Rights, 1948 champions the cause of social and economic rights of humans all over the world. It recognises the human rights of Social Security, Right to own property, Employment Rights, educational Rights.
The International Covenant on Economic, Social and Cultural Rights guarantees the Right to Self-Determination, Right to just and favourable conditions of work, The Right to adequate Standard of living which includes adequate food, shelter and clothing; Right to Freedom from Hunger, Right to Education, Right to highest attainable standard of physical and mental health including the right to healthcare and many other rights that help in enjoying freedom and justice at all phases of life.

When it comes to children, the United Nations International Children’s Emergency Fund helps to provide help and to protect children all over the world. The UNICEF has successfully administered pentavalent vaccines to 65 million children and has helped 4 million children to overcome severe acute malnutrition. Even Convention on the Rights of the Child, 1989 embodies various rights like right against discrimination, right to education, care and protection, right to life etc. of the children and work towards providing a healthy environment for overall welfare of the children.

International law and India

India became an open economy only in 1991 after accepting loan from the World Bank. The loan received helped to stabilise the financial situation of country. Due to opening of economy, the consumers started getting better quality foreign products and producers could now avail the technical assistance from foreign countries. The free trade policy of WTO helped to increase our exports by leaps and bounds. Today, India is a major exporter of human resources. Many companies want to set up factories for the availability of cheap and skilled labourers. India is the Fastest Growing Economy today with a growth rate of 6.1% as declared by IMF.

As part of numerous treaties and conventions, India has upheld its core values of peace, human rights and welfare. India is a signatory to Stockholm Declaration and it brought the Environment Protection Act, 1986 into force in India. Many biodiversity conservation laws have also been enacted in view of these treaties and conventions. In the social field, the policy of equal pay for equal work to women, maternity leaves for the benefit of women etc. have been developed keeping in mind the treaties and conventions. International laws have helped India shine throughout the globe with this culture, business and growth.

Conclusion

To conclude our analysis, let us recall the costs of international laws. The costs or the limitations include the huge transaction costs, the non-bindingness or binding only on the signatories, the Most Favoured Nation policy creates differences between countries. International laws have failed in many instances like Taliban oppression on Afghanistan, Russia-Ukraine War, Israel-Palestine conflict and so on. The world trembles in fear of another world war, even though international laws exist.

If we look at the benefits of international law, we see that they have had a very positive impact on the standard of life of the people. It has laws regulating trade, employment, international cooperation, environment protection, and every possible area of law. The UN is the biggest international body with 193 member countries, all bound by the guidelines and recommendations made by UN. UN helps in overcoming all the lacunae of international law.
Thus, we can now conclude that the benefits or positive effects derived from international laws are more than the costs or negatives. International law makes world more orderly and peaceful.

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