You're referring to the process of finalizing a treaty. That would be conceptually similar to "executing" an agreement between parties—the most important step that makes it legally binding!
But "reaching a deal" and "executing the agreement" are often different steps. When we have discussions with a client, and we negotiate on the terms we can reach an agreement on the negotiation before we actually execute the contract.
After reaching satisfactory terms in the agreement, I need to run the agreement by my business partner and ensure he approves. Sometimes the person who actually signs the contract may be a different party that I've never met or talked with during any part of our discussions.
All of which is to say the language here seems appropriate. The G7 has reached a deal—that doesn't mean the deal is now effective or legally binding. Deals that have been reached can still fall through. But the G7 has reached a deal. What they haven't done is yet made it legally binding through a formal treaty process.
Your analogy is flawed because you seem to be assuming that the people with execution authority are the ones who reached an agreement in principle. You’d expect them to succeed in papering it up.
That’s not the case here. The agreement in principle was reached by someone who has no power to do anything with regards to corporate taxes. Congress sets U.S. tax law and agrees to treaties. To do that, you need 60% or 66% of the Senate. It’s like the CFOs reaching an “agreement in principle” to something that requires Board approval—and a big chunk of the Board is hostile to management.
1. The finance ministers reach an agreement. This is what has happened.
2. A treaty is written and signed, normally by the head of state, but sometimes by the head of government (for the US in both cases the President). At this point the treaty in not yet legally binding, although according to international law the signatory country has an obligation "to refrain, in good faith, from acts that would defeat the object and the purpose of the treaty."[1]
3. The parliament (for the US the Senate) ratifies the treaty, making it binding.
4. The parliament (House and Senate in the US) creates the necessary national legislation to implement the provisions of the treaty.
5. The government creates the secondary legislation for the application of the national legislation created at 4.
Usually after 2. the other steps follow more or less smoothly, but there are some high profile cases where the ratification never happened (e.g. the Kyoto protocol).
> 3. The parliament (for the US the Senate) ratifies the treaty, making it binding.
Under international law, ratification happens when a state’s international representatives (head of state, ministers, ambassadors) formally lodge instruments of ratification with the depositary. (See Article 2(1)(b), Vienna Convention on the Law of Treaties.) When the US Senate "ratifies" a treaty, that is not ratification under international law, that is a domestic legislative procedure which confusingly happens to have the same name.
Under international law, legislatures are not involved in ratification, only the state's international representatives are (which almost universally belong to its executive). Domestic law may require those representatives to consult or seek approval from the legislature, but international law mostly (but not entirely) doesn't care about those requirements.
I would quibble that the name collision of the US Senate's "ratification" power is intentional and not confusing. When the Senate votes to "ratify" a treaty, it is authorizing the US government to perform the international act of ratification.
i.e. US domestic law governs the procedures by which the state can perform the internationally-recognized act of treaty ratification.
To be strict about it, the Senate never votes to ratify a treaty. It votes to give its "advice and consent to the ratification". The actual ratification is done by the Executive not by the Senate. But the Senate's advice and consent is popularly called "ratification" even though it isn't.
And the Senate's consent is not required to ratify a treaty. Ultimately the Executive decides whether to classify something as a "treaty" or an "international agreement". By classifying a treaty as an "international agreement", the Executive is allowed to ratify it without the Senate's consent. Such a ratification without the Senate's consent counts as "ratification" under international law but not under US domestic law. And that's why it is confusing, the meaning of the term "ratification" under US domestic law is a subset of its meaning under international law.
The Senate's consent is required to ratify certain treaties.
It all depends on what the treaty's terms require the government to do. If the terms can be fulfilled by executive power, the executive can sign and ratify on its own (executive agreement). If the terms need the force of congressional legislation to implement, it can be ratified on a regular legislative vote of both houses of congress (executive-legislative agreement).
The ones that require a Senate supermajority are the ones that "legislate" in areas outside of Congress's normal jurisdiction. e.g. the US Congress probably can't pass a law prohibiting states from using the death penalty, but with a 2/3 Senate vote it could sign a treaty banning it.
(Another advantage of going "up" a level is that repealing or withdrawing from a treaty is more difficult the higher you go, generally requiring a similar authority to withdraw as was used to ratify.)
> The ones that require a Senate supermajority are the ones that "legislate" in areas outside of Congress's normal jurisdiction. e.g. the US Congress probably can't pass a law prohibiting states from using the death penalty, but with a 2/3 Senate vote it could sign a treaty banning it.
It isn't clear that is actually true. Yes, the 1920 case of Missouri v. Holland appears to say that treaties ratified by the Senate can bind the states in ways that Acts of Congress cannot, but a number of legal scholars think there is a decent chance that SCOTUS would overturn that precedent if the issue came before it – see for example https://doi.org/10.2307%2F1123464
Suppose that, somehow, Democrats manage to gain control of both the Presidency and a two-thirds majority in the Senate. They then use that majority to ratify the Second Optional Protocol to the International Covenant on Civil and Political Rights, and then argue that the ratification outlawed the death penalty nationwide. A retentionist state goes to SCOTUS to challenge the treaty. If we assume the current conservative SCOTUS, I think a majority would likely overturn Missouri v. Holland and rule that the treaty is unenforceable as beyond the federal government's power. However, I doubt they'd rule that the legislative act of the Senate giving advice and consent, or the executive act of depositing instruments of ratification, was unconstitutional, merely that the treaty was not legally enforceable against the states. It is worth noting such a decision would not invalidate the ratification of the protocol under international law, and the US would still have an international legal obligation to obey it (unless and until they denounced it), even though the federal government would be legally powerless (under US constitutional law) to fulfil that obligation. (See also Medellin v. Texas.)
> The Senate's consent is required to ratify certain treaties.
In legal systems which adopt the dualist approach to international law, the international act of submitting the instruments of ratification of a treaty, and the domestic legislative acts necessary to enforce it, are two different things. Although the second act normally precedes the first, there is no requirement for such an ordering under international law. And I think it is very likely that SCOTUS would consider the executive act of submitting the instruments of ratification for a treaty to be beyond its power to judicially review; SCOTUS will confine its role to deciding what the legal consequences of that act are under domestic law. It may in some cases rule the executive act legally ineffective in creating domestic legal obligations, but in doing so it is not passing judgement on the constitutionality of the executive act itself. Suppose some President decided to ratify a treaty first, and hope to get legislation implementing it through Congress second. A risky move, in that if the legislation cannot be passed, the US could be left with international legal obligations which are impossible under domestic law to fulfil. But I don't see any evidence such a risky act would be either unconstitutional under domestic law or invalid under international law.
> (Another advantage of going "up" a level is that repealing or withdrawing from a treaty is more difficult the higher you go, generally requiring a similar authority to withdraw as was used to ratify.)
The President has unilateral discretion to withdraw from any treaty, irrespective of whether it is a treaty to which the Senate gave advice and consent, a congressional-executive agreement, or a sole executive agreement. So which type is used makes no difference to the President's power to withdraw. That was the effective holding of SCOTUS in the 1979 case of Goldwater v. Carter.
Now, the President does not have unilateral discretion to repeal a congressional-executive agreement insofar as it forms part of domestic US law, and the same may be true of a treaty to which the Senate gives advice and consent. But the President's inability to repeal the domestic legal effects of the treaty doesn't make any difference to the international legal effects of withdrawal – once the withdrawal is completed, it is no longer binding on the US under international law, even if some of its provisions continue to be binding under domestic US law.
I don't agree that domestic law always wins. It all depends on the situation.
If a country's domestic law violates international law, the extent to which that country gets away with it depends a lot on how powerful that country is. Great powers have much more ability to violate international law with impunity than small countries do.
And in this particular case, it is not that US law and international law are actually in conflict. It is just they assign different meanings to the same words. Even the US government generally accepts the internationally standard meanings in international fora.
Nations are sovereign they can do what they want. Short of going to war its hard to force a country todo something it does not want too. Although if you pull out of agreement don't expect the other country to continue following it.
Also there are other countries not part of this talk nothings stops a company from setting up there and doing the same tax games. So i dont see how this idea does anything
> Nations are sovereign they can do what they want. Short of going to war its hard to force a country todo something it does not want too
In today's world economic pressure is a much bigger factor than war. If you upset enough countries, they can all start imposing trade and financial sanctions on you, which then ruins your economy. International law is a useful (even though of course not always perfect) guide in answering the question "is doing X going to upset a large number of countries?"
> Also there are other countries not part of this talk nothings stops a company from setting up there and doing the same tax games.
Most of these companies are actually headquartered in major economies – US, the EU, etc. What they've been doing is exploiting complex loophole interactions between the tax laws of those major economies and the tax laws of small countries with favourable tax regimes. If the major economies close those loopholes, they can stop most of this. The small countries only get away with it because the major economy tax law loopholes let them. Most of the time, companies don't want to move their actual headquarters to these small countries due to the negative consequences
In international law, this is known as monism vs dualism.
Monism says that international law and domestic law form a single cohesive whole. International law automatically applies domestically, and domestic law which contradicts international law is automatically invalid.
Dualism says that international law and domestic law are two independent systems. International law only applies domestically if domestic legislation is passed or amended to make it applicable. Domestic law and international law can contradict each other, and in cases of contradiction the domestic courts will follow the domestic law and ignore international law.
Some legal systems have adopted monism and others dualism. And yet others, like the US, are actually a hybrid – US law is mostly dualist but with a few monist elements.
Yes, I gave a quick overview of the main steps, with minor inaccuracies to keep it simple.
Ratification itself is not required unless the treaty itself requires it. Countries do form agreements with “signed” but not “ratified” treaties. Sometimes even “exchanges of notes” can be binding.
> At this point the treaty in not yet legally binding, although according to international law the signatory country has an obligation "to refrain, in good faith, from acts that would defeat the object and the purpose of the treaty."
International "law" is always entertaining like this: Who enforces this "obligation"?
> The agreement in principle was reached by someone who has no power to do anything with regards to corporate taxes
I think you are considerably understating the power of the G7 finance ministers including the US Secretary of the Treasury. Sure, they can't ratify a treaty without the cooperation of congress. They're still extraordinarily powerful individuals and have loads of direct authority to shape tax policy.
My analogy is really just a reference to what "reached a deal" colloquially means.
"reached a deal" doesn't mean the deal absolutely 100% will be implemented. It means, the referenced parties have reached an agreement to something.
In this case, the leaders of the G7 countries have reached an agreement among themselves to have a minimum corporate tax rate. Note that the United States has no obligation according to this deal—only Joe Biden has agreed the deal. And Joe Biden has no legal obligation under the deal, he merely has a reputational one.
Since the agreed minimum corporate tax rate is 15%, and the United States corporate tax rate is 21% there's literally nothing Joe Biden needs to do in order to meet the terms of the deal he made with the other G7 leaders.
If they want to turn this into an international treaty, absolutely, GOP Senate votes will be needed (though, given that the treaty would create a floor that's 6 percentage points below our current tax rate, I would imagine those would be attainable votes—if the GOP created a global floor that was lower than our tax rate, they could use it to argue for lowering our corporate tax rate).
> It's not even that. Most international agreements are executed without a treaty.
Only in the US (and possibly a handful of other countries which copy the US approach). Under international law, all legally-binding international agreements are treaties. What the US calls "international agreements" are treaties from the non-US point of view.
> I would think a treaty requires all parties to it to think it's a treaty.
Well, even the US agrees that "international agreements" are "treaties" in the international law sense, despite not being "treaties" in the US domestic law sense.
> Any idea where I can read a bit more about the fundamentals
Unfortunately it isn't easy to get your hands on. You can buy a hardcopy for US$173 plus shipping. Or you can do what I did, and read it for free in a university library. (It is also included in Westlaw subscriptions, but unless you already have access to one, buying the hardcopy would probably be cheaper.)
> That term has a different, and as I understand, more nebulous meaning under international law?
The most common way to make an international agreement not legally binding is to put a clause in there explicitly stating that it isn't legally binding. When the agreement explicitly states it isn't legally binding, then it clearcut isn't.
If an agreement is in the usual written form of a finalised formal agreement, it is generally going to be assumed to be legally binding unless it explicitly states it isn't.
Generally speaking, to be binding under international law, the parties have to have "international legal personality". That basically means the parties must be the national governments of sovereign states, or international organizations established by treaty. An agreement involving private corporations, private individuals, subnational governments, non-governmental organisations, etc, generally isn't going to be legally binding under international law, even if it also includes national governments among its parties. Occasionally, dependent territories are granted power by the national government to sign legally binding international treaties on certain topics (such as Hong Kong and Macau), but that is an exception to the general rule.
There are grey areas which lawyers and scholars will debate, but it rarely turns into a live issue in practice.
I used to want to be a lawyer. I even applied to law school once but didn't get in. Probably if I kept on trying I would have gotten in eventually but just decided to stick with software engineering instead.
>> After reaching satisfactory terms in the agreement, I need to run the agreement by my business partner and ensure he approves
Do you think Mitch McConnell sees US Treasury Secretary Janet Yellen as his business partner? Or vice versa? That's your perception?
>> The G7 has reached a deal—that doesn't mean the deal is now effective or legally binding
So if I'm negotiating with you and you tell me we have a deal, I should consider that to be something that may or may not happen, may or may not be effective, and may or may not be legally binding?
Assume we’re going back and forth in negotiations. After a few back and forth a, with small changes each time, I send you over some language and you say: “That’ll work, I’ll draw up a contract and send it over to you”.
At that point, I would tell people internally to my company that we have a deal with that client.
But we don’t count on that revenue arriving, until we have a signed contract in place. Anything can happen between the negotiation and the contract being signed. The client could come back to us and say “there’s been a sudden change in priorities on our end, and we’re cancelling the project”. Or they might come back with any other change that they want “when I sent this to my VP, he said the top line number wouldn’t work, and we need to move it again, I’m so sorry!”
Yes, we don’t consider anything to be legally binding until the contract is signed. We “had a deal”, but deals can fall through.
If you deal in any contract worth more than a few hundred dollars, I really recommend you take the same attitude: everything is provisional until the final agreement is written down and signed.
> Which car company do you work for?
Was that necessary? Really? You can make your point without attempting to attack people.
> > "The G7 group of advanced economies has reached a historic deal to make multinational companies pay more tax"
> Is that true?
Yep! Because a "deal" can be something that is provisional. "Reached a deal" to me doesn't in any way mean that the deal has been executed, finalized and is legally binding. It means the first step of negotiations has been completed and all parties are agreeing to the terms of the deal.
Look, we're just arguing about the semantics of how final "reached a deal" is. I think it's not very final (especially when discussing large multiparty negotiations like the ones described here). You seem to think it refers to an absolutely final step. That's fine! English is messy and we can disagree about what specific phrases mean. I'll just caution you that most of the world will use the phrase "reached a deal" to refer to negotiations that are preliminarily complete, but the terms not having been formally adopted or legally finalized.
That's totally fair! I don't disagree that people who reach a deal shouldn't change the deal after that point (though the UK government seems to think it's fine).
But, suppose the following events happen:
- we reach a deal on some cool project
- reporters announce that we have a deal on the cool project
- I decide to back out of our agreement and not go forward with the cool project
- reporters announce that I backed out of our agreement
- You condemn me for my treachery, and tell everyone that I'm a backstabbing two-faced used-car dealer
- reporters announce that you have condemned me
The reporters aren't wrong at any step in this! We did have a deal, and it's correct to report on it and correct to say we had a deal. Even if the deal ultimately fell through to my used-car treachery.
I'm not saying people shouldn't hold to the deals that they make (though you seem to think that's my argument, so I must've made my point poorly somewhere along the way). 100% of my point is "reached a deal" doesn't mean it's final, and it's OK and even correct to say that a group of people have reached a deal—even if you don't think that deal is feasible.
Another example: Let's say that I form a deal with 10 investors that I will guarantee them a risk-free 50% annual return on their investment. You would be absolutely correct to say that I was probably lying! You would be correct to say it's clear that malfeasance exists! But you would be wrong to say that we didn't reach that deal. We did reach that deal, even if you think there is a 0% chance that the deal will actually be accomplished in the real world.
>> So if I'm negotiating with you and you tell me we have a deal, I should consider that to be something that may or may not happen, may or may not be effective, and may or may not be legally binding?
I hope you don't touch contracts in your job. Until a contract is signed nothing is official.
There's all sorts of outcomes here. While you may be right that the US will not sign on to the deal it might still have to deal with some consequences. E.g. while Yellen may not have the ability influence US tax laws there are also foreign tax laws that are part of this over which McConnell has no control. Let's say the rest of the G7/G20/OECD changes the way they tax global companies, if the US doesn't ratify their side there's still plenty of real world consequences. I think Yellen's agreement does count as in this is the US's (sort of foreign policy?) position, i.e. the rest of the world can proceed to make changes based on that agreement even though Yellen does not have the authority to commit to changing US tax laws.
>> I think Yellen's agreement does count as in this is the US's (sort of foreign policy?)
No it doesn't work like that.
To get anything done, you need Republican votes. I have no idea, I haven't checked this afternoon, how many Republican votes do you have for a minimum corporate tax?
That's what I want to know, I'm guessing it is zero, but let me know what the number is.
I'm not sure why Canada imposing a tax on Google's revenue in Canada requires US Republican votes? Or what the Republicans would do about it? So seems like we can get a lot of things done without those votes. Most of these companies are US based and they are effectively dodging taxes in other countries, it's not the US tax laws that impact those for the most part.
But it could be an informal agreement between the leaders of these countries, that they will all pass such laws. In that case, passing a law that changes the corporate tax rate would fit into a reconciliation package with no issues.
Though, if it’s an informal agreement then no such law even needs to be passed, since our corporate tax rate is above the agreed minimum.
Offhand, does someone know which countries that belong to the G7 and made this "historic agreement" have higher tax rates than that agreed upon?
Edit
In an alternate universe I wish the title was"G7 agrees to carbon tax" that would certainly level the playing field...I mean surely intrinsically FANG's are highly carbon intensive if you took into account the pollution they help generate through added energy usage (delivery trucks every day, lots of packaging, server farms etc) and the highly paid jobs which fuel inflation, consumption and speculation...(p.s. please don't feel ruffled)
> Isn't ratifying a treaty something completely different?
Sure, but there is a distinction between treaties in international law and those under the Constitution; by far the most common way for treaties in the international law sense to be adopted in tbe US in the last several decades is as Congressional-executive agreements, which are, procedurally, either normal legislation submitted after an executive-negotiated agreement or an executive-negotiated agreement under authority granted by normal legislation.
To be clear, Constitutionally the United States Senate only needs a majority to pass a law that changes the Taxes collected from corporations.
The Senate Filibuster which requires a 60-vote majority is not a Constitutional provision, and you wouldn't strictly need a Treaty for this agreement, if all the countries simply adopted the same tax provisions.
So, if the Democrats had the vote for it, they could pass this law with 0 Republican votes. In fact, since raising taxes is a budgetary measure, they could absolutely pass the corporate tax increase on reconciliation and do it with 0 Republican votes and without touching the filibuster. So, it seems quite plausible to me that this will happen.
Reconciliation is a process within Congress by which the Senate does not impose its not-Constitutionally-required supermajority requirement to certain budget-impacting measures.
So, no, its use doesn’t bypass Constitutional powers (not rights, which are not attributes of government bodies) of Congress, it is a means by which Congress has chosen to exercise them.
You don't need to ratify a treaty through reconciliation. There's no need for this to be done with a formal treaty. It could simply be each of the nations passing laws that do the same thing.
If the Senate passes a law that changes the corporate tax rate to a certain amount, that is a budgetary measure that could absolutely be passed with reconciliation.
Yes, this law wouldn't be a treaty, but it could have a similar effect.
> If the Senate passes a law that changes the corporate tax rate to a certain amount, that is a budgetary measure that could absolutely be passed with reconciliation.
If it was revenue-neutral, sure. That is unlikely to be the case with changes to corporate tax rates. And even then, you are going to have a hard time getting even 50 votes.
No, revenue-neutrality doesn't weigh in favor of being eligible for reconciliation; a measure must principally address either spending, revenue, or the debt limit to be eligible for that process.
That’s an incorrect description of the budget reconciliation process.
One of the budget reconciliation categories is explicitly for revenue, which means being revenue-neutral would make it harder to pass under reconciliation.
Being an aspect that explicitly impacts revenue makes it much easier to pass under the revenue reconciliation process. In fact, adjusting those rates would be a pretty straight-down-the-middle use of reconciliation.
> You are not going to ratify a treaty with the required 2/3 votes in the Senate via reconciliation
Which is among the reasons this won’t technically be a treaty in US law (even if it is in international law), but a Congressional-executive agreement [0].
The US corporate tax rate is 21%, above the 15% minimum that was proposed. Furthermore, it was the Trump administration who introduced GILTI and BEAT, both measures aimed at taxing foreign profits in low wage and low tax countries. Now, of course, republicans are probably loathe to give the White House any "wins", so that might throw a spanner in the works, but republicans don't have any love for tax havens.
But "reaching a deal" and "executing the agreement" are often different steps. When we have discussions with a client, and we negotiate on the terms we can reach an agreement on the negotiation before we actually execute the contract.
After reaching satisfactory terms in the agreement, I need to run the agreement by my business partner and ensure he approves. Sometimes the person who actually signs the contract may be a different party that I've never met or talked with during any part of our discussions.
All of which is to say the language here seems appropriate. The G7 has reached a deal—that doesn't mean the deal is now effective or legally binding. Deals that have been reached can still fall through. But the G7 has reached a deal. What they haven't done is yet made it legally binding through a formal treaty process.