A.L.C. de Mestral

December, 2003

PART 1

INTRODUCTORY CONSIDERATIONS: PRESENTATION OF INTERNATIONAL REGULATORY REGIMES

Is there a genuine international regulatory regime? International regulation is a concept not easily defined. The primary and secondary rules of European Community Law, governing fifteen and soon twenty-five states, have been described as a new regime of international law neither international nor domestic. Nevertheless, it represents the most dynamic body of modern regulatory activity encompassing more than a single state in the world existence today. Standards set by multinational mutual insurance and reinsurance companies are formally domestic and private in nature, yet they effectively set establish the boundaries the bounds for much private commercial activity and of much public regulatory activity. Activities which cannot be insured are unlikely to be undertaken.

By what standard can one judge the quality or efficiency of international regulations? This issue is even more troublesome than the first. Furthermore this assessment requires agreement on the purpose of international regulations. Currently, there is insufficient agreement on this at the international level. In consequence, the search for consensus requires the identification of an International Community. The Roman maxim ubi societas ibi ius suggests that there can be no true law without a society for it to govern. Yet the central dilemma of all international lawyers is to find and to define an international society. This question is prior to the discussion of regulatory regimes.

What is the international regulator? A number of answers are offered by political science regime theory. The realist school assumes nation-states act internationally to achieve their own purposes. For the policy science Yale school, international law, including international regulations, exists to achieve specific values. For the neo-liberal institutionalist, international relations are best understood through the prism of formal or informal institutions. Finally, the constructivist school believes participation of nation-states in international regimes (formal and informal) shapes not only their interests but their very identity. Legal rules emerge from the interaction of nation-states and private actors in these regimes. A more modern school of international relations concentrates on transnational governance networks. These networks are made up of members of domestic regulatory bodies acting through informal channels. For all but the realist school, law and defined regulatory regimes are more a function of an ongoing process of interaction and change than a finite statement of fixed rules. The international regulatory regime is thus a constant work in progress. The actual regulator in positivist terms is very difficult to define.

Is there a single and unified concept of international regulation? Here, there is greater clarity. It in fact appears that there is no single concept of international regulations. Instead, there seem to be many forms of international regulations. As a result, it is best to develop an analytical framework in function of a series of related but different international regulatory regimes. The concept of a regulation itself is a highly ambiguous. In the Nineteenth Century, regulation was largely achieved by private ordering under private law. Railways were built, thousands of workers employed, cities were constructed, all under a framework of private law. Regulation is often conceived in terms of the modern welfare state. As the Westphalian model of the sovereign state recedes and is replaced, new concepts of regulation emerge with governance functions. Some observers, particularly of commercial relations, profess to see a transnational multi polar international order emerging. This is governed by private ordering, primarily through contract and arbitration, and is the dominant form of governance.

International treaties and international regulations made pursuant to these treaties, and rules of customary international law are presently the source of all or a part of thirty percent of federal legislation. These international instiutions also account for a smaller but significant part of provincial legislation. If one considers the areas of legislative activity involved, such as transportation, communications, trade in goods and services and their standards, as well as health and safety issues, labour standards and human rights, the significance of these international institutions becomes clear. It is also evident that this thirty percent of contemporary legislative activity represents some of the most dynamic work of government (with the exception of taxation).

The material in annexes I, II and III suggests different approaches to classification and analysis of the phenomenon of international regulation. ANNEX I lists different families of treaties entailing regulatory schemes which characterize contemporary public international law. These bodies of law are made up of a large number of related treaties which not only deal with similar subjects and objectives but frequently rely on similar regulatory institutions and techniques. They constitute subsets of international law or distinct legal regimes. Traditionally, students of regime theory base their analysis upon the study of a single area. This annex demonstrates the existence of large subject-driven regulatory regimes, some made up of many hundreds of multilateral, regional and bilateral treaties. In the case of environmental law some 220 treaties; in the case of trade law, well over 250 treaties.

ANNEX II sets out different approaches that may be adopted for the analysis of international regulatory systems. This analysis is more abstract and synthetic than ANNEX I; it attempts to set out the broad categories of regulation in function of overall authority, of legal hierarchy, of international authority, of form, of level and nature of regulatory intervention etc. It also seeks to demonstrate the complementary role of private ordering in international regulation by private ordering. A special place is given to the regulatory experience of the European Community. The object of this annex is to suggest the great variety of approaches that must be taken to gain a full understanding of the complexity of international regulation. If nothing else, this annex demonstrates that there is no single model of international regulation but that there are a great variety of approaches which may be taken.

ANNEX III sets out in columnar form different regulatory regimes in function of the method of regulation. The columns encompass different degrees of obligation from left to right, and different degrees of clarity of commitment by the parties. They attempt to display common methods of regulation. The columns represent a progression in the degree of legal obligation and possibly of effectiveness, although this is not always the case. Clearly a hortatory declaration will not produce the same result as a European Community Regulation. But regime theory shows that an open- ended regulatory system may produce more predictable results compared with a tightly worded treaty. The choice of regulatory systems is thus dictated primarily by result. Thus, there is less emphasis on legally tight and binding obligations. A very striking example of this is found in the historical experience of the EC with regards to the harmonization of laws. The fact that the EC possesses broad authority to impose a common approach to the regulation of a given product or problem, does not mean that the most legally binding approach is the most effective. Respect for differences, and sensitivity to plurality suggests preference for Directives over Regulations. In international terms this would translate to mutual recognition of standards over uniformity, or even the adoption of the 'open ended method of coordination over strictly supervised uniformity.

Annex III also demonstrates the variety of approaches to international regulation. An extraordinary range of methods have been and are currently used in order to regulate. It is not even possible to expect that the same institution or cluster of treaties will continue to use the same techniques over a long period of time. Change is as typical as stability.

The second message of this study is that international regulation is directed to the domestic legal order. The regulation has little effect or meaning if it is not implemented into the domestic regulatory order. The nation-state is thus not only the original and formal maker of the regulatory regime, but the essential agent of enforcement. Indeed, when one realizes that all nation-states do not have equal influence in the actual design of the regime it remains that they must be faithful to its observance.

A.L.C. de MESTRAL, PART 2 :

STRUCTURAL PROBLEMS GIVING RISE TO A GAP BETWEEN CANADA'S OBLIGATIONS AND INTERNATIONAL REGULATORY SYSTEMS

1. International regulation - the Role of Treaties and Customary International Law

International law is composed of treaties. Treaties are formally made legal instruments binding those states which accept them. Rules of customary international law are unwritten and uncodified rules, also binding on all states, but without any requirement of prior acceptance. Arguably, international law is composed of a third body of rules related to customary law: the general principles of law. International regulatory systems are created by treaty. They may incorporate customary rules and custom may be of assistance in their interpretation, but they have to be formally drafted and accepted by states before they become binding.

Customary international law is generally held to be part of the law of all states. The highest courts of the United States and the United Kingdom have reiterated this principle in emphatic terms. Many nation-states establish the principle as a matter of constitutional law. In the US or the UK, the rules of customary international law can be overridden by Parliament or Congress, albeit in clear and express terms. The Supreme Court of Canada, although it has yet to state this principle so emphatically, has suggested the incorporation of customary international law in its decisions. Indeed to suggest the contrary would be to create an enormous void in the Canadian legal order.

The appropriate place for treaties within the domestic legal order is a more complex and ambiguous matter. Some nation-states, such as the Netherlands, by their very constitutions, accord treaties a higher place than ordinary statutes. Others, such as France and Mexico, give treaties a force of law superior to preexisting laws, but leave them subject to subsequent legislative limitation. In the US, the Constitution declares that treaties are 'the supreme law of the land'. This phrase has been interpreted to mean that they are the equivalent to existing legislation at the time of adoption but can be overridden at a later date by act of Congress.

Canada has traditionally taken a reserved and often ambiguous position on the status of treaties, and an even more confusing position on the legislation implementing them. The Constitution Acts are virtually silent on the status of treaties in domestic law, with the small exception of treaties concluded for Canada by the British Empire. Very few of these treaties remain, a notable example being the Boundary Waters Treaty of 1908. The only point on which all courts seem to agree is that without further legislative action, treaties do not form part of the legal system. Where they cannot be enforced in the domestic legal order, they are not directly binding on governments or on private citizens in the sense that they are not invoked before the courts. Even when Canada has declared itself bound by a treaty, this obligation is deemed to exist only at international law. This is binding on Canada in its responsibilities towards other states. Without further legislation, it produces no effects upon either Canadian governments or private citizens.

In order to produce effects in the domestic legal order, a treaty must be 'implemented'. The legislation must clearly be conducted by the appropriate legislative body according to the ordinary division of powers. Any such legislation is subject to change by subsequent legislative act. The principle dichotomy is that even when internationally binding on Canada, a treaty creates no duty for administrators or courts to enforce it within Canada. The only duty of the Canadian Court is to apply Canadian statutes and customary law, not international treaty law. The only circumstance in which there will be recognition of an international treaty is when it is used to assist in interpreting domestic law. Courts may presume that a law implementing a treaty is to be interpreted in conformity with the treaty. Even here, the court is under no clear obligation to do so. The distance between a treaty and its implementing statute may be considerable. Canadian judges and members of administrative tribunals are seldom familiar with international law and the process of treaty making, although this is changing and they have been displaying greater interest in recently.

The issue of judicial recognition is further compounded by legislative issues. Parliament and the provincial Legislatures, when adopting laws to implement treaties, are under no obligation under the Constitution to legislate faithfully to the treaty. These political bodies have no established procedures for the review of legal treaties or the manner in which they should legislate when they are to be implemented. Treaties have been implemented through a wide variety of legislative techniques. Furthermore, Canadian governments enjoy great latitude in the procedures they adopt to deal with the treaty obligations that Canada has contracted internationally. It appears to have been the view of successive federal governments, (perhaps as a result of constitutional disputes with Québec) over the last 20 years, that they are under no obligation to seek authority either for the negotiation or the ratification of a treaty. Successive federal governments have thus used the opportunity to exercise their discretion to ensure respect for the treaty obligations within the country. Where the existing Constution Acts are silent, the Canadian Parliament has given no clear guidance on any of these issues by way of legislation, or even special rules of procedure.

The result of this ambiguity in Canada is a greater distance between treaties and domestic law compared to countries with comparable legal systems and international commitments. Canadian courts have been extremely reluctant to look directly at treaties, rather domestic statutes are used as the basis for decisions. Furthermore, courts in Canada have been reluctant to venture where American, and even the relatively conservative British courts have gone. Parliament, dominated by successive governments which prefer to treat treaties as falling within executive discretion, does not given guidance on this matter in either the Interpretation Act or in the Department of Foreign Affairs and International Trade Act.

The public is left with little to understand the relationship between the international source and certain domestic regulatory regimes. As international regulations increase in number and importance, observers have commented on the 'democratic deficit' allegedly characteristic of international regulatory regimes. This happens even in the context of the European Community, which has a variety of political institutions in which citizens are represented. This dissatisfaction is felt even more where there is no direct citizen representation. There is a strong sense that sovereignty is being eroded with the creation of international regimes. It is argued elsewhere in this paper that this is not necessarily the case, but the public perception is strong. One response which Canada should consider is a greater involvement of elected representatives of in international system building. International regulatory systems are too important to remain in the preserve of governments and public servants.

International regulatory regimes are usually established by treaties. The only exceptions are where the international regulatory regime is based on informal networking of officials or on private action. The situation in Canada, as described above, has not bound courts to give absolute primacy to international treaties. On the contrary their reflex is almost always to look to the statute or to the statutory instruments that is being applied rather than to the treaty that underlies them. In a number of cases, administrative tribunals and courts, including the Supreme Court of Canada, have given primacy to a domestic law rule over what appeared to be the intention expressed in the treaty. The National Corn Growers case involved the issue of the definition of a subsidy under the Special Import Measures Act, implementing the 1979 GATT Subsidy Code. It was adopted to provide a standard approach to the assessment of countervailing duties against goods imported at lower prices due to the subsidy. Before the Canadian Import Tribunal, and again before the Federal Court of Appeal the discrepancy between the statute and the treaty was discussed. Despite strong dissenting opinions, the majority decided to give primacy to the statute. The Supreme Court of Canada suggested that a treaty might be used to interpret a statute or regulation in the event of ambiguity, but fell far short of holding that a Canadian court had any duty to uphold international treaty law in the face of a clear Canadian statute.

During the SARS crisis earlier in 2003, the World Health Organisation called on Canada to adopt medical screening procedures at Canadian airports. Officials of the Departments of Transport and Health and Welfare questioned the necessity for these procedures and delayed implementation. As a result, a travel advisory was issued by the WHO, damaging the reputation and economy of Toronto. Consider the advantages of recognizing a duty to give effect to the WTO request. Such requests are not made lightly and are issued from a perspective of global health considerations. Having committed itself to respect the regulatory system of the WHO, should Canadian officials be free to second guess the judgment of the global organization?

In 1994 Parliament adopted amendments to the Patent Act and the WTO Implementation Act. Among the objectives of this legislation was the adoption of a 20 year period of patent protection for drugs. Canada had made an important policy change from its previous support of generic drug manufacturing. This change is due partly because it had little choice at the end of the Uruguay Round and partly because it obtained other concessions from governments in the NAFTA and GATT negotiations, as well as investment commitments from drug manufacturing companies. Yet this legislation was attacked successfully before WTO panels, not once but twice, in succeeding years for an incomplete implementation. Parliament had left disguised advantages for generic manufacturers and had only adopted protection good for 18 years.

Underlying this approach is the view that international obligations are assumed by the executive branch of government and that international law and domestic law form two very separate entities. Furthermore, even when Parliament acts to implement international obligations, the Supreme Court of Canada assumes the absolute primacy of the rules set by Parliament over the international legal order. From the international perspective, this constitutes a serious threat to the integrity of this and other international regimes. The international community, and specifically Canada's treaty partners, cannot rely on Canadian courts or administrators to implement the treaty fully if Parliament fails to do the job. Another, somewhat ironical consequence is that treaty regimes created for the benefit of citizens are not enforceable by citizens. The latter's only complaint is against their government which has already chosen to violate the rules. A greater capacity for citizens to invoke treaty rules directly in courts might increase their interest and confidence in these regimes.

Should this situation be of concern to those seeking to ensure effective international regulation? Arguably, yes. States are and will continue for the foreseeable future to be the primary agents of democracy and the primary defenders of the interests of their citizens. But states are no longer only concerned or responsible to their own domestic legal order. International law binds states. States deal with an increasing range of problems through international organizations in the creation of international regulatory regimes. There is really little choice. These regimes are necessary. They serve the interests of citizens as well as government. Yet Canada, even after it has decided to be bound by the regulatory regime, seems to wish to be free to pick and chose. A leading American scholar Louis Henkin of Columbia University has stated that 'most states respect most rules of international law most of the time' and this is true. Curiously, it is Canada, which sees itself as a very staunch defender of international law, and not a conservative Republican Administration, which often rejects the restraints of international law, that perpetuates the situation. A situation which leaves Canada free to second guess international obligations, even after it has publicly assumed their submission.

What is argued here is not that Canada is a rogue state, far from it. But there is a very conservative and outmoded view of the relationship of the domestic and international legal orders. At a time when an increasing range of international regulations constitute the basis of our legislative, administrative and judicial decisions this is regrettable. The state of affairs does not reinforce Canada's fidelity to the international regulatory regimes that it accepts. Arguably, steps should be taken by legislators, judges, administrative decision makers and administrators to bridge this unfortunate gap between the Canadian and international legal order.

To give effect to the views expressed in this paper, the following proposals are set out:

1. Parliament should assume a greater degree of control over the negotiation and adoption of international treaties in order to avoid an increasing democratic deficit between international regulatory regimes which affect the lives of all Canadians and the will of the people as expressed by their representatives.

2. Parliament should take greater care to ensure the congruity of domestic law and international regulations.

3. There should be changes in parliamentary practice to promote greater fidelity to international law and greater understanding of international regulatory régimes.

4. Governments should be vigilant to ensure that statutory instruments adopted that give effect to treaties be faithful to those treaties and the regulatory regimes they create.

5. It should be the duty of administrative tribunals and administrators to comply faithfully, not only with federal and provincial laws implementing treaties, but also with the treaties themselves, unless the legislator has expressly required a different result.

6. Courts should have greater authority to enforce these policies at the behest of Canadian litigants unless the legislator has expressly required otherwise.

7. Courts should give treaties a status equivalent to legislation unless the legislator has expressly required otherwise.

A.L.C. de MESTRAL PART 3

INTERNATIONAL REGULATORY COOPERATION

A. SOVEREIGNTY

1. International regulatory choices - do they exist? - do they involve competition or loss of sovereignty?

Sovereignty raises both vital and false questions. Vital, in that sovereignty is the essential attribute of the state; false, in that the pursuit and assertion of sovereignty for its own sake is foolish and self-defeating as well as being an inappropriate response to the forces of globalization. Albania and Cambodia went to the limit of asserting their sovereignty. It got them nowhere. There are very serious reasons to believe that the most effective manner of asserting sovereignty is engagement in the international regulatory community rather than vain efforts to assert difference. (Chayes) In the post modern globalised world, difference for its own sake is not the approach that Canada should contemplate. The people of Canada are far better protected by engagement in international regulatory regimes than by their denial. Sovereignty can be enhanced by the rule of law in the world far more than the assertion of difference for its own sake.

Is regulatory competition a matter of serious concern, either because a state may wish to adopt a regulatory system to gain commercial advantage or in order to avoid some kind of race to the bottom? There are situations where choices have to be made between competing technical standards put forward by national commercial groups (i.e. wireless telephone or television etc.). These are normally driven by commercial interests that nation-states seldom control. The regulations come after the fact, and in almost all cases Canada has little choice but to follow the lead of the United States. We could hardly impose a Japanese or European technical standard for television different from the United States, however superior it might be. Thus it is conceivable that Canadian governments may wish to intervene to promote a national commercial interest. Nevertheless, governments have seldom been successful in picking technological winners - their record in this domain is lamentable. It has been conceded that governments should stick to doing what they do best: protecting their citizens from harm.

A second allegation arises where governments are to be vigilant against the tendency of international regulation to pursue a race to the bottom. It is asserted that Canada can best avoid this by being different. The Canadian approach will always be the best. This is highly debatable. In the sphere of environmental regulation, and, to an even greater extent, in the commercial sphere, there is reason to believe that the jurisdiction with the highest standard will be the most trusted. For example, it was alleged that NAFTA would promote a race to the bottom of environmental and labour or human rights standards. This has not happened. Indeed much is happening to suggest that it is Mexican standards that are seeking to rise to the Canadian and American levels. The experience of the European Community is even more eloquent, since the experience of the EC has been the enhancement of standards in new states after they have joined. The race to the bottom via international agreement is thus a false issue. It is true that it is often difficult to obtain international agreement and that this agreement does not always reach the level that might be desired by some states but the fact of international agreement is itself a very positive factor and nothing stops a state from maintaining higher standards for itself where they are deemed appropriate.

Setting aside these theoretical debates, there are important practical considerations that must be assessed. In short, what is actually happening in terms of international regulatory regimes that Canada feels so compelled to submit? In many cases, Canada has no choice. In other cases Canada has a margin of choice, and in still others, Canada has considerable ability to reject or ignore international regulatory systems.

There are in fact a large number of regulatory regimes where Canada has no choice but to interact. It has to accept them, and live by them, at the very least complying with the minimum standard. Canada has no choice but to live by ICAO safety standards for the construction and maintenance of aircraft. Unilateralism is not possible. It would mean no international air transport to or from other jurisdictions and the likelihood of air tragedies within the country. In certain areas even stricter standards apply. Those which require different aircraft construction, can scarcely be imposed unilaterally. More generally, the regime of international law governing air transport services is governed by a highly regulated system of some 5000 bilateral treaties based on sovereignty over airspace and a narrow calculus of reciprocal advantage. There are few multilateral disciplines applicable at the present time. During the last decade however, the EC has completely liberalized air services among its 15, soon to be 25, Member States. As a result, at the request of the EC, the US and the EC are negotiating a new, comprehensive treaty based on non-discriminatory principles of 'open skies.' The former Canadian Minister of Transport found the matter to be strictly of European concern, and stated that Canada need not follow the EC lead. The Minister claimed his policy was to do nothing. This is not a sustainable strategy. It is to be hoped that his successor will soon - though perhaps disastrously late - realize that Canada cannot base its international air transport relations on different principles from those followed by our two most important partners. Canada will quickly have to follow the US - EC lead. Within five years the whole world will adjust. The message is clear: Canada has no choice but to comply.

There are areas where Canada has a margin of choice. Almost always, a nation-state may adopt stricter standards of protection. This is the essential margin of discretion. In most cases, a state has considerable discretion in determining how best to domestically enforce a regulatory regime. Although, the objectives and rules are set internationally, substantial latitude is given as to the means of enforcing them. This is only logical given differing legal systems, administrative traditions and even capacity among nation-states. Several treaties deliberately leave open certain issues. The treaties on intellectual and industrial property are cases in point. Indeed, the latitude left to nation-states to take or leave parts of these conventions is so great that further regulation was required. The TRIPS Agreement was thus promoted in the WTO to force all Members to adhere to a minimum level of IP protection.

In other contexts, Canada can take or leave the international regulatory regime. This is the case when they are non binding, such as many declarations or codes of conduct, or because it does not command sufficient international support, as is the case with various international commodity agreements.

The argument regarding loss of nation-state sovereignty generates moderate support. It gives rise to concerns that by participating in various international regulatory systems, such as the WTO or NAFTA, Canada has compromised its sovereignty. The argument is further compounded by the perceived 'democratic deficit'. Democratic society is compromised at the expense of international arrangements where the public has no input. As demonstrated, international regimes will only increase in size and importance. Canadian governments should thus take this issue seriously and assess ways to reduce the problem. All things are relative. In comparison to the Landesgemeinde of Appenzell, where all citizens vote together in public, all Western countries suffer from severe democratic deficits. But this is a real issue. One possibility for reform in this area would be to give parlaimentarians a greater role in the approval and oversight of international regulatory systems. Other measures to increase the openness of these procedures to the scrutiny of civil society should also be envisaged. Other suggestions could include dialogue between government officials and negotiators and the public. This has been done in the area of Environment and Sustainable development where sessions were held before and after WSSD. NGO participation in UN conferences has been increased perhaps to remedy the situation on the international level.

2. Preferred systems of international regulation?

There is no quick fix to the search for an appropriate international regulation. There are simply too many different regulatory models and systems, for a meaningful suggestion of a superior approach. Approaches to guaranteeing common schemes for commodity or customs classification are hardly useful in monitoring the enforcement of human rights conventions. Despite difficulties, advances have been made for the regulation of specific areas. It has been possible to develop rules governing the safety of aircraft directly by ICAO, a UN Specialized Agency. The IMO, which enjoys the same status, works towards the safety of ship construction primarily through separate international conventions. Should the IMO change its regulatory approaches because states are free to pick and chose the treaties they wish to accept and the speed with which they decide to accept them? Possibly, but it will not necessarily increase the IMO's success. There is no indication that altering the regulation mechanism would promote better standards for the construction of ships. In fact, the results of this are almost impossible to predict. The continuing resistance to adopting new and tighter standards for ship construction comes from the nature of the very conservative and profit driven maritime shipping industry. Government here, as in all things, is the art of the possible.

A central issue with respect to international regulations is the capacity of the international decision-makers to enter into detail. How detailed can international rules and standards be? In most cases the establishment of international rules are made removed from the parties to whom it is actually applied or who are expected to live by it. There is an inevitable process of refinement and precision required between the stage of making the rule at the international level and its effective application at the domestic level. Additional refining is almost always required.

For the above reasons, it is of little use to suggest specific techniques of regulation. None are inherently superior in a general manner. Within specified contexts - trade, environmental protection, health, etc - it is possible to identify appropriate techniques for regulation. But even here the techniques deemed effective at one moment in time may not have the same support decades later. This is witnessed in the remarkable change in regulatory technique strategy in the EC between 1957 and 1986. The introduction of the 'New Approach' to the regulation of the free movement of goods was first adopted in 1985.The innovative feature of the 'New Approach' is that it has the aim of developing flexible and technology-neutral legislation. This strategy represents a marked shift from the previous, stricter regulatory regime.

Rather than focus on the most effective, or the latest technique, it seems better to assess international regulation from the standpoint of conformity to Canadian values. In situations where Canada has a choice - which is not always the case - what system of regulation should be used? Here there is a consideration of the values sought to be reflected to the international community. Paramount is a high standard of protection for Canadian citizens, and human beings in general. The first principle of good law is law with humanity. Thus perhaps a high standard of regulatory protection serves humanity better than a low standard. But is this always appropriate?

Some international rules such as those protecting diplomats or consuls are value neutral since they are designed to ensure contact between governments of all types. But when a regulatory regime is designed, the approaches which reflect Canadian values and which afford a high standard of protection of all persons are surely to be preferred.

3. Relevance of the EU regulatory experience

The Treaty on European Union and the Treaty Establishing the European Community are a useful case study in the area of regulation. The European institutions do much more than create an international economic system to remove barriers to trade. In some respects they come close to a federal, economic union. The system however, remains treaty based. These international treaties can be examined to discern genuinely effective international rule making. Unlike other international arrangements, the members of the EC have been prepared to submit themselves to the discipline of supranational law making institutions. Nevertheless, those interested in studying how to design effective international regulatory systems would do well to examine the experience of the EC. To date, no institution has done better.

The EC (as opposed to the more politically oriented EU) has been invested with regulatory authority from its inception in 1957. The EC has authority to adopt binding Regulations, equivalent in effect to that of a Canadian statute. However, most EC regulation is in fact made through Directives which are binding on Member States only as to the result. This leaves states free to determine the most appropriate means of achieving the result. The EC is also empowered to make binding Decisions which are enforceable in domestic courts. The EC may legislate to promote the free movement of goods, services, persons and capital and to establish the common, now 'single' market. It is also empowered to legislate over an ever-increasing list of other matters. These rules can apply directly to the activities of individuals and companies and their products and services.

Chief among the legislative powers is the capacity to 'harmonize' the laws of Member States. Initially, it was thought that the EC would set out to harmonize by making uniform rules governing business and product manufacture. This was in fact attempted in the early years of the EC. It soon became apparent however, that highly detailed and specific regulations, and even directives, would never suffice to capture the complexities of six, then 9, then 15 and soon 25 states, and growing. Despite having the legal authority to do so, making highly specific regulatory regimes at this level proved to be mission impossible. The regulation required drastic simplification. This was done in several processes. First, the Court of Justice established that all goods legally in circulation in one EC country had access to the others. The EC followed with new approaches to legislation which built upon the principle of mutual recognition. It also changed its approach to regulations in general. The EC adopted more rules drafted in function of objectives, fitness for purpose and the 'essential character' of the regulation, rather than rules of exhaustive detail. The regulations and directives adopted to establish the single market in 1986 were largely of this type.

In subsequent years, the EC experimented further, and attempted more politically charged regulatory regimes dealing with social issues. In these areas it now employs the 'open method of coordination' which requires only that states set common goals and benchmarks. Subsequently, they meet to discuss their successes and failures in seeking common objectives. This process allows Member-States to learn from each other.

Even in areas where the EC seeks to establish detailed product regulations, it concedes. The EC's 'New Approach' enrolls users and manufacturers into a revolutionary flexible regulatory system. The New Approach defines mandatory product requirements. This ensures a high level of public protection while leaving technical solutions to interested parties (users, manufacturers etc). The New Approach has proven highly efficient in inducing competitiveness, product innovation and the free movement of goods, while ensuring a high level of public safety. The New Approach is applied to over 20 industrial sectors and thousands of industrial products. It is described by the EC as a 'co-regulatory' process that involves all stakeholders in the drive for better regulation.

4. Criteria for judging and making international regulatory choices by the GOC

Are there general criteria for appropriate models of international regulation? This is first and foremost a political question depending upon ones' political philosophy. It is not easy to satisfy the regulatory demands of the Hayeks and Lord Keynes, of the conservative Republicans and the French socialists, of the Indian regulators and Chinese communist reformers, let alone the representatives of over a hundred developing countries. This is nevertheless the task of contemporary international regime builders.

Surely, the common denominator between all cultures is the principle of humanity. Know your values. Seek a high level of protection. Within a given sector it is possible to examine what works best and how to build more effective systems, but this involves close analysis of a sectors.

To this end, a series of recommended approaches are set out under Canadian Leadership at the end of this paper.

5. Deepening the NAFTA regulatory relationship

The degree of interpenetration of the Canadian economy into the American is greater than that of any two members of the EU. The phenomenon is virtually unparalleled in history. While the degree of American involvement in the Canadian economy reflects a much smaller percentage of the total US economy, given its size, Canada remains crucial to the US. Canada is the America's largest trading partner and the major trading partner of 38 US states. Perhaps even more important is that Canada is its greatest energy supplier. The FTA and NAFTA have considerably advanced the process of economic integration in both of these directions. It is thus self-evident that Canada must align its regulatory systems in most significant areas with those of the USA. It is impossible to maintain different standards for products as many of them are manufactured by processes occurring on both sides of the border. (Major components of an automobile for example, cross the border at least four times in the process of manufacture.) Those products manufactured in only one jurisdiction are just as likely to be sold in the other. They have to be fit for sale in both jurisdictions.

There is still much to be done to align American and Canadian product and manufacturing regulatory systems. The greatest problem is that of overcoming what Michael Hart calls 'the tyranny of small differences.' At the level of services the differences between the two countries remain considerable. Barriers to the free movement of persons prevent a significant amount of integration, in comparison to the success of the European Union in this area. Greater harmonization of industrial standards and testing procedures are clearly in the Canadian interest. This would promote freer movement of goods into Canada's principal market. Recognition of diplomas and professional qualifications, where not already done through limited NAFTA arrangements such as in the medical area, is clearly in the Canadian interest. To significantly deepen the level of economic integration requires delving into complex issues - ones that most Canadian do not wish to face, and that most Americans are oblivious of.

The strategy of harmonization with the USA primarily depends on political considerations regarding the evolution of NAFTA. Is the Agreement to remain a free trade area or will it become a customs union? The obvious solution would be to find an intermediate formula giving Canadians the benefits of an economic union without the name and without the political and regulatory institutions of a customs union. How far are Canadians willing to risk their identity to deepen relations with the USA? Are the Americans interested in listening to our concerns? These questions lie beyond this paper but they are the true issues precedent to any discussion of regulatory harmonization.

Assuming that a formal move to a customs and monetary union is not feasible, a number of areas of regulatory cooperation can still be envisaged. These involve careful analysis of rules currently governing different sectors of trade in goods and services. Much integration is assured today by networking between officials to remove the small differences that persist. In particular this involves working to enhance the existing institutional cooperation mechanisms - the Commission, the many often unused standing committees and cooperative bodies - to ensure that the maximum is obtained from Chapters 3 and 12 of NAFTA on the movement of goods and services. Much more work could be done to further the objectives of Chapters 7 and 9 dealing with sanitary, phytosanitary and technical standards. In addition progress towards mutual recognition of standards and testing procedures can be made. The regulatory objective should be to free movement of all goods and services between Canada and the USA. Ideally both countries should move to the regulatory principle of free movement of goods and services and mutual recognition of existing regulatory standards. This should also involve continued commitment to the FTAA.

Much is said and written about the threat to domestic social policies posed by the free movement of goods and services. The threats are often imaginary. It should be remembered that in the EU, where the equivalent of a constitutionally enforceable right of free movement of goods, services, persons and capital actually exists, very different social programmes are at work and are not threatened. The message from the European experience for Canadian nationalists is that a high degree of regulatory harmonization can coexist with the assertion of different social policies and institutions.

6. Proposals:

1. Existing domestic arrangements

Given the very broad range of Canadian regulations which are based on internationally agreed policies, Canada should take the steps necessary to facilitate the congruence of international regulations and the domestic regulatory order whenever it has agreed to be bound. (see Paper 2)

2. Sovereignty

Act like a genuine post-modern state - one part of a horizontal / multi polar regulatory process, where it is of the essence that the state should be seen as one element of a bigger picture. The state cannot be the only centre of regulatory policy-making, although it remains the essential motor of effective regulatory enforcement

3. Canada - US special relationship

1. Deepen NAFTA to form a genuine single market. Much can be done incrementally on the basis of NAFTA, but it is preferable to adopt a customs union if politically feasible.

2. Enhance existing NAFTA institutional cooperation. Expand areas of existing cooperation under Chapters 3 and 12, and 7 and 9 on standards and mutual recognition of tests & testing services. Aim for the objective of free movement of goods and services. Facilitate the movement of people as well as capital.

4. Informing Canadian Leadership on International Regulatory Issues:

1. Accept that many problems require international solutions. In these cases the international regime will drive domestic regulation. Where this is the case, work to build effective regimes of regulation.

2. A high standard of protection is of the essence. In principle, align with international regulations whenever possible "on the basis of a high standard of regulation."

3. Where international responses are adopted, the involvement of Parliament and the Legislatures in the process can help to deal with public concerns of a democratic deficit.

4. Ensure Canadian compliance in laws, regulations, administrative decision-making, and judicial decisions. Parliament should play a greater role in the process of treaty approval in order to avoid accusations of democratic deficit. Where Canada has committed itself to an international regime the agents of the state must be bound to respect it by law; courts should be empowered to enforce compliance with treaties. A clearer duty of compliance can be required by amendments to the Interpretation Act and the Department of Foreign Affairs and International Trade Act.

5. Always retain the right to set higher standards than the norm, provided this not become a barrier to trade

6. Where rules are set internationally, enforcement is the key role of the state. Act to ensure parallel policies with other states and cooperate in ensuring effective enforcement.

7. Different regulatory regimes have their own logic, be sensitive to that logic and ensure Canadian regulatory approaches are in conformity.

8. Deregulation is not the preferred option. In many contexts lighter forms and regulatory approaches are preferred. Total deregulation or elimination is not compatible with a concern for high levels of protection.

9. The use of an international standard is not a loss but a gain to effective regulation and enhancement of sovereignty. Distinctiveness does not enhance sovereignty.

10. Facilitate understanding and sympathy for international solutions in federal and provincial courts and bureaucracies.

11. Work with other countries to enhance best regulatory practices by public administrations.

12. Facilitate implementation. Update constantly. Make use of best regulatory practices by private ordering and civil society.

13. Democratic states are the most open to effective public and private ordering - work closely with other democracies

ANNEX I

Different leading treaty regimes of public law involving different forms of regulation; different levels of obligation and different degrees of incorporation of international law into domestic law:

General rules: Vienna Convention on the Law of Treaties; Vienna Convention on Diplomatic and Consular Relations; LOS Convention etc.

Maritime law

Air law

Space law

International trade law (WTO + RTAs)

Monetary & banking law

Health law

Food safety law

Environmental law

International labour law

Postal and Telecommunications

Human rights law

International IP protection law

International criminal law

International humanitarian law

Private international law

EC/EU / Benelux

ANNEX II

Different approaches to the analysis of international regulatory systems

Division of jurisdiction
Exclusive national jurisdiction
International and intergovernmental regime
Supranational
Transnational networks

Forms of international regulation:
Allocation of jurisdiction + exclusive allocation or cooperative enforcement
International regime creation
Supranational regime
Transnational rule-making

Forms of law
Exclusive national
Intergovernmental
Supranational

Levels of rules:
Multilateral
Regional
Bilateral
National

Form of establishing agreement
Written agreements
Customary rules
Practices
Diplomacy / negotiation

Form of normative instruments
Standards
Norms
Principles
Rules

Form of international regulatory structures
Hard law
Soft law
Recommended practices
Standards
Guidelines

Within treaty regimes distinguish
Primary rules
Secondary rules

Systemic / intersticial international law:
UN Charter
State sovereignty
Diplomatic law
Treaty law
Determination of territorial and personal jurisdiction
International civil society NGO law
Disputes settlement

Different families of organizations and treaty regimes

Global political organizations (G-8
Specialised Agencies
Development banks
IP organizations
International tribunals
Single issue regulatory bodies: IOSCO /Montreal Protocol Secretariat

Associations of domestic regulators ( informal associations)Parliamentary assemblies,
Police,
Competition authorities,
Securities regulators
Auditors general
Insurance supervisors
Central banks

Private ordering - international organisations - (welfare, sport,voluntary activitiy, professions etc)
Religions / Churches
IOC
Red Cross
International Sports Federations
ICC
ISO and other standard setting organisations
IBA and other professional organisations
Criminal organizations

Private ordering - international rulemaking
ICC - INCOTERMS
ISO
International accounting rules
International Arbitral Rules
International insurance standards

Experience of the EC:
Approximation - expression of single rule by Regulation ECT art 94
Free circulation - national treatment - based on ECT art 24
Harmonization - on single standard by Directive
Result oriented harmonization by Directive
Mutual recognition by treaty, by ECJ decision by Directive
New approach and Global approach (1986)
Open method of coordination (Best practices, benchmarking, consultation)
by Directive (2000)
New 'co-regulatory' approach to regulation (2003)
Regulatory Agencies whose role is indicative rather than directory

International regime theories
Realist
Neo-liberal institutionalist
Transformational model
Constuctivist
Informal governance networks

ANNEX III

INTERNATIONAL REGULATORY REGIMES: (NON-EXHAUSTIVE) SPECTRUM