Despite of some concerns from misunderstanding of law and economics approach, law and economics can give insights to study international law, using economic theories such as price theory
Introduction 8
Since World War II, over twenty international human rights treaties have been signed by most nations, marking what Louis Henkin describes as 'the Age of Rights.' These treaties are expected to compel member states to uphold human rights and enhance their protection This expectation stems from the belief among human rights scholars and advocates that international standards can influence domestic practices Scholars argue that once states embrace human rights rhetoric and strive for compliance, there is no turning back Ultimately, the human rights movement aims for the norms established in international law to foster a better world.
Despite widespread adherence to international human rights treaties, significant violations persist globally In 2011, 'The Economist' highlighted China's transformation post-WTO membership, noting substantial economic advancements while political structures remained largely unchanged The articles, titled 'China’s economy and the WTO: All Change' and 'Chinese politics and the WTO: No Change,' illustrate how China's compliance with WTO regulations facilitated economic growth and integration into the international economic framework, yet political reforms lagged behind.
1 Louis Henkin, The Age of Rights (Columbia University Press, 1990)
2 Andrew T Guzman and Katerina Linos, ‘Human Rights Backsliding’, 102 California Law Review (2014) 603-654, at 605
3 Eran Shor, ‘Conflict, Terrorism, and the Socialization of Human Rights Norms: The Spiral Model
4 David Rieff, ‘The Precarious Triumph of Human Rights’, New York Times Magazine, 8 Aug
1999, (visited 11 Dec 2014)
5 ‘China’s economy and the WTO: All change’, The Economists, Dec 10th 2011; Chinese politics and the WTO: No change, The Economists, Dec 10th 2011
China's growing power and economic influence have not mitigated its status as a major violator of human rights Despite its efforts to align with WTO laws and international standards, compliance has not translated into the protection of human rights values as mandated by international law Furthermore, a report by the United States Senate Select Committee on Intelligence reveals that even the US, often viewed as a beacon of democracy, engaged in torture through the CIA's Detention and Interrogation Program from 2001 to 2009 Human rights violations extend beyond China and the US, affecting numerous countries worldwide In fact, recent records indicate that in 2011, 93 countries employed torture frequently, 65 occasionally, and only 34 did not engage in such practices at all.
Henkin's assertion in "How Nations Behave" suggests that most nations adhere to international law most of the time However, international human rights obligations appear to be an exception, given the widespread violations occurring globally This discrepancy necessitates a critical evaluation of international human rights law, focusing on the effectiveness and limitations of treaties in bridging the gap between expectations and reality The prevalence of human rights violations raises important questions about the challenges within international human rights law and the reasons states tend to comply with other legal frameworks, such as WTO law and the law of war, more consistently.
6 For more detail, See Senate Select Committee on Intelligence, Committee Study of the Central Intelligence Agency’s Detention and Interrogation Program,
(visited 30 Dec 2014); The Guardian, ‘CIA torture report’, (visited 28 Dec 2014)
7 David L Cingranelli, David L Richards, and K Chad Clay, CIRI Human Rights Documentation,
(visited 5 Jan 2015)
8 Eric A Posner, The Twilight of Human Rights Law (Oxford University Press, 2014), at 3
9 Louis Henkin, How Nations Behave (2 nd edn, Columbia University Press, 1979), at 47
10 See Alan O Sykes, ‘When is International Law Useful?’ (2013) New York University Law and Economics
Working Papers, Paper 348, (visited 20 April 2015), at 14-17
To comprehend the phenomenon of state behavior in relation to international law, particularly compliance with customary international law and treaties, it is essential to recognize that compliance is a fundamental issue in international law Understanding the relationship between international law and state actions is crucial for offering effective policy advice in this domain.
This paper addresses the critical issue of why international human rights law fails to compel states to fulfill their human rights obligations, despite their relative compliance with other international laws It seeks to understand the underlying reasons for this discrepancy and examines the differences between international human rights law and other forms of international law To effectively analyze state behavior and compliance, the paper emphasizes the importance of understanding why states adhere to international law It proposes a law and economics approach as a more coherent and logical framework for comprehending international law and its implications Although this approach is often misunderstood and not widely accepted among international legal scholars, the paper advocates for its relevance in studying international legal issues Ultimately, it aims to answer three pivotal questions: the best method for understanding international law, the reasons behind state compliance, and the challenges facing international human rights law.
To achieve the goal to answer the central research questions and to discover the
11 See Eric Posner, ‘Human Rights, the Laws of War, and Reciprocity’ (2010), John M Olin Law &
Economics Working Paper No 537, (visited
12 See Harold H Koh, ‘Why Do Nations Obey International Law?’, 106 The Yale Law Journal(1997) 2599-
This paper explores the relationship between international law and state behavior, focusing on international human rights law through a law and economics lens It begins by outlining the law and economics approach, highlighting the advantages of applying economic analysis to international law The paper then addresses why states comply with international law, critiquing existing compliance theories from legal and international relations scholars for their limitations Following this, it discusses the challenges of international human rights law, explaining why it struggles to ensure state compliance and differentiating it from other forms of international law The analysis includes a review of key universal human rights treaties, such as the International Covenant on Civil and Political Rights (ICCPR) and the Convention against Torture (CAT), while excluding regional treaties with stronger enforcement mechanisms Empirical findings from significant prior research will support the analysis, culminating in a comprehensive conclusion.
Law and Economics Approach to International Law 11
Law and economics has significantly influenced various legal fields, including contract law, tort law, criminal law, and constitutional law, but its impact on international law remains limited Despite a growing number of studies applying economic theories to international law, many scholars in this field either lack a solid understanding of these theories or misinterpret them Nevertheless, integrating law and economics can enhance the comprehension of international law and its related issues, ultimately leading to improved legal frameworks and solutions.
This article presents twelve solutions or international legal policies relevant to the global community, focusing on the question of how to better understand international law and legal issues It argues that the law and economics approach is a viable and compelling methodology for analyzing international law The first section will define law and economics, followed by an exploration of how economic theories are applied to international law through various examples Additionally, the article will address the reasons why international lawyers have traditionally shied away from incorporating law and economics into their practice.
What Is Law and Economics 12
Price theory 13
Price theory serves as a fundamental concept in economic models, particularly within neoclassical economics, by assuming that rational actors aim to maximize their preferences This implies that, all else being equal, individuals tend to prefer cheaper goods and services, as well as more efficient methods to achieve their consumption goals Additionally, price theory underpins cost-benefit analysis, which evaluates the trade-offs involved in economic decisions.
16 Quoted in Cooter and Ulen, Law and Economics, supra note 14, at 2
17 See Cooter and Ulen, Law and Economics, supra note 14, at 4-5
18 David Friedman, ‘law and economics’, in Steven N Durlauf and Lawrence E Blume (eds), The New
Palgrave: A Dictionary of Economics (8 vols, Palgrave Macmillan, 1987), Vol 2, at 144
Joel P Trachtman, in his book "The Economic Structure of International Law," emphasizes the intricate relationship between economics and international legal frameworks Additionally, in their article, Jeffrey L Dunoff and Joel P Trachtman explore the law and economics surrounding humanitarian law violations during internal conflicts, highlighting the complexities of legal accountability in such situations.
20 Dunoff and Trachtman, ‘The Law and Economics’, supra note 19, at 396
21 Trachtman, The Economic Structure, supra note 19, at 4
To achieve their preferences, individuals aim to maximize benefits while minimizing costs Economists have created methods utilizing price theory, even in markets where transactions cannot be expressed in monetary terms This approach demonstrates that measuring benefits and costs does not always require monetization.
Price theory examines the stability of supply and demand equilibrium, focusing on two key criteria: Pareto efficiency and Kaldor-Hicks efficiency Pareto efficiency assesses whether an equilibrium can improve one individual's situation without negatively impacting others In contrast, Kaldor-Hicks efficiency, or potential Pareto efficiency, evaluates if the benefits to one person significantly outweigh the losses to another This analysis is closely related to cost-benefit analysis Legal institutions can be assessed using these criteria; a law is deemed desirable under the Pareto criterion if it benefits one party without harming others, while under the Kaldor-Hicks criterion, a law is considered favorable if the gains for the winners exceed the losses for the losers.
Transaction Cost Economics 14
Transaction cost economics, rooted in the Coase theorem, posits that if individuals could negotiate without costs, they would achieve Pareto efficiency without external intervention The theorem suggests that with zero transaction costs, efficient outcomes can be reached through negotiation, independent of property rights However, when transaction costs are present, well-defined property rights that enhance asset specificity and certainty become crucial in minimizing these costs and facilitating contract establishment Thus, higher transaction costs can hinder efficient outcomes.
23 Dunoff and Trachtman, ‘The Law and Economics’, supra note 19, at 396
24 Trachtman, The Economic Structure, supra note 19, at 5
25 Dunoff and Trachtman, ‘The Law and Economics’, supra note 19, at 396
27 Eric A Posner and Alan O Sykes, Economic foundations of International Law (The Belknap Press of Harvard University Press, 2013), at 13
28 For more detail, see Ronald H Coase, ‘The Problem of Social Cost’, 3 Journal of Law and
Economics(1960) 1-44; ‘The Nature of the Firm’, 4 Economica(1937) 386-405
29 Dunoff and Trachtman, ‘The Law and Economics’, supra note 19, at 396
30 Cooter and Ulen, Law and Economics, supra note 14, at 89
High transaction costs can hinder the establishment of effective negotiations and transactions, making it challenging to achieve Pareto efficiency in resource allocation The determination of property rights by law plays a crucial role in this process Although transaction costs are a constant factor, the Coase theorem suggests that government intervention may still be necessary to facilitate efficient outcomes.
Legal systems play a crucial role in minimizing transaction costs and facilitating negotiations Transaction cost economics enhances traditional price theory by factoring in expenses related to identifying potential transactors, negotiating agreements, and enforcing those agreements This framework helps explain why parties may fail to reach beneficial agreements despite the presence of clear rules, and it highlights the importance of establishing effective legal systems to enhance transaction efficiency.
Game Theory 15
Game theory is an economic model that analyzes strategic interactions among players, where one player's rational choices depend on the decisions of others The law often encounters these strategic situations, resembling games where players must follow a strategy that responds to others' actions A key concept in game theory is the 'Prisoner’s Dilemma,' which illustrates how players can maximize their individual benefits through cooperation, yet often fail to do so This framework helps explain scenarios where players, despite having legal rules or institutions aimed at maximizing collective benefits, may not achieve this goal due to their strategic actions being influenced by the decisions of others.
31 김성원, ‘법경제학 국제법 방법론에 관한 연구’, 33 Hanyang Law Review (2011) 65-84 at 71
32 Dunoff and Trachtman, ‘The Law and Economics’, supra note 19, at 396
33 Cooter and Ulen, Law and Economics, supra note 14, at 97
34 Dunoff and Trachtman, ‘The Law and Economics’, supra note 19, at 396
36 Cooter and Ulen, Law and Economics, supra note 14, at 96
37 Dunoff and Trachtman, ‘The Law and Economics’, supra note 19, at 396
38 For more detail, see C Goetz, Law and Economics: Cases and Materials (West Publishing Company,
39 김성원, ‘법경제학 국제법 방법론에 관한 연구’, supra note 31, at 72
16 improve the understanding of some legal rules and institutions 40
Public Choice Theory 16
Public choice theory applies economic principles to analyze decision-making beyond market contexts, positing that politicians, bureaucrats, and government officials act out of rational self-interest This theory suggests that these actors prioritize their own interests—such as personal power, wealth, and political support—over the welfare of the general public, mirroring behaviors typically observed in the private sector.
Public choice theory offers valuable insights into the behavior of government actors, suggesting that politicians and bureaucrats may trade laws for political support, money, and power This perspective views the legislative process as a microeconomic system, where laws are treated as goods available to the highest bidders.
Why law and economics approach to international law? 16
Why have international lawyers avoided law and economics? 17
Dunoff and Trachtman highlight the discomfort many international legal scholars feel towards economics, citing two main reasons Firstly, there is a general distrust of economic theories and methodologies that are non-normative and
Economic analysis of law does not necessarily require complex mathematical tools, as many relevant issues for international legal scholars can be understood without advanced mathematical skills The modern law and economics approach, particularly through new institutional economics, integrates neoclassical economics with institutional analysis, emphasizing transaction costs, game theory, public choice, and positive political economy This approach highlights the significance of comparing institutions across different systems or countries, and despite criticisms of the law and economics framework, comparative institutional analysis is widely accepted among international lawyers.
In addition to being difficult to access, many critics of economic analysis relate to the matter of political neutrality They argue that the analysis inherently has political biases
The economic analysis of international law explores the intersection of legal frameworks and economic principles, highlighting the implications of legal decisions on economic outcomes This approach, as discussed by Dunoff and Trachtman, emphasizes the importance of understanding how international law can influence economic behavior and policy Additionally, the research by Kim underscores the methodological aspects of applying law and economics to international legal studies, further enriching the discourse in this field.
47 Dunoff and Trachtman, ‘Economic Analysis of’, supra note 46, at 7
48 Ibid; 김성원, ‘법경제학 국제법 방법론에 관한 연구’, supra note 31, at 74
49 Dunoff and Trachtman, ‘Economic Analysis of’, supra note 46, at 7-8
Critics argue that economists adhere to a 'laissez-faire' approach, aligning with either liberal or conservative politics while dismissing government intervention They contend that economic analysis often prioritizes market values, maximizing economic outcomes at the expense of other significant social values Consequently, this perspective suggests that economic analysis fails to recognize or quantify incommensurable social values, effectively subordinating them to economic considerations.
Critics of applying an economic approach to international law often misunderstand its principles, as highlighted by Dunoff and Trachtman They mistakenly believe that economic analysis opposes government intervention and favors the market unconditionally In reality, economic methodologies maintain a neutral stance towards government regulation and market autonomy, focusing on rational choice and efficiency Furthermore, this approach recognizes the validity of government processes and considers key institutional questions, including those related to the market Contrary to claims that economics overlooks non-monetized values, the law and economics framework acknowledges the importance of these values, with politics serving as the primary mechanism for value selection It does not reject the prioritization of political values over economic ones.
The final critique addresses the positivism inherent in economic analysis, highlighting the ambiguous distinction between positive and normative economics A fundamental tenet of law and economics is its emphasis on positivism, which focuses on empiricism and the analysis of reality rather than normative ideals Dunoff and Trachtman note that international lawyers have historically engaged with a form of international legal theory known as "positivist."
50 Dunoff and Trachtman, ‘Economic Analysis of’, supra note 46, at 8
52 김성원, ‘법경제학 국제법 방법론에 관한 연구’, supra note 31, at 74
53 Dunoff and Trachtman, ‘Economic Analysis of’, supra note 46, at 8-9
Critics of international legal positivism argue that the law and economics approach lacks value in addressing international issues While this methodology effectively analyzes existing laws (lex lata), it struggles to propose alternatives for problematic laws and institutions (lex ferenda) Thus, although law and economics can assess the efficacy of current legal frameworks, its limitations hinder the development of solutions for reform.
Critics of positivism in economic analysis often misunderstand its distinction from other forms of positivism, as noted by Dunoff and Trachtman While international legal scholars have historically rejected the Westphalian positivist view, which is linked to a realist perspective, the positivism in law and economics is rooted in methodological individualism This approach emphasizes individual choice, or 'individual sovereignty,' in contrast to the state-centric focus of Westphalian positivism Methodological individualism allows for a clearer examination of cooperation and conflict, highlighting the treaties and institutions that interest international legal scholars Furthermore, this form of positivism enables the analysis of the power and efficiency of international agreements and organizations, identifying issues and potential solutions for improvement Ultimately, a law and economics perspective can serve as a foundation for discussions on 'lex ferenda,' countering the critiques against it.
Applying Law and Economics to International Law 19
56 김성원, ‘법경제학 국제법 방법론에 관한 연구’, supra note 31, at 74
57 Dunoff and Trachtman, ‘Economic Analysis of’, supra note 46, at 10-11
58 김성원, ‘법경제학 국제법 방법론에 관한 연구’, supra note 31, at 74
Law and economics serve as valuable tools for analyzing international legal issues through various economic theories, including price theory, efficient breach hypothesis, transaction cost, game theory, and public choice theory Each theory is explained separately to clarify its application, yet they work in conjunction to provide a comprehensive analysis of international law For instance, price theory underpins cost-benefit analysis and the efficient breach theory, while transaction economics enhances price theory by reflecting real-world conditions in incomplete markets Additionally, game theory offers insights into the strategic behaviors of states in international contexts, framing these interactions as a strategic game.
A law and economics perspective interprets treaties as market prices within a competitive market framework, viewing international conferences and resolutions as platforms for exchanging supply and demand information This approach posits that treaties reflect the preferences of states, achieving 'Pareto Efficiency.' However, it acknowledges the potential for market failure, where Pareto Efficiency may not be realized Despite this, the theory supports a text-based interpretation of treaties, prioritizing the written agreements as a means to maximize party preferences, thus emphasizing the importance of textual analysis in legal interpretation.
Text-based interpretation reinforces the agreements made by treaty parties, assuming these contracts are effective in well-functioning markets for treaties or resolutions This interpretation is further validated by the presence of such a market.
59 See, e.g., Richard O Zerbe, Economic Efficiency in Law and Economics (Edward Elgar Publishing 2001), at 167-174
60 김성원, ‘법경제학 국제법 방법론에 관한 연구’, supra note 31, at 75
A text-based interpretation of legal preferences is often more respected than a court's analogical interpretation, as it encourages states to engage in treaties when authoritative interpreters honor original texts From a law and economics perspective, relying on analogical interpretation through judicial activism is undesirable in the absence of a direct rule applicable to a specific issue.
In its advisory opinion on the legality of nuclear weapons, the International Court of Justice (ICJ) emphasized the significance of text-based interpretation within a law and economics framework The ICJ concluded that there is no specific authorization or comprehensive prohibition of nuclear weapons in either customary or conventional international law This conclusion has faced criticism from international lawyers, particularly regarding the ICJ's non liquet, which is seen as a central issue However, the law and economics perspective suggests that a solution through 'judicial activism' is not advisable Additionally, an argument was made to classify nuclear weapons as poisoned weapons, citing various historical legal documents The ICJ countered this by noting the lack of a clear definition for 'poison or poisoned weapons' in these regulations and highlighted that state practice does not categorize nuclear weapons as such.
61 Dunoff and Trachtman, ‘The Law and Economics’, supra note 19, at 399
62 Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion, ICJ Report (1996) 21
Timothy L.H McCormack, in his article "A non liquet on nuclear weapons," critiques the International Court of Justice (ICJ) for not applying general principles of international humanitarian law to the issue of nuclear weapons He contends that the ICJ's approach represents a significant oversight in addressing the complexities of international law in this context.
66 김성원, ‘법경제학 국제법 방법론에 관한 연구’, supra note 31, at 75
67 Advisory Opinion, supra note 60, at para 54
The ICJ's conclusion in this opinion exemplifies the importance of a text-based interpretation, which is a key focus of the law and economics approach.
Law and economics can effectively predict compliance with international law by utilizing price theory and cost-benefit analysis Compliance is influenced by the "price of breach"; when this price is high, compliance is more likely To determine this price, one must consider both the measure of damages and the institutions responsible for enforcing payment This analytical framework allows for the assessment of the binding force of international treaties and can inform necessary modifications to enhance compliance In cases where international agreements lack sanctions or have ambiguous penalties, expecting high compliance levels is unrealistic By comparing the benefits of compliance against the costs of breaching agreements, a law and economics perspective provides valuable insights for evaluating compliance levels and improving international regulations.
Law and economics applies the theory of efficient breach to assess the compliance and binding nature of international agreements within the domestic contract context This theory posits that when breaching a contract is more efficient than fulfilling it, the law should support such breaches Despite the efforts of contracting parties, courts, and contract law drafters, there are situations where the costs of compliance outweigh the benefits, and these scenarios may not be adequately addressed by existing contract law principles In such cases, a party may choose to compensate the other for the value lost due to non-compliance instead of adhering to the contract.
69 Dunoff and Trachtman, ‘Economic Analysis of’, supra note 46, at 31
70 김성원, ‘법경제학 국제법 방법론에 관한 연구’, supra note 31, at 76
71 For more detail, See Barry E Alder, ‘Efficient Breach Theory Through the Looking Glass’, 83 New York
University Law Review (2008) 1679-1725; Eric A Posner and Alan O Sykes, ‘Efficient Breach of
International Law: Optimal Remedies, “Legalized Noncompliance,” and Related Issues’, 110 Michigan Law
72 Dunoff and Trachtman, ‘Economic Analysis of’, supra note 46, at 31
Efficient breach occurs when the cost of complying with a contract exceeds the expected benefits, leading parties to breach the contract for greater efficiency This concept, rooted in law and economics, is widely recognized and accepted in contract law across many countries.
Some international legal scholars express skepticism towards the concept of efficient breach, arguing that its acceptance could weaken the treaty regime and diminish states' sincere compliance with international treaties The principle of pacta sunt servanda, which emphasizes the importance of treaty obedience, is traditionally viewed as a cornerstone of international law If efficient breach is prioritized due to a state's immediate interests, it threatens to undermine this fundamental rule, making sustained cooperation between states through treaties more challenging.
The objection regarding contract adherence is prevalent both internationally and domestically, as the belief in contract enforcement is fundamental Contracts hold significant importance, but when the likelihood of breach is anticipated and liability is evident, the theory of efficient breach can be effectively applied This theory is particularly beneficial in scenarios where effective dispute resolution and clear, easily monetized remedies for damages are assured, thereby facilitating a state's engagement in contracts A pertinent example of this application in international law is the GATT/WTO escape clause According to the WTO Dispute Settlement Understanding, if a WTO dispute panel or the Appellate Body finds a measure inconsistent with the GATT, it will recommend that the concerned Member align the measure with the agreement.
73 Posner and Sykes, ‘Efficient Breach of International Law’, supra note 71, at 257-258
74 Trachtman, The Economic Structure, supra note 19, at 142
75 김성원, ‘법경제학 국제법 방법론에 관한 연구’, supra note 31, at 76
76 For more detail, see, Joost Pauwelyn, Optimal Protection of International Law: Navigating between
European Absolutism and American Voluntarism (Cambridge University Press, 2012)
77 Dunoff and Trachtman, ‘Economic Analysis of’, supra note 46, at 32
78 Ibid; 김성원, ‘법경제학 국제법 방법론에 관한 연구’, supra note 31, at 77
79 See Alan O Sykes, ‘Protectionism as a “Safeguard”: A Positive Analysis of the GATT “Escape Clause” with Normative Speculations’, 58 University of Chicago Law Review (1991) 255-306
According to the dispute settlement body's conclusion, a member state is required to align its measures with the agreement by either amending or retracting any inconsistent actions However, if the state compensates for damages resulting from the non-compliant measure, it may retain the measure Thus, the state can avoid making changes to the offending measure by providing compensation or accepting retaliation authorized by the WTO to restore compliance.
The concept of 'the balance of negotiated concessions' highlights that while escaping obligations of international treaties should not be a common practice to strengthen their normative force, the law and economics analysis provides valuable insights This analysis can encourage more states to engage in treaties and help in creating effective dispute settlement procedures.
A law and economics perspective highlights the role of transaction cost economics in understanding the success or failure of international contractual arrangements between states Transaction costs, which include expenses related to negotiation, arrangement, monitoring, and enforcement, significantly influence these agreements Unlike domestic contracts, international agreements face even higher transaction costs due to their inherent complexity, uncertainty, and the involvement of multiple states Therefore, a comprehensive understanding of international agreements necessitates an awareness of both the benefits and the transaction costs associated with them.
Compliance Theory 27
As the part II explains, law and economics can be a useful methodology of
99 Cass, ‘Economics and International Law’, supra note 96, at 509
Dunoff and Trachtman discuss the intersection of law and economics, emphasizing its significance in understanding legal frameworks Similarly, Kim Seong-won explores methodological approaches in international law through the lens of law and economics, highlighting its relevance in contemporary legal studies.
101 Dunoff and Trachtman, ‘The Law and Economics’, supra note 19, at 404-405
102 Vienna Convention on the Law of Treaties, 23 May 1969, in force 27 January 1980, 1155 UNTS 331
103 Dunoff and Trachtman, ‘Economic Analysis of’, supra note 46, at 33-36
This paper explores why states comply with international law through the lens of law and economics, which is crucial for understanding the challenges within international human rights law By identifying the key conditions that drive state compliance and comparing them to the circumstances of the international human rights regime, we can more clearly identify the issues at hand and potential starting points for improvement Additionally, this section aims to provide a theoretically coherent and logical explanation of compliance, suggesting a law and economics approach While numerous theories exist regarding compliance with international law, they often fall short of offering a comprehensive and logical framework This part will review these previous theories and highlight their limitations.
Previous Studies 28
International Relations Theories 35
Despite efforts to maintain or enhance its influence over treaty regimes, a state's decisions may not always align with its interests The examples provided do not demonstrate the internalization of international legal norms; rather, they stem from a cost-benefit analysis Research by Posner indicates a lack of substantial evidence supporting the transnational legal process theory within the United States Supreme Court.
Transnational legal process theory faces two significant challenges First, it questions the circumstances under which international legal norms take precedence over a state's self-interest, as there is no clear rationale for prioritizing compliance with international law over domestic institutional interests Second, varying domestic institutions with distinct interests may adopt different stances on treaty compliance, complicating the theory's ability to explain state adherence to international agreements Consequently, without a clear understanding of how and why domestic institutions internalize international legal norms, and how this internalization fosters compliance, the transnational legal process theory lacks convincing power.
Classical realism posits that international law has little to no impact on state behavior, as realists are skeptical of international norms like sovereign equality, self-determination, and non-intervention They argue that a state's actions are primarily driven by its geopolitical interests, with compliance to international law occurring only when it aligns with those interests Furthermore, international law is often created and adhered to when it benefits powerful states, which may coerce others into acceptance and compliance.
149 Jack L Goldsmith and Eric A Posner, The Limits of International Law (Oxford University Press, 2005), at104
150 See Eric Posner, ‘Transnational Legal Process and the Supreme Court's 2003-2004 Term: Some Skeptical
Observations’, 12 Tulsa Journal of Comparative and International Law (2004) 23-37
151 Goldsmith and Posner, The Limits of International Law, supra note 149, at105-106
152 Guzman, ‘A Compliance-Based Theory’, supra note 114, at 1836
36 law is mostly a concomitant phenomenon 153
Neo-realism, also known as structural realism, evolves from classical realism while broadening its focus beyond mere international power It maintains the view of states as unitary actors, utilizing concepts from game theory and economics Kenneth Waltz posits that states primarily seek their own preservation and, at their most ambitious, strive for universal domination In this framework, adherence to international law is not due to its effectiveness but rather stems from the alignment of international law with the self-interests of states within an anarchic international society.
Despite realism's dominance in post-World War II academic and policy discussions, it struggles to effectively explain the complexities of the international landscape, revealing its theoretical weaknesses Notably, realism fails to account for the significant investments states make in international treaties and organizations, such as the extensive resources dedicated to the Uruguay Round for the World Trade Organization and the United Nations Convention on the Law of the Sea Additionally, states actively engage in shaping customary international law across various domains, including investment, human rights, and environmental law, contradicting the realist assertion that international law is inconsequential Furthermore, realism does not adequately address why states accuse others of violating international law or why those accused seek to refute such claims The successful operation of international dispute settlement mechanisms in resolving global issues further undermines the core tenets of realism.
153 For more detail, see Edward H Carr, The Twenty Years’ Crisis 1919-1939: An Introduction to the Study of
International Relations (Perennial, 2001); Hans J Morgenthau, ‘Positivism, Functionalism, and International
Law’, 34 American Journal of International Law (1940) 260-284
154 Kenneth N Waltz, Theory of International Politics (Addison-Wesley, 1979), at 118
155 See Joseph M Grieco, Anarchy and the limits of cooperation: A Realist Critique of the Newest Liberal
156 Guzman, ‘A Compliance-Based Theory’, supra note 114, at 1837
Liberalism, a significant theory in international relations, posits that individuals and domestic groups are the primary actors in international dynamics, rather than states themselves This perspective emphasizes the importance of domestic political processes in shaping state behavior and compliance with international law Prominent liberal theorists like Andrew Moravcsik and Anne-Marie Slaughter highlight that societal ideas, interests, and institutions play a crucial role in influencing state preferences and actions Moravcsik notes that these factors shape the fundamental social purposes behind governmental strategies Furthermore, from a liberal viewpoint, a state's compliance with international norms is often contingent upon its liberal nature, with Slaughter suggesting that liberal states are more likely to amicably resolve disputes among themselves.
Liberal states are characterized by representative governments, the protection of civil and political rights, and judicial systems committed to the rule of law According to Slaughter, the extent to which a state adheres to international law is influenced by its domestic liberal structure.
Liberalism offers valuable insights into government actions; however, its intricate model, which emphasizes domestic structures and overlooks unitary state actors, presents significant challenges Compliance assessment in liberalism relies heavily on the complexities of domestic politics, including the intricate relationships among institutions and political situations This complexity hinders the establishment of a general theory to explain state compliance with international law Consequently, while liberalism can elucidate instances of compliance, it falls short as a comprehensive model for predicting such behavior.
159 See Andrew Moravcsik, ‘Taking Preferences Seriously: A Liberal Theory of International Politics’, 51 International Organization (1997) 513-553; Anne-Marie Burley, ‘Law among Liberal States: Liberal
Internationalism and the Act of State Doctrine’, 92 Columbia Law Review (1992) 1907-1996; Anne-Marie Slaughter, ‘International Law in a World of Liberal States’, 6 European Journal of International Law (1995) 503-538
160 Moravcsik, ‘Taking Preferences Seriously’, supra note 159, at 513
161 Burley, ‘Law among Liberal States’, supra note 159, at 1916-1922
162 Slaughter, ‘International Law in a World of Liberal States’, supra note 159, at 511
163 Oona A Hathaway, ‘Do Human Rights Treaties Make a Difference?’, 111 The Yale Law Journal (2002) 1935-2042, at 1953
Institutionalism is the third theory of international relations, emphasizing a decentralized model of state interaction in an anarchic world Like realism, it views the state as the primary rational actor driven by self-interest However, institutionalism differs by asserting that international cooperation is achievable, facilitated by international institutions that reduce transaction costs and promote repeated interactions States comply with international law as it aligns with their interests and fosters cooperation, although most international relations scholars do not prioritize international law in their analyses Additionally, institutionalists may misinterpret Coase's ideas, suggesting that institutions are beneficial in all instances of "market failure."
Law and economics approach to compliance 38
Simple Models of Cooperation 39
The initial model of state cooperation is termed 'coincidence of interest,' as described by Goldsmith and Posner This model illustrates a behavior pattern where each state pursues its self-interest independently of the actions of others In this framework, states derive private benefits from their actions, regardless of the decisions made by other states Essentially, the model operates under conditions where all participants are motivated to comply and lack incentives to deviate from the agreed actions.
Suppose that two countries established a treaty in order to prohibit satellite-based
171 Goldsmith and Posner, The Limits of International Law, supra note 149, at 12
The development of satellite-based weapons systems is hindered by immature technology and prohibitive costs, making them ineffective Consequently, even in the absence of treaty obligations, neither country is likely to pursue the development of such weapons.
In Figure A, if both countries violate the obligation of treaty, they obtain worse payoff
(4) because they expended resources on the untrustworthy weapon system Conversely, if both countries comply with the treaty, they can obtain the maximum possible payoff (10)
In a scenario where Country 1 violates a treaty while Country 2 complies, Country 1 incurs losses due to wasted resources, and Country 2 also experiences setbacks as it prefers not to allow its adversary access to a potentially unreliable weapon system Therefore, compliance emerges as the optimal strategy for both nations, as each can achieve the highest possible payoff by adhering to the treaty, irrespective of the actions taken by the other country.
The second model, known as 'coercion', involves one state or a coalition of states compelling other states to undertake specific actions that align with the interests of the coercing state or states.
173 The first entry in each cell represents the payoff to Country 1 while the second entry represents the payoff to Country 2
174 Guzman, ‘A Compliance-Based Theory’, supra note 114, at 1843
41 suppose that a big and powerful state can make threats to punish a particular action, action
X, conducted by a small and weak state, and the cost of punishment is insignificant The weak state has two options to act whether it does action X or not Then, the powerful state responds by punishing the weak state or not If the weak state does not conduct the action
X, the powerful state will obtains its highest benefits The weak state can obtain higher benefits if it does not conduct the action X and it can avoid from punishment than if it conducts the action X and is punished In equilibrium, the weak state does not conduct action X, and the powerful state does not punish the weak state Thus, the threat of punishment by a powerful state can affect a weak state behaviour and be most credible when the cost of the punishment is low 175
Under current international law, treaties obtained through coercion, threats, or the use of force are considered void A notable historical example is the 1919 Treaty of Versailles, where Germany was compelled to cede power to the Allied countries, entering the agreement under duress Similarly, the Trade and Investment Framework Agreement between the US and Afghanistan illustrates coercion, as Afghanistan's decision to engage in the treaty was heavily influenced by its urgent need for US support, undermining the notion of free choice Additionally, the Hay-Bunau-Varilla Treaty of 1903 serves as another example of a treaty formed under coercive circumstances.
The treaty granted the United States control over the Panama Canal Zone and the authority to build the Panama Canal At that time, Panama had recently declared independence from Colombia and sought U.S aid and protection against Colombia, creating a coercive situation that facilitated the treaty's establishment.
‘granted the US one of the most valuable property rights in the world’ 178
The third model is ‘pure coordination’ The pure coordination game is that there are incentives to cooperation between states, but to achieve the cooperation, the states
175 Goldsmith and Posner, The Limits of International Law, supra note 149, at 28-29
176 Art 51-52, Vienna Convention on the Law of Treaties, supra note 102
177 Guzman, How International Law Work: A Rational Choice Theory (Oxford University Press, 2008), at 60
In a pure coordination game, states focus on aligning their interests, but unlike the coincidence of interest model, the optimal action for each state is influenced by the actions of the other state.
In the game illustrated in Figure B, if Country 1 chooses action X, Country 2 will also choose action X, and similarly, if Country 2 opts for action Y, it will continue with action Y This results in two equilibria where both countries engage in the same actions: (X, X) and (Y, Y) Once the countries coordinate on either action, neither has an incentive to deviate However, the challenge arises from Country 1's uncertainty regarding Country 2's expected action, complicating its decision between actions X and Y This randomness in initial choices hinders cooperation, preventing both countries from fully reaping the benefits of coordination.
International law plays a crucial role in facilitating coordination among countries by guiding their initial actions In a pure coordination game, when two countries reach an agreement and communicate their first actions, they can effectively coordinate and maximize the benefits of their collaboration The primary challenge in a pure coordination game is the initial action dilemma, which international law helps to address.
180 Goldsmith and Posner, The Limits of International Law, supra note 149, at 32
International agreements on air travel and safety regulations are essential for harmonizing standards across countries These coordinated rules significantly reduce costs, as a single flight often traverses multiple nations If aircraft in one country adhere to different safety regulations than those in another, it can lead to increased air travel expenses.
While international law can facilitate coordination, it does not play a significant role in fostering cooperation or compliance in pure coordination games States can effectively address coordination problems through informal methods such as memoranda, letters, or meetings, which allow them to share information and align on preferred actions Since states aim to achieve mutual benefits at lower costs, they often favor these simpler forms of communication over formal agreements Once states have coordinated their initial actions, international law has little impact on their behavior, as demonstrated in coordination games where countries have no incentive to deviate from their agreed actions Ultimately, cooperation in pure coordination games relies more on the alignment of states' interests than on international law, making the latter's role relatively insignificant.
The fourth model of simple cooperation is another type of coordination game, called as
‘Battle of the Sexes’ game As similar to pure coordination game, in battle of the sexes
182 For examples, The Convention for the Unification of certain rules relating to international carriage by air,
12 October 1929, in force 13 February 1933; The Convention for the Unification of Certain Rules for
The International Carriage by Air Convention, effective from November 4, 2003, was established on May 28, 1999 The Convention on International Civil Aviation, which came into force on April 4, 1947, was signed on December 7, 1944 Additionally, the Convention on Offences and Certain Other Acts Committed On Board Aircraft was enacted on December 14, 1963, and took effect on December 4, 1969 The Convention for the Suppression of Unlawful Seizure of Aircraft, effective from October 14, 1971, was signed on December 16, 1970 Lastly, the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation was established on September 23, 1971, and came into force on January 26, 1973.
183 Guzman, How International Law Work, supra note 177, at 26-27
In a 44 game scenario, both countries are motivated to coordinate their actions, leading to two distinct equilibriums Once an equilibrium is established, neither country has an incentive to deviate from it However, unlike a pure coordination game, one country may gain greater benefits in the first equilibrium, while the other may benefit more in the second This indicates that each country has a unique incentive to coordinate in different equilibriums.
Prisoner’s Dilemma 45
In real world, most international issues are more difficult to solve than above
187 Guzman, How International Law Work, supra note 177, at 29
188 Posner and Sykes, Economic foundations of International Law, supra note 27, at 36
189 Guzman, How International Law Work, supra note 177, at 28-29
Most international cooperation models resemble simple cooperation games, which would suggest a higher level of cooperation across various international issues and a limited role for international law However, many international issues governed by international law are complex, often due to conflicting state interests To truly assess the value of international law and its capacity to foster cooperation, it is essential to analyze its effectiveness in challenging circumstances If international law can facilitate cooperation in these scenarios, it demonstrates a significant influence on state behavior.
The prisoner’s dilemma, illustrated in Figure D, represents a challenging cooperation model where players make decisions independently without communication In this one-shot game, if both countries cooperate, they each receive a payoff of 3, totaling 6 However, if one country cooperates while the other defects, the defecting country gains a higher payoff of 4, leaving the cooperating country with only 1, resulting in a total of 5 If both countries choose to defect, they each receive a payoff of 2, summing to 4 Despite the potential for greater collective benefit through cooperation, the strategic inclination for each country is to defect, as defection consistently yields a higher payoff regardless of the other country's choice.
In the context of international relations, Country 2's dominant strategy is to defect regardless of Country 1's actions Similarly, Country 1 also opts for defection to avoid the worst-case scenario Consequently, both countries end up in a less favorable situation by defecting against each other compared to what they would have achieved through cooperation.
In the classic prisoner's dilemma, the outcome of a one-shot game typically leads both players to defect, resulting in a failure of cooperation International law is unable to alter this outcome or influence state behavior, as agreements are merely exchanges of promises In the absence of a central authority, such as courts or police, these agreements lack impact Consequently, compliance arises not from the agreement itself but from alternative motivations Given that agreements cannot fulfill their intended purpose, rational states are unlikely to engage in such agreements.
Repeated Prisoner’s Dilemma 47
The classic prisoner’s dilemma, where international agreements have no impact and states choose to defect, fails to accurately represent the complexities of the real international landscape Unlike the traditional model, countries can communicate and interact with one another, allowing for strategic decision-making Additionally, the real-world scenario is not a one-time game; states engage in repeated interactions, enabling them to respond to each other's actions over time This means that if one state defects, the other can retaliate in subsequent rounds Furthermore, information regarding compliance or defection is often accessible, which alters the dynamics of the game These factors transform the classic prisoner’s dilemma into a more nuanced version, where cooperation can be achieved through international law, leading to efficient equilibria.
In the repeated prisoner’s dilemma game, there are many different strategic choices,
191 Posner and Sykes, Economic foundations of International Law, supra note 27, at 28-29
192 Guzman, How International Law Work, supra note 177, at 32
194 See Trachtman, The Economic Structure, supra note 19, at 83-84; Posner and Sykes, Economic foundations of International Law, supra note 27, at 29-30
195 Trachtman, The Economic Structure, supra note 19, at 84
In the context of the repeated prisoner's dilemma, strategies like grim trigger and tit-for-tat lead to multiple equilibriums, reflecting plausible responses to defection The grim trigger strategy involves Player 1 starting with cooperation and continuing until Player 2 defects; thereafter, Player 1 will defect indefinitely For instance, if Country 1 adopts the grim trigger strategy while Country 2 consistently defects, Country 2's payoffs will be (4), (2), (2), (2), etc., while Country 1's payoffs will be (1), (2), (2), (2), and so on, as it retaliates by defecting in subsequent rounds Unless Country 2 significantly discounts future payoffs compared to the immediate gain from defection, it is unlikely to choose to defect Despite the potential for defection to undermine cooperation in future rounds, the grim trigger strategy serves as a viable means of fostering cooperation through retaliation.
The tit-for-tat strategy is a prominent approach in the context of the repeated prisoner’s dilemma, where player 1 responds to player 2's defection with a defection of their own If player 2 opts to defect in the first round, player 1, who prefers the tit-for-tat strategy, will retaliate by defecting in the second round if player 2 cooperates initially Conversely, if player 2 cooperates in the first round, player 1 will continue to cooperate until player 2 defects This strategy is characterized by its forgiving nature, unlike the grim trigger strategy, which is more punitive Therefore, if player 2 defects in the first round but cooperates in the second, player 1 will reciprocate with cooperation in the third round However, even with both players adopting the tit-for-tat strategy, there remains a risk that cooperation may ultimately fail.
In a game scenario, Player 1 maintains cooperation while Player 2 accidentally defects In the third round, Player 1 retaliates with a defection using a tit-for-tat strategy, while Player 2 continues to cooperate However, in the fourth round, Player 1 shifts back to cooperation due to Player 2's previous cooperation, but Player 2 responds by defecting, influenced by Player 1's earlier defection Consequently, following the second round, where Player 2's defection was unintentional, both players' strict adherence to the tit-for-tat strategy leads to a cycle of alternating cooperation and defection.
197 Posner and Sykes, Economic foundations of International Law, supra note 27, at 29
198 Trachtman, The Economic Structure, supra note 19, at 85
The tit-for-tat strategy can effectively promote cooperation in the repeated prisoner's dilemma, despite the potential for failure This strategy enforces consequences for defection, as any player who defects will face retaliation in subsequent rounds Additionally, its forgiving nature encourages players to shift from defection to cooperation, fostering a more collaborative environment Thus, the tit-for-tat approach serves as a viable mechanism for enhancing cooperative behavior among participants.
In addition to strategies like grim trigger and tit-for-tat, various other approaches can establish equilibria of cooperation or defection in repeated games Game theory indicates that cooperation is feasible when the game lacks a definitive endpoint and players maintain low discount rates, ensuring that immediate gains from defection do not overshadow the long-term benefits of cooperation Consequently, the analysis of the repeated prisoner's dilemma suggests that sustained cooperation between nation-states can be achieved over time.
Role of International Law 49
In the context of the repeated prisoner’s dilemma, which mirrors real international issues, international law plays a crucial role in facilitating cooperation among states By utilizing customary international laws and treaties, states can focus on specific equilibria amidst multiple options This focus helps establish a commonly recognized equilibrium that players are likely to expect and implement Furthermore, clear definitions of defection and established rules of the game are essential, as mutual defection poses significant challenges Without these clear guidelines, the costs associated with defection can escalate, undermining cooperation efforts.
199 Posner and Sykes, Economic foundations of International Law, supra note 27, at 29
202 Roger B Myerson, Game Theory: Analysis of Conflict (Harvard University Press, 1991), at 371
203 Trachtman, The Economic Structure, supra note 19, at 87-88
204 Posner and Sykes, Economic foundations of International Law, supra note 27, at 30
The increase in disputes over the definition of defection highlights the importance of international law in minimizing costs associated with such conflicts By facilitating closer communication between states, international law enables easier identification of defection as a form of punishment States engaged in international agreements maintain strong relationships, where any plans for defection are subject to public scrutiny and debate, making defection more challenging Furthermore, enhanced communication can shorten the duration of negotiations, thereby diminishing the short-term benefits of defection.
The interactions between states and the influence of international law facilitate cooperation, as states recognize its value both now and in the future International law serves as a guiding framework that simplifies cooperation among nations This dynamic introduces three fundamental costs, known as the "three Rs of compliance" with international law: reciprocity, retaliation, and reputation Understanding these costs is essential to grasp how international law functions and why states choose to comply with it.
The Three Rs of Compliance 50
Reciprocity is responses to defections by other states and will often be operated
States may choose to leave or violate their international obligations when their interests are not met due to violations by other states, acting without the intent to sanction the violator In such cases, reciprocal actions do not impose costs on the responding state; rather, they reflect a modification of behavior driven by the need to maximize benefits in light of new circumstances or information According to Keohane, reciprocity involves exchanges of roughly equivalent values, where each party's actions depend on the prior actions of others.
207 Guzman, How International Law Work, supra note 177, at 32
51 way that good is returned for good, and bad for bad’ 210
Reciprocity serves as an effective measure for fostering cooperation among sovereign states It can enhance compliance under favorable conditions In the context of the repeated prisoner's dilemma, where reciprocity is effectively applied, it often leads to successful cooperation.
International treaties between Country 1 and Country 2 involve significant transaction costs related to negotiation, administration, enforcement, monitoring, and modifications, which can impede the formation and adherence to these agreements As illustrated in Figure E, the transaction costs associated with mutual cooperation (T) are greater than those from partial cooperation (t), indicating that T > t The game theoretic analysis of the repeated prisoner’s dilemma suggests that mutual violations and the threat of reciprocal reactions can foster cooperation A key factor in the treaty's success is Country 1's ability to threaten its own violation or withdrawal if Country 2 fails to comply with the terms.
210 Robert O Keohane, ‘Reciprocity in International Relations’, 40 International Organization(1986) 1-27, at 8
212 Todd Sandler, Treaties: ‘Strategic Considerations’, 1 University of Illinois Law Review(2008) 155-179, at
Mutual compliance in international agreements is upheld by the credible threat of non-performance The potential for termination or mutual violations can motivate states to adhere to these agreements, as the immediate benefits of a one-time violation must be outweighed by the long-term advantages of mutual compliance.
Retaliation refers to the actions taken by states in response to violations by others, distinguishing it from reciprocity by the costs it imposes on the retaliating state If a response incurs no costs, it is merely reciprocal non-compliance States resort to retaliatory sanctions to punish violators and encourage compliance with international obligations, while also signaling the consequences of violations to deter future misconduct Retaliatory measures can take various forms, including economic sanctions, treaty termination, and, in extreme cases, military force For instance, under WTO law, a state may impose trade sanctions if another state fails to comply with dispute resolution.
213 Guzman, How International Law Work, supra note 177, at 43
218 Art 22, Understanding on Rules and Procedures Governing the Settlement of Disputes, supra note 77
An international treaty creates obligations between Country 1 and Country 2, as illustrated in Figure F In this context, transaction costs (T) for Country 1 are greater than those (t) for Country 2 Retaliation incurs costs for both the violating and retaliating states, with the costs for the violator (R) potentially exceeding those for the retaliator (c) If the costs for the retaliating state (c) surpass the costs for the violating state (R), retaliation will not be pursued For retaliatory sanctions to be effective, Country 2 must derive greater benefits from violation (4-t-R) than from mutual compliance (3-T); otherwise, compliance with international obligations will be achieved.
According to Guzman, a state's reputation is shaped by judgments of its past behavior and predictions regarding future compliance This reputation can act as a sanction, imposing costs on states that fail to comply with international law, although these reputational sanctions are not meant to serve as punishment When a state adheres to international legal obligations, it signals its commitment to these norms, influencing the behavior of other states A state that consistently complies with international law builds a positive reputation, while one that frequently violates its obligations develops a negative reputation.
A strong reputation can transform into future value, enhancing the credibility of promises and facilitating cooperation States with a history of compliance are more likely to attract partners when seeking cooperative agreements, enabling them to demand greater concessions and encourage compliance from others In the complex landscape of international relations, states face limited information and challenges in predicting future payoffs and the actions of other states.
219 Guzman, How International Law Work, supra note 177, at 33
A state's reputation significantly influences its willingness to adhere to international legal obligations When a state fails to comply with these obligations, it risks damaging its credibility and reputation, leading to perceptions of being an "unreliable partner." Consequently, a state with a tarnished reputation may face challenges in future cooperation and miss out on the benefits that come from collaboration with other nations.
A good reputation can lead to higher payoffs, while a bad reputation increases the costs of violations, motivating states to uphold their international obligations In the context of an international treaty between Country 1 and Country 2, transaction costs (T) are higher than those of mutual cooperation (t) A strong reputation can lower these transaction costs through enhanced negotiation, enforcement, and monitoring, represented as (T-r) Reputation impacts both cooperation and violations, with (+R) indicating the benefits of a good reputation and (-R) the costs of a bad one If both countries adhere to the treaty, they can reduce transaction costs to (T-r) and gain additional benefits (+R) However, if only one country complies, the dynamics change significantly.
In the context of international relations, Country 1 can enhance its reputation through cooperation, even if the immediate benefits are minimal, while Country 2 incurs greater costs due to a tarnished reputation from violations When one country adheres to agreements and the other does not, the disparity between the payoffs from violation and cooperation is less pronounced than in the traditional Prisoner’s Dilemma Reputation and reputation sanctions play a crucial role in diminishing the rewards of violations and amplifying the benefits of cooperation, ultimately lowering transaction costs associated with mutual cooperation Therefore, reputation serves as a significant motivator for compliance among nations.