“If Only Half of International Agreements Have Dispute Resolution Provisions,
Which Half Needs Explaining?”
Barbara Koremenos
Associate Professor of Political Science
University of Michigan
ABSTRACT
Examining a random sample of international agreements conditional on four issue
areas, only about one out of every two agreements has any dispute resolution provision.
This observation begs for an explanation, and which half needs explaining depends on
where one is sitting. Do power politics dominate international law or does the law provide a
fundamental order? Employing a rational choice framework, I focus on a set of independent
variables that capture the cooperation problem being addressed by members to an
agreement and put forth conjectures explaining the inclusion of dispute resolution
provisions. Using newly collected data, I find that agreements addressing complex
cooperation problems, that is, problems characterized by uncertainty, prisoners’ dilemmalike incentives to defect, and/or time inconsistency, are more likely to include such
provisions. I thereby suggest that international law is quite efficient with states not creating
and/or delegating dispute resolution authority when it is unlikely to be needed.
“If Only Half of International Agreements Have Dispute Resolution Provisions,
Which Half Needs Explaining?”
Barbara Koremenos 1
Associate Professor of Political Science
University of Michigan
1. INTRODUCTION
International dispute resolution is now one of the most popular topics in studies of
international cooperation. NAFTA (North American Free Trade Agreement) and the
institutions of the EU (European Union) have been studied extensively (Sweet and Brunell
1998, Garvey 1995). The transformation of a political negotiation style of dispute resolution
under GATT (General Agreement on Tariffs and Trade) to the formal legal process
embodied in the WTO (World Trade Organization) has perhaps garnered the most attention
(Busch 2000, Pauwelyn 2001, Charnovitz 2001, Schloemann and Ohlhoff 1999, Jackson
1978, Steinberg 2002, Schwartz and Sykes 2002, and Guzman and Simmons 2002). And
this is an important topic. Perhaps we could go so far as to say that the more states can use
institutions to adjudicate or arbitrate their disputes, the more international law resembles
domestic law.
1
Barbara Koremenos is an associate professor in the University of Michigan’s Department
of Political Science. She thanks Eric Posner, Edwin Smith, Alan Sykes, George Tsebelis,
and the anonymous referees for very helpful comments and her coders, in particular, Leslie
Padilla, Amin Ramzan, Sherol Michaeli, and Caitlin Antos. She also thanks Matt Spence,
who provided research assistance with respect to both the coding and the statistics, and
Christian Spreitzer for designing and managing the international agreements database. This
article is based on research supported by the National Science Foundation CAREER
Award: “Designing International Agreements: Theoretical Development, Data Collection,
and Empirical Analysis” (SES-0094376).
2
But while a lot of attention has focused on these three cases, we have no idea what
the typical international agreement entails with respect to dispute resolution provisions. Our
intuitions about international dispute resolution, and international cooperation more
generally, are shaped only by a few high-profile agreements. Almost all scholarship on the
subject is focused on these agreements. 2
In reality, institutionalized international cooperation is captured in the more than
50,000 agreements that are registered with the United Nations. Indeed, most cooperation is
bilateral and has at its foundation an international agreement, not an international
organization. What kind of picture emerges if we consider this larger continent of
international cooperation?
Employing a random sample of international agreements conditional on four issue
areas, we find that only about one out of every two agreements has any dispute resolution
provision whatsoever. This empirical observation begs for an explanation, and which half
needs explaining depends on where one is sitting. The standard Realist perspective tells us
that the dispute resolution provisions in those agreements that have them are simply cheap
talk – just like the entire agreements. So the puzzle is why states bother putting such
provisions in half of their agreements. The standard international law perspective is
surprised that only half of the agreements have these provisions.
To get some leverage on this puzzle, we can first ask what happens when states have
a dispute and there is no dispute resolution provision? The Treaty of Versailles created the
Permanent Court of International Justice (PCIJ), which was replaced by the International
Court of Justice (ICJ). So the standard international law answer is that the ICJ is the default
2
A very notable exception is James McCall Smith (2000), who studies differences in
3
court lurking in the background. But to have jurisdiction under such circumstances, both
parties to the dispute must agree. Hence the standard international relations answer that
power politics comes into play is, at first glance, more compelling.
More and more, scholars are solving such puzzles through systematic theoretical
and empirical work. In looking to other fields for guidance, we find those who study the
judicial dimension of comparative law focus on the very interesting and important
differences across domestic institutions (Lubman 1991, Husa 2000, Blankenburg 1998,
Lutz 1976). But they analyze and compare a set of relatively long-lived institutions, like
domestic courts. Those who rigorously study domestic contracts do so knowing that the
shadow of the law is fundamental: Whenever private bargaining breaks down, there is
always recourse to an existing set of courts (Cooter, Marks, and Mnookin 1982, Mnookin
and Kornhauser 1979, Katz 1990). International law, on the other hand, is characterized by
neither a set of long-lived institutions nor a shadow of the law. How then can we study
international dispute resolution design?
First we must acknowledge that the enforceability of international agreements
cannot be taken for granted; hence, if international law is going to provide any order for
international politics, the law itself must be an equilibrium in a noncooperative game, that
is, it must be self-enforcing. Recently there has been theoretical work that recognizes that
anarchy is a fundamental feature of the international landscape yet still argues that
international law can have an effect on state behavior. In particular, “The Rational Design
of International Institutions” (Koremenos, Lipson and Snidal 2001), draws on gametheoretic logic to argue that international law can be effective if it takes into account the
dispute resolution design across a large set of regional trade pacts.
4
preferences and constraints of international actors. Self-interested actors, including states,
can create institutions for the very purpose of serving as future constraints, as in North
1990.
This article exploits both the Rational Design theoretical framework and newly
collected data on a random sample of international agreements across four issue areas to
address the “half and half” empirical statistic noted above. It thereby rises to the challenge
put forth by critics of the rational choice approach to international law regarding untested
(and untestable) theory (Duffield 2003, Walt 1999). It attempts to measure carefully
abstract theoretical variables as well as details of agreement design and show the value of,
and thereby encourage more, systematic empirical work on international institutional
design.
2. RATIONAL DESIGN THEORY
The starting point for the International Organization special issue, The Rational
Design of International Institutions (Koremenos, Lipson, and Snidal 2001), heretofore
referred to as “Rational Design,” is a very simple observation: Institutionalized
international cooperation is organized in radically different ways. 3 The theoretical premise
is the following: We cannot understand institutional design and compare across institutions
without understanding the cooperation problem the institutions are trying to solve. What
this implies is that differences among international institutions are not random. Rather,
states and other international actors shape institutions to solve the specific problems they
3
Institutionalized international cooperation is defined as any explicit arrangement,
negotiated among international actors, prescribing, proscribing, and/or authorizing
behavior.
5
face. In other words, design variations are largely the result of rational, purposive
interactions.
The goal of the Rational Design volume is to offer a systematic account of five
design features (membership, scope, centralization, control, and flexibility), relating them
to recurrent cooperation problems faced by states, the independent variables. One possible
way to conceptualize an abstract idea like “cooperation problem” is to break it into two sets
of elements: interests and constraints. This has the advantage of being able to draw on a
powerful and well-developed set of theory on these topics. Interests are captured in two of
the independent variables, with Enforcement referring “to the strength of individual actors’
incentives to cheat …” (Koremenos, Lipson and Snidal 2001: 776) and Distribution
depending “on how each actor compares its preferred alternative to other actors’ preferred
alternatives (Koremenos, Lipson and Snidal 2001: 775).” Constraints are captured with
variables that address both information and beliefs: Uncertainty about preferences (that is,
uncertainty regarding what one’s partners’ preferences are), Uncertainty about behavior
(not being able to decipher easily whether partners are cooperating or defecting), and
Uncertainty about the state of the world (that is, uncertainty regarding the consequences of
cooperation).
With respect to the subject of this article, international dispute resolution design, the
set of conjectures surrounding the dependent variable centralization (defined as whether
institutional tasks are performed by a single focal entity or not) are pertinent. Of the sixteen
univariate conjectures relating one independent variable to one dependent variable put forth
by the Rational Design authors, four conjectures involve that dependent variable. Three of
the four stipulate some aspect of the cooperation problem the states are facing as the
6
independent variable. Centralization increases with the Enforcement Problem;
Centralization increases with Uncertainty about Behavior; and Centralization increases with
Uncertainty about the State of the World. 4
The Rational Design variables and conjectures are framed rather generally. Among
the dependent variables, this is particularly the case with the centralization variable. 5 I
narrow the definition of centralization to refer to delegated dispute resolution. Here I draw
on another International Organization special issue, Legalization and World Politics
(Goldstein et al 2000), heretofore referred to as “Legalization,” which focuses on the
increasing but not uniform legalization characterizing international cooperation. A typology
of legalization, consisting of three dimensions – obligation, precision, and delegation – is
elaborated. Delegation is defined as “the extent to which states and other actors delegate
authority to designated third parties—including courts, arbitrators, and administrative
organizations—to implement agreements” (Abbott et al 2000: 415).
The Legalization volume offers an additional conjecture regarding delegation. As
Goldstein et al. 2000: 393 states: “Governments and domestic groups may also deliberately
employ international legalization as a means to bind themselves or their successors in the
future. In other words, international legalization may have the aim of imposing constraints
on domestic political behavior.” Thus, according to this logic, delegated dispute resolution
can solve a domestic commitment problem or a time-inconsistency problem.
4
The fourth conjecture is a transactions cost argument, “Centralization increases with
number,” where number can capture the literal number of states and/or their heterogeneity.
5
The authors note this and encourage refinement of this and other variables in future work.
7
Combining the general theoretical conjectures found in the Rational Design volume
with the rich conceptualization provided in the Legalization volume, I offer the following
rational design conjectures:
RD1: States facing enforcement problems are more likely to include delegated
dispute resolution provisions in their international agreements. 6
RD2: States facing uncertainty about behavior are more likely to include
delegated dispute resolution provisions in their international agreements.
RD3: States facing uncertainty about the state of the world are more likely to
include delegated dispute resolution provisions in their international agreements.
RD4: States facing commitment problems are more likely to include delegated
dispute resolution provisions in their international agreements.
Thus proponents of rational design, believing that agreements are tailored to the problems
they are trying to solve, would expect more centralized or formalized dispute resolution
provisions when at least one of the above highlighted cooperation problems is present.
3. DATA
3.1. Sample of International Agreements
To put these theoretical conjectures to a scientific test requires data. To that end, I
am collecting data on the characteristics of a large sample of international agreements
drawn from the United Nations Treaty Series. 7 My random sample is conditional on four
issue areas: economics, environment, human rights, and security.
6
For each of these conjectures, the comparison is with those international agreements for
which the cooperation problem does not include the highlighted problem.
7
The Internet collection at the time the sample was drawn contained over 34,000
international agreements “which have been published in hard copy in over 1,450 volumes,
which corresponds to all treaties and subsequent actions registered up to December 1986”
(http://www.un.org/Depts/Treaty/).
8
A coding instrument records the characteristics of the agreements. 8 (Below I
describe in detail the variables used in this analysis.) Importantly, the coders for this
project are extensively trained in order to give them high levels of both competency and
consistency, with the majority going through 9-12 months of course-based training that
includes both theoretical training and practice coding runs. Two coders independently code
each agreement using an online survey instrument. Upon completion, an intercoder
reliability report is generated for the 375 questions for which there are “quantitative”
answers, e.g., yes/no, multiple choice, a specific number, etc. The average coded
agreement is characterized by disagreement on approximately 15 questions, or 4% of the
quantitative questions; the range so far has been between 2% and 11%. The inconsistencies
are then resolved through a close re-reading of the agreement and supervised discussion
involving the original coders, a trained graduate student, and the author.
3.2. Variables
3.2.1. Independent Variables
Given the driving force of the cooperation problem in any institutional analysis, I
first present the independent variables. The Rational Design volume, while theoretically
rich, does not provide much advice with respect to operationalizing these variables given
the level of abstraction. In his critique of the special issue, which includes a set of case
studies, Duffield (2003:424) states: “For the cases to generate useful findings, the variables
must be operationalized and measured in a consistent manner….The problem begins with
8
See http://www.polisci.ucla.edu/faculty/koremenos/ for a list of the agreements used in
this analysis.
9
the analytic framework, which offers no guidance on this vital methodological issue…” 9 In
fact, Duffield concludes his critique by calling on the project organizers to develop and
publicize explicit guidelines for variable measurement (2003: 428). Obviously, this is not
an easy task. Still, this article introduces the first results of a consistent coding of the
independent variables.
As noted above, two trained coders carefully read the international agreement and
code potentially hundreds of institutional design variables. Independently, a graduate
student with training in rationalist approaches to international cooperation and I also look at
the agreement before it is given to the coders. We answer the following substantive
question among others: How can the cooperation problem be characterized? In addition to
the independent variables elaborated in Rational Design, I have added the following
possible answers: commitment problem, positive externalities, negative externalities,
deadlock, and other. (The “other” category includes areas of cooperation such as foreign
aid for which there are no or few strategic considerations and pure coordination games
without uncertainty.) Of course, more than one answer can be chosen for each agreement.
To help bring these variables to life, consider the following examples: An
agreement for which the cooperation problem is characterized by a commitment problem,
an enforcement problem, and an uncertainty about the state of the world problem is the
Agreement for the Promotion and Protection of Investments” (UNTS 19536) between the
United Kingdom and Bangladesh. Given its tumultuous political history, including military
coups in the 1970s, Bangladesh wants to tie its hands in case of a future regime change so
9
In their response, Koremenos and Snidal (2003) argue that careful conceptualization is the
first step and necessary condition before operationalization.
10
that outsiders will invest. 10 This is also a classic Prisoner’s Dilemma, where the best
outcome for me is if you protect my investments but I can nationalize yours; hence the
enforcement problem. 11 And finally the uncertainty about the state of the world comes
about because future political shocks change the benefits accrued under such agreements in
unstable states, which Bangladesh certainly was. Put differently, what the future
distribution of benefits will look like under such cooperation depends on whether certain
political developments change the desirability of the cooperative terms. These
developments cannot be predicted and hence are best modeled as shocks. States like
Bangladesh are vulnerable to such shocks.
An example of an agreement for which the cooperation problem is quite simple is
the African Migratory Locust Convention (UNTS 10476) in which the main goal is
scientific cooperation. This agreement is also coded for “negative externalities,” because
an outbreak of migratory locust in any one state could spread into Africa more generally.
As another example, consider the “Agreement between the U.S. and Ecuador for Financing
Certain Educational Exchange Programs” (UNTS 4114), which is characterized only by
“other.” The agreement creates a bilateral commission to administer a joint educational
exchange program between the U.S. and Ecuador, funded by Ecuadorian payments for
surplus U.S. agricultural commodities.
10
This hands-tying is also important given the tenets of the New International Economic
Order, which allow for national expropriation. (I thank John Crook for his comments on
this point.)
11
I remind readers that the term “enforcement problem” as used in the Rational Design
framework does not refer to the likelihood that states will actually comply with an
agreement; rather, it refers to the pre-agreement incentives in the particular substantive area
covered by the agreement. Put differently, the cooperation problem characterizes the
situation in the absence of any institutional solutions provided by an agreement.
11
The Convention Concerning Equality of Treatment for National and Foreign
Workers as Regards Workmen's Compensation for Accidents (UNTS 602) is an example of
a human rights agreement for which the underlying cooperation problem is characterized by
uncertainty about behavior as well as an enforcement problem. States can easily discern if
other member states have appropriately incorporated equal treatment into their domestic
law, but it is quite difficult to tell if the laws are being enforced. This kind of uncertainty
about behavior underlies many human rights agreements. The enforcement problem is
created by the Prisoner's Dilemma structure of the payoffs: A state wants its workers to be
treated well in other states, but would prefer not to spend resources on foreigners working
within its borders.
A second agreement for which the underlying cooperation problem is characterized
by uncertainty about behavior is the International Covenant on Civil and Political Rights
(UNTS 14668). The goal of the parties is to prescribe a number of civil and political rights
that states would be obligated to respect. But given the considerable distance involved in
monitoring the compliance of fellow members, it is extremely difficult to determine to what
extent states are faithfully complying with these prescriptions. In addition to the uncertainty
about behavior, the cooperation problem is characterized as "other," given its goal of normsetting. Unlike the human rights agreement described above, the payoff structure among
the states does not resemble a Prisoner's Dilemma – for example, while I may have an
interest in your cooperation, your defection does not make me wish I had defected as well;
hence the cooperation problem is not characterized by an enforcement problem. 12
12
The cooperation problems underlying many of the prominent multilateral human rights
agreements are not multi-person Prisoner’s Dilemmas and hence are not coded as having
enforcement problems. In fact, examining the underlying cooperation problems of each of
12
3.2.2. Dependent Variables
One of the goals of the overall coding project is to develop and collect data on more
refined (and hence more precisely defined) conceptualizations of variables used frequently
in the international cooperation literature. Of course, the motivation for this is a belief that
such refinements are theoretically meaningful. In what follows, I describe in detail the
institutional design variables used in this analysis.
Dispute Resolution
To quantify the tremendous variation in dispute resolution provisions across
international agreements, I identify a few key dimensions along which dispute resolution
design may vary. I first distinguish four possible channels for the resolution of disputes.
The first method is informal – that is, is the dispute to be settled through diplomacy,
friendly negotiations, or other informal methods not involving any other actors? Often
agreements suggest that this method be tried first; other methods are then outlined should
the human rights agreements in the random sample, only 20% are characterized by a
Prisoner’s Dilemma structure. Nonetheless, 40% are characterized by uncertainty about
behavior. (I remind readers that agreements are often characterized by more than one kind
of underlying cooperation problem.) Not surprisingly, 60% are considered norm-setting or
norm-codifying agreements. For a norm-setting agreement to be a self-enforcing
equilibrium given the existence of states who do not share the norm at the time of entry into
force, credible inducements to compliance must be incorporated into the agreement’s
design. Hathaway (2002) finds that many human rights treaties are characterized by poor
compliance records with respect to particular states. Given that she looks at 14 multilateral
human rights agreements, most if not all of which would be characterized as norm-setting
or codifying agreements, it may be that the ones that are not effective are not optimally
designed – perhaps because the states themselves do not have a serious interest in them.
(For instance, a state who complies is not hurt by another state’s noncompliance to the same
degree as in certain trade agreements, which are best characterized as having enforcement
problems, and hence widespread compliance in human rights is not as urgent.) Or it may be
that compliance is a longer-term phenomenon (norms are not changed overnight). In any
event, my analysis looks only at the relationship between the type of cooperation problem
and the incidence of dispute resolution provisions; we must wait until more data exist for a
13
informal methods fail. The next method, a more formal avenue, is mediation, which I define
as a nonbinding form of dispute resolution in which a neutral third party assists disputing
parties in reaching a mutually agreeable solution. Generally, mediators only transmit the
disputants’ positions, but they can help reconcile different positions if all parties trust the
mediator. Arbitration is a stronger form of dispute resolution because third-party actors
actually work toward a resolution. More specifically, arbitration occurs when a third party,
selected by the disputants, resolves the dispute. Arbitrators are sometimes private judges.
An arbitration provision will usually specify how an arbitrator is to be chosen, and whether
the arbitrator's findings are conclusive (i.e., binding on the parties) or simply
recommendations. The final, and strongest, possible method of dispute resolution is
adjudication, where a court steps in to make a ruling for the disputants. As in arbitration,
sometimes the agreement will specify how the judges are to be chosen. Of course, many
agreements provide for more than one method of dispute resolution. Below I present
statistics on dispute resolution provisions.
A second dimension of variation captured is whether the dispute resolution process
is handled by internal or external delegation. Internal delegation occurs when a body
composed of representatives of the member states themselves handles the mediation,
arbitration, or adjudication. 13 For example, when disputing members must each choose an
arbitrator to form a panel, while the claim may be that these arbitrators are neutral third
parties, they could just as easily be retired judges from the member states and hence biased.
more comprehensive analysis of the overall effectiveness of particular agreement designs to
solve particular cooperation problems.
13
My definition of delegation is broader than the Legalization one, which only includes
external delegation.
14
This conceptualization stems from my assumption that the units of analysis that
bargain/negotiate at the international level are the states – not the governments within those
states. The unitary actor assumption is a good baseline as well as a focal point. While we
know that domestic politics implies that it is not always the case that the state should be
modeled as unitary, it becomes very difficult in reading agreements to ascertain which level
of the state is the one bargaining, influencing, being influenced etc. There is simply not
enough detail in agreements to discover such things. (Perhaps this is intentional as
agreements are bargains among states.) In contrast, the state is a salient unit. 14
Given this, whenever a body is (or is likely to be) composed of some representative
of at least some of the member states – in the case of a panel of one, obviously only one
state can be represented – this body is coded as internal—that is, a body created by the
agreement and hence is a form of internal delegation. For example, suppose that when
Bolivia and the US need to arbitrate a dispute, a very professional US lawyer with an
international reputation for being fair is appointed as the arbitrator. If I were using the
government as the unit of analysis, then this would be external delegation because the
lawyer does not represent the government. But given my assumption that the nation state is
the unit of analysis, the lawyer is a citizen of the US as well as being an expert. Hence this
is a case of internal delegation. 15
On the other hand, external delegation occurs when a third party is without a doubt
involved. This third party usually is an existing Intergovernmental Organization (IGO), e.g.,
14
I thank Chris Way for helping me clarify this point.
My assumption that professionals from a member state are biased in favor of that state
goes against the traditional international law opinion. Strikingly, Posner and de Figueiredo
(2005) make a stronger argument, finding that judges of the ICJ (an example of external
delegation) actually favor states whose wealth is similar to that of their home states.
15
15
the International Court of Justice. Still, I allow for the possibility that the third party is a
state outside the agreement or a Non-governmental Organization (NGO).
To bring these variables to life, consider the following examples. “The Cooperation
Agreement between France and Morocco” (UNTS 20783) stipulates that all disputes shall
be resolved through “friendly channels.” At the other end of the spectrum, the “American
Convention on Human Rights” (UNTS 17955) uses mediation and adjudication by internal
bodies as avenues of dispute resolution. States submit their concerns and arguments to the
mediation body, which then considers the facts and states its conclusions in a report to the
disputing members. If the dispute is still unresolved after attempts at mediation, states
submit their concerns and arguments to an internal court. The court has authority to make
binding decisions and give final interpretations regarding the agreement’s provisions. (The
court can also punish the non-complying country.)
Investment agreements generally prescribe arbitration as a method of dispute
resolution. In an investment agreement between the United Kingdom and Egypt (UNTS
15181), the states must submit their dispute to an arbitral body if they cannot settle it
diplomatically. The members of this body are chosen by the disputing states, but if they
cannot find mutually-acceptable members, the selection process is turned over to an
external source, either the International Centre for the Settlement of Investment Disputes or
the International Court of Justice. Thus, the body is usually internal, but if the members
cannot agree, it becomes external. The arbitral body listens to arguments, considers the
facts, and, in this case, makes binding recommendations to resolve the dispute.
3.2 Descriptive Statistics
16
Tables 1 presents a first illustration of the variables of interest. With a random
sample of 88 agreements, there are quite a few interesting patterns. The first thing to note is
that the variation with respect to international dispute resolution provisions is extreme.
Some agreements dictate that all disputes will be resolved through friendly relations while
others create and delegate authority to a court – a court that can be directly approached by
individuals residing within states.
Table 1.
Incidence and Form of Dispute Resolution Provisions.
(Percentages with number of observations in parenthesis below)
Forms of Dispute Resolution, for Agreements with Dispute
Resolution Provisions1
Type of
Agreement
All
Economic
Environmental
Human Rights
Security
Agreements
with Any
Dispute
Resolution
Provision
(1)
45%
(40)
49%
(20)
24%
(4)
73%
(11)
33%
(5)
0.028
Informal
(2)
90%
(36)
100%
(20)
100%
(4)
64%
(7)
100%
(5)
0.008
Mediation
(3)
18%
(7)
10%
(2)
0%
(0)
36%
(4)
20%
(1)
0.225
Arbitration
(4)
50%
(20)
75%
(15)
25%
(1)
27%
(3)
20%
(1)
0.018
Adjudication
(5)
25%
(10)
5%
(1)
50%
(2)
55%
(6)
20%
(1)
0.013
Option for
External
Delegation
(6)
65%
(26)
75%
(15)
50%
(2)
64%
(7)
40%
(2)
0.448
P-value of
Pearson Test2
N
88
40
40
40
40
40
1
Many agreements mention multiple forms of dispute resolution.
2
The Pearson test for independence is a procedure to measure whether there is statistically significant
variation among categories. The reported p-value is very similar to that reported in a regression table; that is,
the probability that the observed variation could be due to chance alone. Thus there is approximately a 3%
chance that the observed variation in column (1) is due to chance; this difference is below the conventional
5% cutoff and thus is statistically significant. In this column, for example, there is a meaningful difference
among the four issue areas regarding how often they incorporate dispute resolution provisions; this difference
is not likely due to chance and can instead be attributed to a systematic influence that differs across issue-area.
Column (1) in Table 1 displays the statistic that motivates the paper: 55% of the
agreements do not contain any dispute resolution provision whatsoever. Column (1) also
shows that the incidence of any form of dispute resolution provision varies by issue area,
17
with human rights ranking the highest at 73%; economics is just under 50% while security
and environmental agreements are below. These differences across issue area are
statistically significant, as shown by the low p-values in the Pearson tests for independence.
In Columns (2) through (5) of Table 1, the incidence of the four forms of dispute
resolution is displayed according to issue area. These statistics are conditional on the
agreement having a dispute resolution provision. Agreements sometimes specify multiple
forms. Most agreements specify that states can first try to resolve their disputes informally
through friendly diplomacy, as shown in Column (2). Nonetheless, it is interesting that
36% of the human rights agreements only specify a more formal process. Mediation is
never mentioned in environmental agreements. Arbitration, which occurs in three-quarters
of economics agreements, occurs only occasionally in the other three issue areas. Perhaps
most striking is Column (5) showing adjudication provisions. While 50% of environmental
and 55% of human rights agreements contain adjudication provisions, only 20% of security
agreements have them; economics agreements hardly ever mention adjudication.
Column (6) shows whether delegating dispute resolution to an external party is an
option, whether it is to another state, an existing IGO, or an NGO. (Again, these statistics
are conditional on the agreement having a dispute resolution provision.) Delegation is least
common in security agreements and most common in economic agreements.
4. EMPIRICAL TESTS
In this section, I put Rational Design conjectures outlined above to the test.
According to the conjectures, agreements for which the underlying cooperation problem is
uncertainty about the state of the world, uncertainty about behavior, enforcement, and/or
18
commitment/time inconsistency are more likely to include delegated dispute resolution
provisions than those not characterized by one or more of these problems. I create a
variable called, “Complex Cooperation Problem,” that is equal to one whenever a treaty
attempts to solve one or more of the “complex” cooperation problems listed above. The
variable equals zero only when an agreement does not attempt to solve any of the possible
“complex” cooperation problems.
I first look at whether there is any relationship between the kind of cooperation
problem and having a dispute resolution provision.
Hypothesis 1: Agreements solving complex cooperation problems are more likely
to include dispute resolutions provisions than those that do not solve complex
problems.
The Rational Design and Legalization logic suggest a more refined definition to
capture the idea of centralization or delegation. Hence I refine my dependent variable and
look only at formal provisions, leaving out informal means like friendly diplomacy. This
leads to the refined hypothesis:
Hypothesis 1a: Agreements solving complex cooperation problems are more likely
to have formal dispute resolutions provisions than those that do not solve complex
problems.
However, even mediation, which is included in formal dispute resolution, still tends
to leave dispute resolution up to the parties. Mediators mostly bring parties together and
occasionally simply suggest resolutions. Thus I refine the hypothesis even further:
Hypothesis 1b: Agreements solving complex cooperation problems are more likely
to have provisions for arbitration and/or adjudication than those that do not solve
complex problems.
Finally, I examine whether agreements characterized by an underlying complex
cooperation problem are more likely to call for external delegation of dispute resolution.
19
Hypothesis 2: Agreements solving complex cooperation problems are more likely
to be characterized by dispute resolutions provisions that include external delegation
than those that do not solve complex problems.
To test these hypotheses, I generate a set of cross tabulations to investigate the
incidence of dispute resolution conditional on an agreement being characterized by an
underlying complex cooperation problem. For instance, if Hypothesis 1 is to be supported,
we would expect agreements solving complex cooperation problems to have a significantly
higher incidence of dispute resolution provisions than those agreements not solving such
problems. Likewise for Hypotheses 1a and 1b, we would expect higher frequencies of
dispute resolution for those agreements that attempt to solve complex problems than for
those that do not.
The results, displayed in Table 2, Columns (1) through (3), do show a significant
relationship between the inclusion of dispute resolution provisions and the complexity of
the cooperation problem. Column (1) illustrates that 30% of agreements that do not solve
complex coordination problems include dispute resolution provisions (while 70% do not),
and that 51% of agreements that do solve such problems include dispute resolution (while
49% do not). Moreover, as shown by the p-value, we expect this observed variation to be
attributable to chance only 9% of the time.
Additionally, when we refine the dispute resolution variable and leave out informal
provisions, the observed difference becomes even more statistically significant, as
illustrated in Column (2): only 1% of the time is the variation in the inclusion of formal
dispute resolution provisions attributable to chance. Moreover, on further refinement,
looking only at dispute resolution provisions that include arbitration and/or adjudication as
in Column (3), the relationship remains strongly statistically significant. These results
20
strongly support the Rational Design conjectures. Finally, as Column (4) in Table 2
illustrates, agreements attempting to solve complex problems are significantly more likely
to draw on external delegation than those that do not attempt to solve such problems.
Table 2.
Incidence of Dispute Resolution Provisions. Conditional on Complex Coordination Problem
(Percentages)
No
Complex
Cooperation
Problem
Complex
Cooperation
Problem
P-value of
Pearson
Test
N
Hypothesis 1
All Dispute
Resolution
Hypothesis 1a
Hypothesis 1b
Hypothesis 2
Formal Dispute
Resolution
Arbitration and/or
Adjudication
(1)
30
(2)
13
(3)
9
External Delegation,
Conditional on Having Dispute
Resolution
(4)
29
51
42
39
73
0.092
0.013
0.008
0.026
88
88
88
40
Given the promising results of the cross tabulations, I conduct three probit analyses,
using the presence or absence of a dispute resolution provision as the dependent variable.
In each specification, I include the variable indicating the presence or absence of a complex
cooperation problem as well as two controls: a superpower variable – equal to one if the
United States or the Soviet Union is a signatory and zero otherwise – and a proxy variable
for transaction costs – the number of original participants in the negotiation of the
agreement. 16 For these tests, we expect to see positive signs on the coefficients of the
variable of interest, complex cooperation problem, as well as on those for number. 17
16
17
I use the number of participants logged.
See note 4 which predicts positive coefficients on number for Hypothesis 1a and 1b.
21
The results of these tests are shown in Columns (1) through (3) in Table 3. As
Column (1) indicates, international agreements attempting to solve complex cooperation
problem are significantly more likely to have dispute resolution provisions, and when we
refine the variable further to include, first, only formal dispute resolution and, second, only
provisions for arbitration or adjudication, Columns (2) and (3), respectively, the coefficients
become larger and more statistically significant. Additionally, as the number of states
increases, the more likely we will find some kind of dispute resolution provision. Finally,
the sign on the power dummy is negative (i.e., agreements that include either the U.S. or
Soviet Union are less likely to include dispute resolution) but surprisingly only significant
in the first model which includes informal dispute resolution.
Table 3.
Results of Probit Analyses of the Incidence and Form of Dispute Resolution Provisions.
Hypothesis 1
All Dispute
Resolution
Hypothesis 1a
Hypothesis 1b
Hypothesis 2
Formal Dispute
Resolution
Arbitration and/or
Adjudication
(3)
1.206**
(0.425)
External Delegation,
Conditional on Having Dispute
Resolution
(4)
1.120*
(0.564)
-0.476
(0.313)
0.226*
(0.124)
88
0.399
(0.511)
-0.071
(0.182)
40
(1)
(2)
Complex
0.669*
1.057**
(0.333)
(0.395)
Cooperation
Problem
Superpower
-0.628*
-0.419
(0.298)
(0.306)
Dummy
Number
0.379**
0.312*
(logged)
(0.126)
(0.123)
N
88
88
Note: Standard errors are in parentheses
+P < .10; *P < .05; **P < .01
And finally, as Column (4) indicates, international agreements attempting to solve
complex cooperation problem are significantly more likely to have dispute resolution
externally delegated. However, the number of states does not significantly affect the
22
likelihood of external delegation. Moreover, unlike in the previous table, the power
variable is positive, but it is not significant.
Finally, using the same variables employed in the tests reported in Table 3, I
conduct a set of dprobit analyses. Dprobit estimates measure a change in the probability of
the incidence of a dispute resolution provision associated with a small change in the
continuous variable of number (around its mean) or a switch in the dummy variables.
Because Dprobit results are marginal effects, they are easier to interpret than probit results.
For example, what Column (1) in Table 4 tells us is that, holding all of the other variables at
their mean, as the underlying cooperation problem characterizing an agreement switches
from not being complex to being complex, the probability of having any dispute resolution
provision goes up by 25%. Likewise, in columns (2) and (3), the probability of having
formal dispute resolution and the probability of having arbitration and/or adjudication
provisions both increase by 31% while the probability of the agreement including a dispute
resolution provision incorporating external delegation rises by 45%. All of these effects are
statistically significant and hence offer further support for the rational design conjectures.
Table 4.
Results of DProbit Analyses on the Incidence and Form of Dispute Resolution Provisions.
Hypothesis 1
All Dispute
Resolution
Hypothesis 1a
Formal Dispute
Resolution
Hypothesis 1b
Arbitration and/or
Adjudication
(1)
(2)
(3)
Complex
0.252*
0.313**
0.317**
(0.112)
(0.089)
(0.080)
Cooperation
Problem1
Superpower
-0.244*
-0.147
-0.156
(0.112)
(0.106)
(0.101)
Dummy1
Number
0.150**
0.111*
0.088*
(logged)
(0.049)
(0.043)
(0.041)
N
88
88
88
1
dF/dx is for discrete change of dummy variable from 0 to 1
Note: Standard errors are in parentheses
+P < .10; *P < .05; **P < .01
23
Hypothesis 2
External Delegation,
Conditional on Having Dispute
Resolution
(4)
0.452*
(0.189)
0.144
(0.180)
-0.026
(0.067)
40
5. CONCLUDING THOUGHTS: NEITHER HALF NEEDS EXPLAINING
The results of this inquiry very much inform the debate between those who believe
international law can order world politics and those who do not. I started out asking which
half of the agreements needs explaining? In fact, neither does. When we examine the
continent of international law through the game-theoretic lens of the underlying cooperation
problems states are trying to resolve, we expect differences across international agreements
and institutions. States shape agreements to solve the specific problems they face; design
variations are largely the result of rational, purposive interactions.
Thus different cooperation problems imply different needs for dispute resolution
provisions. The findings that states put in formal (including externally delegated) dispute
resolution provisions significantly more often when the cooperation problem is eased by
such provisions strongly supports the rational design logic.
More broadly, the finding calls attention to the efficiency of international law and
even suggests the relevance of the law of economic organization to international
institutional design. In 1937, Coase argued that transactions are transferred from markets to
firms up to the point where the marginal reduction in transactions costs from doing so is
equal to the marginal increase in inefficiency costs. For example, according to Coase,
making one long-term contract for the supply of some commodity (broadly-construed) may
often be less costly that a series of shorter contracts, given that negotiating and drafting
contracts is itself costly. In such contexts, a firm may arise. Of course, the frequency of
interaction among the parties for this commodity would be one factor driving this choice.
While there are no firms per se in international relations, we can apply these
concepts to the realm of international law by focusing on the degree of institutional detail
24
embodied in an international agreement. Agreements with very few provisions regarding
how to monitor compliance, how to punish when there is an instance of noncompliance,
how to change the agreement when the environment changes, etc. are more market-like
whereas agreements with very detailed articles on these same kinds of issues are more like
firms. It would follow then that the decision to include certain activities (like dispute
resolution) within the “governance structure” of an international agreement is the result of a
cost-benefit analysis, taking into account factors such as how frequently such processes will
be used as well as the costs to states of including them.
In international relations, the costs that arise when activities like dispute resolution
are included in an agreement are best captured by Milgrom and Roberts (1990) conception
of influence costs. They argue that any centralization of authority (public or private)
creates the possibility of intervention and thus gives rise to influence costs. Given anarchy,
states are particularly sensitive to issues of autonomy. Indeed the “sovereignty costs” of
having activities like dispute resolution dictated are probably much more significant to
states than are the contracting costs of spelling out such provisions. Thus, we should only
find such provisions included when they are likely to be needed. Rational states will not pay
these costs if such provisions are unlikely to be used. 18 This is exactly what the empirical
results suggest.
Of course, in this analysis, I look mainly at the cooperation problem as the driving
factor. No doubt other factors left out of this analysis also affect the inclusion of dispute
18
Interestingly, as Table 2 illustrates, states are almost always given the choice to use the
market (i.e., use informal dispute resolution) even when formal processes are articulated
within the agreement. Nonetheless, in almost all of the agreements, if informal measures do
not succeed within a specified time, either one of the disputing parties may initiate the
formal dispute resolution procedure dictated by the agreement.
25
resolution provisions. Moreover, it is also important to consider more deeply the variation
within the provisions. Future work, and a larger data set, will allow more fine-grained
analyses of these issues. At the least, the results of this analysis show that such future work
is promising.
This analysis also encourages us to broaden our perspective when thinking about
international agreements. While questions of multilateralism versus bilateralism or
important versus not as important agreements are still interesting and important, there is a
multitude of other ways of dividing and analyzing agreements that shed light on the
foundational questions of international relations. By examining which agreements have
dispute resolution provisions, in particular, formal and delegated dispute resolutions
provisions, we find that international law not only resembles domestic law more than
previously thought. We also find that international law may actually be quite efficient with
states not creating and/or delegating dispute resolution authority when it is not likely to be
needed. Yes, many can still argue that the rulings these dispute resolution entities dictate
can be ignored. 19 Yet, one could counter that, if such were the case, either states would
learn and change their ways (that is, stop taking the time to negotiate and create dispute
resolution authority) 20 or, more likely, the statistical patterns would resemble random noise.
But the statistical results are far from random noise and therefore are not easily dismissed.
19
No doubt solid empirical research is needed to shed light on such important issues.
As Goldstein et al. 2000: 391 state: “For those propounding an anarchic international
politics based on national self-help, the central puzzles are why states devote so much
attention to constructing legalized institutions that are bound to have so little effect and why
states accept as credible pledges to obey legal rules that could effectively bind them to act
in ways that might be antithetical to their interests.”
20
26
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