Treaties’ Domains

When and why do American judges enforce treaties? Today’s dominant theory of treaty enforcement is the doctrine of “self-execution,” which suggests that judicial enforcement of treaties is deduced from the nature of the treaties signed. The theory holds that some treaties are written so as to be directly enforceable, just like a statute, with full domestic effects, while other treaties are written so as to create duties only under international law. Unfortunately, as most scholars recognize, the doctrine is perplexing and of limited predictive value.

This Article, based on a new study of the history and record of treaty enforcement, provides a different theory as to when treaties are actually enforced in American courts. It finds that the question of whether a treaty is “self-executing” is acting as a proxy for questions of institutional deference. A good guide to treaty enforcement across the history of the United States is whether it is Congress, the Executive, or a State accused of breach. 

The basic treaty enforcement question is, and has been, whether the alleged act of treaty breach justifies a judicial remedy. Judicial deference to Congressional action with respect to a treaty is to be expected. Conversely, the judiciary will continue to use treaty law to prevent States from putting the United States in violation of its international obligations. As to the Executive, the judiciary should begin to explain why, in terms of deference, it is or is not choosing to enforce a treaty against Executive breach.

Economic and Legal Boundaries of Firms

Two types of theories of the firm have emerged in scholarship. Economic theories concern the allocation of control rights and residual claims: a firm is a group of assets under common ownership. Legal theories focus on the legal significance of firm boundaries: each firm is a legal person. Thus, assets may be economically integrated under common control and yet be partitioned between distinct legal entities. This paper presents a theory of legal boundaries that focuses on the choice of capital structure, and traces the interplay between economic integration and legal partitioning. The law treats many capital structure decisions, including both financial and governance choices, as in personam rather than in rem. Thus, these decisions must be made firm-wide; these include the issuance of debt or equity, the adoption of takeover defenses, and the composition of the board of directors. Yet, the determinants of optimal capital structure are often asset-contingent. For example, the amount of leverage, the desirability of takeover defenses and the number of independent directors may vary with the industry. The resulting tension is significant in the choice of firm boundaries. If two groups of assets have divergent capital structure demands—in that the optimal design of financial and governance rights related to each group is different—then either the assets are put in separate firms that tailor capital structure to their respective asset groups or they are combined in a single firm with a blended capital structure. We suggest that legal integration into a single firm sacrifices efficiency in some cases, but not in others. Where the efficiency losses are large enough to offset countervailing advantages from legal integration, legal partitioning might occur. We also demonstrate, however, that legal partitioning may undermine the benefits from economic integration, even if the discrete firms are kept under common control, as that concept is defined in law. Our theory thus suggests additional factors to be considered in explaining the structure of combinations (such as mergers or acquisitions) and divestitures (such as spin-offs, carve-outs or securitizations).

Authorized Generics: A Prescription for Hatch-Waxman Reform

Authorized generics present the latest controversy in the perennial battle between pioneer and generic drug manufacturers. Under these arrangements, a pioneer firm will “authorize” a generic version of its brand-name drug to enter the market during another generic competitor’s 180-day exclusivity period. This practice has generated intense debate within the pharmaceutical industry regarding its potential impact on Paragraph IV patent challenges, in addition to the proper operation and intent of the Hatch-Waxman Act. Because of the immense economic and public health consequences at stake, and previous patterns of Hatch-Waxman abuse, the Federal Trade Commission has recently launched an investigation of authorized generics.

This Note explores the qualitative nature of pharmaceutical competition, specifically focusing on the interaction between pharmaceutical supply chain economics and consumer behavior. From these observations, I propose a theory of competitive harm and conclude that authorized generics are an anticompetitive strategic behavior which violate the antitrust laws by deterring Paragraph IV entry. I find normative support within the Hatch-Waxman and patent law regimes to corroborate my antitrust analysis. Finally, I recommend potential solutions to the authorized generics controversy, including Hatch-Waxman legislative reform.