Introduction – The Historical Today
There is currently a lack of theoretical framework for comparing some of the legal world’s most interesting developments, namely the creation of semi-autonomous international financial centres with their own separate ‘internationalised’ legal systems and courts, such as the Dubai International Financial Centre (DIFC), with similar set-ups from the past and present. Two examples from recent history highlight the important insights that they contain for the present.
Take, for example, International Shanghai. It comprised the International Settlement and the French Concession and was in existence from approximately 1854 until 1941/43 in some form. Whilst officially remaining under Chinese sovereignty, the international part of the city was de facto a semi-city-state run by Western powers under various international, national and local laws, resulting in what could be called transnational or shared colonialism (Isabella Jackson, Shaping Modern Shanghai: Colonialism in China’s Global City (CUP 2017)). It was a centre of global commerce and finance, rivalling the other major cities of the time. One of its main characteristics was that it was visa-free, which also led it to host many Jews fleeing Europe in the late 1930s and during World War II, even when it was under Japanese Occupation. It is no coincidence that many key Chinese figures, such as Mao Zedong, found refuge in International Shanghai (Jonathan Kaufman, The Last Kings of Shanghai: The Rival Jewish Dynasties That Helped Create Modern China (Viking 2020) 77-94). It was also the primary gateway to China for foreign investors, mostly from the West. For example, by 1929, 77% British investment in China and 65% of American investment went into Shanghai, primarily into the International Settlement.The main reason was, in the words of the aforementioned Jackson: ‘These investors wanted to be sure that their capital was secure for the foreseeable future, that the infrastructure they needed would be maintained, that their legal rights would be protected by courts and a police force, that their staff in Shanghai would be protected from disease and that the labour required for their mills and factories would be reliable.’ (p.6)
With the fall of Shanghai in 1949 to the very communists it had helped co-create and enable, another port city in the region took in many of its successful inhabitants and its vibrant ‘internationalised’ energy: the British Crown Colony of Hong Kong. Today, the Hong Kong Special Administrative Region (‘HKSAR’) retains strong ‘internationalised’ aspects inherited from the refugees of international Shanghai and their former British rulers under the One Country, Two Systems policy of the People’s Republic of China.
The International Zone of Tangier – the birthplace of Special Economic Zones & International Commercial Courts?
Likewise, the International Zone of Tangier (1923–1956) was a case of transnational or shared colonialism (between France, Italy, Belgium, the Netherlands, Portugal, Spain, the United Kingdom – and later also the United States), but its fascinating story is less well-known than that of Shanghai (Daniela Hettstedt, Die Internationale Stadt Tanger: Infrastrukturen Des Geteilten Kolonialismus, 1840–1956 (De Gruyter 2022) & Graham H. Stuart, The International City of Tangier (Stanford University Press 1955)). The Zone was established as a sort of “internationalisation” comprise between the UK, France and Spain, which were all vying for power in Morocco and control over the Strait of Gibraltar. The Tangier International Zone remained under the sovereignty of the Sultan of Morocco. Moroccan law, therefore, continued to apply to the local Muslim and Jewish inhabitants when they came before the local Sharia and Rabbinical courts. The Sultan was represented by the Mendoub, who was responsible for co-signing and promulgating all laws of the Zone. Next to this local element, there was the international element. This consisted of the International Administration and Administrator, the International Legislative Assembly, the Diplomatic Committee of Control (the de facto executive) and the Mixed Court. The “mixed” legislation (mostly French-inspired) in force was directly based on treaties or enacted by the assembly. This internationalization built forth upon generations of previous internationalization experiences in Tangier, such as its International Sanitary Council and the International Commission of the Cap Spartel Lighthouse (Javier Francisco Martínez, ‘Double Trouble: French Colonialism in Morocco and the Early History of the Pasteur institutes of Tangier and Casablanca (1895-1932)’ (2016) (36:2) Dynamis 317-339; Graham H. Stuart, ‘The International Lighthouse at Cape Spartel’ (1930) (24:4) The American Journal of International Law 770–76)). Its international and neutral status, coupled with its lax laws and limited taxes, led Tangier to arguably -and only very gradually- become the first large-scale modern tax haven. It attracted numerous banks, gold deposits and tax-avoiding companies and individuals, especially after World War II, when it was dubbed ‘the gold safe of Europe’ (Vanessa Ogle, ‘Funk Money’: The End of Empires, The Expansion of Tax Havens, and Decolonization as an Economic and Financial Event, (2020) (249:1) Past & Present 220-224).
It is striking that in Tangier, multiple European nations, including four of the six founding members of the European Coal and Steel Community, collaborated on an institutional level over a period of three decades. Furthermore, over time, the Mixed Court of the Tangier International Zone developed interesting case law that seems to already foreshadow later “novel” case law of the CJEU. This might sound surprising, yet there are, for example, clear personal connections between the Mixed Court of Tangier and the early CJEU. The International Zone however has until now only rarely been connected to the history of European law, most likely in order to not undermine the “novelty” of the project (Michel Erpelding, ‘International Law and the European Court of Justice: The Politics of Avoiding History’ (2020) (22:2-3) Journal of the History of International Law).
In 1956 Tangier returned to Morocco. In the advent to those negotiations, the term ‘Zone à Régime Economique Spécial’, i.e. a Special Economic Zone (SEZ), was arguably used for the first time ever (Chambre de Commerce Britannique/Espagnole/Internationale/Italienne/Marocaine de Tanger, Régime Economique de Tanger (Tanger, 1956). Dutch Diplomatic Archives, 2.05.120 – 90)). On 26 August 1957, Mohammed V declared Tangier a Royal Charter City, granting it certain tax and other privileges, such as customs exemptions, to retain its role as a major financial centre, effectively making it a type of Special Economic Zone (SEZ). The text of the Royal Charter was short and fully published in the Tangier Gazette (see image 1 hereunder).
Image 1. Tangier Gazette, p2, edition 6 September 1957, as found in the archives of the American Legation Tangier.
There also seem to have been plans to create a special chamber in the local court for dealing with international commercial cases- a ‘juridiction spéciale chargée des arbitrages et des litiges en matière de commerce international’ (Wnd Consul, De Nieuwe Rechtspraak te Tanger (Tangier, 1957), Dutch Diplomatic Archvies, 2.05.69 – 2256), but this never materialised. In 1960, the King suddenly revoked Tangier’s special status. By then, most foreigners, foreign companies, and a significant amount of money had already gone elsewhere, primarily to many of the current-day tax havens.
The Concept Special Economic & Internationalised Jurisdiction
Neither the International Zone of Shanghai nor the International Zone of Tangier were exceptional throughout history. From the very beginning of international trade, some cities or zones have had exceptional statuses due to distinct (geo)political factors and/or their unique location at the crossroads of different trade routes, nations, and cultures. These special zones were often major trade hubs and naturally attracted people from diverse backgrounds, thereby becoming prosperous, open, and cosmopolitan places. The idea of a special zone or jurisdiction for foreign investors and merchants has persisted throughout history, but the exact set-up has greatly differed, with some finding their origins in national law, others in treaties and thus international law, and some others in a combination of both. They were or are thus truly ‘places in-between’. It is true that it is hard to draw direct lessons from and parallels with, for example, specific Muslim trading quarters in medieval China or from the Hanse system in Europe for the modern era, as the nation-state and territorial jurisdiction, concepts that seem so universal and essential today, were not yet in place. But from the mid/late 19th century onwards, many of the key underpinnings of the present-day system, such as territorial sovereignty and jurisdiction, were in place, which allows for a comparison and insights to some extent, despite the radically different geopolitical set-up compared to today, with European colonial empires being at their zenith.
The strong division between studies in international or national law helps to explain why special jurisdictions are often overlooked, as they are frequently treated as curiosities in either international or national law, depending on their status and foundation. Today, all too often, certain developments, such as the establishment of SEZs, international commercial courts, or semi-autonomous financial centres, are termed novel, whereas they are often different renderings of something that has happened before. Insights from the past and other similar yet distinct contemporary developments can be useful in better understanding and predicting what is possible or can happen. This legal historical angle is, however, often missing in many major concepts such as Special International Zones, Charter Cities or SEZs. Likewise, the ‘gap’ between international and national law is never fully bridged (Tom W Bell, ‘Special International Zones in Practice and Theory’, 2 ChapL Rev 21 (2018), Paul Romer, ‘Technologies, Rules, and Progress: The Case for Charter Cities’, Center for Global Development Essay (2010), UNCTAD World Investment Report, Special Economic Zones (2019)). Here the true problem comes forth: there is no real suitable theoretical framework to compare such ‘in-between’ places from the past and present.
In my PhD, I propose a theoretical framework to facilitate comparison between ‘in-between places’ that are intuitively linked, whether these are places from recent history or those established under or in international law (or both). I do so by first examining the various semi-autonomous exceptions that exist today, such as Mount Athos, and then presenting a general theory on special jurisdictions. Whilst the term jurisdiction is difficult to define, and has many different meanings depending on the exact context, including either a personal or territorial angle, I frame special jurisdictions as “an area or community with a certain normative authority wherein a specific set of rules is in place and enforced that are different from its home jurisdiction.” My PhD, in particular, focuses on those special jurisdictions that play a significant economic role for their host states and are ‘internationalised’, i.e., they have official or unofficial foreign involvement in their governance, such as the presence of foreign judges or public officials.I have coined such zones ‘special economic & internationalised jurisdictions’ (SEIJs) under the following definition: “a special jurisdiction with a certain internationalised element and which acts as an economic hub and gateway to its hosting jurisdiction”. I then proceed to test this definition using three case studies: the International Zone of Tangier, the Hong Kong Special Administrative Region, and the Qatar Financial Centre (QFC).
It is found that the definition is applicable to all three, although each is established by different legal instruments (purely national law for the QFC, purely international law for Tangier, or a hybrid in the case of Hong Kong) and under varying circumstances. All three perform the same functions and have remarkable similarities, and sometimes even direct legal links. Especially Tangier and, to some extent, Hong Kong also hold another lesson: SEIJ often also hold the seed of their own destruction. They often give shelter to those who will later destroy them, or they lose their purpose when the larger economy in which they are embedded has caught up, or the balances have changed, often for a great part because of the capital and ideas that were originally available in the SEIJ. In other words, they start to lose their value when their role is deemed complete, which then leads to their special status being questioned and often diminished or extinguished.
Conclusion
Special areas for attracting foreign business have existed since the beginning of recorded history for a reason. These areas then often became major economic hubs and gateways. This shows the effect that a special jurisdiction can have, even though it is only divided from its host state by a fictional ‘line in the sand’. SEIJs are but one modern type of this recurring phenomenon. A certain degree of internationalisation of institutions, especially the courts, has always seemed conducive to gaining the trust of foreigners and attracting foreign investment. This is most likely because internationalisation raises the familiarity and knowledge of that jurisdiction to foreigners. For example, the QFC’s impact on Qatar’s overall GDP was around 1% in 2020, and that number has risen since then (Business Start Up Qatar, ‘QFC contributes 1% to Qatar’s gross domestic product’ (1 July 2021). Further qualitative research on the connection between the internationalisation and economic development of these special jurisdictions is necessary to exactly detail this impact, but this does correspond to the central themes of Katherina Pistor’s groundbreaking work in the Code of Capital (Princeton University Press 2019) and the work of Daron Acemoglu, Simon Johnson and James Robinson, the laureates of the 2024 Nobel Prize in Economic Sciences (Daron Acemoglu & James Robinson, Why Nations Fail (Penguin Random House 2013)) which all point to the importance of (the origins of the) institutions and the (rule of) law in creating wealth and prosperity.
Posted by Dr. Willem Theus (Visiting Professor Private International Law KU Leuven (Spring term 2024-2025).
This post is a summary of a PhD defended on 29th January 2025 at the KU Leuven & UCLouvain (Belgium).
British Association of Comparative Law 
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