Perspectives

*Muhammad Siddique Ali Pirzada

I. Introduction

The nations comprising the African Union (AU) jointly affirmed their endorsement for the Protocol on Investment (the Protocol), an integral part of the broader agreement that underpins the African Continental Free Trade Area (AfCFTA). The Protocol marks a significant shift in Africa’s investment landscape by terminating intra-African BITs and adopting a state-centric framework that fundamentally reshapes the continent’s approach to investment regulation. The Protocol, as of January 2023, has been made publicly accessible for examination and review. As prescribed in Article 48, the Protocol is presently available for ratification, and accession by the parties to the AfCFTA. As per Article 23 (2), “The Protocols on Investment, Intellectual Property Rights, Competition Policy and any other Instrument within the scope of this Agreement deemed necessary, shall enter into force thirty (30) days after the deposit of the twenty second (22nd) instrument of ratification.” Though the specific status of ratification is not publicly disclosed, it is apparent that the requisite procedures are diligently progressing.

This piece endeavors to elucidate three pivotal ramifications that are likely to arise from the imminent commencement of the Protocol: (a) the abrogation of the majority of intra-African bilateral investment treaties (BITs); (b) diminished protections for investors and the imposition of new duties on them, alongside an effort to establish extraterritorial liability for their actions; and (c) the strong likelihood that the Protocol’s stance on dispute resolution will exclude provisions for Investor-State Dispute Settlement (ISDS).

Finally, this piece adopts a more panoramic view, highlighting two primary, overarching inferences from this unfolding development. First, the Protocol’s tangible influence is likely to be limited, given the modest scale of intra-African foreign direct investment (FDI) relative to the far greater influx of extra-African FDI into the continent, which also aligns with the fact that most ISDS claims against African states to date have been initiated by non-African investors. Second, while protections under BITs for AU investors within AU member states are poised to erode, the safeguards granted to non-African investors in these same jurisdictions will remain largely intact.

II. Reevaluating Investor Protections: The Shift in Existing Intra-African Investment Agreements

Presently, African states have entered into a total of 173 intra-African BITs, excluding those previously abrogated or rendered void. Of this corpus, 145 BITs are between AU member states, with approximately a quarter still in effect. In accordance with the provisions of Article 49(1) of the Protocol, all BITs executed between the Parties to the Protocol are unequivocally destined for termination within a period of five years from the Protocol’s promulgation. Consequently, the aforementioned 145 BITs are scheduled for termination within this stipulated five-year period following the Protocol’s effective date. Furthermore, Agreement for the Termination of All Intra-EU Bilateral Investment Treaties serves as a significant parallel to the approach reflected in Article 49(1) of the Protocol, which aligns with the collective strategy adopted by the European Union. 

Article 49(1) of the Protocol decrees that, following the cessation of existing BITs, “their survival clauses shall also be extinguished.” This stipulation fundamentally subverts the very essence of sunset clauses, which are traditionally intended to preserve a modicum of stability by ensuring the continued applicability of certain provisions for a defined period post-termination. Such a stipulation is poised to provoke intense debate regarding the extent to which investors have secured inviolable entitlements under international law and whether sovereign nations possess the prerogative to unilaterally rescind these rights once bestowed.

Article 49(3) of the Protocol further enjoins the signatories to exert their utmost endeavors in scrutinizing and amending the regional investment accords forged by the African Regional Economic Communities (RECs) — a body of 12 treaties incorporating investment provisions, including those of RECs recognized by the AU — with the overarching goal of securing seamless “alignment” with the Protocol within a timeframe of five to ten years from its inception.

While certain RECs incorporate provisions that echo those in the Protocol, they appear to fall short of embracing its transformative ethos. The Protocol’s ambiguously worded mandate regarding RECs raises concerns about the potential dilution of investor protections across the continent, fostering uncertainty and indeterminacy, as it provides little clarity on what precisely constitutes “alignment.”

III. The Investment Protocol: Erosion of Investor Protections

Unpacking the Carve-Outs

Article 3(3) of the Protocol meticulously delineates a series of exclusions from its ambit, which include: (a) government procurement activities; (b) subsidies or grants provided by State Parties; (c) fiscal measures relating to taxation; and (d) preferential treatment extended by development finance institutions. Additionally, Article 3(3) unequivocally precludes from the Protocol’s purview investments undertaken by State-Owned Enterprises, alongside those “derived from capital or assets of illegal origin.” Though other International Investment Agreements (IIAs) may also exclude certain areas, the  Protocol’s treatment of investments with an “illegal origin” is especially unconventional. Notably, the phrase “illegal origin” remains undefined within the Protocol itself, rendering it ambiguous and subject to a wide range of interpretations. This lack of clarity opens the door to a potentially sweeping and unpredictable scope of exclusion.

Fair and Equitable Treatment Exclusion

In redefining investor protections, Article 17 of the Protocol substitutes the former concept of Fair and Equitable Treatment (FET) with the more circumscribed and judiciously defined standard of  Administrative and Judicial Treatment. Through this shift, signatories are obligated to guarantee that investors and their investments are not subjected to any form of treatment amounting to a flagrant miscarriage of justice, a manifest violation of due process, arbitrary caprice, or discriminatory animus on the grounds of gender, race, religion, or other similarly protected characteristics. 

Moreover, Article 17(2) unequivocally clarifies that such treatment shall not be construed as synonymous with the former standard of fair and equitable treatment, but rather as a minimum threshold of protection — a safeguard against the egregious maltreatment of investors within both administrative and judicial domains. This recalibration represents a deliberate shift towards a more measured approach to investor protection, emphasizing procedural rectitude and the avoidance of unjust, arbitrary, or unduly prejudicial actions in state-administered legal processes.

This articulation signifies a purposeful divergence from the traditional and expansive contours of FET, as exemplified by Article 2 of the 2006 Egypt-Ethiopia BIT, which unambiguously asserts that capital allocations “shall at all times be accorded fair and equitable treatment” while refraining from imposing any constraints on the breadth of FET’s application. In contrast, the Protocol explicitly invokes the minimum standard of treatment (MST). Notably, Article 17(2) categorically ostracizes FET from its ambit. The pragmatic consequences of this shift may bear a striking resemblance to the way arbitral tribunals have construed FET clauses in treaties that unequivocally tie them to the MST. This is particularly evident in the case of Article 14.6 of the USMCA, where the interpretations of FET provisions have often aligned with the MST framework.

A Hollow Guarantee

Articles 12 to 16 of the Protocol, which enshrine the principles of National Treatment (NT) and Most-Favored Nation (MFN), afford substantially less robust protections than conventional NT and MFN provisions. A case in point is Article 4 of the 2009 Burundi-Kenya BIT. The protections offered by Article 12 and 14 of the Protocol are confined to the post-establishment phase of investments, explicitly excluding the pre-establishment stage from their scope. In Article 12(2), a comprehensive set of factors is outlined to assess “like circumstances,” purposefully shifting the focus from the investor’s interests and the impact on the investment to broader societal concerns and the regulatory framework.

Article 13 of the Protocol provides several exceptions to the NT provision, including measures for public interest, national development, and support for disadvantaged groups or regions. It also allows states to adopt NT exceptions for sectors or regions of strategic importance—though these exceptions are vaguely defined—granting states broad discretion to implement such measures without prior notice to investors.

Moreover, the MFN provision enshrined in Article 14(3) of the Protocol narrows the scope of “treatment” by expressly excluding dispute resolution mechanisms, provisions governing admissibility and jurisdiction, as well as substantive commitments embedded in other IIAs. This restriction significantly curtails the safeguard against discriminatory practices for investors from third-party states, diverging from the broader, more traditional formulations of MFN clauses typically found in other IIAs, which customarily encompass these elements with greater breadth and inclusivity.

Compensation Rights – Scarcity of Redress 

Compared to the typical expropriation clauses in most IIAs, such as Article V of the 1997 Egypt-Malawi BIT, the expropriation provisions enshrined in the Protocol establish a notably more stringent and narrowly defined framework. Article 20(2) of the Protocol limits the definition of expropriation by excluding “non-discriminatory regulatory measures . . . aimed at safeguarding legitimate public policy objectives.” This aligns with provisions in recent IIAs, such as Annex 8-A(3) of the 2014 Comprehensive Economic and Trade Agreement (CETA), which similarly exempt regulatory actions from expropriation claims.

Articles 19 and 21 of the Protocol impose unconventional restrictions on compensation for expropriation. Notably, instead of the traditional requirement that compensation be “made without delay“ or “without undue delay” as seen in Article 5(3) of the 2006 Gambia-Morocco BIT, the Protocol replaces this traditional requirement with the more ambiguous phrasing “paid within a reasonable period of time.”

The Protocol also departs from the traditional standard of “prompt, adequate, and effective compensation” as exemplified in Article 6 of the 2009 Mauritius-Tanzania BIT. It conditions compensation on the host state’s domestic laws (Article 19(1)(d)), while also requiring a fair balance between public interest and the rights of affected parties (Article 21(2)), and various other factors come into play, including the investment’s market value, purpose of expropriation, profitability, investor conduct, and duration.

The Case for Limited Security – A Constrained Approach?

In a departure from customary practice, Article 18 of the Protocol notably deviates from established norms by subtly constraining the conventional application of Full Protection and Security (FPS), a time-honored pillar in the lexicon of IIAs. Consider, for instance, Article 4(3) of the 2019 BIT between the Central African Republic and Rwanda explicitly guarantees that investments made by investors from either state shall be accorded “full protection and security” within the territories of the other. However, the Protocol curtails the breadth of protection by restricting it to “physical” security, deliberately omitting the term “full” from its language. In doing so, it narrows the scope of safeguards afforded to investments, deliberately excluding not only legal protections but also any broader interpretations of FPS that might encompass elements beyond the mere physical safeguarding of investments. This shift signifies a deliberate move toward a more limited and restrictive understanding of FPS, contrasting with the traditionally more expansive and inclusive standards.

Moreover, Article 18 of the Protocol introduces an additional layer of limitation by tethering the obligation of physical protection and security to the “capabilities” of the State Party. Specifically, it invokes the “obligation of due diligence” that a State must uphold within its own borders, in alignment with the principles of Customary International Law. In doing so, this provision recalibrates the level of protection afforded to investors, linking it to the host state’s practical capacity. This creates a flexible framework that undermines the traditionally steadfast FPS standard, lowering the threshold of protection that investors might otherwise anticipate and introducing an element of variability based on the state’s resources and capabilities.

Chapter 5 of the Protocol sets out a comprehensive array of investor duties, encompassing adherence to the legal framework of the host state; the upholding of rigorous ethical standards in business conduct, labor practices, human rights, and corporate governance; the safeguarding of environmental integrity and the rights of indigenous communities; the prohibition of corrupt activities and interference in the internal affairs of the host state; and the active promotion of sustainable development. These obligations reflect a commitment not only to legal compliance but also to the ethical, social, and environmental imperatives that underpin responsible investment.

In an innovative extension of investor obligations, Article 47 of the Protocol introduces the concept of extraterritorial liability. It specifies that investors and their investments may be subject to civil actions in their home state’s judicial system for any acts, decisions, or omissions related to their investment in the host state that result in harm, personal injury, or loss of life. This provision represents a pioneering attempt within an IIA to address competence obstacles, such as issues of territoriality and forum non conveniens, among others. While a full examination of its practical ramifications and enforcement complexities is beyond the scope of this discussion, the provision will likely provoke significant opposition from investors who could face such legal actions.

IV. Dispute Settlement in the Investment Protocol: A Shift Away from ISDS

Initially, the signatories to the Protocol aimed to conclude the Annex on dispute settlement within one year of the Protocol’s adoption, as enshrined in Article 46(3). Yet, the Annex remains incomplete to this day. The Draft Annex, spanning Articles 5 to 21, sets forth the framework for Investor-State Dispute Settlement (ISDS). Notably, Article 6 grants investors the flexibility to pursue arbitration under the ICSID Rules, the UNCITRAL Rules, or, intriguingly, “any other arbitration framework or set of rules of their choosing.” This exceptional flexibility allows investors to select the arbitration mechanism that best aligns with their preferences, thereby expanding the range of available dispute resolution options.

The Protocol’s endorsement of traditional ISDS mechanisms starkly contrasts with its broader shift away from established investor protection standards. This adherence to the conventional framework also fails to reflect the growing skepticism within certain African nations—South Africa in particular—toward the continued application of ISDS. This signals a deliberate move towards alternative, more balanced approaches to resolving investment disputes, diverging from the entrenched ISDS model. Given this precedent, one might reasonably expect that the final iteration of the Protocol’s Annex on dispute settlement would notably refrain from incorporating provisions that compel host states to grant prior consent to ISDS mechanisms. Furthermore, it would be surprising if the Annex were to include a standing, unilateral offer permitting investors to unilaterally elect the arbitral rules under which to advance their claims.

V. Conclusion

The Protocol’s reforms, while ambitious, are likely to have a limited impact, predominantly altering protections for intra-African FDI under existing BITs, while leaving safeguards for non-African investors largely intact. In 2022, the bulk of FDI into Africa came from outside the continent, with the Netherlands (USD 109 billion), France (USD 58 billion), and the United States and United Kingdom (USD 46 billion each) leading the charge. South Africa continued to be the primary origin of intra – African FDI totaling (USD 33 billion). Thus, while the Protocol may reshape intra-African investment dynamics, its effect on the broader flow of external FDI—which defines Africa’s investment infrastructure—will remain negligible.

The majority of ISDS disputes lodged against the member states of the AU have predominantly stemmed from investment treaties involving African and non-African counterparts, rather than from intra-African agreements. According to the 2023 UNCTAD Investment Dispute Settlement Navigator, African investors represent a mere fraction—below 10%—of ISDS cases pursued against African nations. Should current trajectories continue, this Protocol appears poised to exert minimal influence on roughly 90% of potential ISDS claims that might emerge post-ratification.

In this context, investors from the AU—particularly those from South Africa—appear to be in the best position to benefit from the limitations imposed by the Protocol. This contrasts sharply with the dissolution of intra-EU BITs, which, despite their termination, left European investors protected under the EU’s robust legal framework. By comparison, while the Protocol curtails protections for AU investors under intra-African BITs, it fails to establish equivalent safeguards to compensate for these losses.

 

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* Mr. Muhammad Siddique Ali Pirzada is a final-year LL.B. (Hons.) candidate at the University of London (Pakistan College of Law – PCL), currently serving as Managing Editor of LEAP, President of the PCL Study Circle Society, and a YIAG member. Additionally, he has competed as an Oralist in the Philip C. Jessup International Law Moot Court Competition. He has authored numerous articles for prestigious global publications and gained work experience at Al Tamimi & Co. (DIFC), Bhandari Naqvi Riaz, Mohsin Tayebaly & Co., and The Supreme Court of Pakistan, focusing upon: International Litigation & Dispute Resolution, Commercial Litigation & Advisory, Constitutional Law and Corporate Governance.

Cover image credit

*Sankari B

I. Introduction

Recently, the World Trade Organization’s (“WTO”) Agreement on Fisheries Subsidies (“AFS”) was adopted during the 12th Ministerial Conference in 2022. Being the first multilateral agreement to achieve the Sustainable Development Goal (“SDG”), AFS was considered a milestone in environmental objectives and ocean sustainability. The AFS primarily deals with eliminating fisheries subsidies to regulate illegal, unreported and unregulated fishing (“IUU Fishing”), which is contained within SDG 14.6. 

Fisheries subsidies are considered to have damaging effects on “trade, environment and sustainable development” according to Chen in Fisheries Subsidies under International Law.  They create competitive disadvantages and restrict market access for non-subsidized fish and fish products. Further, they incentivize overfishing, which has a direct impact on ocean sustainability. The latest data on fisheries subsidies indicate that USD 35.4 billion was spent on fisheries subsidies across the globe, with China, the US, and the Republic of Korea, paying the highest on them. This issue has caught attention since the 2001 Doha Ministerial Conference. It has finally culminated in the AFS, which offers a skeletal framework for removing fisheries subsidies. However, as evident from Article 12, the AFS is still being negotiated, and the current agreement would stand terminated if comprehensive disciplines are not adopted within four years since the AFS entered into force. 

Despite the pernicious nature of fisheries subsidies, developing and least-developed countries (“LDCs”) (collectively, the “Global South”) have raised several concerns ranging from the livelihoods of small-scale fishermen to food security issues in countries, which are heavily reliant on fish for nutrition. While the existing literature on AFS discusses its potential benefits, its impact on indigenous communities and the nature, scope and implications of the agreement, there is a limited understanding of how the Global South shaped (or did not shape) the formulation of the AFS. 

In this context, this perspective seeks to examine the AFS through the Third World Perspectives on International Law (“TWAIL”) and unpack the voices of the Global South in the negotiations and formulation of the AFS. It argues that the AFS significantly suppressed these voices and could have drastic implications on small-scale and artisanal fishing communities in the Global South. 

II. Unpacking TWAIL in the Context of Trade and Environment

BS Chimni, in his Critical Theory and International Economic Law: Third World Approach to International Law (TWAIL ) Perspective, argued how mainstream international economic law perceives international economic law as “ahistorical,” ignoring the relationship between countries arising from colonialism, neo-colonialism and global imperialism. In the same vein,  sustainable development also ignores the intrinsic link between capitalism, imperialism, and nature. The concept can be manipulated by powerful nations and corporations to promote their interests and fails to acknowledge the historical relationship between imperialism and prevalent environmental challenges. Thus, it is argued that neoliberal definitions of international economic law do not ensure sustainability.  

The WTO’s Agreement on Agriculture (“AoA”) illustrates the TWAIL perspective concerning the intersection of trade and environment. The implied promise of agricultural trade liberalization under the AoA is to ensure market access to developing countries and to remove subsidies contributing to the over-exploitation of land through the indiscriminate use of fertilizers and pesticides. However, none of these objectives were  truly achieved with the developed nations (collectively, the “Global North”), which employed liberalization, development, and environmental justice to cement their hegemony. 

First, the AoA led to an increase in food imports, along with a decrease in food production, adversely impacting food security, poverty, development and the environment. Such an increase in imports had a domino effect on the Global South, including a threat to key agricultural sectors crucial for food supply, employment, poverty alleviation and economic development, and environmental damage in developing countries due to chemical-intensive and monocultural modes of agricultural production.

Second, the AoA has institutionalized power imbalances between the Global North and the Global South. It permits past users (the Global North) to maintain export subsidies (subject to minimal reductions) while prohibiting the introduction of new subsidies by developing countries. It has unfairly deprived the Global South of the policy tool to build their agro-export revenue from domestic food production and made the countries therein  increasingly import subsidized goods. 

III. Uncovering the Global South Voice in the AFS Negotiations

During the AFS negotiations, the Global South had a host of concerns that were brought up during the negotiations. First, the Special and Differential Treatment (“SDT”) for the Global South. SDT was especially highlighted in the Hong Kong Ministerial Conference, wherein it stressed the vitality of the fisheries sector for the Global South, especially for poverty alleviation, livelihood, and food security concerns. Small and vulnerable economies have called for an expansive understanding of SDT, including flexibilities for industrial and semi-industrial fishing, length of time to implement the agreement, greater opportunity to consult before any Dispute Settlement Body cases, and technical assistance and capacity building. 

Second, non-actionable subsidies. It was contended that some subsidies that do not adversely impact trade and sustainability (“non-actionable subsidies”) should not be removed, like subsidies involving infrastructural development, the prevention and protection against diseases, scientific research and training, or any other rehabilitative facilities for fishermen. Others include subsidies for conservation and regional development and social security, such as subsidies for natural disasters at sea, subsidies for the off-season, unemployment fees, early retirement funds and subsidies for fishermen’s re-education, re-training and alternative employment assistance.  

Third, the capacity to develop fishing resources. It was argued that the prohibition of measures increasing fishing in a more sustainable way would unduly impede the ability of the Global South to use their fisheries resources for food security, poverty alleviation, and sustainable development. Further, there has been some skepticism regarding the link between subsidies and fisheries depletion, since the evidence has been based on data from the Global North with large-scale industrial fleets.

Fourth, the protection of small and vulnerable coastal states and artisanal fishing. There have been calls to exclude subsidies to artisanal and small-scale fishing from the definition of fisheries subsidies while providing small and vulnerable coastal states with SDT or classifying such activities as non-actionable subsidies.  Small and vulnerable coastal states proposed to exclude subsidies granted to assist their development from the purview of discussion.

Fifth, addressing the harms of non-specific fuel subsidies. There have been contentions surrounding the reduction of non-specific fuel subsidies. It has been argued that fuel subsidies constitute twenty-two percent of the fisheries subsidies provided, and largely cover non-specific fuel subsidies. This obscurity of non-specific fuel subsidies is detrimental to ocean sustainability, because it continues to incentivize unsustainable fishing practices.

Sixth, sufficient transition period. Developing countries like India have also requested a twenty-five-year moratorium imposed on Distant Water Fishing Nations to provide any subsidy for fishing or fishing-related activities beyond their Exclusive Economic Zones (“EEZ”). Further, it was argued that subsidies should not be prohibited for developing nations and LDCs during this period. This would allow the nascent fisheries sectors in these countries to thrive.

Seventh, unequal comparison of subsidies between developed and developing nations. The Global South argued that the comparison of subsidies should be based on “per-fisher subsidy.” Given the larger fishing population in the Global South vis-à-vis the same in the Global North, the per-fisher subsidies are much lower in the Global South vis-à-vis those in the Global North. To illustrate this, in India, the per-fisher subsidy is estimated to be $15 per fisher, while the Global North countries, such as Denmark, provide per-fisher subsidies as high as $75,000. Thus, without considering per-fisher subsidies, the comparison between the Global South and Global North has been unfair. 

IV. Assessing the AFS through a TWAIL Perspective: The Case Study on India’s Fisheries Sector

This section analyzes AFS through a TWAIL perspective, keeping in mind the seven blocks of concern examined in Part III. This analysis is performed with the Indian fisheries sector as the case study. The reason behind contextually analyzing a country is to demonstrate the needs and concerns of one nation distinct from others. This offers a larger critique of the AFS for homogenizing countries, without understanding the unique concerns of the Global South. 

i. Contextual Analysis of India’s Fisheries Sector

Fisheries is a crucial sector for India socio-economically; it contributes 1 percent of India’s Gross Domestic Product and exports INR 46,662.85 worth of crore, while providing food security and securing livelihood for around 3.77 million people. Of the fishing-dependent population, about 67 percent of the families are under the Below the Poverty Line (“BPL”) category, around 16 percent belong to marginalized backgrounds and 48.7 percent are women. Only 25.8 percent of Indian fishing vessels are mechanized, while the rest are non-mechanized or motorized fishing crafts. 

India provides INR 2225 crore approximately towards supporting fisheries as of FY 2019. Fuel subsidies are the most significant support, amounting to 32 percent of the subsidies provided, and are rapidly increasing with a growth rate of 142 percent. The second most key category of subsidies is those promoting deep-sea fishing, mariculture and vessel modernization. The third most crucial type of support is relief from disaster and other social security nets.

Existing studies and accounts demonstrate the flawed structure and distribution of fisheries subsidies in India. Firstly, these subsidies may not truly benefit the most vulnerable fishermen as they predominantly aid the better-off fishermen. Further, there are additional developmental needs (such as safety in the sea) that remain unaddressed through these support programs. The Indian experience with fuel subsidies has demonstrated that they are inefficient in transferring benefits, prone to leakages and manipulated by middlemen, who resell the fuel at higher prices. Secondly, most of the subsidies are focused towards fuel, modern fishing gear, ice plants, and marketing since India is promoting aquaculture. For instance, in Karnataka, of the eighteen subsidies listed in 2018-19, only two were dedicated towards welfare, and thirteen focused on marketing and inland fisheries development and aquaculture. This does not provide any incentive or support for small-scale and vulnerable fishing communities. Thirdly, a study conducted in Southern Karnataka shows that only select fisherfolk receive welfare subsidies on a first-come-first-served basis. Further, many fishers are not aware of the schemes available to them. Thus, the fisheries subsidies in India require reformation. 

ii. TWAIL Critique of AFS and the Implications on India’s Fisheries Sector

This segment presents a TWAIL critique of AFS and analyzes the implications on the Indian fisheries sector, offering recommendations to India and other developing nations and LDCs.

1. The AFS under-regulates subsidies harmful to ocean sustainability. They are used to subsidize vessels’ increased fishing capacity and fishers’ fishing expenses, such as fishing gears, capital costs, and fuel subsidies. These subsidies account for 60 percent of the global fisheries subsidies and are constantly increasing, most of which are provided by the developed countries. India pointed out the lack of recognition of non-specific fuel subsidies. This suggestion was rejected by the majority of the members. 

Recommendation: The AFS negotiations should identify subsidies that are detrimental to achieving ocean sustainability. Article 5 should accordingly contain guidance regarding identifying “harmful” subsidies. 

2. The categories of “developed” and “developing” countries are obsolete. The self-declaratory mechanism to recognize developing status allows some large economies to maintain the footing of developing nations. In the context of fisheries subsidies, this is more problematic. Specifically, China dominates distant-water fishing with large and modernized vessels but continues to enjoy SDT benefits as a developing nation. 

Recommendation: To address over-generalization of developing nations, the self-declaratory mechanism must be transformed. There should be further classification within developing nations, based on fishing fleet size, mechanization or catch capacity to fairly distribute SDT benefits.

3. The de minimis requirement was notified as an explanatory note in December 2023. Reading this requirement along with Article 4.3 of the AFS carries adverse implications for the Global South. The note specified that while the twenty largest subsidy providers would be subject to the strictest scrutiny, LDCs and developing countries with a global share of marine catch not greater than 0.8 percent would be excluded from the prohibition on fisheries subsidies. Countries not within these categories are mandated to demonstrate sustainability as per Article 4.3. This is fallacious because the Global North with large industrial fleets have the capacity and the regulatory regime to show compliance. This would then incentivize them to provide prohibited subsidies to their historically large industrial fleets. In contrast, developing countries like India, which fall under neither of the categories, lack the capacity to engage with onerous requirements and paperwork to demonstrate sustainable fishing and cannot provide the necessary support for their nascent fisheries sectors to grow. 

Recommendation: The requirements of sustainability under Article 4.3 must be defined in a manner that allows for contextual interpretation based on the needs of the Global South. 

4. The twenty-five-year transition period sought was rejected and would have detrimental implications on livelihood and food security. Given the socioeconomic background of Indian fishing communities and food security concerns, there is a pressing need to address these issues before phasing out subsidies. Appallingly, the AFS provides merely two years to transition for the Global South. However, this is not the case in other WTO agreements. For instance, the AoA has a transition period of ten years. Short transition puts the livelihoods of fishing communities and the food security of developing countries like India at risk.

Recommendation: In further negotiations, there must be a strong push for extending the transition period and providing more robust SDT provisions that impose concrete obligations on developed nations.

5. There exists no definition for artisanal and small-scale fishing, which are the most vulnerable groups within the fisheries sector. Without such a definition, the AFS cannot proceed in carving out exceptions for them. The lack of a sufficient transition period coupled with the absence of any exceptions for BPL-fishers would further push them into poverty. Thus, the interests of vulnerable communities in the Global South have been compromised, despite the incessant demands to meet their interests during the negotiations. 

Recommendation: There must be a push for defining and protecting small and vulnerable coastal states and traditional and artisanal fishers. The prohibitions on subsidies must be lifted for these categories.

6. Article 7, which provides for a voluntary funding mechanism for developing countries, is inadequate because it does not obligate developed nations to provide income support or offer technical know-how to develop sustainable fishing practices. Further, the fund excludes other crucial disciplines, including poverty reduction, disaster recovery, alternative employment for fishers and technology transfer. All these requirements were put forth during the negotiations by the Global South but were neglected in the AFS.

Recommendation: The voluntary fund mechanism should be made mandatory for a specific number of years to assist the Global South during their transition phase. There must also be a call for more technological transfers that would aid the Global South to develop sustainable fishing practices.

7. The use of sustainability to institutionalize Global North hegemony is evident in the AFS and its negotiations. There is a complete lack of historical responsibility by the Global North with large industrial fleets, who have contributed to the current overfishing crisis. They have employed the United Nations Convention on the Law of Seas (“UNCLOS”) to exploit deep-sea fishing beyond the EEZs, the common heritage of mankind. This was effectively achieved through Fisheries Access Agreements (“FAAs”), drawn up by the EU, the US, Russia and Japan. The FAAs, along with the UNCLOS, affected small and traditional fishers and provided incentives to larger corporations to fish beyond limits. Thus, the institutionalized sustainable objectives may stifle the growth of fisheries in the Global South by denying them a reasonable way of providing income and rehabilitative support to vulnerable fishers.

Recommendation: The Global North must acknowledge its responsibility for the overfishing crisis. Suitable amendments also must be made to the FAAs to incorporate ocean sustainability and SDT provisions for the Global South.

These recommendations must be supplemented with reforms in India’s (and other developing countries’ and LDCs’) subsidies distributive mechanisms. India must phase out fuel subsidies, given its link to unsustainable fishing and instead redistribute such harmful subsidies in a positive manner. This includes support for traditional fishing practices, sustainable fishing, research and development, fisheries management, social security nets, disaster relief, and poverty alleviation. 

The article unpacks the complexities of approaching the issue of fisheries subsidies and ocean sustainability. A one-size-fits-all approach, as in the case of the AFS, is grounded in institutionalizing power imbalances between the Global North and the Global South. This negatively impacts the latter and their small-scale, nascent and vulnerable fishing sector. Further, the AFS is not efficacious in achieving ocean sustainability since it does not dismantle the root causes of overfishing: non-specific fuel subsidies and FAAs. Thus, going forward, the Global South must push for measures that protect their fisheries sector and ameliorate ocean sustainability concerns. 

 

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* Sankari B is a final year undergraduate student studying at the National Law School of India University, Bangalore (NLSIU).

Cover image credit 

Michael Jacobson* & Stephen Finan**

     The Charming Betsy canon of interpretation, articulated by the U.S. Supreme Court in 1804, states that “[a]n act of Congress ought never to be construed to violate the law of nations if any other possible construction remains.”  The Supreme Court has never caveated or altered this longstanding canon of interpretation.  And yet, various court decisions in recent years have taken different approaches to interpreting and applying this canon in cases involving international law. 

     In the past, courts’ potential application of the Charming Betsy canon in cases arising out of government agency action may have come into conflict with the Supreme Court’s standard of deference to agencies’ interpretations of ambiguous statutes under Chevron v. NRDC.  However, last year the Supreme Court overturned Chevron deference and replaced it with a new standard in Loper Bright Enterprises v. Raimondo.  Now, “[c]ourts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority” irrespective of an agency’s interpretation.  The Supreme Court explained that lower courts shall read an ambiguous statute “[as] if no agency were involved” and determine “the best reading” “after applying all relevant interpretive tools.”¹1 The Court held that “courts need not and under the [Administrative Procedure Act] may not defer to an agency interpretation of the law simply because a statute is ambiguous.” 

     This sea change in administrative law compels courts to stop deferring to strained agency interpretations of law when a better reading exists.  Courts are now likely to lean more on traditional forms of statutory interpretation.  In doing so, the Charming Betsy canon elevates the importance of reading statutes in a manner that is in accordance with relevant international law as courts determine the best reading of a statute.

     In this article, we explore the future of the Charming Betsy canon of interpretation in a post-Loper Bright world.  This issue is particularly timely as the Trump Administration has announced new trade-restrictive actions relying upon novel legal authorities.  The new administration imposed tariffs on Canada and Mexico (following a 30-day pause) for the stated purpose of stemming immigration and fentanyl flows into the United States before removing and delaying those tariffs again, imposed additional new tariffs on China for the same reason, imposed expanded tariffs on imported steel and aluminum, and took initial steps to implement “reciprocal” tariffs to “correct longstanding imbalances in international trade and ensure fairness across the board.” 

     Trade-restrictive measures are commonly implemented through agency action, and thus reviewing courts may be applying the Loper Bright standard of statutory interpretation.  In doing so, the courts may need to assess how best to apply the Charming Betsy canon of interpretation as they seek the best meaning of a statute.    

     This article proceeds as follows.  First, we provide a brief summary of the Charming Betsy canon of interpretation, including its scope and usefulness to courts’ statutory interpretation.  Next, we examine different instances where courts have recently applied (or not applied) the Charming Betsy canon under various types of international law.  Then, we look back to the Solar Safeguards case involving imports from Canada, which arose out of one of the first trade-restrictive measures imposed by the Trump Administration, in early 2018.  This case provides an example of a court’s decision to disregard Charming Betsy arguments and uphold the government’s action, despite on-point international law that disallowed such action.  Indeed, an international tribunal later read the relevant international law in a manner that led to a reversal of the underlying agency decision.  We then look ahead to Charming Betsy’s increased pertinence following the Loper Bright decision.  Finally, we set forth a step-by-step guide to applying the Charming Betsy canon that courts should consider employing in a post-Chevron world.

I. A Summary of the Charming Betsy Canon of Interpretation

     The Charming Betsy canon of interpretation states that “[a]n act of Congress ought never to be construed to violate the law of nations if any other possible construction remains.”  There are a few key elements to this canon of interpretation for courts to consider when applying it.

     Crucially, this canon only applies when there is a “law of nations”—or international law—that is relevant to the case.  Although the Supremacy Clause of the Constitution elevates treaties as the “supreme Law of the Land” on par with federal statutes²2 In fact, as explained by Sec. 115 of the U.S. Foreign Relations Restatement, treaties “supersede[] as domestic law any inconsistent preexisting provision of a law or treaty of the United States.” (and enacted with signature of the President and agreement of two-thirds of the Senate), other sources of international law are equally applicable under the Charming Betsy canon as “laws of nations.”³3 See, e.g., Trans World Airlines, Inc. v. Franklin Mint Corp., 466 U.S. 243, 252 (1984) (applying the Charming Betsy canon to avoid conflict with a treaty); Fed. Mogul Corp. v. United States, 63 F.3d 1572, 1581-82 (Fed. Cir. 1995) (applying the Charming Betsy canon to avoid conflict with a Congressional-Executive agreement); Weinberger v. Rossi, 456 U.S. 25, 32 (1982) (applying the Charming Betsy canon to avoid conflict with an executive agreement concluded without congressional approval). One important category of international agreements that applies under Charming Betsy are trade agreements which are enacted under U.S. law as Congressional-Executive Agreements.  These agreements are signed by the President and voted into law by both the House and the Senate.  Prominent trade agreements enacted as Congressional-Executive Agreements include, for example, the North American Free Trade Agreement (“NAFTA”) and the subsequent United States-Mexico-Canada Agreement (“USMCA”) between the United States, Canada, and Mexico, as well as the Agreements of the World Trade Organization (“WTO”).  There are also other sources of international law that might be relevant to a Charming Betsy analysis and that require less involvement of Congress, such as Executive Agreements (which do not require congressional action) and customary international law.  For example, the Vienna Convention on the Law of Treaties has never been enacted by the United States but is a widely accepted source of customary international law that is used to interpret treaties and may be relevant in the Charming Betsy context.  

     Additionally, the Charming Betsy canon advises courts to avoid conflict between U.S. federal law and international law wherever possible.  The 1988 U.S. Foreign Relations Restatement Section 115 explains the need to “reconcile[]” acts of Congress with international law and that courts “will endeavor to construe them so as to give effect to both.”⁴4 Restatement (Third) of the Foreign Relations Law of the United States, § 114 (1987). Courts are tasked to read international law in congruence with U.S. law.  The best reading of a statute is one that does not violate international law. 

     It is possible that there are rare instances in which no possible construction of a statute allows it to be read in congruence with international law.  For example, if a statute is clear—previously known as Chevron “Step 1”—then courts may choose to apply that clear meaning irrespective of international law.⁵5 “[A]n unambiguous statute will prevail over a conflicting international obligation.” Timken Company v. United States, 240 F. Supp. 2d 1228, 1240 (Ct. Int’l Trade 2002) (citing Fed.Mogul Corp. v. United States, 63 F.3d 1572, 1581 (Fed. Cir. 1995)); see also Corus Staal BV. v. United States, 593 F. Supp. 2d 1373, 1385 (Ct. Int’l Trade 2008) (holding that Charming Betsy did not apply in the case because there were clear statutory requirements and Federal Circuit precedent). In addition, statutes could expressly provide for a means of interpretation or context to avoid ambiguity.  However, where statutes are ambiguous, Charming Betsy should apply.⁶6 The Timken court notes “an ambiguous statute should be interpreted so as to avoid conflict with international obligations.”

II. Although courts generally apply the Charming Betsy canon, different federal judges have taken divergent approaches to how they apply it.

     More than 200 years after the Supreme Court’s decision in Charming Betsy, courts across the federal system continue to find this interpretative canon applicable.⁷7 See, e.g., Weinberger v. Rossi, 456 U.S. 25, 32 (1982); Fed. Mogul Corp. v. United States., 63 F.3d 1572, 1575 (Fed. Cir. 1995); Allegheny Ludlum Corp. v. United States, 367 F.3d 1339 (Fed. Cir. 2004). “[D]eeply embedded in American jurisprudence,” Charming Betsy is “a rule of statutory construction sustained by an unbroken line of authority.”  As the Supreme Court noted in 1988, Charming Betsy “has for so long been applied by this Court that it is beyond debate.”  In fact, Justice Neil Gorsuch cited approvingly to the doctrine in a 2023 dissenting opinion.  Similarly, Justice Amy Coney Barrett expressed approval of the doctrine prior to taking the bench as a helpful tool for textualist jurists.⁸8 Justice Barrett concluded that “[a]t least when a substantive canon promotes constitutional values, the judicial power to safeguard the Constitution can be understood to qualify the duty that otherwise flows from the principle of legislative supremacy.”  

     Despite widespread acceptance of this canon, courts have not applied the canon in a uniform manner.  Below we review the various ways the doctrine has been interpreted and applied by the courts. 

a. Federal courts regularly apply Charming Betsy in cases not involving international trade agreements.

     Judges readily apply Charming Betsy to interpret statutes in accordance with international obligations, particularly in non-trade contexts.  If a statute is ambiguous, courts generally employ Charming Betsy as an interpretative tool to determine the best meaning of the statute.  

     For example, in Weinberger v. Rossi, the Supreme Court reviewed a statute that prohibited employment discrimination against U.S. citizens at overseas military installations, “unless such discrimination [was] permitted by a ‘treaty’ between the United States and the host country.”  At the time of the statute’s passing, the U.S. had an existing agreement with the Philippines to provide Filipino citizens with preferential treatment for employment.  The question before the Supreme Court was whether the term “treaty” should be understood as it appears in the Constitution or whether it also encompasses executive agreements like the Base Labor Agreement between the U.S. and Philippines.  The Supreme Court ultimately applied the Charming Betsy canon to interpret the statute in a manner that avoided conflict with U.S. international obligations under the executive agreement.

     There are several other examples.  In a case involving international tax law, the Court of Federal Claims applied the Charming Betsy canon to “to interpret [a domestic statute] not to conflict with the provision of a foreign tax credit under paragraph 2(b) of Article 24 of the 1994 Treaty.”  In a case involving intellectual property rights, Fox Television Stations, Inc. v. Aereokiller, LLC, the Ninth Circuit applied the Charming Betsy canon to conclude that interpreting § 111 of the Copyright Act so as to include Internet-based retransmission services would risk putting the U.S. in violation of certain treaty obligations.  And, in a case involving terrorism and UN agreements, United States v. Palestine Liberation Organization, the U.S. District Court for the Southern District of New York strained to find an unambiguous statute ambiguous, applying the Charming Betsy canon to interpret the statute in a manner that did not conflict with U.S. international obligations.⁹9 The Court found the text of the Anti-Terrorism Act of 1987 ambiguous where it made it illegal for the Palestinian Liberation Organization, “notwithstanding any provision of law to the contrary, to establish or maintain an office, headquarters, premises, or other facilities or establishments within the jurisdiction of the United States” and applying Charming Betsy as it conflicts with a UN Treaty providing that “federal, state or local authorities of the United States [would] not impose any impediments to transit to or from the headquarters district by the United Nations . . . on official business.” The Court unequivocally stated: “this court is under a duty to interpret statutes in a manner consonant with existing treaty obligations.” 

     Clear and consistent application of this canon appears to be uncontroversial and consistent when trade agreements are not the source of international law.

b. Charming Betsy is not useful where the statute is clear.

     Most courts also agree as to when Charming Betsy does not apply—where the statute is clear, international law will not override that clear meaning.¹⁰10 Comm. Overseeing Action for Lumber Int’l Trade Investigations of Negotiations v. United States, 483 F.Supp.3d 1253 (Ct. Int’l Trade 2020) (citing Chevron, U.S.A, Inc. v. Natural Res. Def. Council, Inc. 467 U.S. 837, 842-43 (1984) (“[w]hen, as here, the court concludes that Congress’s intent is clear, ‘that is the end of the matter’ [] the court ‘must give effect to the unambiguously expressed intent of Congress.’”); Government of Quebec v. United States, 105 F.4th 1359 (Fed. Cir. 2024) (choosing not to apply Charming Betsy where the statute was clear); Nippon Steel Corp. v. United States, 732 F. Supp. 3d 1353 (Ct. Int’l Trade 2024) (choosing not to apply Charming Betsy where “Congress has spoken clearly.”). In Nippon Steel Corp. v. United States, the U.S. Court of International Trade (“CIT”) concluded that “[t]he Charming Betsy canon is a canon of statutory interpretation—not a matter of constitutional law—and therefore it is ‘not [a] mandatory rule[].’ Congress is free to override the canon via legislation.”  Nippon Steel’s arguments failed because Congress had spoken.  Similarly, in Government of Quebec v. United States, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) concluded that the statutory language is clear and therefore, Charming Betsy was inapplicable.  This rule of application stems from the understanding that Charming Betsy “acts as a rebuttable presumption that Congress did not intend to place the United States in breach of international law” and to rebut that presumption, Congress must provide an “affirmative expression of congressional intent.”  Where congressional intent to diverge from international obligations is clear, Congress has rebutted the presumption against breach.

c. The CIT and the Federal Circuit have applied Charming Betsy in different ways in various cases involving trade agreements.

     Different cases before the federal courts that hear issues involving tariffs and trade measures—the CIT and the Federal Circuit—have taken varied approaches to the Charming Betsy canon.

     For example, in Federal-Mogul, the Federal Circuit faithfully applied the Charming Betsy canon in a case involving antidumping duties.  The court found that where “the Act presented [the agency] with a choice between methodologies for calculating dumping margins” and “[t]ax-neutral methodologies clearly accord with international economic understandings,” the court should not read a violation of an international obligation into the statute and should interpret the statute in a manner consistent with those international obligations.

     However, the Federal Circuit in Allegheny Ludlum Corp. v. U.S. took a somewhat different approach.  In that case, the court was tasked with determining whether the sale of a steel company’s assets from the French government to private individuals could extinguish pre-sale subsidies.  In determining that 19 U.S.C. § 1677(5)(F) does not distinguish between an asset sale and stock sale, the Federal Circuit found that the “trial court correctly grounded its judgement in the statute and this court’s precedent,” however went further and concluded “[a]nother consideration also supports the trial court’s analysis . . . Section 1677(5)(F) ‘must be interpreted to be consistent with [international] obligations.’”  The court found that disparate treatment under [Commerce’s] methodology would contravene a WTO appellate body report “specifically reject[ing] the argument that sales of assets should be treated differently from sales of stock for assessing countervailing duties.”  The court thus recognized Charming Betsy as a “guideline that supports the trial court’s judgment.”¹¹11 Similarly, in Meyer Corporation v. United States, the Federal Circuit used Charming Betsy principles to further support the conclusion that 19 U.S.C. § 1401a does not require a Thai manufacturer to show its “first-sale” price was unaffected by Chinese nonmarket economy influences (arguing “[f]urther, the trade laws ‘must be interpreted to be consistent with [international] obligations, absent contrary indications in the statutory language or its legislative history.”) 43 F.4th 1325 (Fed. Cir. 2022).  

     In addition, Judge Restani of the CIT in a law review article took a somewhat different view of how to apply Charming Betsy principles to statutory interpretation.  She argued that Charming Betsy should be used as a means to interpret legislative intent: “If the statute is unclear, but the international agreement is clear, it likely should aid the court’s interpretation, but perhaps not based upon the Charming Betsy principles, as they have been understood.  Rather, the statute is intended to implement the agreement, and the relevant WTO agreement may be viewed as secondary legislative history.”¹²12 See also Corus Staal BV v. U.S. Dept. of Commerce, 259 F. Supp.2d 1253 (Ct. Int’l Trade 2003) (Restani, J.) (finding that WTO decisions may help inform a court’s decision, however when faced with an ambiguous statute and ambiguous international agreement, the agency interpretation controls).

     Other court decisions have taken the approach of seeking to point out conflict between U.S. law and international agreements under Charming Betsy analyses as a basis to disregard the international law, rather than to seek harmony between statute and international law as the age-old canon entails.  For example, in Nippon Steel v. United States, the CIT cites 19 U.S.C. § 2504(a) of the Trade Agreements Act of 1979, which states that “[n]o provision of any trade agreement approved by the Congress . . . which is in conflict with any statute of the United States shall be given effect under the laws of the United States” to conclude that where “the GATT and a federal statute collide, the statute governs, sinking the Charming Betsy canon in the process.”  The Federal Circuit made a similar finding in Corus Staal BV v. Department of Commerce.¹³13 The Court concluded that “[n]either the GATT nor any enabling international agreement outlining compliance therewith (e.g., the [Antidumping Agreement]) trumps domestic legislation; if U.S. statutory provisions are inconsistent with the GATT or an enabling agreement, it is strictly a matter for Congress.”  

     However, the Charming Betsy canon, as articulated by the Supreme Court, requires that the statute is interpreted to be consistent with the international obligation, when such “possible construction remains.”  The canon is not designed to find conflict, but instead to find harmony between statute and international law.  As one commentator explains, the canon should be invoked to “evaluat[e] the proper U.S. stance toward [international law]” rather than give international law positive legal force.  Indeed, in the Federal-Mogul Corp. v. United States decision, the Federal Circuit acknowledged the 19 U.S.C. § 2504(a) requirement not to give effect to a provision of a trade agreement that conflicts with statute, but noted “GATT agreements are international obligations, and absent express Congressional language to the contrary, statutes should not be interpreted to conflict with international obligations.”  It is not incongruent to read statutes consistently with trade agreements.  In particular, 19 U.S.C § 2504, a standard provision commonly found in U.S. trade agreements’ implementing legislation, does not restrict courts’ ability to read statutes congruently with trade agreements, but rather reflects a core tenet of the Charming Betsy canon—that clear statutory language controls, and that the trade agreement should be read to be consistent with statute.

III. A Case Study: The Solar Safeguards Case¹⁴14 Hogan Lovells US LLP was counsel to several different Canadian parties in the solar safeguards proceedings, including the original investigation before the U.S. International Trade Commission, the CIT, the Federal Circuit, and the USMCA Panel.

     Some of the very first trade-restrictive measures imposed by the first Trump Administration were the global safeguard measures on solar cells and modules.  Leveraging authority under Section 201 of the Trade Act of 1974, President Trump signed a presidential proclamation resulting in an initial 30% tariff and an annual 2.5-gigawatt tariff-free quota.  This was the culmination of the first safeguards investigation in the United States since 2001 and implicated a massive amount of annual trade, primarily imports from Southeast Asia and South Korea.¹⁵15 There was also a global safeguards investigation on washing machines around the same time as the solar safeguards investigation, and the remedies for both cases were imposed on the same day (February 7, 2018). This is a useful case for a post–Loper Bright Charming Betsy analysis for two reasons.  First, it involves a major trade measure imposed by the first Trump Administration and subsequent legal challenges, which gives a window into what might be ahead.  Second, it offers a useful natural experiment on the Charming Betsy canon, where a reviewing court sets aside Charming Betsy arguments in its statutory interpretation, and later, an international tribunal came to a contrasting conclusion, interpreting the statute’s best meaning through the lens of the USMCA, a source of international law.  This case shows how courts that seek the best meaning of a statute in light of the Charming Betsy canon might come to a different conclusion than if they were to give deference to the government’s reading or to read the statute without regard to international law.

a. Overview of the Solar Safeguards case

     The statutory scheme for global safeguard measures can be found in Sections 201–204 of the Trade Act of 1974.  Global safeguards investigations begin before the U.S. International Trade Commission (“USITC”), which investigates the market through detailed questionnaire submissions, a public, full-day hearing, and briefs from interested parties; makes a binding determination on whether to authorize safeguard measures; and then issues a nonbinding recommendation to the President on what measure(s) to impose.  Then, the statute grants the President the authority to impose (or not impose) safeguard measures as he or she chooses, with some specific statutory limitations and constraints. 

     Separately, the NAFTA Implementation Act provided for a distinct and specific legal test for imposition of global safeguard measures on imports from Canada and/or Mexico.  That legal test also can be found in the text of the NAFTA and parallel text in the subsequent USMCA, although there are important differences between the NAFTA/USMCA and their implementing legislation, as addressed below.

     In the Solar Safeguards case, the USITC made affirmative findings for global imports, thereby authorizing the President to impose safeguard measures on a global basis—which he did.  However, the USITC in a 3–1 vote made negative findings for imports from Canada because the Commission found that imports from Canada were not a substantial share of imports nor did they contribute importantly to the serious injury caused by global imports under the NAFTA Implementation Act’s separate test.  In every other global safeguard case prior, a negative finding from the USITC ended the matter for imports from Canada (or Mexico).  However, for the first time ever, in this case President Trump disregarded the Commission’s negative findings and imposed safeguard measures on Canada in the same manner as were imposed on all other imports.

b. U.S. court litigation arising out of the Solar Safeguards case

     The President’s imposition of safeguard measures on imports from Canada led to litigation before the CIT, which was then appealed to the Federal Circuit.

     Three Canadian solar panel producers/exporters and a U.S. affiliated importer requested an injunction to halt application of the safeguard measure as applied to imports from Canada.  Plaintiffs (supported by the Canadian Government as an amicus curiae) argued that the NAFTA Implementation Act was ambiguous in certain aspects and that international law—the NAFTA—made clear the proper interpretation of U.S. law in this case.¹⁶16 For example, the NAFTA Implementation Act refers to “quantitative restrictions” while the NAFTA text refers to “restrictions” when addressing a condition of imposing a safeguard on imports from Canada—allowing for reasonable growth of such imports. Plaintiffs and the Government of Canada argued that the statute should be read in accordance with the NAFTA text and that the safeguard measures, which imposed restrictions on imports from Canada, should be subject to these conditions. Notably, Article 802.5(b) of the NAFTA expressly provides that “[n]o Party may impose restrictions on a good in [a safeguard] action . . . that would have the effect of reducing imports of such a good from a Party below the [recent] trend of imports.”  Plaintiffs argued that Charming Betsy should lead the court to read the statute as preventing application of safeguard measures on Canada, at least in the manner that was done in this case.¹⁷17 See, e.g., Memorandum in Support of Plaintiff’s Motion for Temporary Restraining Order and Preliminary Injunction at 33–34, Silfab Solar v. United States, 296 F. Supp. 3d 1295 (Ct. Int’l Trade 2018) (No. 18-00023); Reply in Support of Plaintiff’s Motion for Temporary Restraining Order and Preliminary Injunction at 14–17, Silfab Solar, 296 F. Supp. 3d 1295 (No. 18-00023); see also Amicus Curiae Brief of Government of Canada at 8–11, Silfab Solar, 296 F. Supp. 3d 1295 (No. 18-00023).

     The CIT upheld the safeguard measure on imports from Canada, irrespective of these Charming Betsy arguments.  The CIT instead found that the plain meaning of the statute did not require interpretation in light of the international law on point.¹⁸18  Id. at 32–33. The Federal Circuit affirmed.  

c. The USMCA panel reached different conclusions under international law.

     Separately from the court cases brought by Canadian solar producers, the Government of Canada brought a NAFTA dispute against the United States on the basis that the solar safeguards measures on imports from Canada violated NAFTA Articles 802–803.  

     Because of the difficulty of forming an international panel under the NAFTA, which plagued NAFTA state v. state dispute settlement for many years, no panel was ever formed.  Soon after the USMCA entered into force in 2020, Canada brought a USMCA dispute on the same basis.  Due to fixes to the panel formation process in the USMCA, a USMCA panel was quickly formed and heard this case. 

     In February 2022, the USMCA panel unanimously ruled in favor of Canada on all counts—finding that the safeguard measures violated the USMCA.  The USMCA panel explained that multiple aspects of the safeguard measures as applied to Canada were contrary to the text of the USMCA (which paralleled the text of the NAFTA).¹⁹19 “The Panel doubts that the United States’ claim that the applied measure was structured to ensure no reduction in imports from Canada despite the substantial increase in tariffs or that the measure allowed for reasonable growth in Canadian imports by means of geographical proximity would satisfy the test under Article 10.2.5(b). Such argument is inconsistent with the reading of the clear prohibition in Article 10.2.5 (“No Party may impose restrictions that . . .”), requiring some action to ensure that the conditions of 10.2.5(b) are met. The Panel doubts that a passive acknowledgement of the geographical proximity of Canada (and Mexico) to the U.S. market would constitute an “allowance for reasonable growth” within the meaning of Article 10.2.5 (b).”

     Several months after the USMCA panel’s decision, the United States and Canada entered into a memorandum of understanding (“MOU”) that included removal of the safeguard tariffs on imports from Canada.  Following this MOU, imports of solar panels from Canada were permitted to enter without regard to any safeguard—four and a half years after they were imposed in a manner that was upheld by the CIT and Federal Circuit, but ultimately found to be in violation of the USMCA.

d. Takeaways from the Solar Safeguards dispute

     The solar safeguards dispute is a prominent example of the importance of the Charming Betsy canon in assisting U.S. courts to find the best meaning of a statute.  If the courts had applied the Charming Betsy canon and read the NAFTA Implementation Act in concert with the on-point international law contained in the NAFTA, the courts may have come to a different conclusion and avoided several years of application of an unlawful measure and irreversible economic damage. 

IV. Chevron and Charming Betsy

     Until June of 2024, courts had long applied Chevron’s two-step analysis when reviewing agency interpretations of statutes.  Generally, where an agency advocated a statutory construction that comported with the relevant international obligation, “Charming Betsy and Chevron simply reinforce[d] each other.”  When courts reviewed agency interpretations that conflicted with clear international obligations, courts typically applied Chevron, at the expense of the Charming Betsy doctrine.  Below, we review how courts interpreted ambiguous statutes that conflicted with international obligations under Chevron and then look at how their methods of interpretation may change, now unbridled by the defunct Chevron deference doctrine.

a. Some courts found that Charming Betsy should be read in conjunction with Chevron.

     Some courts read the two doctrines “in tandem” by generally incorporating the Charming Betsy canon into Chevron’s Step 2 analysis.  While Chevron states that a court should normally defer to an agency’s reasonable interpretation, the CIT has found that “where international obligations arise, the reasonability of the agency’s interpretation must be gauged against such obligations.”  When applying Charming Betsy, courts have generally imported the canon into Chevron Step 2 as an aid to determine whether the agency’s interpretation is reasonable.  If the agency’s interpretation conflicts with a clear international obligation, courts have found the agency’s interpretation of the statute to be unreasonable.²⁰20 Courts have used Charming Betsy as a statutory tool of interpretation to construe a statute contrary to the agency’s “proffered construction.”

b. Some courts found that Chevron took precedence over Charming Betsy.

     Some courts and commentators alike have advocated for an approach where, even in the face of clear conflicting international obligations, an agency’s interpretation of an ambiguous statute takes primacy over Charming Betsy.  In Suramerica de Aleaciones Laminadas, C.A. v. United States, the Federal Circuit held that “[if] Commerce’s interpretation of its statutory power falls within the range of permissible construction . . . that ends our inquiry . . . [E]ven if we were convinced that Commerce’s interpretation conflicts with the [General Agreement on Tariffs and Trade],  which we are not, the GATT is not controlling.”  Other courts have been hesitant to upset Chevron deference “unless the conflict between an international obligation and Commerce’s interpretation of a statute is abundantly clear.”  Both the Tenth Circuit and First Circuit chose not to apply the Charming Betsy canon where it arguably could have, ultimately resolving the matter on Chevron grounds.  Indeed, the First Circuit noted the majority’s “failure to adequately consider the Charming Betsy question and the tension between the agency’s interpretation in this case and U.S. treaty commitments.”²¹21 The First Circuit concluded “there is no reason why the judiciary, as a co-equal branch of government, should interpret a statute in such a way that would violate a treaty, absent a clear showing by Congress that it desires this result.  Applying the Charming Betsy canon is therefore consistent with the judiciary’s role to ‘say what the law is.’” Similarly, Professor Cass Sunstein and Judge Eric Posner have posited that, as an “international relations doctrine,” Charming Betsy should yield to Chevron deference when interpreting statutes related to foreign relations because the executive “is in the best position to balance the competing interests” of the nation and has “better information about the consequences of violating international law.”  International Law Scholar and Professor Curtis Bradley, who has written extensively on Charming Betsy, has also prioritized Chevron, arguing that Charming Betsy “should not trump Chevron deference, at least where there is a ‘controlling executive act.’”  Justice Kavanaugh as a judge on the D.C. Circuit (who joined the majority in Loper Bright in overturning Chevron) had previously taken the view that Chevron should be given priority.²²22 Justice Kavanaugh found that “[t]he basic reason is that the Executive—not international law or an international tribunal—possesses the authority in the first instance to interpret ambiguous statutes and to determine how best to weigh and accommodate international-law principles not clearly incorporated in the statute.” 

c. Applying Charming Betsy in a post-Chevron world

     On June 28, the Supreme Court uttered the already infamous words: “Chevron is overruled.”  The decision was premised on a separation of powers argument that “the Framers crafted the Constitution to ensure that federal judges could exercise judgment free from the influence of the political branches.”  The Court’s holding repeatedly points to Marbury v. Madison, which concluded that it is the province of the courts to say what the law is, but it also looked to Section 706 of the Administrative Procedures Act which “codifies for agency cases the unremarkable, yet elemental proposition . . . that courts decide legal questions by applying their own judgment.”

     The Loper Bright decision rids courts of the need to defer to agencies when conducting their independent judicial review of questions of law.  In addition to these signals, the Court presses lower courts to “apply[] all relevant interpretive tools” to determine the “best” interpretation of the statute.

     Courts typically employ five types of interpretive tools to “say what the law is.”  In a post-Chevron world, all five interpretative tools become more important and will be increasingly relied on.  First, courts may look to the statutory text to determine a term’s ordinary meaning—“what the text would convey to a reasonable English user in the context of everyday communication.”²³23 See also Frank H. Easterbrook, The Role of Original Intent in Statutory Construction, 11 Harv. J.L. & Pub. Pol’y 59, 61 (1988) (“Meaning comes from the ring the words would have had to a skilled user of words at the time, thinking about the same problem.”). Judges may leverage dictionaries or books to better understand the word’s ordinary usage.²⁴24  In a dissenting opinion, Justice Scalia used a dictionary definition to interpret the word “use.” Second, courts may turn to the broader statutory context of the law, including how the term is used elsewhere in the statute or how the statute is structured.  Third, courts can review the statute’s legislative history to decipher congressional intent.  Fourth, courts may consider past practices or future scenarios. More specifically, a court could look at how an agency enforced a law previously or how a particular statutory interpretation may operate in the future.  Fifth, and most important for our purposes, judges may choose to leverage various canons of construction—presumptions about how courts should read the text of a statute that “have been touted for centuries as neutral rules of thumb for reliably interpreting statutes.”  

     Unbridled by Chevron, courts will increasingly rely on substantive canons like Charming Betsy to interpret the “best” meanings of statutes.  Charming Betsy requires courts to harmonize an ambiguous statute with U.S. international obligations whenever possible.  Charming Betsy says the “best” interpretation of the statute is the one that does not conflict with international law.  When interpreting ambiguous statutes, which courts are often called to do, they should turn to canons of interpretation including the Charming Betsy canon as a first step in determining the “best” reading of the statute.  

     Substantive canons have “long been a prominent feature of American, as well as English, statutory interpretation” and “have been and continue to be routinely invoked by federal and state courts.”  However, substantive canons are not without their critics.  Professor Bradley argues that there are three principal criticisms of canons: 1) canons do not effectively constrain judicial decision-making; 2) canons do not always represent likely congressional intent and 3) canons promote judicial activism as judges may use them to ignore the plain meaning of statutes. 

     Certain elements of the Charming Betsy canon insulate it from criticisms in a post-Chevron world.  First, as Professor Curtis Bradley notes, many of these historical critiques have been countered by recent “academic and judicial support” finding that normative canons like Charming Betsy “represent value choices by the [c]ourt” that are “defensible . . . to the extent that good substantive and institutional arguments can be advanced on their behalf.”  Similarly, Justice Barrett has acknowledged that a textualist’s obligation of faithful agency to Congress is qualified by substantive canons which serve to uphold constitutional values.  Charming Betsy represents a canon that is applied not to further policy prerogatives but rather to reinforce institutional values.  The canon is “a means of both respecting the formal constitutional roles of Congress and the President and preserving a proper balance and harmonious working relationship between the three branches.”  

     Second, Charming Betsy is a doctrine as old as the Republic.  In Loper Bright, Justice Gorsuch seemed to challenge the dissent’s implication, that with overruling Chevron, the Court was getting rid of all substantive canons, by differentiating the deference doctrine from other “interpretative rules that have guided federal courts since the Nation’s founding.”  While the Supreme Court formally announced the Charming Betsy canon in 1804,²⁵25 In fact, Charming Betsy was not even the first American case to articulate the underlying principle that statutes should be read in harmony with international obligations.  See Jones v. Walker, 13 F. Cas. 1059, 1064 (C.D. Va. 1800) (concluding it would be “contrary to the laws and practice of civilized nations” to construe a statute to prohibit British subjects to bring suits in Virginia courts when a construction “more consonant to reason and the usage of nations can be found.” See also Talbot v. Seeman, 5 U.S. (1 Cranch) 1 (1801) (adopting a reading of a statute that is consistent with the law of nations because “[b]y this construction the act of Congress will never violate those principles which we believe, and which it is our duty to believe, the legislature of the United States will always hold sacred.”). the principles underlying the Court’s thinking trace back much further.  Professor Bradley believes Chief Justice Marshall could have found support for the canon in a pre-constitutional case, argued by none other than Alexander Hamilton, where a New York court read a state law in a way that comported with the Treaty of Paris and the law of nations.  In addition, English law employs a similar canon and Professor Louis Henkin has found “numerous statements” where the Supreme Court as early as the late 1700s referred to the law of nations being incorporated into the “common law.”²⁶26  Louis Henkin, Foreign Affairs and the United States Constitution 509 n.17 (2d 1996); See also United States v. Worrall, 2 U.S. (2 Dall.) 384, 392 (1798). In fact, the principles underpinning the doctrine, known as the “law of nations” or jus gentium, find their roots in ancient Roman law.  

     Third, the Charming Betsy canon has been a feature in our judicial system for a long time and in that time, it has elicited no controversy or reaction from the political branches.  It has become a critical “component of the legal regime defining the U.S. relationship with international law” and is even “enshrined in the black-letter-law provisions of the influential Restatement (Third) of the Foreign Relations Law of the United States.”  Congress has long legislated with Charming Betsy as a backdrop and is on notice that it should speak clearly when it intends for a statute to violate international obligations.  This argument follows the Supreme Court’s understanding that “Congress legislates with knowledge of our basic rules of statutory construction.”

V. Peering Through the Spyglass: A Step By Step Guide to Use of Charming Betsy Going Forward

     Consistent with Supreme Court precedent, courts should apply the Charming Betsy canon when interpreting statutes that overlap with international law.  Courts have even broader discretion to do so in a post-Chevron world.  Below, we propose a three-phase approach that courts should employ when reviewing agency interpretations of statutes where international law is at play. 

a. Step 1

     First, courts should determine whether a statute is clear.  If the statute lacks ambiguity, in particular if Congress expressly declared its intention to legislate in a manner that contradicts an international obligation, courts should apply the statute as written, irrespective of international law.  Where Congress has clearly spoken, Charming Betsy is inapplicable. 

b. Step 2

     Second, if the statute is ambiguous, courts should look to international law to guide their interpretation of the best meaning of the statute.  In accordance with Charming Betsy, courts should interpret the domestic statute in a manner that comports with the United States’s international obligation, with the goal of avoiding conflict between domestic law and international law wherever possible.  This interpretive exercise should take precedence over agency interpretation of a statute, in accordance with the Supreme Court’s clear directive in Loper Bright that courts should seek the best meaning of a statute, irrespective of agency interpretation.  Courts have long applied Charming Betsy as an aid in the statutory interpretation process in this way.  Unbridled by Chevron, Charming Betsy should be a primary tool employed to interpret ambiguous statutes where coinciding international obligations exist. 

c. Step 3

     Third, if applicable international law is too ambiguous to guide the interpretation of an ambiguous statute, only then should courts give agencies’ interpretations “respect” to the extent they have the “power to persuade.”  Notably, the Supreme Court in Loper Bright “warmly embraced Skidmore v. Swift & Co., which calls not for deference, but for respectful attention to the views of the relevant agency.”  The Court held that interpretations “‘made in pursuance of [an agency’s] official duty’ and ‘based upon . . . specialized experience,’ ‘constitute[d] a body of experience and informed judgment to which courts and litigants [could] properly resort for guidance,’ even on legal questions.”²⁷27 Interpretations made by the same agencies that initially negotiated the international agreement may have greater power to persuade.  See Iceland S.S. Co.-Eimskip v. U.S. Dep’t of Army, 201 F.3d 451, 458 (D.C. Cir. 2000) (“[W]e give ‘great weight’ to ‘the meaning attributed to treaty provisions by the Government agencies charged with their negotiation and enforcement.”’). Courts should use the Skidmore factors to weigh whether the agency’s interpretation is entitled to such “respect.”  Factors for a court to consider include the “thoroughness evident in [the agency’s] consideration, the validity of [the agency’s] reasoning, [the interpretation’s] consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”  Under this approach, courts can fulfill their duty to interpret statutes, while relying on agencies’ expertise as a guide when both the statute and applicable international law present true ambiguity, in line with the standard established in Loper Bright.

VI. Conclusion

     Charming Betsy has been applied by the Supreme Court for over 200 years.  While the substantive canon of interpretation has sometimes come into conflict with the Chevron doctrine, diminishing its applicability and influence, the Loper Bright decision requires courts to “exercise their independent judgment in deciding whether an agency has acted within its statutory authority,” “applying all relevant interpretive tools” to determine the “best” interpretation of the statute.  With courts now unmoored from Chevron, courts can, and should, more actively leverage Charming Betsy to harmonize agency interpretations of ambiguous statutes with international law.

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*Michael Jacobson is a Partner at the law firm Hogan Lovells US LLP in the firm’s International Trade and Investment practice, based in Washington, DC.

**Stephen Finan is a student at the American University Washington College of Law.

All views, positions, and conclusions expressed in this article should be understood to be solely those of the authors in their personal capacity.

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