Sovereignty as Responsibility

Mégret's project is based on the premise that international law shapes and molds states’ power. According to Mégret, international law serves as the “external . . . constitution of the . . . sovereign subject.”Footnote ³ To substantiate this point, and, more specifically, to outline the limits imposed by international law on privatization, Mégret refers to several doctrines that insist on state monopoly in the recourse to force.Footnote ⁴ Mégret is correct in highlighting such doctrines for the principled argument: key norms of international law reflect a keen interest in maintaining effective and stable governmental authority within the state. What is less certain is whether all those doctrines were equally intended to address the issue of privatization. Some were in fact designed to consolidate governmental authority and protect the bourgeoisie against domestic challengers to the social order.Footnote ⁵

Mégret is right to dwell on state responsibility as a key concept in delineating inherent state functions. This emphasis echoes a foundational approach to international law that refers to sovereignty not only as a right but also as entailing responsibility. Famously articulated by Max Huber in the Island of Palmas award,Footnote ⁶ that approach envisions international law as “divid[ing] between nations the space upon which human activities are employed, in order to assure them at all points the minimum of protection of which international law is the guardian.”Footnote ⁷ Probably the primary responsibility is to exercise sovereign authority: “Territorial sovereignty . . . involves the exclusive right to display the activities of a State. This right has as corollary a duty: the obligation to protect within the territory the rights of other States.”Footnote ⁸ Huber immediately follows by stating what can be helpful in outlining the limits of privatization. According to Huber, “[w]ithout manifesting its territorial sovereignty in a manner corresponding to circumstances, the State cannot fulfil this duty.”Footnote ⁹

Importantly, the “manifestation” of sovereignty “in a manner corresponding to circumstances” is not only designed to protect the rights of other states. Huber believes that international law, and the states system it generates, ultimately serves individuals and promotes justice among them. Accordingly, in the British Claims in the Spanish Zone of Morocco award,Footnote ¹⁰ he explains state responsibility as required to prevent “injustices that amount to the negation of the human personality.”Footnote ¹¹

The key, then, is to inquire how states should “manifest” their territorial sovereignty in a manner that would correspond with their responsibility to other nations and to justice among individuals and communities. What are the circumstances that require states to act as sovereign, rather than rely on private actors (or other non-state actors, including international organizations)? This perspective yields a possible first line of inquiry into the limits of privatization: privatization must not diminish the sovereign's ability to meet its international responsibilities and compromise the law's aspirations for justice among individuals and communities.

In seeking a response to this query, Mégret identifies a clue to the answer: the Montevideo Convention's definition of statehood, which insists on the existence of a “government.” This is immensely fruitful, because the Montevideo formula identifies the necessary traits of the unique entity that is worthy of being allocated the authority and the responsibility to govern territorial space. Why is it that only entities that exercise government over a population within a certain territory enjoy this exclusive right? The answer, probably, is that such entities are more likely than all others to identify and promote the interests of the populations they govern in light of the resources that are available to them. That rootedness holds the promise that such entities will manage “the space upon which human activities are employed”Footnote ¹² in a relatively stable and sustainable manner. Unlike private corporations that can effortlessly relocate once they are done plundering the natural resources of areas they exploit, having immiserated the local population, governments exercising control over their population within their territory are more likely to be invested in their population's long-term welfare—and hence more likely to serve as reliable agents of humanity.Footnote ¹³

This leads to a possible first limitation on privatization that is refracted in the doctrine: a state may not privatize governmental tasks and services in ways that might undermine its responsibility to serve its citizens and humanity at large in a stable and sustainable manner.

Sovereignty as the Embodiment of Personal and Collective Self-Determination

Mégret rightly searches for another ground for limits on privatization, one that is not based on reasons of functionality. He elaborates on what may be called “the right to the state,” namely, the right to benefit from public rather than private decision-making processes, such as the right to public proceedings, rather than having one's rights determined by private arbitrators. While this right might indeed be derived, as Mégret suggests in his inductive approach, from specific human rights, such as the right to a fair trial, it may also find more general support in the broad notion of “government of the people, by the people,”Footnote ¹⁴ derived in turn from the right to individual and collective self-determination.

As Doreen Lustig and I have suggested, following the writings of John Stuart Mill,Footnote ¹⁵ privatization carries direct consequences for democracy. Every delegation of authority away from the public carries two potentially adverse consequences: the shrinking of the space for public deliberation, and the reduced capacity of voters to monitor private actors due to weak accountability mechanisms that private actors are traditionally subjected to:Footnote ¹⁶ “The public is demoted to an on-looker, able at the most to monitor and to comment on the company's practice, but never part of those who decide.”Footnote ¹⁷ Following Mill's metaphor of the omniscient and well-meaning “Good Despot,” we suggest that even if the private actors performed like “good private despots,” they would still deny the voters’ voice and agency. Hence it is necessary to ensure that privatization does not undermine robust democratic processes that protect individual and collective self-determination, by putting limits to it or by complementing it by remedial procedures that secure the effective participation of all those affected by it.Footnote ¹⁸

A similar conclusion about the need to ensure voice and accountability may be derived from another foundational precept of international law, the idea of human dignity. For Immanuel Kant, human dignity meant treating every person not merely as a means, but also a purpose. As he observed, most probably in reference to the American Revolution (and obviously inspired by the French one), only in an organized state with functioning “legal authorities, etc.” can this categorical imperative become the governing norm.Footnote ¹⁹ It is the publicness of the decision-making processes, and public checks and balances, that can ensure that even “a race of devils” can commit itself to following the universal law.Footnote ²⁰

These observations about the requirements of publicness of decision-making processes as a prerequisite for securing personal and collective self-determination yield a second limitation on privatization: a state may not privatize governmental tasks and services that might undermine human agency and deplete the space for public deliberation. In addition, private regulation must remain subject to effective public scrutiny.

The Inherent Public Functions of International Regulation

The convincing focus on the role of international law in identifying core sovereign functions holds important conclusions beyond the immediate question of delegating state functions to private actors. The same concerns—of relying on irresponsible and unaccountable actors—cast a shadow over international law's own practice of relying on non-state actors to perform public functions, and more generally, in facilitating the processes through which private actors dominate decision-making within international organizations (IOs).Footnote ²¹ International law is often part of the problem of suppressing public control of private regulation. As Doreen Lustig has shown, from the late nineteenth century, international law has served as an effective tool for private corporations to hide their activities from public scrutiny.Footnote ²² And Melissa Durkee has observed that international lawmaking processes open up ways for business actors to shape policies without accountability.Footnote ²³ One consequence of such private leverage is the replacement of national regulatory authority with international regulation that is prone to pressure by private actors, and is overseen by private adjudication.Footnote ²⁴ The consequences for public welfare can be dire, as demonstrated by the systematic lobbying of the World Health Organization by the pharmaceutic, tobacco, baby-formula, and soft-drink industries.Footnote ²⁵ As Tim Dorlach and Paul Mertenskötter have recently shown, the threat of private dispute settlement by investment tribunals has been used by such industries to chill national regulation.Footnote ²⁶

But international law could also be part of the solution to this problem, facilitating states’ resolve to withstand such pressures by powerful state and non-state actors. Both Mégret's inductive approach and the principles identified above for limiting states’ privatization can be invoked to constrain the delegation of state authority to IOs. Under the approach sketched in this essay, IOs exercising delegated state functions are required to serve the citizenry of the member states and indeed humanity at large in a stable and sustainable manner, while ensuring human agency and providing for effective public participation and scrutiny. Among the several ramifications radiating from these principles would be the obligation of IOs to provide “reasonable alternative means to protect effectively” the internationally recognized human rights of their employees,Footnote ²⁷ to regulate the involvement of lobbyist operating within IOs,Footnote ²⁸ to impose procedural and substantive constraints on their process of decision-making,Footnote ²⁹ and to insist on public adjudication,Footnote ³⁰ and even public review that transcends traditional doctrines on immunities.Footnote ³¹

In other words, through the lens that identifies core sovereign responsibilities, it is possible also to identify core responsibilities of IOs, embedding them in a system of legal obligations, and recognizing continued state responsibility for certain acts or omissions of those organizations that the states are parties to.Footnote ³² The same inquiry becomes pertinent in considering whether there are areas of human activity that states and IOs fail to regulate, and are hence subject to private power. In recent years this question arose in the context of global sports, an area that is subject to systems of private regulation and adjudication.Footnote ³³ Attempts by several athletes to challenge the rules in national and international courts have demonstrated the promise of public intervention in private regulation when the latter is not sufficiently effective in protecting the rights of the athletes.Footnote ³⁴ Obviously many questions result from such public intervention in private regulation—such as how much deference private regulators should have, or whose norms and perspectives should inform the public actors that scrutinize them—but the hope is that the discussion about the limits of privatization will spur greater attention to these matters. Indeed, it is high time for international law to address the pressing question of, “what are inherently public functions of international regulation.”Footnote ³⁵